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 September 30, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-9033
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SUN ENERGY PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
DELAWARE 75-2070723
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
13155 NOEL ROAD, DALLAS, TEXAS 75240-5067
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(Address of principal executive offices) (Zip code)
(214) 715-4000
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(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
---
The number of depositary units outstanding as of October 31,
1994 was 7,543,100.
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SUN ENERGY PARTNERS, L.P.
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the
Three and Nine Months Ended September 30, 1994 and 1993 3
Condensed Consolidated Balance Sheets at September 30,
1994 and December 31, 1993 4
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1994 and 1993 5
Notes to Condensed Consolidated Financial Statements 6
Report of Independent Accountants 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
SUN ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months For the Nine Months
(Millions of Dollars, Ended September 30 Ended September 30
Except Per Unit Amounts) 1994 1993 1994 1993
------ ------ ------ ------
(Unaudited)
REVENUES
Oil and gas $ 145 $ 168 $ 470 $ 522
Other 3 (3) (9) (3)
------- ------- ------- ------
148 165 461 519
------- ------- ------- ------
COSTS AND EXPENSES
Operating costs 51 49 149 149
Production taxes 11 10 33 37
Exploration costs 5 8 40 27
Depreciation, depletion
and amortization 56 65 175 190
General and admini-
strative expense 11 15 41 53
Interest and debt
expense 3 4 10 10
Provision for
restructuring (Note 2) - - 84 -
------- ------- ------- ------
137 151 532 466
------- ------- ------- ------
Net Income (Loss) $ 11 $ 14 $ (71) $ 53
======= ======= ======= =======
Net Income (Loss) Per
Unit $ .03 $ .03 $ (.17) $ .13
======= ======= ======= =======
Cash Distributions Paid
to Unitholders $ 29 $ 95 $ 92 $ 264
======= ======= ======= =======
Cash Distributions Per
Unit $ .07 $ .23 $ .22 $ .64
======= ======= ======= =======
Weighted Average Number
of Units Outstanding
(in thousands) 421,171 412,550 421,171 412,487
======= ======= ======= =======
(See Accompanying Notes)
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SUN ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December 31
(Millions of Dollars) 1994 1993
------ ------
(Unaudited)
ASSETS
Current Assets
Cash and short-term investments $ 12 $ 4
Accounts and notes receivable
and other current assets 98 113
-------- --------
Total Current Assets 110 117
Properties, Plants and Equipment
(Note 3) 1,457 1,625
Deferred Charges and Other Assets 79 80
-------- --------
Total Assets $ 1,646 $ 1,822
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Advances from affiliate $ 38 $ 22
Accounts payable 65 92
Accrued liabilities 68 58
Current portion of long-term debt
due affiliate 9 9
Current portion of long-term debt 2 5
-------- --------
Total Current Liabilities 182 186
Long-Term Debt Due Affiliate 75 82
Long-Term Debt 3 4
Deferred Credits and Other Liabilities 24 25
Partners' Capital (Note 4)
Limited partnership interests 418 468
General partnership interests 944 1,057
-------- --------
Partners' Capital 1,362 1,525
-------- --------
Total Liabilities and Partners'
Capital $ 1,646 $ 1,822
======== ========
The successful efforts method of accounting is followed.
(See Accompanying Notes)
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SUN ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30
(Millions of Dollars) 1994 1993
------ ------
(Unaudited)
CASH FROM OPERATING ACTIVITIES
Net income (loss) $ (71) $ 53
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Depreciation, depletion and
amortization 175 190
Dry hole costs and leasehold
impairment 23 3
Loss (gain) on divestments 5 (2)
Provision for restructuring 84 -
Other 1 2
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217 246
Changes in working capital:
Accounts and notes receivable and
other current assets 14 31
Accounts payable and accrued
liabilities and advances from
affiliates (1) 5
------- -------
Net Cash Flow Provided From Operating
Activities 230 282
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INVESTING ACTIVITIES
Capital expenditures (115) (137)
Proceeds from divestments 3 37
Other (7) (4)
------- -------
Net Cash Flow Used For Investing
Activities (119) (104)
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FINANCING ACTIVITIES
Proceeds from borrowings of long-term
debt - 6
Repayments of long-term debt (11) (12)
Sale of limited partnership units - 70
Cash distributions paid to unitholders (92) (264)
------- -------
Net Cash Flow Used For Financing
Activities (103) (200)
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Changes In Cash and Cash Equivalents 8 (22)
Cash and Cash Equivalents at Beginning
of Period 4 27
------- -------
Cash and Cash Equivalents at End of
Period $ 12 $ 5
======= =======
(See Accompanying Notes)
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SUN ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying condensed consolidated financial statements
and related notes of Sun Energy Partners, L.P. and its
subsidiaries (hereinafter, unless the context otherwise requires,
being referred to as the Partnership) are presented in accordance
with the requirements of Form 10-Q and do not include all
disclosures normally required by generally accepted accounting
principles or those normally made in annual reports on Form 10-K.
