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 period ended: JUNE 30, 1995
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: 0-15905
BLUE DOLPHIN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 73-1268729
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ELEVEN GREENWAY PLAZA, SUITE 1606, HOUSTON, TEXAS 77046
(Address of principal executive offices) (Zip Code)
(713) 621-3993
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report.)
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
34,957,118 shares $.01 par value outstanding at August 11, 1995
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PART. I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements of Blue Dolphin Energy
Company and Subsidiaries (the "Company") included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and, in the
opinion of management, reflect all adjustments necessary to present a
fair statement of operations, financial position and cash flows. The
Company follows the full cost method of accounting for oil and gas
properties, wherein costs incurred in the acquisition, exploration and
development of oil and gas reserves are capitalized. The Company
believes that the disclosures are adequate and the information presented
is not misleading, although certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations.
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
____________ ____________
(Unaudited)
ASSETS
Current Assets:
Cash $ 525,123 $ 434,157
Trade accounts receivable 769,512 774,362
Inventory 7,210 17,350
Prepaid expenses and other current assets 325,164 217,203
____________ _____________
Total Current Assets 1,627,009 1,443,072
Property and equipment, at cost, using full
cost method for oil and gas properties 21,503,080 21,643,280
Accumulated depletion, depreciation
and amortization (4,322,884) (4,299,078)
____________ ____________
17,180,196 17,344,202
Land 1,700,000 1,700,000
Other assets 520,118 272,064
____________ ____________
Total Assets $ 21,027,323 $ 20,759,338
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 652,273 $ 749,720
Current portion of long-term debt 2,190,450 1,392,299
Current portion of accrued abandonment costs 570,989 716,144
____________ ____________
Total Current Liabilities 3,413,712 2,858,163
Long-Term Debt, less current portion 3,825,000 4,450,000
Accrued Abandonment Costs, less current portion 1,672,118 1,924,321
Dividends Payable on Preferred Stock 1,602,044 1,456,442
Cumulative Convertible Preferred Stock 1,456,048 1,456,048
Common Stock 349,405 343,791
Additional Paid in Capital 13,465,161 13,210,354
Accumulated Deficit since January 1, 1990 (4,756,165) (4,939,781)
____________ ___________
Total Liabilities and
Stockholders' Equity $ 21,027,323 $ 20,759,338
============ ============
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF OPERATIONS - UNAUDITED
Three Months
Ended June 30,
_________________________
1995 1994
____________ ____________
Revenue from operations:
Pipeline operations $ 1,229,277 $ 1,354,113
Oil and gas sales and operating fees 351,771 496,374
____________ ____________
REVENUE FROM OPERATIONS 1,581,048 1,850,487
Cost of operations:
Pipeline operating expenses 313,840 229,224
Lease operating expenses 178,418 208,788
Repair and maintenance costs 95,670 87,407
Depletion, depreciation, and amortization 166,436 210,391
____________ ____________
COST OF OPERATIONS 754,364 735,810
____________ ____________
826,684 1,114,677
Other income (expense):
General and administrative (362,459) (399,994)
Interest expense (155,638) (150,686)
Interest and other income 4,681 298
____________ ____________
INCOME BEFORE INCOME TAXES 313,268 564,295
Provision for income taxes (115,916) (219,087)
____________ ___________
NET INCOME 197,352 345,208
Dividend requirements on preferred stock 72,801 72,801
____________ ____________
Net income applicable to common stockholders $ 124,551 $ 272,407
============ ============
Net income per common share $ 0.003 $ 0.006
============ ============
Weighted average number of common and common
equivalent shares outstanding 46,659,352 48,337,968
============ ============
Net income per common share (fully diluted) $ 0.005
============
Weighted average number of common and common
equivalent shares outstanding (fully diluted) 62,898,443
============
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF OPERATIONS - UNAUDITED
Six Months
Ended June 30,
----------------------------
1995 1994
------------- -------------
Revenue from operations:
Pipeline operations $ 2,414,485 $ 2,558,513
Oil and gas sales and operating fees 645,166 1,002,020
------------- -------------
REVENUE FROM OPERATIONS 3,059,651 3,560,533
Cost of operations:
Pipeline operating expenses 595,804 469,023
Lease operating expenses 425,543 407,484
Repair and maintenance costs 176,641 289,185
Depletion, depreciation, and amortization 319,058 385,829
------------- -------------
COST OF OPERATIONS 1,517,046 1,551,521
------------- -------------
1,542,605 2,009,012
Other income (expense):
General and administrative (721,896) (751,921)
Interest expense (301,855) (320,568)
Interest and other income 8,461 36,095
------------- -------------
INCOME BEFORE INCOME TAXES 527,315 972,618
Provision for income taxes (198,097) (385,142)
------------- -------------
INCOME BEFORE EXTRAORDINARY ITEM 329,218 587,476
Extraordinary item-gain from early
retirement of debt, net of income taxes --- 616,695
------------- -------------
NET INCOME 329,218 1,204,171
Dividend requirements on preferred stock 145,602 145,602
------------- -------------
Net income applicable to common stockholders $ 183,616 $ 1,058,569
============= =============
