=============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
Commission file number 001-14256
______________
BELCO OIL & GAS CORP.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction
of incorporation or organization)
767 Fifth Avenue, 46th Floor
New York, New York
(Address of principal executive offices)
13-3869719
(IRS Employer Identification Number)
10153
(Zip Code)
(212) 644-2200
(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
As of June 30, 1999, there were 31,769,900 shares of the Registrant's Common
Stock, par value $.01 per share, outstanding.
=============================================================================
FINANCIAL STATEMENTS
BELCO OIL & GAS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30,
1999 December 31,
(Unaudited) 1998
----------- ------------
<C> <C>
<S>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . $ 4,344 $ 2,435
Accounts receivable, oil and gas . . . . . . 23,694 28,464
Assets from commodity price risk management
activities . . . . . . . . . . . . . . . . 2,977 18,643
Other current assets . . . . . . . . . . . . 4,148 1,005
-------- --------
Total current assets . . . . . . . . . 35,163 50,547
-------- --------
PROPERTY AND EQUIPMENT:
Oil and gas properties at cost based on full
cost accounting
Proved oil and gas properties. . . . . . . . 947,233 931,218
Unproved oil and gas properties. . . . . . . 79,532 74,935
Less--Accumulated depreciation, depletion
and amortization . . . . . . . . . . . . . (592,957) (566,613)
-------- --------
Net oil and gas properties. . . . . . . 433,808 439,540
-------- --------
Building and other equipment . . . . . . . . 8,863 8,633
Less--Accumulated depreciation . . . . . . . (1,948) (1,281)
-------- --------
Net building and other equipment. . . . 6,915 7,352
-------- --------
OTHER ASSETS . . . . . . . . . . . . . . . . . . . 6,027 8,097
======== ========
Total assets. . . . . . . . . . . . . . $481,913 $505,536
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable. . . . . . . . . . . . . . . $ 11,989 $ 18,372
Liabilities from commodity price risk
management activities . . . . . . . . . . . 7,159 5,393
Accrued interest. . . . . . . . . . . . . . . 7,021 6,897
Other accrued liabilities . . . . . . . . . . 5,548 5,064
-------- --------
Total current liabilities. . . . . . . . 31,717 35,726
-------- --------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . 291,178 294,990
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . 26,401 31,833
LIABILITIES FROM COMMODITY PRICE RISK MANAGEMENT
ACTIVITIES . . . . . . . . . . . . . . . . . . . 8,439 4,696
STOCKHOLDERS' EQUITY:
6-1/2% Convertible Preferred stock, $.01
par value; 10,000,000 shares authorized;
4,249,100 and 4,312,000 issued and
outstanding at June 30, 1999 and
December 31, 1998, respectively. . . . . . 42 43
Common stock ($.01 par value, 120,000,000
shares authorized; 31,769,900 and
31,609,900 shares issued and outstanding
at June 30, 1999 and December 31, 1998,
respectively). . . . . . . . . . . . . . . 318 316
Additional paid-in capital . . . . . . . . . 301,197 301,416
Retained earnings (deficit). . . . . . . . . (174,934) (161,627)
Unearned compensation. . . . . . . . . . . . (1,670) (1,082)
Notes receivable for equity interest . . . . (775) (775)
-------- --------
Total stockholders' equity. . . . . . . 124,178 138,291
-------- --------
Total liabilities and stockholders'
equity. . . . . . . . . . . . . . . . $481,913 $505,536
======== ========
</TABLE>
BELCO OIL & GAS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
June 30,
-----------------
1999 1998
------ ------
<S> <C> <C>
Oil and gas sales . . . . . . . . . . . . . . . . $31,834 $33,426
Commodity price risk management activities
- cash settlements (a). . . . . . . . . . . . . 3,059 3,887
- non-cash mark-to-market . . . . . . . . . . . (15,521) 50
Interest and other. . . . . . . . . . . . . . . 200 140
-------- -------
Total revenues. . . . . . . . . . . . . . . . . 19,572 37,503
-------- -------
COSTS AND EXPENSES:
Oil and gas operating expenses. . . . . . . . . . 9,880 9,715
Depreciation, depletion and amortization. . . . . 13,680 14,333
General and administrative. . . . . . . . . . . . 1,216 1,274
Interest expenses . . . . . . . . . . . . . . . . 4,975 5,557
Impairment of oil and gas properties. . . . . . . -- 74,000
Impairment of equity securities . . . . . . . . . -- 4,000
-------- -------
Total costs and expenses. . . . . . . . . . . . 29,751 108,879
-------- -------
LOSS BEFORE INCOME TAXES . . . . . . . . . . . . . . (10,179) (71,376)
INCOME TAX BENEFIT . . . . . . . . . . . . . . . . . (3,562) (27,530)
-------- -------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . (6,617) (43,846)
PREFERRED STOCK DIVIDENDS. . . . . . . . . . . . . . (1,726) (1,263)
-------- -------
EARNINGS (LOSS) ON COMMON STOCK. . . . . . . . . . . ($8,343) ($45,109)
======== =======
EARNINGS (LOSS) PER SHARE OF COMMON STOCK, BASIC
AND FULLY DILUTED. . . . . . . . . . . . . . . . . ($0.26) ($1.43)
======== =======
AVERAGE NUMBER OF COMMON SHARES USED IN COMPUTATION,
BASIC AND FULLY DILUTED. . . . . . . . . . . . . . 31,600 31,609
======== =======
_____________________________
(a) Includes cash premiums received.
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
----------------
1999 1998
------ ------
<S> <C> <C>
REVENUES:
Oil and gas sales . . . . . . . . . . . . . . . . $56,819 $68,259
Commodity price risk management activities
- cash settlements (a). . . . . . . . . . . . . 10,093 743
- non-cash mark-to-market . . . . . . . . . . . (23,015) 1,427
Interest and other. . . . . . . . . . . . . . . 400 425
-------- ------
Total revenues. . . . . . . . . . . . . . . . . 44,297 70,854
-------- ------
COSTS AND EXPENSES:
Oil and gas operating expenses. . . . . . . . . . 19,581 19,195
Depreciation, depletion and amortization. . . . . 27,012 28,794
General and administrative. . . . . . . . . . . . 2,474 2,399
Interest expenses . . . . . . . . . . . . . . . . 10,350 9,677
Impairment of oil and gas properties. . . . . . . -- 154,000
Impairment of equity securities . . . . . . . . . -- 14,100
-------- ------
Total costs and expenses. . . . . . . . . . . . 59,417 228,165
-------- ------
LOSS BEFORE INCOME TAXES . . . . . . . . . . . . . . (15,120) (157,311)
INCOME TAX BENEFIT . . . . . . . . . . . . . . . . . (5,292) (54,072)
-------- ------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . (9,828) (103,239)
PREFERRED STOCK DIVIDENDS. . . . . . . . . . . . . . (3,479) (1,855)
-------- -------
EARNINGS (LOSS) ON COMMON STOCK. . . . . . . . . . . ($13,307)($105,094)
======== ======
EARNINGS (LOSS) PER SHARE OF COMMON STOCK, BASIC
AND FULLY DILUTED. . . . . . . . . . . . . . . . . ($0.42) ($3.33)
======== ======
AVERAGE NUMBER OF COMMON SHARES USED IN COMPUTATION,
BASIC AND FULLY DILUTED. . . . . . . . . . . . . . 31,600 31,609
======== ======
_____________________________
(a) Includes cash premiums received.
