<PAGE>
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-10662
-------
Cross Timbers Oil Company
(Exact name of registrant as specified in its charter)
Delaware 75-2347769
---------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
810 Houston Street, Suite 2000, Fort Worth, Texas 76102
- - ------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(817) 870-2800
-----------------------------------------------------
(Registrant's telephone number, including area code)
NONE
-----------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if change 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) has been subject to such filing
requirements for the past 90 days. Yes X No_____
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding as of April 30, 1996
- - ------------------------------------ --------------------------------
Common stock, $.01 par value 18,420,317
================================================================================
<PAGE>
CROSS TIMBERS OIL COMPANY
Form 10-Q for the Quarterly Period Ended March 31, 1996
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
at March 31, 1996 and December 31, 1995................................... 3
Consolidated Statements of Operations
for the Three Months Ended March 31, 1996 and 1995........................ 4
Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1996 and 1995........................ 5
Notes to Consolidated Financial Statements.................................. 6-8
Report of Independent Public Accountants.................................... 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................. 10-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................... 14
Item 6. Exhibits and Reports on Form 8-K............................................ 14
Signatures.................................................................. 15
</TABLE>
2
<PAGE>
P A R T I. F I N A N C I A L I N F O R M A T I O N
CROSS TIMBERS OIL COMPANY
Consolidated Balance Sheets
- - --------------------------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
March 31, 1996 December 31,
(Unaudited) 1995
-------------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................... $ 5,290 $ 2,212
Accounts receivable, net.................................................... 28,602 27,582
Deferred income tax benefit................................................. 1,560 1,661
Other current assets........................................................ 708 1,282
-------- ---------
Total Current Assets...................................................... 36,160 32,737
-------- ---------
Property and Equipment, at cost - successful efforts method:
Producing properties........................................................ 498,400 493,800
Undeveloped properties...................................................... 1,939 1,939
Gas gathering and other..................................................... 20,185 48,064
-------- ---------
Total Property and Equipment.............................................. 520,524 543,803
Accumulated depreciation, depletion
and amortization........................................................... (185,181) (179,329)
-------- ---------
Net Property and Equipment................................................ 335,343 364,474
-------- ---------
Investment in Equity Securities, at market value.................................. 14,258 -
-------- ---------
Other Assets...................................................................... 5,034 5,464
-------- ---------
TOTAL ASSETS...................................................................... $390,795 $ 402,675
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities..................................... $ 27,320 $ 25,314
Payable to Royalty Trust..................................................... 1,996 1,890
Accrued stock incentive compensation......................................... 3,135 3,881
-------- --------
Total Current Liabilities.................................................. 32,451 31,085
-------- --------
Long-term Debt (Note 2)............................................................ 221,750 238,475
-------- --------
Deferred Income Tax................................................................ 3,542 2,382
-------- --------
Other Long-term Liabilities........................................................ 13 33
-------- --------
Stockholders' Equity:
Preferred stock ($.01 par value, 25,000,000 shares authorized, none issued).. - -
Common stock ($.01 par value, 100,000,000 shares authorized,
18,462,654 and 18,415,257 shares issued).................................... 185 184
Additional paid-in capital................................................... 157,307 156,670
Treasury stock (52,224 and 30,516 shares).................................... (914) (528)
Unrealized gain (loss) on investment in equity securities.................... (1,203) -
Retained earnings (deficit).................................................. (22,336) (25,626)
-------- --------
Total Stockholders' Equity................................................. 133,039 130,700
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................... $390,795 $402,675