Net income per common share, extraordinary item --- $ 0.013
=============
Net income per common share $ 0.004 $ 0.022
============= =============
Weighted average number of common and common
equivalent shares outstanding 46,914,141 48,358,971
============= =============
Net income per common share (fully diluted) $ 0.019
=============
Weighted average number of common and common
equivalent shares outstanding (fully diluted) 63,103,237
=============
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
<TABLE>
<CAPTION> Six Months
Ended June 30,
---------------------------
1995 1994
----------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 329,218 $ 1,204,171
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary gain-early retirement of debt,
net of income taxes --- (616,695)
Depletion, depreciation and amortization 319,058 385,829
Gain on sale of securities --- (33,678)
Unrealized appreciation on government bonds --- (4,680)
Charge in lieu of taxes 169,597 312,942
Changes in operating assets and liabilities:
(Increase) Decrease in trade accounts receivable 4,851 (13,017)
(Increase) Decrease in prepaid expenses, crude
inventory and other assets (97,821) 6,127
(Decrease) in accounts payable and accrued
expenses (541,176) (631,019)
----------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 183,727 609,980
INVESTING ACTIVITIES
Purchases of property and equipment (75,155) (567,038)
Investment in other assets (217,084) ---
Proceeds from redemption of investments --- 305,688
Exploration and development costs (1,280) (89,784)
----------- -------------
NET CASH (USED IN)
INVESTING ACTIVITIES (293,519) (351,134)
FINANCING ACTIVITIES
Payments on borrowings (751,849) (5,664,470)
Proceeds from borrowings 925,000 5,321,284
Funds escrowed for future abandonment obligations (63,217) (87,657)
Net proceeds from capital funding 90,824 56,260
----------- -------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 200,758 (374,583)
----------- -------------
(INCREASE) DECREASE IN CASH 90,966 (115,737)
CASH AT BEGINNING OF YEAR 434,157 650,933
----------- -------------
CASH AT JUNE 30, $ 525,123 $ 535,196
=========== =============
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid $ 301,289 $ 657,000
=========== =============
Income taxes paid $ 37,600 $ 69,450
=========== =============
</TABLE>
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a review of certain aspects of the financial condition
and results of operations of the Company and should be read in
conjunction with the Condensed Consolidated Financial Statements of the
Company included in Item 1. of this report.
First half 1995 revenues declined 14% to $3,059,651 compared to revenues
of $3,560,533 reported for the first half 1994. Excluding a $616,695
extraordinary gain recorded in the first half 1994, first half 1995 net
income decreased $258,258 or 44% to $329,218 compared to net income of
$587,476 in the first half 1994.
Both first half 1995 and 1994 included provisions for income taxes of
$198,097 and $702,833 respectively, of which $169,597 and $630,633 are
offset with increases to paid in capital, reflecting utilization of net
operating loss carryforwards that were incurred prior to a
quasi-reorganization recorded at December 31, 1989.
FINANCIAL CONDITION
Working capital and liquidity have been adversely affected by reduced
Buccaneer Field production and lower gas prices received for Buccaneer
Field gas sales. First half 1995 transportation revenues decreased
slightly from first half 1994. Lower gas throughput was offset in part
by increased oil and condensate throughput. Additionally, an increase
in the current portion of long term debt has resulted in an increase in
the working capital deficit.
Although no significant change is expected in the Company's oil and gas
production activities in the short term, revenues from its pipeline
operations business segment are expected to improve. During the first
half 1995, an existing shipper drilled and completed two new oil wells.
Production from the first well commenced in May 1995. However,
production was shut-in during most of June and July while the offshore
platform facilities were being modified to handle the increased oil
production. The Company is planning to increase the capacity of its
onshore oil and condensate facilities. Costs associated with the
onshore capacity expansion are estimated to be $550,000, with completion
of the modifications expected by mid-November 1995. The Company plans
to fund the expansion with its reducing revolving credit facility and/or
vendor financing.
At June 30, 1995, the Company's working capital deficit (current assets
less current liabilities) increased by $371,612 to $1,786,703 compared
with a working capital deficit of $1,415,091 at December 31, 1994.
The Company's $10,000,000 reducing revolving credit facility with Bank
One, Texas, N.A. provides for the borrowing availability and reducing
amount to be redetermined semi-annually or at such other times as may be
requested by the Company. Effective May 1, 1995, the borrowing base was
increased from $5,500,000 to $6,100,000, reducing by $175,000 per month
beginning June 1, 1995. The facility was made available for debt
retirement and consolidation, and to finance working capital needs,
including the acquisition of oil and gas reserve based assets.
The Loan Agreement includes certain restrictive covenants, including
restrictions on the payment of dividends on capital stock, and the
maintenance of certain financial coverage ratios.
The Company's 3-D seismic based offshore prospect generation program has
resulted in generation of several prospects available for sale.
