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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 - AUGUST 13, 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
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FORM 8-K
HS RESOURCES, INC.
August 13, 1998
ITEM 5. OTHER EVENTS.
On August 13, 1998, HS Resources, Inc., a Delaware corporation ("HSR"
or the "Company"), issued its second 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 August 13, 1998.
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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: August 13, 1998.
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- ------------
<S> <C>
EX. 99.1 Press Release, dated August 13, 1998.
</TABLE>
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Exhibit 99.1
FOR IMMEDIATE RELEASE
August 13, 1998
HS RESOURCES ANNOUNCES SECOND QUARTER RESULTS
San Francisco, California - HS Resources, Inc. (NYSE: HSE) today announced its
operating and financial results for the quarter ended June 30, 1998. For the
quarter, net income was $1.3 million, or $0.07 per share, before a $36.5 million
after-tax ($59 million pre-tax) non-cash charge for a full cost ceiling test
impairment described below, compared to net income of $1.2 million, or $0.07 per
share, for the comparable prior year period. Quarterly production was a record
3.26 million barrels of oil equivalent (MMBoe), up 43% from 2.28 MMBoe during
the comparable prior year period. The Company produced 15.4 billion cubic feet
of natural gas (Bcf), an increase of 53% from the 10.1 Bcf produced during the
second quarter of 1997. Oil production increased 15% from 608 thousand barrels
of oil (MBbl) to 699 MBbl.
The impact of the increased production was partially offset by a 25% decline in
the weighted average price that the Company received for its oil production.
During the quarter, the Company's realized oil price was $14.63 per barrel,
which includes a positive $1.25 per barrel adjustment resulting from the
Company's hedging program. This compares to a weighted average oil price of
$19.48 realized during the comparable prior period. Net realized gas prices were
virtually unchanged from second quarter 1997, up two cents per Mcf from $1.81 to
$1.83. The weighted average price per equivalent barrel (Boe) was $11.76, down
11% from $13.17 during the comparable prior period, and down 21% from $14.82 for
the first quarter of 1998.
Revenues from production for the quarter amounted to $38.3 million, a 27%
increase from $30.1 million in the comparable prior year period. Operating cash
flow was $20.2 million, or $1.08 per share, compared to $14.7 million, or $0.85
per share, for the second quarter of 1997.
Aggregate lease operating expenses increased from $5.9 million to $8.2 million
due to the addition of a substantial number of wells acquired from Amoco
Production Company (the Amoco Acquisition) at the end of 1997. However, lease
operating expense per Boe was reduced 3%, from $2.60 to $2.51, as the Company
realized efficiencies through added production in a tightly concentrated
operating area. Similarly, aggregate general and administrative expense
increased 48%, while remaining relatively unchanged at $0.59 per Boe. Net
interest expense increased 12% to $8.6 million as a result of the additional
debt incurred in connection with the Amoco Acquisition. This amount is net of
$5.7 million of capitalized interest attributable to the cost of the Company's
undeveloped acreage. The Company's investment in undeveloped acreage (including
capitalized interest) at June 30, 1998 increased by $143.8 million since June
30, 1997 as a result of undeveloped properties acquired in the Amoco Acquisition
and additional investment in the Gulf Coast region.
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Depreciation, depletion and amortization (DD&A) expense increased 40% due to
increased production, while DD&A per Boe was reduced from $5.62 to $5.52 per
Boe. The Company adjusted its DD&A rate in the second quarter of 1998 to reflect
an increase in proved reserves and to give effect to the full cost ceiling test
impairment charge.
The full cost method of accounting, which HS Resources employs, requires a
periodic comparison of discounted asset value to recorded capital costs
utilizing unescalated current commodity prices. Due to the significant
deterioration of realized crude oil prices and, to a lesser extent, natural gas
prices at the end of the second quarter, the Company recognized an after-tax
non-cash impairment in the quarter of $36.5 million. Including the effect of the
impairment, the Company reported a net loss for the quarter of $35.2 million, or
$1.89 per share.
During the quarter, the Company recorded approximately 29 MMBoe of new proved
reserves, primarily in the D-J Basin, reflecting its ongoing development program
and the new field-wide spacing rule approved by the Colorado Oil and Gas
Conservation Commission on April 29, 1998.
For the first half of 1998, the Company reported net income of $4.6 million, or
$0.25 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 $31.9 million, or $1.71 per share, compared to net income of $5.5
million, or $0.32 per share, for the comparable 1997 period. Production
increased 40% to 6.3 MMBoe from 4.5 MMBoe, with oil and gas revenues increasing
27% to $83.7 million from $66.1 million. The realized oil price for the first
six months of 1998 declined 22% to $15.79 per Bbl from $20.37 in 1997 while the
realized gas price was $2.09 per Mcf, virtually unchanged from $2.11 in 1997.