In management's opinion, all adjustments necessary for a fair
presentation of the results of operations for the periods shown
have been made and are of a normal recurring nature. The results
of operations of the Partnership for the nine months ended
September 30, 1994 are not necessarily indicative of the results
for the full year 1994.
Statements of Cash Flows
Amounts paid for interest were as follows:
Nine Months Ended September 30
1994 1993
------ ------
(Millions of Dollars)
Interest paid (net of capitalized
amounts) $ 10 $ 10
In accordance with Statement of Financial Accounting Standards
No. 95, "Statement of Cash Flows," non-cash transactions are not
reflected within the accompanying Condensed Consolidated
Statements of Cash Flows.
2. Provision for Restructuring
In March 1994, Oryx Energy Company (Company) adopted plans
designed to achieve significant future cost reductions for the
Partnership by disposing of certain assets. Associated
therewith, the Partnership recognized an $84 million charge in
the first quarter of 1994. Management of the Company expects the
Partnership to realize about $66 million of cost reductions in
1995 resulting from a combination of asset disposals and reduced
management fees as a result of the Company's major cost reduction
program.
During 1993, the properties included in the divestment plan
accounted for about four percent of the Partnership's oil and gas
production and at December 31, 1993, they accounted for about
eight percent of the Partnership's net investment in properties,
plants and equipment. The asset disposals will be completed
during the fourth quarter of 1994.
3. Properties, Plants and Equipment
June 30 December 31
1994 1993
------ ------
(Millions of Dollars)
Gross investment ............... $4,230 $4,247
Less accumulated depreciation,
depletion and amortization ... 2,773 2,622
------- -------
Net investment $1,457 $1,625
======= =======
4. Partners' Capital
At September 30, 1994, the ownership of the Partnership was
comprised of a 69 percent general partnership interest and a 31
percent limited partnership interest. Oryx Energy Company holds
a 98 percent interest in the Partnership. A two percent limited
partnership interest in the form of depositary units is held by
the public. As of September 30, 1994, there was a total of 421.2
million units outstanding.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Sun Energy Partners, L.P., and the Board of
Directors of Oryx Energy Company:
We have made a review of the condensed consolidated balance sheet
of Sun Energy Partners, L.P. and its Subsidiaries as of September
30, 1994, the related condensed consolidated statements of income
for the three and nine months ended September 30, 1994 and 1993
and the related condensed consolidated statements of cash flows
for the nine months ended September 30, 1994 and 1993, in
accordance with standards established by the American Institute
of Certified Public Accountants.
A review of interim financial information consists principally of
obtaining an understanding of the system for the preparation of
interim financial information, applying analytical review
procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December
31, 1993, and the related consolidated statements of income and
cash flows for the year then ended (not presented herein); and in
our report dated February 19, 1994, we expressed an unqualified
opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1993 is fairly
stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
Dallas, Texas
November 7, 1994
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION
At September 30, 1994, cash and cash equivalents were $12 million
compared to $4 million at December 31, 1993. The $8 million
increase in cash and cash equivalents was comprised of $230
million provided from operating activities, $119 million used for
investing activities and $103 million used for financing
activities. The $230 million net cash flow provided from
operating activities was comprised of $217 million net cash flow
provided from operating activities before changes in current
assets and liabilities and $13 million net cash flow provided
from changes in current assets and liabilities. The $217 million
net cash flow provided from operating activities before changes
in current assets and liabilities was unfavorably impacted by
declines in crude oil prices and volumes partially offset by an
increase in natural gas volumes. The $13 million net cash flow
provided from changes in current assets and liabilities consisted
of a $14 million decrease in accounts and notes receivable and
other current assets, partially offset by a $1 million decrease
in accounts payable and accrued liabilities.
The $119 million net cash flow used for investing activities
consisted primarily of $115 million used for capital
expenditures. The $103 million net cash flow used for financing
activities resulted from the scheduled payment of $11 million of
long-term debt and $92 million of cash distributions paid to
unitholders.
On behalf of the Partnership, Oryx Energy Company, from time to
time, enters into oil and gas futures agreements to hedge the
impact of price fluctuations on anticipated crude oil and natural
gas sales. These agreements expose the Partnership to market risk
in instances where the applied settlement price is greater than
the ceiling price specified in the agreements, and to credit risk
from nonperformance by the counterparties. The counterparties to
the Partnership's oil and gas futures agreements are major
financial institutions. The Partnership believes that losses
from nonperformance by counterparties are unlikely to occur.
In March 1994, Oryx Energy Company adopted plans designed to
achieve significant future cost reductions for the Partnership by
disposing of certain assets. Associated therewith, the
Partnership recognized an $84 million charge in the first quarter
of 1994. Management of Oryx Energy Company expects the
Partnership to realize about $66 million of cost reductions in
1995 resulting from a combination of asset disposals and reduced
management fees as a result of Oryx Energy Company's major cost
reduction program.
