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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 0-22576
COHO ENERGY, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
TEXAS 75-2488635
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
14785 PRESTON ROAD, SUITE 860 75240
DALLAS, TX (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code:
(214) 774-8300
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 / /
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
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<CAPTION>
CLASS OUTSTANDING AT AUGUST 1, 1996
----- -----------------------------
<S> <C>
Common Shares, $.01 par value 20,171,896
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INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- December 31, 1995 and
June 30, 1996....................................................
Condensed Consolidated Statements of Operations -- three and six
months ended June 30, 1995 and 1996..............................
Condensed Consolidated Statements of Cash Flows -- six months ended
June 30, 1995 and 1996...........................................
Notes to Condensed Consolidated Financial Statements...............
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................
Item 2. Changes in Securities..............................................
Item 3. Defaults Upon Senior Securities....................................
Item 4. Submission of Matters to a Vote of Security Holders................
Item 5. Other Information..................................................
Item 6. Exhibits and Reports on Form 8-K...................................
Signatures..................................................................
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COHO ENERGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
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<CAPTION>
DECEMBER 31 JUNE 30
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents......................................... $ 1,430 $ 409
Accounts receivable, principally trade............................ 5,049 6,936
Deferred income taxes............................................. 973 811
Other current assets.............................................. 869 1,231
Net assets of discontinued operations (note 2).................... 15,938 --
-------- --------
24,259 9,387
PROPERTY AND EQUIPMENT, at cost, net of accumulated depletion and
depreciation, based on full cost accounting method, (note 3)...... 175,899 189,406
OTHER ASSETS........................................................ 2,401 1,898
-------- --------
$ 202,559 $ 200,691
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities.......................... $ 11,041 $ 15,172
Current portion of long term debt................................. 268 283
-------- --------
11,309 15,455
LONG TERM DEBT, excluding current portion........................... 107,403 95,959
DEFERRED INCOME TAXES............................................... 9,526 12,781
-------- --------
128,238 124,195
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.01 per share
Authorized 10,000,000 shares, none issued
Common stock, par value $0.01 per share
Authorized 50,000,000 shares
Issued 20,171,896 shares....................................... 202 202
Additional paid-in capital........................................ 82,278 82,315
Retained deficit.................................................. (8,159) (6,021)
-------- --------
Total shareholders' equity........................................ 74,321 76,496
-------- --------
COMMITMENTS AND CONTINGENCIES (note 5)
$ 202,559 $ 200,691
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
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COHO ENERGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30 JUNE 30
-------------------- --------------------
1995 1996 1995 1996
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
(RESTATED) (RESTATED)
OPERATING REVENUES
Net crude oil and natural gas production............ $ 19,402 $25,305 $ 10,000 $12,938
-------- -------- -------- --------
OPERATING EXPENSES
Crude oil and natural gas production................ 5,218 5,541 2,614 2,711
Taxes on crude oil and natural gas production....... 947 1,266 529 669
General and administrative.......................... 3,029 3,299 1,685 1,840
Depletion and depreciation.......................... 7,313 7.885 3,851 3,980
-------- -------- -------- --------
Total operating expenses.................... 16,507 17,991 8,679 9,200
-------- -------- -------- --------
OPERATING INCOME...................................... 2,895 7,314 1,321 3,738
-------- -------- -------- --------
OTHER INCOME AND EXPENSES
Interest and other income........................... 56 510 19 33
Interest expense.................................... (3,760) (4,233) (1,923) (1,921)
-------- -------- -------- --------
(3,704) (3,723) (1,904) (1,888)
-------- -------- -------- --------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES........................................ (809) 3,591 (583) 1,850
INCOME TAX PROVISION (BENEFIT)........................ (308) 1,453 (222) 747
-------- -------- -------- --------
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS........ (501) 2,138 (361) 1,103
DISCONTINUED OPERATIONS (note 2)
Income (Loss) from discontinued marketing and
transportation operations (less applicable income
tax expenses of $211 and $16, respectively)...... 343 -- 26 --
-------- -------- -------- --------
NET EARNINGS (LOSS)................................... (158) 2,138 (335) 1,103
DIVIDENDS ON PREFERRED STOCK.......................... 700 362 --
-------- -------- -------- --------
NET EARNINGS (LOSS) APPLICABLE TO COMMON STOCK........ $ (858) $ 2,138 $ (697) $ 1,103
======== ======== ======== ========
EARNINGS (LOSS) FROM CONTINUING OPERATIONS PER COMMON
SHARE............................................... $ (0.05) $ 0.11 $ (0.03) $ 0.06
