UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
__________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8704
HOWELL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1223027
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1111 Fannin, Suite 1500, Houston, Texas 77002
(Address of principal executive offices)(Zip Code)
(713) 658-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past
90 days.
Yes X No
--- ---
Indicate the number of shares outstanding on each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at April 30, 1998
_____________________________ ___________________________
Common Stock, $1.00 par value 5,471,782
This report contains 13 pages
================================================================================
HOWELL CORPORATION AND SUBSIDIARIES
Form 10-Q
INDEX
Page No.
______
Part I. Financial Information
Item 1. Consolidated Statements of Operations --
Three months ended March 31, 1998 and 1997
(unaudited)............................................... 3
Consolidated Balance Sheets --
March 31, 1998 (unaudited) and December 31, 1997.......... 4
Consolidated Statements of Cash Flows --
Three months ended March 31, 1998 and 1997
(unaudited)............................................... 5
Notes to Consolidated Financial Statements
(unaudited)............................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
Part II.Other Information
Item 6. Exhibits and Reports on Form 8-K........................... 13
================================================================================
PART I. FINANCIAL INFORMATION
(ITEM 1)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Howell Corporation and Subsidiaries
Three Months Ended
March 31,
1998 1997
(In thousands, except
per share amounts)
Revenues ............................................. $ 14,267 $ 9,067
-------- --------
Cost and expenses:
Lease operating expenses ........................... 8,277 3,809
Depreciation, depletion, and amortization........... 3,632 2,234
Ceiling test write-down ............................ 66,118 --
General and administrative expenses................. 2,068 1,491
-------- --------
80,095 7,534
-------- --------
Other income (expense):
Interest expense ................................... (2,672) (413)
Interest income .................................... 12 25
Net earnings of investees .......................... 120 428
Other-net .......................................... (11) (134)
-------- --------
(2,551) (94)
-------- --------
(Loss) earnings before income taxes .................. (68,379) 1,439
Income tax (benefit) provision ....................... (23,223) 495
-------- --------
Net (loss) earnings from continuing operations........ (45,156) 944
-------- --------
Discontinued operations:
Net earnings from Howell Hydrocarbons (less
applicable income taxes of $256).................. -- 458
-------- --------
Net (loss) earnings .................................. (45,156) 1,402
Less: Preferred stock dividends .................... (604) (604)
-------- --------
Net (loss) earnings applicable to common shares....... $(45,760) $ 798
======== ========
Basic (loss) earnings per common share:
Continuing operations .............................. $ (8.37) $ 0.07
Discontinued operations ............................ -- 0.09
-------- --------
Net (loss) earnings per common share (basic)........ $ (8.37) $ 0.16
======== ========
Weighted average shares outstanding (basic)........... 5,465 4,985
======== ========
Diluted (loss) earnings per common share:
Continuing operations .............................. $ (8.37) $ 0.07
Discontinued operations ............................ -- 0.09
-------- --------
Net (loss) earnings per common share (diluted)...... $ (8.37) $ 0.16
======== ========
Weighted average shares outstanding (diluted)......... 5,465 5,075
======== ========
Cash dividends per common share ...................... $ 0.04 $ 0.04
======== ========
See accompanying Notes to Consolidated Financial Statements.
