<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, 1996
-------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-20125
--------------------------------------------------------
BASIN EXPLORATION, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1143307
---------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 17th Street, Suite 1800, Denver, CO 80202
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 685-8000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- ------
Indicate the number of shares outstanding of each of the issuer's classes
of Common stock, as of the latest practicable date.
Outstanding at
Class March 31, 1996
---------------------------- -----------------
Common stock, $.01 par value 10,686,662 shares<PAGE>
BASIN EXPLORATION, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets-
March 31, 1996 and December 31, 1995. . . . . . . 3
Consolidated Income Statements-
Three Months Ended March 31, 1996 and 1995. . . . 5
Consolidated Statements of Changes in
Stockholders' Equity. . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows-
Three Months Ended March 31, 1996 and 1995. . . . 7
Notes to Consolidated Financial Statements. . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
EXHIBITS -
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . 17
2<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
ASSETS
------
<TABLE>
<CAPTION>
(In thousands) March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,209 $ 1,613
Accounts receivable 5,591 7,029
Stockholder note receivable 559 559
Inventory and other current assets 949 1,116
-------- --------
Total current assets 8,308 10,317
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, under the full
cost method of accounting
Proved 172,225 206,880
Unproved 5,606 5,001
Less accumulated depreciation,
depletion and amortization (84,070) (80,961)
--------- ---------
93,761 130,920
Furniture and equipment, net 3,493 3,678
-------- --------
97,254 134,598
-------- --------
OTHER ASSETS:
Restricted cash 594 578
Other, net 1,179 1,158
-------- --------
1,773 1,736
-------- --------
$ 107,335 $ 146,651
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
3<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
(In thousands) March 31, December 31,
1996 1995
--------- ------------
<C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt (Note 3) $ 35 $ 175
Accounts payable and accrued expenses 6,766 7,985
Accrued ad valorem taxes 4,646 4,368
-------- --------
Total current liabilities 11,447 12,528
-------- --------
LONG-TERM DEBT, net of current portion (Note 3) 40,164 77,172
AD VALOREM TAXES AND OTHER 3,311 3,664
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per
share; authorized 10,000,000 shares,
no shares issued and outstanding - -
Common stock, par value $.01 per
share, authorized 50,000,000 shares,
10,724,000 shares issued 107 107
Additional paid-in capital 59,335 59,288
Retained earnings (deficit) (6,930) (6,014)
Common stock held in treasury, at cost,
37,000 shares (99) (94)
--------- ---------
Total stockholders' equity 52,413 53,287
-------- --------
$ 107,335 $ 146,651
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
4<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
(In thousands, except per share data) 1996 1995
--------- ---------
<S> <C> <C>
REVENUES:
Oil sales $ 3,875 $ 5,762
Gas sales 3,611 5,532
Other 23 259
---------- ----------
7,509 11,553
---------- ----------
OPERATING COSTS AND EXPENSES:
Lease operating expenses 1,676 2,070
Production taxes 726 1,004
Depreciation, depletion and amortization 3,354 4,634
General and administrative, net 1,189 1,543
Other 18 144
---------- ----------
6,963 9,395
---------- ----------
OPERATING INCOME 546 2,158
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (1,529) (1,622)
Other 67 (18)
---------- ----------
(1,462) (1,640)
---------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES (916) 518
Income tax provision - (193)
---------- ----------
NET INCOME (LOSS) $ (916) $ 325
========== =========
EARNINGS (LOSS) PER SHARE $ (0.09) $ 0.03
========== =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 10,687 10,679
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
5<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH MARCH 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON STOCK PAID-IN TREASURY STOCK EARNINGS SHAREHOLDERS'
(IN THOUSANDS) SHARES AMOUNT CAPITAL SHARES AMOUNT (DEFICIT) EQUITY
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1994 10,692 $107 $58,985 (13) $(47) $13,529 $72,575
Issuance and vesting of restricted
stock and stock options 32 - 302 - - - 302
Purchase of treasury stock - - - (19) (47) - (47)
Net loss - - - - - (19,543) (19,543)
--------------------------------------------------------------------------------
BALANCES, December 31, 1995 10,724 $107 $59,288 (32) $(94) $(6,014) $53,287
Issuance and vesting of restricted
stock and stock options - - 47 - - - 47
Purchase of treasury stock - - - (5) (5) - (5)
Net loss - - - - - (916) (916)
