UNIMAR COMPANY
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Statements of Earnings
for the Three Months Ended March 31, 1998
and March 31, 1997 . . . . . . . . . . . . . . . . . 1
Condensed Consolidated Balance Sheets
as of March 31, 1998 and December 31, 1997 . . . . . 2
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998
and March 31, 1997 . . . . . . . . . . . . . . . . . 3
Notes to Condensed Consolidated Financial Statements
as of March 31, 1998 . . . . . . . . . . . . . . . . 4
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION
ITEM 5. Other Information. . . . . . . . . . . . . . . . . . 8
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 8
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
PART I. FINANCIAL INFORMATION
UNIMAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Oil and gas production revenues $ 43,284 $ 66,283
Production costs 4,617 5,876
Depletion, depreciation and amortization 10,724 11,620
Exploration costs including dry holes 634 248
---------- ----------
Operating profit 27,309 48,539
General and administrative expenses 196 239
Other income (7) (45)
----- -----
Earnings before income taxes 27,120 48,345
Income tax expense (benefit)
Current 19,386 32,850
Deferred (1,485) (1,931)
----- -----
17,901 30,919
-------- --------
Net earnings $ 9,219 $ 17,426
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- -----------
(UNAUDITED)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 4,923 $ 4,454
Accounts receivable 9,175 8,670
Inventories 7,960 8,275
Other current assets 3,384 1,999
------ ------
Total current assets 25,442 23,398
Property, plant and equipment, at cost:
Oil and gas properties (successful
efforts method) 1,102,725 1,097,568
Other 2,363 2,348
---------- ----------
1,105,088 1,099,916
Less: accumulated depreciation
and depletion 773,920 763,151
---------- -------
Net property, plant and equipment 331,168 336,765
Other assets 2,081 3,191
---------- -----------
$ 358,691 $ 363,354
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Accounts payable $ 160 $ 752
Advances from joint venture partners 1,398 2,637
Accrued liabilities 14,485 14,138
Income and other taxes 8,906 14,035
----- ------
Total current liabilities 24,949 31,562
Deferred income taxes 146,650 148,135
Other liabilities 16,323 16,107
Partners' capital 250,769 247,550
Less: demand notes receiva 80,000 80,000
------ ------
170,769 167,550
------- -------
Commitments and Contingencies
$ 358,691 $ 363,354
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Operating activities:
Net earnings $ 9,219 $ 17,426
Adjustments to reconcile to net cash
provided by operating activities:
Depletion, depreciation and
amortization 10,769 11,684
Deferred income taxes (1,485) (1,931)
Exploratory dry hole costs 9 18
Changes in working capital and other (5,623) (1,787)
------- --------
Net cash provided by operating activities 12,889 25,410
------- --------
Investment activities:
Capital expenditures (5,181) (7,152)
------- --------
Net cash used in investing activities (5,181) (7,152)
------- --------
Financing activities:
Capital contributions 7,000 8,600
Capital distributions (13,000) (25,800)
-------- --------
Net cash used in financing activities (6,000) (17,200)
------- --------
Decrease in advances from joint venture
partners (1,239) (102)
------- --------
Net increase in cash and cash equivalents 469 956
------- --------
Cash and cash equivalents at beginning
of period 4,454 3,274
------- --------
Cash and cash equivalents at end of period $ 4,923 $ 4,230
======= ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
- ---------------------------------
IPU distributions paid $ 4,419 $ 6,898
======= =======
Income taxes paid $24,516 $36,326
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
(1) Unimar Company (the Company) is a general partnership organized under
the Texas Uniform Partnership Act, whose partners are Unistar, Inc.,
a Delaware corporation and a direct subsidiary of Union Texas
Petroleum Holdings, Inc., a Delaware corporation, and LASMO (Ustar)
Inc., a Delaware corporation and an indirect wholly-owned subsidiary
of LASMO plc, a public limited company organized under the laws of
England. Each partner shares equally in the Company's net earnings,
distributions and capital contributions. See Part II. Other Informa-
tion - Item 5. Other Events.
(2) These condensed consolidated financial statements should be read in the
context of the consolidated financial statements and notes thereto
included in the Company's 1997 annual report on Form 10-K. In the
opinion of management, the accompanying financial statements contain
all adjustments of a normal recurring nature necessary for a fair
presentation. Interim results are not necessarily indicative of
results on an annualized basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabil-
ities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
(3) The table below outlines the calculation of the Indonesian Participating
Unit (IPU) participation payment for the first quarter of 1998.
