SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------- -------
Commission file number 1-11516
REMINGTON OIL AND GAS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2369148
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
8201 Preston Road, Suite 600, Dallas, Texas 75225-6211
(Address of principal executive offices)
(Zip code)
(214) 210-2650
(Registrant's telephone number, including area code)
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
--- ---
There were 21,476,855 outstanding shares of Common Stock, $0.01 par value, on
August 4, 2000.
<PAGE>
Remington Oil and Gas Corporation
Table of Contents
PART I, FINANCIAL INFORMATION 3
ITEM 1. FINANCIAL STATEMENTS 3
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 11
PART II, OTHER INFORMATION 12
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 2. CHANGES IN SECURITIES 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
Remington Oil and Gas Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share data)
June 30, December 31,
2000 1999
Assets ----------- ------------
Current assets (Unaudited)
Cash and cash equivalents $ 9,859 $ 4,356
Restricted cash and cash equivalents 11,442 11,042
Accounts receivable 12,160 6,421
Prepaid expenses and other current assets 1,117 2,054
----------- ------------
Total current assets 34,578 23,873
----------- ------------
Properties
Oil and natural gas properties (successful-efforts
method) 294,845 275,690
Other properties 2,672 2,862
Accumulated depreciation, depletion and
amortization (192,074) (183,971)
----------- ------------
Total properties 105,443 94,581
----------- ------------
Other assets 1,806 872
----------- ------------
Total assets $ 141,827 $ 119,326
=========== ============
Liabilities and stockholders' equity
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 12,355 $ 6,613
Phillips judgment payable 19,258 18,894
Short-term notes payable and current portion of
long-term notes payable 9,590 2,635
----------- ------------
Total current liabilities 41,203 28,142
----------- ------------
Other liabilities
Long-term accounts payable 3,793 1,598
Notes payable 22,271 27,526
8 1/4% Convertible subordinated notes payable
due in 2002 5,950 5,950
----------- ------------
Total other liabilities 32,014 35,074
----------- ------------
Total Liabilities 73,217 63,216
----------- ------------
Commitments and contingencies (Note 2)
Minority interest in subsidiaries - 56
Stockholders' equity
Preferred stock, $0.01 par value, 25,000,000
Shares authorized, shares issued - none - -
Common stock, $0.01 par value, 100,000,000 shares
authorized, 21,511,214 shares issued and
21,476,855 shares outstanding in 2000, 21,491,170
shares issued and 21,285,195 shares outstanding
in 1999 215 213
Additional paid-in capital 45,302 44,273
Retained earnings 23,093 11,568
----------- ------------
Total stockholders' equity 68,610 56,054
----------- ------------
Total liabilities and stockholders' equity $ 141,827 $ 119,326
=========== ============
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
Remington Oil and Gas Corporation
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2000 1999 2000 1999
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Oil sales $ 8,221 $ 4,364 $ 15,691 $ 7,096
Gas sales 10,602 4,868 19,001 8,525
Other income 794 791 1,365 1,851
-------- --------- --------- ---------
Total revenues 19,617 10,023 36,057 17,472
-------- --------- --------- --------
Costs and expenses
Operating costs and expenses 3,189 1,878 4,976 3,551
Net Profits interest expense 464 456 1,057 690
Exploration expenses 927 633 1,209 5,155
Depreciation, depletion and amortization 4,781 5,504 9,199 10,260
General and administrative 1,349 1,725 2,698 3,009
Royalty settlement - - 3,216 -
Interest and financing expense 1,148 872 2,164 2,528
-------- --------- --------- ---------
Total costs and expenses 11,858 11,068 24,519 25,193
-------- --------- --------- ---------
Income (loss) before taxes and minority interest 7,759 (1,045) 11,538 (7,721)
-------- --------- --------- ---------
Income tax expense - 6 - 6
Minority interest in income of subsidiaries - 22 (5) 20
-------- --------- --------- ---------
Net income (loss) 7,759 (1,073) 11,543 (7,747)
-------- --------- --------- ---------
Other comprehensive income (loss) (net of
taxes) - - - -
-------- --------- --------- ---------
Comprehensive income (loss) $ 7,759 $ (1,073) $ 11,543 $ (7,747)
======== ========= ========= =========
Basic income (loss) per share $ 0.36 $ (0.05) $ 0.54 $ (0.36)
======== ========= ========= =========
