<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8970
DIAMOND SHAMROCK OFFSHORE PARTNERS
LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
DELAWARE 75-2058990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5051 WESTHEIMER, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
(713) 831-1600
(Registrant's telephone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO THE FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [_]
Number of Depositary Units evidenced by Depositary Receipts of the
Registrant outstanding at April 30, 1994: 9,846,555.
<PAGE>
PART I. FINANCIAL INFORMATION
The accompanying financial statements have not been examined by independent
accountants, but in the opinion of Diamond Shamrock Offshore Partners Limited
Partnership's management all adjustments (consisting only of normal accruals)
necessary for a fair presentation of results of operations, changes in partners'
capital, financial position and cash flows at the date and for the periods
indicated have been included.
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<PAGE>
DIAMOND SHAMROCK OFFSHORE PARTNERS LIMITED PARTNERSHIP
STATEMENT OF INCOME - (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1994 1993
----- -----
<S> <C> <C>
REVENUES
Sales and operating revenues - trade......................... $ 3,476 $17,188
Sales and operating revenues - associated companies.......... 17,218 7,189
Other revenues, net.......................................... 443 144
------- -------
21,137 24,521
COSTS AND EXPENSES
Production and operating costs............................... 3,943 5,514
Exploration, including exploratory dry holes................. 794 506
Depreciation and depletion................................... 10,334 10,784
General and administrative expenses (b)...................... 1,296 2,038
------- -------
16,367 18,842
NET INCOME.................................................... 4,770 5,679
General Partners' Interest................................... 48 57
------- -------
NET INCOME APPLICABLE TO LIMITED PARTNERS..................... $ 4,722 $ 5,622
======= =======
NET INCOME PER UNIT (c)....................................... $.06 $.08
AVERAGE UNITS OUTSTANDING..................................... 73,761,740 73,761,740
</TABLE>
See Notes to Financial Statements (Unaudited)
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<PAGE>
DIAMOND SHAMROCK OFFSHORE PARTNERS LIMITED PARTNERSHIP
BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
1994 DECEMBER 31,
(UNAUDITED) 1993
----------- ------------
<S> <C> <C>
ASSETS
Current Assets
Note receivable - Maxus Energy Corporation.......... $ 17,328 $ 7,428
Accounts receivable - oil and gas sales............. 8,819 9,335
Accounts receivable - joint interest................ 1,519 1,817
Other............................................... 454 1,105
-------- --------
Total Current Assets.............................. 28,120 19,685
-------- --------
Oil and Gas Properties and Equipment - held for sale,
net.................................................. 14,116 -
-------- --------
Oil and Gas Properties and Equipment.................. 598,496 698,798
Less - Accumulated depreciation and depletion....... 472,791 553,622
-------- --------
125,705 145,176
-------- --------
$167,941 $164,861
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable.................................... $ 13,660 $ 15,081
Take-or-pay liability............................... 1,600 1,600
-------- --------
Total Current Liabilities......................... 15,260 16,681
Other Liabilities and Deferred Credits................ 3,763 3,766
Take-or-Pay Liability................................. 5,067 5,333
Partners' Capital..................................... 143,851 139,081
-------- --------
$167,941 $164,861
======== ========
</TABLE>
The Partnership uses the successful efforts method to account for its oil and
gas producing activities.
See Notes to Financial Statements (Unaudited).
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<PAGE>
DIAMOND SHAMROCK OFFSHORE PARTNERS LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1994 1993
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 4,770 $ 5,679
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion........................... 10,334 10,784
Dry hole costs....................................... (9) (332)
(Gain)/Loss on sale of assets........................ (42) -
Changes in components of working capital:
Accounts receivable................................ 814 1,596
Other current assets............................... 651 237
Accounts payable................................... (1,421) (2,710)
-------- --------
Net cash provided by operating activities............ 15,097 15,254
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for oil and gas properties and equipment,
including dry hole costs............................... (4,951) (8,029)
(Increase) decrease in current note receivable........... (9,900) 4,654
Other.................................................... (246) 42
-------- --------
Net cash used in investing activities.................. (15,097) (3,333)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid.................................. - (11,921)
-------- --------
Net cash used in financing activities................ - (11,921)
-------- --------
Net change in cash......................................... - -
Cash at beginning of period................................ - -
-------- --------
Cash at end of period...................................... $ - $ -
======== ========
</TABLE>
See Notes to Financial Statements (Unaudited).