The Company also announced that it has been named by the Colorado Oil and Gas
Conservation Commission as the recipient of an "Outstanding Oil and Gas Operator
Award" for innovative exploration techniques in the D-J Basin. The award cites
HS Resources' successful use of 3D seismic to discover the Spenson Field in
Adams County, Colorado, which has estimated reserves of approximately one
million barrels of oil. The discovery well had an initial producing rate of 500
barrels of oil per day, and six additional development wells have been drilled,
with a high degree of success, based on the 3D seismic interpretations.
According to the award, HS Resources used an innovative exploration technique to
discover a field that would have been extremely difficult to find using other
methods, and is successfully applying 3D seismic to develop other exploration
areas in the D-J Basin.
President P. Michael Highum commented, "Our record production levels reflect the
success of our D-J Basin development activities coupled with our acquisition of
Amoco's D-J Basin properties. Through the end of the second quarter, we have
completed more than half of the approximately 500 activities planned for the
year in our D-J District. These activities, which range from recompletions and
reworks to well deepenings and new well drillings, are drawn from our inventory
of several thousand specifically identified opportunities. Of the more than 130
activities completed during the second quarter, approximately one-half were
hydraulic restimulations (refracs) of existing wells. Results to date for our
refrac program show a 750%
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average increase in initial production per well, projected internal rates of
return approaching 100% and average finding costs of under $3.50 per Boe. The
Company also drilled two new J-Sand "stand-alone" wells and eleven J-Sand infill
wells, and deepened seven wells to the J-Sand from previously producing
shallower horizons. All were completed and successfully brought on-line with
excellent initial flows. The Company also successfully deepened sixteen out of
nineteen wells to the Dakota formation, with thirteen brought on-line during the
quarter averaging initial production rates of more than 500 Mcf per day. Since
the first of the year, we have increased net gas production in the D-J Basin by
approximately 25%, or 28 MMcf per day. It is also noteworthy that these
activities, combined with the field-wide spacing ruling by the Colorado Oil and
Gas Conservation Commission, have enabled the Company to book 29 MMBoe of new
proved reserves. These new reserves nearly replace the reserves that are the
subject of our previously announced Mid-Continent property divestiture."
Chairman and Chief Executive Officer Nicholas J. Sutton added, "In addition to
our excellent results in the D-J Basin, this has been a very active and
successful quarter for our seismically driven program in the onshore Gulf Coast
area. We have drilled five wells in our North Gillis project area, which HSR
operates and in which the Company owns a 37.5% working interest. Four were
completed as producers; partners may complete the fifth. We estimate average
reserves of 1 million Boe per well for the four completions. In addition, during
July we drilled another apparent producer that is currently undergoing testing.
These wells are expected to come on-line during September. Our other large-scale
seismic surveys, including Iowa, Port Barre, Indian Village and Edgerly are in
various stages of data acquisition, processing and interpretation and are
beginning to surface many potential drilling locations. We expect our Gulf Coast
program to drill as many as 14 wells during the second half of the year."
Chief Financial Officer James E. Duffy added, "It is unfortunate that the rules
regarding ceiling test adjustments have not been updated since the days of
stable, generally regulated, product prices. As a result, HS Resources and other
companies are forced to 'mark to market' based on transient product prices that
are only remotely related to the true value of long lived properties. Most
importantly, it is a non-cash charge that does not directly impact the Company's
cash flow or investment decisions. Oil prices have been disappointing, but HS
Resources is principally a natural gas producer and our realized gas prices in
the D-J Basin have remained relatively strong. Furthermore, the Company has in
place several hedges that provide price protection during the rest of the summer
months and into 1999. Our financial strength and flexibility will be further
enhanced by our previously announced intention to sell our Mid-Continent
properties to Questar Corporation for $157.5 million in cash, with an expected
closing date of September 1, 1998. We will apply net proceeds from the sale to
the repayment of bank debt."
Statements concerning the anticipated sale of assets to Questar Corporation,
debt repayment ability, drilling, exploration, exploitation, development and
other plans, production levels, reserve estimates or potential additions, rates
of return, timing of well connections, expected future operating efficiencies,
the timing, quality and applicability of seismic data and the interpretation
thereof, 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
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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, Mid-Continent and 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]
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HS Resources, Inc.