<TABLE>
<CAPTION>
1998
First Quarter
----------------------------
(Thousands of dollars)
<S> <C>
Positive cash flow:
Gas receipts $ 40,850
Oil and condensate receipts 8,670
Other non-revenue cash receipts from
the Joint Venture 982
--------
Total positive cash flow 50,502
---------
Cash Outflows:
Expenditures to the Joint Venture 11,132
Indonesian income taxes 20,069
--------
Total cash outflows 31,201
--------
Net positive cash flow from 23.125% interest
in the Joint Venture $19,301
=======
Net cash flow for the benefit of the
IPU holders* $ 4,743
=======
Participation Payment per IPU* $ .44
=======
</TABLE>
* Each IPU is entitled to 1/14,077,747 of 32% of net positive cash flow
until September 25, 1999 at which time the Units will expire with no
residual value. As of March 31, 1998, there were 10,778,590 IPUs
issued and outstanding.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
(UNAUDITED)
(4) In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This statement establishes standards for report-
ing and display of comprehensive income and its components in a full
set of financial statements. The Company adopted SFAS No. 130 in the
first quarter of 1998. The Company's comprehensive income was as
follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
------ -----
<S> <C> <C>
Net income $9,219 $17,426
Other comprehensive income (loss):
Minimum pension liability adjustment - 109
Comprehensive income $9,219 $17,535
====== =======
</TABLE>
Adoption of SFAS No. 130 had no impact on Partners' Capital in the first
quarter of 1998.
(5) In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement
establishes standards for reporting information about operating segments
in annual financial statements and requires that enterprises report
selected information about operating segments in interim reports.
The Company will adopt the provisions of SFAS No. 131 during 1998.
As SFAS No. 131 establishes standards for reporting and display, the
Company does not expect the adoption of this statement to have a
material impact on its financial condition or results of operations.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
MANAGMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the business
section, consolidated financial statements, notes, and management's discussion
contained in the Company's 1997 annual report on Form 10-K, and condensed
consolidated financial statements and notes contained in this report.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations amounted to $13 million for the three months
ended March 31, 1998, as compared to $25 million for the same period in 1997.
The decrease primarily resulted from lower sales prices and lower LNG volumes.
Capital expenditures of $5 million were spent primarily on continued development
activities in the Indonesian Joint Venture (IJV). Net distributions to the
partners of $6 million for the first three months of 1998 were $11 million lower
than for the first three months of 1997.
The Company's ability to generate cash is primarily dependent on the
prices it receives for the sale of liquefied natural gas (LNG) and, to a
lesser extent, the sale of crude oil and liquefied petroleum gas (LPG). LNG
and LPG are primarily sold under long term contracts whose prices are derived
from a basket of Indonesian crudes. In the event cash generated from opera-
tions is not sufficient to meet capital investment and other requirements,
any shortfall will be funded through additional cash contributions by the
partners. The Company cannot predict with any degree of certainty the prices
it will receive in future periods for its crude oil, LNG and LPG. The
Company's financial condition, operating results and liquidity will be
materially affected by any significant fluctuations in its sales prices.
See Part II. Other Information - Item 5. Other Events.
RESULTS OF OPERATIONS
Quarter Ended March 31, 1998 compared to Quarter Ended March 31, 1997
- ---------------------------------------------------------------------
Net earnings of $9 million for the first quarter of 1998 were $8 million
lower than for the first quarter of 1997. The decreased earnings in the current
year was primarily due to a $23 million decrease in gross revenues. Of this
revenue decrease, nearly 80 percent resulted from lower realized prices and the
remainder from sales volumes.
The weighted average crude oil basket price used to determine LNG prices
was
UNIMAR COMPANY AND SUBSIDIARIES
MANAGMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (cont'd)
$15.20 per barrel for the first three months of this year, or $7.56 per barrel
lower than in the corresponding 1997 three-month period. As a result, the
average price received for LNG during the first quarter of 1998 decreased $1.15
per million BTUs to $2.43 per million BTUs. The average realized crude oil
price in the first quarter of 1998 was $14.50 per barrel, as compared to $22.00
per barrel in the corresponding 1997 quarter.
The IJV's share of LNG sold during the first quarter of 1998 was 81
trillion BTUs (27.5 net equivalent cargoes), or 11 percent lower than the
1997 first quarter volumes of 91 trillion BTUs (31.0 net equivalent cargoes).
Crude oil volumes net to the Company increased by 74 thousand barrels to 484
thousand barrels, mainly due to the timing of crude oil liftings.
The IJV's share of LNG shipments for 1998 is expected to decline by
about 20 percent as compared to 1997. The primary reasons for this decline
are the phase-out of the original 1973 LNG Sales Contract in which the IJV
had a higher participation interest, a reduction in IJV equity percentages
under terms of the Indonesian Production Sharing Contract which become effect-
ive August 8,1998, and revisions to the LNG deliveries planned for the year.