================================================================================
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Howell Corporation and Subsidiaries
- -----------------------------------------------------------------------------------
March 31, December 31,
1998 1997
(Unaudited)
- -----------------------------------------------------------------------------------
(In thousands,
except share data)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ............................ $ 1,874 $ 56
Trade accounts receivable, less allowance for doubtful
accounts of $147 in 1998 and $144 in 1997 .......... 10,180 5,520
Accounts receivable from investees ................... 2,300 2,300
Other current assets ................................. 1,514 1,489
--------- ---------
Total current assets ................................ 15,868 9,365
--------- ---------
Property, plant and equipment:
Oil and gas properties, utilizing the full-cost method
of accounting....................................... 375,934 371,975
Unproven properties .................................. 41,017 41,017
Fee mineral properties, unproven ..................... 18,123 18,123
Other ................................................ 2,690 2,670
Less accumulated depreciation, depletion and
amortization........................................ (277,307) (207,557)
--------- ---------
Net property and equipment .......................... 160,457 226,228
--------- ---------
Investment in investees ................................ 16,513 16,432
Other assets ........................................... 14,918 14,686
--------- ---------
Total assets ........................................ $207,756 $266,711
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt .................... $ 20,000 $ 20,000
Accounts payable ..................................... 4,527 2,165
Accrued liabilities .................................. 8,633 4,819
Income tax payable ................................... (247) (1,411)
--------- ---------
Total current liabilities ........................... 32,913 25,573
--------- ---------
Deferred income taxes .................................. 2,592 25,071
--------- ---------
Other liabilities ...................................... 1,391 1,428
--------- ---------
Long-term debt ......................................... 119,200 117,000
--------- ---------
Shareholders' equity:
Preferred stock, $1 par value; 690,000 shares issued
and outstanding, liquidation value of $34,500,000... 690 690
Common stock, $1 par value; 5,464,642 shares issued
and outstanding..................................... 5,465 5,465
Additional paid-in capital ........................... 40,760 40,760
Retained earnings .................................... 4,745 50,724
--------- ---------
Total shareholders' equity .......................... 51,660 97,639
--------- ---------
Total liabilities and shareholders' equity........... $207,756 $266,711
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
===============================================================================
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Howell Corporation and Subsidiaries
- -------------------------------------------------------------------------------
Three Months Ended March 31,
1998 1997
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) earnings from continuing operations......... $(45,156) $ 944
Adjustments for non-cash items:
Depreciation, depletion and amortization ............ 69,750 2,234
Deferred income taxes ............................... (22,479) --
Equity in earnings of investees - net of
amortization....................................... (120) (427)
-------- --------
Earnings from continuing operations plus non-cash
operating items..................................... 1,995 2,751
Changes in components of working capital from
operations:
(Increase) decrease in trade accounts receivable..... (4,660) 1,128
(Increase) decrease in other current assets.......... (25) 566
Increase (decrease) in accounts payable ............. 2,362 (1,177)
Increase (decrease) in accrued and other liabilities. 3,777 (3,668)
Increase (decrease) in income tax payable ........... 1,164 (1,215)
-------- --------
Cash provided by (utilized in) continuing operations... 4,613 (1,615)
Cash provided by discontinued operations............... -- 1,224
-------- --------
Cash provided by (utilized in) operating activities.... 4,613 (391)
-------- --------
INVESTING ACTIVITIES:
Dividends received from investees ..................... 39 202
Additions to property, plant and equipment ............ (3,979) (1,642)
Other, net ............................................ (232) (155)
-------- --------
Cash (utilized in) investing activities ............... (4,172) (1,595)
-------- --------
FINANCING ACTIVITIES:
Long-term debt:
Borrowings under revolving credit agreement, net -
Bank of Montreal.................................... 2,200 --
Repayments under revolving credit agreement, net -
Bank One............................................ -- (500)
Repayments to Department of Energy .................. -- (682)
Cash dividends:
Common shareholders .............................. (219) (200)
Preferred shareholders ........................... (604) (604)
Exercise of stock options ............................. -- 735
-------- --------
Cash provided by (utilized in) financing activities.... 1,377 (1,251)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .. 1,818 (3,237)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD......... 56 3,253
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD .............. $ 1,874 $ 16
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Net cash paid for:
Interest .............................................. $ 1,731 $ 61
======== ========
Income taxes .......................................... $ -- $ 1,873
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Howell Corporation and Subsidiaries
March 31, 1998 and 1997
- -------------------------------------------------------------------------------
Note 1 - Basis of Financial Statement Preparation
The unaudited consolidated financial statements included
herein have been prepared by Howell Corporation (the
"Company"), pursuant to the rules and regulations of the
Securities and Exchange Commission and in accordance with
generally accepted accounting principles. In the opinion
of management, all adjustments (all of which are normal
and recurring) have been made which are necessary for a
fair statement of the results of operations for the three
months ended March 31, 1998 and 1997. The results of
operations for the three months ended March 31, 1998 are
not necessarily indicative of results to be expected for
the full year. The accounting policies followed by the
Company are set forth in Note 1 to the consolidated
financial statements in its Annual Report on form 10-K
for the year ended December 31, 1997. These consolidated
financial statements should be read in conjunction with
the financial statements and notes thereto included in
the Company's latest Form 10-K.
