SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-K/A-1
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File Number
November 30, 1995 1-9872
-----------------
COLUMBUS ENERGY CORP.
(Exact name of Registrant as specified in its Charter)
COLORADO 84-0891713
(State of incorporation) (I.R.S. Employer Identification
No.)
1660 Lincoln Street 80264
Denver, Colorado (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(303) 861-5252
Securities registered pursuant to
Section 12(b) of the Act:
Name of each Exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, ($.20 par value) American Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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, and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates
of the registrant as of January 31, 1996 is $12,703,000.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of January 31, 1996
Outstanding at
Class January 31, 1996
----- ----------------
Common Stock, ($.20 par value) 3,054,899 shares
DOCUMENTS INCORPORATED BY REFERENCE
Columbus Energy Corp. definitive proxy statement to be filed no
later than 120 days after the end of the fiscal year covered by this
report, is incorporated by reference into Part III.
<PAGE>
COLUMBUS ENERGY CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants 46
Financial Statements:
Consolidated Balance Sheets at
November 30, 1995 and 1994 47
Consolidated Statements of Operations for the
years ended November 30, 1995, 1994 and 1993 49
Consolidated Statements of Stockholders'
Equity for the years ended
November 30, 1995, 1994 and 1993 51
Consolidated Statements of Cash Flows for the
years ended November 30, 1995, 1994 and 1993 53
Notes to the Consolidated Financial Statements 54
45<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Columbus Energy Corp.
We have audited the accompanying consolidated balance sheets of
Columbus Energy Corp. and subsidiaries as of November 30, 1995 and
1994, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the
period ended November 30, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Columbus Energy Corp. and subsidiaries as of
November 30, 1995 and 1994, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended November 30, 1995, in conformity with generally accepted
accounting principles.
As explained in Note 2 to the consolidated financial statements,
effective September 1, 1995, the Company changed its method of
accounting for the impairment of long-lived assets and as explained in
Note 6 to the consolidated financial statements, effective December 1,
1992, the Company changed its method of accounting for income taxes.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
February 9, 1996
46<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
November 30,
--------------------------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,414 $ 1,819
Accounts receivable:
Joint interest partners 1,258 1,923
Oil and gas sales 817 938
Other - 108
Less allowance for doubtful
accounts (116) (127)
Income tax receivable 7 34
Deferred income taxes (Note 6) 1,290 741
Inventory of oil field equipment,
at lower of average cost or market 76 84
Other 78 120
-------- -------
Total current assets 4,824 5,640
-------- -------
Property and equipment:
Oil and gas assets, successful
efforts method (Notes 3 and 5) 22,244 29,847
Other property and equipment 2,028 2,177
-------- -------
24,272 32,024
Less: Accumulated depreciation,
depletion, amortization and
valuation allowance
(Notes 2 and 3) (10,775) (12,709)
-------- -------
Net property and equipment 13,497 19,315
-------- -------
$ 18,321 $24,955
======== =======
</TABLE>
(continued)
47<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED BALANCE SHEETS - (continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
November 30,
--------------------------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,314 $ 1,393
Undistributed oil and gas
production receipts 348 371
Accrued production and property taxes 635 670
Prepayments from joint interest owners 189 453
Accrued expenses 318 305
Foreign income taxes payable (Note 6) - 64
Other (Note 4) 79 222
------- -------
Total current liabilities 2,883 3,478
------- -------
Long-term bank debt (Note 5) 1,600 4,200
Deferred income taxes (Note 6) 652 1,036
Other liabilities - 39
Commitments and contingent liabilities
(Notes 4, 7, 9 and 10)
Stockholders' equity:
Preferred stock authorized 5,000,000
shares, no par value; none issued - -
Common stock authorized 20,000,000 shares
of $.20 par value; 3,328,580 shares
issued in 1995 and 3,282,109 in 1994
(outstanding 3,068,149 in 1995 and
2,947,512 in 1994) (Notes 1 and 8) 666 656
Additional paid-in capital 15,842 15,855
Cumulative foreign currency
translation adjustments - (496)
Retained earnings (accumulated deficit)
since December 1, 1987 (Note 2) (1,378) 2,814
------- -------
15,130 18,829
Less:
Treasury stock, at cost (Note 8)
260,431 shares in 1995 and
334,597 shares in 1994 (1,944) (2,627)
------- -------
Total stockholders' equity 13,186 16,202
------- -------
$18,321 $24,955
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
48<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended November 30,
-------------------------------------
1995 1994 1993
---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Oil and gas sales $ 7,902 $11,227 $11,138
Operating and management
services (Note 7) 1,338 1,807 1,678
Interest income 160 107 97
-------- ------- -------
Total revenues 9,400 13,141 12,913
-------- ------- -------
Costs and expenses:
Lease operating expenses 1,811 2,017 2,203
Property and production taxes 780 1,072 1,050
Operating and management
services (Note 7) 1,017 1,052 1,062
General and administrative 1,278 1,549 1,440
Depreciation, depletion and
amortization 2,757 2,965 2,470
Impairments of long-lived
assets and loss on asset
disposition/abandonments (Note 1) 3,055 - 258
Exploration expense 245 600 165
-------- ------- -------
Total costs and expenses 10,943 9,255 8,648
-------- ------- -------
Operating income (1,543) 3,886 4,265
-------- ------- -------
Other expense:
Interest 185 253 126
Retirement and separation 141 - -
Litigation expense (Notes 9
and 10) 127 244 -
Other 26 19 77
-------- ------- -------
479 516 203
-------- ------- -------
Earnings (loss) before income
taxes and cumulative effect
of accounting change (2,022) 3,370 4,062
Provision (benefit) for income
taxes (Note 6) (527) 1,180 1,248
-------- ------- -------
Earnings (loss) before cumulative
effect of accounting change (1,495) 2,190 2,814
Cumulative effect of accounting
change (Note 6) - - 992
-------- ------- -------
Net earnings (loss) $(1,495) $ 2,190 $ 3,806
======= ======= =======
</TABLE>
(continued)
49<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS - (continued)
<TABLE>
<CAPTION>
Year Ended November 30,
-------------------------------------
1995 1994 1993
---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C>
Earnings (loss) per share:
Before cumulative effect of
accounting change $ (.48) $ .67 $ .83
Cumulative effect of
accounting change -- -- .29
------- ------- -------
Net earnings (loss) $ (.48) $ .67 $ 1.12
======= ======= =======
Average number of common and
common equivalent shares
outstanding 3,143 3,269 3,404
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
50<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For The Three Years Ended November 30, 1995
<TABLE>
<CAPTION>
Cumalative
Retained Foreign
Common Stock Additional Earnings Currency Treasury Stock
----------------- Paid-In (Accumulated) Translation -----------------
Shares Amount Capital Deficit) Adjustments Shares Amount
------ ------ ---------- ------------- ----------- ------ ------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 1, 1992 2,967,144 $ 593 $ 13,163 $ (651) $ (481) 295,201 $(1,555)