Discussions with potential program participants and/or candidates for
the purchase of individual prospects are ongoing. The Company does not
intend to invest in the development of a significant prospect
inventory, but rather will limit its investment to prospects salable
shortly after completion, to limit out of pocket costs associated with
the program.
In March 1995, the acquisition of Petroport, L.C. was completed.
Petroport, L.C. holds proprietary technology, represented by certain
patents issued and/or pending, associated with the development and
operation of an offshore deepwater crude oil and products port and
storage facility. The form of the transaction was a merger of
Petroport, L.C. into Petroport, Inc., a wholly owned subsidiary of the
Company.
Consideration paid included a small amount of cash and future
consideration contingent upon the successful development and operation
of the primary Petroport facility, planned for the western Gulf of
Mexico off the Texas coast. The contingent consideration primarily
includes the issuance of Common Stock, with issuance dependent upon
successful completion of the facility and maintaining a prespecified
throughput volume.
The Petroport offshore terminal and storage facility will receive and
store imported crude oil and refined products with deliveries into U.S.
markets. Petroport will provide importers with a competitive and
environmentally attractive alternative to the lightering of large
tankers as well as low cost, long-term storage of crude oil and
products. Cost of the facility is currently estimated at approximately
$500 million, with operations expected to commence in 1999.
The Company is continuing to evaluate resources needed to meet current
working capital and growth requirements. Combinations of utilization of
the existing credit facility, vendor financings, asset monetization and
additional investment in the Company will be sought to meet requirements
and goals.
In general, the Company believes that it has or can obtain adequate
capital resources and liquidity to continue to finance and otherwise
meet its anticipated business requirements. However, if the Company's
or its transportation system customers' oil and gas production were to
substantially decline, or if prices for the Company's oil and gas
production substantially decline or if purchases by Dow and the
Company's other oil and gas transportation system customers are
substantially curtailed, the Company's cash needs could impose
significant additional financing requirements on the Company. Depending
upon the timing and amounts of required payments, restrictions in
certain of the Company's outstanding debt instruments, and other
factors, the liquidity of the Company could be adversely affected, with
the Company not being able to raise all of the funds needed. Even if it
were able to finance such amounts, the financing could place severe
restrictions on capital resources and business operations.
RESULTS OF OPERATIONS
Net income for the six months ended June 30, 1995, ("current period")
represents a decrease of $874,953 or 73%, compared to net income of
$1,204,171 reported for the corresponding period of the previous year
("previous period"). Previous period net income included an
extraordinary gain from early retirement of debt of $616,695.
REVENUES:
Revenues for the current period decreased from those of the previous
period by $500,882 or 14%.
Revenues from pipeline operations decreased by $144,028 or 6% during the
current period. Gas transportation revenues decreased by $531,854 due
primarily to production declines. However, the decrease in gas
transportation revenues were substantially offset by an increase in oil
transportation revenues of $388,702, resulting from an increase in
throughput volumes from an existing shipper.
Oil and gas sales and operating fees decreased in the current period
from those of the previous period by $356,854. Gas sales decreased
$294,574 due to a 44% decline in Buccaneer Field gas production and a
12% decline in gas prices.
COSTS AND EXPENSES:
Pipeline operating expenses for the current period increased by $126,781
from those of the previous period. The increase was due primarily to
incremental costs associated with the transportation and handling of
increased oil throughput.
Repair and maintenance costs for the current period decreased by
$112,544. The decrease was due primarily to non-recurring costs of
approximately $160,000 associated with repairs to the Blue Dolphin
Pipeline in the previous period, offset in part by non-recurring
maintenance costs associated with the Company's offshore production
facilities incurred in the current period.
Depletion, depreciation, and amortization expense for the current period
decreased by $66,771 compared to the previous period. The decrease
resulted from decreased depletion due to decreased gas sales in the
current period.
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
A) Exhibits - None
B) Form 8-K - None
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES
SIGNATURES
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.
By: BLUE DOLPHIN ENERGY COMPANY
Date: August 11, 1995
Michael J. Jacobson
Michael J. Jacobson
President and Chief Executive Officer
G. Brian Lloyd
G. Brian Lloyd
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES' CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 525,123
<SECURITIES> 0
<RECEIVABLES> 769,512
<ALLOWANCES> 0
<INVENTORY> 7,210
<CURRENT-ASSETS> 1,627,009
<PP&E> 23,203,080
<DEPRECIATION> 4,322,884
<TOTAL-ASSETS> 21,027,323
<CURRENT-LIABILITIES> 3,413,712
<BONDS> 3,825,000
<COMMON> 349,405
0
1,456,048
<OTHER-SE> 8,708,996
<TOTAL-LIABILITY-AND-EQUITY> 21,027,323
<SALES> 373,372
<TOTAL-REVENUES> 3,059,651
<CGS> 609,393
<TOTAL-COSTS> 2,238,942
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 301,855
<INCOME-PRETAX> 527,315
<INCOME-TAX> 198,097
<INCOME-CONTINUING> 329,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 329,218
<EPS-PRIMARY> .004
<EPS-DILUTED> 0
</TABLE>