Diluted income (loss) per share $ 0.35 $ (0.05) $ 0.53 $ (0.36)
======== ========= ========= =========
Weighted average shares outstanding (Basic) 21,469 21,311 21,386 21,286
======== ========= ========= =========
Weighted average shares outstanding (Diluted) 22,549 21,311 22,162 21,286
======== ========= ========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
Remington Oil and Gas Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
June 30,
--------------------
2000 1999
--------- ---------
Cash flow provided by operations
Net income (loss) $ 11,543 $( 7,747)
Adjustments to reconcile net income
Depreciation, depletion and amortization 9,199 10,260
Amortization of deferred charges 80 672
Dry hole costs 693 4,185
Minority interest in income of subsidiaries (5) 20
Royalty settlement 3,216 -
Stock issued to directors and employees for
compensation 88 78
(Gain) on sale of properties (13) (95)
Changes in working capital
(Increase) in accounts receivable (5,746) (1,259)
(Increase) decrease in prepaid expenses and other
current assets 1,514 (48)
Increase (decrease) in accounts payable and accrued
liabilities 5,208 (557)
(Increase) in restricted cash (400) (2,042)
--------- ---------
Net cash flow provided by operations 25,377 3,467
--------- ---------
Cash from investing activities
Payments for capital expenditures (20,560) (14,026)
Proceeds from property sales 232 95
--------- ---------
Net cash (used in) investing activities (20,328) (13,931)
--------- ---------
Cash from financing activities
Proceeds from note payable 1,790 30,628
Debt issuance costs for line of credit - (528)
Payments on notes payable and long-term accounts
payable (1,329) (36,600)
Stock options exercised 11 -
Dividends paid to minority stockholders of
subsidiaries (18) (20)
--------- ---------
Net cash provided by (used in) financing activities 454 (6,520)
--------- ---------
Net increase (decrease) in cash and cash equivalents 5,503 (16,984)
Cash and cash equivalents at beginning of period 4,356 19,018
--------- ---------
Cash and cash equivalents at end of period $ 9,859 $ 2,034
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
Note 1. Accounting Policies and Basis of Presentation
Remington Oil and Gas Corporation is an independent oil and gas exploration
and production company incorporated in Delaware. Our oil and gas properties
are located in three areas - offshore Gulf of Mexico, Mississippi/Alabama,
and onshore Gulf Coast.
We prepared these financial statements according to the instructions for Form
10-Q. Therefore, the financial statements do not include all disclosures
required by generally accepted accounting principles. However, we have
recorded all transactions and adjustments necessary to fairly present the
financial statements included in this Form 10-Q. The adjustments made are
normal and recurring. The following notes describe only the material changes
in accounting policies, account details or financial statement notes during
the first six months of 2000. Therefore, please read these financial
statements and notes to the financial statements together with the audited
financial statements and notes to financial statements in our 1999 Form 10-K.
The income statements for the three and six months ended June 30, 2000,
cannot necessarily be used to project results for the full year.
Note 2. Contingencies
Phillips Petroleum Litigation
Our litigation with Phillips Petroleum Company is a material contingency. We
have included a complete discussion of this contingency in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
under the topic "Phillips Petroleum Litigation" on pages 8 through 10 of this
Form 10-Q. Please read this discussion carefully.
Minerals Management Service Issues
In 1999, Minerals Management Service (MMS) issued orders to pay additional
royalty on three issues regarding our South Pass 89 lease. MMS demanded
payment of royalty on $63.4 million of the $69.6 million TETCO settlement
received in 1990. Royalty was paid in 1990 on $5.8 million of the settlement
which was allocated to production, and no royalty was due on the remaining
$.4 million of the settlement. Prior to 1999, the MMS had not questioned our
initial allocation to production or our payment of royalty based on this
allocation. This MMS demand is the same claim that Phillips has been
litigating since 1990. After demonstrating to the MMS that a significant
portion of the 1990 payment was for settlement of litigation between TETCO
and Remington and not associated with production, we reached an agreement
with the MMS to pay additional royalties in the amount of $4.8 million.