Cumulative effect of
accounting change
(Note 6) - - 125 - 102 - -
Exercise of employee
stock options 263,300 53 1,323 - - - -
Tax benefit of
disqualifying disposition
of incentive stock options - - 165 - - - -
Adjustment for
foreign currency
translation, net of
$30,000 income tax - - - - (49) - -
Purchase of shares - - - - - 259,546 (2,390)
Shares issued for Stock
Purchase Plan 4,512 1 47 - - (1,140) 6
Termination of ESOP - - - - - (21,870) -
Income tax benefit of
loss carryforwards
arising prior to
quasi-reorganization - - 142 - - - -
Net earnings - - - 3,806 - - -
--------- ------ -------- ------- ------- -------- -------
Balances,
November 30, 1993 3,234,956 647 14,965 3,155 (428) 531,737 (3,939)
Exercise of employee
stock options 35,730 7 185 - - - -
Tax benefit of
disqualifying disposition
of incentive stock options - - 29 - - - -
Adjustment for foreign
currency translation, net
of $43,000 income tax - - - - (68) - -
Purchase of shares - - - - - 83,674 (781)
Shares issued for Stock
Purchase Plan 11,423 2 111 - - (2,875) 22
10% stock dividend - - 515 (2,531) - (269,777) 2,014
</TABLE>
(continued)
51<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (continued)
For The Three Years Ended November 30, 1995
<TABLE>
<CAPTION>
Cumalative
Retained Foreign
Common Stock Additional Earnings Currency Treasury Stock
----------------- Paid-In (Accumulated) Translation -----------------
Shares Amount Capital Deficit) Adjustments Shares Amount
------ ------ ---------- ------------- ----------- ------ ------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for
Incentive Bonus Plan
and directors' fees - - - - - (8,162) 57
Income tax benefit of
loss carryforwards
arising prior to
quasi-reorganization - - 50 - - - -
Net earnings - - - 2,190 - - -
--------- ------ -------- ------- ------- -------- -------
Balances,
November 30, 1994 3,282,109 $ 656 $ 15,855 $ 2,814 $ (496) 334,597 $(2,627)
Exercise of employee
stock options 35,658 8 158 - - - -
Adjustment for
foreign currency
translation, net of
$326,000 income tax - - - - 496 - -
Tax benefit of
disqualifying
disposition of
incentive stock
options - - 25 - - - -
Purchase of shares - - - - - 246,631 (1,860)
Shares issued for Stock
Purchase Plan 10,813 2 85 - - (2,719) 22
Dividend related to
Resources rights
offering (Note 1) - - - (582) - - -
10% stock dividend - - (202) (2,115) - (291,399) 2,314
Shares issued for
Incentive Bonus Plan,
directors' fees
and retirement - - (79) - - (26,679) 207
--------- ------ -------- ------- ------- -------- -------
Net loss - - - (1,495) - - -
Balances,
November 30, 1995 3,328,580 $ 666 $15,842 $(1,378) $ -0- 260,431 $(1,944)
========= ====== ======== ======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
52<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended November 30,
-------------------------
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Net earnings (loss) $(1,495) $ 2,190 $ 3,806
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation, depletion, and
amortization 2,757 2,965 2,470
Cumulative effect of accounting change (Note 6) - - (992)
Impairments and loss on asset dispositions 3,055 6 264
Deferred income tax provision (576) 889 897
Exploration expense, noncash portion 69 139 -
Other 110 65 23
Changes in operating assets and liabilities:
Accounts receivable 411 264 (974)
Other current assets 40 23 55
Accounts payable 147 (445) 165
Undistributed oil and gas production receipts (89) 125 (285)
Accrued production and property taxes (35) (33) 118
Prepayments from joint interest owners (264) 27 26
Income taxes payable (receivable) (32) 66 (36)
Other current liabilities (169) (87) 3
------- ------- -------
9 (60) (928)
------- ------- -------
Net cash provided by operating activities 3,929 6,194 5,540
------- ------- -------
Cash flows from investing activities:
Proceeds from sale of assets 34 7 279
Proceeds from sale of Resources
common stock, net of cash 4,075 - -
Additions to oil and gas properties (4,144) (7,044) (5,775)
Additions to other assets (84) (157) (156)
------- ------- -------
Net cash used in investing activities (119) (7,194) (5,652)
------- ------- -------
Cash flows from financing activities:
Proceeds from long-term debt 2,090 2,200 2,600
Reduction in long-term debt (4,690) (1,200) (1,500)
Proceeds from exercise of stock options 209 271 1,268
Purchase of treasury stock (1,830) (750) (2,289)
Other (2) (2) -
------- ------- -------
Net cash provided by (used in)
financing activities (4,223) 519 79
------- ------- -------
Effect of exchange rate on cash 8 (19) (3)
------- ------- -------
Net decrease in cash and cash equivalents (405) (500) (36)
Cash and cash equivalents at beginning of year 1,819 2,319 2,355
------- ------- -------
Cash and cash equivalents at end of year $ 1,414 $ 1,819 $ 2,319
======= ======= =======
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest $ 214 $ 235 $ 119
======= ======= =======
Income taxes (net of refunds) $ 82 $ 225 $ 374
======= ======= =======
Supplemental disclosure of non-cash
investing and financing activities:
Non-cash compensation expense
related to common stock $ 162 $ 65 $ 61
======= ======= =======
Oil and gas property additions $ 185 $ - $ -
======= ======= =======
Dividend for Resources rights $ 582 $ - $ -
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
53<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1) FORMATION AND OPERATIONS OF THE COMPANY
Columbus Energy Corp. ("Columbus") was incorporated as a Colorado
corporation on October 7, 1982 primarily to explore for, develop,
acquire and produce oil and gas reserves. Columbus' wholly-owned
subsidiaries are CEC Resources Ltd. ("Resources") and Columbus Gas
Services, Inc. ("CGSI"). Resources activity was only included through
February 24, 1995 when it was divested by Columbus by a rights
offering to its shareholders (see below). Columbus and its
subsidiaries are referred to in these Notes to the Financial
Statements as the "Company".
As of June 1, 1985, Consolidated Oil & Gas, Inc. formed a master
limited partnership, Consolidated Energy Partners L.P. (the
"Partnership" or "CPS"). Under the terms of the Partnership
agreement, Columbus was made the managing general partner and as such
had all management authority with respect to the operations of CPS.
Consolidated served as an associate general partner of CPS. Columbus
owned 1% and also served as the managing general partner of
Consolidated Operating Partners L.P. ("COP") which was 99% owned by
CPS as its sole limited partner. During 1989, the oil and gas
properties of COP were sold and both CPS and COP were dissolved
effective November 30, 1989 (see Note 4).
On February 24, 1995, Columbus completed a rights offering to the
Columbus shareholders to purchase one share of Resources at U.S.$3.25
cash plus two subscription rights. One right was distributed as a
dividend for each share held of record on January 27, 1995. All
1,500,000 shares of Resources common stock were subscribed (and
oversubscribed) yielding an aggregate of $4,875,000. The total value
assigned to the rights on its books was $582,000 for the dividend
portion of the purchase of Resources shares. A deduction of $126,000
for the costs of the offering was recorded. No gain or loss can be
recognized for book purposes in a spin-off. The combination of the
cash offering price of $3.25 per share plus the value of the rights
dividend assigned was equal to the U.S. historical book cost of
Columbus' investment in Resources. No taxes are due Revenue Canada as
a result of this divestiture of common stock because the tax basis
exceeds the proceeds received upon disposition.
