<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 March 31, 1997
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
-------
VINTAGE PETROLEUM, INC.
--------------------------------------------------
(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 April 30, 1997
- ----------------------------- -----------------------------
Common Stock, $.005 Par Value 25,714,443
-1-
<PAGE>
PART I
FINANCIAL INFORMATION
-2-
<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>
March 31, December 31,
1997 1996
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,858 $ 2,774
Accounts receivable -
Oil and gas sales 48,412 68,219
Joint operations 5,024 4,445
Prepaids and other current assets 10,020 9,252
---------- --------
Total current assets 67,314 84,690
---------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, full cost method 1,003,438 964,623
Oil and gas gathering systems 13,348 13,489
Other 8,737 8,439
---------- --------
1,025,523 986,551
Less accumulated depreciation, depletion and
amortization 295,392 275,392
---------- --------
730,131 711,159
---------- --------
OTHER ASSETS, net 32,121 18,101
---------- --------
TOTAL ASSETS $ 829,566 $813,950
========== ========
</TABLE>
See notes to unaudited consolidated financial statements.
-3-
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
----------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Revenue payable $ 21,470 $ 24,746
Accounts payable - trade 19,518 20,355
Other payables and accrued liabilities 24,214 26,595
Current portion of long-term debt 5,328 6,629
Acquisition costs payable - 35,051
-------- --------
Total current liabilities 70,530 113,376
-------- --------
LONG-TERM DEBT, less current portion above 357,156 372,390
-------- --------
DEFERRED INCOME TAXES 62,722 57,610
-------- --------
OTHER LONG-TERM LIABILITIES 3,124 3,641
-------- --------
MINORITY INTEREST IN SUBSIDIARY 1,945 1,828
-------- --------
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, 25,714,443 and 24,069,112 shares
issued and outstanding 129 120
Capital in excess of par value 201,078 152,321
Retained earnings 132,882 112,664
-------- --------
334,089 265,105
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $829,566 $813,950
======== ========
</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
March 31,
--------------------
1997 1996
---------- ---------
<S> <C> <C>
REVENUES:
Oil and gas sales $83,997 $58,641
Oil and gas gathering 4,847 5,015
Gas marketing 10,271 7,220
Other income 119 464
------- -------
99,234 71,340
------- -------
COSTS AND EXPENSES:
Lease operating, including production taxes 24,514 22,072
Oil and gas gathering 4,324 4,181
Gas marketing 9,852 6,695
General and administrative 4,391 3,811
Depreciation, depletion and amortization 20,000 17,015
Interest 8,178 7,319
------- -------
71,259 61,093
------- -------
Income before provision for income taxes
and minority interest 27,975 10,247
PROVISION FOR INCOME TAXES:
Current 1,415 -
Deferred 5,454 3,065
MINORITY INTEREST IN INCOME OF SUBSIDIARY (117) (8)
------- -------
NET INCOME $20,989 $ 7,174
======= =======
EARNINGS PER SHARE $ .82 $ .30
======= =======
Weighted average common shares and common
equivalent shares outstanding 25,699 24,303
======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
-5-
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------
(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, 1996 24,069 $120 $152,321 $112,664 $265,105
Net income - - - 20,989 20,989
Issuance of common stock 1,500 8 47,075 - 47,083
Exercise of stock options and
resulting tax effects 145 1 1,682 - 1,683
Cash dividends declared
($.03 per share) - - - (771) (771)
------ ---- -------- -------- --------
Balance at March 31, 1997 25,714 $129 $201,078 $132,882 $334,089
====== ==== ======== ======== ========
</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>
Three Months Ended
March 31,
---------------------
1997 1996
---------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,989 $ 7,174
Adjustments to reconcile net income to
cash provided by operating activities -
Depreciation, depletion and amortization 20,000 17,015
Minority interest in income of subsidiary 117 8
Provision for deferred income taxes 5,454 3,065
--------- --------
46,560 27,262
Decrease (increase) in receivables 19,228 (2,956)
Decrease in payables and accrued liabilities (5,795) (3,541)
Other (768) 1,534
--------- --------
Cash provided by operating activities 59,225 22,299
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment -
Oil and gas properties (37,346) (30,048)
Other property and equipment (157) (376)
Purchase of subsidiary (27,233) (3,297)
Other (9,890) 52
--------- --------
Cash used by investing activities (74,626) (33,669)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 47,181 1,532
Sale of 8 5/8% Senior Subordinated Notes 96,270 -
Advances on revolving credit facility and other
borrowings 42,908 19,907
Payments on revolving credit facility and other
borrowings (168,657) (9,102)
Dividends paid (722) (591)
Other (495) 776
--------- --------
Cash provided by financing activities 16,485 12,522
--------- --------
Net increase in cash and cash equivalents 1,084 1,152
Cash and cash equivalents, beginning of period 2,774 2,545
--------- --------
Cash and cash equivalents, end of period $ 3,858 $ 3,697
========= ========
</TABLE>
See notes to unaudited consolidated financial statements.
