<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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 0-18691
NORTH COAST ENERGY, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 34-1594000
(State of Incorporation) I.R.S. (Employer
Identification No.)
5311 NORTHFIELD ROAD, SUITE 320
CLEVELAND, OHIO 44146-1135
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (216) 663-1668
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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Indicate the number of shares
outstanding of each of the issuers' classes of Common Stock as of the latest
practical date.
CLASS OUTSTANDING AT AUGUST 8, 1995
---------------------------- -----------------------------
COMMON STOCK, $.01 PAR VALUE 8,032,432
<PAGE> 2
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets -
March 31, 1995 (Audited) and
June 30, 1995 (Unaudited) 2
Unaudited Consolidated Statements of Operations -
For The Three Months Ended
June 30, 1994 and 1995 4
Unaudited Consolidated Statements of Cash Flows -
For The Three Months Ended
June 30, 1994 and 1995 5
Unaudited Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
PART II - OTHER INFORMATION 19
</TABLE>
<PAGE> 3
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1995 1995
---- ----
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash and equivalents $ 2,366,660 $ 1,628,144
Accounts receivable:
Trade 1,592,321 1,181,541
Affiliates 59,243 81,860
Refundable income taxes - 61,000
Inventory 218,628 77,680
Deferred income taxes 59,000 61,000
Other 7,682 62,207
------------ ------------
Total current assets 4,303,534 3,153,432
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Land 122,699 122,699
Oil and gas properties (successful
efforts) 21,051,552 21,482,837
Pipelines 3,187,714 3,397,263
Vehicles 384,241 381,361
Furniture and fixtures 362,288 374,203
Building and improvements 145,539 145,539
------------ ------------
25,254,033 25,903,902
Less accumulated depreciation, depletion,
amortization and write-down (8,867,435) (9,318,870)
------------ ------------
16,386,598 16,585,032
OTHER ASSETS 445,534 410,994
------------ ------------
$ 21,135,666 $ 20,149,458
============ ============
</TABLE>
The accompanying notes are an integral part of these Balance Sheets
2
<PAGE> 4
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1995 1995
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of long-term debt $ 432,100 $ 291,700
Accounts payable 3,644,368 2,420,956
Accrued expenses 423,981 363,667
Billings in excess of costs on
uncompleted contracts 284,880 217,774
----------- -----------
Total current liabilities 4,785,329 3,294,097
----------- -----------
LONG-TERM DEBT 6,197,450 7,155,168
DEFERRED INCOME TAXES 930,000 860,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A, 6% Non-Cumulative Convertible Preferred
stock, par value $.01 per share; 563,270 shares
authorized; 309,460 and 308,555 issued and out-
standing (aggregate liquidation value of
$3,094,600 and $3,085,550, respectively) 3,095 3,086
Series B, Cumulative Convertible Preferred stock,
par value $.01 per share; 625,000 shares author-
ized; 464,665 and 464,665 issued and outstanding
(aggregate liquidation value of $4,646,650
and $4,646,650, respectively) 4,647 4,647
Undesignated Serial Preferred stock, par
value $.01 per share; 811,730 shares
authorized; none issued and outstanding - -
Common stock, par value $.01 per share;
40,000,000 shares authorized; 8,030,352
and 8,032,432 issued and outstanding 80,304 80,324
Additional paid-in capital 12,083,024 12,083,011
Retained deficit (2,948,183) (3,330,875)
----------- -----------
Total stockholders' equity 9,222,887 8,840,193
----------- -----------
$21,135,666 $20,149,458
=========== ===========
</TABLE>
The accompanying notes are an integral part of these Balance Sheets
3
<PAGE> 5
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three Months Ended June 30, 1994 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
1994 1995
---- ----
<S> <C> <C>
REVENUE:
Oil and gas production $ 728,736 $ 744,372
Drilling revenues 1,002,400 168,750
Well operating, transportation and other 565,516 459,610
Administrative and agency fees 150,728 192,741
----------- ----------
2,447,380 1,565,473
COSTS AND EXPENSES:
Oil and gas production expenses 123,662 201,744
Drilling costs 893,708 148,242
Oil and gas operations 345,539 232,319
General and administrative expenses 575,695 656,895
Depreciation, depletion, amortization,
and other 350,519 495,235
Abandonment of oil and gas properties 144,924 -
----------- ----------
2,434,047 1,734,435
----------- ----------
INCOME (LOSS) FROM OPERATIONS 13,333 (168,962)
----------- ----------
OTHER INCOME:
Interest 9,456 20,774
Other - 4,653
(Loss) gain on sale of property
and equipment (3,029) 8,943
----------- ----------
6,427 34,370
----------- ----------
OTHER EXPENSE
Interest 93,077 170,099
----------- ----------
LOSS BEFORE INCOME TAXES (73,317) (304,691)
PROVISION (CREDIT) FOR TAXES ON INCOME
Current (200) (61,000)
Deferred (13,000) (70,000)
----------- ----------
(13,200) (131,000)
----------- ----------
NET LOSS $ (60,117) $ (173,691)
=========== ==========
NET LOSS PER SHARE (primary
and fully diluted) $ (.04) $ (.05)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements
4
<PAGE> 6
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months Ended June 30, 1994 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (60,117) $ (173,691)
Adjustments to reconcile net loss
to cash provided by operating activities-
Depreciation, depletion, amortization
and other 350,519 495,235
Abandonment of oil and gas properties 144,924 -
Loss (gain) on sale of property
and equipment 3,029 (8,943)
Deferred income taxes (15,000) (70,000)
Change in:
Accounts receivable (554,450) 327,163
Other current assets (52,775) 84,423
Other assets (1,166) 9,497
Accounts payable (66,696) (1,065,256)
Current income taxes payable (114,000) -
Accrued expenses (39,395) (60,312)
Billings in excess of costs on uncompleted
contracts (562,850) (67,106)
----------- -----------
Total adjustments (907,860) (355,299)
----------- -----------
Net cash used by operating
activities (967,977) (528,990)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (822,612) (579,259)
----------- -----------
Net cash used by investing
activities (822,612) (579,259)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of accounts payable used to