(2) ACCOUNTING POLICIES
The consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles
and require the use of managements' estimates. The following is a
summary of the significant accounting policies followed by the
Company.
54<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Consolidation
-------------
The accompanying consolidated financial statements include the
accounts of Columbus and its wholly-owned subsidiaries, CGSI and
Resources through February 24, 1995. All significant intercompany
balances have been eliminated in consolidation.
Cash Equivalents
----------------
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents. Hedging activities
are included in cash flow from operations in the cash flow statements.
Oil and Gas Properties
----------------------
The Company follows the successful efforts method of accounting.
Lease acquisition and development costs (tangible and intangible) for
expenditures relating to proved oil and gas properties are
capitalized. Delay and surface rentals are charged to expense in the
year incurred. Dry hole costs incurred on exploratory operations are
expensed. Dry hole costs associated with developing proved fields are
capitalized. Expenditures for additions, betterments, and renewals
are capitalized. Geological and geophysical costs are expensed when
incurred.
Upon sale or retirement of proved properties, the cost thereof
and the accumulated depreciation or depletion are removed from the
accounts and any gain or loss is credited or charged to income if
significant. Abandonment, restoration, dismantlement costs and
salvage value are taken into account in determining depletion rates.
These costs are generally about equal to the proceeds from equipment
salvage upon abandonment of such properties. Maintenance and repairs
are charged to operating expenses.
Provision for depreciation and depletion of capitalized
exploration and development costs are computed on the unit-of-
production method based on proved developed reserves of oil and gas,
as estimated by petroleum engineers, on a property by property
basis. Unproved properties are assessed periodically to determine
whether they are impaired. When impairment occurs, a loss is
recognized by providing a valuation allowance. When leases for
unproved properties expire, any remaining cost is expensed.
Depreciation of other assets are provided on the straight line method
over their estimated useful lives.
55<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company uses crude oil and natural gas hedges to manage price
exposure. Realized gains and losses on the hedges are recognized in
oil and gas sales as settlement occurs.
The Company follows the entitlements method of accounting for gas
balancing of gas production. The Company's gas imbalances are
immaterial at November 30, 1995 and 1994.
Effective for the fourth quarter beginning September 1, 1995 the
Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS 121"). This statement prescribes the
accounting for the impairment of long-lived assets, such as oil and
gas properties. An impairment loss is reported as a component of
income from continuing operations. Adoption of this statement
resulted in an impairment loss (non-cash charge) of $3,055,000 for the
fourth quarter 1995 and was recognized as impairment expense to the
oil and gas business segment. The Company reviewed the impairment of
oil and gas properties for each successful efforts pool. The B. R.
Cox field in Texas and the Oklahoma, New Mexico and North Dakota
property pools were determined to be impaired and an impairment loss
equal to the difference between the carrying value and the fair value
of the pool was recognized. Fair value was estimated to be a
discounted present value of expected future net cash flows with
appropriate risk consideration over the economic life of the reserves.
Quasi-reorganization
--------------------
In fiscal 1988, the Board of Directors adopted a corporate
resolution which approved a quasi-reorganization effective December 1,
1987 and transferred $13,441,000 from additional paid-in capital to
offset the accumulated deficit.
Other Property and Equipment
----------------------------
Gains and losses from retirement or replacement of other
properties and equipment are included in income. Betterments and
renewals are capitalized. Maintenance and repairs are charged to
operating expenses.
56<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Income Taxes
------------
The Company files a consolidated income tax return with CGSI.
Resources, its Canadian subsidiary, was also included in the
consolidated U.S. income tax return through February 24, 1995
before terminating with completion of the divestiture. Resources was
also subject to tax under applicable Canadian tax law. Columbus and
its consolidated subsidiary have executed a tax allocation agreement
which provides for an allocation and payment of U.S. income taxes
based upon each Company's separate tax liability calculation.
Foreign Currency Translation
----------------------------
Canadian assets and liabilities were translated into U.S. dollars
using the exchange rate in effect at year end. Canadian revenues and
expenses were translated using average exchange rates for each period.
Adjustments resulting from these translations were accumulated in a
separate component of stockholders' equity. Foreign currency
transaction gains or losses, which primarily represented exchange
gains or losses resulting from the denomination of current
intercompany balances into U.S. dollars, were included in determining
net income for prior period. Such gains or losses are not significant
for the periods presented.
Operating and Management Services
---------------------------------
The Company recognizes revenue for operating and management
services provided to other companies and non-operating interest owners
in which the Company has no economic interest. The Company receives
overhead fees, management fees and revenues related to gas marketing,
compression and gathering.
The cost of providing such services is expensed and shown as
"operating and management services" cost.
Earnings Per Share
------------------
Earnings per share are computed using the weighted average number
of common shares outstanding. Stock options are included as common
stock equivalents, when dilutive, using the treasury stock method.
Historical amounts have been adjusted for the 10% stock dividend
distributions, in 1995 and 1994.
57<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Accounting for Stock-Based Compensation
- ---------------------------------------
The Financial Accounting Standards Board issued Statement No.
123 on the "Accounting for Stock-Based Compensation". This statement
prescribes the accounting and reporting standards for stock-based
employee compensation plans and is effective for the Company's 1997
fiscal year unless adopted earlier. The Company has not decided if it
will adopt this standard or simply make pro forma disclosures as the
alternative provided by the standard.
(3) OIL AND GAS PRODUCING ACTIVITIES
The following tables set forth the capitalized costs related to
oil and gas producing activities, costs incurred in oil and gas
property acquisition, exploration and development activities, and
results of operations for producing activities:
<TABLE>
<CAPTION>
CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
(in thousands)
November 30, 1995 November 30, 1994
------------------------- -------------------------
United United
Total States Canada Total States Canada
----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Proved properties<F1> $22,153 $22,153 $ -- $29,688 $22,596 $ 7,092
Unproved properties 91 91 -- 159 105 54
------- ------- ------ ------- ------- -------
22,244 22,244 -- 29,847 22,701 7,146
Less accumulated depreciation,
depletion, amortization and
valuation allowance(a) (9,414) (9,414) -- (11,368) (8,632) (2,736)
------- ------- ------ ------- ------- -------
Total net properties $12,830 $12,830 $ -- $18,479 $14,069 $ 4,410
======= ======= ====== ======= ======= =======
<FN>
<F1> During 1994 U.S. fully depleted properties were written-off.
