<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1999
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 001-11769
---------
KEY PRODUCTION COMPANY, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1089744
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
707 Seventeenth Street, Suite 3300 Denver, Colorado 80202-3404
- -----------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 303/295-3995.
----------------
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
----- -----
The number of shares of Key Production Company, Inc. common stock, $.25 par
value, outstanding as of June 30, 1999, is 11,528,634.
<PAGE>
PART 1 - FINANCIAL INFORMATION
------------------------------
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
KEY PRODUCTION COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
For the Quarter For the Six Months
Ended June 30, Ended June 30,
----------------- ------------------
(In thousands, except per share data) 1999 1998 1999 1998
------- ------- -------- --------
Revenues:
Natural gas production $ 6,724 $ 6,534 $ 12,811 $ 12,712
Oil production 4,890 2,850 8,544 6,248
Plant production 145 210 309 420
Other revenues 125 101 225 126
------- ------- -------- --------
11,884 9,695 21,889 19,506
------- ------- -------- --------
Operating Expenses:
Depreciation, depletion and
amortization 6,653 3,878 11,932 7,838
Operating costs 2,759 2,638 5,374 5,465
Administrative, selling and other 671 424 1,218 876
Financing costs:
Interest costs 628 305 1,271 595
Interest income (46) (50) (69) (83)
------- ------- -------- --------
10,665 7,195 19,726 14,691
------- ------- -------- --------
Income Before Income Taxes 1,219 2,500 2,163 4,815
Provision for Income Taxes 463 950 822 1,830
------- ------- -------- --------
Net Income $ 756 $ 1,550 $ 1,341 $ 2,985
======= ======= ======== ========
Basic Earnings Per Share $ .07 $ .13 $ .12 $ .26
======= ======= ======== ========
Diluted Earnings Per Share $ .06 $ .13 $ .11 $ .24
======= ======= ======== ========
The accompanying notes to consolidated financial statements
are an integral part of this statement.
2
<PAGE>
KEY PRODUCTION COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
------------------------------
(In thousands) 1999 1998
-------- --------
Cash Flows from Operating Activities:
Net income $ 1,341 $ 2,985
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 11,932 7,838
Deferred income taxes 735 1,637
Changes in operating assets and liabilities:
Decrease in receivables 193 3,169
Increase in prepaid expenses and other (53) (160)
Decrease in accounts payable and accrued
expenses (4,022) (2,138)
Increase(decrease) in long-term property
liabilities and other 12 (197)
-------- --------
Net cash provided by operating activities 10,138 13,134
-------- --------
Cash Flows from Investing Activities:
Oil and gas exploration and development
expenditures (15,788) (17,274)
Acquisition of oil and gas properties (278) (128)
Proceeds from sale of oil and gas properties 206 2,175
Other capital expenditures (49) (404)
-------- --------
Net cash used by investing activities (15,909) (15,631)
-------- --------
Cash Flows From Financing Activities:
Long-term borrowings 5,000 4,000
Payments to acquire treasury stock (2) (17)
-------- --------
Net cash provided by financing activities 4,998 3,983
-------- --------
Net Increase (Decrease) in Cash
and Cash Equivalents (773) 1,486
Cash and Cash Equivalents at Beginning of Year 4,720 3,349
-------- --------
Cash and Cash Equivalents at End of Period $ 3,947 $ 4,835
======== ========
The accompanying notes to consolidated financial statements
are an integral part of this statement.
