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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-22664
PATTERSON ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of 75-2504748
incorporation or organization) (I.R.S. Employer Identification No.)
P. O. Drawer 1416, 4510 Lamesa Highway, Snyder, Texas 79550
(Address of principal executive offices) (Zip Code)
(915) 573-1104
(Registrant's telephone number, including area code)
No change
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No [ ]
As of August 2, 1996 the issuer had 4,810,689 shares of Common Stock, par value
$0.01 per share, outstanding.
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This Form 10-Q/A is being filed solely for the purpose of reporting a
change in the average price per barrel of oil for the fiscal quarter ended June
30, 1995, from $18.51 to $18.06.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had working capital of approximately
$5,160,000 including cash and cash equivalents of approximately $4,251,000 as
compared to working capital of approximately $5,538,000 including cash and cash
equivalents of approximately $4,649,000 as of June 30, 1995. For the six
months ended June 30, 1996, the Company generated net cash from operations of
approximately $4,423,000, borrowed additional funds in the amount of $2,440,000
and received approximately $703,000 from the sale of various fixed assets.
These funds were used primarily to fund the Company's capital expenditure
program including the acquisition of drilling and related equipment of
approximately $3,090,000, and leasehold acquisition, exploration and
development of approximately $2,245,000. The funds were further utilized to
reduce certain notes payable by approximately $323,000 and to increase cash by
approximately $1,784,000.
The Company has a $10,000,000 line of credit with The CIT Group/Equipment
Financing, Inc. ("CIT") and a $4,000,000 line of credit with Norwest Bank
Texas, Wichita Falls, N.A. ("Norwest"). As of June 30, 1996, the Company has
drawn down $7,700,000 and approximately $3,600,000 on the lines of credit with
CIT and Norwest, respectively.
The Company's management believes that it will continue to use cash flow
from operations and borrowings (if available) which, together with the current
working capital should be sufficient to fund operations and service the
Company's debt for at least the next twelve months. The Company's ability to
repay debt would be adversely affected by a decline in natural gas and crude
oil prices or by unsuccessful results in the Company's contract drilling or
exploration, development and production activities. See "Volatility of Oil and
Gas Prices" below in this item.
The Company believes it must continually upgrade and maintain its contract
drilling fleet. As such, management has budgeted $4,000,000 in capital
expenditures for fiscal year 1996 for its contract drilling segment. The funds
(if available) will be used for repairs and maintenance on the existing
drilling rig fleet as well as to fund acquisitions of drilling and other
related equipment. For the six months ended June 30, 1996, a significant
portion of the aforementioned capital expenditures included purchases of
approximately 79,000 feet (or approximately $2,077,000, of which approximately
$556,000 was expended during the three months ended March 31, 1996 and
$1,521,000 was expended during the three months ended June 30, 1996) of new
drill pipe. During July 1996, the Company began assembly of the last of the
four drilling rigs acquired in the second quarter of 1995. Management
estimates expenses of the assembly to approximate $350,000.
The Company has also budgeted $4,000,000 in the current fiscal year for
capital expenditures in its oil and gas segment. The funds (if available) will
be used for leasehold acquisitions, exploration and development of oil and gas
properties. As of June 30, 1996 the Company had expended approximately
$2,245,000 of this budget. A significant portion of the Company's current
capital expenditures in its oil and gas segment involve a focused effort to
increase its ownership interest in the North Nena Lucia Unit. As of June 30,
1996, the Company expended $248,651 increasing its net working and net revenue
interests to approximately 24.87% and 21.68%, respectively. Subsequent to June
30, 1996, the Company expended an additional $729,839 further increasing its net
working and net revenue interests to approximately 40.82% and 35.59%,
respectively. The Company obtained short term bank financing of $730,000 during
July 1996 to fund its continued investment in this oil and gas property.
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RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
For the six months ended June 30, 1996, contract drilling revenues were
approximately $22,882,000 as compared to $18,492,000 for the same period in
1995; an increase of 24%. Average rig utilization was 80% for the six months
ended June 30, 1996 as compared to 77% for the same period in 1995. The
utilization rate for 1996 was based on 26 rigs while 1995 was based on 23 rigs.
