<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - NOVEMBER 10, 1998
(DATE OF EARLIEST EVENT REPORTED)
HS RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COMMISSION FILE NO. 0-18886
DELAWARE 94-303-6864
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
ONE MARITIME PLAZA, 15TH FLOOR,
SAN FRANCISCO, CALIFORNIA 94111
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 433-5795
<PAGE>
FORM 8-K
HS RESOURCES, INC.
November 10, 1998
ITEM 5. OTHER EVENTS.
On November 10, 1998, HS Resources, Inc., a Delaware corporation ("HSR" or
the "Company"), issued its third quarter press release A copy of the press
release by the Company is attached hereto as Exhibit 99.1.
ITEM 7(C). EXHIBITS FILED.
Exhibit Number Description
- -------------- -----------
99.1 Press Release, dated November 10, 1998.
2
<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 hereunto duly authorized.
HS RESOURCES, INC.
By: /s/ James M. Piccone
__________________________________
James M. Piccone
Vice President
Dated: November 10, 1998.
3
<PAGE>
Exhibit 99.1
FOR IMMEDIATE RELEASE
HS RESOURCES ANNOUNCES THIRD QUARTER RESULTS;
PROVIDES OPERATIONAL UPDATE
San Francisco, California - HS Resources, Inc. (NYSE: HSE) today announced its
operating and financial results for the quarter ended September 30, 1998. For
the quarter, the Company reported a net loss of $1.44 million, or $0.08 per
share, on production revenues of $32.9 million compared to net income of $1.56
million, or $0.09 per share, on production revenues of $31.7 million for the
comparable prior year period. The decline was due in part to the effects of
lower product pricing and to temporary conditions on gas gathering systems in
the Denver-Julesburg (D-J) Basin limiting the amount of gas which the Company
could transport. Operating cash flow was $14.8 million, or $0.79 per share,
compared to $15.6 million, or $0.89 per share, for the third quarter of 1997.
Quarterly production was 3.05 million barrels of oil equivalent (MMBoe), up 31%
from 2.33 MMBoe during the comparable prior year period. The Company produced
14.4 billion cubic feet of gas (Bcf), an increase of 40% from the 10.3 Bcf
produced during the third quarter of 1997. Oil production increased 6% from 619
thousand barrels of oil (MBbl) to 653 MBbl. The Company estimates that net
production for the quarter was reduced by approximately 129,000 barrels of oil
equivalent (Boe), or 4%, because of high line pressure in both of the major gas
gathering systems which transport the Company's D-J Basin gas to the Amoco
Wattenberg gas processing plant. The higher line pressure was primarily caused
by a compressor failure, which has been repaired by the system operator.
During the quarter, the Company's realized oil price was $13.07 per barrel
(Bbl), which includes a positive adjustment of $0.78 per Bbl resulting from the
Company's hedging program. This compares to a weighted average oil price of
$19.14 per Bbl realized during the comparable prior period. The net realized gas
price was $1.69 per thousand cubic feet (Mcf), down 12% from the $1.93 per Mcf
realized during the third quarter of 1997. The current quarter pricing includes
a positive hedging adjustment of $0.03 per Mcf. The weighted average price per
Boe was $10.78, down 21% from $13.58 per Boe during the comparable prior year
period, and down 8% from $11.76 per Boe during the second quarter of 1998.
Aggregate lease operating expenses increased from $5.9 million to $7.8 million
due to the addition of a substantial number of wells acquired from Amoco
Production Company (the Amoco Acquisition) at the end of 1997. On a unit-of-
production basis, lease operating expenses rose by $0.03, from $2.53 per Boe to
$2.56 as the result of a large number of workovers which the Company undertook
in order to enhance D-J Basin production. Aggregate general and administrative
expense increased 8% to $2.0 million on an absolute basis, but declined by
$0.14, or 18%, on a unit-of-production basis, from $0.79 to $0.65 per Boe. Net
interest expense increased to $10.0 million, as a result of the additional debt
incurred in connection with the Amoco Acquisition, net of $3.8 million of
capitalized interest attributable to the cost of the Company's undeveloped
acreage.
