<PAGE>
UNITED STATES
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 ended June 30, 1996
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 1-10578
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VINTAGE PETROLEUM, INC.
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(Exact name of registrant as specified in charter)
Delaware 73-1182669
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4200 One Williams Center Tulsa, Oklahoma 74172
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(918) 592-0101
------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
----------------------------------------------------------------------------
(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
----- -----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1996
------- ----------------------------
Common Stock, $.005 Par Value 24,062,462
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<PAGE>
PART I
FINANCIAL INFORMATION
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<PAGE>
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In thousands, except shares
and per share amounts)
(Unaudited)
ASSETS
------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,569 $ 2,545
Accounts receivable -
Oil and gas sales 45,127 40,256
Joint operations 5,009 4,616
Prepaids and other current assets 9,240 11,665
---------- ----------
Total current assets 64,945 59,082
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, full cost method 822,033 762,582
Oil and gas gathering systems 12,817 12,765
Other 7,136 7,733
---------- ----------
841,986 783,080
Less accumulated depreciation, depletion
and amortization 238,890 205,334
---------- ----------
603,096 577,746
---------- ----------
OTHER ASSETS, net 10,461 10,711
---------- ----------
TOTAL ASSETS $ 678,502 $ 647,539
========== ==========
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
----------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Revenue payable $ 19,631 $ 16,855
Accounts payable - trade 19,237 15,514
Other payables and accrued liabilities 13,445 18,697
Current portion of long-term debt 9,945 7,930
---------- ----------
Total current liabilities 62,258 58,996
---------- ----------
LONG-TERM DEBT, less current portion above 323,752 315,846
---------- ----------
DEFERRED INCOME TAXES 44,030 37,753
---------- ----------
OTHER LONG-TERM LIABILITIES 3,469 3,922
---------- ----------
MINORITY INTEREST IN SUBSIDIARY 2,866 7,062
---------- ----------
STOCKHOLDERS' EQUITY per accompanying
statement:
Preferred stock, $.01 par, 5,000,000
shares authorized, zero shares
issued and outstanding - -
Common stock, $.005 par, 40,000,000
shares authorized, 24,062,462 and
23,661,162 shares issued and
outstanding 120 118
Capital in excess of par value 152,121 149,725
Retained earnings 89,886 74,117
---------- ----------
242,127 223,960
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 678,502 $ 647,539
========= ==========
</TABLE>
See notes to unaudited consolidated financial statements.
-4-
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- --------- --------
REVENUES:
<S> <C> <C> <C> <C>
Oil and gas sales $ 64,301 $ 38,068 $ 122,942 $ 70,878
Oil and gas gathering 5,430 2,455 10,445 5,134
Gas marketing 6,252 4,265 13,472 9,289
Other income 60 442 524 971
-------- -------- --------- --------
76,043 45,230 147,383 86,272
-------- -------- --------- --------
COSTS AND EXPENSES:
Lease operating, including 22,743 15,924 44,815 30,419
production taxes
Oil and gas gathering 4,512 2,045 8,693 4,077
Gas marketing 5,691 3,797 12,386 8,459
General and 4,386 2,304 8,197 4,827
administrative
Depreciation, depletion 16,526 11,898 33,541 22,943
and amortization
Interest 7,418 3,944 14,737 7,595
-------- -------- --------- --------
61,276 39,912 122,369 78,320
-------- -------- --------- --------
Income before provision
for income taxes and
minority interest 14,767 5,318 25,014 7,952
PROVISION FOR INCOME TAXES:
Current 1,569 208 1,569 465
Deferred 3,212 1,866 6,277 2,636
MINORITY INTEREST IN
INCOME OF SUBSIDIARY (190) - (198) -
-------- -------- --------- --------
NET INCOME $ 9,796 $ 3,244 $ 16,970 $ 4,851
======== ======== ========= ========
NET INCOME PER SHARE $ .40 $ .15 $ .70 $ .23
======== ======== ========= ========
Weighted average common
shares and common
equivalent shares 24,474 21,290 24,400 21,212
outstanding ======== ======== ========= ========
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1996
--------------------------------------
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Capital
Common Stock In Excess
-------------- of Par Retained
Shares Amount Value Earnings Total
------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 23,661 $118 $149,725 $74,117 $223,960
Net income - - - 16,970 16,970
Exercise of warrants 306 2 1,530 - 1,532
Exercise of stock options and
resulting tax effects 96 - 866 - 866
Cash dividends declared
($.05 per share) - - - (1,201) (1,201)
------ ------ --------- -------- --------
Balance at June 30, 1996 24,063 $120 $152,121 $89,886 $242,127
====== ====== ========= ======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
-6-
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,970 $ 4,851
Adjustments to reconcile net income to
cash provided by operating activities -
Depreciation, depletion and amortization 33,541 22,943
Minority interest in income of subsidiary 198 -
Provision for deferred income taxes 6,277 2,636
---------- ---------
56,986 30,430
Increase in receivables (5,264) (116)
(Decrease) increase in payables and accrued (1,196) 1,099
liabilities
Other 2,425 705
---------- ---------
Cash provided by operating activities 52,951 2,118
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment -
Oil and gas properties (57,494) (59,437)
Other property and equipment (1,034) (495)
Purchase of additional interest in subsidiary (4,520) -
Other (598) (1,115)
---------- ---------
Cash used by investing activities (63,646) (61,047)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 1,532 129
Advances on revolving credit facility and other 26,503 41,063
borrowings
Payments on revolving credit facility and other (14,148) (10,494)
borrowings
Dividends paid (1,192) (822)
Other 1,024 -
---------- ---------
Cash provided by financing activities 13,719 29,876
---------- ---------
Net increase in cash and cash equivalents 3,024 947
Cash and cash equivalents, beginning of period 2,545 431
---------- ---------
Cash and cash equivalents, end of period $ 5,569 $1,378
========== =========
</TABLE>
See notes to unaudited consolidated financial statements.