Note 2 - Adoption of New Accounting Standards
Comprehensive Income
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," ("SFAS 130").
SFAS No. 130 is effective for periods beginning after
December 15, 1997. SFAS 130 establishes standards for
reporting and displaying comprehensive income and its
components. The purpose of reporting comprehensive
income is to report a measure of all changes in equity of
an enterprise that result from recognized transactions
and other economic events of the period other than
transactions with owners in their capacity as owners.
The Company has adopted this standard and as of March 31,
1998, there are no adjustments ("other comprehensive
income") to net income in deriving comprehensive income.
In June 1997, the Financial Accounting Standards Board
issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information," (SFAS No. 131).
SFAS No. 131 establishes standards for the way that
public business enterprises report information about
operating segments. SFAS No. 131 is effective for
periods beginning after December 15, 1997, but need not
be applied to interim financial statements in the initial
year of application. Management of the Company is
evaluating what, if any, additional disclosures may be
required when this statement is first applied.
Note 3 - Financial Instruments and Hedging Activities
In order to mitigate the effects of future price
fluctuations, the Company used a limited program of
hedging its crude oil production through February 1997.
Crude oil futures and options contracts are used as the
hedging tools. Changes in the market value of the
futures transactions are deferred until the gain or loss
is recognized on the hedged transactions.
In 1996, the Company purchased a put option and sold a
call option covering 100,000 barrels of oil per month for
a six-month period ended February 28, 1997. The strike
prices were $16.50 per barrel for the put option and
$21.10 per barrel for the call option. There was no
premium associated with these options.
In 1997, the monthly average price of crude oil on the
organized exchange exceeded the strike price for the call
option during January and February, the final two months
of the options. The payments required in 1997 under the
call option totaled $0.5 million and were recorded as a
reduction of revenue.
In 1998, the Company purchased a put option and sold a
call option covering 4,800 barrels of oil per day for a
nine-month period ended December 31, 1998. The strike
prices are $16.00 per barrel for the put option and
$19.25 per barrel for the call option. There is no
premium associated with these options.
Note 4 - Accumulated Depreciation, Depletion and
Amortization
During the first quarter of 1998 a pre-tax write-down of
the Company's oil and gas properties of $66.1 million was
required as a result of lower energy prices. On an
after-tax basis, the write-down amounted to $43.6
million. The Company's depletion rate is anticipated to
drop from $3.25 to $2.30 per equivalent barrel as a
result of the write-down.
Note 5 - Income Taxes
The effective tax rate from Continuing Operations was 34%
for the first three months of 1998 and 1997.
Note 6. Acquisitions & Dispositions
On December 18, 1997, the Company purchased certain oil
and gas producing properties (the "Acquisition") in
Wyoming from Amoco Production Company ("Amoco"), a
subsidiary of Amoco Corporation, for approximately $115.4
million, subject to purchase price adjustments. The
effective date of the Acquisition was December 1, 1997.