-7-
<PAGE>
VINTAGE PETROLEUM, INC. AND SUBSIDIARIES
----------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 1997 AND 1996
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 1996 audited financial statements and related
notes.
2. SIGNIFICANT ACCOUNTING POLICIES
Statements of Cash Flows
During the three months ended March 31, 1997 and 1996, cash payments for
interest totaled $4,387,298 and $3,639,086, respectively. During the three
months ended March 31, 1997, cash payments of $85,600 were made for U.S.
Federal and state income taxes. During the three months ended March 31, 1996,
the Company made no cash payments for U.S. Federal and state income taxes.
During the three months ended March 31, 1997 and 1996, the Company made no
cash payments for foreign income taxes.
Depreciation, Depletion and Amortization
Amortization per equivalent barrel of the Company's U.S. oil and gas
properties for the three months ended March 31, 1997 and 1996, was $3.92 and
$3.88, respectively. Amortization per equivalent barrel of the Company's
Argentina oil and gas properties for the three months ended March 31, 1997 and
1996, was $4.15 and $4.27, respectively. Amortization per equivalent barrel
of the Company's Bolivia oil and gas properties for the three months ended
March 31, 1997, was $3.66. The Company had no Bolivia operations prior to
January 1997.
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.
3. PUBLIC OFFERINGS
On February 5, 1997, the Company completed a public offering of 1,500,000
shares of its common stock, all of which were sold by the Company. Net
proceeds to the Company of approximately $47.1 million were used to repay a
portion of existing indebtedness under the Company's revolving credit
facility.
-8-
<PAGE>
Also on February 5, 1997, the Company issued $100 million of its 8 5/8% Senior
Subordinated Notes Due 2009 (the "8 5/8% Notes"). Net proceeds to the Company
of approximately $96.3 million were used to repay a portion of existing
indebtedness under the Company's revolving credit facility.
The 8 5/8% Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after February 1, 2002. Upon a change in control (as
defined) of the Company, holders of the 8 5/8% Notes may require the
Company to repurchase all or a portion of the 8 5/8% Notes at a purchase price
equal to 101 percent of the principal amount thereof, plus accrued and unpaid
interest. The 8 5/8% Notes mature on February 1, 2009, with interest payable
semiannually on February 1 and August 1 of each year.
The 8 5/8% Notes are unsecured senior subordinated obligations of the Company,
rank subordinate in right of payment to all senior indebtedness (as defined)
and rank pari passu with the Company's 9% Senior Subordinated Notes Due 2005.
The indenture for the 8 5/8% Notes contains limitations on, among other
things, additional indebtedness and liens, the payment of dividends and other
distributions, certain investments and transfers or sales of assets.
4. RECENT PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share ("SFAS No. 128"), which establishes new standards
for computing and presenting earnings per share. The provisions of SFAS No.
128 are effective for earnings per share calculations for periods ending after
December 15, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. If the provisions of SFAS No. 128 had been adopted in the first
quarter of 1997 and 1996, basic and diluted earnings per share would have been
as follows:
Quarter Ended March 31,
-----------------------
1997 1996
-------- --------
Earnings per share:
Basic $0.84 $0.30
Diluted $0.82 $0.30
5. SUBSEQUENT EVENT
On April 1, 1997, the Company acquired certain producing oil and gas
properties and facilities located in the Gulf Coast areas of Texas and
Louisiana from subsidiaries of Burlington Resources Inc. ("Burlington") for
approximately $101.4 million in cash. Funds for this acquisition were provided
by advances under the Company's revolving credit facility. As of March 31,
1997, approximately $11.4 million of the purchase price had been paid to
Burlington and is included in Other Assets on the Company's balance sheet.
-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
March 31,
------------------
1997 1996
------ -------
<S> <C> <C>
Production:
Oil (MBbls) -
U.S............................... 2,015 1,852
Argentina......................... 1,320 898
Bolivia (1)....................... 25 -
Total............................. 3,360 2,750
Gas (MMcf) -
U.S............................... 7,578 8,405
Bolivia (1)....................... 1,216 -
Total............................. 8,794 8,405
Total MBOE............................ 4,826 4,151
Average prices:
Oil (per Bbl) -
U.S............................... $19.77 $16.64
Argentina......................... 17.87 15.87
Bolivia (1)....................... 18.13 -
Total............................. 19.01 16.39
Gas (per Mcf) -
U.S............................... $ 2.46 $ 1.62
Bolivia (1)....................... 1.22 -
Total............................. 2.29 1.62
------ ------
</TABLE>
- --------------
(1) Bolivia operations commenced January 1997.