-7-
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
----------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
June 30, 1996 and 1995
1. GENERAL
The accompanying financial statements are unaudited. The consolidated
financial statements include the accounts of the Company and its wholly- and
majority-owned subsidiaries. Management believes that all material
adjustments (consisting of only normal recurring adjustments) necessary for
a fair presentation have been made. These financial statements and notes
should be read in conjunction with the 1995 audited financial statements and
related notes. Certain reclassifications have been made to the prior year
financial statements to conform to the 1996 presentations. These
reclassifications had no effect on previously reported net income or cash
flow.
2. SIGNIFICANT ACCOUNTING POLICIES
Statements of Cash Flows
During the six months ended June 30, 1996 and 1995, cash payments for
interest totaled $12,013,947 and $6,793,719, respectively. During the six
months ended June 30, 1996 and 1995, cash payments for U.S. Federal and
state income taxes totaled $100,000 and $545,453, respectively.
Depreciation, Depletion, and Amortization
Amortization per equivalent barrel of the Company's U.S. oil and gas
properties for the three months ended June 30, 1996 and 1995, was $3.68 and
$3.88, respectively. For the six months ended June 30, 1996 and 1995,
amortization per U.S. equivalent barrel was $3.78 and $3.90, respectively.
Amortization per equivalent barrel of the Company's Argentina oil and gas
properties for the three months and six months ended June 30, 1996, was
$4.14 and $4.20, respectively. The Company had no Argentina operations prior
to July 1995.
Income Taxes
Deferred income taxes are provided on transactions which are recognized in
different periods for financial and tax reporting purposes. Such temporary
differences arise primarily from the deduction of certain oil and gas
exploration and development costs which are capitalized for financial
reporting purposes and differences in the methods of depreciation. The
Company follows the provisions of Statement of Financial Accounting
Standards No. 109 when calculating the deferred income tax provision for
financial purposes.
-8-
<PAGE>
Earnings of the Company's foreign subsidiaries, Cadipsa S.A. and Vintage Oil
Argentina, Inc., are subject to Argentina income taxes. Due to significant
Argentina net operating loss carryforwards for both companies, the Company
does not expect to pay any foreign income taxes related to these
subsidiaries in the near future. No U.S. deferred tax liability has been
recognized related to the unremitted earnings of these foreign subsidiaries,
as it is the Company's intention, generally, to reinvest such earnings
permanently.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Results of Operations
The Company's results of operations have been significantly affected
by its success in acquiring oil and gas properties and its ability to maintain
or increase production through its exploitation and exploration activities.
Fluctuations in oil and gas prices have also significantly affected the
Company's results. The following table reflects the Company's oil and gas
production and its average oil and gas prices for the periods presented:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Production:
Oil (MBbls) -
U.S..................... 1,921 1,676 3,773 3,208
Argentina (1)........... 953 - 1,851 -
Total................... 2,874 1,676 5,624 3,208
Gas, all U.S. (MMcf)...... 8,187 7,504 16,592 14,436
Total MBOE................ 4,239 2,927 8,390 5,614
Average prices:
Oil (per Bbl)
U.S..................... $18.01 $15.96 $ 17.34 $ 15.58
Argentina (1)........... 15.89 - 15.88 -
Total................... 17.31 15.96 16.86 15.58
Gas, all U.S.(per Mcf).... $ 1.78 $ 1.51 $ 1.69 $ 1.48
</TABLE>
----------------------
(1) Argentina operations commenced July 5, 1995.