Direct contract drilling costs for the six months ended June 30, 1996 were
approximately $18,861,000 or 82% of the contract drilling revenues as compared
to approximately $15,029,000 or 81% of the contract drilling revenues for the
same period in 1995. The increase in contract drilling revenues and direct
drilling costs was due primarily to the addition of three drilling rigs during
the second and third quarters of 1995. General and administrative expense for
the contract drilling segment was approximately $1,250,000 for the six months
ended June 30, 1996 as compared to $850,000 for the same period in 1995. The
increase in general and administrative expense was largely attributable to
approximately $270,000 of professional and other related expenses incurred
relative to the Company's merger with Tucker and approximately $70,000 of
repairs and maintenance incurred by the Company relative to an airplane leased
by the Company from an affiliate of the Chairman of the Board and Chief
Executive Officer of the Company. Depreciation expense was approximately
$2,355,000 for the six months ended June 30, 1996 as compared to $1,468,000 for
the same period in 1995. The increase in depreciation expense was due
primarily to the Company's significant purchases of new drill pipe through the
second quarter ended June 30, 1996 and, to a lesser extent the addition of the
three aforementioned drilling rigs in late fiscal year 1995. For the six
months ended June 30, 1996, income from this segment was approximately $779,000
as compared to approximately $1,179,000 for the same period in 1995.
Oil and gas revenue was approximately $2,889,000 for the six months ended
June 30, 1996, as compared to approximately $1,967,000 for the six months ended
June 30, 1995. The volume of crude oil and natural gas sold increased by 27%
and 25%, respectively, for the six months ended June 30, 1996 as compared to
the same period in 1995. The average price per barrel of crude oil was $19.53
in the first six months of 1996 as compared to $17.47 for the same period in
1995, and the average price per mcf of natural gas was $1.80 in the first six
months of 1996 as compared to $1.47 for the first six months of fiscal year
1995. Lease operating and production costs were $4.13 per barrel of oil
equivalent for the six months ended June 30, 1996 as compared to $3.76 per
barrel of oil equivalent for the same period in 1995. Exploration costs
increased by 77% to approximately $233,000 for the six months ended June 30,
1996 as a result of the addition of an exploration and production office in
Midland, Texas during June of 1995. Depreciation, depletion and amortization
was approximately $1,331,000 for the six months ended June 30, 1996 as compared
to approximately $950,000 for the same six months ended in 1995. The increase
is due primarily to increased production of crude oil and natural gas as
discussed above. General and administrative expense for the oil and gas
segment was approximately $698,000 for the first six months of 1996 as compared
to $608,000 for the first six months of 1995. For the six months ended June
30, 1996 income from the oil and gas segment was approximately $511,000 as
compared to $194,000 for the same period in 1995.
For the six months ended June 30, 1996, interest expense was approximately
$644,000 as compared to $460,000 for the same period in 1995. This increase is
primarily attributable to an approximate 21% increase in the total outstanding
principal balance of the Company's notes payable as compared to the same period
of 1995. At June 30, 1996, the Company recognized a net gain on the sale of
certain of its fixed assets of approximately $366,000 as compared to
approximately $87,000 recognized a year earlier. This increase is primarily
attributable to the sale of six drilling rig generator sets and approximately
12,000 feet of drill pipe.
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COMPARISON OF THE FISCAL QUARTERS ENDED JUNE 30, 1996 AND 1995
For the fiscal quarter ended June 30, 1996, contract drilling revenues
were approximately $12,349,000 as compared to $9,450,000 for the same fiscal
quarter in 1995; an increase of 31%. Average rig utilization was 82% for the
fiscal quarter ended June 30, 1996 as compared to 79% in the same fiscal
quarter in 1995. Direct contract drilling costs for the fiscal quarter ended
June 30, 1996 were approximately $10,115,000 or 82% of contract drilling
revenues as compared to approximately $7,574,000 or 80% of contract drilling
revenues for the same fiscal quarter in 1995. The increase in contract
drilling revenues and direct contract drilling costs was due largely to the
addition of three drilling rigs during the second and third quarters of 1995
and, to a lesser extent increased cost of fuel to operate the rigs. General
and administrative expense for the contract drilling segment was approximately
$803,000 for the fiscal quarter ended June 30, 1996 as compared to
approximately $408,000 for the same fiscal quarter in 1995. This increase in
general and administrative expense was largely attributable to increased
professional and other related expenses incurred relative to the Company's
merger with Tucker and approximately $70,000 of repairs and maintenance
incurred relative to an airplane leased by the Company from an affiliate of
the Chairman of the Board and Chief Executive Officer of the Company.