finance property and equipment additions (140,018) (236,422)
Borrowings under revolving credit facility 1,500,000 -
Borrowings under note payable to stockholder - 1,000,000
Repayments of borrowings under revolving
credit facility - (155,003)
Proceeds from issuance of long-term debt 14,332 -
Payments on long-term debt (20,929) (27,679)
Cash paid for deferred financing cost (5,513) (2,159)
Distributions and dividends (212,156) (209,004)
</TABLE>
The accompanying notes are an integral part of these Financial Statements
5
<PAGE> 7
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For The Three Months Ended June 30, 1994 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Proceeds from the exercise of Common
Stock options $ 22,500 $ -
----------- -----------
Net cash provided by
financing activities $ 1,158,216 $ 369,733
----------- -----------
DECREASE IN CASH AND EQUIVALENTS $ (632,373) $ (738,516)
CASH AND EQUIVALENTS AT BEGINNING
OF PERIOD 1,295,642 2,366,660
----------- -----------
CASH AND EQUIVALENTS AT END OF PERIOD $ 663,269 $ 1,628,144
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest $ 94,773 $ 166,238
Income taxes 108,495 24,818
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Long-term debt incurred for the purchase
of property and equipment $ 14,332 $ -
Accounts payable incurred for the
purchase of property and equipment 140,018 78,266
</TABLE>
The accompanying notes are an integral part of these Financial Statements
6
<PAGE> 8
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Accounting Policies
A. General
The consolidated financial statements included herein, have been
prepared by North Coast Energy, Inc. without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position have
been made.
Information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
It is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto which are incorporated
in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995.
The results of the operations for the interim periods may not
necessarily be indicative of the results to be expected for the full
year.
B. Principles of Consolidation
The consolidated financial statements include the accounts of North
Coast Energy, Inc. and its wholly owned subsidiaries (the Company),
North Coast Operating Company (NCOC), and NCE Securities, Inc. (NCE
Securities). In addition, the Company's investments in oil and gas
drilling partnerships, which are accounted for under the proportional
consolidation method, are reflected in the accompanying financial
statements. The Company's ownership of revenues in these drilling
partnerships are as follows:
<TABLE>
<S> <C>
Capital Drilling Fund 1986-1 Limited Partnership 13.2%
North Coast Energy/Capital 1987-1 Appalachian
Drilling Program Limited Partnership 33.7%
North Coast Energy/Capital 1987-2 Appalachian
Drilling Program Limited Partnership 26.1%
North Coast Energy/Capital 1988-1 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy/Capital 1988-2 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy/1989 Appalachian
Drilling Program Limited Partnership 30.0%
</TABLE>
7
<PAGE> 9
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 1. Summary of Accounting Policies (Continued)
<TABLE>
<S> <C>
North Coast Energy 1990-1 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy 1990-2 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy 1990-3 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy 1991-1 Appalachian
Drilling Program Limited Partnership 26.5%
North Coast Energy 1991-2 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy 1991-3 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy 1992-1 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy 1992-2 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy 1992-3 Appalachian
Drilling Program Limited Partnership 39.5%
North Coast Energy 1993-1 Appalachian
Drilling Program Limited Partnership 30.3%
North Coast Energy 1993-2 Appalachian
Drilling Program Limited Partnership 31.0%
North Coast Energy 1993-3 Appalachian
Drilling Program Limited Partnership 30.0%
North Coast Energy 1994-1 Appalachian
Drilling Program Limited Partnership 30.0%
North Coast Energy 1994-2 Appalachian
Drilling Program Limited Partnership 25.0%
North Coast Energy 1994-3 Appalachian
Drilling Program Limited Partnership 25.0%
</TABLE>
All significant intercompany accounts and transactions have been
eliminated.
8
<PAGE> 10
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 2. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, 1995 June 30, 1995
-------------- -------------
<S> <C> <C>
Revolving credit notes
payable - bank $ 6,050,003 $ 5,895,000
Other financing 335,000 1,335,000
Mortgage note payable to a bank, secured by
land and a building, requiring monthly pay-
ments of approximately $1,019 (including
interest at 8%) through July 1998. There-
after the balance of the note will be
amortized over a 5 year period, at an
interest rate to be renegotiated. 73,790 72,205
Various installment notes payable, in
aggregate monthly installments (including
interest of $8,585 at March 31, 1995
and $8,122 at June 30, 1995). 170,757 144,663
----------- -----------
6,629,550 7,446,868
Less current portion 432,100 291,700
----------- -----------
$ 6,197,450 $ 7,155,168
=========== ===========
</TABLE>
On September 20, 1993, the Company entered into an agreement with its
lender to provide a reducing revolving line of credit of up to
$10,000,000. Subsequently, a draw was made on the new line of credit to
pay off certain of the Company's term loans. Available borrowings under
this agreement are computed based on a borrowing base determined
semi-annually by the lender, based upon the Company's financial position,
and level of oil and gas and pipeline based reserves and are further
based upon the amount of outstanding letters of credit used to support
certain bonding requirements ($130,000 at June 30, 1995). The borrowing
base is reduced monthly by an amount determined by the lender at the
semi-annual borrowing base determination. At June 30, 1995, the
borrowing base was $5,980,000, with required monthly reductions of
$85,000. An amendment to the credit agreement effective August 8, 1995
increased the borrowing base to $8,500,000, with required monthly
reductions of $100,000 beginning on September 1, 1995.
