<PAGE>
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
For the transition period from to
Commission file number 1-9033
SUN ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2070723
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
13155 NOEL ROAD, DALLAS, TEXAS 75240-5067
(Address of principal executive offices) (Zip code)
(972) 715-4000
(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
The number of depositary units outstanding as of April 30,
1998 was 421,170,459.
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PAGE 2
SUN ENERGY PARTNERS, L.P.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Income for the Three Months Ended March
31, 1998 and 1997 ........................ 3
Condensed Consolidated Balance Sheets at
March 31, 1998 and December 31, 1997 ..... 4
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 1998 and 1997 ................. 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 ........ 11
SIGNATURE ........................................... 12
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PAGE 3
PART I
FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
SUN ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For the Three Months
(Millions of Dollars, Except Ended March 31
Per Unit Amounts) 1998 1997
(Unaudited)
<S> <C> <C>
Revenues
Oil and gas $ 138 $ 204
Other 8 (4)
----- -----
146 200
----- -----
Costs and Expenses
Operating costs 37 34
Production taxes 8 11
Exploration costs 41 10
Depreciation, depletion and
amortization 49 52
General and administrative
expense 11 10
Interest and debt expense 4 4
Interest capitalized (4) (4)
----- -----
146 117
----- -----
Net Income $ - $ 83
===== =====
Net Income Per Unit $ - $ .20
===== =====
Cash Distributions Paid Per Unit $.02 $ .15
===== =====
Weighted Average Number of Units
Outstanding (in thousands) 421,171 421,171
======= =======
<FN>
(See Accompanying Notes)
</TABLE>
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PAGE 4
<TABLE>
SUN ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
(Millions of Dollars) 1998 1997
(Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and short-term investments $ 1 $ 2
Accounts receivable and
other current assets 86 124
------ ------
Total Current Assets 87 126
Properties, Plants and Equipment
(Note 2) 1,338 1,254
Investment in Affiliate 83 83
Other 4 5
------ ------
Total Assets $1,512 $1,468
====== ======
Liabilities and Partners' Capital
Current Liabilities
Accounts payable $ 139 $ 80
Accrued liabilities 71 84
Advances from affiliate 72 49
Current portion of long-term debt
due affiliate 13 13
Current portion of long-term debt 1 1
------ ------
Total Current Liabilities 296 227
Long-Term Debt due Affiliate 34 38
Deferred Credits and Other
Liabilities 37 49
Partners' Capital (Note 3)
Limited partnership interests 351 354
General partnership interests 794 800
------ ------
Partners' Capital 1,145 1,154
------ ------
Total Liabilities and Partners'
Capital $1,512 $1,468
====== ======
<FN>
The successful efforts method of accounting is followed.
(See Accompanying Notes)
</TABLE>
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PAGE 5
<TABLE>
SUN ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Three Months
Ended March 31
(Millions of Dollars) 1998 1997
(Unaudited)
<S> <C> <C>
Cash and Cash Equivalents From Operating
Activities
Net income $ - $ 83
Adjustments to reconcile net income to
net cash from operating
activities:
Depreciation, depletion and
amortization 49 52
Dry hole costs and leasehold
impairment 26 2
Gain on divestments (5) -
Other - 4
----- -----
70 141
Changes in working capital:
Accounts receivable and
other current assets 38 50
Advances to affiliate - (16)
Accounts payable and accrued
liabilities 47 6
Advances from affiliate 23 (11)
----- -----
Net Cash Flow Provided From Operating
Activities 178 170
----- -----
Cash and Cash Equivalents From Investing
Activities
Capital expenditures (155) (99)
Proceeds from divestments - 1
Other (12) (5)
----- -----
Net Cash Flow Used For Investing
Activities (167) (103)
----- -----
Cash and Cash Equivalents From Financing
Activities
Repayments of long-term debt (3) (3)
Cash distributions paid to unitholders (9) (63)
----- -----
Net Cash Flow Used For Financing
Activities (12) (66)
----- -----
Changes In Cash and Cash Equivalents (1) 1
Cash and Cash Equivalents at Beginning
of Period 2 2
----- -----
Cash and Cash Equivalents at End
of Period $ 1 $ 3
===== =====
<FN>
(See Accompanying Notes)
</TABLE>
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PAGE 6
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 three months ended
March 31, 1998 are not necessarily indicative of the results
for the full year 1998.
The Partnership adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share," effective
January 1, 1997 resulting in no material impact. In
addition, the Partnership adopted SFAS No. 130, "Reporting
Comprehensive Income," effective January 1, 1998. Total
comprehensive income and net income are identical for the
period ended March 31, 1998.