Thirty-three percent (33%) of this amount will be charged to the net profits
interest. As a result of this agreement, we recorded a $3.2 million expense
in the first quarter of 2000.
In the settlement agreement, MMS also agreed no royalty would be due on the
$49.8 million termination payment received from TETCO by us in July of 1998,
as it was not from production.
MMS has also claimed that since CKB Petroleum, Inc. was an affiliated entity
of the company, we could not charge MMS our actual cost of $2.75 per barrel
for transportation of their oil, but could only charge the operator's actual
operating charges to CKB Petroleum. We strongly disagree with MMS's position
on this issue and have provided documentation showing that we actually paid
the $2.75 per barrel tariff, that the $2.75 per barrel was the actual cost to
us and our public stockholders, that the costs to CKB Petroleum were
significantly more than the operating charges, and that the tariff of $2.75
per barrel was approved by FERC. Additionally, MMS has alleged that we
underpaid royalties since 1993 on certain oil sold from South Pass 89 through
exchange agreements. This underpayment claim arises from a rule change by
the MMS in 1998. We began crediting MMS with the value of these exchanges in
May of 1999 as set pursuant to their new rule. We strongly disagree with the
position of MMS that it may apply its new rule retroactively to 1993. We
have posted bonds totaling $3.6 million while negotiations are in progress to
resolve these issues with the MMS. We cannot predict at this time if
additional royalties may be due on these claims.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion will assist in the understanding our financial
position and results of operations. The information below should be read in
conjunction with the financial statements, the related notes to financial
statements, and our Form 10-K for the year ended December 31, 1999.
Our discussion contains both historical and forward-looking information. We
assess the risks and uncertainties about our business, long-term strategy,
and financial condition before we make any forward-looking statements, but we
cannot guarantee that our assessment is accurate or that our goals and
projections can or will be met. Statements concerning results of future
exploration, exploitation, development, and acquisition expenditures as well
as revenue, expense, and reserve levels are forward-looking statements. We
make assumptions about commodity prices, drilling results, production costs,
administrative expenses, and interest costs that we believe are reasonable
based on currently available information of known facts and trends.
This discussion is primarily an update to the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
1999 Form 10-K. We recommend that you read this discussion in conjunction
with the Form 10-K.
Our long-term strategy is to increase shareholder value by economically
increasing reserves, production, and cash flow on an annual basis. At the
same time, we believe it is important to maintain a strong balance sheet by
keeping our total debt at a manageable level. We will balance our capital
expenditures, financed primarily by operating cash flow and bank debt, among
exploration, development, and acquisitions.
Liquidity and Capital Resources
On March 31, 2000, our current liabilities exceeded our current assets by
$6.6 million. Excluding the Phillips judgment payable from current
liabilities and the related restricted cash and cash equivalents from current
assets, would result in our current assets exceeding our current liabilities
by $3.6 million. From December 31, 1999, to June 30, 2000, our current assets
increased by $10.7 million.
Cash flow from operations increased by $21.9 million primarily because of
increased oil and gas revenues during the first half of 2000. Gas sales
increased by $10.5 million or 123% and oil sales increased by $8.6 million or
121%. The increase in gas sales relates to increased production ($6.9
million) and gas prices ($3.5 million) and the increase in oil revenues
relates primarily to increased oil prices.
During the first half of 2000, we incurred capital expenditures totaling
$20.6 million. The capital expenditures included drilling 4 successful
exploration wells in the Gulf of Mexico and 11 successful wells in
Mississippi and South Texas. During the remainder of 2000, we will continue
to incur costs to build 2 platforms, complete 2 offshore wells and drill
approximately 11 additional wells. We have budgeted $34.5 million for capital
expenditures during the remainder of the year. We expect that our cash flow
from operations and available bank line of credit will be adequate to fund
the capital budget for the reminder of this year.