3
<PAGE>
KEY PRODUCTION COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, December 31,
(In thousands) 1999 1998
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,947 $ 4,720
Receivables 7,785 7,978
Prepaid expenses and other 622 569
-------- --------
12,354 13,267
-------- --------
Oil and Gas Properties, on the basis of
full cost accounting:
Proved properties 201,446 185,813
Unproved properties and properties
under development, not being amortized 22,577 23,276
-------- --------
224,023 209,089
Less - accumulated depreciation,
depletion and amortization (69,467) (57,752)
-------- --------
154,556 151,337
-------- --------
Other Assets, net 1,523 1,691
-------- --------
$168,433 $166,295
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,950 $ 11,271
Accrued exploration and development 2,725 3,651
Accrued lease operating expense and other 1,497 2,276
-------- --------
12,172 17,198
-------- --------
Long-Term Debt 65,000 60,000
-------- --------
Non-current Liabilities
Deferred income taxes 18,858 18,123
Long-term property liabilities and other 1,305 1,293
-------- --------
20,163 19,416
-------- --------
Stockholders' Equity:
Common stock, $.25 par value, 50,000,000
shares authorized, 11,778,190 shares
issued 2,945 2,945
Paid-in capital 37,406 37,406
Retained earnings 33,059 31,737
Treasury stock at cost, 249,556, and
259,734 shares, respectively (2,312) (2,407)
-------- --------
71,098 69,681
-------- --------
$168,433 $166,295
======== ========
The accompanying notes to consolidated financial statements
are an integral part of this statement.
4
<PAGE>
KEY PRODUCTION COMPANY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Total
Stock-
Common Paid-in Retained Treasury holders'
Stock Capital Earnings Stock Equity
------ ------- --------- -------- -------
(In thousands, except per share data)
Balance, December 31, 1998 $2,945 $37,406 $31,737 $(2,407) $69,681
Net income - - 1,341 - 1,341
Treasury stock issued - - (19) 97 78
Treasury stock purchased - - - (2) (2)
------ ------- ------- ------- -------
Balance, June 30, 1999 $2,945 $37,406 $33,059 $(2,312) $71,098
====== ======= ======= ======= =======
The accompanying notes to consolidated financial statements
are an integral part of this statement.
5
<PAGE>
KEY PRODUCTION COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The financial statements included herein have been prepared by Key
Production Company, Inc. (Key or the Company), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission, and reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods, on a basis consistent with the
annual audited statements. All such adjustments are of a normal, recurring
nature except as disclosed herein. Certain information, accounting policies,
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the financial
statements and summary of significant accounting policies and notes thereto
included in the Company's latest annual report on Form 10-K.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Key and the accounts of its wholly-owned subsidiaries: Brock Exploration
Corporation, Brock Oil and Gas Corporation and Brock Gas Systems and Equipment,
Inc.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
Income tax expense consisted of the following:
Six Months Ended June 30,
---------------------------
1999 1998
---------- ----------
Current Taxes:
Federal $ - $ -
State 87 193
Deferred Taxes: 735 1,637
---------- ----------
$ 822 $ 1,830
========== ==========
6
<PAGE>
Net Income Per Share
Basic earnings per share is computed based on the monthly weighted-
average number of shares outstanding during the period. The weighted-average
number of common shares used in computing basic earnings per share were:
11,524,706 and 11,504,686 for the second quarters of 1999 and 1998,
respectively; and 11,521,565 and 11,501,567 for the first six months of 1999 and
1998, respectively. Diluted earnings per share is computed based on the
weighted-average number of common shares outstanding during the periods and the
assumed exercise of dilutive common stock equivalents (stock options) using the
treasury stock method. Dilutive equivalents assumed to have been exercised
totaled: 608,051 and 712,575 for the second quarters of 1999 and 1998,
respectively; and 542,349 and 696,906 for the first six months of 1999 and 1998,
respectively.
Statement of Cash Flows
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents. These
investments earned 4.5 and 4.4 percent rates of interest at June 30, 1999 and
December 31, 1998, respectively, with cost approximating market.
Supplemental Disclosure of Cash Flow Information
For the Six Months
Ended June 30,
-------------------
1999 1998
-------- --------
Cash paid during the period for:
Interest (net of amounts capitalized) $1,309 $ 515
Income taxes (net of refunds received) $ 26 $ 115
Debt
Key has a revolving credit facility with NationsBank of Texas, N.A. On April
1, 2000, the borrowing converts from a revolving loan to a term note. At that
point, if not renegotiated before then, the Company must commence quarterly
principal payments in addition to paying interest. The entire facility matures
on January 1, 2003.