2. Properties, Plants and Equipment
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
(Millions of Dollars)
<S> <C> <C>
Gross investment ............. $4,045 $3,923
Less accumulated depreciation,
depletion and amortization . 2,707 2,669
------ ------
Net investment $1,338 $1,254
====== ======
</TABLE>
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PAGE 7
SUN ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Partners' Capital
At March 31, 1998, 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 98.2 percent interest in the Partnership. A 1.8
percent limited partnership interest in the form of
depositary units is held by the public. As of March 31,
1998, there was a total of 421.2 million units outstanding.
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PAGE 8
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Sun Energy Partners, L.P. and
the Board of Directors of Oryx Energy Company:
We have reviewed the accompanying condensed consolidated balance
sheet of Sun Energy Partners, L.P. and its Subsidiaries as of
March 31, 1998 and the related condensed consolidated statements
of income and cash flows for the three months ended March 31,
1998 and 1997. These financial statements are the responsibility
of Oryx Energy Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
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 conducted 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 accompanying condensed
consolidated financial statements 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, 1997 and the related consolidated statements of income and
cash flows for the year then ended (not presented herein); and in
our report dated February 17, 1998, 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, 1997, is fairly
stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Coopers & Lybrand L.L.P.
Dallas, Texas
May 6, 1998
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PAGE 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION
The Partnership's cash and cash equivalents decreased by $1
million over the three months ended March 31, 1998. Cash flows
for the first quarter of 1998 included $178 million provided from
operating activities, $167 million used for investing activities
and $12 million used for financing activities. The $178 million
net cash flow provided from operating activities was comprised of
$70 million net cash flow provided from operating activities
before changes in current assets and liabilities and $108 million
of net cash flow provided from changes in current assets and
liabilities. The $70 million net cash flow provided from
operating activities before changes in current assets and
liabilities was negatively impacted by decreased crude oil and
natural gas prices and decreased natural gas volumes, offset in
part by increased crude oil production. The $108 million net cash
flow provided from changes in current assets and liabilities
consisted of a $38 million decrease in accounts receivable and
other current assets, a $47 million increase in accounts payable
and accrued liabilities and a $23 million increase in advances
from affiliate.
The $167 million net cash flow used for investing activities
consisted primarily of $155 million used for capital
expenditures. The $12 million net cash flow used for financing
activities resulted from the scheduled payment of $3 million of
long-term debt and $9 million of cash distributions paid to
unitholders.
A cash distribution in the amount of $.02 per unit was paid in
the first quarter of 1998 based on fourth quarter 1997 results.
As a result of a combination of low operating cash flow and high
capital expenditures, no cash distribution will be paid for the
1998 first quarter. Distributions will fluctuate due to oil and
gas prices, production volumes, operating costs and amount of
capital expenditures and divestment proceeds.
<PAGE>
PAGE 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
RESULTS OF OPERATIONS
Net income for the first quarter of 1998 was break-even compared
to net income of $83 million, or $.20 per unit, in the first
quarter of 1997. Revenues for the 1998 first quarter were $146
million versus $200 million for the first quarter of 1997. In
comparing the first quarter of 1998 to the first quarter of 1997,
crude oil prices decreased by $6.14 per barrel and natural gas
prices decreased $.61 per million cubic feet. Crude oil
production increased 7 thousand barrels per day and natural gas
volumes decreased 129 million cubic feet per day. The reduction
in gas volumes resulted primarily from a combination of third-
party interruptions and a well-blow-out at the Belle Isle field.
Average net production of crude oil and condensate was 48
thousand barrels daily during the first quarter of 1998 compared
to an average net production of 41 thousand barrels daily for the
first quarter of 1997. The average crude oil and condensate
price in the first quarter of 1998 decreased to $15.05 per
barrel, as compared to $21.19 per barrel in the same period last
year.
Average net production of natural gas for the first quarter of
1998 was 378 million cubic feet daily compared to average net
production of 507 million cubic feet daily for the same period in
1997. The average natural gas price for the first quarter of
1998 was $2.16 per thousand cubic feet, as compared to $2.77 per
thousand cubic feet in the same period last year.
<PAGE>
PAGE 11
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Partnership did not file any reports on Form
8-K during the quarter ended March 31, 1998.
******************
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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PAGE 12
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/Edward W. Moneypenny
Edward W. Moneypenny
(Executive Vice President, Finance,
and Chief Financial Officer)
DATE: May 11, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 73
<ALLOWANCES> 0
<INVENTORY> 3
<CURRENT-ASSETS> 87
<PP&E> 4045
<DEPRECIATION> (2707)
<TOTAL-ASSETS> 1512
<CURRENT-LIABILITIES> 296
<BONDS> 34
0
0
<COMMON> 0
<OTHER-SE> 1145
<TOTAL-LIABILITY-AND-EQUITY> 1512
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</TABLE>
