<PAGE> 1
FORM 10-Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 period ended June 30, 1996
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: 0-20100
BELDEN & BLAKE CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 34-1686642
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5200 Stoneham Road
North Canton, Ohio 44720
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(Address of principal executive offices) (Zip Code)
(330) 499-1660
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Number of common shares of Belden & Blake Corporation
Outstanding as of July 31, 1996 11,171,081
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BELDEN & BLAKE CORPORATION
INDEX
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I Financial Information:
- ------
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996 and 1
December 31, 1995
Consolidated Statements of Operations for the three and 3
six months ended June 30, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the 4
six months ended June 30, 1996 and the years ended
December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the six 5
months ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II Other Information
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Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE> 3
BELDEN & BLAKE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
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(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 12,569 $ 12,322
Accounts receivable, net 29,792 28,123
Inventories 9,478 9,253
Deferred income taxes 2,658 2,254
Other current assets 2,094 2,198
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TOTAL CURRENT ASSETS 56,591 54,150
PROPERTY AND EQUIPMENT
Oil and gas properties (successful efforts method) 242,371 235,344
Gas gathering systems 25,572 25,416
Land, buildings, machinery and equipment 30,878 29,977
------------ ------------
298,821 290,737
Less accumulated depreciation, depletion
and amortization 72,807 59,209
------------ ------------
PROPERTY AND EQUIPMENT, NET 226,014 231,528
OTHER ASSETS 10,928 11,620
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$ 293,533 $ 297,298
============ ============
</TABLE>
The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes generally required by generally accepted accounting principles for
complete financial statements.
See accompanying notes.
1
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BELDEN & BLAKE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
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(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 9,703 $ 11,004
Accrued expenses 22,984 23,811
Current portion of long-term liabilities 494 1,976
------------ ------------
TOTAL CURRENT LIABILITIES 33,181 36,791
LONG-TERM LIABILITIES
Bank and other long-term debt 57,213 67,223
Senior notes 35,000 35,000
Convertible subordinated debentures 6,800 6,800
Other 1,484 1,500
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100,497 110,523
DEFERRED INCOME TAXES 10,242 7,693
SHAREHOLDERS' EQUITY
Common stock without par value; $.10 stated value
per share; authorized 50,000,000 shares; issued
and outstanding 11,171,081 and 11,136,496 shares 1,117 1,114
Preferred stock without par value; $100 stated value
per share; authorized 8,000,000 shares;
issued and outstanding 24,000 shares 2,400 2,400
Paid in capital 126,686 126,063
Retained earnings 19,557 12,820
Unearned portion of restricted stock (147) (106)
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TOTAL SHAREHOLDERS' EQUITY 149,613 142,291
------------ ------------
$ 293,533 $ 297,298
============ ============
</TABLE>
The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes generally required by generally accepted accounting principles for
complete financial statements.
See accompanying notes.
2
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BELDEN & BLAKE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Oil and gas sales $ 18,512 $ 9,767 $ 38,190 $ 18,974
Gas marketing and gathering 8,588 8,789 21,789 17,705
Oilfield sales and service 5,442 3,508 10,922 6,256
Interest and other 1,108 232 1,741 414
--------- --------- --------- ---------
33,650 22,296 72,642 43,349
EXPENSES
Production expense 4,341 2,269 8,485 4,538
Production taxes 717 408 1,511 773
Cost of gas and gathering expense 6,870 7,351 18,127 15,253
Oilfield sales and service 5,051 3,327 10,152 6,067
Exploration expense 1,343 919 2,873 1,814
General and administrative expense 1,395 1,065 2,613 2,014
Interest expense 1,813 1,316 3,824 2,452
Depreciation, depletion and amortization 7,133 3,925 14,701 7,376
--------- --------- --------- ---------
28,663 20,580 62,286 40,287
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 4,987 1,716 10,356 3,062
Provision for income taxes 1,585 633 3,529 1,128
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 3,402 1,083 6,827 1,934
LOSS FROM DISCONTINUED OPERATIONS -- (167) -- (279)
--------- --------- --------- ---------
NET INCOME $ 3,402 $ 916 $ 6,827 $ 1,655
========= ========= ========= =========
PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.30 $ 0.14 $ 0.60 $ 0.26
DISCONTINUED OPERATIONS -- (0.02) -- (0.04)
--------- --------- --------- ---------
NET INCOME $ 0.30 $ 0.12 $ 0.60 $ 0.22
========= ========= ========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 11,171 7,106 11,166 7,104
========= ========= ========= =========
</TABLE>
See accompanying notes.