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<PAGE>
DIAMOND SHAMROCK OFFSHORE PARTNERS LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED) (A)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LIMITED PARTNERS
----------------------
MAXUS
GENERAL EXPLORATION
PARTNERS COMPANY UNITHOLDERS TOTAL
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
December 31, 1993.. $4,190 $84,095 $50,796 $139,081
Net income..... 48 4,108 614 4,770
------ ------- ------- --------
March 31, 1994..... $4,238 $88,203 $51,410 $143,851
====== ======= ======= ========
</TABLE>
See Notes to Financial Statements (Unaudited).
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<PAGE>
DIAMOND SHAMROCK OFFSHORE PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(A) ORGANIZATION
Diamond Shamrock Offshore Partners Limited Partnership ("Partnership") is a
Delaware limited partnership formed in 1985 to succeed to substantially all of
the oil and gas exploration and production business previously conducted by
Maxus Exploration Company ("Exploration"), a wholly owned subsidiary of Maxus
Energy Corporation ("Maxus"), in federal waters offshore Texas and Louisiana.
In exchange for its contribution of properties to the Partnership, Exploration
received units of limited partnership interest ("Units") in the Partnership. As
of March 31, 1994, Maxus Offshore Exploration Company ("MOEC"), a wholly owned
subsidiary of Maxus, was the managing general partner of the Partnership and
Maxus was the special general partner.
On April 26, 1994, Maxus, MOEC and Exploration sold all their partnership
interests consisting of general partners' interests and Units to affiliates of
Burlington Resources Inc. for an aggregate $291.1 million. Maxus' aggregate
ownership interest in the Partnership was approximately 87.1%. As a result of
the sale, Meridian Offshore Company, a Burlington Resources Inc. affiliate,
became the managing general partner of the Partnership and Meridian Offshore
Acquisition Company became the special general partner.
(B) GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses represent allocations from Maxus. Maxus
believes that the method of allocation is reasonable.
(C) INCOME PER UNIT
Net Income per Unit is calculated for financial reporting purposes only.
Income or loss for federal income tax purposes will be calculated and
communicated separately for each Unitholder subsequent to December 31, 1994.
(D) FINANCIAL INSTRUMENTS
As discussed in the Partnership's Annual Report on Form 10-K for year-ended
December 31, 1993, the Partnership hedged against the effects of fluctuations in
the price of natural gas through price swap agreements. As of April 26, 1994,
the Partnership settled all then-outstanding hedged positions for a $253,050
gain.
(E) DISPOSITION OF ASSETS
On April 25, 1994, the Partnership sold its interests in Main Pass Blocks 72,
73 and 74, offshore Louisiana, to Pogo Producing Company for approximately $18.2
million. The net book value of the properties was $14.1 million. See Part II
Item 5 of this Form 10-Q for the unaudited pro forma financial statements.
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<PAGE>
DIAMOND SHAMROCK OFFSHORE PARTNERS LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER, 1994
RESULTS OF OPERATIONS
Diamond Shamrock Offshore Partners Limited Partnership ("Partnership")
reported net income of $4.8 million for the first three months of 1994, a $.9
million decline over the same period in 1993. This decrease was a result of
lower sales and operating revenues, despite lower production costs and lower
administrative expenses. Sales and operating revenues for the first three
months of 1994 were $20.7 million, down from $24.4 million recorded for the same
period of 1993.