Key is currently working with Bank of America Securities LLC and Bank of
America, N.A. (collectively, Bank of America) to establish a $150 million senior
revolving/term credit facility. Key and Bank of America have executed an
engagement letter and closing on the new facility is expected by mid-September
1999. The facility will replace the Company's existing $75 million credit
facility with NationsBank of Texas, N.A. As a result of a merger, NationsBank
of Texas, N.A. is now known as Bank of America, N.A.
Under the terms of the proposed credit facility, the first principal payment
is not due until March 31, 2002. As a result, the entire balance of the
Company's outstanding debt as been classified as long-term in the accompanying
balance sheet.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Results
Key is reporting second quarter net income of $.8 million, and $.06 per
diluted share. Both are down from the $1.6 million and $.13 per diluted share
reported for the second quarter of 1998. The second quarter results are based
on revenues of $11.9 million and $9.7 million in 1999 and 1998, respectively.
For the first six months of 1999, Key is reporting a 55 percent decrease to
net income, and a 54 percent decrease to net income per diluted share. Net
income for the six-month periods of 1999 and 1998 was $1.3 million and $3.0
million, respectively.
<TABLE>
<CAPTION>
Results of Operations
For the Quarter For the Six Months
Ended June 30, Ended June 30,
------------------------ -----------------------------
1999 1998 1999 1998
---------- ----------- -------------- -----------
Selected Oil and Gas
Operating Statistics
- --------------------
<S> <C> <C> <C> <C>
Gas Volume - Mcf per day 37,187 34,744 37,961 33,905
Gas Price - Per Mcf $ 1.99 $ 2.07 $ 1.86 $ 2.07
Oil Volume - Barrels per day 3,552 2,593 3,585 2,700
Oil Price - Per barrel 5.13 $ 12.08 $ 13.16 $ 12.79
Full Cost Amortization Rate 55.7% 39.4% 54.1% 39.4%
</TABLE>
Oil and gas revenues for the second quarter increased from $9.6 million in
1998 to $11.8 million in 1999. Most of the increase is oil related. Gas sales
for this time frame remained stable. On a year-to-date basis, oil and gas sales
increased 12 percent to reach $21.7 million for the first six months of 1999.
For this period, oil sales increased by 37 percent and gas sales held steady
with a one percent increase.
Oil sales for the second quarter of 1999 reflect a $2.0 million, or 72
percent, increase over 1998 results. Approximately half of the increase can be
attributed to improved commodity prices and the rest is the result of increases
in oil production. Key's average oil price climbed from $12.08 per barrel in
1998 to $15.13 per barrel in 1999, a 25 percent increase. Daily gas production
averaged 2,593 barrels in 1998, compared 3,552 in the same period of 1999. The
37 percent increase in production is primarily from the acquisition of oil
properties at the end of 1998.
Oil sales for the first six months of 1999 and 1998 reflect a 37 percent
increase. Key's average oil price for this period increased from $12.79 per
barrels in 1998 to $13.16 per barrel in 1999 and had minimal impact on sales.
On the other hand, oil production rose 33 percent between the first six months
of 1998 and 1999. Average daily production grew from 2,700 barrels in 1998 to
3,585 barrel in 1999, for an additional $2.1 million of sales. The six-month
production increase also stems from the acquisition of oil properties in the
Hardeman Basin of North Texas.
Gas sales for the second quarter went from $6.5 million in 1998 to $6.7
million in 1999, a three percent increase. The average price Key received
slipped from $2.07 per Mcf in 1998 to $1.99 per Mcf in 1999. The decrease in
price reduced sales by $.3 million. Average daily gas volumes increased seven
percent
8
<PAGE>
to 37,187 Mcf in the second quarter of 1999. The increase in gas production had
a positive impact of $.5 million on gas sales.
Between the first six months of 1998 and 1999, gas sales increased by one
percent. Daily production increased 12 percent from 33,905 Mcf in 1998 to
37,961 Mcf in 1999. The increase in volume added approximately $1.5 million to
sales. However, increased production was not enough to offset a decrease in
commodity prices. Key's average gas price dropped from $2.07 per Mcf in 1998 to
$1.86 per Mcf in 1999 and had a negative impact of $1.4 million on sales.
Expanded gas production for the second quarter and the first six months of 1999
is from the drilling of new gas wells.
