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 - APRIL 26, 2000
(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.
April 26, 2000
ITEM 5. OTHER EVENTS.
On April 26, 2000, HS Resources, Inc., a Delaware corporation ("HSR" or
the "Company"), issued its first quarter earnings press release. A copy of the
earnings press release is attached hereto as Exhibit 99.1. The transcript of the
earnings conference call held Tuesday, April 26, 2000, as edited by the Company,
can be found on the Company's internet site at http//www.hsresources.com. Click
on Investor Info and then click on Quarterly Earnings Conference Call to listen
to the audio version or click on Transcript to read the transcript.
ITEM 7(c). EXHIBITS FILED.
EXHIBIT NUMBER DESCRIPTION
99.1 Earnings Press Release, dated April 26, 2000.
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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: May 24, 2000.
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FOR IMMEDIATE RELEASE
April 26, 2000
HS RESOURCES ANNOUNCES RECORD QUARTERLY PRODUCTION,
REVENUES, CASH FLOW AND NET INCOME
San Francisco, California - HS Resources, Inc. (NYSE:HSE) today announced record
results in oil and gas production, revenues, operating cash flow and earnings
for the quarter ended March 31, 2000. For the quarter, the Company earned $10.1
million or $0.53 per diluted share, compared to $0.1 million or $0.01 per
diluted share in the comparable prior year period. Operating cash flow totaled
$37.5 million or $1.96 per share, compared to $18.4 million or $1.00 per share
for the prior year period. The results for the quarter reflect increases in
production, higher oil and natural gas product prices and strong operating
fundamentals throughout the Company's various business units.
Oil and gas production for the quarter was 20.3 billion cubic feet of gas
equivalent (Bcfe), or 3.38 million barrels of oil equivalent (MMBoe), an
increase of 16% over the comparable prior year period. Quarterly production from
the Company's D-J Basin properties increased 7%, to 17,606 MMcfe from 16,495
MMcfe and production from the Gulf Coast increased 160%, to 2,694 MMcfe from
1,036 MMcfe in the prior year quarter. Approximately 79% of the production was
natural gas (16.04 billion cubic feet) and 21% was oil (710,000 barrels).
Quarterly production revenues, including the effects of product price hedging,
increased 61% from the comparable prior year period, to $58.1 million from $36.1
million, as the higher production was compounded by materially higher commodity
prices. The quarterly average gas price realized by the Company, including
hedging effects, was $2.72 per thousand cubic feet (Mcf), a 33% increase from
$2.04 realized in the first quarter of 1999. Realized oil prices saw a 60%
increase to $20.42 from $12.80 per barrel (Bbl). Hedging activities improved
realized gas prices by $0.01 per Mcf while reducing realized oil prices by $6.91
per Bbl in 2000. In 1999, hedging activities improved realized prices by $0.36
per Mcf and $1.37 per Bbl.
Production taxes increased $3.3 million principally as a result of the increase
in production revenues. That amount also reflects higher production tax rates on
production from the Company's Gulf Coast properties, and incorporates an
increase in the accrual rate for D-J Basin properties due to the higher revenue
base. Combined lease operating and general and administrative expenses declined
on a per unit basis to $0.45 from $0.46 per Mcfe ($2.68 and $2.77 per Boe,
respectively) or approximately 3%. The lower combined costs include a reduction
in per unit lease operating expenses from $0.38 to $0.35 per Mcfe as a result of
operating efficiencies realized in the Company's Wattenberg Field area,
partially offset by an increase in payroll-related general and administrative
expenses from $0.08 to $0.10 per Mcfe. Aggregate interest expense increased 17%,
while per-unit interest expense remained essentially
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flat. The increase in interest expense resulted primarily from the December 1999
purchase and financing of the Wattenberg Gathering System (WGS).