9
<PAGE> 11
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 2. Long-Term Debt (Continued)
Amounts outstanding under the reducing revolving line of
credit, which were $5,895,000 at June 30, 1995, bear interest at the
lending bank's prime rate plus 1-1/2%. The agreement requires the
Company to pay a commitment fee of 1/2% on the unused amount of the
available borrowings and closing costs of 1% on any increase in
borrowing availability. The agreement contains certain restrictive
covenants, including minimum working capital, minimum shareholders'
equity and a minimum debt coverage ratio, all as defined. In
addition, there are restrictions on mergers, capital stock dividends
and stock repurchases, issuance of additional securities, sale of
assets, investments, rental agreements and the incurrence of
additional debt. The dividend restriction does not permit dividends
on any shares of the Company's capital stock (other than dividends
payable solely in shares of its capital stock and the dividends on the
Company's Preferred Stock).
The Company secured $335,000 in financing from NAGIT, a
principal stockholder of the Company, relating to the purchase of
certain producing wells, gas gathering lines and drilling locations.
The amounts outstanding under the terms of the Company's financing
arrangements with NAGIT are subordinated to the prior payment and
amounts outstanding under the Company's credit agreement, and bear an
interest rate at the prime rate designated by the Chemical Bank, N.A.,
plus 1%. This agreement grants NAGIT a 3.125% overriding royalty
interest in the acquired properties. Repayment of the loan is in cash
based upon a percentage of the net monthly revenues from the acquired
properties.
Effective June 13, 1995, the Company entered into a Loan Agreement
with NAGIT with respect to a loan of $1,000,000. The unsecured loan is
due December 29, 1995 and may be repaid in cash plus accrued interest
(with approval of the Company's senior lender) prior to December 29,
1995 or may be converted, after such date, into shares of Common Stock
at the rate of $1.00 per share. The loan is subordinate to the
Company's senior lender and bears interest at the rate of 8% per
annum. In connection with entering into the Loan Agreement, the
Company issued a warrant to purchase 200,000 shares of Common Stock at
$1.20 per share and a warrant to purchase 300,000 shares of Common
Stock at $1.00 per share. The warrants may be redeemed by the Company
at its option upon 30 days written notice.
10
<PAGE> 12
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 3. Billings in Excess of Costs on Uncompleted Contracts
Billings in excess of costs on uncompleted contracts consist of:
<TABLE>
<CAPTION>
March 31, June, 30,
1995 1995
---- ----
<S> <C> <C>
Billings on uncompleted
contracts $ 687,850 $ 519,100
Costs incurred on uncom-
pleted contracts 402,970 301,326
----------- -----------
$ 284,880 $ 217,774
============ ===========
</TABLE>
Note 4. Commitment and Contingencies
The Company and a commercial bank have issued standby letters of
credit which provide a guaranteed total amount of $130,000 in lieu of
coverage provided by insurance or road bond deposits against damage.
At June 30, 1995, the Company has committed to fund certain costs of
the North Coast Energy Appalachian Drilling Programs estimated to be
approximately $415,210 for tangible well equipment and pipeline
construction. This commitment is expected to be realized by September
1995.
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
North Coast Energy, Inc., (the "Company") a Delaware corporation, is
an independent natural gas and oil company engaged in exploration, development
and production activities primarily in the Appalachian Basin region of Ohio and
Pennsylvania. The Company's strategy focuses primarily on its acquisition of
proved undeveloped natural gas and oil properties and on the turnkey drilling
and development of such properties by the Company in conjunction with drilling
partnerships which the Company sponsors and manages (the "Drilling Programs").
The Drilling Programs are funded through the sale of partnership interests to
non-industry investors and by contributions from the Company.
Several factors may affect the amount of the Company's revenues with
respect to the activities of the Drilling Programs. The amount of funds raised
by each Drilling Program determines the number of wells for which the Company
receives drilling revenues. The Company continually monitors the cost incurred
in drilling, completion and production operations and reviews its turnkey
contract prices for each Drilling Program in order to reduce the risk of
unprofitable drilling operations. The turnkey drilling contract price between
the Drilling Programs and the Company may vary from Drilling Program to
Drilling Program depending on competition, type of well drilled and other cost
factors and the returns sought by investors in the Drilling Programs. In
general, a smaller percentage ownership interest by the Company in a Drilling
Program (assuming no change in the turnkey drilling contract price charged by
the Company to the Drilling Programs) would result in a larger amount of
drilling revenue recognized by the Company from such Drilling Program, as well
as a larger amount of oil field service and other fees. A smaller ownership
interest by the Company in a Drilling Program results in the Company receiving
a smaller share of the oil and gas production revenues from the related
Drilling Program's wells, as well as decreasing the Company's percentage
interest in the oil and gas reserves related to such wells. The Company's
capital availability, as well as revenue and profit considerations, may result
in the Company changing its percentage interest in future Drilling Programs.
The Company typically forms the Drilling Programs between August and
December in each year and conducts its drilling operations between October and
March. It generally requires six months between the drilling of a well and the
generation of production revenue from that well. Drilling revenues are
predominantly recognized during the second half of the Company's fiscal year.