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - continued
FINANCIAL CONDITION - (continued)
During 1993, the properties included in the divestment plan
accounted for about four percent of the Partnership's oil and gas
production and at December 31, 1993, they accounted for about
eight percent of the Partnership's net investment in properties,
plants and equipment. The asset disposals will be completed
during the fourth quarter of 1994.
An analysis of the 1994 provision for restructuring follows (in
millions of dollars):
Activity Balance
Initial through at
Provision 9/30/94 9/30/94
--------- -------- -------
Proceeds from Divestment of Assets* (40) (3) (37)
Book Value of Assets to be Divested* 124 48 76
Total Provision 84 45 39
* Proceeds from the divestment of assets and the book value of
such assets are a result of the Partnership's
program to consolidate its onshore position into 6 primary
states. The asset disposals will be completed
during the fourth quarter of 1994.
A third quarter cash distribution of $.07 per unit was paid on
September 9, 1994. A fourth quarter
cash distribution of $.05 per unit has been declared by Oryx
Energy Company's Board of Directors and
will be paid on December 9, 1994 to unitholders of record on
November 18, 1994.
On September 1, 1994, a purchase and sale agreement was signed
whereby the Partnership received
Conoco's royalty interest in the undeveloped Viosca Knoll 826
unit and, in exchange, Conoco will
purchase the Partnership's interest in the undeveloped
Mississippi Canyon 243 unit. The Partnership
operates and owns a 50-percent interest in the four-block Viosca
Knoll 826 unit where a multi-phase
development plan is currently under consideration and should be
finalized later this year. There were
no plans to develop the Mississippi Canyon 243 discovery.
On October 13, 1994, Robert P. Hauptfuhrer, Chairman and CEO of
Oryx Energy Company,
announced his plans to retire effective December 1, 1994. The
Board of Directors elected Robert L.
Keiser, current President and Chief Operating Officer, to succeed
Hauptfuhrer on that same date as
Oryx Energy Company's Chairman, Chief Executive Officer and
President.
During the fourth quarter, the Partnership will complete the sale
of its previously identified onshore
assets culminating in $40 million in proceeds for the year. As a
result of the consolidation of the
onshore business, the Partnership expects to achieve the
previously announced targeted $66 million
annual cost reduction benefit in 1995.
RESULTS OF OPERATIONS - NINE MONTHS
The net loss for the first nine months of 1994 was $71 million,
compared to net income of $53 million
in the first nine months of 1993. Revenues for the nine months
were $461 million in 1994 versus $519
million in 1993. Year-to-date 1994 results include a special $84
million restructuring charge and $5
million of losses on asset sales. In the same period last year
gains from asset sales were $2 million.
Production of crude oil and condensate was 49 thousand barrels
daily during the first nine months of
1994 compared to production of 55 thousand barrels daily for the
first nine months of 1993. The
crude oil and condensate price in the first nine months of 1994
decreased to $14.43 per barrel, as
compared to $16.69 per barrel in the same period last year.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of
Operations - continued
RESULTS OF OPERATIONS - NINE MONTHS - (continued)
Production of natural gas for the first nine months of 1994 was
533 million cubic feet daily compared
to production of 518 million cubic feet daily for the same period
in 1993. The natural gas price was
$1.92 per thousand cubic feet for the first nine months of 1994
and 1993.
RESULTS OF OPERATIONS - THREE MONTHS
The Partnership reported net income of $11 million, or $.03 per
unit, for the quarter ended September
30, 1994, compared to net income of $14 million, or $.03 per
unit, for the same quarter last year.
Revenues for the 1994 third quarter were $148 million versus $165
million for the 1993 third quarter.
In the quarter-to-quarter comparison, oil production decreased 8
thousand barrels per day while gas
production increased 20 million cubic feet per day. Comparing
prices for the third quarter of 1994
versus 1993, oil was approximately the same while natural gas
fell by $.19 per mcf.
Production of crude oil and condensate for the third quarter of
1994 was 47 thousand barrels daily
compared to production for the third quarter of 1993 of 55
thousand barrels daily. The average crude
oil and condensate price in the third quarter of 1994 increased
to $15.34 per barrel, as compared to
$15.33 per barrel in the same period in 1993.
Production of natural gas for the third quarter of 1994 was 536
million cubic feet daily compared to
production of 516 million cubic feet daily for the third quarter
of 1993. The average natural gas price
in the third quarter of 1994 was $1.71 per thousand cubic feet,
as compared to $1.90 per thousand
cubic feet in the same period in 1993.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K:
The Partnership did not file any reports on Form 8-K
during the quarter ended
September 30, 1994.
******************
We are pleased to furnish this report to unitholders who
request it by writing to:
Sun Energy Partners, L.P. Unitholder Relations
c/o Oryx Energy Company
Managing General Partner
P.O. Box 60
Dallas, Texas 75221-0060
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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.
SUN ENERGY PARTNERS, L.P.
BY ORYX ENERGY COMPANY
(Managing General Partner)
BY /s/ E. W. Moneypenny
E. W. Moneypenny
(Senior Vice President, Finance, and Chief Financial
Officer)
DATE: November 14, 1994
<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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