In addition to its oil and gas operations, the Company's wholly-owned gas
marketing, trading and transportation company, HS Energy Services, Inc.,
contributed $1.5 million to income before taxes for the quarter versus $0.3
million in the prior year quarter as a result of marketing more gas volumes and
realizing an increase in trading activities. HS also noted the successful
integration of WGS into its operating activities. WGS transported an average of
approximately 204 MMcf of gas per day for the quarter, representing an increase
of approximately 5% over the prior year quarter, at which time the system was
operated by the previous owner. The initial remedial activities that have been
undertaken by HS have created greater throughput capacity, benefiting HS and all
other producers whose wells are connected to the system. HS plans to continue
expansion of WGS capacity over the next several years. For the quarter, WGS
contributed $3.0 million ($0.16 per share) to operating cash flow and $1.5
million ($0.08 per share) to earnings. The portion of these amounts attributable
to HS' equity gas production is reflected as a component of natural gas
revenues, whereas volumes attributable to third parties are reflected as revenue
and expense line items in the Company's income statement.
HS Resources also announced certain results from its oil and gas operations:
In the D-J Basin, during the quarter HS completed 136 individual activities of
the 400 activities scheduled for this year. These activities included twenty new
J-Sand wells, twenty J-Sand deepenings and 86 Codell refracs.
From inception of the J-Sand program in mid-1998 through the end of the first
quarter of 2000, 177 new drills and deepenings have been completed. These wells
have average gross reserves of 800 MMcfe per well and initial flow rates that
range between 500 and 1,500 Mcf per day. The average finding costs to date have
been $0.27/Mcfe ($1.60/Boe) for deepenings and $0.39/Mcfe ($2.35/Boe) for new
drills. HS currently plans to drill 65 new wells and deepen 74 wells during
2000.
The Codell refracs completed during the quarter brought the total to more than
627 refracs since program inception in 1997. The refrac program has achieved an
overall 7-fold average increase in production per well, a current 73% rate of
return and a $0.67 per Mcfe ($4.05 per Boe) finding cost for incremental
reserves. The Company currently expects to complete more than 200 Codell refracs
during the year.
In the Gulf Coast region, during the quarter HS drilled seven wells (3.3 net),
of which six (2.8 net) were commercially successful, resulting in a gross and
net success rate of 85%. HS operates six of the wells.
Net Gulf Coast production for the quarter averaged 29.6 MMcfe per day compared
to 11.5 MMcfe per day for the prior year period. This represented a 157%
increase from the prior year quarter and a 34% increase from the 22.1 MMcfe per
day produced during the fourth quarter of 1999. Quarterly production includes
two wells that were brought on line during the quarter, one
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on January 3rd and the other on March 17th. At quarter-end, nine wells (4.125
net) were awaiting testing or hookup. During the month of April, four of these
wells (2.0 net) were brought on line.
In addition to drilling, seismic acquisition continues in several south
Louisiana project areas.
Chairman and Chief Executive Officer Nicholas J. Sutton stated, "The quarterly
results reflect the benefits of our programs in the D-J Basin and the Gulf
Coast, programs that required a commitment to our strategy over the last several
years, despite difficult cycles in our industry. They also reflect the
dedication and hard work by the people of HS Resources. In particular, when
commodity prices were at or near all time lows one year ago, our staff continued
to focus on HS' core fundamentals. By doing so, the Company was well positioned
to benefit from oil and natural gas prices returning to a more normal level.
With commodity prices at their current levels, and with our efficient cost
structure in place, we expect to fund all of our exploration, exploitation and
development activities out of cash flow and also to repay a meaningful amount of
debt. We believe that 2000 will be a record year for per-share earnings and cash
flow for HS Resources."
HS Resources President P. Michael Highum commented, "Our strong first quarter
operating results are indicative of how we think the rest of the year could play
out. The D-J District is on target, completing 136 of the more than 400
activities planned for the year. 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. In
the Gulf Coast, we have increased reserves, production and cash flow to the
point where Gulf Coast production now represents more than 13% of our Company
total."
Chief Financial Officer James E. Duffy added, "Our shareholders are currently
realizing the benefits of the strategic initiatives that we have undertaken in
the last few years. During periods of generally lower product prices and
depressed industry conditions we acquired the Amoco properties, developed our
Gulf Coast exploration program and acquired the Wattenberg Gathering System,
while minimizing the issuance of new equity and, in fact, repurchasing a
significant number of our shares at substantially lower prices. In the current
higher product price environment we have locked in solid forward prices and are
using our record cash flow to repay debt while generating significant equity
returns for our shareholders. During the quarter we retired $4.7 million of the
payable to KMI and repaid $7.0 million of bank debt. In addition, our recent
acquisition of 732,000 shares of common stock will increase our per share
results by about 4% on a going forward basis."