Average gas production in the first three months of 1994 was down 18% to 73
million cubic feet ("mmcf") per day compared to 89 mmcf per day in the same
period of 1993. Contributing to the volume decline were watering and sanding
at Main Pass 116/126 (7 mmcf per day) and watering at Vermilion 226/237 (3 mmcf
per day) and Main Pass 181 (5 mmcf per day) partially offset by new production
at West Cameron 142 (8 mmcf per day). The average gas price in the first
quarter 1994 was $2.37 per thousand cubic feet ("mcf"), up $.31 per mcf from
$2.06 per mcf in the first quarter last year.
Crude oil and condensate sales revenues were down in the first three months
of 1994 due to lower oil prices which averaged $12.71 per barrel compared to
$18.05 per barrel in the first quarter last year. Production increased to 4,468
barrels ("bbls") per day compared to 4,246 bbls per day in the same period in
1993. New production from West Cameron 142 (252 bbls per day) and Ewing Bank
944/988 (420 bbls per day) were partially offset by watering at Vermilion 226
and field decline at Main Pass 288/289.
Production and operating costs were $3.9 million in the first quarter 1994 as
compared to $5.5 million in the first quarter 1993. The decrease resulted from
third-party gas purchase costs of $1.1 million recorded in first quarter 1993.
Depreciation and depletion expense was $10.3 million in the first quarter of
1994, $.5 million below the same period last year. Lower production was
responsible for the decline, despite higher depletion rates.
FINANCIAL CONDITION
Net cash provided by operating activities for the Partnership during the
first three months of 1994 decreased slightly to $15.1 million from $15.3
million in the same period in 1993. Lower working capital requirements offset
the decline in operating cash income.
Expenditures for oil and gas properties and equipment, including dry hole
costs, in the first three months of 1994 were $5.0 million compared to $8.0
million in 1993. The decrease in 1994 was largely due to lower spending on
exploratory wells. During the first quarter 1994, the Partnership was high
bidder at the Federal lease sale on two blocks offshore Louisiana. One of
these, Eugene Island 395 (100% working interest) has been awarded to the
Partnership. The bid for the other, West Cameron 54 (100% working interest),
must be accepted or rejected by the Minerals Management Service on or before
June 29, 1994.
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<PAGE>
At March 31, 1994, the Partnership's ratio of current assets to current
liabilities (current ratio) equaled 1.8 compared to a ratio of 1.2 at December
31, 1993. Current assets rose primarily due to an increase in the note
receivable with Maxus Energy Corporation ("Maxus") which, at March 31, 1994, was
$17.3 million, an increase of $9.9 million from December 31, 1993. This note
was repaid in full on April 26, 1994 upon sale of Maxus' interest to Meridian
Offshore Company and the proceeds from the repayment have been advanced to
Meridian Offshore Company.
No cash distribution was made for the first quarter 1994 due to the
Partnership's lack of distributable cash for the quarter. A second quarter cash
distribution, payable June 7, 1994, was declared at $.13 per Unit to Unitholders
of record on May 13, 1994.
OTHER EVENTS
On April 25, 1994 the Partnership sold its interest in Main Pass 72, 73 and
74 to Pogo Producing Company for $18.2 million. The net book value of the
properties was $14.1 million.
On April 26, 1994, Maxus, the special general partner of the Partnership,
Maxus Offshore Exploration Company, the managing general partner, and Maxus
Exploration Company sold all of their interests in the Partnership consisting of
general partners' interests and 64,163,885 Units to affiliates of Burlington
Resources Inc. for an aggregate of $291.1 million. Units were sold at an
equivalent of approximately $4.48 per Unit. Maxus' aggregate ownership interest
in the Partnership was approximately 87.1%. As a result of the sale, Meridian
Offshore Company, a Burlington Resources Inc. affiliate, became the managing
general partner of the Partnership and Meridian Offshore Aquisition Company
became the special general partner.
