<PAGE> 1
- --------------------------------------------------------------------------------
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 MARCH 31, 2000
Commission file number 001-14256
______________
BELCO OIL & GAS CORP.
(Exact name of registrant as specified in its charter)
Nevada 13-3869719
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
767 Fifth Avenue, 46th Floor 10153
New York, New York (Zip code)
(Address of principal executive offices)
(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 March 31, 2000, there were 31,092,400 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
- -------------------------------------------------------------------------------
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BELCO OIL & GAS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (including
restricted cash of $800,000 at December 31, 1999).......... $ 5,539 $ 2,105
Accounts receivable.......................................... 22,488 24,870
Income taxes receivable...................................... -- 6,661
Assets from commodity price risk management activities....... 1,274 2,879
Commodity Price Risk Management related funds on deposit..... 10,800 --
Other current assets......................................... 5,968 3,496
------- --------
Total current assets ................................... 46,069 40,011
------- --------
PROPERTY AND EQUIPMENT:
Oil and gas properties at cost based on full cost accounting--
Proved oil and gas properties...............................1,065,011 1,008,261
Unproved oil and gas properties............................. 74,358 71,075
Less--Accumulated depreciation, depletion and amortization.. (632,860) (619,446)
------- --------
Net oil and gas property................................ 506,509 459,890
------- --------
Building and other equipment................................ 9,231 9,107
Less--Accumulated depreciation.............................. (2,998) (2,634)
------- --------
Net building and other equipment........................ 6,233 6,473
------- --------
OTHER ASSETS..................................................... 3,941 4,599
------- --------
Total assets............................................ $562,752 $510,973
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable............................................ 17,267 17,970
Liabilities from commodity price risk management activities. 29,283 17,822
Accrued interest............................................ 7,302 7,098
Other accrued liabilities................................... 6,373 5,510
------- --------
Total current liabilities............................... 60,225 48,400
------- --------
LONG-TERM DEBT.................................................. 353,574 306,744
DEFERRED INCOME TAXES........................................... 28,756 33,638
LIABILITIES FROM COMMODITY PRICE RISK MANAGEMENT ACTIVITIES..... 17,236 8,219
STOCKHOLDERS' EQUITY:
6-1/2% Convertible Preferred stock, $.01 par value;
10,000,000 shares authorized; 3,965,000 and 3,985,000
issued and outstanding at March 31, 2000 and December 31,
1999, respectively........................................ 40 40
Common stock ($.01 par value, 120,000,000 shares authorized;
31,797,300 shares issued at March 31, 2000 and
December 31, 1999)........................................ 318 318
Additional paid-in capital.................................. 296,923 297,225
Retained earnings (deficit)................................. (187,820) (177,111)
Treasury Stock, 704,900 shares.............................. (4,317) (4,317)
Unearned compensation....................................... (1,430) (1,430)
Notes receivable for equity interest........................ (753) (753)
------- --------
Total stockholders' equity.............................. 102,961 113,972
------- --------
Total liabilities and stockholders' equity.............. $562,752 $510,973
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
<PAGE> 3
BELCO OIL & GAS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
2000 1999
---- ----
<S> <C> <C>
REVENUES:
Oil and gas sales, net of hedging activities............ $46,795 $31,581
Non-Hedge commodity price risk management activities
- cash settlements and premiums................ (6,886) 438
- non-cash mark-to-market...................... (22,178) (7,494)
Interest and other...................................... 250 200
------- -------
Total revenues................................. 17,981 24,725
------- -------
COSTS AND EXPENSES:
Oil and gas operating expenses.......................... 10,535 9,701
Depreciation, depletion and amortization................ 13,777 13,332
General and administrative.............................. 1,538 1,258
Interest expenses....................................... 6,128 5,375
------- -------
Total costs and expenses....................... 31,978 29,666
------- -------
INCOME (LOSS) BEFORE INCOME TAXES................................ (13,997) (4,941)
INCOME TAX PROVISION (BENEFIT)................................... (4,899) (1,729)
------- -------
NET INCOME (LOSS)................................................ (9,098) (3,212)
PREFERRED STOCK DIVIDENDS........................................ (1,611) (1,753)
------- -------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK..................... ($10,709) ($4,965)
======= =======
NET INCOME (LOSS) PER SHARE OF COMMON STOCK,
BASIC AND FULLY DILUTED....................................... ($0.34) ($0.16)
======= =======
AVERAGE NUMBER OF COMMON SHARES USED IN COMPUTATION
BASIC AND FULLY DILUTED....................................... 31,200 31,529
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
<PAGE> 4
BELCO OIL & GAS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-In
Shares Amount Shares Amount Capital
------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1999.... 3,985 $ 40 31,797 $ 318 $297,225
Comprehensive Income..........