In July 2000, we agreed to sell certain non-operated producing properties
located in Nueces, Starr, and Victoria Counties, Texas, for approximately
$17.1 million effective as of May 1, 2000. The purchase price of $17.1
million will be reduced by approximately $2.1 million for sales of production
we received, partially offset by operating costs we paid, from May 1, 2000,
to August 1, 2000, the date the sales closed. We expect to record a gain on
sale of approximately $12.4 million during the third quarter of this year. We
will redeploy the cash received from the sale of these properties to our
operated projects in the Gulf of Mexico and new property acquisitions.
In March 2000, our bank amended the terms of our line of credit to increase
the borrowing base from $32.0 million to $35.0 million. The bank will review
the borrowing base semi-annually and may increase or decrease the borrowing
base relative to the redetermined estimate of proved oil and gas reserves. We
pledged our oil and gas properties as collateral for the increased new line
of credit and agreed not to pay dividends. On June 30, 2000, we had $3.2
million of unused borrowing base on the line of credit. Under the current
terms we may not borrow additional funds after October 1, 2000. On that date,
the revolving credit loans convert to term loans, which must be amortized in
equal quarterly principal payments through the final maturity date of March
1, 2003. In connection with the mid-2000 borrowing base redetermination, we
will seek to extend the credit availability date and the final maturity date.
In July, we repaid $2.0 million of the outstanding balance and currently have
$5.2 million available on the line of credit.
Phillips Petroleum Litigation
In 1977, Phillips Petroleum Company assigned its interest in South Pass 89,
offshore Louisiana, to OKC Limited Partnership, predecessor to Remington Oil
and Gas Corporation. The assignment was accomplished through a farmout
agreement in which Phillips retained a 33% net profits interest. Phillips
had obtained, through a predecessor corporation, the lease from the Minerals
Management Service, which only granted rights to oil and gas from production.
Paragraph IV of the farmout states that Phillips' net profits shall be
"thirty-three percent (33%) of one-fourth (1/4) of eight-eighths (8/8)" of
production. Paragraph IV (a) states that Phillips "shall look exclusively to
the oil, gas, condensate, and other hydrocarbons, ... produced from the
subject lease for the satisfaction and realization of the net profits
interest." Subparagraph IV (d) (4) states the net profits account shall be
credited with "an amount equal to the proceeds of all judgments and claims
collected on account of its ownership of the subject lease." Subparagraph
IV (d) (5) states the net profits account shall be credited with "an amount
equal to all monies and things of value received by or inuring to the benefit
by virtue of its ownership interest in the subject lease" of Remington. The
interpretation of Paragraph IV and its subparagraphs has been the primary
subject of the recent litigation between Phillips and us. Our claim, upheld
by the trial court, is that Phillips can only look to actual production for
satisfaction of the net profits interest according to the clear language of
Paragraph IV. It is our position that Subparagraphs IV (d) (4) and (5)
merely define types of production to be credited to the net profits account.
Phillips claims that Subparagraphs IV (d) (4) and (5) should stand alone and
not as subsets of Paragraph IV and entitle Phillips to amounts received by us
regardless of whether they represent revenues from or associated with
production from the lease. We believe that if Phillips, as drafter of the
farmout agreement, intended Subparagraphs IV (d) (4) and (5) to be so
controlling, no reference to production would have been necessary in the
farmout.
The current litigation between Phillips and us involves three issues related
to the interpretation of Paragraph IV and its subparagraphs -- the TETCO
issue, the Overriding Royalty issue, and the Pipeline Tariff issue detailed
below.
TETCO - We entered into a gas purchase agreement with TETCO in 1982
dedicating our gas from South Pass 89 to TETCO for specified prices. In
1989, TETCO sued us in an attempt to terminate this high priced gas contract.