3
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BELDEN & BLAKE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNEARNED
COMMON COMMON PREFERRED PAID IN RETAINED RESTRICTED
SHARES STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
------- ---------- ---------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1994 7,053 $ 706 $ 2,400 $ 69,865 $ 4,216 $ (330) $ 76,857
Stock issued 32 3 385 388
Net income 3,843 3,843
Preferred stock dividend (180) (180)
Restricted stock 129 105 234
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DECEMBER 31, 1994 7,085 709 2,400 70,379 7,879 (225) 81,142
Stock issued 4,028 403 55,264 55,667
Net income 5,121 5,121
Preferred stock dividend (180) (180)
Stock options exercised 2 -- 25 25
Employee stock bonus 22 2 251 253
Restricted stock 144 119 263
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DECEMBER 31, 1995 11,137 1,114 2,400 126,063 12,820 (106) 142,291
Net income 6,827 6,827
Preferred stock dividend (90) (90)
Stock options exercised 2 -- 31 31
Employee stock bonus 26 2 419 421
Restricted stock 6 1 169 (41) 129
Other 4 4
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JUNE 30, 1996 (UNAUDITED) 11,171 $ 1,117 $ 2,400 $ 126,686 $ 19,557 $ (147) $ 149,613
==================================================================================================================
</TABLE>
See accompanying notes.
4
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BELDEN & BLAKE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
-------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,827 $ 1,655
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 14,701 7,500
(Gain) loss on disposal of property and equipment (8) 119
Deferred income taxes 2,145 501
Deferred compensation and stock grants 682 555
Change in operating assets and liabilities, net of
effects of purchases of businesses:
Accounts receivable and other operating assets (1,092) (1,309)
Inventories (225) 1,121
Accounts payable and accrued expenses (966) (1,052)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 22,064 9,090
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired (254) (23,183)
Proceeds from property and equipment disposals 2,059 382
Additions to property and equipment (11,368) (6,594)
(Increase) decrease in other assets (501) (334)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (10,064) (29,729)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit and long-term debt 7,105 35,011
Repayment of long-term debt and other obligations (18,768) (10,908)
Preferred stock dividends (90) (90)
---------- ----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (11,753) 24,013
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 247 3,374
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,322 3,649
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 12,569 $ 7,023
========== ==========
CASH PAID DURING THE PERIOD FOR:
Interest $ 4,241 $ 2,192
Income taxes 951 597
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of assets in exchange for long-term obligations -- 8,460
</TABLE>
See accompanying notes.
5
<PAGE> 8
BELDEN & BLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
JUNE 30, 1996
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(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Belden
& Blake Corporation (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes included in the Company's annual report on
Form 10-K for the year ended December 31, 1995.
(2) SUBSEQUENT EVENTS
In July 1996, the Company acquired working interests averaging 40% in
17 producing wells, four proved undeveloped locations and 7,000 undeveloped
leasehold acres in Ohio from North American Gas Investment Trust for $1.2
million. The Company operates the wells and owns the remaining working
interests. The interests acquired had estimated proved developed reserves of 0.6
Bcf (billion cubic feet) of natural gas and 53,000 Bbls (barrels) of oil at
January 1, 1996.
In July 1996, the Company signed a letter of intent with NYLife Equity,
Inc. to acquire working interests in 209 wells in Ohio from various NYLife
Energy Investors partnerships for $2.5 million. The Company has operated the
wells on behalf of the NYLife partnerships since 1990. The interests to be
acquired had estimated proved developed reserves of 3.5 Bcf of natural gas and
152,000 Bbls of oil at July 1, 1996.
(3) CHANGE IN ACCOUNTING PRINCIPLE
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of 1996. The Company's
estimate of undiscounted cash flows indicated that such carrying amounts of
assets are expected to be recovered. However, it is possible that the estimates
may change in the future resulting in the write-down of assets to fair value.