Depreciation, depletion and amortization (DD&A) expense increased 31% due to
increased production, while DD&A per Boe remained flat at $5.63. The Company
decreased its DD&A rate at the end of the second quarter of 1998 to reflect
increases in proved reserves and the effects of a full cost ceiling test
impairment charge incurred in that quarter, and increased its DD&A rate in the
third quarter to reflect the decrease in reserves as a result of the sale of its
Mid-Continent properties.
For the first nine months of 1998, the Company reported net income of $3.2
million, or $0.17 per share, before the previously noted non-cash full cost
ceiling test impairment. Including the effects of the impairment, the Company
incurred a net loss of $33.3 million, or $1.78 per share, compared to net income
of $7.1 million, or $0.40 per share, for the comparable 1997 period. Production
increased 37% to 9.4 MMBoe from 6.8 MMBoe, with production revenues increasing
19% to $116.6 million from $97.8 million. The realized oil price for the first
nine months of 1998 declined 25% to $14.92 per Bbl from $19.94 per Bbl in 1997,
while the realized gas price was $1.96 per Mcf, a 4% reduction from $2.05 per
Mcf in 1997. Aggregate operating cash flow increased 18%, from $49.9 million to
$58.9 million, and per share cash flow increased from $2.85 to $3.15.
HS Resources also provided an update on the status of various field activities
in the Gulf Coast, the Northern Rockies and the D-J Basin.
In the Gulf Coast area, during the quarter the Company drilled five wells,
completed one 3-D seismic program and began field data acquisition on an
additional 3-D seismic program. Interpretation and analysis is ongoing on
several more 3-D seismic surveys.
In late October the Company completed installation of its Ragley gas processing
plant in the North Gillis project area of Beauregard Parish, Louisiana, bringing
three wells into production. Although the plant is being operationally tuned,
current gross production from the three wells is approximately 4.6 million cubic
feet of gas per day (MMcfd) and 550 barrels of oil per day (Bopd). Two
additional wells in the area are awaiting hook-up, including the HSR Hayes
Lumber Company #1, which tested at rates of approximately 3 MMcfd and 270 Bopd,
and the HSR Dorothy Stuckey #1, which tested at rates of approximately 2.4 MMcfd
and 28 Bopd. The Company has an average 37.5% working interest in the North
Gillis project where, to date, it has completed five of six wells with
preliminary average gross reserves of approximately 900 MBoe per well. The
Company expects that another four to five wells will be drilled in North Gillis
during the fourth quarter of 1998.
In the Company's Devillier project area in Chambers County, Texas, the HSR Garth
A#1 reached total depth in early October. Data analysis indicate recoverable
reserves of up to 8 Bcf of gas. The Company was carried to casing point, with an
ongoing 25% working interest. This well should be completed by November 10, with
production commencing by mid-December. The rig has moved to the HSR Garth A#2
location, which currently is drilling at about 8,000 feet.
During the quarter the Company also completed the HSR Victory Financial et al #1
in the Welsh project area of Jefferson Davis Parish, Louisiana, in which HSR has
a 50% working interest. The well tested at 890 thousand cubic feet of gas per
day (Mcfd) and 5 Bopd, and currently is waiting on pipeline hookup.
In the Iowa/Woodlawn project area, where HSR has a 25% working interest, the
first well tested at rates of 5.1 MMcfd and 113 Bopd, and should commence
production before year end. This project in Jefferson Davis Parish, Louisiana,
targets the Hackberry formation, which the Company has successfully exploited
elsewhere in Louisiana. Thus far, eight prospects have been identified in this
120 mi/2/ 3-D shoot.
<PAGE>
In the Lox B project area of Jefferson County, Texas, the HSR Broussard et al #1
reached TD on November 5/th/. Preliminary data analysis indicates that the
objective Hackberry sand was encountered as expected but appears to be wet.