</TABLE>
BELCO OIL & GAS CORP.
CONDENSED CONSOLIDATED CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
Outstanding Outstanding Paid-In Unearned
Shares Amount Shares Amount Capital Compensation
------ ------ ------ ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, 12/31/98 4,312 $43 31,609 $316 $301,416 ($1,082)
------ ------ ------ ------ ----------- ------------
Repurchase Pre-
ferred Stock (63) (1) - - (997) -
Restricted stock
issued/earned - - 160 2 778 (588)
Net Loss - - - - - -
Preferred dividend
paid - - - - - -
------ ----- ----- ----- ------- ---------
BALANCE, 6/30/99 4,249 $42 31,769 $318 $301,197 ($1,670)
------ ----- ------ ----- -------- ----------
</TABLE>
<TABLE>
<CAPTION>
Notes
Retained Receivable
Earnings for Equity
(Deficit) Interest Total
--------- ---------- ----------
<S> <C> <C> <C>
BALANCE, 12/31/98 ($161,627) ($775) $138,291
---------- ---------- ----------
Repurchase Preferred Stock - - (998)
Restricted stock issued
/earned - - 192
Net Loss (9,828) - (9,828)
Preferred dividend paid (3,479) - (3,479)
----------- ----------- -----------
BALANCE, 6/30/99 ($174,934) ($775) $124,178
----------- ----------- -----------
</TABLE>
BELCO OIL & GAS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
1999 1998
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . ($9,828) ($103,239)
Adjustments to reconcile net income (loss)
to net operating cash inflows--
Depreciation, depletion and amortization. . 27,012 28,794
Impairment of oil and gas properties. . . . -- 154,000
Deferred tax benefit. . . . . . . . . . . . (5,292) (54,072)
Impairment of marketable equity securities. -- 14,100
Commodity price risk management activities. 5,583 (3,696)
Other . . . . . . . . . . . . . . . . . . . 57 583
Changes in operating assets and liabilities --
Accounts receivable, oil and gas. . . . . 2,765 19,248
Assets from commodity price risk manage-
ment activities . . . . . . . . . . . . 15,666 --
Other current assets. . . . . . . . . . . 82 (35)
Accounts payable and accrued liabilities. (4,008) (4,826)
-------- --------
Net operating cash inflows . . . . . . 32,037 50,857
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development expenditures . . . . (21,352) (44,728)
Purchases of oil and gas properties. . . . . . . (484) (38,343)
Proceeds from sale of oil and gas properties . . 2 3,872
Changes in accounts payable and accrued lia-
bilities for oil and gas expenditures. . . . . -- (16,744)
Change in advances to oil and gas operators. . . -- (80)
Equity investment in Big Bear Exploration Ltd. . -- (10,268)
Proceeds from sale of marketable equity secur-
ities. . . . . . . . . . . . . . . . . . . . . -- 10,819
Purchase of marketable equity securities . . . . -- (1,851)
Other property additions . . . . . . . . . . . . (230) --
Changes in other assets. . . . . . . . . . . . . (87) (1,378)
-------- --------
Net investing cash outflows. . . . . . (22,151) (98,701)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from preferred stock offering, net. . . -- 105,495
Repurchases of preferred stock . . . . . . . . . (998) --
Long-term borrowings . . . . . . . . . . . . . . 7,000 --
Long-term debt repayments. . . . . . . . . . . . (10,500) (58,396)
Preferred dividend paid. . . . . . . . . . . . . (3,479) (1,855)
-------- --------
Net financing cash inflows . . . . . . (7,977) 45,244
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . 1,909 (2,600)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . 2,435 12,260
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . $4,344 $9,660
</TABLE>
BELCO OIL & GAS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Accounting Policies: The financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments which are, in the opinion of management, necessary to present a
fair statement of the results for the interim periods, on a basis consistent
with the annual audited financial statements. All such adjustments are of a
normal recurring nature. The results of operations for the interim period are
not necessarily indicative of the results to be expected for an entire year.
Certain information, accounting policies, and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate
to make the information presented not misleading.
These financial statements should be read in conjunction with the Company's
Form 10-K for the calendar year 1998 which includes financial statements and
notes thereto.
Note 2 - Commodity Price Risk Management Activities: The Company periodically
enters into commodity price risk management transactions such as swaps and
options in order to manage its exposure to oil and gas price volatility.
Gains and losses related to qualifying hedges of the Company's oil and gas
production are deferred and recognized as revenues as the associated
production occurs. Reference is made to the December 31, 1998 financial
statements of Belco Oil & Gas Corp., included in the Form 10-K for the
calendar year 1998, for a more thorough discussion of the Company's commodity
price risk management activities.
The Company uses the mark-to-market method of accounting for instruments that
do not qualify for hedge accounting. Under mark-to-market accounting, those
contracts which do not qualify for hedge accounting are reflected at market
value at the end of the period with resulting unrealized gains and losses
recorded as assets and liabilities in the consolidated balance sheet. Under
such method, changes in the market value of outstanding financial instruments
are recognized as unrealized gain or loss in the period of change.
For the six months ended June 30, 1999, the Company had net commodity price
risk management losses of $12.9 million consisting of $10.1 million in cash
settlements and $23.0 million in mark-to-market net losses. This compares to
a $2.2 million net gain consisting of $0.7 million in cash settlements and
$1.4 million in mark-to-market net gains, reported in the first six months of
1998 related to its price risk management activities.
Note 3 - Impairment of Oil and Gas Properties: The capitalization costs of
proved oil and gas properties are subject to a "ceiling test", which limits
such costs to the estimated present value net of related tax effects,
discounted at a 10 percent interest rate, of future net cash flows from proved
reserves, based on current economic and operating conditions (PV10).