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CROSS TIMBERS OIL COMPANY
Consolidated Statements of Operations (Unaudited)
- - -------------------------------------------------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
------- -------
<S> <C> <C>
REVENUES
Oil....................................... $16,303 $14,630
Gas....................................... 15,610 8,234
Gas gathering, processing and marketing... 3,853 1,152
Other..................................... 315 203
------- -------
Total Revenues............................ 36,081 24,219
------- -------
EXPENSES
Production................................ 9,666 7,708
Taxes on production and property.......... 2,753 2,215
Depreciation, depletion and amortization.. 9,101 7,995
General and administrative................ 2,560 1,145
Gas gathering and processing.............. 891 542
Interest, net............................. 3,951 2,241
Trust development costs................... 188 132
------- -------
Total Expenses............................ 29,110 21,978
------- -------
INCOME BEFORE INCOME TAX........................ 6,971 2,241
------- -------
INCOME TAX
Current................................... 419 -
Deferred.................................. 1,881 778
------- -------
Total Income Tax Expense.................. 2,300 778
------- -------
NET INCOME...................................... $ 4,671 $ 1,463
======= =======
NET INCOME PER COMMON SHARE $0.25 $0.09
===== =====
DIVIDENDS PER COMMON SHARE $0.075 $0.075
====== ======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 18,401 15,925
====== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CROSS TIMBERS OIL COMPANY
Consolidated Statements of Cash Flows (Unaudited)
- - -------------------------------------------------------------------------------
(in thousands)
(Note 4)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................... $ 4,671 $ 1,463
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization.................... 9,101 7,995
Stock incentive compensation................................ (746) (818)
Deferred income tax......................................... 1,881 778
(Gain) loss from property sales............................. (61) (9)
Other non-cash items........................................ 376 102
Changes in working capital (a).............................. 1,639 (2,110)
-------- --------
Cash Provided by Operating Activities......................... 16,861 7,401
-------- --------
INVESTING ACTIVITIES
Sale of property and equipment................................ 28,294 96
Property acquisitions......................................... (3,072) (26,573)
Development costs............................................. (3,493) (3,903)
Investment in equity securities............................... (16,080) (30)
Gas gathering and other additions............................. (1,521) (1,146)
-------- --------
Cash Provided (Used) by Investing Activities.................. 4,128 (31,556)
-------- --------
FINANCING ACTIVITIES
Long-term debt proceeds....................................... 21,000 25,000
Long-term debt payments....................................... (37,725) (2,000)
Dividends..................................................... (1,379) (1,194)
Stock option exercise proceeds................................ 418 -
Treasury stock purchases...................................... (225) -
-------- --------
Cash Provided (Used) by Financing Activities.................. (17,911) 21,806
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... 3,078 (2,349)
Cash and Cash Equivalents, Beginning of Period................. 2,212 7,838
-------- --------
Cash and Cash Equivalents, End of Period....................... $ 5,290 $ 5,489
======== ========
(a) Changes in Working Capital
Accounts receivable......................................... $ (1,045) $ 562
Other current assets........................................ 574 1,550
Accounts payable, accrued liabilities and payable to
Royalty Trust.............................................. 2,110 (4,222)
-------- --------
Decrease (Increase) in Working Capital....................... $ 1,639 $ (2,110)
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CROSS TIMBERS OIL COMPANY
Notes to Consolidated Financial Statements
- - --------------------------------------------------------------------------------
1. Interim Financial Statements
The accompanying consolidated financial statements of Cross Timbers Oil
Company ("the Company"), with the exception of the consolidated balance sheet at
December 31, 1995, have not been audited by independent public accountants. In
the opinion of the Company's management, the accompanying financial statements
reflect all adjustments necessary to present fairly the financial position at
March 31, 1996 and the results of operations and cash flows of the Company for
the three months ended March 31, 1996 and 1995. All such adjustments are of a
normal recurring nature. The results for interim periods are not necessarily
indicative of annual results.
Certain disclosures have been condensed or omitted from these financial
statements. Accordingly, these financial statements should be read with the
Company's consolidated financial statements included in the Company's 1995
annual report on Form 10-K.