--------------------------------------------------------------------------------
BALANCES, March 31, 1996 10,724 $107 $59,335 (37) $(99) $(6,930) $52,413
================================================================================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
6<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) For the Three Months Ended
March 31,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (916) $ 325
Adjustments to reconcile net income (loss) to net cash provided by
Depreciation, depletion and amortization 3,354 4,634
Deferred income tax expense - 193
Restricted stock compensation 47 97
Amortization of prepaid expenses 65 96
Changes in operating assets and liabilities:
Decrease (increase) in:
Restricted cash (16) (19)
Receivables 1,438 1,824
Inventory and other, net 81 401
Increase (decrease) in:
Accounts payable and accrued expenses 13 (8,791)
Ad valorem taxes and other (75) (861)
Unearned income - (529)
--------- ---------
Net cash provided by (used in) operating activities 3,991 (2,630)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions (3,512) (7,085)
Increase (decrease) in drilling payables (931) 2,020
Proceeds from sale of property and equipment 37,202 2,400
--------- ---------
Net cash provided by (used in) investing activities 32,759 (2,665)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt - 2,979
Principal payments on notes payable and long-term debt (37,149) (217)
Purchase of treasury stock (5) -
--------- ---------
Net cash provided by (used in) financing activities (37,154) 2,762
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (404) (2,533)
CASH AND CASH EQUIVALENTS, beginning of period 1,613 5,394
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 1,209 $ 2,861
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 1,271 $ 1,400
========= =========
Cash paid for income taxes $ - $ -
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
7<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
--------
The interim financial data is unaudited. However, in the opinion of
management, all necessary adjustments have been made for a fair
presentation of the financial position of the Company at March 31,
1996 and the results of operations for the interim periods presented.
All such adjustments made have been of a normal and recurring nature.
Because of various factors, results of operations for this period are
not necessarily indicative of results to be expected for the full
year. For a more thorough understanding of the Company's operations
and financial position, these statements should be read in conjunction
with the Company's December 31, 1995 audited financial statements,
including the notes thereto.
(2) DIVESTITURE OF OIL AND GAS PROPERTIES
-------------------------------------
In February 1996, the Company entered into two sales agreements with
HS Resources, Inc. ("HS Resources"). The first agreement provided for
the Company to sell certain assets in the D-J Basin to HS Resources
for approximately $38.0 million. This transaction was closed on March
15, 1996. The second agreement provides for the Company to sell the
remainder of its D-J Basin assets for approximately $87.5 million,
subject to approval by shareholders representing a majority of the
Company's outstanding common shares. Both transactions are subject to
typical buyer due diligence review (some of which may be completed
post-closing for the first transaction) which may result in
adjustments to the agreed upon purchase prices. The transactions have
an effective date of January 1, 1996 and the agreements provide for
the Company to receive interest on the purchase prices from the
effective date to the respective closing dates, at 7.5% per annum.
The second transaction is expected to close in June 1996, after a
shareholder vote scheduled for June 6. Proceeds from the sales are
expected to be used to pay off all outstanding bank debt and fund
potential acquisitions and drilling opportunities. Combined, these
sales will result in Basin selling its interests in two-thirds of its
producing wells and approximately 70% of its proved oil and gas
reserves at December 31, 1995.
(3) LONG TERM DEBT
--------------
The Company utilized most of the proceeds from the closing of the
first transaction discussed in Note 2 above to pay down its bank debt
from $77 million to $40 million. The borrowing base under the
Company's revolving line of credit was concurrently reduced from $80
million to $55 million. When the revolving period expires, the credit
facility will convert to a four year amortizing term loan. Unless
extended, the revolving period will expire April 30, 1997. The
borrowing base is subject to redetermination at least semi-annually.
8<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Basin's revenues are significantly affected by changes in oil and gas
prices. Assuming level production, the Company's total revenue would
generally be higher in the first and fourth quarters due to higher
natural gas prices resulting from greater demand during colder months.