Repurchase of Preferred Stock. (20) - - - (302)
Restricted Stock Issued....... - - - - -
Restricted Stock Forfeited.... - - - - -
Restricted Stock Amortized.... - - - - -
Net Income (Loss)............. - - - - -
Preferred Dividend Paid....... - - - - -
Treasury Stock Acquisitions... - - - - -
Payment Received.............. - - - - -
----- ------ ------ ------- --------
BALANCE, March 31, 2000....... 3,965 $ 40 31,797 $ 318 $296,923
===== ====== ====== ======= ========
Comprehensive Income..........
</TABLE>
<TABLE>
<CAPTION>
Notes
Retained Receivable
Unearned Earnings for Equity
Compensation (Deficit) Interest
------------ --------- ---------
<S> <C> <C> <C>
BALANCE, December 31, 1999... $(1,430) $(177,111) $ (753)
Comprehensive Income.........
Repurchase of Preferred Stock - - -
Restricted Stock Issued...... - - -
Restricted Stock Forfeited... - - -
Restricted Stock Amortized... - - -
Net Income (Loss)............ - (9,098) -
Preferred Dividend Paid...... - (1,611) -
Treasury Stock Acquisitions.. - - -
Payment Received............. - - -
------- --------- ----------
BALANCE, March 31, 2000...... $(1,430) $(187,820) $ (753)
======= ========= ==========
Comprehensive Income.........
</TABLE>
<TABLE>
<CAPTION>
Treasury Common Stock Comprehensive
Shares Amount Total Income
------ ------ ----- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1999.... (705) $(4,317) $113,972
Comprehensive Income.......... $(8,600)
Repurchase of Preferred Stock. - - (302) -
Restricted Stock Issued....... - - - -
Restricted Stock Forfeited.... - - - -
Restricted Stock Amortized.... - - - -
Net Income (Loss)............. - - (9,098) (9,098)
Preferred Dividend Paid....... - - (1,611) -
Treasury Stock Acquisitions... - - - -
Payment Received.............. - - - -
----- ------- -------- -------
BALANCE, March 31, 2000....... (705) $(4,317) $102,961
===== ======= ========
Comprehensive Income.......... $(9,098)
========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE> 5
BELCO OIL & GAS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................. ($9,098) ($3,212)
Adjustments to reconcile net income (loss) to net
operating cash inflows --
Depreciation, depletion and amortization.......... 13,777 13,332
Deferred tax benefit.............................. (4,899) (1,729)
Other............................................. 36 (39)
Commodity price risk management activities........ 9,112 1,025
Changes in operating assets and liabilities --
Commodity price risk management................... 13,066 7,961
Accounts receivable, oil and gas.................. 9,013 6,281
Commodity Price Risk Management related funds
on deposit...................................... (10,800) --
Other current assets.............................. (2,279) (258)
Accounts payable and accrued liabilities.......... 364 (10,159)
------- -------
Net operating cash inflows............... 18,292 13,202
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development expenditures.............. (19,299) (11,128)
Purchases of oil and gas properties................... (40,854) (420)
Proceeds from sale of oil and gas properties.......... 120 2
Other property additions.............................. (124) (159)
Changes in other assets............................... 61 (66)
------- -------
Net investing cash outflows.............. (60,096) (11,771)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of bonds................................... (2,850) --
Repurchases of preferred stock........................ (302) (998)
Long-term borrowings.................................. 83,600 3,500
Long-term debt repayments............................. (33,600) --
Preferred dividend paid............................... (1,611) (1,753)
------- -------
Net financing cash inflows............... 45,237 749
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... 3,433 2,180
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......... 2,105 2,435
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $5,538 $4,615
====== ======
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
<PAGE> 6
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 10K for the