6
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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(4) SALE OF TAX CREDIT PROPERTIES
In February and March 1996, the Company sold certain interests that
qualify for the nonconventional fuel source tax credit. The interests were sold
in two separate transactions for approximately $750,000 and $100,000,
respectively, in cash and a volumetric production payment under which 100% of
the cash flow from the properties will go to the Company until approximately
11.7 Bcf and 3.4 Bcf, respectively, of gas has been produced and sold. In
addition to receiving 100% of the cash flow from the properties, the Company
will receive quarterly incentive payments based on production from the
interests. The Company has the option to repurchase the interests at a future
date.
(5) HEDGING ACTIVITIES
As a result of certain 1995 acquisitions, the Company has several
contracts to sell gas at indexed prices. The Company may, from time to time,
partially hedge these contract prices by selling futures contracts on the NYMEX.
The Company began partially hedging its gas price exposure in January 1996. For
the first half of 1996, the Company incurred a $258,000 pretax loss on its
hedging activities due to rapidly rising gas prices during the period. At June
30, 1996, the Company did not have any open futures contracts.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS - SECOND QUARTERS OF 1996 AND 1995 COMPARED
OIL AND GAS SALES. Oil and gas sales increased $8.7 million (90%) in
the second quarter of 1996 compared to the same period of 1995 due to an
increase in oil and gas volumes sold and a higher average price paid for the
Company's oil and gas.
Oil volumes increased 62,000 Bbls (49%) from 124,000 Bbls in the second
quarter of 1995 to 186,000 Bbls in the second quarter of 1996 resulting in an
increase in oil sales of approximately $1.1 million. Gas volumes increased 2.6
Bcf (80%) from 3.3 Bcf in the second quarter of 1995 to 5.9 Bcf in the second
quarter of 1996 resulting in an increase in gas sales of approximately $6.0
million. These volume increases were primarily due to production from properties
acquired and wells drilled in 1995.
The average price paid for the Company's oil increased from $17.71 per
barrel in the second quarter of 1995 to $20.33 per barrel in the second quarter
of 1996 which increased oil sales by approximately $490,000. The average price
paid for the Company's natural gas increased $.19 per Mcf (thousand cubic feet)
to $2.48 per Mcf in the second quarter of 1996 compared to the second quarter of
1995 which increased gas sales in the second quarter of 1996 by approximately
$1.1 million.
GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering
revenue decreased $201,000 (2%) from $8.8 million in the second quarter of 1995
to $8.6 million in the second quarter of 1996 due to a decrease in the volume of
gas purchased from third parties and resold. The decrease was partially offset
by an increase in the average selling price of gas and an increase in gas
gathering revenues.
7
<PAGE> 10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue
increased $1.9 million (55%) from $3.5 million in the second quarter of 1995 to
$5.4 million in the second quarter of 1996. This increase was primarily due to
the sales generated by the three oilfield sales and service companies acquired
by the Company in 1995.
INTEREST AND OTHER REVENUE. Interest and other revenue increased
$876,000 (378%) from $232,000 in the second quarter of 1995 to $1.1 million in
the second quarter of 1996 primarily due to the recognition of income in 1996
from incentive production payments associated with certain properties operated
by Ward Lake.
PRODUCTION EXPENSE. Production expense increased $2.0 million (91%)
from $2.3 million in the second quarter of 1995 to $4.3 million in the second
quarter of 1996. This increase was largely due to the increased production
discussed above. The average production cost increased from $.56 per Mcfe
(equivalent Mcf of natural gas) in the second quarter of 1995 to $.62 per Mcfe
in the second quarter of 1996. This increase was largely due to increased
weather-related repair and maintenance expenses.
PRODUCTION TAXES. Production taxes increased $309,000 (76%) from
$408,000 in the second quarter of 1995 to $717,000 in the second quarter of
1996. This increase was primarily due to the increased production volumes
discussed above.
COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense
decreased $481,000 (7%) from $7.4 million in the second quarter of 1995 to $6.9
million in the second quarter of 1996 due to a decrease in volumes of gas
purchased from third parties. The decrease was partially offset by an increase
in the cost of gas.
OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense
increased $1.7 million (52%) from $3.3 million in the second quarter of 1995 to
$5.1 million in the second quarter of 1996 primarily as a result of the
increased cost of goods sold associated with increased sales resulting from the
acquisitions described above.