-10-
<PAGE>
Average U.S. oil prices received by the Company fluctuate generally with
changes in the West Texas Intermediate ("WTI") posted prices for oil. The
Company's Argentina oil production is sold at WTI spot prices less a specified
differential. The Company experienced a 16 percent increase in its average oil
price in the first three months of 1997 compared to the same period in 1996.
During the first three months of 1997, the impact of oil hedges reduced the
Company's overall average oil price 50 cents to $19.01 per Bbl. Approximately
51 percent of the Company's Argentina oil production (675 MBbls) was covered by
oil hedges in the first quarter of 1997. The Company's average Argentina oil
price for the first quarter of 1997 was reduced $1.28 to $17.87 per Bbl. The
Company had no oil hedges in place for the first quarter of 1996. The Company's
average realized oil price, before the impact of oil hedges, for the first
quarter of 1997 was 93 percent of WTI posted prices.
Average gas prices received by the Company fluctuate generally with changes
in spot market prices for gas, which may vary significantly by region. The
Company's average gas price for the first three months of 1997 was 41 percent
higher than the same period in 1996. The Company's average gas price during the
first quarter of 1996 was negatively impacted by 18 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 has previously engaged in oil and gas hedging activities and will
continue to consider various hedging arrangements to realize commodity prices
which it considers favorable. Currently, oil hedges for the last three quarters
of 1997 cover 2.063 MMBbls at an average NYMEX reference price of $18.92 per
Bbl. Before the impact of oil hedges, the Company's average realized oil price
for the first quarter of 1997 was $19.51 per Bbl, or approximately 86 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 first quarter 1997 oil production, a change in the
average oil price realized by the Company of $1.00 per Bbl would result in a
change in net income and cash flow before income taxes on a quarterly basis of
---------------
approximately $2.5 million and $3.3 million, respectively. A 10 cent per Mcf
change in the average price realized by the Company 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 $0.9 million, respectively, based on first
quarter 1997 gas production.
-11-
<PAGE>
PERIOD TO PERIOD COMPARISONS
PERIOD ENDED MARCH 31, 1997, COMPARED TO PERIOD ENDED MARCH 31, 1996
Net income was $21.0 million for the quarter ended March 31, 1997, up 192
percent from $7.2 million for the same period in 1996. A 16 percent increase in
oil prices, an increase of 41 percent in natural gas prices, and an increase in
the Company's oil and gas production of 16 percent on an equivalent barrel basis
are primarily responsible for the increase in net income. The production
increases primarily relate to the exploitation activities in Argentina, and the
acquisitions of Vintage Petroleum Boliviana, Ltd. (formerly Shamrock Ventures
(Boliviana) Ltd.) from affiliates of Diamond Shamrock, Inc. and Austrofueguina,
S.A. and certain producing oil and gas properties from Exxon Company, U.S.A. and
Conoco Inc. (collectively, the "1996 Acquisitions").
Oil and gas sales increased $25.4 million (43 percent), to $84.0 million for
the first quarter of 1997 from $58.6 million for the first quarter of 1996. A
22 percent increase in oil production and a 16 percent increase in average oil
prices combined to account for $18.9 million of the increase. A five percent
increase in gas production and a 41 percent increase in average gas prices
contributed to an additional $6.5 million increase.
Oil and gas gathering net margins (revenue less expenses) decreased $310,000
(37 percent), to $525,000 for the first quarter of 1997 from $835,000 for the
first quarter of 1996, due primarily to increased compression costs and a 43
percent reduction in third party volumes transported at the Company's Galveston
Bay gathering facilities and lower margins on two gathering systems in the mid-
continent area as a result of amended gathering contracts.
Lease operating expenses, including production taxes, increased $2.4 million
(11 percent), to $24.5 million for the first quarter of 1997 from $22.1 million
for the first quarter of 1996. The increase in lease operating expenses is due
primarily to costs associated with the 1996 Acquisitions and an increase in
severance taxes due to higher product prices. Lease operating expenses per
equivalent barrel produced decreased five percent to $5.08 in 1997 from $5.32
for 1996.
General and administrative expenses increased $600,000 (16 percent), to $4.4
million for the first quarter of 1997 from $3.8 million for the first quarter of
1996, due primarily to the acquisition of Vintage Petroleum Boliviana, Ltd.