In November of 1990, we settled with TETCO and received $69.6 million to
"settle all causes of action, claims and controversies between them
pertaining to the Litigation." Furthermore, we agreed to a new contract
price for gas sold to TETCO in exchange for its agreement to drop its legal
challenges to the gas contract. TETCO also paid us an additional $5.4
million (over and above the $69.6 million) for past production which we
credited to the net profits account. This payment has not been subject to any
litigation. In May of 1991, we allocated $5.8 million of the $69.6 million as
production to the net profits account. Phillips claims the remaining $63.8
million should have been credited to the net profits account. After a three
week trial in 1997, the Louisiana trial court ruled that we should have
credited $41.2 million to the net profits account as proceeds from production
and thus owed an additional $9.3 million plus interest to Phillips. As part
of its ruling, the trial court supported our claim that Phillips could only
look to actual production for its net profits interest and that the remaining
$28.4 million of the TETCO payment was for settlement of Remington's
counterclaims against TETCO. Phillips appealed this ruling and on January
5, 2000, the Court of Appeal, Fourth Circuit, State of Louisiana, overturned
the trial court and held that the full $69.6 million should be allocated to
the net profits account based on Phillips' contention that all proceeds of
all judgments and claims must be included in the net profits account
regardless of whether they related to production or to the lease. We have
requested a rehearing on this matter and are awaiting the decision of the
Appellate Court.
Overriding Royalty - Phillips claims that in months when no net profits are
achieved, its net profits interest should revert to an overriding royalty. We
claim that once net profits are achieved, Phillips' net profits interest does
not revert to an overriding royalty position until cumulative net profits are
depleted. The trial court ruled in Phillips favor and awarded Phillips $1.6
million plus interest. We appealed this issue, but the appellate court
upheld the trial court's ruling. We believe that both the trial court and the
appellate court are wrong on this issue, and we will continue to appeal these
rulings.
Pipeline Tariff - The farmout agreement allows transportation costs to be
charged to the net profits account. Initially, Marathon constructed and
operated the oil pipeline from the South Pass complex to Venice, Louisiana,
and charged us a tariff of $2.75 per barrel for transportation. This tariff
was charged to the net profits account with no complaint from Phillips from
inception of production in 1982 until 1989. In 1984, CKB Petroleum, Inc.
purchased an interest in the pipeline and entered into a 20-year
transportation agreement with us for $2.75 per barrel to transport all of our
oil. All liabilities associated with the pipeline interest were assumed by
CKB Petroleum, Inc. and Cloyce Box, individually. Before CKB Petroleum
purchased its interest, Phillips was given the right to purchase the interest
under a preferential right clause of the pipeline operating agreement, but
declined to do so. Phillips claimed that we should charge not what we paid
to CKB Petroleum, Inc. for transportation but only a lesser amount which
Phillips claimed was our "actual cost" of transportation. The trial court
dismissed this claim. The appellate court reversed the trial court and
awarded Phillips $7.3 million plus interest. In reaching its decision, the
appellate court contended that we owned the pipeline, which is clearly
incorrect. In fact, we did not purchase the pipeline interest until December
of 1998. We have requested a rehearing on this matter and are awaiting a
ruling from the court.
The total judgment awarded by the trial court in 1998 including interest was
$18.0 million. We recorded an $18.0 million charge to income in the third
quarter of 1998 and continue to accrue interest on this liability each
quarter. The current total liability is $19.3 million. The appellate court
ruling of January 2000, if it stands, would change this liability to
approximately $55.7 million including interest through June 30, 2000. If
unsuccessful on our rehearing request, we intend to appeal to the Louisiana
Supreme Court. Because we believe that it is probable that the decision of
the appellate court will not stand, we have not recorded any additional
contingent liability on our financial statements. Statement of Financial
Accounting Standards No. 5 entitled "Accounting for Contingencies" requires
that when a loss contingency exists, it be accrued if it is reasonably
estimable and it is probable that an unfavorable outcome will occur. In
reaching our conclusion we rely on our legal counsel who have informed us
that in their opinion, the appellate court incorrectly applied the law and
made erroneous findings of fact in reversing the trial court's judgment.
They have further advised us that in their opinion it is as likely as not
that the Court of Appeal's errors will be corrected on rehearing or on appeal
to the Louisiana Supreme Court.
Currently, we have $9 million in restricted cash set aside for this
litigation. If the complete appellate opinion is upheld and the company owes
Phillips an estimated additional $46.7 million over the amount of restricted
capital, our financial position and liquidity could be seriously affected.
It could constitute an event of default under our bank loan agreement, which
might result in acceleration of our long-term debt. Because of the uncertain
nature of this contingent liability, both as to amount and timing as
discussed below, we do not intend at this time to set aside any additional
funds over the restricted capital required by the court. This decision may be
reevaluated as circumstances change.