2. Long-term Debt
During the quarter ended March 31, 1996, long-term debt decreased $16.7
million to $221.8 million. The net decrease resulted primarily from the
application of proceeds from the sale of its processing plant and gathering
system (Note 3), partially offset by additional debt to fund security purchases.
Total borrowing commitments under the bank loan agreement were $227 million at
March 31, 1996, with unused capacity of $70 million. The Company also purchased
$1.7 million principal amount of its 5 1/4% convertible subordinated notes at a
gain of $60,000 during the quarter. The Board of Directors has authorized the
purchase of an additional $5 million principal amount of these notes.
There are no maturities of long-term debt in 1996 and 1997. Maturities
for the three following years are $20 million in 1998, $36.7 million in 1999,
and $35.5 million in 2000.
3. Commitments
In March 1996, the Company sold its gas processing plant and related
gathering system (acquired in August 1995) for $28 million and agreed to lease
the facility from the buyers for an initial term of eight years at annual
rentals of $4 million, and with fixed renewal options for an additional 13
years. If the lessor decides to sell the facility at the end of the initial
term or any renewal period, the lessor must first offer to sell it to the
Company. The Company has a right of first refusal of any third party offers to
buy the facility after the initial term. This transaction was recorded as a
sale and an operating lease, with no gain or loss on the sale. Proceeds of the
sale were used to reduce borrowings under the loan agreement (Note 2).
On January 16, 1996, the Company committed with a bank to enter into two
swap agreements (with notional principal balances of $50 million each for 7 and
10 year terms beginning April 17, 1996) if LIBOR rates declined to a strike rate
of approximately 5.9% on April 17, 1996. The commitments expired unexercised on
April 17. The Company received $500,000 as consideration for this commitment
and the Company will recognize the proceeds as income in the quarter ended June
30, 1996.
In April 1996, the Company purchased a price floor for 125,000 barrels
of May 1996 production. The price floor, obtained at a cost of $89,000,
effectively gives the Company a minimum oil price of $20.60 on approximately 40%
of its projected May 1996 oil production.
6
<PAGE>
4. Supplemental Cash Flow Information
The following are total interest and income tax payments during each of
the periods (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
-------------- ------------
<S> <C> <C>
Interest.... $2,940 $1,160
Income tax.. - -
</TABLE>
5. Stock Incentive Plans
During the three months ended March 31, 1996, 47,397 stock incentive
units granted under the 1991 Stock Incentive Plan ("Units") were exercised at a
weighted average exercise price of $12.21. As a result of these exercises, the
Company received proceeds of $579,000 (including 9,095 shares of common stock
valued at $161,000), issued 47,397 shares of common stock, paid stock
appreciation right compensation of $528,000 and purchased 12,613 treasury shares
for $225,000. As of March 31, 1996, 301,000 Units were exercisable at a
weighted average exercise price of $12.26.
6. Acquisitions
At the end of March 1995, the Company acquired predominantly gas-
producing properties in Kansas, Oklahoma and Texas from Apache Corporation for
$20 million and in northwestern Oklahoma from Meridian Oil, Inc. and certain of
it affiliates for $4.1 million. During the second quarter of 1995, the Company
completed other acquisitions totaling approximately $7 million. These
acquisitions were primarily financed with bank debt under the Company's
revolving credit agreements.
On August 1, 1995, the Company acquired gas-producing properties and a
related gathering system and gas processing plant from Santa Fe Minerals, Inc.
("Santa Fe Acquisition"). The properties consist primarily of operated
interests in the Hugoton Field of Kansas and Oklahoma. Of the $123 million
adjusted purchase price, $94 million was allocated to producing properties and
$29 million was allocated to gas gathering and processing facilities. The Santa
Fe Acquisition was primarily financed by borrowings under the Company's loan
agreement (Note 2), proceeds from the August 1995 common stock offering, and
asset sales.