If capitalized costs exceed this limit, the excess is charged to depreciation,
depletion and amortization. Application of these rules during periods of
relatively low oil and gas prices, even if of short-term duration, may result
in write-downs.
Note 4 - Capital Stock:
Net Income (Loss) Per Common Share
A reconciliation of the components of basic and diluted net income (loss) per
common share for the three and six months ended June 30, 1999 and 1998 is
presented in the table below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
------ ------ ------ ------
<C> <C> <C> <C>
Basic net income (loss) per share:
Net loss ($6,617) ($43,846) ($9,828) ($103,239)
Less: Preferred Stock dividends (1,726) (1,263) (3,479) (1,855)
-------- --------- -------- ---------
Loss attributable to common
shareholders ($8,343) ($45,109) ($13,307) ($105,094)
======== ========= ======== ==========
Weighted average shares of common
stock outstanding (1) 31,600 31,609 31,600 31,609
-------- --------- -------- ---------
Basic net income (loss) per share ($0.26) ($1.43) ($0.42) ($3.33)
======== ========= ======== =========
Diluted net income (loss) per share:
Weighted average shares of common
stock outstanding (1) 31,600 31,609 31,600 31,609
Effect of dilutive securities:
Restricted stock (2) - - - -
Preferred stock, warrants and
stock options (2) - - - -
-------- --------- -------- ---------
Average shares of common stock
outstanding including dilutive
securities 31,600 31,609 31,600 31,609
======== ========= ======== =========
Diluted net loss per share ($0.26) ($1.43) ($0.42) ($3.33)
======== ========= ======== =========
</TABLE>
_____________
(1) Includes shares issued and outstanding minus non-vested restricted stock.
(2) Amounts are not included in the computation of diluted net loss per share
because to do so would have been antidilutive.
Note 5 - Comprehensive Income: In the first quarter of 1998 the Company
adopted SFAS No. 130, "Reporting Comprehensive Income" which requires
disclosure of comprehensive income and its components in the financial
statements. For the Company, comprehensive income includes net income and
reserve for unrealized losses on marketable equity securities held. The
components of comprehensive income for the six months ended June 30, 1999 and
1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1999 1998
------ ------
<S> <C> <C>
Net income (loss) ($9,828) ($103,239)
Less: Reclassification adjustment for losses
included in net income -- 2,000
------- ---------
Total Comprehensive Income (Loss) ($9,828) ($101,239)
======= =========
</TABLE>
PART I - FINANCIAL INFORMATION
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
========
Belco Oil & Gas Corp. and its subsidiaries (the "Company") is an independent
energy company engaged in the exploration for and the acquisition,
exploitation, development and production of natural gas and oil in the United
States primarily in the Rocky Mountains, the Permian Basin, the Mid-Continent
region and the Austin Chalk Trend. Since its inception in April 1992, the
Company has grown its reserve base largely through a balanced program of
exploration and development drilling and through acquisitions. The Company
concentrates its activities primarily in four core areas in which it has
accumulated detailed geologic knowledge and has developed significant
management and technical expertise. Additionally, the Company structures its
participation in natural gas and oil exploration and development activities to
minimize initial costs and risks, while permitting substantial follow-on
investment.
The Company's operations are currently focused in the Rocky Mountains,
primarily in the Green River (which includes the Moxa Arch Trend), Wind River
and Big Horn Basins of Wyoming, the Permian Basin in west Texas, the
Mid-Continent region in Oklahoma and north Texas, and the Austin Chalk Trend,
primarily in Texas. These areas accounted for approximately 99% of the
Company's proved reserves at December 31, 1998. Based on 1998 production, the
Company's reserve life index is 9.7 years.
The Company's revenue, profitability and future rate of growth are
substantially dependent upon prevailing prices for natural gas, oil and
condensate. These prices are dependent upon numerous factors beyond the
Company's control, such as economic, political and regulatory developments and
competition from other sources of energy. Energy markets have historically
been very volatile, and there can be no assurance that oil and natural gas
prices will not be subject to wide fluctuations in the future. A substantial
or extended decline in oil and natural gas prices could have a material
adverse effect on the Company's financial position, results of operations and
access to capital, as well as the quantities of natural gas and oil reserves
that the Company may economically produce. Natural gas produced is sold under
contracts that primarily reflect spot market conditions for their particular
area. The Company markets its oil with other working interest owners on spot
price contracts and typically receives a small premium to the price posted for
such oil. Currently, approximately 65% of the Company's production volumes
relate to the sale of natural gas (based on six Mcf of gas being considered
equivalent to one barrel of oil).
The Company utilizes commodity swaps and options and other commodity price
risk management transactions related to a portion of its oil and natural gas
production to achieve a more predictable cash flow, and to reduce its exposure
to price fluctuations. The Company accounts for these transactions as hedging
activities or uses mark-to-market accounting for those contracts that do not
qualify for hedge accounting. As of June 30, 1999, the Company has various
natural gas and oil price risk management contracts in place with respect to
substantial portions of its estimated remaining production for calendar year
1999 and with respect to lesser portions of its estimated production for 2000
and 2001. The Company expects from time to time to either add or reduce the
amount of price risk management contracts that it has in place in keeping with
its price risk management strategy.
The following table sets forth certain operations data of the Company for the
periods presented:
<TABLE>
<CAPTION>
Three Months
Ended June 30, Variances
-------------------- ------------
1999 1998 AMOUNT %
------ ------ ------ ------
<S> <C> <C> <C> <C>
Oil and Gas Sales (Unhedged)
(in thousands) $31,834 $33,426 $(1,592) (5%)
Commodity Price Risk Management
(in thousands)
- cash $ 3,059 $ 3,887 $(828) (21%)
- non-cash (15,521) 50 (15,571) -
Weighted Average Sales Prices
(Unhedged):
Oil (per Bbl) $ 16.01 $ 13.74 $2.27 17%
Gas (per Mcf) 1.79 1.96 (0.17) (9%)
Net Production Data:
Oil (MBbl) 881 1,105 (224) (20%)
Gas (MMcf) 9,914 9,296 618 7%
Gas equivalent (MMcfe) 15,200 15,926 (726) (5%)
Data per Mcfe:
Oil and gas sales revenues
(Unhedged) $ 2.09 $ 2.10 ($0.01) -
Commodity Price Risk
Management Activities-
cash only 0.20 0.24 (0.04) (17%)
Oil and gas operating expenses (0.65) (0.61) (0.04) (7%)
General and administrative (0.08) (0.08) -- -
Depreciation, depletion and
amortization (0.90) (0.90) -- -
------- ------- ------- -----
Pre-tax operating profit (1) $ 0.66 $ 0.75 ($0.09) (12%)
======= ======= ======= =====
</TABLE>
__________________
(1) Excluding ceiling test provision, impairment of equity securities and
interest income and expenses.