As of August 4, 2000, the Appellate Court had not ruled on our request for a
rehearing. We do not know when the Court of Appeal will rule on our request
for rehearing. If the court denies the rehearing request, we have thirty days
to appeal to the Louisiana Supreme Court. The Louisiana Supreme Court has 120
days to determine whether it will review the case. If the Supreme Court
determines that it will take the case it will, in all probability, be several
months before the case is heard and a decision rendered. Once the Supreme
Court announces its decision on the suit, it is likely that various issues
will be remanded to the trial court to determine how much, if any, we owe as
a result of the decision. Since the issues are complex and involve
interconnected transactions occurring as early as 1977, it may take several
months to resolve and determine the exact payment amount. When the litigation
is concluded and the amount, if any, of our liability is finally determined,
we intend to use a combination of cash, debt financing, and/or property sales
or, as a last resort, protection from creditors under applicable law to
fulfill the amount of any judgment. Final resolution of this matter through
the courts will take a minimum of several months and could take two or more
years.
In August of 1998, we terminated the TETCO gas contract and received $49.8
million. MMS has agreed that no royalty is owed on this payment, and we did
not credit any of this termination payment to the net profits account, as it
was not from production. Phillips has claimed that this full $49.8 million
payment should be credited to the net profits agreement. Litigation on this
issue was initiated in Collin County, Texas, and subsequently stayed pending
the resolution of all the appeals in Phillips' Louisiana suit. If the trial
court opinion stating that Phillips can only look to production for its net
profits interest is upheld, we anticipate this case would be dismissed. If
the Louisiana appellate court opinion is upheld we will have to litigate
whether the entire amount of the buyout must be credited to the net profits
interest. Total liability for this claim would be $16.4 million plus
statutory interest until the date of settlement. The trial and appeals
regarding this issue could take an additional two years to resolve once the
current Louisiana litigation is concluded.
Results of Operations
We recorded net income for the first six months of 2000 of $11.5 million or
$0.54 per share compared to a loss for the first six months of 1999 of $7.7
million or $0.36 per share. For the three months ended June 30, 2000, we
recorded net income of $7.8 million or $0.36 per share compared to a net loss
of $1.1 million or $0.05 per share for the three months ended June 30, 1999.
The increase in net income results from an increase in total gas production,
an increase in the average price for both oil and gas, and a reduction in dry
hole cost. The following table reflects the increase or decrease in oil and
gas sales revenue due to the changes in prices and volumes.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
(In thousands, except prices)
Oil production volume (Bbls) 321 320 613 619
Oil sales revenue $ 8,221 $ 4,364 $ 15,691 $ 7,096
Price per barrel $ 25.61 $ 13.64 $ 25.60 $ 11.47
Increase (decrease) in oil sales
revenue due to:
Change in prices $ 3,830 $ 8,746
Change in production volume 27 (151)
-------- ---------
Total increase (decrease) in oil
sales revenue $ 3,857 $ 8,595
======== =========
Gas production volume (Mcf) 3,175 2,272 6,329 4,021
Gas sales revenue $ 10,602 $ 4,868 $ 19,001 $ 8,525
Price per Mcf $ 3.34 $ 2.14 $ 3.00 $ 2.12
Increase in gas sales revenue
due to:
Change in prices $ 2,726 $ 3,538
Change in production volume 3,008 6,938
-------- ---------
Total increase in gas sales
revenue $ 5,734 $ 10,476
======== =========
Oil production during the second quarter of 2000 increased slightly while oil
production for the first six months of 2000 decreased slightly when compared
to the same periods in 1999. Decreased oil production from offshore Gulf of
Mexico properties, primarily the South Pass blocks, was offset by increased
production from Mississippi and South Texas. The average oil price increased
by 88% during the second quarter of 2000 compared to the prior year second
quarter and by 123% for the first six months of 2000 compared to the same
period in 1999.