These acquisitions have been recorded using the purchase method of
accounting. The following presents unaudited pro forma results of operations
for the three months ended March 31, 1995, as if these acquisitions (net of
related dispositions) and the August 1995 common stock offering had been
consummated as of January 1, 1995. These pro forma results are not necessarily
indicative of future results.
<TABLE>
<CAPTION>
(in thousands, except per share data) Pro Forma
(Unaudited)
-----------
<S> <C>
Revenues.................................... $31,155
=======
Income before income tax.................... $ 623
=======
Net income.................................. $ 395
=======
Net income per common share................. $ .02
=======
Weighted average common shares outstanding.. 17,675
=======
</TABLE>
7
<PAGE>
7. Subsequent Event
In May 1996, the Company agreed to acquire primarily gas-producing
properties in the Green River Basin of southwestern Wyoming from an undisclosed
party. The Company's internal engineers estimate the proved gas reserves for
these properties to be 81 billion cubic feet. The preliminary purchase price is
$40 million effective April 1, 1996 and is scheduled for closing near July 1,
1996. The Company will fund the acquisition with bank debt and cash flow from
operations. Certain of the properties are subject to the customary consents by
third parties.
8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- - ----------------------------------------
Cross Timbers Oil Company:
We have reviewed the accompanying consolidated balance sheet of Cross Timbers
Oil Company (a Delaware Corporation) as of March 31, 1996 and the related
consolidated statements of operations and cash flows for the three-month periods
ended March 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Cross Timbers Oil Company as of
December 31, 1995 included in the Company's 1995 annual report on Form 10-K, and
in our report dated February 5, 1996, we expressed an unqualified opinion on
that statement. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1995 is fairly stated, in all
material respects, in relation to the consolidated balance sheet included in the
Company's 1995 annual report on Form 10-K from which it has been derived.
ARTHUR ANDERSEN LLP
Fort Worth, Texas
April 25, 1996
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with management's
discussion and analysis contained in the Company's 1995 annual report on Form
10-K, as well as with the consolidated financial statements and notes thereto
included in this quarterly report on Form 10-Q.
Oil and Gas Production and Prices
- - -----------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
Increase
1996 1995 (Decrease)
--------- --------- ----------
<S> <C> <C> <C>
Total production
Oil (Bbls)....................... 873,004 867,799 1%
Gas (Mcf)........................ 8,482,743 5,463,784 55%
NEBs............................. 2,286,795 1,778,430 29%
Average daily production
Oil (Bbls)....................... 9,593 9,642 (1%)
Gas (Mcf)........................ 93,217 60,709 54%
NEBs............................. 25,130 19,760 27%
Average sales price
Oil per Bbl...................... $18.67 $16.86 11%
Gas per Mcf...................... $1.84 $1.51 22%
</TABLE>
--------
Bbl - Barrel
Mcf - Thousand cubic feet
NEB - Net equivalent barrel (six Mcf equal one Bbl)
Total oil production increased primarily because of new drilling and
acquisitions. Increased gas production is primarily the result of acquisitions
completed in 1995.
During first quarter 1996, oil prices strengthened as the average posted
price for West Texas Intermediate ("WTI"), a benchmark crude, was $18.07 per
barrel for first quarter 1996, compared to $16.82 for first quarter 1995. The
Company's average oil price includes oil marketing margins, which are partially
offset by lower priced sour crude sales and transportation charges.
Natural gas prices were relatively weak in the first quarter of 1995, and
did not begin to improve until the fourth quarter of 1995. Cold weather and low
storage levels caused gas prices to strengthen in November 1995, and prices have
remained relatively strong through April 1996. The Company generally expects
gas prices for the remainder of 1996 to be higher than the comparable 1995
period.
10
<PAGE>
Results of Operations
- - ---------------------
Net income for first quarter 1996 was $4.7 million compared to $1.5 million
for first quarter 1995. Improved earnings are primarily the result of higher
oil and gas prices, increased gas production and improved gas marketing margins.