Statements concerning debt repayment ability and plans, drilling, deepening,
refracing, exploration, exploitation, development and other plans, expansion
plans for gathering systems, acquisition of seismic data, expectations
concerning earnings, earnings per share, cash flow, cash flow per share and
other per share results, production levels, commodity prices, financial
flexibility and strength, expected future operating and other efficiencies, the
ability to fund activities out of cash flow, 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
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operations, costs of materials and labor, availability of equipment, regulatory
burdens, opportunities to secure favorable hedges, 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 10-K filed March 24, 2000.
HS Resources, Inc. is an independent oil and gas exploration and development
company with active projects in the D-J Basin, Gulf Coast and Northern Rocky
Mountain 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
415-433-5795
[email protected]
www.hsresources.com
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
Quarter Ended
March 31,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Oil & gas sales $ 58,139 $ 36,088
Trading and transportation 18,645 9,300
Other gas revenues 2,007 2,524
Gathering and transmission system revenues 3,108 -
Income from interest in gathering plant 365 -
Interest and other income 259 156
----------- -----------
Total revenues 82,523 48,068
----------- -----------
Expenses:
Production taxes 5,468 2,148
Lease operating 7,024 6,691
Cost of trading and transportation 17,112 8,982
Gathering and transmission system
operating expense 1,215 -
DD&A 14,855 14,198
Exploratory and abandonment 2,668 2,018
Geological and geophysical 3,550 2,022
Impairment and loss on sales
of oil and gas properties 100 -
General and administrative 2,026 1,409
Interest 12,162 10,429
----------- -----------
Total expenses 66,180 47,897
----------- -----------
Income before provision for income taxes 16,343 171
Provision for income taxes 6,227 65
----------- -----------
Net income $ 10,116 $ 106
=========== ===========
Net income per share - diluted $ 0.53 $ 0.01
=========== ===========
Outstanding shares - diluted 19,161 18,419
=========== ===========
Operating cash flow /(a)/ $ 37,515 $ 18,409
=========== ===========
Operating cash flow per share - diluted $ 1.96 $ 1.00
=========== ===========
</TABLE>
/(a)/ Net income before geological and geophysical, exploratory and
abandonment, depreciation, depletion and amortization, impairment and
loss on sales of oil and gas properties and income taxes.
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<TABLE>
<CAPTION>
SUMMARY PRODUCTION, PRICE AND COST DATA
Quarter Ended
March 31,
------------------------------------
%
2000 1999 Change
---------- ----------- -----------
<S> <C> <C> <C>
Production by district (MMcfe):
D-J Basin/(1)/ 17,606 16,495 7%
Gulf Coast 2,694 1,036 160%
Total production (MMcfe) 20,300 17,531 16%
Period Production:
Oil (MBbl) 710 594 20%
Gas (MMcf) 16,040 13,967 15%
Equivalent Gas (MMcfe) 20,300 17,531 16%
Equivalent Barrels (MBoe) 3,383 2,922 16%
Daily Production:
Oil (Bbl) 7,803 6,601 18%
Gas (Mcf) 176,262 155,185 14%
Equivalent Gas (Mcfe) 223,081 194,793 15%
Equivalent Barrels (Boe) 37,180 32,465 15%
Average oil price (Bbl) $ 20.42 $ 12.80 60%
Average gas price (Mcf) $ 2.72 $ 2.04 33%
Average price (Mcfe) $ 2.86 $ 2.06 39%
Average price (Boe) $ 17.18 $ 12.35 39%
Costs:
LOE per Mcfe $ 0.35 $ 0.38 -8%
G&A per Mcfe $ 0.10 $ 0.08 25%
LOE and G&A per Mcfe $ 0.45 $ 0.46 -2%
DD&A per Mcfe $ 0.73 $ 0.81 -10%
(DD&A includes depreciation
on non oil and gas assets)
</TABLE>
/(1)/ Includes nominal production volumes in the Northern Rockies and
Mid-Continent.
