<PAGE> 1
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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________
Commission file number: 1-10216
CHIEFTAIN INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Alberta, Canada None
- --------------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1201 Toronto Dominion Tower, Edmonton Centre,
Edmonton, Alberta, Canada T5J 2Z1
- --------------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code/Postal Code)
</TABLE>
Registrant's telephone number, including area code: (403) 425-1950
Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) have 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 class of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
<S> <C> <C>
Title of each class Date Number Outstanding
- ------------------- ---------------- ------------------
Common shares July 31 ,1998 13,462,991
</TABLE>
<PAGE> 2
Page 2
CHIEFTAIN INTERNATIONAL, INC.
JUNE 30, 1998 FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
June 30, 1998 and December 31, 1997 3
Consolidated Condensed Statement of Income -
Six months ended June 30, 1998 and 1997 and
Three months ended June 30, 1998 and 1997 4
Consolidated Condensed Statement of Changes in Financial Position -
Six months ended June 30, 1998 and 1997 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
<PAGE> 3
Page 3
CHIEFTAIN INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Full Cost Method of Accounting)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
(U.S. $ in thousands)
(unaudited)
ASSETS
Current assets:
Cash and short-term deposits $ 7,604 $ 26,925
Accounts receivable 10,407 10,862
Other 966 606
---------------------------------
18,977 38,393
Capital assets - net 260,209 236,715
Deferred income taxes 3,146 3,442
---------------------------------
$ 282,332 $ 278,550
=================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued $ 12,507 $ 15,717
Long-term debt 10,000 -
Deferred income taxes 14,297 13,367
Preferred shares of a subsidiary 63,403 63,403
Shareholders' equity:
Common shares 191,212 192,845
Contributed surplus - 307
Deficit (9,087) (7,089)
---------------------------------
182,125 186,063
---------------------------------
$ 282,332 $ 278,550
=================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 4
Page 4
CHIEFTAIN INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Six months ended June 30 Three months ended June 30
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(U.S. $ in thousands except number of shares and per share amounts)
(unaudited)
Production revenue, net of royalties $ 31,030 $ 36,042 $ 14,464 $ 14,118
Interest and other revenue
(Note 2) 2,492 1,328 340 689
----------------------------------------------------------------------------------------
33,522 37,370 14,804 14,807
----------------------------------------------------------------------------------------
Production expenses 8,013 6,818 4,143 3,457
General and administrative expenses 2,751 2,292 1,114 1,031
Interest expense 25 - 25 -
Depletion and amortization 20,191 18,545 9,864 9,048
----------------------------------------------------------------------------------------
30,980 27,655 15,146 13,536
----------------------------------------------------------------------------------------
Income (loss) before income taxes
and dividends on preferred shares
of a subsidiary 2,542 9,715 (342) 1,271
Income taxes (Note 3) 1,250 3,790 157 505
----------------------------------------------------------------------------------------
Income (loss) before dividends on
preferred shares of a subsidiary 1,292 5,925 (499) 766
Dividends on preferred shares of a
subsidiary 2,471 2,471 1,236 1,236
----------------------------------------------------------------------------------------
Net income (loss) applicable to
common shares $ (1,179) $ 3,454 $ (1,735) $ (470)
========================================================================================
Net income (loss) per common share
(Note 4) - Basic $ (0.09) $ 0.25 $ (0.13) $ (0.04)
========================================================================================
- Fully diluted $ (0.09) $ 0.25 $ (0.13) $ (0.04)
========================================================================================
Weighted average number of common
shares outstanding:
- Basic 13,562,863 13,604,388 13,526,185 13,608,074
========================================================================================
- Fully diluted 13,562,863 13,604,388 13,526,185 13,608,074
========================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 5
Page 5
CHIEFTAIN INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C>
(U.S. $ in thousands)
(unaudited)
Operating activities:
Net income (loss) applicable to common shares $ (1,179) $ 3,454
Items not requiring a current cash outlay 21,417 22,287
--------------------------
20,238 25,741
Net change in non-cash operating working capital (2,322) 3,143
--------------------------
17,916 28,884
Financing activities:
Issue of common shares 301 324
Purchase of common shares for cancellation (3,061) -
Increase in long-term debt 10,000 -
--------------------------
7,240 324
Investing activities:
Lease acquisition, exploration and drilling costs (37,688) (28,721)
Pipelines and production equipment acquired (5,938) (3,177)
--------------------------
(43,626) (31,898)
Purchase of other capital assets (59) (29)
Change in investing accounts payable and accrued (792) (1,129)
--------------------------
(44,477) (33,056)
--------------------------
Change in cash and short term deposits (19,321) (3,848)
Beginning cash and short-term deposits 26,925 42,449
--------------------------
Ending cash and short-term deposits $ 7,604 $ 38,601
==========================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 6
Page 6
CHIEFTAIN INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation:
In the opinion of Chieftain International, Inc. (the "Company" and
together with its subsidiaries "Chieftain"), the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as at June 30, 1998 and December 31, 1997
and the results of operations and changes in financial position for the
six months ended June 30, 1998 and 1997. Certain information and notes
normally included in Chieftain's financial statements prepared in
conformity with Canadian generally accepted accounting principles have
been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in Chieftain's Annual
Report on Form 10-K for the year ended December 31, 1997.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make informed judgements and
estimates. Actual results may differ from those estimates.