calendar year 1999 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, 1999
financial statements of Belco Oil & Gas Corp., included in the Form 10-K for the
calendar year 1999, 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 three months ended March 31, 2000, the Company had net commodity
price risk management losses of $31.6 million consisting of $9.4 million in cash
settlements paid out by the Company ($2.5 million in hedge and $6.9 million in
non-hedge) and $22.2 million in non-cash mark- to-market unrealized losses. This
compares to $7.0 million in cash settlements received by the Company ($6.3
million in hedge and $0.7 million in non-hedge) and $7.5 million in non-cash
mark- to-market unrealized losses reported in the first three months of 1999
related to its price risk management activities.
<PAGE>
<PAGE> 7
Note 3 - 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 months ended March 31, 2000 and 1999 is presented
in the table below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
2000 1999
---- ----
<S> <C> <C>
Basic net loss per share:
Net loss ($9,098) ($3,212)
Less: Preferred Stock dividends (1,611) (1,753)
--------- --------
Loss attributable to common shareholders ($10,709) ($4,965)
Weighted average shares of common stock outstanding 31,200 31,529
-------- --------
Basic net loss per share ($0.34) ($0.16)
======== ========
Diluted net income (loss) per share:
Weighted average shares of common stock outstanding 31,200 31,529
Effect of dilutive securities:
Preferred stock, warrants and stock options (1) -- --
-------- -------
Average shares of common stock outstanding including
dilutive securities 31,200 31,529
-------- -------
Diluted net loss per share ($0.34) ($0.16)
======== =======
</TABLE>
____________
(1) Amounts are not included in the computation of diluted net loss per
share because to do so would have been antidilutive.
<PAGE>
<PAGE> 8
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 within its four core areas, including the Rocky Mountains, the Permian
Basin, the Mid-Continent region and the Gulf Coast. 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 the 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, 1999. The Company's reserve base was 641 Bcfe at
December 31, 1999 with a reserve life index of 10.6 years, based on 1999
production.
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 64% 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 ("CPRM") 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
<PAGE>
<PAGE> 9
hedging activities or uses mark-to-market accounting for those contracts
that do not qualify for hedge accounting. As of March 31, 2000, 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 2000 and with respect to lesser portions of its estimated
production for 2001 and 2002. 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 March 31, Variances
-------------------- ---------
(Unaudited)
2000 1999 AMOUNT %
---- ---- ------ ----
<S> <C> <C> <C> <C>
Oil and Gas Sales, net of hedging
activities $46,795 $31,581 $15,214 48%
Weighted Average Sales Prices:
Oil (per Bbl)
- Unhedged $ 27.85 $11.37 $16.48 145%
- Hedge Settlements (0.99) 6.59 (7.58) 115%)
------- ------ ------- ------
Net Realized $ 26.86 $17.96 $ 8.90 49%
Gas (per Mcf)
- Unhedged $ 2.15 $ 1.57 $ 0.58 37%
- Hedge Settlements (0.15) 0.08 (0.23) (288%)
------- ------ ------- ------
Net Realized $ 2.00 $ 1.65 $ 0.35 21%
Net Production Data:
Oil (MBbl) 967 886 81 9%
Gas (MMcf) 10,406 9,494 912 10%
Gas equivalent (MMcfe) 16,208 14,810 1,398 9%
Daily Production (MMcfe) 178 165 13 8%
Operations Data per Mcfe:
Oil and gas sales revenues (Hedged) $2.89 $2.13 $0.76 36%
Non-Hedge CPRM Cash Settlements (0.43) 0.03 (0.46)(1,533%)
Oil and gas operating expenses (0.65) (0.65) - -
General and administrative (0.09) (0.08) (0.01) (12%)
Depreciation, depletion and amortization (0.85) (0.90) 0.05 6%
------- ------ ------- ------
Pre-tax operating profit (1) $0.87 $0.53 $0.34 64%
===== ===== ===== ======
Cash flow $1.72 $1.43 $0.29 20%
===== ===== ===== ======
</TABLE>
_____________________________
(1) Excludes non-cash mark-to-market commodity price risk management
activities, interest income and interest expense.