======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE (note 4)............. $ (0.05) $ 0.11 $ (0.04) $ 0.06
======== ======== ======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
2
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COHO ENERGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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<CAPTION>
SIX MONTHS ENDED
JUNE 30
---------------------
1995 1996
-------- --------
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss).................................................. $ (158) $ 2,138
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depletion and depreciation........................................ 7,888 7,885
Deferred income taxes............................................. (240) 1,345
Amortization of debt issue costs and other items.................. 214 425
Changes in operating assets and liabilities:
Accounts receivable and other assets.............................. 2,433 (2,265)
Accounts payable and accrued liabilities.......................... (1,888) 801
-------- --------
Net cash provided by operating activities.............................. 8,249 10,329
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment............................................... (12,341) (21,296)
Net proceeds from sale of marketing and transportation operations.... -- 21,509
-------- --------
Net cash provided by (used in) investing activities.................... (12,341) 213
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long term debt........................................... 7,108 15,107
Repayment on long term debt.......................................... (3,698) (26,706)
Proceeds from exercise of stock options.............................. -- 36
-------- --------
Net cash provided by (used in) financing activities.................... 3,410 (11,563)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS.............................. (682) (1,021)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................... 1,613 1,430
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 931 $ 409
======== ========
CASH PAID (RECEIVED) DURING THE PERIOD FOR:
Interest............................................................. $ 3,409 $ 4,600
Income taxes......................................................... $ (641) $ 533
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
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COHO ENERGY, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED)
(UNAUDITED)
1. BASIS OF PRESENTATION
General
The accompanying condensed consolidated financial statements of Coho
Energy, Inc. (the "Company") have been prepared without audit, in accordance
with the rules and regulations of the Securities and Exchange Commission and do
not include all disclosures normally required by generally accepted accounting
principles or those normally made in annual reports on Form 10-K. All material
adjustments, consisting only of normal recurring accruals, which, in the opinion
of management, were necessary for a fair presentation of the results for the
interim periods have been made. The results of operations for the six month
period ended June 30, 1996 are not necessarily indicative of the results to be
expected for the full year. The condensed consolidated financial statements
should be read in conjunction with the notes to the financial statements, which
are included as part of the Company's annual report on Form 10-K for the year
ended December 31, 1995.
Supplemental Cash Flow Information
The statements of cash flows reflect the cash effects of the Company's
operations, its investing transactions, and its financing transactions. Certain
noncash transactions related to the sale of the discontinued operations have
been excluded from the statement of cash flows for the six months ended June 30,
1996.
2. DISCONTINUED OPERATIONS
On April 3, 1996, the Company's wholly owned subsidiary, Interstate Natural
Gas Company, sold all of the stock of three wholly-owned subsidiaries that
comprised its natural gas marketing and transportation segment to an unrelated
third party for cash of $19.5 million, the assumption of net liabilities of
approximately $2.3 million and the payment of taxes to a maximum of $1.2 million
generated as a result of the tax treatment of the transaction. The sale closed
on April 3, 1996. The marketing and transportation segment is accounted for as
discontinued operations, and accordingly, the accompanying statements of
earnings for the three and six months ended June 30, 1995 have been restated to
segregate such operations.
3. PROPERTY AND EQUIPMENT
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DECEMBER 31, JUNE 30,
1995 1996
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Crude oil and natural gas leases and rights including
exploration, development and equipment thereon, at cost... $ 278,197 $ 299,597
Accumulated depletion and depreciation...................... (102,298) (110,191)
-------- --------
$ 175,899 $ 189,406
======== ========
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Overhead expenditures directly associated with exploration and development
of crude oil and natural gas reserves have been capitalized in accordance with
the accounting policies of the Company. Such charges totalled $958,000 and
$1,201,000 for the six months ended June 30, 1995 and 1996, respectively.
During the six months ended June 30, 1995 and 1996, the Company did not
capitalize any interest or other financing charges on funds borrowed to finance
unproved properties or major development projects.
4
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COHO ENERGY, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995 and June 30, 1996, unproved crude oil and natural gas
properties totalling $6,254,000 and $7,882,000, respectively, were excluded from
costs subject to depletion. These costs are anticipated to be included in costs
subject to depletion during the next three to five years.