Average oil and gas prices received by the Company fluctuate generally
with changes in the West Texas Intermediate ("WTI") posted prices for oil and
spot market prices for gas, however, spot market prices for gas may vary
significantly by region. The Company's average gas price for the second quarter
of 1996 was 18 percent above the same period in 1995, due primarily to the
increases in the average spot market prices for gas. The Company's average gas
price for the first six months of 1996 was negatively impacted by 10 cents per
Mcf as a result of certain gas hedges that were in place for 40,000 Mcf of gas
per day for the period January through March 1996. The Company's average gas
price for the first six months of 1996, after the impact of hedging, was 14
percent higher than the same period in 1995.
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<PAGE>
The Company experienced an eight percent increase in its average oil
price in the second quarter of 1996 compared to the same period in 1995. The
Company realized an average oil price, before the impact of hedges, which was
approximately 90 percent of WTI posted prices for the second quarter of 1996
compared to 91 percent of WTI posted prices for the year earlier quarter.
During the second quarter, the impact of oil hedges reduced the
Company's overall average oil price 75 cents to $17.31 per barrel. The
Company's average Argentina oil price was reduced $1.72 to $15.89 per barrel
while its average U.S. oil price was reduced 28 cents to $18.01 per barrel.
Approximately 78 percent of the Company's Argentina production and 38 percent of
its U.S. oil production (a combined 1.477 million barrels) were covered by oil
hedges in the second quarter.
The Company has previously engaged in oil and gas hedging activities
and intends to continue to consider various hedging arrangements to realize
commodity prices which it considers favorable. Currently, the Company has oil
hedges (swap agreements) in place for the third and fourth quarters of 1996
covering 2.024 million barrels per quarter at a NYMEX reference price of $18.50
and $18.12 per barrel, respectively. Before the impact of oil hedges, the
Company's average realized oil price for the first half of 1996 was $17.25 per
barrel or approximately 84 percent of the average NYMEX reference price.
Relatively modest changes in either oil or gas prices significantly
impact the Company's results of operations and cash flow. However, the impact
of changes in the market prices for oil and gas on the Company's average
realized prices may be reduced from time to time based on the level of the
Company's hedging activities. Based on 1996 second quarter oil production, a
change in the average price realized by the Company of $1.00 per Bbl for oil
would result in a change in net income and cash flow before income taxes on a
quarterly basis of approximately $2.1 million and $2.8 million, respectively. A
- ---------------
change in the average price realized of 10 cents per Mcf for gas would result in
a change in net income and cash flow before income taxes on a quarterly basis of
---------------
approximately $0.5 million and $0.7 million, respectively.
Period to Period Comparisons
During 1995, the Company made various acquisitions which significantly
impacted the period to period comparison for the second quarter and the first
six months of 1996. These acquisitions (the "1995 Acquisitions") include the
purchase of certain U.S. oil and gas properties from Texaco Exploration and
Production, Inc. ("Texaco") in May 1995, the acquisition of a controlling
interest in Cadipsa S.A. ("Cadipsa") in July 1995, the acquisition of Vintage
Oil Argentina, Inc. (formerly BG Argentina, S.A.) in September 1995 and the
acquisition of certain Argentine oil and gas properties from Astra Compania
Argentina de Petroleo S.A. and Shell Compania Argentina de Petroleo S.A.
(collectively the "Astra/Shell Properties") in November 1995 and December 1995,
respectively.
The Company's consolidated revenues and expenses for the second quarter and
first half of 1996 include the consolidation of 100 percent of Cadipsa under the
purchase method of accounting. The minority interest in income of subsidiary
reflects the portion of Cadipsa's income attributable to the minority ownership
during the three months and six months ended June 30, 1996.
-11-
<PAGE>
Three months ended June 30, 1996, Compared to three months ended June 30, 1995
Net income was $9.8 million for the quarter ended June 30, 1996, up 206
percent from $3.2 million for the same period in 1995. Increases in the
Company's oil and gas production of 45 percent on an equivalent barrel basis, an
increase of 18 percent in natural gas prices, and an increase of eight percent
in oil prices are primarily responsible for the increase in net income. The
production increases primarily relate to the 1995 Acquisitions.
Oil and gas sales increased $26.2 million (69 percent), to $64.3 million
for the second quarter of 1996 from $38.1 million for the second quarter of
1995. A 71 percent increase in oil production and an eight percent increase in
average oil prices combined to account for $23.0 million of the increase. A
nine percent increase in gas production and an 18 percent increase in average
gas prices contributed to an additional $3.2 million increase.
Oil and gas gathering net margins (revenue less expenses) increased
$510,000 (124 percent), to $920,000 for the second quarter of 1996 from $410,000
for the second quarter of 1995, due primarily to improved profitability on a
gathering system located in Texas and additional net margins from a gathering
system located in California acquired from Texaco in May 1995.
Lease operating expenses, including production taxes, increased $6.8
million (43 percent), to $22.7 million for the second quarter of 1996 from $15.9
million for the second quarter of 1995, due primarily to the 1995 Acquisitions.