Also on April 26, 1994, Burlington Resources Inc. announced that it intends
to acquire the remaining Units through merger for $4.48 per Unit.
-8-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On April 27, 1994, a purported class action entitled Susser vs. Burlington
Resources Inc., Diamond Shamrock Offshore Partners Limited Partnership, Maxus
Energy Corporation, et al. (C.A. No. 13483) (the "Action") was filed in the
Delaware Chancery Court. The complaint alleges, among other things, that (i)
Maxus failed to adhere to its purported fiduciary duties to minority holders of
units of limited partnership interest ("Units") to attempt to achieve the
highest possible price for the Partnership, (ii) the proposed purchase price to
be paid to Unit holders does not represent the true value of the assets and
future prospects underlying the limited partnership interests in the
Partnership, (iii) the proposed transaction serves no legitimate business
purpose of the Partnership, but is an attempt to benefit Burlington Resources
Inc. ("BR") unfairly at the expense of Unit holders, (iv) the proposed purchase
price to be paid to Unit holders is unconscionable, unfair and grossly
inadequate because, among other things, the market value and intrinsic value of
the Units was and is materially in excess of $4.48 per Unit and the purchase
price is not the result of arm's length negotiations and (v) BR and Maxus have
breached and continue to breach their purported fiduciary duties as past and
present controlling security holders of the Partnership. The complaint seeks,
among other things, preliminary and permanent injunctive relief and unspecified
damages. BR and Meridian Offshore Company believe that the Action is wholly
without merit and intend to contest it vigorously.
ITEM 5. OTHER INFORMATION.
(a) On April 26, 1994, Maxus Energy Corporation ("Maxus"), Maxus Offshore
Exploration Company and Maxus Exploration Company sold all their interests in
the Partnership consisting of the general partners' interests and units of
limited partnership interest ("Units") to affiliates of Burlington Resources
Inc. for an aggregate $291.1 million. Maxus' aggregate ownership interest in
the Partnership was approximately 87.1%. As a result of the sale, Meridian
Offshore Company, a Burlington Resources Inc. affiliate, became the managing
general partner of the Partnership and the owner of all 64,163,885 Units
formerly owned by Maxus and Meridian Offshore Acquisition Company became the
special general partner.
(b) Pro forma Financial Information -- On April 25, 1994, the Partnership
sold its interests in Main Pass Blocks 72, 73 and 74, offshore Louisiana, to
Pogo Producing Company for approximately $18.2 million. The net book value of
these properties was $14.1 million. An unaudited pro forma balance sheet as of
March 31, 1994 has been prepared as if the sale had occurred at that date. The
unaudited pro forma statements of income for the year ended December 31, 1993
and the three months ended March 31, 1994 have been prepared as if the sale had
occurred at January 1, 1993 and January 1, 1994, respectively. The pro forma
data are not necessarily indicative of the financial results which would have
occurred had the sale been effective on those dates and should not be viewed as
indicative of the Partnership in future periods.
