<PAGE> 1
Page 1 of 13
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, 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: 1-10216
CHIEFTAIN INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Alberta, Canada None
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1201 TD Tower, 10088 - 102 Avenue,
Edmonton, Alberta, Canada T5J 2Z1
- ---------------------------------- ------------------------------------
(Address of principal (Zip Code/Postal Code)
executive offices)
Registrant's telephone number, including area code: (780) 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.
Title of each Class Date Number Outstanding
- --------------------------- ----------------- ------------------
Common Shares July 21 , 1999 13,348,391
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CHIEFTAIN INTERNATIONAL, INC.
JUNE 30, 1999 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, 1999 and December 31, 1998 3
Consolidated Condensed Statement of Income (Loss) -
Six months ended June 30, 1999 and 1998 and
Three months ended June 30, 1999 and 1998 4
Consolidated Condensed Statement of Cash Flows -
Six months ended June 30, 1999 and 1998 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
</TABLE>
PART II
<TABLE>
<S> <C>
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
<PAGE> 3
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CHIEFTAIN INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Full Cost Method of Accounting)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1999 1998
--------- ------------
(unaudited) (US $ in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term deposits $ 3,157 $ 10,613
Accounts receivable 14,223 14,030
Other 938 282
--------- -----------
18,318 24,925
Capital assets - net 272,291 288,477
Deferred income taxes 10,670 5,182
--------- -----------
$301,279 $318,584
========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued $ 13,390 $ 22,533
Long-term debt 45,000 40,000
Abandonment cost accrual 7,994 7,421
Deferred income taxes 12,397 13,684
Shareholders' equity:
Preferred shares of a subsidiary 63,403 63,403
Common shares 189,001 189,108
Contributed surplus 26 --
Deficit (29,932) (17,565)
--------- -----------
222,498 234,946
--------- -----------
$301,279 $318,584
========= ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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CHIEFTAIN INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME (LOSS)
<TABLE>
<CAPTION>
Six months Three months
Period ended June 30 1999 1998 1999 1998
- -------------------- --------- ---------- ---------- ----------
(unaudited) (US $ in thousands except number of shares and per share amounts)
<S> <C> <C> <C> <C>
Production revenue, net of royalties $ 30,385 $ 31,030 $ 17,351 $ 14,464
Interest and other revenue
(Note 2) 376 2,492 192 340
--------- ---------- ---------- ----------
30,761 33,522 17,543 14,804
--------- ---------- ---------- ----------
Production costs 7,362 8,013 4,050 4,143
General and administrative expenses 2,373 2,751 1,044 1,114
Interest 1,201 25 636 25
Depletion and amortization 25,092 20,191 12,911 9,864
Additional depletion: Libyan properties (Note 3) 11,393 -- 11,393 --
--------- ---------- ---------- ----------
47,421 30,980 30,034 15,146
--------- ---------- ---------- ----------
Income (loss) before income taxes
and dividends on preferred shares
of a subsidiary (16,660) 2,542 (12,491) (342)
Income taxes (Note 4) (6,764) 1,250 (5,220) 157
---------- ---------- ---------- ----------
Income (loss) before dividends on
preferred shares of a subsidiary (9,896) 1,292 (7,271) (499)
Dividends on preferred shares of a
subsidiary 2,471 2,471 1,236 1,236
---------- ---------- ---------- ----------
Net income (loss) applicable to
common shares $ (12,367) $ (1,179) $ (8,507) $ (1,735)
========= ========== ========== ==========
Net income (loss) per common share
(Note 5) - Basic $ (0.93) $ (0.09) $ (0.64) $ (0.13)
========= ========== ========== ==========
- Fully diluted $ (0.93) $ (0.09) $ (0.64) $ (0.13)
========= ========== ========== ==========
Weighted average number of common shares
outstanding:
- Basic 13,351,267 13,562,863 13,348,391 13,526,185
========= ========== ========== ==========
- Fully diluted 13,351,267 13,562,863 13,348,391 13,526,185
========= ========== ========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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CHIEFTAIN INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