Lease operating expenses per equivalent barrel produced decreased to $5.36 in
the second quarter of 1996 from $5.44 for the same period in 1995.
General and administrative expenses increased $2.1 million (91 percent), to
$4.4 million for the second quarter of 1996 from $2.3 million for the second
quarter of 1995, due primarily to the acquisitions of Cadipsa and Vintage Oil
Argentina, Inc.
Depreciation, depletion and amortization increased $4.6 million (39
percent), to $16.5 million for the second quarter of 1996 from $11.9 million for
the second quarter of 1995, due primarily to the 45 percent increase in
production on an equivalent barrel basis. Amortization per equivalent barrel of
the Company's U.S. oil and gas properties declined to $3.68 in the second
quarter of 1996 from $3.88 in 1995. Amortization per equivalent barrel of the
Company's Argentina oil and gas properties for the second quarter of 1996 was
$4.14. The Company had no Argentina operations prior to July 1995.
Interest expense increased $3.5 million (90 percent), to $7.4 million for
the second quarter of 1996 from $3.9 million for the second quarter of 1995, due
primarily to a 61 percent increase in the Company's total average outstanding
debt related primarily to the 1995 Acquisitions.
-12-
<PAGE>
Six months ended June 30, 1996, Compared to six months ended June 30, 1995
Net income was $17.0 million for the first six months of 1996, up 247
percent from $4.9 million for the same period in 1995. Increases in the
Company's oil and gas production of 49 percent on an equivalent barrel basis, an
increase of 14 percent in natural gas prices, and an increase of eight percent
in oil prices are primarily responsible for the increase in net income. The
production increases primarily relate to the 1995 Acquisitions.
Oil and gas sales increased $52.0 million (73 percent), to $122.9 million
for the first six months of 1996 from $70.9 million for the first six months of
1995. A 75 percent increase in oil production and an eight percent increase in
average oil prices combined to account for $44.9 million of the increase. A 15
percent increase in gas production and a 14 percent increase in average gas
prices contributed to an additional $7.1 million increase.
Oil and gas gathering net margins (revenue less expenses) increased
$700,000 (64 percent), to $1.8 million for the first six months of 1996 from
$1.1 million for the first six months of 1995, due primarily to improved
profitability on a gathering system located in Texas, additional net margins
from a gathering system located in California acquired from Texaco in May 1995
and increased gas prices.
Gas marketing net margins (revenue less expenses) increased $270,000 (33
percent), to $1.1 million for the first six months of 1996 from $830,000 for the
first six months of 1995, due primarily to an increase in the reserve for
doubtful accounts associated with gas sales in the first six months of 1995 with
no similar increase in 1996.
Lease operating expenses, including production taxes, increased $14.4
million (47 percent), to $44.8 million for the first six months of 1996 from
$30.4 million for the first six months of 1995. The increase in lease operating
expenses is due primarily to the 1995 Acquisitions. Lease operating expenses
per equivalent barrel produced decreased to $5.34 in the first six months of
1996 from $5.42 for the same period in 1995.
General and administrative expenses increased $3.4 million (71 percent), to
$8.2 million for the first six months of 1996 from $4.8 million for the first
six months of 1995, due primarily to the acquisitions of Cadipsa and Vintage Oil
Argentina, Inc.
Depreciation, depletion and amortization increased $10.6 million (46
percent), to $33.5 million for the first six months of 1996 from $22.9 million
for the first six months of 1995, due primarily to the 49 percent increase in
production on an equivalent barrel basis. Amortization per equivalent barrel of
the Company's U.S. oil and gas properties declined to $3.78 in the first six
months of 1996 from $3.90 in 1995. Amortization per equivalent barrel of the
Company's Argentina oil and gas properties for the first six months of 1996 was
$4.20. The Company had no Argentina operations prior to July 1995.
Interest expense increased $7.1 million (93 percent), to $14.7 million for
the first six months of 1996 from $7.6 million for the first six months of 1995,
due primarily to a 66 percent increase in the Company's total average
outstanding debt related primarily to the 1995 Acquisitions.
-13-
<PAGE>
Capital Expenditures
During the first six months of 1996, the Company's U.S. capital
expenditures totaled $37.9 million, including $14.0 million for the acquisition
of producing oil and gas properties from Conoco. Funds for the acquisition were
provided by an advance under the Company's revolving credit facility.
The Company's capital expenditures in Argentina during the six months ended
June 30, 1996, were $21.9 million. These capital expenditures included $4.5
million for the purchase of an additional 22.8 percent of the outstanding common
stock of Cadipsa, increasing the Company's total ownership of Cadipsa to 94.4
percent at June 30, 1996.