<TABLE>
<CAPTION>
Six Months
Ended June 30, Variances
------------------ --------------
1999 1998 AMOUNT %
------ ------ ------ -----
<S> <C> <C> <C> <C>
Oil and Gas Sales (Unhedged)
(in thousands) $56,819 $68,259 $(11,440) (17%)
Commodity Price Risk Management
(in thousands)
- cash $10,093 $ 743 $ 9,350 -
- non-cash (23,015) 1,427 (24,442) -
Weighted Average Sales Prices
(Unhedged):
Oil (per Bbl) $ 13.68 $ 14.09 ($0.41) (3%)
Gas (per Mcf) 1.68 1.99 (0.31) (16%)
Net Production Data:
Oil (MBbl) 1,767 2,179 (412) (19%)
Gas (MMcf) 19,408 18,918 490 3%
Gas equivalent (MMcfe) 30,013 31,994 (1,981) (6%)
Data per Mcfe:
Oil and gas sales revenues
(Unhedged) $ 1.89 $ 2.13 ($0.24) (11%)
Commodity Price Risk
Management Activities-
cash only 0.34 0.02 0.32 -
Oil and gas operating expenses (0.65) (0.60) (0.05) (8%)
General and administrative (0.08) (0.07) (0.01) (14%)
Depreciation, depletion and
amortization (0.90) (0.90) -- -
-------- -------- ------- ------
Pre-tax operating profit (1) $ 0.60 $ 0.58 $ 0.02 3%
======== ======== ======= ======
</TABLE>
__________________
(1) Excluding ceiling test provision, impairment of equity securities and
interest income and expenses.
RESULTS OF OPERATIONS
=====================
Three Months Ended June 30, 1999 Compared to June 30, 1998
- ----------------------------------------------------------
Revenues
- --------
During the second quarter of 1999, oil and gas sales revenues (unhedged)
declined from $33.4 million to $31.8 million, or 5%, when compared to the
prior year comparable period due principally to lower oil production partly
offset by higher oil prices and a 7% increase in gas production. Average
price realizations for oil improved by 17% to $16.01 per barrel compared to
$13.74 per barrel in the prior year comparable period. Natural gas prices, on
the other hand, declined by 9% to $1.79 compared to $1.96 in the second
quarter of 1998. Average price realizations recited exclude price risk
management activities. Oil production declined by 20% during the second
quarter of 1999 while natural gas production increased 7% when compared to the
prior year comparable period. Natural gas production represented
approximately 65% of total Company production on an Mcfe basis, up from the
58% reported in the second quarter of 1998.
As a result of the continued upward price movement in oil prices through the
second quarter of 1999, commodity price risk management activities resulted in
non-cash net losses of $15.5 million due to mandatory mark-to-market
accounting requirements. This non-cash loss was partially offset by
approximately $3.1 million in cash settlements received during the quarter.
The mark-to-market reported loss primarily represents a reversal of
mark-to-market gains reported in the fourth quarter of 1998 based on year-end
1998 prices.
Costs and Expenses
- ------------------
Production and operating expenses increased to $9.9 million for the second
quarter of 1999 when compared to the $9.7 million reported for the second
quarter of 1998. The increase is primarily related to reduced cost
efficiencies that result from lower oil production. Operating costs were
$0.65 per Mcfe for the second quarter of 1999 when compared to $0.61 per Mcfe
in the second quarter of 1998.
Depreciation, depletion and amortization ("DD&A"), for the quarter ended June
30, 1999 was $13.7 million, a $0.7 million decline when compared to the $14.3
million recorded in the prior year comparable period. The decline is related
to lower volumes produced. The current DD&A rate per Mcfe is $0.90, unchanged
from the comparable prior year quarter.
General and administrative expense ("G&A") declined by $58,000 in the second
quarter of 1999 to $1.2 million primarily due to cost reduction efforts in
response to low commodity prices when compared to the $1.3 million incurred in
the second quarter of 1998. The rate per Mcfe for G&A costs is unchanged
quarter over quarter at $0.08 per Mcfe.
Income (Loss) Before Income Taxes
- ---------------------------------
The Company's reported loss before income tax benefits for the second quarter
of 1999 was $10.2 million. This compares to a pre-tax loss of $71.4 million
reported in the second quarter of 1998. The reduced loss primarily reflects
the absence of $78 million of non-cash ceiling test and equity securities
impairment provisions reported in the prior year second quarter.
Income Taxes
- ------------
Income tax benefits were recorded for the 1999 second quarter in the amount of
$3.6 million as a result of the reported pre-tax loss. The second quarter
1998 income tax benefit recorded was $27.5 million.
Six Months Ended June 30, 1999 Compared to June 30, 1998
- --------------------------------------------------------
Revenues
- --------
For the first six months of 1999, oil and gas sales revenues (unhedged)
declined $11.4 million, or 17% to $56.8 million when compared to the prior
year comparable period primarily the result of lower commodity prices and
lower oil production. Natural gas production increased 3% over the prior year
first half. Average Mcfe price realizations exclusive of price risk
management activities declined by 11% in the first half of 1999 compared to
last year's first six months. Natural gas production represented
approximately 65% of total Company production on an Mcfe basis compared to the
59% reported for the first six months of 1998. Oil production declined by 19%
over the prior year comparable period due to normal decline from seasoned
properties and lower commodity prices that limited capital expenditures and
maintenance on oil production related activities in general during the first
half of the year.
Commodity price risk management activities during the first half of 1999
resulted in a net loss of $12.9 million compared to a net gain of $2.2 million
recognized in the prior year comparable period. The first half 1999 loss
consisted of $10.1 million in actual cash settlements received primarily
related to oil hedges in place. The positive cash flow was more than offset
by the mandatory mark-to-market non-cash loss calculated on the portfolio of
commodity price risk management contracts using June 30, 1999 prices and
representing primarily the reversal of previously reported gains in the fourth
quarter of 1998. In the prior year comparable period, $743,000 of cash
settlements were realized while the mark-to-market component was represented
by a $1.4 million non-cash gain. The impact of all such activities on an Mcfe
basis amounted to net cash inflows of $0.34 and $0.02 for the six months
ending June 30, 1999 and 1998, respectively.