Further petrophysical analysis has been undertaken to confirm or refute that
preliminary determination. HSR has a 50% working interest in this project.
Successful activity continued in Calcasieu Parish, Louisiana, on the Buhler
project where the Company primarily targets the Hackberry formation. Two
additional successful wells were drilled in the third quarter bringing the
program total to five successes in six attempts during 1998, and thirteen
successes in sixteen attempts from the inception of the program. Another well is
drilling currently, and ten more could be drilled during 1999. HSR's interest in
this project is a financially small, but strategically significant 3% working
interest.
Elsewhere in the Gulf Coast, the Company's 116 mi/2/ 3-D program on the Indian
Village project (sometimes referred to as North Iowa), located in Jefferson
Davis and Allen Parishes, Louisiana, has been acquired and processed.
Interpretation is under way and has generated several leads. Prospects should be
ready for drilling during the first quarter of 1999.
Various seismic activities are ongoing on other projects, including Bayou
Choupique, Bayou Shaffer/Ramos, Edgerly, Hathaway, Port Barre, Big Creek and
Starks.
HS Resources also was active in its Northern Rockies area, reporting three
exploratory wells in Sublette County, Wyoming, that appear to be successful
based on data currently available. Pipe has been set on the Company's HSR Gold
Coast #16-6 well, after encountering overpressured sands which show strong
reserve potential based on analysis of electric logs and mud logs. The first
stage of completion is expected to take place early next week. HSR has a 100%
working interest in this prospect, subject to partial reduction after payout,
and a 70% interest in approximately 40,000 gross acres surrounding the well.
Pipe was also run on the HSR-Holmes Federal #05-01, operated by McMurray Oil
Company on HSR's South Jonah project, after encountering several sections of
overpressured and normally pressured sands. The well is scheduled to be
stimulated in five separate stages, two of which have been completed to date.
The first stage stimulation showed encouraging results while the second stage
stimulation was less encouraging. The remaining sections will be stimulated and
tested at the rate of about one every two weeks. This project area encompasses
approximately 15,000 gross acres potentially exploitable by the Company with a
60% working interest.
Finally, in mid-October Lance Oil & Gas Company, an affiliate of Western Gas
Resources, set casing on its Sherlock Federal #15-08. Located on acreage
acquired by farmout from HS Resources (with the Company retaining a 30% interest
after payout), this well could set-up an additional 1,000 net prospective acres
in which the Company owns a 70% working interest and has retained operatorship.
The Company's D-J District also was active during the quarter, moving forward
with drilling, refracs and recompletions. For example, 29 Codell wells were
refraced. Initial results continue to be encouraging and consistent with
previous experience, showing an average 7.5x increase in production, strong
rates of return and net finding costs of about $3.50/Boe. Thus far in 1998,
refracs have added an estimated 5.3 MMBoe of new reserves net to the Company.
Also during the quarter, the Company drilled four new J-Sand wells and deepened
twelve wells from shallower formations to the J-Sand. All were successfully
completed and brought online. Deepening operations also were undertaken on ten
Dakota wells. Of these, one had natural (unstimulated) Dakota production of 1
MMcfd and an estimated ultimate recovery of 2.5 Bcf. Two wells showed rates of
230 Mcfd and 440 Mcfd respectively, two wells are still cleaning-up after
stimulation, and five wells yielded minimal incremental production.
Chairman and Chief Executive Officer Nicholas J. Sutton commented, "Our short-
term production was inhibited by excessive line pressure largely due to a
compressor failure on the K N Gas Gathering system. This has been repaired and
our operations continue to advance aggressively but smoothly. For example,
despite this line pressure issue we have increased net gas production in the D-J
Basin by approximately 25%, or 28 MMcf per day, since the first of the year, and
our gas is situated at the "city gate" of a growing and economically vibrant
market. We also have experienced excellent results in the Gulf Coast projects;
the technological manpower that we have devoted to our numerous 3-D seismic
project areas has lead us to an accelerating level of drilling on very high
quality prospects. Our current estimate is that our recent drilling activities
in the Gulf Coast will add approximately 4 MMBoe of new reserves to the Company
by year-end and more than 30 MMcfd and 1,500 Bopd of gross operated production
there as we exit 1998. Clearly, we have substantially more set-up for 1999, and
we view our recent success as the tip of the iceberg".