4. EARNINGS PER SHARE
Earnings per share have been calculated based on the weighted average
number of shares outstanding (including common shares plus, when their effect is
dilutive, common stock equivalents consisting of stock options) for the six
months ended June 30, 1995 and 1996, of 16,782,925 and 20,336,803, respectively,
and for the three months ended June 30, 1995 and 1996, of 16,782,925 and
20,417,772, respectively.
5. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various legal proceedings and claims which
arise in the normal course of business. Based on discussions with legal counsel,
the Company does not believe that the ultimate resolution of such actions will
have a significant effect on the Company's financial position.
Like other crude oil and natural gas producers, the Company's operations
are subject to extensive and rapidly changing federal and state environmental
regulations governing emissions into the atmosphere, waste water discharges,
solid and hazardous waste management activities and site restoration and
abandonment activities. The Company does not believe that any potential
liability, in excess of amounts already provided for, would have a significant
effect on the Company's financial position.
The Company has entered into certain financial arrangements which act as a
hedge against price fluctuations in future crude oil and natural gas production.
Gains and losses on these transactions are recorded in operating revenues when
the future production sale occurs. The Company has 1,230,000 Mmbtu of natural
gas production hedged over the period from July through October 1996, at an
average price of $2.12 per Mmbtu. The Company has also entered into certain
arrangements which fix a minimum WTI price per barrel of $16.00 and a maximum
WTI price of $18.20 for 3,000 barrels of oil production per day through July
31,1996 and a minimum WTI price per barrel of $17.00 and a maximum WTI price of
$18.28 for 3,500 barrels per day of oil production for the period beginning
August 1, 1996 through December 31, 1996.
6. SUBSEQUENT EVENT
Effective August 8, 1996 the Company amended its revolving credit facility
with its lenders. Under this new amended credit facility, the lenders have
increased their maximum commitment from $147.5 million to $250 million.
Additionally, the amount available to the Company in borrowing capacity for
general corporate purposes ("Borrowing Base") increased from $110 million to
$130 million, with an additional $20 million immediately available to the
Company to provide bridge financing for acquisitions. Other changes to the
credit facility include: (a) lengthening the time period for permitted advances
and repayments to January 1, 2000 from January 31, 1998, at which time the loan
converts to a non-revolver term facility requiring quarterly principal
repayments until fully repaid in 2003 (previously 2002), and (b) reducing the
margin premium in excess of LIBOR charged for revolving Eurodollar advances ,
which will now be based on a rolling four-quarter basis of consolidated
indebtedness to earnings before interest, taxes, depreciation and amortization,
with the highest applicable margin being 1.50%(previously a static margin of
2%).
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Condensed Consolidated Financial Statements and notes thereto included elsewhere
herein.
GENERAL
The Company seeks to acquire controlling interests in underdeveloped oil
and gas properties and attempts to maximize reserves and production from such
properties through relatively low-risk activities such as development drilling,
multiple completions, recompletions, workovers, enhancement of production
facilities and secondary recovery projects. During the six months ended June 30,
1996, 75% of production revenues were attributable to the sale of crude oil and
the remaining 25% were derived from natural gas as compared to 73% from crude
oil sales and 27% from natural gas sales during the first half of 1995.
The Company increased its crude oil production in the first six months of
1996 as a result of ongoing development activities on its existing properties in
Mississippi. Average net daily BOE production was 9,602 BOE for the six months
ended June 30, 1996 as compared to 9,003 BOE for the same period in 1995.
Crude oil and natural gas prices are subject to significant seasonal,
political and other variables which are beyond the Company's control. In an
effort to reduce the effect on the Company of the volatility of the prices
received for crude oil and natural gas, the Company has entered, and expects to
continue to enter, into crude oil and natural gas hedging transactions. The
Company's hedging program is intended to stabilize cash flow and thus allow the
Company to plan its capital expenditure program with greater certainty. Because
all hedging transactions are tied directly to the Company's crude oil and
natural gas production, the Company does not believe that such transactions are
of a speculative nature.
LIQUIDITY AND CAPITAL RESOURCES
Capital Sources. For the six months ended June 30, 1996, cash flow
generated from operating activities was $10.3 million compared with $8.2 million
for the same period in 1995. A 16% increase in crude oil production volumes for
the six months ended June 30, 1996, compared to the same period in 1995 and a
15% increase in crude oil prices realized in 1996 are the major factors
contributing to this increase. See results of operations for a discussion of
operating results.