The Acquisition was accounted for using the purchase
method of accounting, and accordingly, the purchase price
has been preliminarily allocated to the assets acquired
based on estimated fair values at the date of
acquisition. The operating results of the assets
acquired from Amoco have been included in the Company's
Statement of Operations since December 18, 1997. The pro
forma information shown below assumes that the
Acquisition occurred at January 1, 1997. Adjustments
have been made to reflect changes in the Company's
results from revenues and direct operating expenses of
the producing properties acquired from Amoco, additional
interest expense to reflect the acquisition,
depreciation, depletion and amortization based on fair
values assigned to the assets acquired and general and
administrative expenses incurred from hiring additional
employees. The pro forma financial data are based on
assumptions and the actual recording of the Acquisition
could differ. The unaudited pro forma financial data are
not necessarily indicative of financial results that
would have occurred had the Acquisition occurred on
January 1, 1997, and should not be viewed as indicative
of operations in future periods.
<TABLE>
<CAPTION>
ProForma
Unaudited
Three Months Ended
March 31, 1997
(In thousands,
except per share data)
<S> <C>
Revenues ........................................................ $ 22,500
Net earnings from continuing operations ......................... $ 3,838
Net earnings from continuing operations per common share - basic. $ 0.65
Net income from continuing operations per common share-diluted .. $ 0.54
</TABLE>
Note 7 - Litigation
On July 11, 1995, the Company received a demand letter
from several working interest owners in the North Frisco
City Field and in the North Rome Field indicating the
Company had not paid according to the terms of a "call on
production." The Company was granted a call on a portion
of this production but has never exercised the call.
Accordingly, the Company has filed petitions for
declaratory judgment to that effect in cases styled
Howell Petroleum Corporation, et al, vs. Shore Oil
Company, et al, District Court of Harris County, Texas;
No. 95-037480 and Howell Petroleum Corporation, et al,
vs. Tenexco, Inc., et al, District Court of Harris
County, Texas; No. 95-037970. The defendants in this
action have counterclaimed against the Company. These
claims are similar in nature to the Alabama and
Mississippi royalty litigation. One of the defendants,
John Faulkinberry, has filed a counterclaim against the
Company seeking actual damages of $75,000 and punitive
damages of $100,000,000. Effective July 14, 1997, the
Company settled with John Faulkinberry as well as several
other working interest owners. The terms of the
settlement are confidential, but the amounts paid in
settlement were not material to the Company's financial
condition, results of operations or cash flows. The case
(as to the remaining interest owners) is currently set
for trial on June 15, 1998.
Related to this matter, several royalty owners have filed
lawsuits against the Company in Alabama and Mississippi
concerning pricing in the North Frisco City Field. The
lawsuits allege the Company violated its contracts with
the plaintiffs by not paying the plaintiffs ". . . the
highest available price for oil." Damages claimed by the
plaintiffs include approximately $3.8 million and are
based on numerous damage theories including, but not
limited to, allegations of breach of contract and fraud.
The complaints also seek unspecified punitive damages in
the Alabama lawsuits and $7 million in punitive damages
in the Mississippi lawsuit. The Company filed answers
denying all charges. The Company does not believe that
the ultimate resolution of these matters will have a
materially adverse effect on the financial position,
results of operations or cash flows of the Company. On
July 28, 1997, the Company settled the Mississippi
lawsuit. On March 30, 1998 a tentative settlement was
reached with the Alabama class representative; however,
the settlement must be approved by the court. The terms
of the settlement are confidential, but the amounts paid
in settlement were not material to the Company's
financial condition, results of operations or cash flows.
On December 3, 1997, Snyder Oil Corporation sued Amoco
Production Company and Howell Petroleum Corporation to
enjoin the sale of the Beaver Creek Unit to Howell
Petroleum until such time as Amoco complies with Snyder's
preferential right to purchase the unit. Snyder Oil
Corporation v. Amoco Production Company and Howell
Petroleum Corporation; District Court, Ninth Judicial
District, Fremont County, Wyoming; Civil Action No.
29861. The lawsuit is based upon two theories: (i) the
Beaver Creek Unit should not have been sold in a package
with other properties, and (ii) Amoco and Howell
Petroleum inflated the value of the unit in order to make
it too costly for Snyder to buy the unit. Answers have
been filed and discovery has begun.