12
<PAGE> 14
The following table is a review of the results of operations of the
Company for the three months ended June 30, 1994 and 1995. All items in the
table are calculated as a percentage of total revenues.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
June 30, 1994 June 30, 1995
------------- -------------
<S> <C> <C>
Revenue:
Oil and gas production 30% 46%
Drilling revenues 41 11
Well operating, transportation and other 23 29
Administrative and agency fees 6 12
Other 0 2
---- ----
Total Revenues 100% 100%
---- ----
Expenses:
Oil and gas production expenses 5% 12%
Drilling costs 37 9
Oil and gas operations 14 15
General and administrative expenses 23 41
Depreciation, depletion, amortization
and other 14 31
Abandonment of oil and gas properties 6 0
Provision for taxes on income (1) (8)
Other 4 11
---- ----
Total Expenses 102% 111%
---- ----
Net Loss (2%) (11%)
==== ====
</TABLE>
The following discussion and analysis review the results of operations
and financial condition for the Company for the three months ended June 30, 1995
and 1994. The review should be read in conjunction with the financial
information presented elsewhere herein.
THREE MONTHS ENDED JUNE 30, 1995
COMPARED WITH THREE MONTHS ENDED JUNE 30, 1994.
REVENUES
Natural gas production increased by 35% in the Appalachian Basin both
from existing wells and from the acquisition of 163 wells acquired December 1,
1994. While overall natural gas production increased 22%, revenues from oil and
gas production remained relatively unchanged as a result of a 19% decline in the
price of natural gas between the comparable periods.
Drilling revenues for the period decreased by $833,650 (83%) due to the
Company's drilling and completion schedule in fiscal 1995 which resulted in
recognizing revenue on fewer wells for the three months ended June 30, 1995
than in the prior corresponding period. The Company recognized revenues for
the three months ended June 30, 1995 on 3 wells as compared to 8 wells for the
three months ended June 30, 1994. The three wells recognized in revenue for
the three months ended June 30, 1995 were shallow oil wells for which the
Company generally charges a lesser turnkey drilling contract price as compared
to the 8 deeper gas wells which were recognized in revenue for the three months
ended June 30, 1994. The remaining 4 deeper gas wells in progress at June 30,
1995 are anticipated to be completed in the second or third quarter of the
Company's fiscal year.
13
<PAGE> 15
Revenue from well operating, gas marketing, compression and
transportation increased 13%, while unaffiliated third parties gas sales
declined approximately $155,000 for three months ended June 30, 1995 as
compared to the three months ended June 30, 1994. The Company reduced the
amount of unaffiliated third party gas sales primarily in an effort to manage
its cash flow. Well operating, transportation and other revenues for the three
months ended June 30, 1995 decreased $105,906 (19%) compared to the three
months ended June 30, 1994.
Revenues from administrative and agency fees, which are based on a
percentage of the total investor capital raised in all of the Drilling
Programs, increased by 28% for the three months ended June 30, 1995 compared to
the three months ended June 30, 1994 due to the formation of three new
partnerships during fiscal 1995.
EXPENSES
Oil and gas production expense increased $78,082 (63%)for the three
months ended June 30, 1995 as compared to the three months ended June 30, 1994.
This increase was primarily due to repairs associated with a well in the Gulf
Coast area and costs associated with the increased production of the 163 wells
the Company acquired in December 1994.
Drilling costs for the three months ended June 30, 1995 as compared
to the three months ended June 30, 1994 decreased $745,466 (83%) primarily due
to the decreased number of wells completed in the recent period.
Oil and gas operations expense decreased $113,220 (33%)for the three
months ended June 30, 1995 as compared to the three months ended June 30, 1994.
This decrease was due to the decrease in unaffiliated third party gas purchases
related to third party gas sales as discussed above.
General and administrative expenses increased $81,200 (14%) for the
three months ended June 30, 1995 as compared to the three months ended June 30,
1994. This increase was primarily due to increases in salary expense
associated with additional personnel, professional fees associated with various
financing arrangements and expenses associated with the separation agreement
with a former officer of the Company.
Depreciation, depletion, amortization and other expenses increased
$144,716 (41%) for the three months ended June 30, 1995 compared to the three
months ended June 30, 1994. This increase was primarily due to an increase in
depletion resulting from the increase in production from the Company's wells.
Abandonment of oil and gas properties decreased $144,924 for the
three months ended June 30, 1995 as compared to the three months ended June 30,
14
<PAGE> 16
1994. The Company did not abandon any oil and gas properties for the three
months ended June 30, 1995.
Interest expense increased from $93,077 for the three months ended June
30, 1994 to $170,099 for the three months ended June 30, 1995. This increase
was primarily associated with increased borrowings under the Credit Facility
and additional borrowings from NAGIT, a principal stockholder of the Company,
in order to fund a portion of the Company's additional investments in the
fiscal 1995 Drilling Programs. Outstanding borrowings at June 30, 1995 were
$7,230,000 under the Company's Credit Facility and with NAGIT, as compared to
$4,965,774 at June 30, 1994.
A net loss for the three months ended June 30, 1995 of $173,691
compares to a net loss of $60,117 for the three months ended June 30, 1994.
The increase in net loss is due primarily to the increase in oil and gas
production expenses, general and administrative expenses and interest expense
coupled with the decrease in net income from drilling activities and the
effects of reduced natural gas prices for the three months ended June 30, 1995.