Costs and Expenses
- ------------------
Production and operating expenses during the first half of 1999 increased a 2%
to $19.6 million compared to $19.2 million reported in the prior year
comparable period. The increase is related to lower volumes produced and cost
inefficiencies related to such lower production. Operating costs were $0.65
per Mcfe for the first six months of 1999 when compared to $0.60 per Mcfe in
the first six months of 1998.
DD&A for the six months ended June 30, 1999 decreased $1.8 million to $27.0
million when compared to the $28.8 million recorded in the prior year
comparable period due to lower oil production. The first half DD&A rate per
Mcfe is unchanged at $0.90 when compared to the prior year comparable period.
For the six month period ending June 30, 1998, the Company recorded a $154
million ($100 million after-tax) non-cash ceiling test provision as required
by full cost accounting rules. This provision was the result of applying
substantially lower commodity prices to estimated recoverable reserves as of
June 30, 1998.
G&A costs increased by 3% in the first six months of 1999 to $2.5 million when
compared to the $2.4 million incurred in the first six months of 1998. The
rate per Mcfe for such costs increased from $0.07 to $0.08.
Interest expense is incurred on $150 million of 8-7/8% Senior Subordinated
Notes due 2007 issued in September 1997, $109 million of 10-1/2% Senior
Subordinated Notes due 2006 assumed in the Coda acquisition, and bank debt
incurred to fund various Company activities. Interest expense for the six
months ended June 30, 1999 increased by $700,000, a 7% increase over the prior
year comparable period due to additional borrowings outstanding under our
Revolving Credit Agreement.
Income (Loss) Before Income Taxes
- ---------------------------------
The Company's reported loss before income tax benefits for the first six
months of 1999 was $15.1 million. This compares to a pre-tax loss of $157.3
million reported for the first six months of 1998. The 1999 first half loss
is the result of recognizing the required mark-to-market loss during the
period representing a reversal of previously reported related gains in 1998 as
required by current accounting rules. The 1998 first half loss resulted from
the non-cash ceiling test impairment of $154 million ($100 million after-tax)
and $14.1 million equity securities related impairment. Excluding the effect
of the mark-to-market and impairment provisions income before income taxes was
$7.9 million and $10.8 million for 1999 and 1998, respectively.
Income Taxes
- ------------
Income tax benefits were recorded for the first six months of 1999 in the
amount of $5.3 million as a result of the reported pre-tax loss. The benefit
for income taxes for the comparable six month period of 1998 was $54.1
million.
LIQUIDITY AND CAPITAL RESOURCES
===============================
General
- -------
In September 1997, the Company entered into a five-year $150 million Credit
Agreement dated September 23, 1997 (the "Credit Facility") with The Chase
Manhattan Bank, N.A., as administrative agent (the "Agent") and other lending
institutions (the "Banks"). The Credit Facility provides for an aggregate
principal amount of revolving loans of up to the lesser of $150 million or the
Borrowing Base (as defined) in effect from time to time, and includes a
sub-facility from the Agent for letters of credit. The Borrowing Base at June
30, 1999 was $150 million with $26.0 million advanced to the Company on that
date. The borrowing base is redetermined by the Agent and the Banks
semi-annually based upon their usual and customary oil and gas lending
criteria as such exist from time to time. The borrowing base was reaffirmed
on July 20, 1999. In addition, the Company may request two additional
redeterminations and the Banks may request one additional redetermination per
year. Indebtedness of the Company under the Credit Facility is secured by a
pledge of the capital stock of each of the Company's material subsidiaries.
Indebtedness under the Credit Facility bears interest at a floating rate based
(at the Company's option) upon (i) the ABR with respect to ABR Loans or (ii)
the Eurodollar Rate (as defined) for one, two, three or six months (or nine or
twelve months if available to the Banks) Eurodollar Loans (as defined), plus
the Applicable Margin. The ABR is the greater of (i) the Prime Rate (as
defined), (ii) the Base CD Rate (as defined) plus 1% or (iii) the Federal
Funds Effective Rate (as defined) plus 0.50%. The Applicable Margin for
Eurodollar Loans varies from 0.50% to 0.875% depending on the Borrowing Base
usage. Borrowing Base usage is determined by a ratio of (i) outstanding Loans
(as defined) and letters of credit to (ii) the then effective Borrowing Base.
Interest on ABR Loans is payable quarterly in arrears and interest on
Eurodollar Loans is payable on the last day of the interest period therefore
and, if longer than three months, at three month intervals.
The Company is required to pay to the Banks a commitment fee based on the
committed undrawn amount of the lesser of the aggregate commitments or the
then effective Borrowing Base during a quarterly period equal to a percent
that varies from 0.20% to 0.30% depending on the Borrowing Base usage.
In September 1997, the Company issued $150 million of the 8-7/8% Senior
Subordinated Notes due 2007 (the "8-7/8% Notes"). Interest on the 8-7/8%
Notes accrues at the rate of 8-7/8% per annum and is payable semi-annually in
arrears on March 15 and September 15 of each year, commencing on March 15,
1998. The 8-7/8% Notes mature on September 15, 2007 unless previously
redeemed. Except under limited circumstances, the 8-7/8% Notes are not
redeemable at the Company's option prior to September 15, 2002. Thereafter,
the 8-7/8% Notes will be subject to redemption at the option of the Company,
in whole or in part, at specified redemption prices, plus accrued and unpaid
interest, if any, thereon to the applicable redemption date. In addition,
upon a change of control (as defined in the indenture pursuant to which the
8-7/8% Notes were issued) the Company is required to offer to redeem the
8-7/8% Notes for cash at 101% of the principal amount, plus accrued and unpaid
interest, if any, thereon to the applicable date of repurchase.
The 8-7/8% Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Debt (as
defined in the 8-7/8% indenture) of the Company, which includes borrowings
under the Credit Facility described above. The 8-7/8% Notes rank pari passu
in right of payment with any existing or future senior subordinated debt of
the Company and rank senior in right of payment to all other subordinated
indebtedness of the Company.
In November 1997, the Company completed the acquisition of Coda. The Company
paid an aggregate of $324 million including approximately $192 million in cash
($150 million plus a $42 million adjustment for proceeds from the disposition
of Taurus Energy Corp. ("Taurus"), a subsidiary of Coda (which occurred on the
day prior to closing of the Coda acquisition)), assumption of $110 million of
Coda long-term debt outstanding and three year warrants to purchase 1,666,667
shares of Common Stock of the Company at $27.50 per share issued to the
holders of the outstanding common stock, preferred stock and options to
purchase common stock of Coda. Concurrently with the closing of the
acquisition of Coda, the Company contributed $23 million to Coda that Coda
utilized, together with the funds from the disposition of Taurus, to repay all
of the debt outstanding under Coda's revolving credit facility (approximately
$65 million in principal amount), plus accrued interest thereon, and such
credit facility was thereafter terminated. At closing, the Company funded the
cash portion of the consideration and the cash contribution to Coda through
cash on hand and borrowings of $84 million under its Credit Facility.