The following table reflects the Company's average oil and gas prices
and its average daily oil and gas production for the periods
presented:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1996 1995
---- ----
<S> <C> <C>
Average price:
Oil (per Bbl) $17.94 $16.83
Oil, excluding hedging (per Bbl) $18.51 $16.83
Gas (per Mcf) $ 1.47 $ 1.60
Gas, excluding hedging and
Section 29 tax credit income
(per Mcf) $ 1.47 $ 1.45
Average daily production:
Oil (Bbl) 2,374 3,805
Gas (Mcf) 27,000 38,500
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- --------------------------------------------------------
OPERATING REVENUE. Operating revenue for the first quarter
decreased by $4,044,000, or, 35%, to $7,509,000, from $11,553,000 in
the same period in 1995. The decrease was primarily due to lower
production levels in 1996. Gas production dropped 30% and oil
production declined 38% in the first quarter of 1996 compared to the
prior year. These decreases were due to the Company's significant
reduction in capital expenditures in 1995 (when it drilled only four
wells compared to 152 wells drilled in 1994), asset sales during 1995
and in the first quarter of 1996, and natural production declines.
Gas prices declined by 8% while oil prices rose 7%. For the first
three months of 1995, the Company recognized gas revenues for payments
received with respect to transferred Section 29 tax credits in the
amount of $528,000.
9<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LEASE OPERATING EXPENSES. Total lease operating expenses for the
first quarter decreased by $394,000, or 19%, compared to the same
period in 1995, but the amount per barrel of oil equivalent (BOE)
produced increased to $2.68 in 1996, from $2.36 in the first quarter
of 1995. The increased cost per BOE was caused primarily by a decline
in the number of new wells brought on line, since such wells typically
have relatively high initial production rates, generating average unit
production costs that are lower than for more mature properties.
PRODUCTION TAXES. Production taxes decreased with oil and gas
sales, but represented 9.7% of sales in 1996 compared to 8.9% in 1995.
The increased average tax rate was due to a greater portion of sales
occuring in higher-tax jurisdictions in 1996.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion
and amortization expense declined $1,280,000, or 28%, as the result of
less depletion due to lower production volumes in the current period.
The current year depletion rate of $4.97 per BOE produced was
approximately the same as in the prior period.
GENERAL AND ADMINISTRATIVE, NET. Net general and administrative
expenses for the first quarter of 1996 decreased by $354,000, or 23%,
compared to the prior year. This decrease resulted primarily from
staff reductions made during the second half of 1995.
INTEREST EXPENSE. Interest expense during the first quarter
decreased by $93,000, or 6%, to $1,529,000 in 1996 from $1,622,000 in
1995. The effects of decreased average bank borrowings were partially
offset by higher interest rates in the current period. Average debt
outstanding for the first quarter decreased to $71.1 million in 1996
from $78.7 million in 1995, due largely to an asset sale closed during
March 1996 (further discussed below). The Company's average effective
interest rate for the first quarter of 1996 increased to 8.6%, from
8.2% in 1995, due to higher prevailing market rates and an increased
spread over benchmark rates applicable under the Company's bank line
of credit.
10<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company presently has no major capital expenditure
commitments pending, other than approximately $7.2 million for the
balance owing on leases on which the Company was high bidder at a
federal offshore (Central Gulf of Mexico) lease sale held in late
April 1996 (further discussed below). The Company's capital
expenditures are generally discretionary and activity levels are
determined by a number of factors, including oil and gas prices,
interest rates, availability of funds, quantity and character of
identified investment projects and competition. Most capital
expenditures during the past several years have been for the
acquisition and development of properties with established proved and
probable oil and gas reserves, but the portion targeted toward
exploration has been increasing over time.