The timing of most of the Company's capital expenditures is discretionary
with no material long-term capital expenditure commitments. Consequently, the
Company has a significant degree of flexibility to adjust the level of such
expenditures as circumstances warrant. The Company primarily uses internally
generated cash flow to fund capital expenditures other than significant
acquisitions and anticipates that its cash flow will be sufficient to fund its
planned 1996 non-acquisition capital expenditures of approximately $48 million
in the U.S. and approximately $49 million in South America. The Company does
not have a specific acquisition budget since the timing and size of acquisitions
are difficult to forecast. The Company is actively pursuing additional
acquisitions of oil and gas properties. In addition to internally generated
cash flow and advances under the Company's revolving credit facility, the
Company may seek additional sources of capital to fund any future significant
acquisitions (see "-Liquidity").
Liquidity
Internally generated cash flow and the borrowing capacity under the
Company's revolving credit facility are its major sources of liquidity. In
addition, the Company may use other sources of capital, including the issuance
of additional debt securities or equity securities, to fund any major
acquisitions it might secure in the future and to maintain its financial
flexibility. The Company funds its capital expenditures (excluding
acquisitions) and debt service requirements primarily through internally
generated cash flows from operations. Any excess cash flow is used to reduce
outstanding advances under the Company's revolving credit facility and other
indebtedness.
In the past, the Company has accessed the public equity markets to finance
significant acquisitions and provide liquidity for its future activities. In
August 1990, the Company sold 3.4 million shares of its common stock for net
proceeds of approximately $32.8 million which were used to fund an acquisition
of oil and gas properties and reduce indebtedness under the Company's revolving
credit facility. In January 1993, the Company sold 3.9 million shares of its
common stock for net proceeds of approximately $44.8 million which were used to
reduce indebtedness under the Company's revolving credit facility.
On December 20, 1995, the Company completed a public offering of 2,793,700
shares of common stock of which 2,500,000 shares were sold by the Company and
293,700 shares were sold by a stockholder. Net proceeds to the Company, after
underwriting commission and other expenses, were approximately $49.5 million and
were used to fund a substantial portion of the purchase of the Astra/Shell
Properties.
-14-
<PAGE>
Also on December 20, 1995, the Company issued $150 million of its 9% Senior
Subordinated Notes Due 2005 (the "Notes"). The net proceeds to the Company from
the sale of the Notes of approximately $145.1 million were used principally to
reduce a portion of the outstanding balance under the Company's revolving credit
facility. The Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after December 15, 2000. Upon a change in control of
the Company, holders of the Notes may require the Company to purchase all or a
portion of the Notes at a purchase price equal to 101 percent of the principal
amount thereof, plus accrued and unpaid interest. The Notes will mature on
December 15, 2005, with interest payable semiannually on June 15 and
December 15 of each year.
Under its Credit Agreement dated November 3, 1993, as amended, certain
banks have provided to the Company an unsecured revolving credit facility. The
revolving credit facility establishes a borrowing base (currently $240 million)
determined by the banks' evaluation of the Company's U.S. oil and gas reserves.
The Company has elected to set the banks' commitment under the revolving credit
facility at $193 million in order to reduce fees charged by the banks.
Outstanding advances under the revolving credit facility bear interest
payable quarterly at a floating rate based on Bank of Montreal's alternate base
rate (as defined) or, at the Company's option, at a fixed rate for up to six
months based on the eurodollar market rate ("LIBOR"). The Company's interest
rate increments above the alternate base rate and LIBOR vary based on the level
of outstanding senior debt and the borrowing base at the time. As of July 31,
1996, the Company had elected a fixed rate based on LIBOR for a substantial
portion of its outstanding advances which resulted in an average interest rate
of approximately 6.5 percent per annum. In addition, the Company must pay a
commitment fee of 0.375 percent per annum on the unused portion of the banks'
commitment.
On a semiannual basis, the Company's borrowing base is redetermined by the
banks based upon their review of the Company's U.S. oil and gas reserves. If
the sum of outstanding senior debt (which includes the $36.7 million bank term
loan and the 5.92% Senior Note of the Company in the principal amount of $9.9
million) exceeds the borrowing base, as redetermined, the Company must repay
such excess. Any principal advances outstanding at October 31, 1997, will be
payable in 16 equal consecutive quarterly installments commencing January 31,
1998, with maturity at October 31, 2001.
The unused portion of the revolving credit facility was approximately $104
million at July 31, 1996. The unused portion of the revolving credit facility
and the Company's internally generated cash flow provide liquidity which may be
used to finance future capital expenditures, including acquisitions. As
additional U.S. acquisitions are made and properties are added to the borrowing
base, the banks' determination of the borrowing base and their commitment may be
increased.
-15-
<PAGE>
Income Taxes
The total provision for U.S. income taxes is based on the Federal corporate
statutory income tax rate plus an estimated average rate for state income taxes.