INFLATION AND CHANGES IN PRICES
While the costs of operations have been and will continue to be
affected by inflation, oil and gas prices have fluctuated during recent years
and generally have not followed the same pattern as inflation. With today's
global economy, especially in the area of oil and natural gas, management
believes that other forces of the economy and world events, such as OPEC, the
weather, economic factors, and the effects of supply of natural gas in the
United States and regionally have a more immediate effect on current pricing
than inflation. The Company received an average price of $2.09 and $2.59 per
Mcf for natural gas in the three months ended June 30, 1995 and 1994,
respectively. The price the Company received for oil remained relatively
constant between these periods. The general market for natural gas in the
Appalachian Basin has remained weak for a longer period than the Company
previously anticipated. The reasons for continued weak natural gas prices can
be attributed to supply and demand fluctuations caused by the weather sensitive
nature of the industry, increased competition from Canadian gas, effects of gas
storage and possibly Federal Energy Regulatory Commission ("FERC") Order 636.
The FERC Order may have contributed to the lower spot market prices by
mandating an unbundling of pipeline service and allowing open access to a
variety of geographical markets. Management cannot predict what long-term
effects FERC Order 636 will have on either spot market prices or longer term
gas contracts.
Currently, the Company sells natural gas under both fixed price
contracts and on the spot market. The spot market price the Company receives
for gas production is related to several variables including the weather and
the effects of gas storage.
The Company continues to construct new pipeline systems in the
Appalachian Basin and to contract with other pipeline systems in the region to
transport natural gas production from wells the Company operates.
15
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was approximately negative $141,000 at
June 30, 1995 compared to approximately negative $482,000 at March 31, 1995.
The increase of $341,000 in working capital from March 31, 1995 reflects
additional borrowings from NAGIT of $1,000,000 during the three months ended
June 30, 1995. Also, subsequent to June 30, 1995, an amendment to the Credit
Facility increased the Company's borrowing base from $6,450,000 at January 13,
1995 to $8,500,000 at August 8, 1995. As of August 8, 1995, the Company had
$5,810,000 outstanding under its Credit Facility. North Coast's current ratio
was .96 to 1.0 at June 30, 1995 and .90 to 1.0 at March 31, 1995.
The following table summarizes the Company's financial position at
March 31, 1995 and June 30, 1995:
<TABLE>
<CAPTION>
March 31, June 30,
1995 1995
-------- --------
Amount % Amount %
------ - ------ -
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Working capital $ (482) (3%) $ (141) (1%)
Property and equip-
ment (net) 16,387 100 16,585 99
Other 445 3 411 2
------- ---- ------- ----
Total $16,350 100% $16,855 100%
======= ==== ======= ====
Long-term debt $ 6,197 38% $ 7,155 43%
Deferred income taxes 930 6 860 5
Stockholders' equity 9,223 56 8,840 52
------- ---- ------- ----
Total $16,350 100% $16,855 100%
======= ==== ======= ====
</TABLE>
The following table summarizes the Company's Statements of Cash Flows
for the three months ended June 30, 1994 and 1995:
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------
1994 1995
---- ----
Amount % Amount %
------ - ------ -
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net cash used by
operating activities $ (968) (44%) $ (529) (39%)
Net cash used by investing
activities (822) (37) (579) (43)
Net cash provided by
financing activities 1,158 53 369 27
------- ---- ------- ----
Decrease in cash and cash
equivalents $ (632) (28%) $ (739) (55%)
======= ==== ======= ====
</TABLE>
Note:
(1) All items in the previous table are calculated as a percentage of total
cash sources. Total cash sources include the following items, if
positive: cash flow from operations before working capital changes,
changes in working capital, net cash provided by investing activities
and net cash provided by financing activities, plus any decrease in
cash and cash equivalents.
16
<PAGE> 18
As the above table indicates, the Company's cash flow used by operating
activities decreased approximately $440,000 for the three months ended June 30,
1995 compared to the period ended June 30, 1994. This decrease reflects the
payment of drilling and completion costs associated primarily with the Drilling
Programs.
Net cash used by investing activities decreased from approximately
$822,000 (37% of cash sources) for the three months ended June 30, 1994 to
approximately $579,000 (43% of cash sources) for the three months ended June
30, 1995. This decrease is primarily due to the timing of the Company's cash
expenditures related to its obligation to fund the tangible equipment for the
Drilling Programs.
Net cash provided by financing activities decreased approximately
$789,000 for the three months ended June 30, 1995 compared to the prior period.
This decrease reflects a decrease in borrowings and the payments on the
Company's Credit Facility.
On September 20, 1993 the Company entered into an agreement with its
lender to provide a reducing revolving line of credit of up to $10,000,000 (the
"Credit Facility"). At June 30, 1995 the Company's borrowing base under its
Credit Facility was $5,980,000 based upon the Company's current financial
position and level of oil and natural gas and pipeline-based reserves, with
available borrowings reduced by $85,000 at the first of each month. Available
borrowings also are subject to reduction based upon the amount of outstanding
letters of credit used to support certain bonding requirements ($130,000 as of
June 30, 1995). The Credit Facility provides that availability is subject to
adjustment based upon the Company's semi-annual reserve study and is subject to
certain covenants. An amendment to the Credit Facility, effective August 8,
1995, increased the Company's borrowing base to $8,500,000, reduced by $100,000
at the first of each month commencing September 1, 1995. At June 30, 1995 the
Company was not in violation of any of its loan covenants. Amounts borrowed
under the Credit Facility bear interest at the lending bank's prime rate plus 1
1/2% (10 1/2% at June 30, 1995). The mortgage note bears interest at the rate
of 8% and requires the Company to make monthly payments of approximately $1,019
through July 1998. Thereafter, the balance of the mortgage note will be
amortized over a five-year period at an interest rate to be renegotiated.