On February 25, 1998, the Company merged Coda into Belco and immediately
thereafter transferred all of Coda's assets and liabilities, except for Coda's
obligations under its 10-1/2% Senior Subordinated Notes due 2006 ("the 10-1/2%
Notes") to Belco Energy Corp., a Nevada corporation and a wholly owned
subsidiary of the Company. As of June 30, 1999, the Company also had $109
million principal amount outstanding under the 10-1/2% Notes. Interest on the
10-1/2% Notes accrues at the rate of 10-1/2% per annum and is payable
semi-annually in arrears on April 1 and October 1 of each year. Except under
limited circumstances, the 10-1/2% Notes are not redeemable at the Company's
option prior to April 1, 2001. Thereafter the 10-1/2% Notes will be subject
to redemption at specified prices, plus accrued and unpaid interest, if any,
thereon to the applicable redemption date. The 10-1/2% Notes are general
unsecured obligations of the Company and are subordinated in right of payment
to all existing and future Senior Debt (as defined) of the Company, including
any bank debt.
The Company entered into interest rate swap agreements converting two
long-term debt fixed rate obligations to floating rate obligations as follows:
<TABLE>
<CAPTION>
Current
Agreement Transaction Fixed Floating Floating Rate
Amount Date Rate Rate Expiration Date
--------- ----------- ------ -------- ---------------
<S> <C> <C> <C> <C> <C>
$100 million 12/97 8.875% 8.280% March 15, 2000 (a)
$110 million 12/97 10.500% 10.120% April 1, 2000 (a)
$50 million 1/98 8.875% 7.919% September 15, 1999 (a)
</TABLE>
_______________________
(a) Floating rate is redetermined at each six month period following the
expiration through September 15, 2007.
The agreements obligate the Company to actually pay the indicated floating
rate rather than the original fixed rate. The floating rates are capped at
8-7/8% through September 15, 2001 and at 10% from March 15, 2002 through
September 15, 2007 on the 8-7/8% Notes and capped at 10-1/2% through October
1, 1999 and 11.625% from April 1, 2000 through April 1, 2003 on the 10-1/2%
Notes. The agreements will reduce the Company's 1999 interest expense by
approximately $1 million.
On March 10, 1998 the Company completed the sale of 4.37 million shares of its
6-1/2% Convertible Preferred Stock (the "Preferred Stock"). The Preferred
Stock has a liquidation preference of $25 per share and is convertible at the
option of the holder into shares of the Company's Common Stock at an initial
conversion rate of 1.1292 shares of Common Stock for each share of Preferred
Stock, equivalent to a conversion price of $22.14 per share of Common Stock.
The Company received net proceeds from the sale of the Preferred Stock of
$105.1 million, which was used to pay down bank indebtedness.
On December 15, 1998, the Company's Board of Directors authorized the purchase
from time to time, in the open market or in privately negotiated transactions,
shares of its Common and 6-1/2% Convertible Preferred Stock, in an aggregate
amount not to exceed $10 million. Through June 30, 1999 the Company expended
approximately $1.8 million acquiring 120,900 shares of its 6-1/2% Convertible
Preferred Stock.
On June 12, 1998, the Company, through its wholly-owned Canadian subsidiary,
purchased approximately $10.5 million of 5% Convertible Preferred Stock of Big
Bear, a Canadian oil and gas company, at approximately $0.85 per share with
each share convertible into one common share of Big Bear. The Company was
also issued approximately $120 million of Special Acquisition Warrants at a
price of approximately $0.72 per warrant. In connection with the issuance of
the Special Acquisition Warrants, the Company deposited a $60 million letter
of credit and 3,436,000 shares of the Company's common stock into an escrow
account. On November 10, 1998, the Company executed a restructuring agreement
whereby (i) the Company agreed to convert the Big Bear 5% Convertible
Preferred Stock into 21,428,571 shares of Big Bear Common Stock at a
conversion price of approximately $0.50 per share (reduced from $0.85 per
share), (ii) the Special Acquisition Warrants were canceled, (iii) the Belco
representatives resigned from Big Bear's Board of Directors, (iv) the $60
million letter of credit was canceled, and (v) the 3,436,000 shares of Company
common stock held in the escrow account were returned to the Company and
designated as unissued. The restructuring agreement closed on January 22,
1999. Immediately following the closing of the restructuring agreement, an 11
to 1 reverse split of Big Bear Common Shares was effected and Belco, through
its wholly-owned Canadian subsidiary, now owns 1,948,052 common shares or
approximately 4.6% ownership in Big Bear.
In February 1998, the Company acquired properties consisting of approximately
65 Bcfe of long-lived reserves in the Permian Basin of west Texas from
EnerVest Texoma Acquisition L.P. for $37.3 million in cash.
In November 1998, the Company acquired approximately 20 Bcfe of long-lived
reserves on producing properties in Oklahoma and Kansas, as well as certain
undeveloped acreage and 3-D seismic data, for approximately $14.8 million.
Cash Flow
- ---------
Operating cash flow, a measure of performance for exploration and production
companies, is generally derived by adjusting net income to eliminate the
effects of the non-cash components included in the net income calculation such
as depreciation, depletion and amortization expense, provision for deferred
income taxes, ceiling test provisions, and the non-cash effects of investing
and commodity price risk management activities. First half cash flow from
operating activities was approximately $32.0 and $50.9 million for 1999 and
1998, respectively. The Company had working capital of $3.4 million as of
June 30, 1999, a decrease of $11.0 million from the $14.4 million available as
of March 31, 1999. The decline is exclusively related to the recording of
non-cash mark-to-market losses related to derivatives activities as required
by current accounting rules. Excluding the mark-to-market items, working
capital would have been essentially unchanged.
Capital Expenditures
- --------------------
During the six months ending June 30, 1999 the Company incurred approximately
$21.8 million of capital expenditures. For the full year 1998, the Company
incurred capital expenditures in the amount of $133.1 million, including
property acquisitions totalling $52.2 million.
The Company intends to fund its future capital expenditures, commitments and
working capital requirements through cash flows from operations, borrowings
under the Credit Facility or other potential financings. The Company has a
1999 capital expenditure budget of approximately $75 million, with $25 million
allocated to potential acquisitions. If there are changes in oil and natural
gas prices that correspondingly affect cash flows and the Borrowing Base under
the Credit Facility, the Company has the discretion and ability to adjust its
capital budget. The Company believes that it will have sufficient capital
resources and liquidity to fund its capital expenditures and meet all of its
financial obligations as they come due.