EXPLORATION EXPENSE. Exploration expense increased $424,000 (46%) from
$919,000 in the second quarter of 1995 to $1.3 million in the second quarter of
1996 primarily due to higher levels of geological, geophysical and leasing
activity and increases in the size of the technical staff in conjunction with
increased drilling activity.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased $330,000 (31%) from $1.1 million in the second quarter of 1995 to $1.4
million in the second quarter of 1996 primarily due to an increase in franchise
taxes and an increase in estimated profit sharing and bonuses for 1996.
INTEREST EXPENSE. Interest expense increased $497,000 (38%) from $1.3
million in the second quarter of 1995 to $1.8 million in the second quarter of
1996. This increase was primarily due to higher average debt balances incurred
to finance the 1995 acquisitions.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased by $3.2 million (82%) from $3.9 million in the second
quarter of 1995 to $7.1 million in the
8
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
second quarter of 1996. Depletion expense increased $2.4 million (83%) from $3.0
million in the second quarter of 1995 to $5.4 million in the second quarter of
1996. This increase was primarily due to the increased production volumes
described above. Depletion per Mcfe increased from $.73 per Mcfe in the second
quarter of 1995 to $.77 per Mcfe in the second quarter of 1996. This increase
was primarily the result of proved reserves added through acquisitions and
drilling at a higher cost per Mcfe.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from
continuing operations before income taxes increased $3.3 million (191%) from
$1.7 million in the second quarter of 1995 to $5.0 million in the second quarter
of 1996. The operating income from the oil and gas operations segment increased
$2.8 million (98%) from $2.8 million in the second quarter of 1995 to $5.6
million in the second quarter of 1996. The increase was attributable to the
items discussed above. The operating income from the oilfield sales and service
segment increased $130,000 from an operating loss of $29,000 in the second
quarter of 1995 to operating income of $101,000 in the second quarter of 1996.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased $2.3 million (214%) from $1.1 million in the second quarter of 1995 to
$3.4 million in the second quarter of 1996. This increase in income from
continuing operations was primarily the result of the items discussed above.
Provision for income taxes from continuing operations increased $952,000 (150%)
from $633,000 in the second quarter of 1995 to $1.6 million in the second
quarter of 1996. This increase was attributable to an increase in income from
continuing operations before income taxes partially offset by a decrease in the
effective tax rate. Income from continuing operations on a per share basis
increased from $.14 per share in the second quarter of 1995 to $.30 per share in
the second quarter of 1996. This increase was primarily the result of the
factors discussed above.
LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations
was $258,000 ($167,000 net of tax benefit or $.02 per share) in the second
quarter of 1995.
RESULTS OF OPERATIONS - SIX MONTHS OF 1996 AND 1995 COMPARED
OIL AND GAS SALES. Oil and gas sales increased $19.2 million (101%) in
the first six months of 1996 compared to the same period of 1995 due to an
increase in oil and gas volumes sold and a higher average price paid for the
Company's oil and gas.
Oil volumes increased 115,000 Bbls (48%) from 242,000 Bbls in the first
six months of 1995 to 357,000 Bbls in the first six months of 1996 resulting in
an increase in oil sales of approximately $2.0 million. Gas volumes increased
6.1 Bcf (98%) from 6.2 Bcf in the first six months of 1995 to 12.3 Bcf in the
first six months of 1996 resulting in an increase in gas sales of approximately
$14.6 million. These volume increases were primarily due to production from
properties acquired and wells drilled in 1995.
The average price paid for the Company's oil increased from $17.22 per
barrel in the first six months of 1995 to $19.09 per barrel in the first six
months of 1996 which increased oil sales by approximately $670,000. The average
price paid for the Company's natural gas increased $.16 per Mcf to $2.54 per Mcf
in the first six months of 1996 compared to the first six months of 1995 which
increased gas sales in the first six months of 1996 by approximately $2.0
million.
9
<PAGE> 12
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering
revenue increased $4.1 million (23%) from $17.7 million in the first six months
of 1995 to $21.8 million in the first six months of 1996 due to an increase in
the volume of gas marketed, an increase in the average selling price of gas and
an increase in gas gathering revenues.
OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue
increased $4.6 million (75%) from $6.3 million in the first six months of 1995
to $10.9 million in the first six months of 1996. This increase was primarily
due to the sales generated by the three oilfield sales and service companies
acquired by the Company in 1995.
INTEREST AND OTHER REVENUE. Interest and other revenue increased $1.3
million (321%) from $414,000 in the first six months of 1995 to $1.7 million in
the first six months of 1996 primarily due to the recognition of income in 1996
from incentive production payments associated with certain properties operated
by Ward Lake.
PRODUCTION EXPENSE. Production expense increased $4.0 million (87%)
from $4.5 million in the first six months of 1995 to $8.5 million in the first
six months of 1996. This increase was largely due to the increased production
discussed above. The average production cost remained consistent at $.59 per
Mcfe in the first six months of 1995 and 1996.
PRODUCTION TAXES. Production taxes increased $738,000 (95%) from
$773,000 in the first six months of 1995 to $1.5 million in the first six months
of 1996. This increase was primarily due to the increased production volumes
discussed above.
COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense
increased $2.8 million (19%) from $15.3 million in the first six months of 1995
to $18.1 million the first six months of 1996 due to an increase in volumes of
gas purchased and an increase in the cost of gas.
OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense
increased $4.1 million (67%) from $6.1 million in the first six months of 1995
to $10.2 million in the first six months of 1996 primarily as a result of the
increased cost of goods sold associated with increased sales resulting from the
acquisitions described above.
EXPLORATION EXPENSE. Exploration expense increased $1.1 million (58%)
from $1.8 million in the first six months of 1995 to $2.9 million in the first
six months of 1996 primarily due to higher levels of geological, geophysical and
leasing activity and increases in the size of the technical staff in conjunction
with increased drilling activity.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased $599,000 (30%) from $2.0 million in the first six months of 1995 to
$2.6 million in the first six months of 1996 primarily due to an increase in
franchise taxes and an increase in estimated profit sharing and bonuses for
1996.
INTEREST EXPENSE. Interest expense increased $1.3 million (56%) from
$2.5 million in the first six months of 1995 to $3.8 million in the first six
months of 1996. This increase was primarily due to higher average debt
balances incurred to finance the 1995 acquisitions.
10
<PAGE> 13
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased by $7.3 million (99%) from $7.4 million in the first six
months of 1995 to $14.7 million in the first six months of 1996. Depletion
expense increased $6.0 million (109%) from $5.4 million in the first six months
of 1995 to $11.4 million in the first six months of 1996. This increase was
primarily due to the increased production volumes described above. Depletion per
Mcfe increased from $.71 per Mcfe in the first six months of 1995 to $.78 per
Mcfe in the first six months of 1996. This increase was primarily the result of
proved reserves added through acquisitions and drilling at a higher cost per
Mcfe.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from
continuing operations before income taxes increased $7.3 million (238%) from
$3.1 million in the first six months of 1995 to $10.4 million in the first six
months of 1996. The operating income from the oil and gas operations segment
increased $6.9 million (130%) from $5.3 million in the first six months of 1995
to $12.2 million in the first six months of 1996. The increase was attributable
to the items discussed above. The operating income from the oilfield sales and
service segment increased $422,000 from an operating loss of $228,000 in the
first six months of 1995 to operating income of $194,000 in the first six months
of 1996.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased $4.9 million (253%) from $1.9 million in the first six months of 1995
to $6.8 million in the first six months of 1996. This increase in income from
continuing operations was primarily the result of the items discussed above.
Provision for income taxes from continuing operations increased $2.4 million
(213%) from $1.1 million in the first six months of 1995 to $3.5 million in the
first six months of 1996. This increase was attributable to an increase in
income from continuing operations before income taxes partially offset by a
decrease in the effective tax rate. Income from continuing operations on a per
share basis increased from $.26 per share in the first six months of 1995 to
$.60 per share in the first six months of 1996. This increase was primarily the
result of the factors discussed above.
LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations
was $431,000 ($279,000 net of tax benefit or $.04 per share) in the first six
months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital is closely related to and dependent on
the current prices paid for its oil and gas.