The Company had a current provision of $1.6 million for U.S. income taxes in the
first half of 1996 and a current provision of $0.5 million in the same period of
1995. The Company has a $3.5 million U.S. alternative minimum tax credit
carryforward which does not expire and is available to offset U.S. regular
income taxes in future years, but only to the extent that U.S. regular income
taxes exceed the U.S. alternative minimum tax in such years.
Earnings of the Company's foreign subsidiaries, Cadipsa and Vintage Oil
Argentina, Inc., are subject to Argentina income taxes. Due to significant
Argentina net operating loss carryforwards for both companies, the Company does
not expect to pay any foreign income taxes related to these subsidiaries in the
near future. No U.S. deferred tax liability has been recognized related to the
unremitted earnings of these foreign subsidiaries, as it is the Company's
intention, generally, to reinvest such earnings permanently. As a result of the
Company's Argentina earnings, the Company's effective tax rate for the first
half of 1996 was 32 percent as compared to 39 percent for the same period of
1995. The Company's effective tax rate for the second quarter of 1996 was 33
percent as compared to 39 percent for the same period in 1995. The Company had
no Argentina operations prior to July 1995.
Foreign Operations
Substantially all of the Company's foreign operations are located in
Argentina. The Company believes Argentina offers a politically stable
environment and does not anticipate any significant change in the near future.
The current democratic form of government has been in place since 1983 and,
since 1989, has pursued a steady process of privatization, deregulation and
economic stabilization and reforms involving the reduction of inflation and
public spending. Argentina's 12-month trailing inflation rate measured by the
Argentine Consumer Price Index declined from 200.7 percent as of June 1991 to
zero as of July 1996.
The Company believes that its Argentine operations present minimal currency
risk. All of the Company's Argentine revenues are U.S. dollar based, while a
large portion of its costs are Argentine peso denominated. The Argentina
Central Bank is obligated by law to sell dollars at a rate of one Argentine peso
to one U.S. dollar and has sought to prevent appreciation of the peso by buying
dollars at rates of not less than 0.998 peso to one U.S. dollar. As a result,
the Company believes that should any devaluation of the Argentine peso occur,
its revenues would be unaffected and its operating costs would not be
significantly increased. At the present time, there are no foreign exchange
controls preventing or restricting the conversion of pesos into dollars.
-16-
<PAGE>
PART II
OTHER INFORMATION
-17-
<PAGE>
Item 1. Legal Proceedings
-----------------
not applicable
Item 2. Changes in Securities
---------------------
not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Stockholders of the Company (the "Annual
Meeting") was held on May 14, 1996, in Tulsa, Oklahoma. At the Annual
Meeting, the stockholders of the Company elected Charles C. Stephenson,
Jr, S. Craig George and John T. McNabb, II as Class III directors of
the Company for three-year terms. The stockholders also considered and
approved an amendment to the Vintage Petroleum, Inc. 1990 Stock Plan to
increase the number of shares authorized for issuance and the
appointment of Arthur Andersen LLP as the independent auditors of the
Company for the fiscal year ending December 31, 1996.
There were present at the Annual Meeting, in person or by proxy,
stockholders holding 20,004,249 shares of the common stock of the
Company, or 83% of the total stock outstanding and entitled to vote at
the Annual Meeting. The table below describes the results of voting at
the Annual Meeting.
<TABLE>
<CAPTION>
Votes Broker
Votes Against or Non-
For Withheld Abstentions Votes
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
1. Election of Directors:
Charles C. Stephenson, Jr. 19,956,545 47,704 -0- -0-
S. Craig George 19,957,745 46,504 -0- -0-
John T. McNabb, II 19,957,723 46,526 -0- -0-
2. Approval of Amendment
Number 3 to
Vintage Petroleum, Inc.
1990 Stock Plan 17,214,144 2,782,002 8,103 -0-
3. Ratification of Arthur
Andersen LLP as independent
auditors of the Company for
fiscal 1996 19,995,799 4,300 4,150 -0-
</TABLE>
-18-
<PAGE>
Item 5. Other Information
-----------------
not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
The following documents are included as exhibits to the Form
10-Q. Those exhibits below incorporated by reference herein are
indicated as such by the information supplied in the
parenthetical thereafter. If no parenthetical appears after an
exhibit, such exhibit is filed herewith.
10.1 Amendment No. 3 to Vintage Petroleum, Inc. 1990 Stock
Plan dated March 15, 1996 (Filed as Exhibit A to the
Company's 1996 Proxy Statement).
10.2 Seventh Amendment to Credit Agreement dated May 31, 1996,
among the Company, as borrower, certain financial
institutions, as lenders, and Bank of Montreal, as agent.
10.3 Third Amendment to Credit Agreement ($36,736,000) dated
May 31, 1996, among the Company, as borrower, certain
financial institutions, as lenders, and Bank of Montreal,
as agent.