SIX MONTHS ENDED JUNE 30 1999 1998
- ------------------------- -------- -------
(unaudited) (US $ in thousands)
<S> <C> <C>
Operating activities:
Net income (loss) applicable to common shares $(12,367) $ (1,179)
Items not requiring a current cash outlay 29,710 21,417
--------- ---------
17,343 20,238
Net change in non-cash operating working capital (Note 6) (1,090) (2,322)
--------- ---------
16,253 17,916
Financing activities:
Increase in long-term debt 5,000 10,000
Purchase of common shares for cancellation (80) (3,061)
Issue of common shares -- 301
---------- ---------
4,920 7,240
Investing activities:
Lease acquisition, exploration and drilling costs (16,182) (37,688)
Pipelines and production equipment acquired (3,675) (5,938)
Sale of producing properties 155 --
--------- ----------
(19,702) (43,626)
Purchase of other capital assets (24) (59)
Change in investing accounts payable and accrued (8,903) (792)
--------- ---------
(28,629) (44,477)
--------- ---------
Change in cash and short term deposits (7,456) (19,321)
Beginning cash and short-term deposits 10,613 26,925
--------- ---------
Ending cash and short-term deposits $ 3,157 $ 7,604
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 6
Page 6 of 13
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, 1999 and December 31, 1998
and the results of operations and changes in financial position for the
six month periods ended June 30, 1999 and 1998. 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, 1998.
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
month period ended June 30, 1999 are not necessarily indicative of the
results to be expected for the full year.
Material differences between Canadian and US accounting principles that
affect Chieftain are referred to in Note 7, which provides the effects of
such 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.
3. Additional Depletion:
Additional depletion of $11.4 million arises from the termination of an
exploration program and production test in Libya.
4. 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 THREE MONTHS
PERIOD ENDED JUNE 30 1999 1998 1999 1998
- -------------------- ------ ------ ------ ------
(unaudited) (US $ in thousands)
<S> <C> <C> <C> <C>
Tax at statutory Canadian rate 44.62% $(7,434) $1,137 $(5,574) $ (150)
Lower income tax rate on earnings of US
subsidiaries 331 (239) 6 (17)
Canadian income tax on exchange loss (gain)
which is eliminated upon consolidation 593 206 548 192
Exchange revaluation of Canadian
deferred tax assets (280) 117 (206) 123
Other 26 29 6 9
-------- ------ -------- ------
Tax at effective rate $(6,764) $1,250 $(5,220) $ 157
======== ====== ======== ======
Effective tax rate 40.6% 49.2% 41.8% (45.9%)
======= ====== ======= ======
</TABLE>
<PAGE> 7
Page 7 of 13
5. Per Share Amounts:
Net income (loss) per common share is computed by dividing net income
(loss) 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 where dilutive. Earnings are adjusted by
the amount of imputed interest on share option proceeds and preferred
share dividends.
6. Supplemental Cash Flow Information:
Cash outflows for income taxes during the second quarter were $ 7,000
(year-to-date--$17,000) (1998--second quarter -- $9,000; year-to-date --
$27,000). Cash outflows for long-term debt interest during the second
quarter were $584,000 (year-to-date -- $1,151,000) (1998--second quarter --
$nil; year-to-date -- $nil).
7. United States Accounting Principles:
(a) Full cost accounting
US full cost accounting rules differ materially from the Canadian full
cost accounting guidelines followed by Chieftain. The US 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, US 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 and financing costs. The quarterly
test required by US accounting rules, using a March 31 UK gas price of
$0.84 per mcf in 1999 and June 30 US gas and oil prices of $2.09 per
mcf and $12.40 per barrel in 1998 to determine future net revenues,
would have resulted in a write-down of UK property carrying costs at
March 31, 1999 of $7.1 million which, after providing for tax
recoveries of $3.1 million, resulted in a net charge to operations of
$4.0 million and a writedown of US property carrying costs at June 30,
1998 of $24.7 million which, after providing for tax recoveries of
$8.6 million, resulted in a net charge to operations of $16.1 million.