The results of operations and changes in financial position for the six
months ended June 30, 1998 are not necessarily indicative of the results
to be expected for the full year.
Material differences between Canadian and U.S. accounting principles that
affect Chieftain are referred to in Note 5, which provides the condensed
effects of the differences on earnings and balance sheet accounts.
2. Interest and Other Revenue:
Interest and other revenue for the first quarter of 1998 included $1.6
million awarded by the courts pursuant to a successful claim for recovery
of excess transportation charges incurred from 1990 through 1997. The
award comprises transportation charges, legal fees and judgement interest
in the amounts of $1,129,000, $282,000 and $189,000, respectively.
<PAGE> 7
Page 7
3. Income Taxes:
The provision for income taxes differs from the amount of income tax
determined by applying the Canadian statutory rate to pre-tax income
(loss) before dividends paid on preferred shares of a subsidiary as a
result of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 Three months ended June 30
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(U.S. $ in thousands) (unaudited)
Tax at statutory Canadian rate 44.62% $ 1,137 $ 4,335 $ (150) $ 567
Lower income tax rate on earnings of U.S.
subsidiaries (239) (716) (17) (96)
Canadian income tax on exchange loss (gain)
which is eliminated upon consolidation 173 150 155 85
Exchange revaluation of Canadian
deferred tax assets 117 - 123 -
Other 62 21 46 (51)
---------------------------------------------------------------
Tax at effective rate $ 1,250 $ 3,790 $ 157 $ 505
===============================================================
Effective tax rate 49.2% 39.0% (45.9%) 39.7%
===============================================================
</TABLE>
4. Per Share Amounts:
Net income per common share is computed by dividing net income applicable
to common shares, by the weighted average number of common shares
outstanding during the period.
In the calculation of fully diluted earnings per share, shares
outstanding are adjusted for share options and shares issuable on
conversion of preferred shares. Earnings are adjusted by the amount of
imputed interest on share option proceeds and preferred share dividends.
5. United States Accounting Principles:
U.S. full cost accounting rules differ materially from the Canadian full
cost accounting guidelines followed by Chieftain. The U.S. rules require
an impairment test to be conducted quarterly whereas the Canadian
guidelines require this test only at year-end. In determining the
limitation on carrying values, U.S. rules require the discounting of
future net revenues at 10% and Canadian guidelines require the use of
undiscounted future net revenues and the deduction of estimated future
administrative costs. The quarterly test required by U.S. accounting
rules, using June 30 U.S. gas and oil prices of $2.09 per mcf and $12.40
per barrel to determine future net revenues, would have resulted in a
write-down of U.S. property carrying costs of $16.1 million, after
providing for tax recoveries of $8.6 million.
<PAGE> 8
Page 8
The effect on the Consolidated Condensed Balance Sheet of the differences
between Canadian and U.S. accounting principles is as follows:
<TABLE>
<CAPTION>
AS AT JUNE 30, 1998 December 31, 1997
- ----------------------------------------------------------------------------------------------------
(U.S.$ in thousands)
<S> <C> <C> <C> <C>
Under U.S. Under U.S.