</TABLE>
58<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION,
EXPLORATION AND DEVELOPMENT ACTIVITIES
(in thousands)
<TABLE>
<CAPTION>
Year Ended November 30,
----------------------------------------------------------------------------------------
1995 1994 1993
------------------------- ------------------------- -------------------------
United United United
Total States Canada Total States Canada Total States Canada
----- ------ ------ ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Property acquisition
costs:
Proved $1,443 $1,443 $ - $2,501 $ 2,501 $ - $ 871 $ 871 $ -
Unproved 85 85 - 96 59 37 525 455 70
Exploration costs 245 196 49 600 464 136 165 85 80
Development costs 2,843 2,771 72 3,885 2,360 1,525 4,434 3,876 558
------ ------ ----- ----- ------ ------ ----- ------ ------
Total costs
incurred $4,616 $4,495 $ 121 $7,082 $5,384 $1,698 $5,995 $5,287 $ 708
====== ====== ====== ====== ====== ====== ====== ====== =====
</TABLE>
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
(in thousands)
<TABLE>
<CAPTION>
Year Ended November 30,
----------------------------------------------------------------------------------------
1995 1994 1993
------------------------- ------------------------- -------------------------
United United United
Total States Canada Total States Canada Total States Canada
----- ------ ------ ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $7,902 $ 7,269 $ 633 $11,227 $ 8,798 $ 2,429 $11,138 $ 8,730 $ 2,408
Production (lifting)
costs<F1> 2,591 2,343 248 3,089 2,285 804 3,253 2,340 913
Exploration expenses 245 196 49 600 464 136 165 85 80
Impairment of long-
lived assets 3,055 3,055 - - - - - - -
Depreciation,
depletion and
amortization<F2> 2,543 2,410 133 2,742 2,355 387 2,254 1,903 351
------ ------ ----- ----- ------ ------ ------ ------ ------
(532) (735) 203 4,796 3,694 1,102 5,466 4,402 1,064
Imputed income
tax<F3> (138) (209) 71 1,691 1,311 380 1,726 1,466 260
------ ------ ----- ----- ------ ------ ------ ------ ------
Results of operations
from producing
activities
(excluding overhead
and interest
costs) $ (394) $ (526) $ 132 $ 3,105 $2,383 $ 722 $ 3,740 $ 2,936 $ 804
====== ====== ===== ======= ====== ======= ======= ======= =======
<FN>
<F1> Production costs include lease operating expenses, production and property taxes
<F2> Amortization expense per equivalent barrel of production:
1995 - $3.83 1994 - $2.78 1993 - $2.73
<F3> The imputed income tax is hypothetical and determined without regard to the Company's deduction for general
and administrative expense, interest costs and other items.
</TABLE>
59<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
For the years ended November 30, 1995, 1994 and 1993, the Company
had the following customers who purchased production equal to more
than 10% of its total revenues. The following table shows the amounts
purchased by each customer.
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- -------------------- --------------------
Amount % Revenue Amount % Revenue Amount % Revenue
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Customer A $2,027 27.9% $1,755 13.4% $ 2,881 25.9%
Customer B 2,635 36.2 4,072 31.0 2,740 24.6
Customer C 1,046 14.4 1,423 10.8 1,487 13.3
</TABLE>
In the Company's judgment, termination by any purchaser under
which its present sales are made would not have a material impact upon
its ability to sell its production to another purchaser at similar
prices.
(4) INVESTMENT IN PARTNERSHIP
Columbus was formerly the managing general partner of CPS, and
also operated almost all oil and gas properties owned by its
subsidiary partnership, COP. When these partnerships were dissolved
effective November 30, 1989, no partners received a cash distribution
from their investment in CPS as the proceeds from the sale of the
properties were less than the bank debt and other partnership
liabilities.
Columbus, as managing general partner of COP, and Columbus as
managing general partner and Consolidated as associate general partner
of CPS had an obligation to pay for the respective partnership's costs
incurred. Included in other current liabilities as of November 30,
1994 and 1995 is $122,000 and $16,000, respectively, which represented
remaining cash available to pay any valid claims that might become
payable related to either liquidation or prior operations. During
1995, a settlement was reached with Jicarilla Apache Tribe relative to
their claims for additional royalty owed for the period 1985 through
1992 from gas wells on their leaseholds in which COP owned varying
interests and Columbus was operator. COP's share of the settlement
was $95,000 which was paid from the available $122,000 on hand.
60<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(5) LONG-TERM DEBT
The Company has a Credit Agreement ("Agreement") with Norwest
Bank Denver, N.A. ("Bank") having a borrowing base which has been
recently reduced at the request of Columbus to $7,000,000, which is
subject to semi-annual redetermination for any increase or decrease.
On January 5, 1996 the Credit Agreement was amended to extend the
revolving period and maturity date. The loan now revolves until July
1, 1997 and then in its entirety converts to an amortizing term loan
which matures July 1, 2000. The credit is collateralized by a first
lien on U.S. oil and gas properties. The interest rate options are
the Bank's prime rate or LIBOR plus 1 3/4%. In addition, a commitment
fee of 1/4 of 1% of the average unused portion of the credit is
payable quarterly.
At November 30, 1995 outstanding borrowings on the revolving line
of credit were $1,600,000 and the unused borrowing base available was
$5,400,000 and the $1,600,000 bore interest at LIBOR rates of 5.82%
plus 1 3/4%.
The Agreement as amended provides that certain financial
covenants be met which include a minimum net worth of $8,300,000 plus
50% of cumulative net income after November 30, 1991, a quarterly
calculation of a current ratio of not less than 1.0:1.0 and a ratio of
funded debt to consolidated net worth not greater than 1.25:1.00.
Columbus has complied with these covenants. Under the terms of the
Agreement, Columbus is permitted to declare and pay a dividend in cash
so long as no default has occurred or a mandatory prepayment of
principal is pending.
The scheduled payments of long-term debt are as follows (in
thousands):
Year ending November 30,:
1996 $ -
1997 178
1998 533
1999 533
2000 356
-------
Total $ 1,600
=======
61<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(6) INCOME TAXES
The provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ - $ 57 $ 75
Foreign (Canada) 29 162 116
State 20 72 160
------ ------ ------
49 291 351
------ ------ ------
Deferred:
Federal (620) 636 723
Foreign (Canada) 44 253 174
------ ------ ------
(576) 889 897
------ ------ ------
Total income tax
(benefit) expense $ (527) $1,180 $1,248
====== ====== ======
</TABLE>
The components of earnings (loss) before income taxes are (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. $(2,231) $2,167 $ 2,873
Canada 209 1,203 1,189
------- ------ -------
Total $(2,022) $3,370 $ 4,062
======= ====== =======
</TABLE>
Total tax provision has resulted in effective tax rates which
differ from the statutory Federal income tax rates. The reasons for
these differences are:
<TABLE>
<CAPTION>
Percent of Pretax Earnings
----------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. Statutory rate (34)% 34% 34%
Foreign taxes (Canada) 4 12 7
State income taxes (4) 2 4
Change to post-1987
carryforwards 13 (7) (8)
Percentage depletion (5) (4) -
Foreign tax credit/deduction (4) (4) (7)
Other 4 2 1
--- --- ---
Effective rate (26)% 35% 31%
=== === ===
</TABLE>
62<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company files a consolidated income tax return with its
subsidiary and has executed a tax allocation agreement which provides
for an allocation and payment of U.S. income taxes based upon each
company's separate tax liability calculation.
The net operating loss carryforwards and percentage depletion
deductions are for U.S. tax purposes only. For Canadian income tax
purposes, when the annual taxable income of Resources exceeded its
available Canadian tax allowances and deductions for that year,
current income taxes were provided and a tax liability recorded.
Canadian taxes were currently payable in 1994 and 1993. Consolidated
U.S. income taxes are payable only when taxable income exceeds
available U.S. net operating loss carryforwards and other credits.