The amounts borrowed under the Company's Credit Facility are secured by
its receivables, inventory, equipment and a first mortgage on certain of its
interests in oil and gas wells and reserves. The mortgage note is secured by
certain land and buildings.
In addition to bank financing, the Company secured $335,000 in financing
from NAGIT, a principal stockholder of the Company, relating to the purchase of
certain producing wells, gas gathering lines and drilling locations. The
amounts outstanding under the terms of the Company's financing arrangements
with NAGIT are subordinated to the prior payment and amounts outstanding under
the Company's Credit Facility, and bear an interest rate at the prime rate
designated by the Chemical Bank, N.A., plus 1% (10% at June 30, 1995). This
agreement grants NAGIT a 3.125% overriding royalty interest in the acquired
17
<PAGE> 19
properties. Repayment of the loan is in cash based upon a percentage of the
net monthly revenues from the acquired properties.
Also, effective June 13, 1995, the Company entered into a Loan
Agreement with NAGIT with respect to a loan of $1,000,000. The unsecured loan
is due December 29, 1995 and may be repaid in cash plus accrued interest (with
approval of the Company's senior lender) prior to December 29, 1995 or may be
converted, after such date, into shares of Common Stock at the rate of $1.00
per share. The loan is subordinate to the Company's senior lender and bears
interest at the rate of 8% per annum. In connection with entering into the
Loan Agreement, the Company issued a warrant to purchase 200,000 shares of
Common Stock at $1.20 per share and a warrant to purchase 300,000 shares of
Common Stock at $1.00 per share. The warrants may be redeemed by the Company
for $.10 per share at its option upon 30 days written notice.
The Company anticipates that the demands on its capital resources may
increase further during fiscal 1996. This potential increase is anticipated to
result from additional drilling and completion obligations of the Company
relating to its sponsorship of drilling programs, further development of the
Company's drilling prospects, the possibility of future joint ventures or other
arrangements intended to assist in increasing the Company's reserve base and
production revenues and the dividend obligations associated with the Company's
Preferred Stock.
The Company believes that due to the amount of funds committed to
current and future projects, including those projects described above, the
uncertainties associated with the amount of funds raised from investors in the
Drilling Programs, and uncertainties associated with revenues from production,
it may be necessary for the Company to investigate additional sources of
capital or financing for its future long-term projects. In the event that
additional long-term financing is not obtained, the Company believes that it
would be required to change its growth oriented business plan in order to
conserve cash. In order to accomplish this objective, the Company believes
that it would be necessary to take various actions, including reducing the
amount of outside capital raised in investor financed Drilling Programs and the
level of its participation in such Programs. The Company believes that cost
cutting measures of this type would have a material adverse effect on its
results of operations and financial condition.
Management of the Company believes that the proceeds of the June 13,
1995 loan from NAGIT, together with internally generated funds and available
borrowings under its Credit Facility will be sufficient to fund the Company's
anticipated capital expenditures as well as its working capital needs through
the end of the current fiscal year. Management expects to continue to review
additional financing options, including additional borrowings and sales of
stock, in order to meet the needs of the Company's growth oriented business
plan. If additional financing cannot be obtained, the Company may be required
to change its growth oriented business plan and possibly implement various cost
cutting measures.
18
<PAGE> 20
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable
Item 2. CHANGES IN SECURITIES
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a). Exhibits
10.28 Third Amendment to Credit Agreement by
and between Bank One, Texas, N.A. and
the Company dated August 8, 1995.
11.1 Computation of Earnings per
Common Share.
27 Financial Data Schedule
b). No reports on Form 8-K have been filed during the quarter
for which this report was filed.
19
<PAGE> 21
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.
NORTH COAST ENERGY, INC.
August 14, 1995 /s/ Charles M. Lombardy, Jr.
--------------------------------------
Charles M. Lombardy, Jr.
Chief Executive Officer and Director
August 14, 1995 /s/ Tim Wagers
--------------------------------------
Tim Wagers
Treasurer (Principal Accounting
and Financial Officer)
<PAGE> 1
Exhibit 10.28
THIRD AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
This THIRD AMENDMENT TO CREDIT AGREEMENT (this "THIRD
AMENDMENT") is made and entered into effective as of the 8th day of
August, 1995, by and between NORTH COAST ENERGY, INC., a Delaware corporation
(the "BORROWER") and BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking
association (the "LENDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto have entered into the Credit
Agreement dated September 20, 1993, as amended by that certain First Amendment
to Credit Agreement effective as of March 16, 1994, and as further amended by
that certain Second Amendment to Credit Agreement effective as of January 13,
1995 (as amended, the "AGREEMENT"), pursuant to which the Lender has extended
credit to the Borrower; and
WHEREAS, the parties to the Agreement are desirous of amending
the Agreement in the particulars hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in the Agreement and this Third Amendment, the parties
hereto agree as follows:
DEFINITIONS AND INTERPRETATION
------------------------------
TERMS DEFINED ABOVE. As used herein, each of the
terms "AGREEMENT," "BORROWER," "LENDER," and "THIRD AMENDMENT" shall have the
meaning assigned to such term hereinabove.
TERMS DEFINED IN AGREEMENT. As used herein, each
term defined in the Agreement shall have the meaning assigned thereto in the
Agreement, unless expressly provided herein to the contrary.
REFERENCES. References in this Third Amendment to
Article or Section numbers shall be to Articles and Sections of this Third
Amendment, unless expressly stated to the contrary. References in this Third
Amendment to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," and "hereunder" shall be to this Third Amendment in its entirety and
not only to the particular Article or Section in which such reference appears.