Accounting Accounting
As reported Principles As reported Principles
-------------- ------------- -------------- -------------
Net capital assets $ 260,209 $ 218,861 $ 236,715 $ 218,673
Deferred tax - asset $ 3,146 $ 4,792 $ 3,442 $ 5,537
Deferred tax - liability $ 14,297 $ 1,061 $ 13,367 $ 8,737
Deficit $ (9,087) $ (35,553) $ (7,089) $ (18,406)
</TABLE>
The effect on consolidated earnings of these differences is summarized as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 1998 1997
- ----------------------------------------------------------------------------------------------------------
(U.S.$ in thousands except number of shares and per share amounts)
<S> <C> <C>
Net income (loss) applicable to common shares
as reported $ (1,179) $ 3,454
Additional depletion (24,725) -
-------------------------------------------
(25,904) 3,454
Add reduction in depletion expense 1,419 1,694
Less (increase) decrease in deferred tax provision 8,157 (627)
--------------------------------------------
Net income (loss) applicable to common shares
under U.S. accounting principles $ (16,328) $ 4,521
============================================
Net income (loss) per common share under U.S.
accounting principles:
- Basic $ (1.20) $ 0.33
============================================
- Fully diluted $ (1.20) $ 0.33
============================================
Fully diluted number of common shares outstanding 13,562,863 13,885,675
============================================
</TABLE>
<PAGE> 9
Page 9
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
(U.S.$ in thousands except number of shares and per share amounts)
<S> <C> <C>
Net income (loss) applicable to common shares
as reported $ (1,735) $ (470)
Additional depletion (24,725) -
-----------------------------------------------------
(26,460) (470)
Add reduction in depletion expense 649 801
Less (increase) decrease in deferred tax provision 8,393 (286)
-----------------------------------------------------
Net income(loss) applicable to common shares under
U.S. accounting principles $ (17,418) $ 45
=====================================================
Net income (loss) per common share under U.S.
accounting principles:
- Basic $ (1.29) $ 0.00
=====================================================
- Fully diluted $ (1.29) $ 0.00
=====================================================
Fully diluted number of common shares outstanding 13,526,185 13,608,074
=====================================================
</TABLE>
The Company applies the intrinsic value method prescribed by APB Opinion 25 and
related interpretations in accounting for share option transactions.
Accordingly, no compensation cost is recognized in the accounts. U.S.
accounting principles require disclosure of the impact on earnings and earnings
per share of the value of options granted after 1994, calculated in accordance
with FAS 123. Such impact, for the six months ended June 30, 1998 would amount
to a net of tax charge to income of $873,000 (1997 - $513,000) and for the three
months ended June 30 such impact would amount to a net of tax charge to income
of $451,000 (1997 - $288,000). Under U.S. accounting principles after
reflecting this charge, for the six months ended June 30, pro forma net income
(loss) applicable to common shares would be $(17,201,000) (1997 - $4,008,000);
net income (loss) per common share under U.S. accounting principles would be
$(1.27)(1997- $0.30); and pro forma fully diluted earnings (loss) per common
share would be $(1.27) (1997 - $0.29). For the three months ended June 30, pro
forma net income (loss) applicable to common shares under U.S. accounting
principles would be $(17,869,000) (1997 - $(243,000)); pro forma net income
(loss) per common share would be $(1.32) (1997 - $(0.02)); and pro forma fully
diluted earnings (loss) per common share would be $(1.32) (1997 - $(0.02)).
These effects are not necessarily indicative of those to be expected in future
periods.
<PAGE> 10
Page 10
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
To be read in conjunction with the accompanying consolidated condensed
financial statements.
RESULTS OF OPERATIONS
Six months ended June 30, 1998 and 1997
The 14% decrease in first half 1998 production revenue resulted from a 13%
decrease in average price received for natural gas to $2.04 per mcf, a 37%
decrease in average oil price received to $12.65 per barrel, a less than 1%
decrease in natural gas production to 14.6 bcf and a 36% increase in oil
production volume to 612,000 barrels, all as compared to the corresponding 1997
period.