The Company's borrowing base under its revolving line of credit
was $80 million at December 31, 1995, compared to an outstanding
balance of $77 million. In order to improve its liquidity to fund an
expanded capital expenditure program, the Company determined in late
1995 to pursue a transaction to monetize a portion of its developed
oil and gas reserves. This objective was satisfied in March 1996
through the sale of a portion of the Company's D-J Basin assets to HS
Resources for approximately $38 million. Following this transaction,
the Company's bank debt was paid down to $40 million and the borrowing
base under the Company's bank line of credit was redetermined to be
$55 million, establishing unutilized borrowing capacity under the line
of $15 million. The improved ratio of bank debt to total
capitalization after the sale will also result in a revised applicable
interest rate of 1.125% above LIBOR, as compared to 2.0% above LIBOR
before the sale. The Company executed a second agreement with HS
Resources that provides for the sale of the remainder of the Company's
D-J properties for approximately $87.5 million. This transaction is
presently pending. As more fully described below, these two
transactions, with an aggregate sales price of $125.5 million, will
significantly improve the Company's liquidity and financial
flexibility, but will also greatly reduce the Company's oil and gas
property base and related cash flows. Another consequence of these
asset sales will be a significant reduction in the Company's inventory
of development projects, resulting in an increased portion of the
Company's capital budget being targeted toward new proved property
acquisitions and exploration.
During the second half of 1995 and the first quarter of 1996, the
Company added senior level exploration and acquisition personnel to
enable it to more effectively pursue opportunities in its historical
operating areas in the Rocky Mountain region and to expand into other
major producing basins. In a departure from its previous practices,
the Company intends to direct a substantial portion of its future
exploration budget toward the Gulf of Mexico area, where utilization
of 3-D geophysical data and computer-aided exploration ("CAEX")
technology for prospect identification and delineation has proven to
be effective in improving drilling success rates and economic returns.
To implement this strategy, the Company established a Houston-based
exploration office in December 1995.
Exploration in the Gulf Coast typically will involve larger
targets with commensurately greater economic investment per well than
the Company's historical exploration efforts. Preliminarily, the
Company has established a 1996 capital budget for Gulf Coast
exploration of approximately
11<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
$13 million, excluding any related development costs for successful
prospects. This budget anticipates participation in up to eight
prospect test wells during the year. However, inasmuch as 1996 will
be the Company's first year of Gulf Coast operations, it began the
period with no prospect inventory and, therefore, considerable
uncertainty regarding the volume of business activity that will
actually develop. Through the first four months of 1996 (mostly in
April), the Company acquired 75% and 100% working interests,
respectively, in two lease blocks offshore Texas, and was the high
bidder on six blocks offshore Louisiana at a Central Gulf of Mexico
federal lease sale. The Company's total initial leasehold investment
for these eight blocks, provided that the Minerals Management Service
("MMS") awards all blocks on which the Company was the high bidder at
the Central Gulf of Mexico sale, will be approximately $10 million.
The Company has paid 20% of its bid amount for the leases on which it
was the high bidder at the Central Gulf of Mexico federal lease sale.
The balance will be due when the leases are awarded, within 120 days
of the lease sale unless the MMS exercises its right to reject all
bids on selected blocks. The Company plans to generally reduce its
interests in these prospects through sale of promoted interests or
through swapping for other prospect interests. Although exchanging
prospect interests would result in less cost recoupment for the
Company, it would be consistent with the Company's overall objectives
of prospect diversification and risk management, and would accelerate
development of prospect inventory. If the Company is able to, and
elects to, swap a portion of its prospects for interests in other
prospects, rather than re-selling such interests, its Gulf Coast
exploration capital budget for 1996 may be increased from $13 million
to $20 million or more to provide for the additional investment in
prospect inventory. The Company is not anticipating a current year
contribution of production or cash flow resulting from Gulf Coast
exploration, even if it makes one or more discoveries, since at least
nine months is typically required for platform fabrication and
installation for a new discovery (unless such infrastructure is
already in place).
In addition to Gulf Coast exploration activities, the Company
expects to invest up to $4 million in 1996 on development of its
proved properties in Wyoming and up to $1 million on exploration
related to its existing Rocky Mountain prospect inventory. Other
capital expenditures during the year will be determined primarily
based on the level of success achieved in pursuing proved property
acquisitions and the amount of development activity generated by
exploration discoveries. Such investments could be significant.