The Company's current ratio at June 30, 1996 was 1.71 to 1.00. During
the first six months of 1996, working capital increased $6.0 million from $17.4
million to $23.4 million. The increase was primarily due to a reduction in
accounts payable and accrued expenses ($2.1 million), an increase in accounts
receivable ($1.7 million) and a reduction in the current portion of long-term
liabilities ($1.5 million). The reduction in the current portion of long-term
debt was due to a final principal payment of $1.5 million on a note used to
finance the U.S. Energy acquisition in 1995. The Company's operating activities
provided cash flow of $22.1 million during the first six months of 1996.
On May 25, 1995, the Company's revolving bank facility was amended. The
facility was increased to $200 million, the maturity date was extended to March
31, 1999, and the borrowing base was increased to $81 million. The borrowing
base is calculated by the bank group and is based on the
11
<PAGE> 14
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
cash flows generated by the Company's proved developed reserves, gas gathering
systems and other corporate assets. Generally, the Company can expect to have
the borrowing base increased by at least 50% of the present value before income
taxes (discounted at 10% per annum) of any proved developed reserves added
through acquisition or drilling.
On February 16, 1996, the Company's revolving bank facility was further
amended. The maturity date was extended to March 31, 2001 and the LIBOR interest
rate option was modified to decrease from LIBOR + 2% to a range of LIBOR +
1-1/4% to LIBOR + 3/4% as outstanding balances decrease in relation to the
borrowing base.
Outstanding balances under the facility incur interest at the Company's
choice of either: (1) the one, two or three-month LIBOR + 1.25% (6.84% for the
three-month LIBOR interest rate option at June 30, 1996) or (2) the bank's prime
rate (8.25% at June 30, 1996). During the first half of 1996, the Company paid
down its outstanding balances on this facility by $10 million. At June 30, 1996,
the Company had $57 million outstanding under this facility.
The amended facility will continue to restrict the sale of assets to no
more than 15% of shareholders' equity in any one year and will require the
Company to maintain certain levels of net worth, working capital and debt
service coverage.
When market conditions are favorable, the Company may enter into
interest rate swap arrangements, whereby a portion of the Company's floating
rate exposure is exchanged for a fixed interest rate. The Company had no such
derivative financial instruments at June 30, 1996.
During 1993, the Company placed $35 million of 7% fixed-rate senior
notes with five insurance companies in a private placement. These notes, which
are interest-only for four years, mature on September 30, 2005. Equal annual
principal payments of $3,888,888 will be required on each September 30
commencing in 1997.
The senior note agreement limits the Company's senior debt to 50% of
the Company's discounted present value (at 10%) of its oil and gas reserves plus
the net book value of its gas gathering systems. Other terms and covenants are
substantially the same as those contained in the $200 million revolving credit
facility.
The Company seeks to replace its production and expand its reserve base
through the acquisition of producing oil and gas properties, development
drilling in the shallow blanket formations and exploratory and development
drilling in the less developed and deeper formations in the Appalachian and
Michigan Basins. The Company's acquisition activities in 1996 are discussed in
Note (2) to the Consolidated Financial Statements. The Company plans to drill
approximately 200 gross wells in 1996. The following table summarizes the
Company's drilling activities for the six months ended June 30, 1996.
12
<PAGE> 15
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
1996 DRILLING RESULTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
-------------------------
GROSS NET
---------- ----------
<S> <C> <C>
Development wells
Shallow blanket formations
Productive ............................... 41 34.3
Dry ...................................... -- --
Less developed and deeper formations
Productive ............................... 12 8.1
Dry ...................................... 5 3.3
Exploratory wells
Productive ............................... -- --
Dry ...................................... -- --
</TABLE>
The shallow blanket formation wells were drilled in Michigan to the
Antrim Shale formation; in New York and Pennsylvania to the Medina Sandstone
formation; in New York to the Bass Island Sandstone formation; and in West
Virginia to the Devonian Shale formation. The wells drilled to the less
developed and deeper formations were drilled to the Dundee Carbonate and
Niagaran Carbonate formations in Michigan; to the Beekmantown Dolamite, Rose Run
Sandstone and Trempealeau Sandstone formations in Ohio; and to the Onondaga
Limestone and Oriskany Sandstone formations in Pennsylvania.