Total revenues for the 1996 quarter were $36.1 million, a 49% increase over
first quarter 1995 revenues of $24.2 million. Oil revenue increased $1.7
million (11%) because of the 11% increase in oil prices. Gas revenue increased
$7.4 million (90%) as a result of the 22% increase in gas prices and a 55%
increase in volumes primarily attributable to acquisitions made in the second
and third quarter of 1995.
The following are expenses on a net equivalent barrel (NEB) basis:
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
Increase
1996 1995 (Decrease)
----- ----- ---------
<S> <C> <C> <C>
Production........................ $4.23 $4.33 (2%)
Taxes on production and property.. 1.20 1.25 (4%)
Depreciation, depletion and
amortization ("DD&A") (a)........ 3.49 4.28 (18%)
General and administrative........ 1.12 0.64 75%
Interest.......................... 1.73 1.26 37%
</TABLE>
--------
(a) Includes only DD&A directly related to oil and gas production.
Expenses for the first quarter 1996 totaled $29.1 million as compared to
$22 million for the first quarter 1995. Production expense increased $2 million
and DD&A increased $1.1 million primarily because of the 1995 acquisitions.
General and administrative expense increased $1.4 million primarily because of a
reduction in accrued stock incentive compensation in the first quarter 1995
caused by a decline in the Company's common stock price and company growth
related to acquisitions. Excluding non-cash net reductions to stock incentive
compensation of $0.2 million and $0.8 million in first quarter 1996 and 1995,
respectively, general and administrative expense was $1.21 per NEB in first
quarter 1996 compared to $1.10 for first quarter 1995.
Taxes on production and property for the first quarter 1996 increased $0.5
million over first quarter 1995 because of increased oil and gas revenues and
property taxes related to the 1995 acquisitions. Interest increased $1.7
million because of borrowings to fund the 1995 acquisitions and an increase in
the weighted average interest rate from 5.9% in first quarter 1995 to 6.2% in
first quarter 1996. Gas gathering expense increased $0.3 million related to the
operations of the processing plant and related gathering system acquired in the
Santa Fe Acquisition in August 1995.
11
<PAGE>
Liquidity and Capital Resources
- - -------------------------------
Cash Flow and Working Capital
During the quarter ended March 31, 1996, debt proceeds of $21 million under
the Credit Facility, $16.9 million of cash provided by operating activities,
$28.3 million in property sales proceeds and $0.2 million in net stock option
proceeds were used to fund property acquisitions, development costs, other
capital additions and investments in equity securities of $24.2 million, debt
payments of $37.7 million and dividends of $1.4 million. The resulting increase
in cash and cash equivalents for the period was $3.1 million.
Other significant changes in current assets during the first three months
of 1996 were a $1 million increase in accounts receivable because of increased
product prices and a $0.6 million decrease in other current assets attributable
to a reduction in prepaid income tax.
Total current liabilities increased $1.4 million during first quarter 1996
primarily related to the timing of interest and compensation payments.
Acquisitions and Development
In March 1996, the Company sold its gas processing plant and related
gathering system for $28 million and agreed to lease the facility from the
buyers for an initial term of eight years at annual rentals of $4 million, and
with fixed renewal options for an additional 13 years. Proceeds of the sale
were used to reduce bank debt.
Through March 31, the Company's 1996 expenditures for exploitation and
development were $3.5 million as compared to $3.9 million for the same 1995
period. Although actual exploitation and development expenditures may vary
significantly due to many factors, the Company anticipates its 1996 expenditures
for exploitation and development activities to exceed its previously announced
$25 million budget by $5 million. Such expenditures are expected to be funded
by cash flow from operations. During the quarter ended March 31, 1996, the
Company's purchases of common stock (for non-trading purposes) totalled $16.1
million.
As of the end of March, the Company had completed drilling one oil well and
four gas wells in 1996. A total of 22 recompletions and workovers were also
completed in the first quarter. Results of 1996 development and exploitation
activity to date have generally exceeded expectations.