Product sales from gas processing plants for the second quarter decreased by
31 percent between 1998 and 1999, and decreased 26 percent between the first six
months of 1999 and 1998.
Key's second quarter oil and gas revenues are derived from the following
product mix: 42 percent oil, 57 percent gas and one percent plant products.
This compares to the following mix for 1998: 30 percent oil, 68 percent gas and
two percent plant products.
Other revenues were approximately $225,000 and $126,000 for the first six
months of 1999 and 1998, respectively. Key's other revenue is primarily
comprised of income from the Company's gathering system in California.
Depreciation, depletion and amortization (DD&A) expense increased by 72
percent between the second quarters of 1998 and 1999, a much larger variance
than the 23 percent increase in oil and gas revenues. The second quarter
depletion rates as a percentage of oil and gas sales increased from 39.4 percent
in 1998 to 55.7 percent in 1999. DD&A expense for the six months increased by
52 percent between 1998 and 1999 while sales increased by 12 percent. The six-
month depletion rate as a percentage of oil and gas sales escalated from 39.4
percent in 1998 to 54.1 percent in 1999. Key uses the future gross revenue
method to compute DD&A expense. For purposes of the calculation, future gross
revenue is computed using a trailing 12-month average price. If the trailing
12-month average price is lower than the price the Company is currently
receiving for its oil and gas production, the increase in DD&A expense will be
greater than the increase in revenue for the period. This was the case during
the second quarter of 1999. Also included in DD&A expense is a relatively
immaterial amount of depreciation on fixed assets and amortization of financing
costs associated with the Company's credit facility.
Quarterly operating expenses increased by five percent between 1998 and 1999.
On a unit of production basis, second quarter expenses decreased from $.58 per
EMcf in 1998 to $.52 per EMcf in 1999. Year to date operating expenses
decreased two percent between 1998 and 1999. Compared on a unit of production
basis, year to date expenses decreased 17 percent, or $.10 per EMcf, to $.50 per
EMcf in 1999. (Oil is compared to natural gas in terms of equivalent thousand
cubic feet, "EMcf." One barrel of oil is the energy equivalent of six Mcf of
natural gas.)
Administrative, selling and other costs (G&A) increased by 58 percent between
the second quarters of 1998 and 1999. On a unit of production basis, second
quarter G&A expense increased from $.09 per EMcf in 1998 to $.13 per EMcf in
1999. For the six month periods, G&A increased by 39 percent between 1998 and
1999, or $.01 per EMcf.
Interest expense before capitalization was $1,918,000 and $1,277,000 for the
first six months of 1999 and 1998, respectively. The long-term debt balance was
9
<PAGE>
$65.0 million at June 30, 1999, compared to $39.0 million at June 30, 1998. Key
capitalized interest of $647,000 and $682,000 in 1999 and 1998, respectively.
These amounts are for borrowings associated with undeveloped leasehold.
Key is using an effective tax rate of 38 percent for 1999 and 1998.
Cash Flow and Liquidity
Key's primary needs for cash are to fund oil and gas exploration, development
and acquisition activities and for payment of existing obligations and trade
commitments related to oil and gas operations. The Company's primary sources of
liquidity are cash flows from operating activities and proceeds from financing
activities.
Cash from operating activities was $10.1 million in 1999, compared to $13.1
million in 1998. The net decrease of $3.0, or 23 percent, is primarily due to
changes in accounts receivable, accounts payable and accrued expense balances.
However, these working capital changes are partially offset by the combined
changes to net income, DD&A expense and deferred taxes for 1999 and 1998.
Expenditures for exploration and development (E&D) in the first six months of
1999 totaled $15.8 million. While the level of expenditures was down from the
$17.3 million expended for E&D in 1998, 1999 expenditures equaled 156 percent of
cash generated by operating activities for the same period. Amounts expended in
1998 for E&D were 132 percent of cash from operating activities. E&D projects
initiated in the first six months of 1999 and 1998 were funded with a
combination of cash from operations and long-term debt.
Key received proceeds from various sources totaling $.2 million and $2.2
million in 1999 and 1998, respectively, for the sale of miscellaneous producing
properties and non-producing acreage.