Pursuant to provisions enacted as part of the Tax Reform Act of
1986, utilization of these corporate tax carryforwards in any one
taxable year is limited if a corporation experiences a 50% change of
ownership. Columbus experienced such a change of ownership in
October, 1987 effectively limiting the utilization of pre-change
ownership net operating losses to approximately $900,000 in each
subsequent year. Subsequent additional ownership changes accumulated
to more than 50% by August 25, 1993 thereby causing a second ownership
change to occur. This second change limited the utilization of post-
1987 net operating losses to $1,300,528 in 1993 and $848,137 in 1994
so that Columbus was not able to utilize the remaining post-1987 net
operating loss carryforwards of approximately $593,000 until fiscal
1995 or later.
The Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109") effective December
1, 1992. SFAS 109 requires the asset and liability approach be used
to account for income taxes. Under this method, deferred tax
liabilities and assets are determined based on the temporary
differences between financial statement and tax basis of assets and
liabilities using enacted rates in effect for the year in which the
differences are expected to reverse. U.S. tax assets (net of a
valuation allowance) primarily result from net operating loss
carryforwards, percentage depletion and certain accrued but unpaid
employee benefits. U.S. deferred tax liabilities result from the
recognition of depreciation, depletion and amortization in different
periods for financial reporting and tax purposes. Canadian deferred
tax assets consisted of the tax attributes of carryforward costs that
had expended but not yet utilized as tax deductions while deferred tax
liabilities resulted from temporary differences in amortization of
costs.
63<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Because of the Company's previous 1987 quasi-organization, the
adoption of SFAS 109 requires the Company to report the effect of its
net deferred tax asset arising prior to December 1, 1987 as an
increase in stockholders' equity rather than as an increase to net
earnings. The net deferred tax asset arising subsequent to the quasi-
reorganization was a credit to income and was reported separately as a
"cumulative effect of change in method of accounting for income
taxes".
The cumulative effect (benefit) of $992,000 related to the post-
quasi-reorganization net deferred tax asset resulting from adoption of
SFAS 109 was recognized in the first quarter of 1993. The cumulative
effect (benefit) of $125,000 related to the pre-quasi-reorganization
net deferred tax asset was credited to additional paid-in capital in
stockholders' equity. In addition, the cumulative effect (benefit) of
$102,000 related to foreign currency translation adjustment was
credited to that account in stockholders' equity. The total benefit
of $1,219,000 was recorded as a deferred tax asset.
64<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
During fiscal 1995, certain U.S. tax assets (shown in the table
below) were utilized. Projected taxable income caused the Company to
increase the valuation allowance during the year by $96,000 which
increased from the net loss.
The tax effect of significant temporary differences representing
U.S. deferred tax assets and liabilities and changes were as follows
(in thousands):
<TABLE>
<CAPTION>
Current Year
-------------------------
Dec. 1, Stockholders' Nov. 30,
1994 Equity Operations 1995
------- ------------- ---------- --------
<S> <C> <C> <C> <C>
Deferred tax assets:
Pre-1987 loss carryforwards $1,976 $ - $ - $1,976
Post-1987 loss carryforwards 219 - 501 720
Percentage depletion
carryforwards 782 - 112 894
State income tax loss
carryforwards 33 - 164 197
Canadian deferred taxes 233 - (233) -
Other 252 - (7) 245
Foreign currency translation
adjustment 326 (326)<F1> - -
------ ------ ------ ------
Total 3,821 (326) 537 4,032
Valuation allowance (1,641) - <F2> (96) (1,737)
------ ------ ------ ------
Deferred tax assets 2,180 (326) 441 2,295
------ ------ ------ ------
Tax benefit of disqualifying
disposition of incentive
stock options - 25 <F2> (25) -
------ ------ ------ ------
Deferred tax liabilities-
Depreciation, depletion and
amortization and other (1,861) - 204 (1,657)
------ ------ ------ ------
Net tax asset $ 319 $ (301) $ 620 $ 638
====== ====== ====== ======
____________________
<FN>
<F1> Foreign currency translation adjustment for divestiture of Resources.
<F2> Credited to additional paid-in capital.
</TABLE>
The Company has approximate net operating loss carryforwards (in
thousands) available at November 30, 1995 as follows:
Net
Expiration Year Operating loss
--------------- --------------
1999 $4,517
2000 907
2001 386
2003 478
2004 115
2010 1,525
-------
$ 7,928
=======
65<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
For U.S. Alternative Minimum Tax purposes the Company had net
operating loss carryforwards of approximately $8,500,000 as of
November 30, 1995. The Company also has percentage depletion
carryforwards of $2,300,000 which do not expire. State income tax
operating loss carryforwards of approximately $3,400,000 are available
at November 30, 1995.
The tax effect of significant temporary differences representing
Canadian deferred tax assets and liabilities and charges were as
follows (in thousands):
<TABLE>
<CAPTION>
Foreign
Exchange Current
Dec. 1, Translation Year Nov. 30,
1994 Adjustment Activity 1995
------- ----------- -------- --------
<S> <C> <C> <C> <C>
Deferred tax liabilities -
Temporary differences $ 616 $ - $ (616) $ -
------ ------- ------ -------
Deferred tax asset -
Alberta Royalty tax
deduction 2 - (2) -
------ ------- ------ -------
Net deferred income
taxes $ 614 $ - $ (614) $ -
====== ======= ====== =======
</TABLE>
The Canadian carryforwards were utilized to the extent possible
to reduce Canadian taxable income. U.S. taxable income, which
included Canada in consolidation until the sale of Resources shares on
February 24, 1995, was reduced by the Canadian taxes paid using a
foreign tax deduction or as a foreign tax credit. Therefore, the
consolidated tax benefit realized was insignificant.
66<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The earnings before income taxes for financial statements
differed from taxable income as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Earnings loss) before income taxes
per financial statements $(2,022) $3,370 $4,062
Differences between income
before taxes for financial
statement purposes and
taxable income:
Intangible drilling costs
deductible for taxes (3,125) (2,372) (1,764)
Excess of book over tax
depletion, depreciation
and amortization 607 1,020 1,225
Disqualifying disposition of
incentive stock options (88) (76) (430)
Impairment expense 3,055 - -
Lease abandonments (258) - -
Dividend of rights of Resources 234 - -
Other 72 (105) 23
------- ------ ------
Federal taxable income $(1,525) $1,837 $3,116
======= ====== ======
</TABLE>
Realization of the future tax benefits is dependent on the
Company's ability to generate taxable income within the carryforward
period. Based upon the proved reserves as of November 30, 1995 as
well as contemplated drilling activities, but excluding revenues from
any possible future increase in proved reserves, management believes
that taxable income during the carryforward period will be sufficient
to partially utilize the NOL's before they expire. Of the total
valuation allowance of $1,737,000 as of November 30, 1995, $1,407,000
relates to pre-quasi-reorganization tax assets and the balance of
$330,000 relates to post-quasi-reorganization tax assets. In future
periods, reduction of the pre-quasi-reorganization portion of the
valuation allowance will be credited to additional paid-in capital and
reduction of the post-quasi-reorganization portion of the valuation
allowance will be credited to income.