1
<PAGE> 2
ARTICLES AND SECTIONS. This Third Amendment, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties, and other legal
relations of the parties hereto shall be determined from this Third Amendment
as an entirety and without regard to such division into Articles and Sections
and without regard to headings prefixed to such Articles and Sections.
NUMBER AND GENDER. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural and likewise the plural shall be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine, and
neuter, when such construction is appropriate, and specific enumeration shall
not exclude the general, but shall be construed as cumulative. Definitions of
terms defined in the singular and plural shall be equally applicable to the
plural or singular, as the case may be.
AMENDMENTS TO AGREEMENT
-----------------------
The Borrower and the Lender hereby amend the Agreement in the
following particulars, effective as of and after the effective date of this
Third Amendment:
AMENDMENT OF SECTION 1.2. Section 1.2 of the
Agreement is hereby amended as follows:
(a) The following definitions are hereby amended to read as
follows:
"COMMITMENT AMOUNT" shall mean the amount of $8,500,000, as
such amount is reduced pursuant to Section 2.1.
"COMMITMENT TERMINATION DATE" shall mean April 1, 1998.
"CURRENT LIABILITIES" shall mean all liabilities which would,
in accordance with GAAP, be included as current liabilities on a
consolidated balance sheet of the Borrower and its Subsidiaries as of
the date of calculation, but excluding (a) current maturities in
respect of the Obligations, both principal and interest, (b) accounts
payable, the payment of which is being contested in good faith and as
to which adequate reserve in accordance with GAAP has been
established, (c) billings in excess of cost on uncompleted contracts,
(d)
2
<PAGE> 3
deferred income tax, and (e) the Nagit Subordinated Debt.
"INDEBTEDNESS" shall mean, as to any Person, without
duplication, (a) all liabilities (excluding reserves for deferred
income taxes, deferred compensation liabilities, and other deferred
liabilities and credits) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability
side of a balance sheet, (b) all obligations of such Person evidenced
by bonds, debentures, promissory notes, or similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed
money, and (d) all obligations of others, to the extent any such
obligation is secured by a Lien on the assets of such Person (whether
or not such Person has assumed or become liable for the obligation
secured by such Lien), but excluding, as to the Borrower, the Nagit
Subordinated Debt.
(b) The following definition is added to read as follows:
"NAGIT SUBORDINATED DEBT" shall mean debt owed to Nagit (USA)
Inc. under the Promissory Note dated January 17, 1995 in the original
principal amount of $335,000 executed by the Borrower and the
Promissory Note dated June 7, 1995 in the original principal amount of
$1,000,000 executed by the Borrower; provided that such notes remain
subordinated to the payment and performance of the Obligations on
terms satisfactory to the Lender and such notes are not renewed,
extended or increased or the repayment terms otherwise amended or
modified."
AMENDMENT OF SECTION 2.1. The last sentence of
Section 2.1 of the Agreement is hereby amended to read as follows:
"Commencing on September 1, 1995 and continuing thereafter on
the first day of each calendar month through the date of the next
Borrowing Base determination, the Commitment Amount shall be reduced
by $100,000, and thereafter reduced on the first day of each calendar
month in the amount determined by the Lender in connection with any
redetermination of the Borrowing Base made in accordance with Section
2.8."
AMENDMENT OF SECTION 2.8(a). Section 2.8(a) of the
Agreement is hereby amended to read as follows:
3
<PAGE> 4
"(a) The Borrowing Base as of the date of the Third Amendment
to this Agreement is acknowledged by the Borrower and the Lender to be
$8,500,000."
AMENDMENT OF SECTION 6.14. Section 6.14 of the
Agreement is hereby amended to read as follows:
"6.14 SHAREHOLDER'S EQUITY. Permit Shareholder's Equity as
of the close of any fiscal quarter to be less than $7,000,000, plus a
cumulative 80% of positive Net Income for all fiscal years of the
Borrower ending subsequent to March 31, 1993, plus a cumulative 100%
of all net proceeds from equity offerings commencing from September
30, 1994, less the amount of Preferred Stock dividends made for such
period."
II.5 AMENDMENT OF SECTION 7.1. Section 7.1(d) of
the Agreement is hereby amended to read as follows:
"(d) default shall be made by the Borrower (as principal or
guarantor or other surety) in the payment or performance of an
aggregate amount in excess of $250,000 under any bond, debenture,
note, or other Indebtedness, including the Nagit Subordinated Debt, or
under any credit agreement, loan agreement, indenture, promissory
note, or similar agreement or instrument executed in connection with
any of the foregoing, and such default shall remain unremedied for in
excess of the period of grace, if any, with respect thereto."
III
CONDITIONS
----------
The obligation of the Lender to amend the Agreement as
provided herein is subject to the fulfillment of the following conditions
precedent:
RECEIPT OF DOCUMENTS AND OTHER ITEMS. The Lender
shall have received, reviewed, and approved the following documents and other
items, appropriately executed when necessary and in form and substance
satisfactory to the Lender:
(a) multiple counterparts of this Third Amendment
executed by the Borrower, as requested by the Lender;
4
<PAGE> 5
(b) Notice of Final Agreement; and
(c) a Facility Fee in the amount of $20,500 and an
extension fee in the amount of $16,125.
ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in Article IV of the Agreement and in
any other Loan Document shall be true and correct, except as affected by the
transactions contemplated in the Agreement and this Third Amendment.