President P. Michael Highum added, "As a result of the previously announced Mid-
Continent property sale, the Company ended the third quarter with approximately
$140 million less debt than it had at the beginning of the quarter. We continue
to be aggressive about managing our balance sheet. Our coverage ratios remain at
good levels, and we continue to seek out additional efficiencies in our
organization and operations. For example, the D-J District has several cost
saving initiatives under review or being implemented. And, although oil prices
are down from recent years, our natural gas prices remain strong by historical
standards and the Company has 75,000 million British thermal units (Mmbtu) per
day hedged from November through March at more than $2.43 per Mmbtu."
Statements concerning the debt coverage ratios, drilling, exploration,
exploitation, development and other plans, timing and amount of future
production levels, reserve estimates or potential additions, rates of return,
timing of well connections and completions, expected future operating
efficiencies, number of potential drilling locations, timing and amount of
future drilling, and all similar statements or implications are forward looking
statements within the meaning of Federal securities laws. Actual results or
events may differ materially from these forward looking statements, depending
upon a variety of factors, including commodity prices, availability of capital,
results of exploration and other drilling, cash flow from operations, costs of
materials and labor, availability of equipment, regulatory burdens, Company
objectives and business judgment and other factors, both within and outside of
the Company's control. The Company's forward looking statements are qualified in
their entirety by these and other factors more fully set forth on the company's
report on Form 8-K filed February 26, 1997.
HS Resources, Inc. is an independent oil and gas exploration and development
company with active projects in the Rocky Mountain and onshore Gulf Coast
regions. The common stock of HS Resources, Inc. is traded on the New York Stock
Exchange under the symbol "HSE."
Contact: Theodore Gazulis
Vice President -- Treasury, Capital Markets
and Investor Relations
415-433-5795
[email protected]
<PAGE>
HS Resources, Inc.
Summary of 1998 Operations
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
Unaudited
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
--------------------------------------- -------------------------------------
1998 1997 1998 1997
------------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Revenues:
Oil & gas sales $ 32,887 $ 31,657 $ 116,599 $ 97,778
Trading and transportation 13,831 16,576 41,297 64,361
Other gas revenues 2,068 1,017 6,214 3,206
Other income 504 271 1,147 894
------------------- ------------------ ----------------- ------------------
Total revenues 49,290 49,521 165,257 166,239
------------------- ------------------ ----------------- ------------------
Expenses:
Production taxes 2,068 2,060 7,825 6,893
Lease operating 7,798 5,902 23,113 18,273
Cost of trading and transportation 12,550 16,505 38,910 63,365
DD&A 17,173 13,120 53,707 38,436
Impairment of oil & gas properties - - 59,000 -
General and administrative 1,996 1,841 5,679 4,872
Interest 10,036 7,568 30,873 22,945
------------------- ------------------ ----------------- ------------------
Total expenses 51,621 46,996 219,107 154,784
------------------- ------------------ ----------------- ------------------
Income (loss) before provision
for income taxes (2,331) 2,525 (53,850) 11,455
Provision (benefit) for income taxes (888) 962 (20,517) 4,364
------------------- ------------------ ----------------- ------------------
Net income (loss) $ (1,443) $ 1,563 $ (33,333) $ 7,091
=================== ================== ================= ==================
Net income (loss) per share - diluted $ (0.08) $ 0.09 $ (1.78) $ 0.40
=================== ================== ================= ==================
Outstanding shares - diluted 18,818 17,561 18,706 17,520
=================== ================== ================= ==================
Operating cash flow (a) $ 14,842 $ 15,645 $ 58,857 $ 49,891
=================== ================== ================= ==================
Operating cash flow per share - diluted $ 0.79 $ 0.89 $ 3.15 $ 2.85
=================== ================== ================= ==================
(a) Net income before depreciation, depletion and amortization, impairment and deferred income taxes.