At June 30, 1996, the Company had a working capital deficit of $5.9 million
primarily due to current payables associated with drilling and recompletion
activity which will be funded with cash flow from operations and borrowings
under the revolving credit facility.
On April 3, 1996, the Company's wholly owned subsidiary, Interstate Natural
Gas Company, sold to Republic Gas Partners, L.L.C. ("Republic") all of the stock
of its wholly-owned subsidiaries, Mid Louisiana Gas Company, Mid Louisiana
Marketing Company and Mid Louisiana Gas Transmission Company, which comprised
the Company's Louisiana natural gas marketing and transportation segment of
operations for total consideration of approximately $23 million. The total
consideration is comprised of $19.5 million in cash, the assumption of net
liabilities of approximately $2.3 million (excluding deferred taxes) and the
reimbursement for the payment of certain taxes to a maximum of $1.2 million,
generated as a result of the tax treatment of the transaction. Republic is an
unaffiliated third party. The proceeds from the sale were used to reduce amounts
outstanding under the Company's revolving credit facility.
Outstanding advances under the Company's revolving credit facility at June
30, 1996 were $91.9 million, all of which is classified as long term. The
Company also had letters of credit aggregating $4.2 million outstanding under
the Company's revolving credit facility as of June 30, 1996, to secure
promissory notes issued in August 1995, relating to the acquisition of the
Brookhaven field in Mississippi, leaving $33.9 million available under the
amended credit facility (discussed below) at June 30, 1996.
Effective August 8, 1996 the Company amended its revolving credit facility
with its lenders. Under this new amended credit facility, the lenders have
increased their maximum commitment from $147.5 million to
6
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$250 million. Additionally, the amount available to the Company in borrowing
capacity for general corporate purposes ("Borrowing Base") increased from $110
million to $130 million, with an additional $20 million immediately available to
the Company to provide bridge financing for acquisitions. Other changes to the
credit facility include: (a) lengthening the time period for permitted advances
and repayments to January 1, 2000 from January 31, 1998, at which time the loan
converts to a non-revolver term facility requiring quarterly principal
repayments until fully repaid in 2003 (previously 2002), and (b) reducing the
margin premium charged in excess of LIBOR for revolving Eurodollar advances,
which will now be based on a rolling four-quarter basis of consolidated
indebtedness to earnings before interest, taxes, depreciation and amortization,
with the highest applicable margin being 1.50% (previously a static margin of
2%).
The restated credit agreement contains certain financial and other
covenants including (i) the maintenance of minimum amounts of shareholders'
equity, (ii) maintenance of minimum ratios of cash flow to interest expense as
well as current assets to current liabilities, (iii) limitations on the
Company's and Coho Resources, Inc.'s ability to incur additional debt and (iv)
restrictions on the payment of dividends.
Capital Expenditures. During the first six months of 1996, the Company
incurred capital expenditures of $21.3 million compared with $12.3 million for
the first six months of 1995. During the first six months of 1996, the Company
participated in the drilling of six new wells (including two new salt water
disposal wells), seven sidetrack projects and three re-entries of plugged and
abandoned wells. The remaining capital expenditures incurred during the first
six months of 1996 were in connection with the continuing development efforts on
existing wells in the Company's Soso, Summerland, Laurel, Brookhaven and
Martinville fields. Approximately 40% of the capital spent in the first six
months is associated with projects which are not yet complete and therefore have
not yet had an effect on daily production. General and administrative costs
directly associated with the Company's exploration and development activities
were $1.2 million for the first six months of 1996 compared with $958,000 for
the first six months of 1995 and are included in total capital expenditures.
In August 1996, the Board of Directors approved a $7.6 million increase in
the 1996 capital expenditure program to a total of $45.4 million.
The Company has no material capital commitments and is consequently able to
adjust the level of its expenditures as circumstances warrant.