Depreciation, depletion and amortization increased $3.0 million (18 percent),
to $20.0 million for the first quarter of 1997 from $17.0 million for the first
quarter of 1996, due primarily to the 16 percent increase in production on an
equivalent barrel basis. Amortization per equivalent barrel of the Company's
U.S. oil and gas properties increased to $3.92 for the first quarter of 1997
from $3.88 for the first quarter of 1996. Amortization per equivalent barrel of
the Company's Argentina oil and gas properties for the first quarter of 1997 was
$4.15 as compared to $4.27 for the first quarter of 1996. Amortization per
equivalent barrel of the Company's Bolivia oil and gas properties for the first
quarter of 1997 was $3.66. The Company had no Bolivia operations prior to
January 1997.
-12-
<PAGE>
Interest expense increased $900,000 (12 percent), to $8.2 million for the
first quarter of 1997 from $7.3 million for the first quarter of 1996, due
primarily to a 16 percent increase in the Company's total average outstanding
debt as a result of the $91 million in acquisitions made in 1996. The increase
was partially offset by a decrease in the Company's overall average interest
rate from 8.42% in the first quarter of 1996 to 8.09% in the first quarter of
1997.
CAPITAL EXPENDITURES
During the first three months of 1997, the Company's U.S. and international
non-acquisition related capital expenditures totaled $20.1 million and $16.0
million, respectively. Subsequent to March 31, 1997, the Company purchased
certain producing oil and gas properties from Burlington Resources Inc. for
approximately $101.4 million. Funds for this acquisition were provided by
advances under the revolving credit facility. 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, net of debt service obligations, will be sufficient to fund its
planned 1997 non-acquisition capital expenditures of approximately $64 million
in the U.S. and approximately $60 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 its revolving
credit facility are the Company's 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.
In the past, the Company has accessed the public markets to finance
significant acquisitions and provide liquidity for its future activities. In
conjunction with the purchase of substantial oil and gas assets in 1990, 1992
and 1995, the Company completed three public equity offerings, as well as a
public debt offering in 1995, which provided the Company with aggregate net
proceeds of approximately $272 million.
On February 5, 1997, the Company completed a public offering of 1,500,000
shares of its common stock, all of which were sold by the Company. Net proceeds
to the Company of approximately $47.1 million were used to repay a portion of
existing indebtedness under the Company's revolving credit facility.
Also on February 5, 1997, the Company issued $100 million of its 8 5/8%
Senior Subordinated Notes Due 2009 (the "8 5/8% Notes"). Net proceeds to the
Company of approximately $96.3 million were used to repay a portion of existing
indebtedness under the Company's revolving credit facility.
-13-
<PAGE>
The 8 5/8% Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after February 1, 2002. Upon a change in control (as
defined) of the Company, holders of the 8 5/8% Notes may require the Company
to repurchase all or a portion of the 8 5/8% Notes at a purchase price equal to
101 percent of the principal amount thereof, plus accrued and unpaid interest.
The 8 5/8% Notes mature on February 1, 2009, with interest payable semiannually
on February 1 and August 1 of each year.
The 8 5/8% Notes are unsecured senior subordinated obligations of the
Company, rank subordinate in right of payment to all senior indebtedness (as
defined) and rank pari passu with the Company's 9% Senior Subordinated Notes Due
2005. The indenture for the 8 5/8% Notes contains limitations on, among other
things, additional indebtedness and liens, the payment of dividends and other
distributions, certain investments and transfers or sales of assets.
Under its Credit Agreement dated August 29, 1996, as amended (the "Credit
Agreement"), certain banks have provided to the Company an unsecured revolving
credit facility. The Credit Agreement establishes a borrowing base (currently
$270 million) determined by the banks' evaluation of the Company's U.S. and
certain Argentina oil and gas reserves.
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 portion of the borrowing base attributable to
the U.S. reserves at the time. As of May 7, 1997, 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 6.9 percent per
annum. In addition, the Company must pay a commitment fee ranging from 0.25 to
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. and certain Argentina oil
and gas reserves. If the sum of outstanding senior debt (excluding debt of the
Company's foreign subsidiaries) exceeds the borrowing base, as redetermined, the
Company must repay such excess. Any principal advances outstanding at October
1, 1999, will be payable in 12 equal consecutive quarterly installments
commencing January 1, 2000, with maturity at October 1, 2002.
The unused portion of the revolving credit facility was approximately $82
million at May 7, 1997. 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. and Argentina acquisitions are made and properties are added to the
borrowing base, the banks' determination of the borrowing base and their
commitment may be increased.