There are various other lawsuits and claims against the
Company, none of which, in the opinion of management,
will have a materially adverse effect on the Company.
Note 8. (Loss) Earnings per Share
Basic earnings per common share amounts are calculated
using the average number of common shares outstanding
during each period. Diluted earnings per share assumes
conversion of dilutive convertible preferred stocks and
exercise of all stock options having exercise prices less
than the average market price of the common stock using
the treasury stock method. The earnings per share data
for the three months ended March 31, 1997 has been
restated following the standards in Statement of
Financial Accounting Standards No. 128, "Earnings Per
Share".
The tables on the following page present the
reconciliation of the numerators and denominators in
calculating diluted earnings per share ("EPS") from
continuing operations in accordance with Statement of
Financial Accounting Standards No. 128.
================================================================================
Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
Earnings
Increase in per
Increase in Number of Incremental
Income Shares Share
-------- --------- --------
<S> <C> <C> <C>
Options................................. - 144,910 -
Dividends on convertible preferred stock $603,750 2,090,909 $0.29
</TABLE>
<TABLE>
<CAPTION>
Computation of Diluted Earnings per Share
Net
Loss
Available
from
Continuing Common
Operations Shares Per Share
-------- ------- --------
<S> <C> <C> <C> <C>
$(45,759,750) 5,464,642 $(8.37)
Common stock options.................... - 144,910
------------ ---------- --------
$(45,759,750) 5,609,552 $(8.16) Antidilutive
Dividends on convertible preferred stock 603,750 2,090,909
------------ ---------- --------
$(45,156,000) 7,700,461 $(5.86) Antidilutive
============ ========== ========
</TABLE>
Note: Because diluted EPS from continuing operations
increases from $(8.37) to $(8.16) when common stock
options are included in the computation and because
diluted EPS increases from $(8.16) to $(5.86) when
convertible preferred shares are included in the
computation, both common stock options and convertible
preferred shares are antidilutive and are ignored in the
computation of diluted EPS from continuing operations.
Therefore, diluted EPS from continuing operations is
reported as $(8.37).
Three Months Ended March 31, 1997
<TABLE>
<CAPTION>
Earnings
Increase in per
Increase in Number of Incremental
Income Shares Share
-------- --------- --------
<S> <C> <C> <C>
Options................................. - 90,203 -
Dividends on convertible preferred stock $603,750 2,090,909 $0.29
</TABLE>
<TABLE>
<CAPTION>
Computation of Diluted Earnings per Share
Income
Available
from
Continuing Common
Operations Shares Per Share
-------- ------- --------
<S> <C> <C> <C> <C>
$ 340,250 4,984,641 $ 0.07
Common stock options.................... - 90,203
------------ ---------- --------
$ 340,250 5,074,844 $ 0.07 Dilutive
Dividends on convertible preferred stock 603,750 2,090,909
------------ ---------- --------
$ 944,000 7,165,753 $ 0.13 Antidilutive
============ ========== ========
</TABLE>
Note: Because diluted EPS from continuing operations
increases from $0.07 to $0.13 when convertible preferred
shares are included in the computation, the convertible
preferred shares are antidilutive and are ignored in the
computation of diluted EPS from continuing operations.
Therefore, diluted EPS from continuing operations is
reported as $0.07.
================================================================================
PART I. FINANCIAL INFORMATION
(ITEM 2)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion of the Company's financial
condition, results of operations, capital resources and
liquidity. This discussion and analysis should be read
in conjunction with the Consolidated Financial Statements
of the Company and the notes thereto. Management's
review may include certain forward-looking statements
reflecting the Company's expectations in the near future;
however, many factors which may affect the actual
results, especially commodity prices and changing
regulations, are difficult to predict. Accordingly,
there is no assurance that the Company's expectations
will be realized.
RESULTS OF CONTINUING OPERATIONS
The Company's principal business segment is oil and gas
production. Results of continuing operations for the
three months ended March 31, 1998 and 1997, are discussed
below.