Gas production increased by 40% during the second quarter of 2000 compared to
the second quarter of 1999 primarily from gas produced from the Gulf of
Mexico and from South Texas. Total gas production for the first six months of
2000 increased by 57% primarily from the Gulf of Mexico and South Texas. The
average gas price increased by 56% during the second quarter of 2000 compared
to the second quarter of 1999 and by 42% during the first half of 2000
compared to the first half of 1999.
Operating expenses increased during the three and six months ended June 30,
2000, compared to the same period in 1999 primarily because of a $1.3 million
workover on West Cameron block 170 charged to expense during the second
quarter of 2000. Net profits expense for the second quarter of 2000 was
slightly higher than the prior year, while year to date 2000 the net profits
expense increased by $367,000 as a result of increase oil and gas prices.
Exploration expense increased by $294,000 during the second quarter of 2000
primarily because of one dry hole drilled in Mississippi. Exploration expense
for the first six months of 2000 decreased by $3.9 million primarily because
of lower dry hole costs incurred during the first quarter of 2000.
Depreciation, depletion, and amortization expense decreased by $723,000
during the second quarter of 2000 and by $1.1 million during the first six
months of 2000 compared to the same period in the prior year primarily as a
result of our lower finding costs per unit during the last three years.
General and administrative expenses decreased during the second quarter by
$376,000 compared to the second quarter of 1999. During the first half of
2000, general and administrative expenses decreased by $311,000 when compared
to the first half of 1999. The decrease primarily relates to lower legal
expense for both periods. In May 2000, we reached an agreement with the
Minerals Management Service concerning the royalties due on the settlement of
a 1990-gas purchase contract. Because of the agreement, we recorded an
expense of $3.2 million in the first quarter of 2000.
Interest and financing expense increased by $276,000 during the second
quarter of 2000, compared to the second quarter of 1999 reflecting the recent
increases in interest rates. During the first six months of 2000, interest
and financing expense decreased by $364,000 because we recorded additional
expense in 1999 when we accelerated the amortization of the offering costs on
the 81/4% Convertible Subordinated Notes after we purchased approximately 85%
of the outstanding notes in February 1999. Partially offsetting the decrease
is an increase in interest and financing expense due to higher interest
rates.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our market risk sensitive instrument at June 30, 2000, is a revolving line of
credit from a bank. At June 30, 2000, the unpaid principal balance under the
line was $31.8 million. The interest rate on this debt is sensitive to market
fluctuations, however, we do not believe that significant fluctuations in the
market rate of interest have a material effect on our consolidated financial
position, results of operations, or cash flow from operations.
<PAGE>
PART II, OTHER INFORMATION
Item 1. Legal Proceedings
Incorporated herein by reference is the discussion of litigation set forth in
Part I, Item 1, Notes to the Financial Statements - Note 2. Contingencies of
this Form 10-Q.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On June 16, 2000, we held our annual stockholders' meeting to elect members
to the company's board of directors and ratify Arthur Andersen LLP as the
independent auditors for 2000. The stockholders voted as follows:
Election of Directors For Withheld/Against Abstained
------------ ------------------ -----------
Don D. Box 19,640,457 313,689
John E. Goble, Jr. 19,640,957 313,189
William E. Greenwood 19,640,957 313,189
David H. Hawk 19,640,957 313,189
James Arthur Lyle 19,640,957 313,189
David E. Preng 19,640,957 313,189
Thomas W. Rollins 19,640,957 313,189
Alan C. Shapiro 19,640,957 313,189
James A. Watt 19,640,957 313,189
Ratification of independent
auditors for 2000 19,685,654 80,976 187,516
The members of the board of directors do not serve staggered terms of office.
All directors elected at the meeting were already members of the board at the
time of election. No director serving at the time of the election failed to
retain his seat on the board.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2.0++ Agreement and Plan of Merger dated as of June 22, 1998, by and
between Remington Oil and Gas Corporation and S-Sixteen Holding Company.
3.1* Certificate of Incorporation, as amended.
3.2### Certificate of Amendment of Certificate of Incorporation of Box
Energy Corporation.
3.2.1++ Certificate of Amendment of Certificate of Incorporation of
Remington Oil and Gas Corporation.
3.3+++ By-Laws as amended.