Commodity Price Risk Management Transactions
- --------------------------------------------
Certain of the Company's commodity price risk management arrangements require
the Company to deliver cash collateral or other assurances of performance to
the counterparties in the event that the Company's payment obligations with
respect to its commodity price risk management transactions exceed certain
levels.
With the primary objective of achieving more predictable revenues and cash
flows and reducing the exposure to fluctuations in oil and natural gas prices,
the Company has entered into commodity price risk management transactions of
various kinds with respect to both oil and natural gas. While the use of
certain of these price risk management arrangements limits the downside risk
of adverse price movements, it may also limit future revenues from favorable
price movements. The Company engages in transactions such as selling covered
calls or straddles which are marked-to-market at the end of the relevant
accounting period. Since the futures market historically has been highly
volatile, these fluctuations may cause significant impact on the results of
any given accounting period. The Company has entered into price risk
management transactions with respect to a substantial portion of its estimated
production for 1999 and lesser portions of its estimated production
thereafter. The Company continues to evaluate whether to enter into
additional price risk management transactions for future years. In addition,
the Company may determine from time to time to unwind its then existing price
risk management positions as part of its price risk management strategy.
Other
- -----
Environmental Matters
- ---------------------
The Company's operations are subject to various federal, state and local laws
and regulations relating to the protection of the environment, which have
become increasingly stringent. The Company believes its current operations
are in material compliance with current environmental laws and regulations.
There are no environmental claims pending or, to the Company's knowledge,
threatened against the Company. There can be no assurance, however, that
current regulatory requirements will not change, currently unforeseen
environmental incidents will not occur or past noncompliance with
environmental laws will not be discovered on the Company's properties.
Year 2000 Compliance
- --------------------
The year 2000 issue concerns deal with the potential inability of information
technology and non-information technology systems and processes to properly
recognize and process date-sensitive information before, during, and after
December 31, 1999.
The Company has a variety of operating systems, computer software program
applications, computer hardware equipment and other equipment with embedded
electronic circuits, including applications used in the Company's financial
business systems, field operations, and administrative functions
(collectively, the "systems").
Members of the Company's management group and financial department personnel
have oversight of the information systems and personnel charged with
implementing the Company's year 2000 compliance program.
The Company has upgraded hardware and software over the past year and believes
that its internal financial and most of the operational systems are currently
year 2000 compliant. The Company does not separately track the costs
associated with the year 2000 compliance effort, as they have not been
material and, further, no projects with any significant impact to the
Company's operations have been deferred due to the year 2000 compliance
effort. To date, the Company estimates that it has incurred less than
$100,000 in upgrading a limited amount of hardware and does not expect to
incur any significant additional cost in becoming year 2000 compliant. The
Company does not know whether its significant vendors' and customers' systems
are yet fully year 2000 compliant. If they are not, such failure could
partially affect the Company's ability to sell its oil and gas and receive
related payments. In addition, there could be disruptions in getting certain
vendors to provide supplies and/or services in support of the Company's
operations. While this is the most likely worst case scenario, the Company
believes that its significant vendors and customers will be year 2000
compliant before that critical date.
Additionally, the Company fully understands that there are risks associated
with year 2000 issues that it cannot directly control, primarily the readiness
of its key suppliers and customers. The Company has had contact with a
significant number of its customers and vendors and furnished information
about how it is addressing the year 2000 issue. The Company is presently
investigating contingency strategies primarily with existing internal
resources in the event of any third party or internal system failure.
Contingency plans contemplated include the use of alternative hardware and
software vendors and customers as appropriate in the event that a presently
unforeseen failure of a key vendor or customer is burdened with some
non-controllable year 2000 compliance related failure.
The Company presently expects that its financial and related information
systems, operations systems and other essential functions will be ready for
the year 2000 transition, and that year 2000 issues would not have a material
effect on the Company's business or financial condition.
New Accounting Standards
- -------------------------
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133").
FAS 133 requires all derivatives to be recorded on the balance sheet at fair
value and established "special accounting" for the following three different
types of hedges: hedges of changes in the fair value of assets, liabilities,
or firm commitments (referred to as fair value hedges); hedges of the variable
cash flows of forecasted transactions (cash flow hedges); and hedges of
foreign currency exposures of net investments in foreign operations. Though
the accounting treatment and criteria for each of the three types of hedges is
unique, they all result in offsetting changes in fair values or cash flows of
both the hedge and the hedged item being recognized in earnings in the same
period with no net impact on reported earnings. Changes in fair value of
derivatives that do not meet the criteria of one of these three categories of
hedges are included in income and reported as either gain or loss for the
current period. Transition adjustments resulting from adoption must be
recognized in income and comprehensive income, as appropriate, as a cumulative
effect of an accounting change. Belco has not yet determined the effect of
total compliance, but it is not expected to materially impact the financial
statements of the Company. FAS 133 will be effective for fiscal year 2001 for
the Company.
Information Regarding Forward Looking Statements
- ------------------------------------------------
The information contained in this Form 10-Q includes certain forward-looking
statements. When used in this document, such words as "expect", "believes",
"potential", and similar expressions are intended to identify forward-looking
statements. Although the Company believes that its expectations are based on
reasonable assumptions, it is important to note that actual results could
differ materially from those projected by such forward-looking statements.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not limited to, the
timing and extent of changes in commodity prices for oil and gas, the need to
develop and replace reserves, environmental risk, the substantial capital
expenditures required to fund its operations, drilling and operating risks,
risks related to exploration and development, uncertainties about the
estimates of reserves, competition, government regulation and the ability of
the Company to implement its business strategy.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk exposures relate primarily to commodity prices,
interest rates and marketable equity securities. The Company enters into
various transactions involving commodity price risk management activities
involving a variety of derivatives instruments to, in effect, hedge the impact
of crude oil and natural gas price fluctuations. In addition, the Company
entered into interest rate swap agreements to reduce current interest burdens
related to its fixed long-term debt. The derivatives instruments are
generally put in place to limit the risk of adverse oil and natural gas price
movements, however, such instruments can limit future gains resulting from
upward favorable oil and natural gas price movements. Recognition of both
realized and unrealized gains or losses are reported currently in the
Company's financial statements as required by existing generally accepted
accounting principles. The cash flow impact of all derivative related
transactions is reflected as cash flows from operating activities.
As of June 30, 1999, the Company had substantial derivative financial
instruments outstanding and related to its market risk management program.