<PAGE>
<PAGE> 10
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to March 31, 1999
Revenues
During the first quarter of 2000, oil and gas sales revenues net of hedging
activities increased from $31.6 million to $46.8 million when compared to the
prior year comparable period due principally to substantially higher commodity
prices realized in the first quarter of 2000. Average hedged price realizations,
excluding non-hedge Commodity Price Risk Management activities ("CPRM"), for
both oil and natural gas in the first quarter of 2000 compared to last year's
first quarter were higher by 49% and 21%, respectively. Oil production volume
during the first quarter of 2000 increased by 9% and natural gas production
increased by 10% compared to the prior year comparable period. Natural gas
production represented approximately 64% of total Company production on an Mcfe
basis, unchanged compared to the first quarter of 1999.
As a result of the substantial increase in both oil and natural gas prices
during the first quarter of 2000, CPRM activities reduced reported revenues by
$31.6 million including $9.4 million in cash settlements paid out by the Company
($2.5 million in hedge and $6.9 million in non-hedge) and $22.2 million in
non-cash mark-to- market losses recorded as required by current accounting
rules. In the prior year first quarter when commodity prices were substantially
lower, the Company received $7.0 million in cash settlements ($6.3 million in
hedge and $0.7 million in non-hedge) and reported a mark-to-market loss of $7.5
million.
Costs and Expenses
Production and operating expenses increased to $10.5 million for the first
quarter of 2000 when compared to the $9.7 million for the comparable period in
1999. The increase is primarily due to additional producing properties.
Operating costs on an equivalent unit basis were to $0.65 per Mcfe in the first
quarter of 2000, unchanged when compared to $0.65 per Mcfe in the first quarter
of 1999.
Depreciation, depletion and amortization ("DD&A"), for the quarter ended
March 31, 2000 was $13.8 million, a $0.5 million increase when compared to the
$13.3 million recorded in the prior year comparable period. The year over year
increase is related to higher production. The DD&A rate per Mcfe is $0.85, a 6%
decline when compared to the prior year first quarter.
General and administrative expense ("G&A") increased 22% in the first
quarter of 2000 to $1.5 million primarily due to personnel related cost
increases when compared to the $1.3 million incurred in the first quarter of
1999. The rate per Mcfe for G&A costs increased from $0.08 to $0.09.
<PAGE>
<PAGE> 11
Income (Loss) Before Income Taxes
The Company's reported loss before income tax benefits for the first
quarter of 2000 was $14.0 million. This compares to a pre-tax loss of $4.9
million reported in the first quarter of 1999. The increased loss primarily
reflects the impact of the cash and non-cash CPRM activities.
Income Taxes
Income tax benefits were recorded for the 2000 first quarter in the amount
of $4.9 million as a result of the reported pre-tax loss. The first quarter 1999
income tax benefit recorded was $1.7 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, which includes a
sub-facility from the Agent for letters of credit. The Borrowing Base at March
31, 2000 was $150 million with $92.0 million advanced to the Company at 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. 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.