As mentioned above, the Company drew on its credit facility with NationsBank
of Texas, N.A. (now Bank of America) to finance exploration and drilling
activities in excess of cash generated by operating activities. The Company
drew $5.0 million and $4.0 million the first quarters of 1999 and 1998,
respectively. No additional funds were drawn in the second quarters.
Management believes that cash on hand, net cash generated from operations and
amounts available under the Company's revolving line of credit will be adequate
to meet future liquidity needs, including satisfying the Company's financial
obligations and funding operations, exploration and development.
Year 2000 Compliance
Many existing computer programs use only two digits to identify a year in
the date field and were developed without considering the impact of the upcoming
change in the century. If not corrected, date-sensitive software applications
could fail or create erroneous results by or at the Year 2000.
During 1997, Key conducted an assessment of the various computer hardware
and software systems it uses. This assessment identified date-sensitive
software systems used to record, process and track information in three
functional areas: accounting, land and lease records and reservoir engineering.
The land and lease records and reservoir engineering software was found to be
Year 2000 compliant. During 1998, the accounting system was upgraded to make it
Year 2000 compliant. Testing of all three systems was conducted throughout the
year, and the Company believes that these systems will continue to function
properly when the century changes. The cost of the accounting system upgrade
was provided, at no additional
10
<PAGE>
charge, as part of the Company's annual software maintenance agreement with the
vendor. The cost of installing the software and testing the systems was not
material and was charged to expense during 1998.
The Company feels that its remediation plan has adequately addressed the
Year 2000 problem, and therefore, this issue is not expected to have a material
effect on the Company's internal operations. The Company has also attempted to
assess the impact of this issue on the various entities with which the Company
does business. Although failure of these entities to adequately address the
Year 2000 issue could indirectly impact the Company, it is not possible to
quantify that impact, if any. However, the Company does not anticipate that the
impact would have a material adverse effect on the Company's business.
Future Trends
On July 27, 1999, Key filed with the Securities and Exchange Commission a
shelf registration statement allowing for the possible future offering of debt
and equity securities. The registration statement was declared effective by the
SEC on August 5, 1999. It is intended to provide Key the flexibility to raise
up to $150 million from the sale of debt securities, common stock, preferred
stock or a combination thereof. The timing of debt and/or equity securities
issues will be determined by market conditions and the capital needs of the
Company. Key expects to use the proceeds from these future offerings for
general corporate purposes, which could include debt repayment, working capital,
capital expenditures or acquisitions.
Key is currently working with Banc of America Securities LLC and Bank of
America, N.A. (collectively, Bank of America) to establish a $150 million senior
revolving/term credit facility. Key and Bank of America have executed an
engagement letter and closing on the new facility is expected by mid-September
1999. The facility will replace the Company's existing $75 million credit
facility with NationsBank of Texas, N.A. As a result of a merger, NationsBank
of Texas, N.A. is now known as Bank of America, N.A.
Drilling efforts continue to be concentrated in the Mid-Continent,
California and the Gulf Coast. Year-to-date, roughly half of the Company's
drilling capital has been invested in Mid-Continent projects. Twenty-four of
this year's 28 wells drilled in the region were completed or are waiting on
completion. The California region's drilling program is somewhat ahead of
schedule having drilled nine wells so far in 1999. Six wells were completed or
are waiting on completion and three were dry. Gulf Coast activities continue to
center around development of the Company's Mississippi salt dome play.
Interpretation and evaluation of seismic data acquired during 1998 has yielded
several promising drilling locations. Key expects to drill four of these
locations in late 1999 or early 2000 and several others thereafter.
As part of its on-going business strategy, Key will continue to evaluate
merger and acquisition opportunities. Acquisition or merger candidates with the
economic and strategic attributes necessary to facilitate the profitable growth
of the Company will be actively pursued.
Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk as a result of changes in the price
of natural gas and crude oil and changes in interest rates.
Natural gas and crude oil prices fluctuate widely in response to changing
market forces. Virtually 100 percent of the Company's revenue derives from the
11
<PAGE>
sale of natural gas and crude oil, so these fluctuations, positive and negative,
can have a significant impact on the revenue the Company reports each period.