Oil and Gas Production
Three Months Ended March 31,
1998 1997
Revenues (in thousands):
Sales of oil and natural gas........... $ 13,441 $ 7,518
Sales of LaBarge other products........ 491 432
Gas marketing.......................... 220 1,011
Minerals leasing and other............. 115 106
-------- -------
Total revenues.................... $ 14,267 $ 9,067
======== =======
Operating (loss) profit (in thousands). $(65,828) $ 1,533
======== =======
Operating information:
Average net daily production:
Oil and NGL (Bbls)................. 10,221 3,111
Natural gas (Mcf).................. 13,242 8,515
Average sales prices:
Oil and NGL (per Bbl).............. $12.18 $18.63
Natural gas (per Mcf).............. $ 1.88 $ 3.00
Revenues
Revenues for three months increased $5.2 million when
compared to 1997 primarily due to the additional
properties purchased from Amoco. As a result of the new
properties the Company's net daily production of oil and
natural gas liquids increased 228% and the net daily
production of natural gas increased 55% when compared to
the three months ended March 31, 1997.
Increased revenues as a result of increased production
were partially offset by lower energy prices. The
Company's average realized oil price and natural gas price
declined 34% and 37%, respectively. Revenues were also
impacted by a decrease in production from the Company's
Main Pass 64/65 property due to storm-related downtime.
In order to mitigate the effects of future price
fluctuations, the Company periodically enters into a
limited program of hedging its crude oil production.
Crude oil futures and options contracts are used as the
hedging tools. Changes in the market value of the
futures transactions are deferred until the gain or loss
is recognized on the hedged transactions.
The Company's average realized sales price of its crude
oil production during the three months ended March 31,
1997 was reduced by the effects of the put and call
options the Company had in place. The strike price of
the call options was exceeded for two months of the 1997
period, resulting in a reduction of revenues of $0.5
million. Without the effects of the options, the average
sales price of the Company's crude oil production would
have been $20.61 instead of $18.68 for the first quarter
of 1997. The Company did not utilize any hedging
instruments in the three months ended March 31, 1998.
The Company has entered into a hedging program for the
period April through December 1998. The Company purchased
a put option and sold a call option covering 4,800
barrels of oil per day for a nine-month period ended
December 31, 1998. The strike prices are $16.00 per
barrel for the put option and $19.25 per barrel for the
call option. There is no premium associated with these
options.
Operating Profit
During the first quarter of 1998 operating profit
decreased $67.4 million when compared to the first
quarter of 1997. The decrease was primarily due to a
pre-tax non-cash write-down of $66.1 million of the
Company's oil and gas properties. On an after-tax basis,
the write-down amounted to $43.6 million, or a loss of
$7.99 per common share. The operating profit before the
write-down was $0.3 million, or a decrease of $1.2
million when compared to the three months ended March 31,
1997. The Company's depletion rate is anticipated to
drop from $3.25 to $2.30 per equivalent barrel as a
result of the write-down. Offsetting revenue was an
increase in lease operating expenses and pre write-down
depletion expenses primarily due to the additional
production activity from the Wyoming properties.
Also contributing to the decrease in operating profit was
an increase in general and administrative expenses as a
result of the additional transition expenses associated
with assuming operations of the new Wyoming properties.
general and administrative expenses increased $0.6
million when comparing the first quarter of 1998 to 1997.
Crude Oil Marketing
The Company retains a direct and indirect interest in
Genesis Crude Oil, L.P., Genesis Energy, L.P., and
Genesis Energy, L.L.C. (collectively referred to
hereinafter as "Genesis"). As a result of the Company's
interest, the Company recognized net earnings in Genesis
of $0.1 million during the first three months of 1998.
This represents a decrease of $0.3 million from the
first three months of 1997.
Net Interest Expense
Net interest expense for the three months ended March 31,
1998 increased $2.3 million above the 1997 level as a
result of increased debt of $113.9 million. The reason
for this increase was the purchase of the Wyoming
properties from Amoco on December 17, 1997.