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Assets
Current assets $ 89,068 $ 77,662
Oil & gas properties 1,020,159 992,334
Accumulated DD&A (241,644) (227,691)
Gas gathering and transportation
facilities 54,879 54,627
Accumulated DD&A (2,685) (2,016)
Other assets 15,587 16,262
----------- ----------
Total assets $ 935,364 $ 911,178
=========== ==========
March 31, December 31,
2000 1999
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities $ 129,331 $ 114,595
Bank debt 220,000 227,000
Payable to KMI, net of current portion 21,987 27,556
9 7/8% Subordinated notes, due 2003 74,785 74,771
9 1/4% Subordinated notes, due 2006 230,966 230,813
Other long-term liabilities & deferred
revenue 20,471 15,804
Deferred taxes 59,322 53,246
Stockholders' equity 178,502 167,393
----------- ----------
Total liabilities and stockholders' equity $ 935,364 $ 911,178
=========== ==========
</TABLE>
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Quarter Ended
March 31,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,116 $ 106
Depreciation, depletion and amortization 14,855 14,198
Depreciation expense offset against revenue 312 -
Impairment and loss on sales of oil and gas properties 100 -
Amortization of deferred charges, debt issue costs
and deferred compensation 892 1,171
Surrendered and expired acreage 1,703 735
Transfer treasury stock to 401(k) plan 1,057 -
Deferred income tax provision 6,076 65
(Increase) decrease in accounts receivable (7,464) 1,526
Increase in accounts payable and accrued expenses 21,000 5,730
Decrease in deferred revenue, net - (2,524)
Other (3,558) 14
----------- -----------
Net cash provided by operating activities 45,089 21,021
----------- -----------
Cash flows from investing activities:
Exploration, development and leasehold costs (29,996) (19,891)
Workover equipment additions (41) -
Gas gathering and transportation facilities additions (251) (88)
Other property additions (75) (125)
Net proceeds from the sale of oil and gas properties 163 -
Decrease in property related payables (2,492) (1,937)
----------- -----------
Net cash used in investing activities (32,692) (22,041)
----------- -----------
Cash flows from financing activities:
Proceeds from bank debt 30,000 -
Repayments of bank debt (37,000) (3,000)
Repayment of KMI debt (4,675) -
Exercise of options and warrants 1,523 -
Issuance of common stock - 611
Purchase of treasury stock (1,783) -
----------- -----------
Net cash used in financing activities (11,935) (2,389)
----------- -----------
Net increase (decrease) in cash and
cash equivalents 462 (3,409)
Cash and cash equivalents, beginning
of the period 518 9,659
----------- -----------
Cash and cash equivalents, end of
the period $ 980 $ 6,250
=========== ===========
</TABLE>
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<TABLE>
<CAPTION>
2000 DEVELOPMENT, EXPLOITATION AND EXPLORATION COSTS
(In Thousands)
Quarter Ended 3/31/00
--------------------------------------------------------------------------------------
Northern
D-J Basin Gulf Coast Rockies Other Total
--------------- ----------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Capitalized Costs
Land $ (347) $ 2,394 $ 71 $ 377 $ 2,495
Exploration Drilling --- 6,246 907 --- 7,153
Development Drilling 6,650 --- --- --- 6,650
Recompletions and Refracs 12,237 --- --- --- 12,237
Acquisitions 206 --- --- --- 206
Capitalized Interest & Other 1,336 234 46 (361) 1,255
--------------- ----------------- --------------- --------------- --------------
Total Capitalized Costs 20,082 8,874 1,024 16 29,996
--------------- ----------------- --------------- --------------- --------------
Costs Charged to Income Statement
Geological & Geophysical 94 1,595 629 1,232 3,550
Exploratory Dryholes 4 194 --- --- 198
Surrendered & Expired Acreage/(1)/ 13 1,682 8 --- 1,703
Other Exploratory 30 628 89 20 767
--------------- ----------------- --------------- --------------- --------------
Total G&G and Exploration Costs 141 4,099 726 1,252 6,218
--------------- ----------------- --------------- --------------- --------------
Total Development, Exploitation
and Exploration Costs $ 20,223 $ 12,973 $ 1,750 $ 1,268 $ 36,214
=============== ================= =============== =============== ==============
</TABLE>
/(1)/ Includes non-cash charges in the current period for certain previously
capitalized leasehold costs attributable to expired acreage and associated
capitalized interest.
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