Changes in product prices also impact the calculation of the limitation on
capitalized costs under the full cost accounting rules of the Securities and
Exchange Commission. Application of this rule generally requires pricing future
revenues at the unescalated prices in effect at the end of each fiscal quarter
and requires a write-down if the "ceiling" is exceeded, even if prices decline
for only a short period of time. If a write-down were required, the charge to
earnings would not impact cash flow from operating activities. Key has never
taken a full-cost ceiling write-down.
The Company's reported earnings are impacted by changes in interest rates
as a result of its long-term debt with floating interest rates. Interest
charges are based on either the prime rate or the LIBOR rate. Fluctuations in
these rates directly impact the amount of interest expense the Company reports
in each period.
Historically, the Company has not used financial instruments such as
futures contracts or interest rate swaps to mitigate the impact of changes in
commodity prices or interest rates.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
This report contains "forward-looking statements" within the meaning of the
federal securities laws. These forward-looking statements include, among
others, statements concerning the Company's outlook for the remainder of 1999
with regard to production levels, price realizations, expenditures for
exploration and development, plans for funding operations and capital
expenditures, and other statements of expectations, beliefs, future plans and
strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts. The forward-looking statements in this
report are subject to risks and uncertainties that could cause actual results to
differ materially from those expressed or implied by the statements.
These risks and uncertainties include, but are not limited to, fluctuations
in the price the Company receives for its oil and gas production, reductions in
the quantity of oil and gas sold due to decreased industry-wide demand and/or
curtailments in production from specific properties due to mechanical, marketing
or other problems, operating and capital expenditures that are either
significantly higher or lower than anticipated because the actual cost of
identified projects varied from original estimates and/or from the number of
exploration and development opportunities being greater or fewer than currently
anticipated and increased financing costs due to a significant increase in
interest rates. These and other risks and uncertainties affecting the Company
are discussed in greater detail in this report and in other filings by the
Company with the Securities and Exchange Commission.
12
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
None.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
- ----------------------------------------------------------------
On May 7, 1999, Company held its annual meeting of stockholders at which
Francis H. Merelli, Cortlandt S. Dietler and L. Paul Teague were elected as
directors.
The following are the number of votes cast on the election of directors.
Directors For Withhold Authority
- ---------------------- --------- ------------------
Francis H. Merelli 8,353,980 58,014
Cortlandt S. Dietler 8,347,009 64,985
L. Paul Teague 8,353,680 58,314
ITEM 5. OTHER INFORMATION
- --------------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits:
12.1 Statement RE: Computation of Ratio of Earnings to Fixed Charges.
27.1 Financial Data Schedule for Commercial and Industrial Companies per
Article 5 of Regulation S-X for the quarter ended June 30, 1999.
(b) Reports on Form 8-K:
None.
13
<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:
Dated August 13, 1999
KEY PRODUCTION COMPANY, INC.
/s/ Monroe W. Robertson
-----------------------
Monroe W. Robertson
Senior Vice President and Secretary
(Principal Financial Officer)
/s/ Cathy L. Anderson
---------------------
Cathy L. Anderson
Controller
(Principal Accounting Officer)
14
<PAGE>
KEY PRODUCTION COMPANY, INC.
Exhibit Index
Exhibit
Number Description
- ------ -----------
12.1 Statement RE: Computation of Ratio of Earnings to Fixed Charges
27.1 Financial Data Schedule
15
<PAGE>
Exhibit 12.1
KEY PRODUCTION COMPANY, INC.
Statement of Computation of Ratios of Earnings to Fixed Charges
Six Months Ended
June 30, 1999
----------------
Earnings:
Pretax income 2,162,498
Plus: Fixed charges excluding capitalized interest 1,312,550
---------
3,475,048
=========
Fixed Charges:
Interest expensed including capitalized interest 1,917,736
Amortization of debt expenses 5,961
---------
1,923,697
=========
Ratio of earnings to fixed charges 1.81
====
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000837290
<NAME> SHERRI NITTA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,947
<SECURITIES> 0
<RECEIVABLES> 7,785
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,354
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0
0
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</TABLE>