One of the more significant wells completed in the first quarter of 1996
was the Nightingale 2-20 in Major County, Oklahoma. Completed to the Red Fork
formation, this well is currently producing 1,500 Mcf per day. The Company owns
a 54% working interest and 45% net revenue interest in this well. Five
additional wells are budgeted to be drilled along this same trend in 1996.
In the first quarter of 1996, the Company recompleted the Christmas 2 well
in Lea County, New Mexico to the Tubb formation. Current production in this
well is 1,000 Mcf per day; the Company owns an 81% working interest and a 59%
net revenue interest. Three related recompletions are scheduled in the near
future, and the Company is studying further potential in this area.
12
<PAGE>
Debt and Equity
Long-term debt decreased $16.7 million, reflecting $15 million in net bank
debt payments resulting from the sale and leaseback of the Company's gas
gathering and processing facility in March 1996 and $1.7 million in subordinated
note retirements. Stockholders' equity at March 31, 1996 increased $2.3 million
from year-end as a result of first quarter net income of $4.7 million and net
stock option proceeds of $0.2 million, partially offset by an unrealized loss of
$1.2 million (net of deferred taxes of $0.6 million) in the investment in equity
securities and dividends of $1.4 million.
Dividends
In February 1996, the Board of Directors of the Company declared a first
quarter dividend of $0.075 per common share, or a total of $1.4 million, paid in
April 1996. This dividend is at the same quarterly rate paid by the Partnership
or Company since September 1992.
13
<PAGE>
P A R T I I. O T H E R I N F O R M A T I O N
Item 1. Legal Proceedings
The Company and its subsidiaries are named defendants in certain lawsuits and
named parties in certain governmental proceedings arising in the ordinary
course of business. While the outcome of these lawsuits or other proceedings
against the Company cannot be predicted with certainty, management does not
expect these matters to have a material adverse effect on the Company's
financial position, liquidity or operations.
Items 2. through 5.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number
and Description Page
--------------- -----
<S> <C>
15 Letter re unaudited interim financial
information
15.1 Awareness letter of Arthur Andersen LLP 16
</TABLE>
(b) Reports on Form 8-K None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CROSS TIMBERS OIL COMPANY
Date: May 14, 1996 By BENNIE G. KNIFFEN
------------------------------------
Bennie G. Kniffen
Senior Vice President and Controller
(Principal Accounting Officer and
Duly Authorized Officer)
15
<PAGE>
EXHIBIT 15.1
Cross Timbers Oil Company:
We are aware that Cross Timbers Oil Company has incorporated by reference
in its Registration Statements No. 33-64274, No. 33-65238 and No. 33-81766
on Form S-8 its Form 10-Q for the quarter ended March 31, 1996, which
includes our report dated April 25, 1996, covering the unaudited interim
financial information contained therein. Pursuant to Regulation C of the
Securities Act of 1933, that report is not considered a part of the
registration statement prepared or certified by our firm or a report
prepared or certified by our firm within the meaning of Sections 7 and 11
of the Act.
ARTHUR ANDERSEN LLP
Fort Worth, Texas
May 14, 1996
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,290
<SECURITIES> 0
<RECEIVABLES> 28,602
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,160
<PP&E> 520,524
<DEPRECIATION> 185,181
<TOTAL-ASSETS> 390,795
<CURRENT-LIABILITIES> 32,451
<BONDS> 221,750
0
0
<COMMON> 185
<OTHER-SE> 132,854
<TOTAL-LIABILITY-AND-EQUITY> 390,795
<SALES> 36,081
<TOTAL-REVENUES> 36,081
<CGS> 0
<TOTAL-COSTS> 25,159
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,951
<INCOME-PRETAX> 6,971
<INCOME-TAX> 2,300
<INCOME-CONTINUING> 4,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,671
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0
</TABLE>