(b) Effect on earnings
The effect on consolidated earnings of these differences is summarized
as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 1999 1998
- ------------------------ ----------- -----------
(US$ in thousands
except number of shares
and per share amounts)
<S> <C> <C>
Net income (loss) applicable to common shares
as reported $ (12,367) $ (1,179)
Additional depletion (7,104) (24,725)
----------- -----------
(19,471) (25,904)
Add reduction in depletion expense 8,196 1,419
Decrease (increase) in deferred tax provision 174 8,157
----------- -----------
Net income (loss) applicable to common shares
under US accounting principles $ (11,101) $ (16,328)
=========== ===========
Net income (loss) per common share under US
accounting principles:
-- Basic $ (0.83) $ (1.20)
=========== ===========
-- Fully diluted $ (0.83) $ (1.20)
=========== ===========
Fully diluted number of common shares
outstanding 13,351,267 13,562,863
=========== ===========
</TABLE>
<PAGE> 8
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<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 1999 1998
- -------------------------- ----------- -----------
(US$ in thousands
except number of shares
and per share amounts)
<S> <C> <C>
Net income (loss) applicable to common shares
as reported $ (8,507) $ (1,735)
Additional depletion -- (24,725)
---------- ---------
(8,507) (26,460)
Add reduction in depletion expense 4,499 649
Decrease (increase) in deferred tax provision (1,657) 8,393
---------- ----------
Net income (loss) applicable to common shares
under US accounting principles $ (5,665) $ (17,418)
========== ==========
Net income (loss) per common share under US
accounting principles:
- Basic $ (0.42) $ (1.29)
========== ==========
- Fully diluted $ (0.42) $ (1.29)
========== ==========
Fully diluted number of common shares
outstanding 13,348,391 13,526,185
========== ==========
</TABLE>
(c) Effect on balance sheet
The effect on the Consolidated Condensed Balance Sheet of the
differences between Canadian and US accounting principles is as
follows:
<TABLE>
<CAPTION>
AS AT JUNE 30, 1999 December 31, 1998
- ----- ----------------------- -----------------------
Under US Under US
Accounting Accounting
(US$ in thousands) As reported Principles As reported Principles
<S> <C> <C> <C> <C>
Net capital assets $272,291 $170,423 $288,477 $185,517
Deferred tax - asset $ 10,670 $ 35,182 $ 5,182 $ 28,233
Deferred tax - liability $ 12,397 $ -- $ 13,684 $ --
Deficit $(29,932) $(94,891) $(17,565) $(83,790)
</TABLE>
Additionally for US reporting purposes, the preferred shares shown as
shareholders' equity in these consolidated condensed financial
statements would be shown outside the equity section.
(d) Stock-based compensation
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. US 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. For the six months
ended June 30, 1999 such impact would amount to a net of tax charge to
income (loss) of $591,000 (1998 - $873,000) and for the three months
ended June 30 such impact would amount to a net of tax charge to
income (loss) of $330,000 (1998 - $451,000). Under US accounting
principles after reflecting this charge, for the six months ended June
30, pro forma net income (loss) applicable to common shares would be
$(11,692,000) (1998 - ($17,201,000)); net income (loss) per common
share would be $(0.88) (1998 - $(1.27)); and pro forma fully diluted
earnings (loss) per common share would be $(0.88) (1998 - $(1.27)).
For the three months ended June 30, pro forma net income (loss)
applicable to common shares under US accounting principles would be
$(5,995,000) (1998 - $(17,869,000)); pro forma net income (loss) per
common share would be $(0.45) (1998 - $(1.32)); and pro forma fully
diluted earnings (loss) per common share would be $(0.45) (1998 -
$(1.32)). These effects are not necessarily indicative of those to be
expected in future periods.