-9-
<PAGE>
DIAMOND SHAMROCK OFFSHORE LIMITED PARTNERSHIP
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
D.S. Offshore Adjustments
ASSETS Partners Debit Credit Pro Forma
------------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Current Assets
Note Receivable - Maxus Energy Corporation............ $ 17,328 $18,150 - $ 35,478
Accounts Receivable - oil and gas sales............... 8,819 - - 8,819
Accounts Receivable - joint interest.................. 1,519 - - 1,519
Other................................................. 454 - - 454
-------- ------- ------- --------
Total Current Assets............................... 28,120 18,150 - 46,270
-------- ------- ------- --------
Oil and Gas Properties and Equipment - held for sale,
net..................................................... 14,116 - $14,116 -
-------- ------- ------- --------
Oil and Gas Properties and Equipment..................... 598,496 - - 598,496
Less - Accumulated depreciation and depletion......... 472,791 - - 472,791
-------- ------- ------- --------
125,705 - - 125,705
-------- ------- ------- --------
$167,941 $18,150 $14,116 $171,975
======== ======= ======= ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts Payable..................................... $ 13,660 - - $ 13,660
Take-or-pay liability................................ 1,600 - - 1,600
-------- ------- ------- --------
Total Current Liabilities.......................... 15,260 - - 15,260
Other Liabilities and Deferred Credits.................. 3,763 - - 3,763
Take-or-Pay Liability................................... 5,067 - - 5,067
Partners' Capital....................................... 143,851 - $ 4,034 147,885
-------- ------- ------- --------
$167,941 - $ 4,034 $171,975
======== ======= ======= ========
</TABLE>
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<PAGE>
DIAMOND SHAMROCK OFFSHORE LIMITED PARTNERSHIP
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Historical Pro Forma
D.S. Offshore Adjustments
Partners Debit Credit Pro Forma
------------- --------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Sales and operating revenues - trade...................... $37,988 $6,600 - $31,388
Sales and operating revenues - associated companies....... 49,081 1,849 - 47,232
Other revenues, net....................................... (3,395) - - (3,395)
------------- --------- ---------- ----------
83,674 8,449 - 75,225
COSTS AND EXPENSES
Production and operating costs............................ 17,551 - $1,355 16,196
Exploration, including exploratory dry holes.............. 8,484 - - 8,484
Depreciation and depletion................................ 39,564 - 3,316 36,248
General and administrative expenses....................... 5,553 - - 5,553
------------- --------- ---------- ----------
71,152 - 4,671 66,481
NET INCOME................................................... 12,522 8,449 4,671 8,744
General Partner's Interest................................ 125 85 47 87
------------- --------- ---------- ----------
NET INCOME APPLICABLE TO LIMITED PARTNERS.................... $12,397 $8,364 $4,624 $ 8,657
============= ========= ========== ==========
NET INCOME PER UNIT.......................................... $ 0.17 - - $ 0.12
============= ========= ========== ==========
AVERAGE UNITS OUTSTANDING.................................... 73,761,740 73,761,740
</TABLE>
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<PAGE>
DIAMOND SHAMROCK OFFSHORE LIMITED PARTNERSHIP
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
D.S. Offshore Adjustments
Partners Debit Credit Pro Forma
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Sales and operating revenues - trade.................. $ 3,476 $1,116 -- $ 2,360
Sales and operating revenues - associated companies... 17,218 398 -- 16,820
Other revenues, net................................... 443 -- -- 443
------------- ------------- ------------- -------------
21,137 1,514 -- 19,623
COSTS AND EXPENSES
Production and operating costs........................ 3,943 -- $118 3,825
Exploration, including exploratory dry holes.......... 794 -- -- 794
Depreciation and depletion............................ 10,334 -- 649 9,685
General and administrative expenses................... 1,296 -- -- 1,296
------------- ------------- ------------- -------------
16,367 -- 767 15,600
NET INCOME.............................................. 4,770 1,514 767 4,023
General Partner's Interest............................ 48 15 7 40
------------- ------------- ------------- -------------
NET INCOME APPLICABLE TO LIMITED PARTNERS............... $ 4,722 $1,499 $760 $ 3,983
============= ============= ============= =============
NET INCOME PER UNIT..................................... $ 0.06 -- -- $ 0.05
============= ============= ============= =============
AVERAGE UNITS OUTSTANDING............................... 73,761,740 73,761,740
</TABLE>
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
None
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<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Managing General Partner of the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
DIAMOND SHAMROCK OFFSHORE PARTNERS
LIMITED PARTNERSHIP,
a Delaware limited partnership
By: MERIDIAN OFFSHORE COMPANY
Managing General Partner
May 9, 1994 By: Hays R. Warden
---------------------------------------
Hays R. Warden, Senior Vice President
and Controller, on behalf of the
Registrant and as the principal
accounting officer of its Managing
General Partner
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