27. Financial Data Schedule.
b) Reports on Form 8-K
none
************************************************************************
-19-
<PAGE>
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.
VINTAGE PETROLEUM, INC.
----------------------
(Registrant)
DATE: August 12, 1996 \s\ Michael F. Meimerstorf
---------------- -----------------------------------
Michael F. Meimerstorf
Vice President and Controller
(Principal Accounting Officer)
-20-
<PAGE>
Exhibit Index
The following documents are included as exhibits to the Form 10-Q. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.
Exhibit
Number Description
- ---------- -----------------------------------------------------------
10.1 Amendment No. 3 to Vintage Petroleum, Inc. 1990
Stock Plan dated March 15, 1996 (Filed as
Exhibit A to the Company's 1996 Proxy Statement).
10.2 Seventh Amendment to Credit Agreement dated
May 31, 1996, among the Company, as borrower,
certain financial institutions, as lenders, and
Bank of Montreal, as agent.
10.3 Third Amendment to Credit Agreement ($36,736,000)
dated May 31, 1996, among the Company, as
borrower, certain financial institutions, as lenders,
and Bank of Montreal, as agent.
27. Financial Data Schedule.
<PAGE>
Exhibit 10.2
SEVENTH AMENDMENT TO
CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT, dated as of May 31, 1996 (herein
called this "Amendment"), is entered into by and among VINTAGE PETROLEUM, INC.,
a Delaware corporation (together with its successors and assigns the
"Borrower"), the various financial institutions as are or may become parties to
the Credit Agreement (hereinafter defined) as amended hereby (collectively, the
"Lenders"), and BANK OF MONTREAL, acting through certain of its Canadian and
U.S. branches or agencies ("BMO"), as agent (together with its successors and
assigns in such capacity, the "Agent") for the Lenders. Terms defined in the
Credit Agreement are used in this Amendment with the same meaning as in the
Credit Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders and the Agent have heretofore entered
into a certain Credit Agreement, dated as of November 3, 1993, as amended by
that certain Amendment to Credit Agreement dated as of November 22, 1993, that
certain Second Amendment to Credit Agreement dated as of May 11, 1994, that
certain Third Amendment to Credit Agreement dated as of November 22, 1994, that
certain First Amendment to Intercreditor Agreement and Fourth Amendment to
Credit Agreement dated as of December 14, 1994, that certain Fifth Amendment to
Credit Agreement and Waiver dated as of July 5, 1995, and that certain Sixth
Amendment to Credit Agreement dated as of November 2, 1995 (as so amended,
herein called the "Credit Agreement"); and
WHEREAS, the Borrower, the Lenders and the Agent now desire to amend the
Credit Agreement in certain respects, as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Borrower, the Lenders and the Agent hereby agree as
follows:
Section 1. Adjustment of Borrowing Base and the Revolving Loan Commitment
--------------------------------------------------------------
Amount. The Borrowing Base as of the date hereof is acknowledged to be
- ------
$240,000,000. The Revolving Loan Commitment Amount is hereby designated
pursuant to clause (iii) of the definition thereof to be $193,000,000 as of the
date hereof.
Section 2. GOVERNING LAW; SEVERABILITY. THIS AMENDMENT SHALL BE A CONTRACT
---------------------------
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. All
obligations of the Borrower and rights of the Lenders and the Agent, or any of
them, expressed herein shall be in addition to and not in limitation of those
provided by applicable law. Whenever possible each provision of this Amendment
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall
<PAGE>
be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Amendment.
Section 3. Successor and Assigns. This Amendment shall be binding upon the
---------------------
borrower, the Lenders, and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Borrower, the Lenders, and the
Agent and the successors and assigns of the Lenders and the Agent.
Section 4. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Delivered as of the day and year first above written.
VINTAGE PETROLEUM, INC.
By: \s\ William C. Barnes
-------------------------------
William C. Barnes
Executive Vice President and CFO
-2-
<PAGE>
BANK OF MONTREAL
acting through its U.S. branches
and agencies, including initially
its Chicago, Illinois branch,
as Agent
By: \s\ Michael Stuckey
------------------------------------
Michael Stuckey
Director
-3-
<PAGE>
BANK OF MONTREAL
By: \s\ Michael P. Stuckey
------------------------------
Michael P. Stuckey
Director
-4-
<PAGE>
CHEMICAL BANK
By: \s\ Ronald Potter
------------------------------
Ronald Potter
Managing Director
-5-
<PAGE>
MELLON BANK, N.A.
By: \s\ E. Marc Cuenod, Jr.