Provision for Income Taxes
The Company's effective tax rate for both periods was 34%
which reflects the statutory federal rate and state
income taxes less the effect of statutory depletion
deductions in excess of cost basis.
RESULTS FROM DISCONTINUED OPERATIONS
Technical Fuels and Chemical Processing
On July 31, 1997, the Company completed the previously
announced sale and disposition of substantially all of
the assets of its research and reference fuels and custom
chemical manufacturing business.
The results of the technical fuels and chemical
processing business have been classified as discontinued
operations in the accompanying consolidated financial
statements. Net earnings from discontinued operations
were $0.5 million for the three months ended March 31,
1997. Discontinued operations also includes the
allocation of interest expense (based on a ratio of net
assets of discontinued operations to total consolidated
net assets). Interest expense allocated for the three
months ended March 31, 1997 was $52,000.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by continuing operations for the first
quarter of 1998 was $4.9 million. Of this amount, $2.9
million was provided by a reduction in working capital.
This compares to $1.6 million of cash utilized by
continuing operations in the comparable 1997 quarter. Of
this utilization, $4.4 million was for increased working
capital. The Company increased debt by $2.2 million in
the first quarter as compared to a reduction in debt of
$1.2 million in the 1997 first quarter. Capital
expenditures in the 1998 quarter were $4.0 million, a
$2.3 million increase over the 1997 quarter.
The Company's total debt at March 31, 1998 was $139.2
million, comprised of $119.2 million in long-term and
$20.0 million in current maturities. The Company's
working capital deficit of $17.0 million at March 31,
1998 included this $20.0 million of current maturities.
At March 31, 1998, the Company had $10.8 million in
unused borrowing capacity under the terms of its Credit
Facility.
As a result of the impairment of the Company's oil and
gas properties in the first quarter of 1998 due to
decreases in the price of oil, the Company's Tangible Net
Worth was less than the minimum required under the terms
of the Credit Facility. That impairment would have been
an Event of Default, but for the fact that Bank of
Montreal waived the requirement. Lower oil prices also
precipitated a reduction in the Company's borrowing base
in the May 1 redetermination. The Company is currently
negotiating revisions to its Credit Facility with Bank of
Montreal. Management expects a satisfactory agreement to
be completed in the second quarter of 1998.
Budgeted capital expenditures have been reduced to
compensate for the decreased cash flow caused by reduced
oil and gas prices. The Company anticipates capital
spending of $5.0 million to $8.0 million for the
remainder of 1998.
During the first quarter of 1998, the Company paid common
dividends of $0.2 million and preferred dividends of
$0.6 milion.
================================================================================
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - none.
(b) Reports on Form 8-K
A report on Form 8-K was filed on January 2, 1998 announcing:
1) the acquisition of a group of producing oil and
natural gas properties located in Wyoming,
Montana, Colorado and North Dakota from Amoco
Production Company for $115.4 million in cash,
2) the new credit agreement dated December 17, 1997
between Howell Petroleum Corporation and
Bank of Montreal, and
A report on Form 8-K/A was filed on March 3, 1998
disclosing the financial statements and
exhibits associated with the January 2, 1998
Form 8-K filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