RESULTS OF OPERATIONS
Selected Operating Data
[CAPTION]
<TABLE>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30 JUNE 30
------------------- ------------------
1995 1996 1995 1996
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER DAY,
PER BBL AND PER MCF DATA)
<S> <C> <C> <C> <C>
Production
Crude Oil (Bbl/day)................................... 5,692 6,612 5,767 6,615
Natural Gas (Mcf/day)................................. 19,869 17,938 19,559 17,992
BOE (Bbl/day)......................................... 9,003 9,602 9,027 9,614
Average Sales Prices
Crude Oil............................................. $ 13.72 $ 15.71 $ 13.97 $ 16.25
Natural Gas........................................... $ 1.46 $ 1.96 $ 1.50 $ 1.93
Other
Production costs per BOE(1)........................... $ 3.70 $ 3.90 $ 3.66 $ 3.86
Depletion per BOE..................................... $ 4.44 $ 4.51 $ 4.64 $ 4.55
Revenues
Production revenues
Crude Oil.......................................... $14,134 $18,902 $ 7,330 $ 9,781
Natural Gas........................................ 5,268 6,403 2,670 3.157
------- ------- ------- -------
$19,402 $25,305 $10,000 $12,938
======= ======= ======= =======
</TABLE>
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(1) Includes lease operating expenses and production taxes, exclusive of general
and administrative costs.
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Operating Revenues. During the first six months of 1996, production
revenues increased 30% to $25.3 million as compared to $19.4 million for the
same period in 1995. This increase was principally due to a 16% increase in
crude oil production and a 15% increase in crude oil prices received. For the
three months ended June 30, 1996, production revenue increased 29% to $12.9
million as compared to $10.0 million for the same period in 1995. This increase
was principally due to a 15% increase in crude oil production and a 16% increase
in crude oil prices received (including hedging gains and losses discussed
below).
The 16% increase in daily crude oil production during the first half of
1996, to 6,612 Bbls, is primarily a result of the continued positive response
from the Company's development efforts on existing wells, particularly the
Laurel, Martinville, Soso and Summerland fields. In addition for the six months
ended June 30, 1996, production includes oil from the Brookhaven field, which
was acquired in August 1995. Gas production during the first half of 1996 was
10% lower than the comparable 1995 period, primarily due to normal production
declines coupled with operational problems as a result of cold, wet weather in
the first quarter of 1996 and minor gathering lines problems in the second
quarter of 1996. Production from development wells drilled late in the second
quarter of 1996 are anticipated to offset normal gas production declines during
the last half of 1996. The foregoing sentence is a forward looking statement
based on current production information; actual results for the last half of
1996 may differ from projected results if production from such development wells
does not continue at current levels.
Crude oil prices increased during the first half of 1996 compared to the
same period in 1995 and are continuing to remain strong into the third quarter
of 1996. The posted price for the Company's crude oil averaged $19.04 for the
six months ended June 30, 1996, an 11% increase over the average posted price of
$17.22 experienced in the first half of 1995. The price per barrel received by
the Company is adjusted for the quality of the crude oil and is generally lower
than the posted price. The crude oil prices received by the Company during 1996
increased more significantly than the average posted price because the Company
amended its marketing arrangements for the sale of substantially all of its
crude oil during 1995 and again in March 1996, to improve the price it receives
for its crude oil resulting in a net increase in revenues to the Company. These
price improvements were partially offset by increased crude oil hedging losses
during 1996 discussed below.
The price for the Company's natural gas, including hedging gains and
losses, increased during the three and six months ended June 30, 1996 compared
to the same periods in 1995 by 29% and 34%, respectively, due to the colder
winter season across the United States in 1996 and increased heating needs.
Production revenues for the six months ended June 30, 1996 included crude
oil hedging losses of $1.3 million ($1.09 per Bbl) compared to the hedging
losses of $514,000 ($0.50 per Bbl) for the same period in 1995. Production
revenues in 1996 also included natural gas hedging losses of $1.1 million ($0.33
per Mcf) compared with natural gas hedging gains of $184,000 ($0.05 per Mcf) for
the same period in 1995. Production revenues for the three months ended June 30,
1996 included crude oil hedging losses of $928,000 ($1.56 per Bbl) compared to
hedging losses of $461,000 ($0.88 per Bbl) for the same period in 1995. The
second quarter of 1996 production revenues also include natural gas hedging
losses of $372,000 ($0.23 per Mcf) compared to gas hedging gains in 1995 of
$153,000 ($0.08 per Mcf). Additionally, the Company has entered into certain
arrangements which fix a minimum WTI price per barrel of $16.00 and a maximum
WTI price of $18.20 for 3,000 barrels of production per day through July 31,
1996, and a minimum WTI price of $17.00 and a maximum WTI price of $18.28 per
barrel on 3,500 barrels per day of production beginning August 1, 1996 and
ending December 31, 1996. The Company also has 1,230,000 Mmbtu of natural gas
production hedged over the July through October 1996 period at an average price
of $2.12 per Mmbtu. Any gain or loss on the Company's crude oil hedging
transactions is determined as the difference between the contract price and the
average closing price for WTI on the NYMEX for the contract period. Any gain or
loss on the Company's natural gas hedging transactions is generally determined
as the difference between the contract price and the average settlement price
for the last three days during the month in which the hedge is in place.