67<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Estimates of future taxable income are subject to continuing
review and change because oil and gas prices fluctuate, proved
reserves are developed or new reserves added as a result of future
drilling activities, and operation and management services revenue and
expenses vary. A minimum level of $11,000,000 of future taxable
income will be necessary to enable the Company to fully utilize the
net operating loss carryforwards and realize the gross deferred U.S.
tax assets of $4,032,000. This level of income can be achieved using
the value of proved reserves reported in the year end November 30,
1995 standardized measure of net cash flows but this does not give
total assurance that sufficient taxable income will be generated for
total utilization because of the volatility inherent in the oil and
gas industry which makes it difficult to project earnings in future
years due to the factors mentioned above. There is a net deferred tax
asset of $638,000 calculated as of November 30, 1995, after deducting
the valuation allowance. The valuation allowance was increased a net
$96,000 even after a reduction of $233,000 which originally had been
the amount provided for the Canadian deferred taxes and was no longer
needed following the divestiture.
68<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(7) RELATED PARTY TRANSACTIONS
Columbus, as managing general partner, previously had certain
responsibilities to CPS and COP. Additionally, Columbus is
contingently liable for any debts and obligations of COP, excluding
the non-recourse long-term debt to the bank, even though there has
been a dissolution of CPS and COP. This would only occur after
liquidation proceeds available have been exhausted. Columbus is not
aware of any such debts or obligations of COP that it may be liable
for that would exceed the amount available therefor.
Certain direct and indirect general and administrative costs
incurred by CPS and COP were paid for by Columbus and reimbursed by
CPS and COP. The following table sets forth reimbursements (included
with operating and management services revenue) received for each
period from COP.
G & A
Allocated
---------
Year Ended November 30, 1995 $ 11,000
Year Ended November 30, 1994 22,000
Year Ended November 30, 1993 10,000
Reimbursement is made by Resources to Columbus for services
provided by Columbus officers and employees for managing Resources and
reduces general and administrative expense. This reimbursement
totaled $213,000 for the nine months in 1995 following the divestiture
of Resources.
(8) CAPITAL STOCK
Columbus has several stock option plans with outstanding options.
Under the 1985 Plan, options for 87,360 shares were exercisable at
November 30, 1995. No additional options may be granted under the
1985 Plan. At November 30, 1994, 29,014 shares were available for
granting of options and 179,632 shares were exercisable.
Under the 1995 Plan, 220,185 shares were available for granting
of options, and options for 166,830 shares were exercisable at
November 30, 1995.
The Board of Directors has granted nonqualified stock options of
which there were 5,296 exercisable at November 30, 1995 and 116,809
shares exercisable at November 30, 1994.
69<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Options are granted at 100% of fair market value on date of
grant. The following table represents a summary of stock option
transactions for the three years ended November 30, 1995:
<TABLE>
<CAPTION>
Shares Option Price
--------- -----------------
<S> <C> <C>
November 30, 1992 436,562 $3.72 to $5.89
Granted 92,141 7.70 to 8.42
Exercised (318,593) 3.72 to 7.70
Expired (30,092) 4.13 to 5.89
--------
Balance, November 30, 1993 180,018 3.72 to 8.42
Granted 202,829 8.26 to 8.47
Exercised (39,924) 4.13 to 7.70
Expired (5,897) 4.86 to 8.26
--------
Balance, November 30, 1994 337,026 3.72 to 8.47
Granted 181,965 6.44 to 7.94
Exercised (40,227) 3.72 to 5.89
Expired, exchanged or
surrendered (196,745) 5.89 to 8.47
--------
Balance, November 30, 1995 282,019 4.34 to 8.47
========
</TABLE>
As of August 1, 1995, the Board of Directors authorized new stock
options at the closing price ($6.625) on that date in an amount equal
to 80% of previously granted stock options that could be surrendered
at the election of the holder provided that the holder also had his
monthly salary reduced as a part of the downsizing and administrative
cost reduction program. Share options in the amount of 170,521
granted at prices from $5.87 to $8.47 were canceled and 66,015 share
options were reissued as of August 1, 1995 and 70,400 share options
were reissued on February 5, 1996 at the then fair market value of the
Company shares.
On October 28, 1992, the Board of Directors approved an Employee
Stock Purchase Plan ("Plan") to begin January 1, 1993, which was
approved by the shareholders at the 1993 annual meeting. Under the
Plan a total of 220,000 shares were reserved from authorized unissued
common stock from which payments by participants into the Plan will be
utilized to purchase shares and the Company will contribute an amount
of shares equivalent to 25% of those payments with vesting to occur
semi-annually which will be issued out of the Company's treasury
stock. For the fiscal 1995 and 1994 years a total of $17,000 and
$24,000 match, respectively, was accrued as expense by the Company.
The price of the shares will be the average trading price during each
six month purchase period or the ending price, whichever is less.
During fiscal 1994 a total of 14,298 shares were purchased (2,875
shares from treasury stock for the Company contribution of 25%) at an
average cost of $9.43 per share. During fiscal 1995 a total of 13,532
shares were purchased (2,719 shares from treasury stock for the
Company contribution of 25%) at an average cost of $8.01 per share.
70<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company previously had an Employee Stock Ownership Plan
("ESOP"), for Columbus and its domestic subsidiaries from 1987 until
its termination effective November 30, 1992. At November 30, 1992
upon termination of the ESOP, the outstanding ESOP loan balance of
$394,104 was paid and 76,229 shares not paid for or allocated to the
ESOP participants were returned to Columbus as treasury stock (reduced
by 21,870 shares in 1993 after final Internal Revenue Service
determination).
During 1993 the Board of Directors authorized purchase from the
market up to 350,000 shares of common stock (375,000 shares after
stock dividend adjustment) to be held as treasury stock. A total of
249,200 shares were purchased during fiscal 1993 at an average cost of
$9.18 per share. During fiscal 1994 an additional 80,500 shares were
purchased at an average cost of $9.32 per share. This was followed by
45,300 shares purchased during first quarter 1995 at an average cost
of $8.56 per share.
Another 300,000-share repurchase authorization was approved by
the Board in February 1995, restricted to a maximum purchase price of
$8.75 per share. A total of 197,900 shares were purchased during
fiscal 1995 at an average cost of $7.29 per share.
71<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(9) COMMITMENTS AND CONTINGENT LIABILITIES
The Company's Articles of Incorporation and By-Laws provide for
indemnification of its officers, directors, agents and employees to
the maximum extent authorized by the Colorado Corporation Code, as
amended or as may be amended, revised or superseded. In addition, the
Company has entered into individual indemnification agreements with
its officers and directors, present and past, which agreements more
fully describe such indemnification. The indemnification rights
provided under these agreements had been invoked by the
officer/director defendants who had been named in the Adversary
Proceeding described in Note 10 below and in "Item 3 - Legal
Proceedings".
Lease - In June 1991, Columbus executed a lease for office space
for its present building which provides for monthly payments of
$11,123, plus inflationary adjustments to an annual base operating
expense, for a period of 60 months from October 1991 through October
1996. The total rent expense for 1995, 1994 and 1993 was
approximately $126,000, $129,000 and $158,000 respectively. Columbus
has renewed the lease for an additional two years through September
1998 at a base rate of $13,536 per month. Future rental payments,
without regard to operating cost adjustments, required under this
lease as of November 30, 1995 are $138,000, $162,000 and $135,000 for
fiscal years 1996, 1997 and 1998, respectively.