With regard to planned LNG deliveries for the year, meetings between
PERTAMINA, the state petroleum enterprise of Indonesia, and Korea Gas Corpora-
tion (KGC), an LNG customer, were held in late March of this year. As a
result of these meetings, the effect on the IJV will be the deferral of 4
gross cargo commitments from 1998 until the year 2000 and an additional 4
gross cargo reduction from KGC's exercise of a downward flexibility provision
in its contracts. The effect of this 8 cargo reduction will not have a
material impact on the Company's profit or cash flow for the year.
Production costs for the first quarter of 1998 decreased $1 million as
compared to the corresponding quarter in 1997 primarily because of favorable
exchange rates on IJV expenditures denominated in the Indonesian currency.
Depletion, depreciation and amortization charges decreased by approximately $1
million as compared to the first quarter of 1997, due to the lower overall level
of production in the first quarter of 1998.
Income taxes of $18 million for the first three months of 1998 were $13
million lower than for the same period in 1997 as a result of lower first
quarter revenues. The effective tax rates for the 1998 and 1997 first quarters
UNIMAR COMPANY AND SUBSIDIARIES
MANAGMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (cont'd)
were 66 percent and 64 percent, respectively. These rates are the aggregate of
Indonesian source income taxed at a 56 percent rate, and certain expenses
attributable to the Company's activities which are not deductible in the
partnership for Indonesian tax purposes.
The discussion of the Company's business and operations in this report
includes in several instances forward-looking statements, which are based upon
management's good faith assumptions relating to the financial, market, operating
and other relevant environments that will exist and affect the Company's
business and operations in the future. No assurance can be made that the
assumptions upon which management based its forward-looking statements will
prove to be correct, or that the Company's business and operations will not be
affected in any substantial manner by other factors not currently foreseeable by
management or beyond the Company's control. All forward-looking statements
involve risks and uncertainty, including those described in this report, and
such statements shall be deemed in the future to be modified in their entirety
by the Company's public pronouncements, including those contained in all future
reports and other documents filed by the Company with the Securities and
Exchange Commission.
YEAR 2000
The year 2000 issue relates to computer programs being written with two
digits rather than four to define the applicable year. Computer programs that
have date-sensitive software may recognize a date using "00" as the year 1900
instead of 2000. In 1997, the Company successfully installed an accounting
system which is year 2000 compliant. Also in 1997, VICO, as Operator, completed
an assessment of its year 2000 issues. VICO is in the process of converting its
accounting system to a new system which is year 2000 compliant and has initiated
formal communications with all of its significant suppliers, vendors and
customers in Indonesia to determine their year 2000 readiness. While VICO
expects to resolve its year 2000 issues substantially through the replacement
and upgrades of software, there can be no guarantee that the systems of other
companies on which VICO depends will be timely converted or that the failure of
another company to convert, or a conversion which is not compatible with the
VICO system, would not have a material adverse effect on VICO and, therefore,
the Company.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 5. Other Events
------------
On May 4, 1998, Atlantic Richfield Company (ARCO) and Union Texas
Petroleum Holdings, Inc. (Union Texas) announced that they signed a
definitive Agreement and Plan of Merger under which ARCO commenced
an all-cash tender offer for all of Union Texas' outstanding
common stock on May 8, 1998 for $29.00 per share. The tender
offer expires June 5, 1998, unless extended. Any shares not pur-
chased in the tender offer will be acquired for $29.00 per share
in cash pursuant to a merger after completion of the tender offer.
The transaction is subject to usual closing conditions including
regulatory approvals.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
(27)-1- Financial Data Schedule for the three months ended
March 31, 1998.
(b) Reports on Form 8-K
None.
<PAGE>
UNIMAR COMPANY AND SUBSIDIARIES
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.
UNIMAR COMPANY
By: /S/ Linda A. Kubecka
-----------------------------
Linda A. Kubecka
(principal financial officer and the
officer duly authorized to sign on
behalf of the registrant.)
DATE: May 14, 1998
------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4923
<SECURITIES> 0
<RECEIVABLES> 9175
<ALLOWANCES> 0
<INVENTORY> 7960
<CURRENT-ASSETS> 25442
<PP&E> 1105088
<DEPRECIATION> 773920
<TOTAL-ASSETS> 358691
<CURRENT-LIABILITIES> 24949
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 358691
<SALES> 43284
<TOTAL-REVENUES> 43284
<CGS> 15341
<TOTAL-COSTS> 15975
<OTHER-EXPENSES> 236
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 27120
<INCOME-TAX> 17901
<INCOME-CONTINUING> 9219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9219
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