<PAGE> 9
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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, 1999 and 1998
For the first half of 1999, production revenues decreased 2% ($0.6 million), to
$30.4 million.
<TABLE>
<CAPTION>
CHANGE IN PRODUCTION REVENUES
The following table shows the changes in production revenues resulting from
changes in prices and volumes from the year earlier periods.
Period ended June 30, Six months Three months
--------------------------- -----------------------
Price Volume Total Price Volume Total
-------- ------- -------- ------ ------ -------
(US dollars in thousands)
Natural Gas
<S> <C> <C> <C> <C> <C> <C>
US $(3,965) $1,623 $(2,342) $ (530) $ 395 $ (135)
UK (543) (390) (933) 1 76 77
------- ------ ------- -------- ------ ------
Total (4,508) 1,233 (3,275) (529) 471 (58)
Oil and Ngls 680 1,950 2,630 1,476 1,469 2,945
------- ------ ------- -------- ------ ------
$(3,828) $3,183 $ (645) $ 947 $1,940 $2,887
======= ====== ======= ======== ====== ======
</TABLE>
Average daily first half production increased to 111 mmcfe in 1999 from 101
mmcfe in 1998. Though the first half's production rate of 111 mmcfe per day is
below the annual production target range of 115 to 125 mmcfe per day, it is in
step with the Company's expectations for the first half. Initial production
from South Marsh Island 39 commenced at the end of the first quarter and
initial production from the Main Pass 250 B platform commenced during the
latter half of the second quarter. Natural gas production increased to 15.3
bcf compared to 14.6 bcf in 1998. Oil and ngls production increased to 806 mb
compared to 612 mb in 1998. First half natural gas prices averaged $1.70 per
mcf in 1999 compared to $2.04 in 1998. First half oil and ngls prices averaged
$13.43 per b in 1999 compared to $12.65 in 1998.
PRODUCTION AND PRICING
<TABLE>
<CAPTION>
Six months ended
June 30, 1999 1998
Natural Gas Oil and NGLs Natural Gas Oil and NGLs
(mmcfd) (bd) (mmcfd) (bd)
North North
US Sea Total Total US Sea Total Total
---- ------ ----- ------- ----- ------ ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross production 75.3 9.3 84.6 4,455 69.9 10.9 80.8 3,382
Royalties 15.7 - 15.7 663 14.4 - 14.4 442
Net production 59.6 9.3 68.9 3,792 55.5 10.9 66.4 2,940
Average price $1.79 $1.00 $1.70 $13.43 $2.15 $1.32 $2.04 $12.65
</TABLE>
<PAGE> 10
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<TABLE>
<CAPTION>
Three months ended
June 30, 1999 1998
Natural Gas Oil and NGLs Natural Gas Oil and NGLs
(mmcfd) (bd) (mmcfd) (bd)
North North
US Sea Total Total US Sea Total Total
----- ------- ----- --------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross production 74.4 7.7 82.1 5,222 72.0 6.6 78.6 3,495
Royalties 15.3 - 15.3 801 14.9 - 14.9 473
Net production 59.1 7.7 66.8 4,421 57.1 6.6 63.7 3,022
Average price $1.97 $0.82 $1.86 $15.17 $2.07 $0.81 $1.96 $11.54
</TABLE>
Gas prices strengthened in the latter part of the second quarter in response to
stronger demand and reduced gas deliverability and storage volumes. Oil
prices, below 1998 levels during the first quarter, recovered following the
OPEC agreement to reduce production.
Production costs for the first six months of 1999 decreased 8% from the 1998
period, primarily reflecting the significant pipeline repair costs in the South
Pass area during the first quarter of 1998. Production costs decreased to
$0.37 per gas equivalent unit, down 16% from the first half 1998 rate of $0.44.