Howell Corporation
(Registrant)
Date: May 15, 1998 /s/ J. Richard Lisenby
-----------------------
J. Richard Lisenby
Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary financial information
extracted from the form 10-Q of Howell Corporation for the quarter ended
March 31, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 1874
<SECURITIES> 0
<RECEIVABLES> 10180
<ALLOWANCES> 147
<INVENTORY> 38
<CURRENT-ASSETS> 15868
<PP&E> 437764
<DEPRECIATION> 277307
<TOTAL-ASSETS> 207756
<CURRENT-LIABILITIES> 32913
<BONDS> 119200
0
690
<COMMON> 5465
<OTHER-SE> 45505
<TOTAL-LIABILITY-AND-EQUITY> 207756
<SALES> 14267
<TOTAL-REVENUES> 14267
<CGS> 11909
<TOTAL-COSTS> 11909
<OTHER-EXPENSES> 66118
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2672
<INCOME-PRETAX> (68379)
<INCOME-TAX> (23223)
<INCOME-CONTINUING> (45156)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45156)
<EPS-PRIMARY> (8.37)
<EPS-DILUTED> (8.37)
</TABLE>
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<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary financial information
restated as a result of FASB 128 for Howell Corporation for year-to-date
March 31, 1997, June 30, 1997, and September 30, 1997, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-mos 6-mos 9-mos
<FISCAL-YEAR-END> Dec-31-1997 Dec-31-1997 Dec-31-1997
<PERIOD-END> Mar-31-1997 Jun-30-1997 Sep-30-1997
<CASH> 20 19 52
<SECURITIES> 0 0 0
<RECEIVABLES> 9107 3523 4018
<ALLOWANCES> 266 144 141
<INVENTORY> 2295 51 50
<CURRENT-ASSETS> 12270 3902 4674
<PP&E> 408961 306559 306073
<DEPRECIATION> 215072 202816 204871
<TOTAL-ASSETS> 153134 150272 129213
<CURRENT-LIABILITIES> 17355 16610 10955
<BONDS> 20081 17581 3500
0 0 0
690 690 690
<COMMON> 4996 5081 5112
<OTHER-SE> 85695 86136 86654
<TOTAL-LIABILITY-AND-EQUITY> 153134 150272 129213
<SALES> 17645 16971 24493
<TOTAL-REVENUES> 17645 16971 24493
<CGS> 13398 11543 17359
<TOTAL-COSTS> 13398 11543 17359
<OTHER-EXPENSES> 0 28 (128)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 465 854 1064
<INCOME-PRETAX> 2153 2495 3353
<INCOME-TAX> 751 912 1062
<INCOME-CONTINUING> 0 1583 2291
<DISCONTINUED> 0 458 757
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1402 2041 3048
<EPS-PRIMARY> .16 .17 .25
<EPS-DILUTED> .16 .16 .24
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary financial information
restated as a result of FASB 128 for Howell Corporation year-to-date
ended March 31, 1996, June 30, 1996, September 30, 1996, and
December 31, 1996, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-mos 6-mos 9-mos 12-mos
<FISCAL-YEAR-END> Dec-31-1996 Dec-31-1996 Dec-31-1996 Dec-31-1996
<PERIOD-END> Mar-31-1996 Jun-30-1996 Sep-30-1996 Dec-31-1996
<CASH> 1945 6377 4110 3257
<SECURITIES> 0 0 0 0
<RECEIVABLES> 61811 64137 77178 9805
<ALLOWANCES> 229 239 251 267
<INVENTORY> 5321 4315 5476 2530
<CURRENT-ASSETS> 70483 75839 88463 16886
<PP&E> 407650 406901 408961 329681
<DEPRECIATION> 212991 215022 218719 212025
<TOTAL-ASSETS> 267137 269688 280649 158524
<CURRENT-LIABILITIES> 71419 74117 93606 23534
<BONDS> 94553 92785 83805 20581
0 0 0 0
690 690 690 690
<COMMON> 4934 4936 4940 4947
<OTHER-SE> 73798 74562 75490 84411
<TOTAL-LIABILITY-AND-EQUITY> 267137 269688 280649 158524
<SALES> 166257 346437 554958 712391
<TOTAL-REVENUES> 166257 346437 554958 712391
<CGS> 159587 332548 533731 685201
<TOTAL-COSTS> 159587 332548 533731 685201
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 1946 3839 5666 7492
<INCOME-PRETAX> 1841 4343 7049 22339
<INCOME-TAX> 646 1599 2615 8262
<INCOME-CONTINUING> 0 0 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 1195 2744 4434 14077
<EPS-PRIMARY> .12 .31 .53 2.36
<EPS-DILUTED> .12 .31 .52 1.97
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