-----------------------------
E. Marc Cuenod, Jr.
First Vice President
-6-
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By: \s\ Denise Ashford Smith
-------------------------------
Denise Ashford Smith
Senior Vice President
-7-
<PAGE>
FIRST NATIONAL BANK OF BOSTON
By: \s\ Carol E. Holley
------------------------------
Carol E. Holley
Vice President
-8-
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY
By: \s\ Richard A. Erbert
------------------------------
Richard A. Erbert
Vice President
-9-
<PAGE>
UNION BANK
By: \s\ Jeffrey A. Cohen
-------------------------------
Jeffrey A. Cohen
Vice President
-10-
<PAGE>
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By: \s\ Michael M. Coats
------------------------------
Michael M. Coats
Vice President
-11-
<PAGE>
CONSENT
-------
The undersigned hereby consents to the provisions of the foregoing Agreement and
the transactions contemplated thereby.
Dated: May 31, 1996
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: \s\ Paul L. Meiring
---------------------------------
Paul L. Meiring,
Vice President
c/o Prudential Capital Group
1201 Elm Street, Suite 4900
Dallas, Texas 75270
Attn: R. A. Walker
Managing Director
-1-
<PAGE>
Exhibit 10.3
THIRD AGREEMENT TO
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of May 31, 1996 (herein
called this "Amendment"), is entered into by and among VINTAGE PETROLEUM, INC.,
a Delaware corporation (together with its successors and assigns the
"Borrower"), the various financial institutions as are or may become parties to
the Credit Agreement (hereinafter defined) as amended hereby (collectively, the
"Lenders"), and BANK OF MONTREAL, acting through certain of its Canadian and
U.S. branches or agencies ("BMO"), as agent (together with its successors and
assigns in such capacity, the "Agent") for the Lenders. Terms defined in the
Credit Agreement are used in this Agreement with the same meaning as the Credit
Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders and the Agent have heretofore entered
into a certain Credit Agreement, dated as of December 14, 1994, as amended by
that certain First Amendment to Credit Agreement and Waiver dated as of July 5,
1995, and that certain Second Amendment to Credit Agreement dated as of November
2, 1995 (as so amended, herein called the "Credit Agreement"); and
WHEREAS, the Borrower, the Lenders and the Agent now desire to amend the
Credit Agreement in certain respects, as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Borrower, the Lenders and the Agent hereby agree as
follows:
SECTION 1. Adjustment of Borrowing Base and Revolving Loan Commitment
----------------------------------------------------------
Amount. The Borrower and each of the Lenders hereby agrees that pursuant to
- ------
that certain Seventh Amendment to the Existing Credit Agreement and Section 2.6
of the Credit Agreement, the Borrowing Base will be changed to $240,000,000 as
of the date hereof, and the Revolving Loan Commitment Amount will be designated
pursuant to clause (iii) of the definition hereof to be $193,000,000 as of the
date hereof.
SECTION 2. GOVERNING LAW; SEVERABILITY. THIS AMENDMENT SHALL BE A
---------------------------
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
All obligations of the Borrower and rights of the Lenders and the Agent, or any
of them, expressed herein shall be in addition to and not in limitation of those
provided by applicable law. Whenever possible each provision of this Amendment
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Amendment.
<PAGE>
SECTION 3. Successors and Assigns. This Amendment shall be binding upon
----------------------
the Borrower, the Lenders, and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Borrower, the Lenders, and the
Agent and the successors and assigns of the Lenders and the Agent.
SECTION 4. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Delivered as of the day and year first above written.
VINTAGE PETROLEUM, INC.
By: \s\ William C. Barnes
------------------------------------
William C. Barnes
Executive Vice President and
Chief Financial Officer
-2-
<PAGE>
BANK OF MONTREAL
acting through its U.S. branches
and agencies, including initially
its Chicago, Illinois branch,
as Agent
By: \s\ Michael Stuckey
-------------------------------
Michael Stuckey
Director
-3-
<PAGE>
BANK OF MONTREAL
By: \s\ Michael P. Stuckey
-------------------------------
Michael P. Stuckey
Director
-4-
<PAGE>
CHEMICAL BANK
By: \s\ Ronald Potter
--------------------------------
Ronald Potter
Managing Director
-5-
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By: \s\ Denise Ashford Smith
--------------------------------
Denise Ashford Smith
Senior Vice President
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,569
<SECURITIES> 0
<RECEIVABLES> 50,136
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,240
<PP&E> 841,986
<DEPRECIATION> 238,890
<TOTAL-ASSETS> 678,502
<CURRENT-LIABILITIES> 62,258
<BONDS> 323,752
0
0
<COMMON> 120
<OTHER-SE> 242,007
<TOTAL-LIABILITY-AND-EQUITY> 678,502
<SALES> 146,859
<TOTAL-REVENUES> 147,383
<CGS> 65,894
<TOTAL-COSTS> 65,894
<OTHER-EXPENSES> 41,738
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,737
<INCOME-PRETAX> 25,014
<INCOME-TAX> 7,846
<INCOME-CONTINUING> 16,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,970
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