General and administrative expenses for the first six months of 1999 decreased
14% from the 1998 period, reflecting the higher performance based compensation
payments made during the first quarter of 1998. On a gas equivalent basis,
general and administrative costs decreased 20% to $0.12/mcfe compared to $0.15
in the corresponding period of 1998.
Interest expense for the first six months of 1999 increased compared to the
1998 period due to greater credit facility utilization.
Depletion and amortization expense increased 24%, the result of a 10% increase
in units of production and a 13% increase in the average depletion rate to
$1.25 per gas equivalent unit.
In Libya, Chieftain and its partners concluded that a multi-year exploration
program and production test was not commercial under the terms of the
concession and will terminate the program. Accordingly, additional depletion
of $11.4 million was recorded in the second quarter of 1999 for past
expenditures, resulting in a charge to operations, net of income taxes, of $6.3
million.
CAPITAL RESOURCES AND LIQUIDITY
The following table summarizes cash provided from or (used in) operating,
financing and investing activities for each of the periods shown:
<TABLE>
<CAPTION>
Six months ended June 30, 1999 1998
- ------------------------- --------- ---------
<S> <C> <C>
Cash provided from (used in):
Operating activities $ 16,253 $ 17,916
Financing activities 4,920 7,240
Investing activities (28,629) (44,477)
-------- --------
Increase (decrease) in cash $ (7,456) $(19,321)
======== ========
</TABLE>
Cash generated from operating activities decreased 9% primarily as a result of
lower operating revenue.
Financing activities in 1999 provided $4.9 million of cash, the net result of
the drawdown of $5 million of Chieftain's revolving credit facility and the
purchase for cancellation of 7,500 common shares under a normal course issuer
bid. Financing activities in the comparable period 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 cancellation of 136,500 common shares at the
cost of $3.1 million under a normal course issuer bid and the drawdown of $10
million of Chieftain's revolving credit facility.
<PAGE> 11
Page 11 of 13
Cash used in investing activities decreased 36% to $28.6 million. Of the 9
wells in which the Company participated during the 1999 period (1 of which was
drilling at quarter end), six were in the Gulf of Mexico, one was onshore in
the US and two were in Libya. Additionally, two unsuccessful wells were drilled
on Chieftain Gulf of Mexico acreage at no cost to the Company. Of the 31 wells
in which the Company participated during the comparable 1998 period (4 of which
were drilling at quarter end), 14 were in the Gulf of Mexico, and 17 were
onshore in the US. Additionally, one successful well was drilled on Chieftain
Gulf of Mexico acreage at no cost to the Company. The Company plans to
participate in approximately 15 exploratory and development wells in the Gulf
of Mexico area during the balance of 1999.
The June 30, 1999 cash balance of $3.2 million was down $4.4 million from the
comparable 1998 balance. $45 million of the Company's $100 million revolving
credit facility was utilized at June 30, 1999. The weighted average interest
rate was 5.71%.
OUTLOOK
The Company's 1999 annual production target range remains unchanged at 115 to
125 mmcfe per day. Annual average production in 1998 was 103 mmcfe per day.
The Company expects that its 1999 capital expenditure program will be
approximately $50 million. 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. The
Company will monitor capital spending and adjust investment levels based on
cash flow projections. Natural gas in the Gulf of Mexico will continue to be
the focus of the Company.
YEAR 2000 DISCLOSURE
The Company has completed its assessment of its internal Year 2000 issues, has
made changes and employed testing procedures as deemed necessary and at this
time is confident that no internal issues remain which could have a material
effect on its financial condition or results of operations. The Company's
assessment of the readiness of third parties was substantially completed by the
end of the second quarter of 1999. The Company continues to monitor the
readiness of significant third parties in order to obtain assurances that
interruptions, if any, will be held to a minimum. Costs incurred to date and
expected to be incurred in the future are not material to the Company.
The Company has interests in a substantial number of offshore oil and gas
production facilities which are operated by others and is required to rely on
assessments by such third parties as to Year 2000 readiness of such facilities.