-14-
<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 incurred a current provision for U.S. income taxes of approximately
$1.4 million in the first quarter of 1997. The Company had no current provision
for U.S. income taxes in the first quarter of 1996. The Company has a $5.4
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 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
1997. Earnings of the Company's foreign subsidiary, Vintage Petroleum
Boliviana, Ltd., is subject to Bolivia income taxes. Bolivian income taxes are
provided on the earnings of this subsidiary based on the tax laws and
regulations of Bolivia. No U.S. deferred tax liability will be recognized
related to the unremitted earnings of these foreign subsidiaries, as it is the
Company's intention, generally, to reinvest such earnings permanently.
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
0.1 percent as of December 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.
With the purchase of Vintage Petroleum Boliviana, Ltd. (formerly Shamrock
Ventures (Boliviana) Ltd.), the Company expanded its international operations
into Bolivia. Since the mid-1980's, Bolivia has been undergoing major economic
reform including the establishment of a free-market economy and the
encouragement of private foreign investment. Economic activities that had been
reserved for government corporations were opened to foreign and domestic private
investments. Barriers to international trade have been reduced and tariffs
lowered. A new investment law and revised codes for mining and the petroleum
industry, intended to attract foreign investment, have been introduced.
-15-
<PAGE>
On January 1, 1987, a new currency, the Boliviano (Bs), replaced the peso at
the rate of one million pesos to one Boliviano. The exchange rate is set daily
by the Government's exchange house (the "Bolsin") which is under the supervision
of the Bolivian central bank. Foreign exchange transactions are not subject to
any controls. The US$:Boliviano exchange rate at April 30, 1997, was US$1:Bs
5.23. This rate at December 31, 1996, was US$1:Bs 5.19. The Company believes
that any currency risk associated with its Bolivian operations would not have a
material impact on the Company's financial position or results of operations.
-16-
<PAGE>
PART II
OTHER INFORMATION
-17-
<PAGE>
Item 1. Legal Proceedings
-----------------
For information regarding legal proceedings, see the Company's Form
10-K for the year ended December 31, 1996.
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
---------------------------------------------------
not applicable
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 this 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.
2. Purchase and Sale Agreement dated as of February 12, 1997, among
the Company, Burlington Resources Oil & Gas Company and Glacier
Park Company, and Amendments thereto dated March 11, 1997, and
March 20, 1997. (Filed as Exhibit 2. to the Company's report on
Form 8-K filed April 16, 1997.)
4. Indenture dated as February 5, 1997, between The Chase Manhattan
Bank, as Trustee, and the Company. (Filed as Exhibit 4.3 to the
Company's report on Form 10-K for the year ended December 31,
1996.)
27. Financial Data Schedule
b) Reports on Form 8-K
In connection with the Company's registration statement on Form S-3
(No. 333-19569), Form 8-K was filed January 10, 1997, to report under
Item 5 certain pro forma financial information of the Company.
************************************************************************
-18-
<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: May 8, 1997 /s/ Michael F. Meimerstorf
-------------- -----------------------------------------------
Michael F. Meimerstorf
Vice President and Controller
(Principal Accounting Officer)
-19-
<PAGE>
EXHIBIT INDEX
The following documents are included as exhibits to this 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
- ------ ---------------------------------
2. Purchase and Sale Agreement dated as of February 12, 1997, among the
Company, Burlington Resources Oil & Gas Company and Glacier Park
Company, and Amendments thereto dated March 11, 1997, and March 20,
1997. (Filed as Exhibit 2. to the Company's report on Form 8-K filed
April 16, 1997.)
4. Indenture dated as February 5, 1997, between The Chase Manhattan Bank,
as Trustee, and the Company. (Filed as Exhibit 4.3 to the Company's
report on Form 10-K for the year ended December 31, 1996.)
27. Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,858
<SECURITIES> 0
<RECEIVABLES> 53,436
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,020
<PP&E> 1,025,523
<DEPRECIATION> 295,392
<TOTAL-ASSETS> 829,566
<CURRENT-LIABILITIES> 70,530
<BONDS> 357,156
0
0
<COMMON> 129
<OTHER-SE> 333,960
<TOTAL-LIABILITY-AND-EQUITY> 829,566
<SALES> 99,115
<TOTAL-REVENUES> 99,234
<CGS> 38,690
<TOTAL-COSTS> 38,690
<OTHER-EXPENSES> 24,391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,178
<INCOME-PRETAX> 27,975
<INCOME-TAX> 6,869
<INCOME-CONTINUING> 20,989
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,989
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.82
</TABLE>