<PAGE>
<PAGE> 12
The Company entered into interest rate swap agreements converting two long-
term debt fixed rate obligations to floating rate obligations as follows:
<TABLE>
<CAPTION>
Agreement Transaction Fixed Floating Floating Rate
Amount Date Rate Rate Expiration Date
---------- ----------- -------- -------- -----------------
<S><C> <C> <C> <C> <C>
$100 million 12/97 8.875% 8.875% September 15, 2000 (a)
$110 million 12/97 0.500% 10.120% April 1, 2000 (a)
$50 million 1/98 8.875% 8.875% September 15, 2000 (a)
</TABLE>
_______________________
(a) Floating rate is redetermined at each six month period following the
expiration through September 15, 2007 currently capped.
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 reduced the Company's 1999 and 1998 interest expense by
approximately $1.1 and $1.0 million, respectively.
Through March 31, 2000, the Company purchased 405,400 shares of its
Preferred Stock for a total cost of $6.2 million and 704,900 shares of its
Common Stock at a total cost of $4.3 million. All such purchases were made
pursuant to the Company's Board approved share re-acquisition program.
In February 2000, the Company closed a $40.5 million acquisition of oil and
gas properties expected to add approximately 2,400 BOE per day to the existing
production base. The transaction was financed through additional borrowings
under the Company's Revolving Credit Facility.
In January 2000, the Company purchased $3 million face value of its 8-7/8%
Bonds at a discount in the open market resulting in a modest gain.
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. The $10 million authorization is in addition to the $10 million that
was exhausted in December 1999.
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. Operating cash flow before Balance
Sheet items was approximately $22.0 million in the first quarter of 2000, a
<PAGE>
<PAGE> 13
38% increase over the prior year first quarter of $15.9 million. The
Company had working capital deficit of $14.2 million as of March 31, 2000
compared to the $8.4 million deficit as of December 31, 1999. The deficit is
created by the recording of non-cash mark-to-market losses related to
derivatives activities and recorded under current obligations in the balance
sheet as required by current accounting rules. Excluding the mark-to-market
items, working capital would have been positive $9.7 million at March 31, 2000
before recognizing the unused $58 million available under the Company's
Revolving Credit Facility.
Capital Expenditures
Year 2000 capital expenditures are currently estimated at $126.0 million,
including approximately $65.8 million in property acquisitions.
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. If there are changes in
oil and natural gas prices, however, 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, 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 2000 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.
The Company expects to incur additional hedge and non-hedge related cash
settlement costs throughout the remaining nine months of calendar year 2000
assuming commodity prices remain at current levels. This cash settlement amount
is currently estimated at approximately $23.0 million using current forward
price data available and applied to volumes of oil and gas expected to be
produced during the nine month
<PAGE>
<PAGE> 14
period ending December 31, 2000. This estimated amount can increase or
decrease if commodity prices rise or decline from the current levels used in
developing this estimate. As cash settlements are made on volumes produced, no
additional losses are expected to be recorded, unless actual prices increase
above estimated future prices used in the March 31, 2000 mark-to-market
calculation. Subsequent to March 31, 2000, both oil and natural gas futures
prices have increased and if such conditions persist, the Company will be
required to record additional mark-to-market losses.
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.
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. 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.
<PAGE>
<PAGE> 15
As of March 31, 2000, 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 first quarter of 2000.
There has not been a material change in the Company's exposure to commodity
price and interest rate risk since the date of the 1999 Form 10-K filing.
<PAGE>
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS - NONE
ITEM 2 - CHANGES IN SECURITIES - NONE
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS - NONE
ITEM 5 - OTHER INFORMATION - NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No.
27* Financial Data Schedule
___________________
* Filed herewith
(b) Reports on Form 8-K: None.
<PAGE>
<PAGE> 17
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: May 15, 2000 /s/ LAURENCE D. BELFER
Laurence D. Belfer,
Vice-Chairman and Chief Operating Officer
Date: May 15, 2000 /s/ DOMINICK J. GOLIO
Dominick J. Golio,
Senior Vice President - Finance
and Chief Financial Officer
</TABLE>
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