Production volumes are transported through pipelines and processed through
facilities which are also operated by third parties. There is extensive use of
computers to control and operate such pipelines and facilities in the oil and
gas industry and it is reasonably likely that one or more of such facilities
will experience a computer related event which could result in shut down of
production, transportation or processing facilities for such time as is
required to effect alternative controls. The Company can not reasonably
quantify the estimated lost revenue, if any, which would result from such an
interruption. To mitigate the effect of any interruptions, the Company intends
to continue its review of contingency plans prepared by its various operating
partners.
FORWARD LOOKING INFORMATION
This 10-Q contains forward-looking statements that are subject to risk factors
associated with the oil and gas business. The Company believes that the
expectations reflected in these statements are reasonable, but may be affected
by a number 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> 12
Page 12 of 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
There have been no defaults upon senior securities of Chieftain.
Item 4. Submission of Matters to a Vote of Security Holders
a. An annual meeting of shareholders of the Company was held on May 13,
1999.
b. Directors elected for a term of three years were: H. J.
Kelly, L. G. Munin and S. T. Peeler. Other directors whose terms of
office as directors continued after the meeting are: S. A. Milner,
D. E. Mitchell, S. C. Hurley, J. E. Maybin, and E. S. Ondrack.
c. The matters voted upon and the results of the voting were as follows:
(i) The shareholders voted 8,655,437 shares in the affirmative and
withheld from voting 44,800 shares to elect H. J. Kelly, L. G. Munin
and S. T. Peeler as directors to hold office for a term of three years.
(ii) The shareholders voted 8,659,127 shares in the affirmative and withheld
from voting 42,110 shares to appoint PricewaterhouseCoopers as auditors
of the Company to hold office until the close of the next annual
meeting.
(iii) The shareholders voted 4,126,029 shares for and 3,425,273 shares
against the reconfirmation of the Shareholder Rights Plan.
Item 5. Other Information
None
Item 6. Exhibits and Reports of Form 8-K
None
<PAGE> 13
Page 13 of 13
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: July 23, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1999 BALANCE SHEET AND THE STATEMENT OF INCOME (LOSS) FOR THE SIX MONTHS ENDED
JUNE 30, 1999 INCLUDED IN THE COMPANY'S JUNE 30, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,157
<SECURITIES> 0
<RECEIVABLES> 14,223
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,318
<PP&E> 574,214<F1>
<DEPRECIATION> 301,923
<TOTAL-ASSETS> 301,279<F2>
<CURRENT-LIABILITIES> 13,390
<BONDS> 45,000<F3>
0
0
<COMMON> 189,001
<OTHER-SE> 33,497<F4>
<TOTAL-LIABILITY-AND-EQUITY> 301,279<F5>
<SALES> 30,385
<TOTAL-REVENUES> 30,761
<CGS> 0
<TOTAL-COSTS> 46,220<F6>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,201
<INCOME-PRETAX> (16,660)
<INCOME-TAX> (6,764)
<INCOME-CONTINUING> (9,896)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,896)
<EPS-BASIC> (0.93)
<EPS-DILUTED> (0.93)
<FN>
<F1>The Company accounts for gas and oil properties in accordance with Canadian
guidelines on full cost accounting.
<F2>Deferred income taxes of $10,670 have been included in total assets.
<F3>Unsecured revolving credit facility with a syndicate of banks, in the amount of
US $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 US base
rate or at Bankers' Acceptance rates or LIBOR plus applicable margins.
<F4>Preferred shares of a subsidiary of $63,403, contributed surplus of $26
(attributable to common shares), and retained earnings (deficit) of $(29,932)
have been combined in calculating other stockholders' equity.
<F5>Abandonment cost accrual of $7,994 and deferred income taxes of $12,397 have
been included in total liabilities and stockholders' equity.
<F6>Production costs of $7,362, general and administrative expenses of $2,373,
depletion and amortization of $25,092, and additional depletion of $11,393 have
been combined in calculating total costs.
</FN>
</TABLE>