Summary of 1998 Operations
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1998 1997 1998 1997
--------- ------- --------- --------
<S> <C> <C> <C> <C>
Revenues:
Oil & gas sales $ 38,341 $30,097 $ 83,712 $ 66,122
Trading and transportation 11,142 18,946 27,466 47,786
Other gas revenues 2,276 1,094 4,145 2,189
Other income 439 354 643 622
--------- ------- --------- --------
Total revenues 52,198 50,491 115,966 116,719
--------- ------- --------- --------
Expenses:
Production taxes 2,759 2,027 5,757 4,834
Lease operating 8,168 5,941 15,314 12,371
Cost of trading and transportation 10,564 18,821 26,360 46,860
DD&A 18,005 12,850 36,535 25,316
Impairment of oil & gas properties 59,000 -- 59,000 --
General and administrative 1,935 1,304 3,683 3,031
Interest 8,604 7,673 20,837 15,376
--------- ------- --------- --------
Total expenses 109,035 48,616 167,486 107,788
--------- ------- --------- --------
Income (loss) before provision
for income taxes (56,837) 1,875 (51,520) 8,931
Provision (benefit) for income taxes (21,655) 714 (19,629) 3,403
--------- ------- --------- --------
Net income (loss) $ (35,182) $ 1,161 $ (31,891) $ 5,528
========= ======= ========= ========
Net income (loss) per share - diluted $ (1.89) $ 0.07 $ (1.71) $ 0.32
========= ======= ========= ========
Outstanding shares - diluted 18,590 17,423 18,649 17,500
========= ======= ========= ========
Operating cash flow (a) $ 20,169 $14,725 $ 44,015 $ 34,246
========= ======= ========= ========
Operating cash flow per share - diluted $ 1.08 $ 0.85 $ 2.36 $ 1.96
========= ======= ========= ========
</TABLE>
(a) Net income before depreciation, depletion and amortization, impairment and
deferred income taxes.
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HS Resources, Inc.
Summary of 1998 Operations
SUMMARY PRODUCTION, PRICE AND COST DATA
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
-------------------------------- ---------------------------------
% %
1998 1997 Change 1998 1997 Change
------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Daily Production:
Oil (Bbl) 7,681 6,680 15% 7,679 6,446 19%
Gas (Mcf) 168,822 110,545 53% 163,468 110,669 48%
Equivalent Barrels (Boe) 35,818 25,104 43% 34,924 24,891 40%
Period Production:
Oil (MBbl) 699 608 15% 1,390 1,167 19%
Gas (MMcf) 15,363 10,060 53% 29,588 20,031 48%
Equivalent Barrels (MBoe) 3,259 2,284 43% 6,321 4,505 40%
Average oil price (Bbl) $ 14.63 $ 19.48 -25% $ 15.79 $ 20.37 -22%
Average gas price (Mcf) $ 1.83 $ 1.81 1% $ 2.09 $ 2.11 -1%
Average price (Boe) $ 11.76 $ 13.17 -11% $ 13.24 $ 14.68 -10%
Costs:
G&A per Boe $ 0.59 $ 0.57 4% $ 0.58 $ 0.67 -13%
LOE per Boe $ 2.51 $ 2.60 -3% $ 2.42 $ 2.75 -12%
DD&A per Boe $ 5.52 $ 5.62 -2% $ 5.78 $ 5.62 3%
(includes depreciation on
non oil and gas assets)
</TABLE>
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HS Resources, Inc.
Summary of 1998 Operations
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
<S> <C> <C>
Assets
Current assets $ 60,925 $ 55,389
Oil & gas properties 1,150,665 1,140,742
Accumulated DD&A (216,743) (181,206)
Other assets 21,474 20,391
----------- -----------
$ 1,016,321 $ 1,035,316
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities $ 75,661 $ 63,717
Bank debt 433,000 412,000
9 7/8% Subordinated notes, due 2003 74,683 74,654
9 1/4% Subordinated notes, due 2006 149,349 149,310
Other long-term liabilities & deferred revenue 18,975 21,215
Deferred taxes 70,136 90,798
Stockholders' equity 194,517 223,622
----------- -----------
$ 1,016,321 $ 1,035,316
=========== ===========
</TABLE>
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HS Resources, Inc.
Summary of 1998 Operations
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(31,891) $ 5,528
Depreciation, depletion and amortization 36,535 25,316
Impairment of oil and gas properties 59,000 --
Amortization of deferred charges, debt issue costs
and deferred compensation 1,225 915
Transfer treasury stock to 401(k) plan 549 417
Deferred income tax provision (benefit) (19,765) 3,403
Decrease (increase) in accounts receivable (4,022) 10,552
Increase (decrease) in accounts payable and accrued expenses 264 (2,200)
Increase (decrease) in deferred revenue, net (2,506) --
Other (602) (196)
-------- --------
Net cash provided by operating activities 38,787 43,735
-------- --------
Net cash used in investing activities (58,307) (27,511)
-------- --------
Net cash provided by (used in) financing activities 19,413 (22,410)
-------- --------
Net (decrease) in cash and
cash equivalents (107) (6,186)
Cash and cash equivalents, beginning
of the period 6,907 8,765
-------- --------
Cash and cash equivalents, end of
the period $ 6,800 $ 2,579
======== ========
</TABLE>
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