Depreciation expense was approximately $1,224,000 for the fiscal quarter ended
June 30, 1996 as compared to $775,000 for the same fiscal quarter in 1995. The
increase in depreciation expense was due primarily to the significant purchases
of new drill pipe during the three months ended June 30, 1996. For the fiscal
quarter ended June 30, 1996, income from this segment was approximately
$511,000 as compared to approximately $721,000 for the same fiscal quarter in
1995.
Oil and gas revenue was approximately $1,565,000 for the fiscal quarter
ended June 30, 1996, as compared to approximately $1,048,000 for the same
fiscal quarter in 1995. The volume of crude oil and natural gas sold increased
by 32% and 8%, respectively, in the fiscal quarter ended June 30, 1996 as
compared to the same period in 1995. The average price per barrel of oil was
$20.67 for the fiscal quarter ended June 30, 1996 as compared to $18.06 for the
same period in 1995, and the average price per mcf of natural gas was $2.13 as
compared to $1.56 for the second quarter ended 1995. Lease operating and
production costs were $4.46 per barrel of oil equivalent in the fiscal quarter
ended June 30, 1996, as compared to $3.87 per barrel of oil equivalent for the
same period in 1995. Exploration costs increased by 86% to approximately
$117,000 for the three months ended June 30, 1996 as compared to the same
period ended June 30, 1995. The increase is due primarily to the addition of
an exploration and production office in Midland, Texas during June of 1995.
Depreciation, depletion and amortization was approximately $729,000 for the
three months ended June 30, 1996 as compared to approximately $613,000 for the
same three months ended in 1995. The increase is due primarily to increased
crude oil and natural gas production as discussed above. General and
administrative expense for the oil and gas segment was approximately $337,000
for the second quarter ended 1996 as compared to $326,000 for the same period
in 1995. In the fiscal quarter ended June 30, 1996, income from the oil and
gas segment was approximately $294,000 as compared to approximately $69,000 for
the fiscal quarter ended June 30, 1995.
For the fiscal quarter ended June 30, 1996, interest expense was
approximately $315,000 as compared to $272,000 for the same period in 1995.
The increase is due primarily to an increase in the outstanding principal
balance of notes payable of approximately 8%. At June 30, 1996, the Company
recognized a net gain on the sale of certain of its fixed assets of
approximately $339,000 as compared to approximately $58,000 recognized a year
earlier. This increase is primarily attributable to the sale of six drilling
rig generator sets and approximately 12,000 feet of drill pipe.
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INCOME TAXES
Effective March 31, 1996, the Company revised its estimates relative to
the realization of the future benefits of its deferred tax assets, particularly
the net operating loss carryforwards. In light of the Company's
recent historical earnings, stable rig utilization rates and increased crude
oil prices, management has determined that it is more likely than not that the
Company will realize the benefits provided by its net operating loss
carryforwards and certain other deferred tax assets As such, the Company
reduced its valuation allowance and recognized a net deferred income tax
benefit of approximately $1,610,000 which was then offset by approximately
$139,000 of net deferred income tax expense recognized during the second
quarter ended June 30, 1996.
VOLATILITY OF OIL AND GAS PRICES
The Company's revenue, profitability and future rate of growth are
substantially dependent upon prevailing prices for oil and gas, both with
respect to its contract drilling and its oil and gas segments. Historically,
oil and gas prices and markets have been extremely volatile. Prices are
affected by market supply and demand factors as well as actions of state and
local agencies, the United States and foreign governments and international
cartels. All of these are beyond the control of the Company. Any significant
or extended decline in oil and/or gas prices could have a material adverse
effect on the Company's financial condition and results of operations.
The price of crude oil fell to a five year low in December 1993 ($13.50
per barrel in the United States) and has risen and fallen since then to $21.43
per barrel on August 7, 1996. The average price of natural gas per mcf
received by the Company has increased from $1.37 in the first quarter of 1995
to $2.13 in the second quarter of 1996.
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SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PATTERSON ENERGY, INC.
By: /s/ Cloyce A. Talbott
-----------------------------
Cloyce A. Talbott
Chairman of the Board and
Chief Executive Officer
By: /s/ James C. Brown
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James C. Brown
Vice President-Finance
DATED: January 24, 1997
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