Columbus is self-insured for medical and dental claims of its U.
S. employees and dependents as well as any former employees or
dependents who are eligible and elect coverage under COBRA rules.
Columbus pays a premium to obtain both individual and aggregate stop-
loss insurance coverage. A liability for claims incurred before year
end but not yet paid is included in other current liabilities.
During 1994, Columbus hedged natural gas prices by selling
100,000 Mmbtu per month for the twelve month period from May 1994
through April 1995 at an average daily price of $2.12 per Mmbtu. The
"swap" was matched against the calendar monthly average price on the
NYMEX and settled monthly resulting in a gain of $204,600 for the
period from May through November 1994 and a gain of $283,900 during
fiscal 1995 before its expiration in April 1995. The gains were
included in oil and gas sales revenues.
72<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company recently has entered into two new swaps of natural
gas prices by selling 60,000 Mmbtu per month for the period from April
1996 through November 1996 at $1.74 per Mmbtu while the second swap is
for the same period and quantity at $1.88 per Mmbtu. These amounts
represent approximately 65% of Columbus' current gas production. To
partially protect itself against possible escalating gas prices in
October and November 1996, the Company purchased NYMEX futures
contracts for two months for 60,000 Mmbtu of natural gas at $1.805 and
$1.875, respectively. These options can limit the Company's potential
loss for those two months to the difference between those prices and
the $1.74 Mmbtu price of the original swap.
Columbus also has entered into a swap of crude oil prices by
selling 10,000 barrels per month for the twelve month period from
January 1996 through December 1996 at an average daily price of $17.25
per barrel with a cap of $19.50 on the upside should crude oil futures
soar as a result of some world calamity. This amount represents
approximately 50% of its current monthly production. The difference
between the hedge price and the actual daily closing price on the
NYMEX and is settled monthly. Based upon recent futures prices of
crude oil the Company may recognize a loss in the early months but may
show a gain in the latter months.
The Company's natural gas and crude oil swaps are considered
financial instruments with off-balance sheet risk which were in the
normal course of business to reduce its exposure to fluctuations in
the price of crude oil and natural gas. Those instruments involve, to
varying degrees, elements of market and credit risk in excess of the
amount recognized in the balance sheets. As calculated as of February
5, 1996, the Company had 1996 natural gas and crude oil swaps with a
notional value of approximately $3,808,000 and a market value of
approximately $3,686,000. The market value changes constantly and
over the term of the contracts could result in a gain for the Company.
Should the price of crude oil and natural gas futures be above the
swap price each month, then the Company would be exposed to losses but
has capped that exposure in the case of crude oil.
Beginning November 1, 1994, Resources entered into a twelve month
firm gas sales agreement which required it to deliver 2.5 Mmcf per day
of natural gas from the Carbon plant to a pipeline company. Based
upon the terms of the agreement, the average price for the term
averaged CDN$1.73 per Mcf. The Company recognized revenue each month
as production was sold based upon the fixed and variable prices
received until the February divestiture of Resources.
73<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(10) LITIGATION
On April 21, 1993, Columbus was served with a complaint and
discovery in a lawsuit styled Michael Mattalino, Bruce L. Davis,
----------------------------------
and Maris E. Penn vs. Columbus Energy Corp., Case No. H-93-1083,
- --------------------------------------------
in the United States District Court, Southern District of Texas. The
plaintiffs alleged that in June 1987 Columbus had agreed to assign
to them overrides in "all leases acquired and wells drilled" in the
original Ulrich Field Extension Prospect acreage, which prospect area
included only a portion of the Sralla Road field near Houston, Texas.
They further asserted that they were entitled to overrides under any
acreage that Columbus might acquire within an originally agreed upon
working interest Area of Mutual Interest ("AMI") covering almost 70
square miles and that Columbus had failed to assign to them these
additional overrides under additional acquired acreage. The
plaintiffs prayer was for specific performance, an accounting and
punitive damages. Columbus denied their allegations and claimed they
had been assigned all overrides to which they were entitled under the
prospect. A second lawsuit was filed by Mattalino, et al in the
summer of 1994 which was also dismissed by a settlement agreement
executed in September 1994. Provisions of settlement required
Columbus to pay $450,000 to the plaintiffs and assign them a 3%
overriding royalty interest ("ORRI") effective October 1, 1994 under
certain leases on which there were gas wells which had not been
previously assigned. Columbus is to withhold 50% of all revenues
generated by those newly created 3% ORRI interests until it has
recouped $300,000 (which is considered to be an advance ORRI payment)
of the $450,000. The settlement costs and recoupment amounts have
been and are being shared proportionately with the other working
interest owners in the properties. Columbus' share of the entire
settlement amount was $227,618 with the non-recoverable portion being
$75,873. It also reserved an amount of $100,000 for possible future
non-recovery plus interest for its portion of the advance as a
litigation expense.
In February 1994, (as further amended June 1994), a lawsuit was
filed in State District Court in Webb County, Texas styled Rancho
------
Blanco Corporation v. Columbus Energy Corporation, et al, Case No.
- ------------------ -- -----------------------------------
C-94-99154, which sought and obtained a temporary injunction to
stop the Zachry No. 26 well from being produced from the Lobo No. 1
formation. Rancho Blanco Corp. ("RBC") was both a non-consenting 50%
working interest owner and a 100% royalty owner in this well. RBC
claimed the hole was sidetracked into the same reservoir in which a
jointly-owned well was already producing which constituted a breach of
the operating agreement contract. It sought damages as well as
removal of Columbus as operator for this breach. Columbus' working
interest was only 0.44% in the Zachry #26 but it did serve as operator
of and owned an interest in several other wells on the Zachry Ranch.
74<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
During September 1994, RBC and Columbus and all of the other
working interest owner defendants entered into mediation proceedings
which led to settlement of all disputes between the parties. Columbus
agreed to resign as operator of the nine wells which it operated on
the ranch for which it received $50,000 compensation. The Zachry 26
well would be allowed to produce and defendants assigned a 10% working
interest in the well free of cost to RBC plus $10,000 and agreed to
assign RBC a $50,000 production payment out of production from any new
wells drilled using Zachry's 3-D seismic payable out of a 15% net
revenue interest. These amounts are insignificant to Columbus' 0.44%
working interest.
On October 14, 1993, Columbus was served with a complaint and
discovery in a lawsuit styled Porter Farrell II vs. Columbus Energy
-------------------------------------
Corp., Cause No. H-93-3153, in the United States District Court,
- -----
Southern District of Texas. By second amended petition served on or
about January 20, 1994, Porter Farrell, II added a failure to develop
claim of an area of mutual interest to his first claims. Farrell
added yet a second lawsuit on September 26, 1994 assigned Cause No. H-
94-3303 but both cases were consolidated under the first cause number
for purposes of discovery and trial. The case had been scheduled for
Federal District Court in Houston in May, 1995 but on April 12, 1995
Columbus' motion for summary judgment was granted and the lawsuit was
dismissed. Subsequently on May 10, 1995 the plaintiff filed a Notice
of Appeal of this finding by the Federal District Court Judge to the
United States Court of Appeals for the 5th Circuit of New Orleans. On
January 4, 1996 the plaintiff withdrew the appeal and on January 10,
1996 an Entry of Dismissal was issued.