Although the Company is not in negotiations and cannot predict if or
when it will make a material acquisition, or a substantial discovery,
the Company believes that it could finance investment opportunities
aggregating $75 million or more. The Company expects to be able to
fund such capital investments primarily with cash flow from operations
and funds made available through the sale of its D-J Basin assets,
including availability established under its bank credit line. If the
pending asset sale transaction with HS Resources is not closed, the
Company may seek additional liquidity through an alternate asset sale
or monetization transaction. Further, if conditions warrant, the
Company may consider raising additional capital through issuance of
debt or equity securities.
TRANSACTIONS WITH HS RESOURCES. On February 26, 1996, the
Company reached agreements to sell all of its assets in the D-J Basin
to HS Resources in two transactions, for total cash consideration of
$125.5 million. The first transaction, in which a portion of the
Company's D-J Basin assets was sold for approximately $38 million,
closed in March 1996. This transaction satisfied certain asset
monetization objectives that the Company had earlier established to
develop
12<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the minimum level of liquidity necessary to fund its planned 1996
capital expenditures. The pending second transaction, in which the
Company's remaining D-J Basin assets are to be sold for approximately
$87.5 million, will require approval by the holders of a majority of
the Company's outstanding common shares and is expected to close in
June 1996. Both transactions are subject to typical buyer due
diligence review (some of which may be completed post-closing for the
first transaction) that could result in adjustments to the agreed upon
purchase prices. The agreements both provide for a January 1, 1996
effective date and for the Company to receive interest on the purchase
prices from the effective date until the respective closing dates, at
7.5% per annum.
Together, these transactions involve the sale of approximately
two-thirds of the Company's producing wells and 70% of its proved oil
and gas reserve volumes as of December 31, 1995. On a pro forma basis
as of January 1, 1996, after giving effect to both transactions, the
Company would have 10.4 MMBOE of proved reserves, no outstanding bank
debt and net working capital of approximately $38 million.
Unless renegotiated, the Company's existing credit agreement with
its banks will remain effective after the second transaction with HS
Resources. Management anticipates that if revisions are made to the
credit agreement following such transaction they will generally be
favorable to the Company as a consequence of the Company's reduced
leverage and improved financial condition. The Company's borrowing
capacity after the second transaction with HS Resources is expected to
be at least $20 million, although no financial commitment has yet been
made or requested, and the Company expects to be in compliance with
all existing loan covenants following such transaction without
amendment thereof.
It is the Company's plan to utilize liquidity created by these
asset sales to make new investments in oil and gas properties, through
both acquisitions and exploration. Until the sales proceeds are
redeployed, however, cash balances will be invested in short term,
interest-bearing cash equivalents, and oil and gas assets under
management and operational cash flows will be substantially reduced
from pre-sale levels. Accordingly, upon completion of the second sale
transaction, the Company expects to significantly reduce the size of
the office staff at its Denver headquarters.
The following is a summary of selected operating data related to
the sold D-J Basin assets, the remaining D-J Basin assets that are
subject to a purchase and sale agreement with HS Resources, and other
oil and gas properties owned by the Company:
13<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
D-J Basin Assets D-J Basin Assets Other
Sold March 15, 1996 Under Sales Contract Assets Total
------------------- -------------------- ------ -----
<S> <C> <C> <C> <C>
As of December 31, 1995
Proved reserves
Oil (Mbbl) 2,849 3,489 6,268 12,606
Gas (MMcf) 31,836 74,596 25,004 131,436
MBOE 8,155 15,922 10,435 34,512
Proved developed reserves
Oil (Mbbl) 1,600 2,394 4,403 8,397
Gas (MMcf) 24,368 60,615 21,427 106,410
MBOE 5,661 12,497 7,974 26,132
Present value of future net revenue from proved
reserves, before income taxes (in thousands) $28,009 $59,005 $42,054 $129,068
Net developed acreage 18,781 34,821 46,800 100,402
Net undeveloped acreage 22,381 37,051 220,552 279,984
First Quarter, 1996
Average Net Daily Production
Oil (bbl) 527<F1> 683 1,256 2,466<F2>
Gas (Mcf) 6,922<F1> 16,499 4,809 28,230<F2>
BOE 1,681<F1> 3,433 2,057 7,171<F2>
____________________
<FN>
<F1> Through March 15, 1996.
<F2> Total actual amounts reported for the fiscal quarter are lower since assets sold to HS Resources onMarch 15,
1996 did not contribute for the entire period.