See Item 1, Note 2 and Item 2, "Management's Discussion And Analysis of
Financial Condition And Results of Operations" for additional information
related to the Company's market risk management activities during the second
quarter of 1999. There has not been a material change in the Company's
exposure to commodity price and interest rate risk since the date of the 1998
Form 10-K filing.
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS - NONE
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS - NONE
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Shareholders at the Annual Meeting on May 18, 1999, and by proxy, re-elected
the current directors, namely, Graham T. Allison, Daniel C. Arnold, Robert A.
Belfer, Laurence D. Belfer, Alan D. Berlin, Jack Saltz and Georgiana Sheldon-
Sharp. Of the 20,235,214 shares represented at the meeting, 20,126,497 shares
(99.5%) were voted for Dr. Allison, 20,126,897 shares (99.5%) were voted for
Mr. Arnold, 20,125,897 shares (99.5%) were voted for Mr. R. Belfer, 20,124,897
shares (99.5%) were voted for Mr. L. Belfer, 20,126,097 shares (99.5%) were
voted for Mr. Berlin, 20,126,597 shares (99.5%) were voted for Mr. Saltz and
20,124,097 shares (99.5%) were voted for Ms. Sheldon-Sharp.
Two proposals by the Board of Directors were approved by shareholders at the
Annual Meeting, with the following vote tabulation:
Approval of the Amendment to the Company's 1996 Nonemployee Directors' Stock
- ----------------------------------------------------------------------------
Option Plan
- -----------
<TABLE>
<CAPTION>
Shares Withheld/ Shares Excepted/
Shares For Against Abstained
---------- ---------------- ----------------
<S> <C> <C> <C>
19,703,678 / 97.4% 515,479 / 2.5% 16,057 / 0.1%
</TABLE>
Approval of Auditors
- --------------------
<TABLE>
<CAPTION>
Shares Withheld/ Shares Excepted/
Shares For Against Abstained
---------- ---------------- ----------------
<S> <C> <C> <C>
20,144,327 / 99.55% 88,100 / 0.435% 2,787 / 0.015%
</TABLE>
ITEM 5 - OTHER INFORMATION - NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No.
10.1* First Amendment to Belco Oil & Gas Corp. 1996 Nonemployee Directors'
Stock Option Plan
10.2* Termination of Belco Oil & Gas Corp. 1996 Performance Unit Plan
27* Financial Data Schedule
___________________
* Filed herewith
(b) Reports on Form 8-K: None.
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.
BELCO OIL & GAS CORP.,
a Nevada corporation
(REGISTRANT)
<TABLE>
<S> <C>
Date: August 13, 1999 /s/ LAURENCE D. BELFER
---------------------------------------
Laurence D. Belfer,
Vice-Chairman and Chief Operating Officer
Date: August 13, 1999 /s/ DOMINICK J. GOLIO
---------------------------------------
Dominick J. Golio,
Senior Vice President - Finance
and Chief Financial Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 000,000,000,004,344
<SECURITIES> 000,000,000,000,000
<RECEIVABLES> 000,000,000,023,694
<ALLOWANCES> 000,000,000,000,000
<INVENTORY> 000,000,000,000,000
<CURRENT-ASSETS> 000,000,000,035,163
<PP&E> 000,000,001,026,765
<DEPRECIATION> (000,000,000,592,957)
<TOTAL-ASSETS> 000,000,000,481,913
<CURRENT-LIABILITIES> 000,000,000,031,717
<BONDS> 000,000,000,291,178
000,000,000,000,000
000,000,000,000,042
<COMMON> 000,000,000,000,318
<OTHER-SE> 000,000,000,123,818
<TOTAL-LIABILITY-AND-EQUITY> 000,000,000,481,913
<SALES> 000,000,000,056,819
<TOTAL-REVENUES> 000,000,000,044,297
<CGS> 000,000,000,046,593
<TOTAL-COSTS> 000,000,000,046,593
<OTHER-EXPENSES> 000,000,000,002,474
<LOSS-PROVISION> 000,000,000,000,000
<INTEREST-EXPENSE> 000,000,000,010,350
<INCOME-PRETAX> (000,000,000,015,120)
<INCOME-TAX> (000,000,000,005,292)
<INCOME-CONTINUING> (000,000,000,009,828)
<DISCONTINUED> 000,000,000,000,000
<EXTRAORDINARY> 000,000,000,000,000
<CHANGES> 000,000,000,000,000
<NET-INCOME> (000,000,000,009,828)
<EPS-BASIC> (000,000,000,000.042)
<EPS-DILUTED> (000,000,000,000.042)
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FIRST AMENDMENT TO
BELCO OIL & GAS CORP. 1996 NONEMPLOYEE
DIRECTORS' STOCK OPTION PLAN
The Belco Oil & Gas Corp. 1996 Nonemployee Directors' Stock Option Plan (the
"Directors' Plan") is hereby amended as of March 26, 1999 (subject to the
approval of the stockholders of Belco Oil & Gas Corp.) as follows:
1. All capitalized terms used herein but not defined herein shall have the
meaning set forth in the Directors' Plan.
2. Paragraph III is hereby amended by deleting in its entirety the second
sentence of such Paragraph III and substituting in lieu thereof the following:
"As of the date of the annual meeting of the stockholders of the Company in
each year that the Plan is in effect as provided in Paragraph VI hereof, each
Nonemployee Director then in office or elected to the Board of Directors of
the Company (the "Board") on such date shall receive, without the exercise of
the discretion of any person or persons, an Option exercisable for 6,000
shares of Stock (subject to adjustment in the same manner as provided in
Paragraph VII hereof with respect to shares of Stock subject to Options then
outstanding)."
3. This First Amendment will be effective for the grant of Options to the
Nonemployee Directors at the Annual Meeting of Stockholders to be held on May
18, 1999.
4. Except as expressly amended hereby, the Directors' Plan continues to
remain in full force and effect in accordance with its terms.
TERMINATION OF
BELCO OIL & GAS CORP.
1996 PERFORMANCE UNIT PLAN
I. Background
----------
Section IX.B. of the Belco Oil & Gas Corp. 1996 Performance Unit Plan (the
"Plan") provides that the Board of Directors of Belco Oil & Gas Corp. (the
"Company") may terminate the Plan at any time. The Board of Directors of the
Company terminated the Plan as a whole effective as of March 31, 1999. Section
IX.B. of the Plan states that a Plan termination shall be evidenced by a written
instrument describing any special provisions relating to the Plan termination
and the effective date of the termination.
II. Termination of the Plan
-----------------------
The Plan is terminated effective as of March 31, 1999.