MATTERS SATISFACTORY TO LENDER. All matters incident
to the consummation of the transactions contemplated hereby shall be
satisfactory to the Lender.
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby expressly re-makes, in favor of the
Lender, all of the representations and warranties set forth in Article IV of
the Agreement and set forth in any other Loan Document to which it is a party,
and represents and warrants that all such representations and warranties remain
true and unbreached, except as affected by the transactions contemplated in the
Agreement and this Third Amendment.
RATIFICATION
------------
Each of the parties hereto does hereby adopt, ratify, and
confirm the Agreement and the other Loan Documents to which it is a party, in
all things in accordance with the terms and provisions thereof, as amended by
this Third Amendment.
MISCELLANEOUS
-------------
SCOPE OF AMENDMENT. The scope of this Third
Amendment is expressly limited to the matters addressed herein and this Third
Amendment shall not operate as a waiver of any past, present, or future breach,
Default, or Event of Default under the Agreement, except to the extent, if any,
that any such breach, Default, or Event of Default is remedied by the effect of
this Third Amendment.
AGREEMENT AS AMENDED. All references to the
Agreement in any document heretofore or hereafter executed in connection with
the transactions contemplated in the Agreement shall be deemed to refer to the
Agreement as amended by this Third Amendment.
5
<PAGE> 6
PARTIES IN INTEREST. All provisions of this Third
Amendment shall be binding upon and shall inure to the benefit of the Borrower,
the Lender, and their respective successors and assigns.
RIGHTS OF THIRD PARTIES. Subject to the provisions
of Section 6.3, all provisions herein are imposed solely and exclusively for
the benefit of the Lender and the Borrower and no other Person shall have
standing to require satisfaction of such provisions in accordance with their
terms and any or all of such provisions may be freely waived in whole or in
part by the Lender at any time if in its sole discretion it deems it advisable
to do so.
ENTIRE AGREEMENT. THIS THIRD AMENDMENT CONSTITUTES
THE ENTIRE AGREEMENT BETWEEN THE BORROWER AND THE LENDER WITH RESPECT TO THE
SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL,
BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD,
THIS THIRD AMENDMENT, THE AGREEMENT, THE NOTE, THE SECURITY INSTRUMENTS, AND
THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT
AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
GOVERNING LAW. THIS THIRD AMENDMENT SHALL CONSTITUTE
A CONTRACT ENTERED INTO UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW.
JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS
WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF,
RELATED TO OR FROM THIS THIRD AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN
DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDER,
IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. THE BORROWER HEREBY
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN
HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO
TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST
IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.
WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER AND THE
LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF
THIS THIRD AMENDMENT, THE AGREE-
6
<PAGE> 7
MENT, OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE
ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS THIRD AMENDMENT, THE
AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE
PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING
INTO THIS THIRD AMENDMENT.
IN WITNESS WHEREOF, this Third Amendment to Credit Agreement
is executed effective as of the date first hereinabove written.
NORTH COAST ENERGY, INC.
By: /s/ Charles M. Lombardy, Jr.
----------------------------------
Charles M. Lombardy, Jr.
Chief Executive Officer
(Signatures Continued on Next Page)
BANK ONE, TEXAS,
NATIONAL ASSOCIATION
By: /s/ Elizabeth Hunter
----------------------------------
Elizabeth Hunter
Vice President
7
<PAGE> 1
EXHIBIT 11.1
Computation of Primary and Fully Diluted Earnings Per Common Share
<TABLE>
<CAPTION>
Three Months Ended
EARNINGS
6/30/94 6/30/95
------- -------
<S> <C> <C>
Net Loss $ (60,117) $ (173,691)
Series A Preferred Stock Dividends (95,115) (92,838)
Series B Preferred Stock Dividends (117,041) (116,166)
----------- -----------
Pro Forma Loss Applicable
to Common Stock $ (272,273) $ (382,695)
=========== ===========
_______________________________________________________________________________________________
SHARES
Weighted Average Common Shares for
the period ended 6,364,068 8,030,779
Additional Shares Assuming Conversion of:
Employee Options Exercised 0 0
--------- ---------
Pro Forma Shares for Primary Earnings
Per Common Share 6,364,068 8,030,779
--------- ---------
Additional Shares Assuming Conversion of:
Preferred Stock 0 0
--------- ---------
Pro Forma Shares for Fully Diluted
Earnings per Common Share 6,364,068 8,030,779
========= =========
_______________________________________________________________________________________________
Primary Earnings Per Common Share $ (.04) $ (.05)
Fully Diluted Earnings Per Common Share $ (.04) $ (.05)
_______________________________________________________________________________________________
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000839950
<NAME> NORTH COAST ENERGY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,628,144
<SECURITIES> 0
<RECEIVABLES> 1,324,401
<ALLOWANCES> 0
<INVENTORY> 77,680
<CURRENT-ASSETS> 3,153,432
<PP&E> 25,903,902
<DEPRECIATION> 9,318,870
<TOTAL-ASSETS> 20,149,458
<CURRENT-LIABILITIES> 3,294,097
<BONDS> 0
<COMMON> 80,324
0
7,733
<OTHER-SE> 12,083,011
<TOTAL-LIABILITY-AND-EQUITY> 20,149,458
<SALES> 1,565,473
<TOTAL-REVENUES> 1,565,473
<CGS> 1,734,435
<TOTAL-COSTS> 1,734,435
<OTHER-EXPENSES> (34,370)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,099
<INCOME-PRETAX> (304,691)
<INCOME-TAX> (131,000)
<INCOME-CONTINUING> (173,691)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (173,691)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