</TABLE>
3
<PAGE>
HS Resources, Inc.
Summary of 1998 Operations
SUMMARY PRODUCTION, PRICE AND COST DATA
Unaudited
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------------------------------------- ---------------------------------------------------
% %
1998 1997 Change 1998 1997 Change
----------------- ------------------- ------------- ----------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Daily Production:
Oil (Bbl) 7,102 6,723 6% 7,485 6,540 14%
Gas (Mcf) 156,288 111,695 40% 161,048 111,015 45%
Equivalent Barrels (Boe) 33,150 25,339 31% 34,326 25,042 37%
Period Production:
Oil (MBbl) 653 619 6% 2,043 1,785 14%
Gas (MMcf) 14,378 10,276 40% 43,966 30,307 45%
Equivalent Barrels (MBoe) 3,050 2,331 31% 9,371 6,836 37%
Average oil price (Bbl) $ 13.07 $ 19.14 -32% $ 14.92 $ 19.94 -25%
Average gas price (Mcf) $ 1.69 $ 1.93 -12% $ 1.96 $ 2.05 -4%
Average price (Boe) $ 10.78 $ 13.58 -21% $ 12.44 $ 14.30 -13%
Costs:
G&A per Boe $ 0.65 $ 0.79 -18% $ 0.61 $ 0.71 -14%
LOE per Boe $ 2.56 $ 2.53 1% $ 2.47 $ 2.67 -7%
DD&A per Boe $ 5.63 $ 5.63 0% $ 5.73 $ 5.62 2%
(includes depreciation on
non oil and gas assets)
</TABLE>
4
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HS Resources, Inc.
Summary of 1998 Operations
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------------- ------------------
<S> <C> <C>
Assets
Current assets $ 51,223 $ 55,389
Oil & gas properties 1,031,130 1,140,742
Accumulated DD&A (233,456) (181,206)
Other assets 18,393 20,391
------------------- ------------------
$ 867,290 $1,035,316
=================== ==================
September 30, December 31,
1998 1997
------------------- ------------------
Liabilities and Stockholders' Equity
Current liabilities $ 82,532 $ 63,717
Bank debt 293,000 412,000
9 7/8% Subordinated notes, due 2003 74,698 74,654
9 1/4% Subordinated notes, due 2006 149,369 149,310
Other long-term liabilities & deferred revenue 16,698 21,215
Deferred taxes 60,944 90,798
Stockholders' equity 190,049 223,622
------------------- ------------------
$ 867,290 $1,035,316
=================== ==================
</TABLE>
5
<PAGE>
HS Resources, Inc.
Summary of 1998 Operations
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (33,333) $ 7,091
Depreciation, depletion and amortization 53,707 38,436
Impairment of oil and gas properties 59,000 ---
Amortization of deferred charges, debt issue costs
and deferred compensation 1,848 1,370
Transfer treasury stock to 401(k) plan 549 417
Gain on sale of fixed assets (239) ---
Deferred income tax provision (benefit) (20,653) 4,281
Decrease in accounts receivable 3,908 8,455
Increase in accounts payable and accrued expenses 3,741 5,341
Decrease in deferred revenue, net (4,379) ---
Other 27 365
------------------ -----------------
Net cash provided by operating activities 64,176 65,756
------------------ -----------------
Net cash provided by (used in) investing activities 58,767 (18,778)
------------------ -----------------
Net cash used in financing activities (123,038) (51,363)
------------------ -----------------
Net decrease in cash and
cash equivalents (95) (4,385)
Cash and cash equivalents, beginning
of the period 6,907 8,765
------------------ -----------------
Cash and cash equivalents, end of
the period $ 6,812 $ 4,380
================== =================
</TABLE>
6