</TABLE>
CHANGES IN PRICES. The Company's revenues, cash flow, and the
value of its oil and gas properties have been, and will continue to
be, affected by changes in oil and natural gas prices. The Company's
ability to maintain current borrowing capacity and to obtain
additional capital on attractive terms is also substantially dependent
on oil and natural gas prices. As such, changes in oil and gas prices
can significantly affect the amount of the Company's capital
expenditures. Oil and natural gas prices are subject to significant
seasonal and other fluctuations that are beyond the Company's ability
to control or predict.
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE
- -------------------------------------------------------
SECURITIES LITIGATION REFORM ACT OF 1995
- ----------------------------------------
Statements that are not historical facts contained in this report
are forward looking statements that involve risks and uncertainties
that could cause actual results to differ from projected results.
Factors that could cause actual results to differ materially include,
among others: general economic conditions, the market price of oil
and natural gas, the risks associated with exploration in the Gulf
Coast and Rocky Mountain regions, the Company's ability to find,
acquire, market, develop and produce new properties, operating hazards
attendant to the oil and natural gas business, uncertainties in the
estimation of proved reserves and in the projection of future rates of
production and timing of development expenditures, the strength and
financial resources of the Company's competitors, the Company's
ability to find and retain skilled personnel, climatic conditions,
labor relations, availability and cost of material and equipment,
delays in anticipated start-up dates, environmental risks, the results
of financing efforts and other risk factors detailed elsewhere herein.
14<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARY
PART II OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
a. Exhibits.
11.1 Computation of earnings per share.
27 Financial Data Schedule
b. Reports filed on Form 8-K.
February 26, 1996 - Item 5. Other Events - Information relating
to agreements to sell assets to HS
Resources, Inc.
- Item 7. Financial Statements and Exhibits -
Pro forma financial information and
exhibits.
15<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.
BASIN EXPLORATION, INC.
-----------------------
(Registrant)
Date: May 13,1996 By: Neil L. Stenbuck
-----------------------
Neil L. Stenbuck
Chief Financial Officer
Date: May 13, 1996 By: Michael S. Smith
-----------------------
Michael S. Smith
President and
Chief Executive Officer
16<PAGE>
Index to Exhibits
Exhibit Numbers Exhibits Page
- --------------- -------- ----
11.1 Calculation of Earnings Per Share 18
27 Financial Data Schedule 19
17
Exhibit 11.1
Calculation of Earnings Per Share
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
---------
Weighted Average Calculation: 1996 1995
- ----------------------------- --------- ---------
<S> <C> <C>
Net income (loss) $ (916) $ 325
========= =========
Weighted average shares
outstanding 10,687 10,679
========= =========
Earnings per share, based
on weighted average
shares outstanding $ (0.09) $ 0.03
========= =========
Primary Calculation:
Net income (loss) $ (916) $ 325
========= =========
Common Stock Equivalents:
Weighted average shares
outstanding 10,687 10,679
Stock options - 103
--------- ---------
10,687 10,782
========= =========
Earnings per share,
primary $ (0.09) $ 0.03
========= =========
</TABLE>
18<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S INTERIM UNAUDITED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,209,000
<SECURITIES> 0
<RECEIVABLES> 5,591,000
<ALLOWANCES> 0
<INVENTORY> 343,000
<CURRENT-ASSETS> 8,308,000
<PP&E> 184,560,000
<DEPRECIATION> (87,306,000)
<TOTAL-ASSETS> 107,335,000
<CURRENT-LIABILITIES> 11,447,000
<BONDS> 0
0
0
<COMMON> 107,000
<OTHER-SE> 52,306,000
<TOTAL-LIABILITY-AND-EQUITY> 107,335,000
<SALES> 7,486,000
<TOTAL-REVENUES> 7,509,000
<CGS> 1,676,000
<TOTAL-COSTS> 6,963,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,529,000
<INCOME-PRETAX> (916,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (916,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (916,000)
<EPS-PRIMARY> (.09)<F1>
<EPS-DILUTED> (.09)<F1>
<FN>
<F1> Per share
</FN>
</TABLE>