<TABLE>
<CAPTION>
Six months ended
June 30, 1998 1997
- ---------------------------------------------------------------------------------------------
Natural Gas Oil and NGLs Natural Gas Oil and NGLs
(mmcfd) (bd) (mmcfd) (bd)
Gulf of North Gulf of North
Mexico Sea Total Total Mexico Sea Total Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross production 69.9 10.9 80.8 3,382 68.0 13.2 81.2 2,487
Royalties 14.4 -- 14.4 442 13.5 -- 13.5 359
Net production 55.5 10.9 66.4 2,940 54.5 13.2 67.7 2,128
Average price $2.15 $1.32 $2.04 $12.65 $2.50 $1.55 $2.35 $19.97
</TABLE>
<TABLE>
<CAPTION>
Three months ended
June 30, 1998 1997
- ---------------------------------------------------------------------------------------------
Natural Gas Oil and NGLs Natural Gas Oil and NGLs
(mmcfd) (bd) (mmcfd) (bd)
Gulf of North Gulf of North
Mexico Sea Total Total Mexico Sea Total Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross production 72.0 6.6 78.6 3,495 66.8 11.4 78.2 2,446
Royalties 14.9 -- 14.9 473 13.4 -- 13.4 348
Net production 57.1 6.6 63.7 3,022 53.4 11.4 64.8 2,098
Average price $2.07 $0.81 $1.96 $11.54 $1.97 $1.06 $1.84 $18.17
</TABLE>
U.S. gas prices received during the second quarter were similar relative to the
last year, whereas U.S. gas prices in the first quarter were significantly
lower relative to last year. Demand for energy was reduced due to mild
temperatures during the first quarter. During the first quarter the degree day
indicator, a measure of heating demand for energy, was down 9% from normal in
the primary markets for Chieftain's gas in eastern and central parts of the
continent. However, by April the effects of the warm winter had diminished.
Oil prices fell more than gas prices due to reduced demand caused by warmer
weather and by continuing adverse economic conditions in some parts of the
world. Increased supply also contributed to the oil price decline. A decision
of the Organization of Petroleum Exporting Countries to start reducing
production quotas effective July 1, 1998, has yet to result in stronger futures
prices.
<PAGE> 11
Page 11
Production expenses for the first six months of 1998 increased 18% from the
1997 period, primarily reflecting the commencement of production at East
Cameron 349 and significant pipeline repair costs in the South Pass area. On a
gas equivalent basis, production expenses increased 12% to $0.438/mcfe,
reflecting the higher lifting costs associated with increased oil production
which comprised 20% of Chieftain's gas equivalent production during the first
half of 1998, up from 16% in the comparable 1997 period. General and
administrative expenses for the first six months of 1998 increased 20% from the
1997 period, primarily reflecting increased performance based compensation
payments made during the first quarter. On a gas equivalent basis, general and
administrative expenses increased 14% to $0.15/mcfe compared to the
corresponding 1997 period. Depletion and amortization expense increased 9%,
the result of a 5% increase in units of production and a 3% increase in the
average depletion rate to $1.10 per gas equivalent unit.
CAPITAL RESOURCES AND LIQUIDITY
The following table summarizes cash provided from (used in) operating,
financing and investing activities for each of the periods shown:
<TABLE>
<CAPTION>
Six months ended June 30, 1998 1997
- -----------------------------------------------------------
<S> <C> <C>
Cash provided from (used in):
Operating activities $ 17,916 $ 28,884
Financing activities 7,240 324
Investing activities (44,477) (33,056)
--------------------------
Decrease in cash $ (19,321) $ (3,848)
==========================
</TABLE>
Cash generated from operating activities decreased 38% primarily as a result of
lower operating revenue.
Financing activities in 1998 provided $7.2 million of cash, the net result of
the exercise of employee stock options for $0.3 million, the purchase, for
$3.1 million, of 136,500 common shares for cancellation and the drawdown of $10
million of Chieftain's revolving credit facility. Through June 30, 1998,
172,800 common shares had been purchased and cancelled pursuant to the
Company's normal course issuer bid, announced in October, 1997, for up to
500,000 common shares. Financing activities in the comparable period in 1997
provided $0.3 million of cash, the result of the exercise of employee stock
options.
Cash used in investing activities increased 35% to $44.5 million, in comparison
to the 1997 period. Chieftain participated in 32 wells of which 4 were
drilling at quarter end during the 1998 period. During the comparable 1997
period, Chieftain participated in 32 wells of which 4 were drilling at quarter
end. All of the 1998 and 1997 wells were in the U.S. Chieftain plans to drill
up to 11 exploratory and 4 development wells in the Gulf of Mexico during the
remaining half of 1998. The high levels of industry activity in 1997 which
carried through to the first quarter of 1998, particularly in the Gulf of
Mexico were not sustained in the second quarter. Companies with a large amount
of oil production are experiencing capital constraints and are reducing
activity levels. Oil comprises 20% of Chieftain's total gas equivalent
production, minimizing the effect of weak oil prices on its cash flow.
June 30, 1998 cash of $7.6 million was down $31.0 million from the comparable
1997 amount. $90,000,000 of Chieftain's $100,000,000 revolving credit facility
was not drawn upon at June 30, 1998.