(11) DEFINED CONTRIBUTION PENSION PLAN
The Company has a qualified defined contribution 401(k) plan
covering all employees. The Company matches, at its discretion, a
portion of a participant's voluntary contribution up to a certain
maximum amount of the participant's compensation. The Company's
contribution expense was approximately $101,000, $77,000, and $58,000
in the fiscal years 1995, 1994 and 1993, respectively.
75<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(12) INDUSTRY SEGMENTS
The Company operates primarily in two business segments of (1)
oil and gas exploration and development, and (2) providing services as
an operator, manager and gas marketing advisor.
Summarized financial information concerning the business segments
is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Operating revenues from unaffiliated services<F1>:
Oil and gas $ 7,927 $11,246 $11,154
Services 1,473 1,895 1,759
------- ------- -------
Total $ 9,400 $13,141 $12,913
======= ======= =======
Depreciation, depletion and amortization<F2>:
Oil and gas $ 2,638 $ 2,788 $ 2,280
Services 119 177 190
------- ------- -------
Total $ 2,757 $ 2,965 $ 2,470
======= ======= =======
Operating income (loss):
Oil and gas $ (602)<F3> $ 4,770 $ 5,197
Services 337 665 508
General corporate expenses (1,278) (1,549) (1,440)
------- ------- -------
Total operating income (1,543) 3,886 4,265
Interest expense and other 479 516 203
------- ------- -------
Earnings before income taxes $(2,022) $ 3,370 $ 4,062
======= ======= =======
Identifiable assets (b):
Oil and gas $15,238 $20,642 $18,010
Services 3,083 4,313 4,928
Other corporate - - -
------- ------- -------
Total $18,321 $24,955 $22,938
======= ======= =======
Additions to property and equipment:
Oil and gas $ 4,423 $ 6,544 $ 5,974
Services 31 95 12
------- ------- -------
Total $ 4,454 $ 6,639 $ 5,986
======= ======= =======
<FN>
<F1> Approximately $352,000 of inter-segment revenues are included in service revenues in 1993, $294,000 in 1994
and $105,000 in 1995 and are offset by the same amounts in oil and gas operating expenses.
<F2> Other property and equipment have been allocated above to the oil and gas and services segment based upon the
estimated proportion the property is used by each segment. Therefore, depletion, depreciation and amortization and
identifiable assets do not match the functional allocations in the consolidated financial statements.
<F3> Includes non-cash impairment loss of $3,055,000.
</TABLE>
76<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company conducted its foreign operations in Canada until
February 1995 through its wholly-owned subsidiary, CEC Resources Ltd.
Summarized financial information concerning the foreign
operations which is included in the preceding table is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Operating revenues from unaffiliated
services<F1>:
Oil and gas $ 639 $ 2,436 $ 2,412
Services 150 563 708
------ ------- -------
Total $ 789 $ 2,999 $ 3,120
====== ======= =======
Depreciation, depletion and
amortization:
Oil and gas $ 116 $ 325 $ 287
Services 17 63 66
------ ------- -------
Total $ 133 $ 388 $ 353
====== ======= =======
Operating income:
Oil and gas $ 225 $ 1,171 $ 1,132
Services 106 497 497
General corporate expenses (121) (457) (406)
------ ------- -------
Total operating income 210 1,211 1,223
Interest expense and other 1 8 34
------ ------- -------
Earnings before income taxes $ 209 $ 1,203 $ 1,189
====== ======= =======
Identifiable assets:
Oil and gas $ - $ 4,680 $ 3,655
Services - 675 676
------ ------- -------
Total $ - $ 5,355 $ 4,331
====== ======= =======
Additions to property and equipment:
Oil and gas $ 45 $ 1,499 $ 623
Services 27 63 5
------ ------- -------
Total $ 72 $ 1,562 $ 628
====== ======= =======
<FN>
<F1> Approximately $352,000 of inter-segment revenues are included in services revenues in 1993, $294,000 in 1994
and $105,000 in 1995 and are offset by the same amounts in oil and gas operating expenses.
</TABLE>
(13) CONCENTRATIONS OF CREDIT RISK
The Company maintains demand deposit accounts with separate banks
in Denver, Colorado. The Company also invests cash in the highest
rated commercial paper of large U.S. companies, with maturities not
over 30 days, which have minimal risk of loss. At November 30, 1995
and 1994 the Company had investments in commercial paper of $1,200,000
and $1,416,000, respectively.
77<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Columbus as operator of jointly owned oil and gas properties,
sells oil and gas production to relatively large U.S. oil and gas
purchasers (see Note 3), and pays vendors for oil and gas services.
The risk of non-payment by the purchasers or joint owners is
considered minimal. The Company does not obtain collateral from its
oil and gas purchasers for sales to them. Joint interest receivables
are subject to collection under the terms of operating agreements
which provide lien rights to the operator.
(14) SUBSEQUENT EVENT
In December 1995 Columbus purchased producing oil and gas
properties in Texas effective November 1, 1995 for $2.6 million. The
asset and liability for the purchase as well as the revenues and
expenses for the month of November 1995 have not been recorded as of
November 30, 1995 because the closing did not take place until after
year end.
78<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amended
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COLUMBUS ENERGY CORP.
-----------------------------------
(Registrant)
Date: May 8, 1996 By: Harry A. Trueblood, Jr.
--------------------------------
Harry A. Trueblood, Jr.
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER
Chairman of the Board,
Harry A. Trueblood, Jr. President, and Chief 5/8/96
- ---------------------------- Executive Officer ----------
Harry A. Trueblood, Jr.
CHIEF OPERATING OFFICER
Executive Vice President
Clarence H. Brown and Chief Operating Officer 5/8/96
- ---------------------------- ----------
Clarence H. Brown
PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER
Ronald H. Beck Vice President 5/8/96
- ---------------------------- ----------
Ronald H. Beck
MAJORITY OF BOARD OF DIRECTORS
Harry A. Trueblood, Jr. Director 5/8/96
- ---------------------------- ----------
Harry A. Trueblood, Jr.
Clarence H. Brown Director 5/8/96
- ---------------------------- ----------
Clarence H. Brown
J. Samuel Butler Director 5/8/96
- ---------------------------- ----------
J. Samuel Butler
William H. Blount, Jr. Director 5/8/96
- ---------------------------- ----------
William H. Blount, Jr.
79
EXHIBIT 24(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Columbus Energy Corp. on Form S-8 (File No. 33-63336)
Form S-8 (File No. 33-93156), Form S-8 (File No. 33-25743) and Form S-
3 (File No. 333-02787) of our report dated February 9, 1996, on our
audits on the consolidated financial statements of Columbus Energy
Corp. as of November 30, 1995 and 1994, and for the years ended
November 30, 1995, 1994, and 1993, which report is included in this
Annual Report on Form 10-K/A.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
May 8, 1996