4.1* Form of Indenture Box Energy Corporation to United States Trust
Company of New York, Trustee, dated December 1, 1992, 8 1/4% Convertible
Subordinated Notes due December 1, 2002.
10.1* Farmout Agreement with Aminoil USA, Inc., effective May 1, 1977,
dated May 9, 1977.
10.2* Transportation Agreement with CKB Petroleum, Inc. dated March 1,
1985, as amended on April 19, 1989.
10.3* Agreement of Compromise and Amendment to Farmout Agreement, dated
July 3, 1989.
10.4** Pension Plan of Box Energy Corporation, effective April 16, 1992.
10.5# First Amendment to the Pension Plan of Box Energy Corporation
dated December 16, 1993.
10.6## Second Amendment to the Pension Plan of Box Energy Corporation
dated December 31, 1994.
10.7*** Amended and Restated Promissory Note between Box Energy
Corporation and Box Brothers Holding Company.
10.8*** Amended and Restated Pledge Agreement between Box Energy
Corporation and Box Brothers Holding Company.
10.9*** Agreement by and between Box Energy Corporation and James A.
Watt.
10.10### Box Energy Corporation Severance Plan.
10.11+ Box Energy Corporation 1997 Stock Option Plan (as amended June
17, 1999).
10.12### Box Energy Corporation Non-Employee Director Stock Purchase Plan
10.13~ Form of Employment Agreement effective September 30, 1999, by and
between Remington Oil and Gas Corporation and two executive officers.
10.14~ Form of Employment Agreement effective September 30, 1999, by and
between Remington Oil and Gas Corporation and an executive officer.
10.15~~ Employment Agreement effective January 31, 2000, by and between
Remington Oil and Gas Corporation and James A. Watt.
11.1 Statement regarding Computation of income per share.
27.1 Financial Data Schedule.
(b) No Forms 8-K were filed during the quarter ended June 30, 2000.
------------
* Incorporated by reference to the Company's Registration Statement on
Form S-2 (file number 33-52156) filed with the Commission and effective on
December 1, 1992.
** Incorporated by reference to the Company's Form 10-K (file number 0-
19967) for the fiscal year ended December 31, 1992, filed with the Commission
and effective on or about March 30, 1993.
# Incorporated by reference to the Company's Form 10-K (file number 0-
19967) for the fiscal year ended December 31, 1993, filed with the Commission
and effective on or about March 30, 1994.
## Incorporated by reference to the Company's Form 10-K (file number 0-
19967) for the fiscal year ended December 31, 1994, filed with the Commission
and effective on or about March 30, 1995.
+ Incorporated by reference to the Company's Form 10-Q (file number 1-
11516) for the fiscal quarter ended June 30, 1999, filed with the Commission
and effective on or about August 13, 1999.
*** Incorporated by reference to the Company's Form 10-Q (file number 1-
11516) for the fiscal quarter ended June 30, 1997, filed with the Commission
and effective on or about August 12, 1997.
### Incorporated by reference to the Company's Form 10-K (file number 1-
11516) for the fiscal year ended December 31, 1997, filed with the Commission
and effective on or about March 30, 1998.
++ Incorporated by reference to the Company's Registration Statement on
Form S-4 (file number 333-61513) filed with the Commission and effective on
November 27, 1998.
+++ Incorporated by reference to the Company's Form 10-K (file number 1-
11516) for the fiscal year ended December 31, 1998, filed with the Commission
and effective on or about March 30, 1999.
~ Incorporated by reference to the Company's Form 10-Q (file number 1-
11516) for the fiscal quarter ended September 30, 1999, filed with the
Commission and effective on or about November 12, 1999.
~~ Incorporated by reference to the Company's Form 10-K (file number 1-
11516) for the fiscal year ended December 31, 1999, filed with the Commission
and effective on or about March 30, 2000.
<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.
REMINGTON OIL AND GAS CORPORATION
Date: August 7, 2000 By: /s/ James A. Watt
-------------- -------------------------------------
James A. Watt
President and Chief Executive Officer
Date: August 7, 2000 By: /s/ J. Burke Asher
-------------- -------------------------------------
J. Burke Asher
Vice President/Finance
<PAGE>