<PAGE> 12
Page 12
OUTLOOK
While lower first half prices for natural gas and oil from year earlier levels
indicate the possibility of lower average prices for 1998, higher production
volumes are anticipated which should result in steadily increasing quarterly
cash flow from operations for the balance of 1998.
Capital expenditures for 1998 are budgeted at $95 million, of which $44 million
was spent in the first half. The capital expenditures are expected to be
funded by cash flow from operations, working capital and the revolving credit
facility. Such capital expenditures can be varied significantly with respect
to timing and priority dependent upon exploration success, availability of
equipment and services and current opportunities.
INFORMATION REGARDING FORWARD LOOKING FINANCIAL STATEMENTS
This Form 10-Q report contains forward-looking statements that are subject to
risk factors associated with the oil and gas business. Chieftain believes that
the expectations reflected in these statements are reasonable, but may be
affected by a variety of factors including, but not limited to: price
fluctuations, currency fluctuations, drilling and production results,
imprecision of reserve estimates, loss of market, industry competition,
environmental risks, political risks and capital restrictions.
<PAGE> 13
Page 13
PART II
Item 1. Legal Proceedings
Chieftain is not party to, and none of its properties is the subject
of, any material legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Chieftain has declared and paid all cumulative dividends.
Item 4. Submission of Matters to a Vote of Security Holders
a. An annual meeting of shareholders of the Company was held on May 14,
1998.
b. Directors elected for a term of three years were: S. A. Milner, A.O.E.,
LL.D and D. E. Mitchell, O.C. Other directors whose terms of office as
directors continued after the meeting are: S. C. Hurley, H. J. Kelly, J.
E. Maybin, L. G. Munin, E. S. Ondrack, and S. T. Peeler.
c. The matters voted upon and the results of the voting were as follows:
(i) The shareholders voted 8,252,548 shares in the affirmative
and withheld from voting 3,600 shares to elect Stanley A. Milner and
David E. Mitchell as directors to hold office for a term of three
years.
(ii) The shareholders voted 8,251,238 shares in the affirmative
and withheld from voting 4,910 shares to appoint Price Waterhouse as
auditors of the Company to hold office until the close of the next
annual meeting.
Item 5. Other Information
None
Item 6. Exhibits and Reports of Form 8-K
None
<PAGE> 14
Page 14
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.
Chieftain International, Inc.
- -----------------------------
(Registrant)
/s/ E. L. Hahn
- -----------------------------------------------------
E. L. Hahn
Senior Vice President, Finance and Treasurer
(Chief Financial Officer)
Dated: August 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1998 BALANCE SHEET AND THE STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE
30, 1998 INCLUDED IN THE COMPANY'S JUNE 30, 1998 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,604
<SECURITIES> 0
<RECEIVABLES> 10,407
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,977
<PP&E> 505,539<F1>
<DEPRECIATION> 245,330
<TOTAL-ASSETS> 282,332<F2>
<CURRENT-LIABILITIES> 12,507
<BONDS> 10,000<F3>
<COMMON> 191,212
0
0
<OTHER-SE> 54,316<F4>
<TOTAL-LIABILITY-AND-EQUITY> 282,332<F5>
<SALES> 31,030
<TOTAL-REVENUES> 33,522<F6>
<CGS> 0
<TOTAL-COSTS> 30,955<F7>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25
<INCOME-PRETAX> 2,542
<INCOME-TAX> 1,250
<INCOME-CONTINUING> 1,292
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,292
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
<FN>
<F1>The Company accounts for gas and oil properties in accordance with Canadian
guidelines on full cost accounting.
<F2>Deferred income taxes of $3,146 have included in total assets.
<F3>Unsecured revolving credit facility with a syndicate of banks, in the amount
of U.S. $100 million, fully revolving for 364 day periods with extensions at
the option of the lenders upon notice from the Company. If not extended, the
facility converts to term loans repayable over a period not exceeding four
years. Advances under the facility bear interest at Canadian prime or U.S. base
rate, or at Bankers' Acceptance rates or LIBOR plus applicable margins.
<F4>Preferred shares of a subsidiary of $63,403, and retained earnings (deficit)
of $(9,087), have been combined in calculating other stockholders' equity.
<F5>Deferred income taxes of $14,297 have been included in total liabilities and
stockholders' equity.
<F6>Includes a successful $1,600 claim for recovery of past years' excess
transportation charges.
<F7>Production expenses of $8,013, general and administrative expenses of $2,751
and depletion and amortization of $20,191, have been combined in calculating
total costs.
</FN>
</TABLE>