The Company currently expects to spend approximately $28 million during
1996 on its direct drilling activities and approximately $9 million for other
capital expenditures. The Company's acquisition program is expected to be
financed with any available cash flow over $37 million and with its available
bank credit line. The Company believes that its existing sources of working
capital are sufficient to satisfy all currently anticipated working capital
requirements.
The level of the Company's cash flow in the future will depend on a
number of factors including the demand and price levels for oil and gas, its
ability to acquire additional producing properties and the scope and success of
its drilling activities. The Company intends to finance such activities
principally through its available cash flow, through additional borrowings and,
to the extent necessary, the issuance of additional common or preferred stock.
FORWARD-LOOKING INFORMATION
The forward-looking statements regarding future operating and financial
performance contained in this report involve risks and uncertainties that
include, but are not limited to, the Company's future production and costs of
operation, the market demand for, and prices of, oil and natural gas, results of
the Company's future drilling and gas marketing activity, the uncertainties of
reserve estimates, environmental risks, and other factors detailed in the
Company's filings with the Securities and Exchange Commission. Actual results
may differ materially from forward-looking statements made in this report.
13
<PAGE> 16
- --------------------------------------------------------------------------------
PART II Other information
Item 4. Submission of Matters to a Vote of Security Holders
At the annual shareholders meeting held May 23, 1996 the
shareholders approved an amendment to the Company's Amended
Articles of Incorporation to increase the number of authorized
common shares available for issuance from 12,000,000 shares to
50,000,000 shares. There were 7,246,285 votes for the
amendment, 969,038 votes against the amendment or withheld,
32,031 abstentions, and 1,713,528 broker non-votes.
The shareholders also approved an amendment to the Company's
Stock Option Plan. There were 8,242,811 votes for the
amendment, 409,552 votes against the amendment or withheld,
254,907 abstentions, and 1,713,528 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of Earnings Per Common and
Common Equivalent Shares
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
14
<PAGE> 17
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BELDEN & BLAKE CORPORATION
Date: August 5, 1996 By:/S/ Henry S. Belden, IV
------------------------ ------------------------------------------
Henry S. Belden, IV,
Director, Chairman, and Chief
Executive Officer
Date: August 5, 1996 By:/S/ Ronald E. Huff
------------------------ ------------------------------------------
Ronald E. Huff, Director, Senior Vice
President and Chief Financial Officer
15
<PAGE> 1
EXHIBIT 11.1
- --------------------------------------------------------------------------------
BELDEN & BLAKE CORPORATION
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARES
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
--------------------------------- ----------------------------
1996 1995 1996 1995
---------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Average shares outstanding 11,171 7,106 11,166 7,104
Net effect of conversion of stock options and
warrants -- -- -- --
Total primary shares 11,171 7,106 11,166 7,104
Net effect of convertible securities -- -- -- --
Total fully diluted shares 11,171 7,106 11,166 7,104
Net income $ 3,402 $ 916 $ 6,827 $ 1,655
Less preferred stock dividends 45 45 90 90
Net income applicable to common shares
primary 3,357 871 6,737 1,565
Plus 7.5% preferred stock dividends -- -- -- --
Net income applicable to common shares
fully diluted 3,357 871 6,737 1,565
Earnings per common share primary .30 .12 .60 .22
Earnings per common share fully diluted .30 .12 .60 .22
</TABLE>
The effects of common stock options, warrants and convertible
securities have not been included in the computation as their effect is either
not dilutive or antidilutive.
16
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000880114
<NAME> BELDEN & BLAKE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,569
<SECURITIES> 0
<RECEIVABLES> 29,792
<ALLOWANCES> 0
<INVENTORY> 9,478
<CURRENT-ASSETS> 56,591
<PP&E> 298,821
<DEPRECIATION> 72,807
<TOTAL-ASSETS> 293,533
<CURRENT-LIABILITIES> 33,181
<BONDS> 100,497
<COMMON> 1,117
0
2,400
<OTHER-SE> 146,096
<TOTAL-LIABILITY-AND-EQUITY> 293,533
<SALES> 70,901
<TOTAL-REVENUES> 72,642
<CGS> 38,275
<TOTAL-COSTS> 38,275
<OTHER-EXPENSES> 20,187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,824
<INCOME-PRETAX> 10,356
<INCOME-TAX> 3,529
<INCOME-CONTINUING> 6,827
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,827
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