Consequently, hedging activities do not affect the actual sales price received
for the Company's crude oil and natural gas.
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<PAGE> 11
Interest and other income increased to $510,000 in the first half of 1996
from $56,000 in 1995 primarily due to $472,000 of interest earned during 1996 on
the receivable from the sale of the marketing and pipeline segment of
operations.
Expenses. Production expenses were $6.8 million for the first six months of
1996 compared to $6.2 million for the first six months of 1995 and $3.4 million
for the second quarter of 1996 compared to $3.1 million for the same period in
1995. This increase primarily reflects additional production volumes. On a BOE
basis, production costs increased to $3.90 per BOE in 1996 compared to $3.70 per
BOE in 1995 for the six month periods and $3.86 per BOE in 1996 and $3.66 per
BOE in 1995 for the three month periods, primarily due to an increase of $.14
and $.12, respectively, per BOE in production taxes as a result of higher oil
and gas prices.
General and administrative costs increased 9% between the comparable six
month periods from $3.0 million in 1995 to $3.3 million in 1996, and 9% between
the three month period from $1.7 million in 1995 to $1.8 million in 1996,
primarily due to staff additions to handle the increased drilling and
recompletion activity.
Interest expense increased 13% to $4.2 million in the first six months of
1996 from $3.8 million in the same period of 1995 due to higher borrowing levels
during the first three months of 1996 as compared to 1995. For the three months
ended June 30, 1995 and 1996, interest expense remained the same at $1.9
million.
Depletion and depreciation expense increased 8% to $7.9 million for the six
months ended June 30, 1996 from $7.3 million in 1995. Depletion and depreciation
expense increased to $4.0 million for the three months ended June 30, 1996 as
compared to $3.9 million for the comparable period in 1994. These increases are
primarily the result of increased production volumes. The depletion rate per BOE
in 1996 increased to $4.51 versus $4.44 for the comparable six-month period in
1995.
The Company's net earnings for the three and six months ended June 30, 1996
were $1.1 million and $2.1 million, respectively, as compared to net losses of
$(697,000) and $(858,000), respectively, for the same periods in 1995 for the
reasons discussed above.
9
<PAGE> 12
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
At the Company's Annual Meeting of Shareholders held on June 13, 1996, the
following persons were elected directors of the Company and received the
following votes.
<TABLE>
<CAPTION>
SHARES IN FAVOR SHARES WITHHELD
--------------- ---------------
<S> <C> <C>
Robert Anderson.............................. 15,945,149 860,712
Roy Baker.................................... 15,945,149 860,712
Frederick Campbell........................... 16,456,491 349,370
Jeffrey Clarke............................... 15,945,149 860,712
Louis Crane.................................. 15,945,149 860,712
Howard Hoffen................................ 15,945,149 860,712
Kenneth Lambert.............................. 15,945,149 860,712
Douglas Martin............................... 15,945,149 860,712
Carl Quinn................................... 15,945,149 860,712
Jake Taylor.................................. 15,945,149 860,712
</TABLE>
The shareholders approved an amendment to the 1993 Stock Option Plan that
increased the number of shares issuable thereunder by 189,500. With respect to
the proposal, out of a total of 20,166,562 shares of Common Stock outstanding
and entitled to vote, 16,210,807 shares voted "for", 547,728 shares voted
"against" and 31,676 shares abstained from voting. There were no broker
non-votes with respect to this proposal.
The shareholders approved an amendment to the 1993 Non-Employee Director
Stock Plan that increased the number of shares issuable thereunder by 50,000.
With respect to the proposal, out of a total of 20,166,562 shares of Common
Stock outstanding and entitled to vote, 16,082,677 voted "for", 673,749
"against" and 33,785 shares abstained from voting with respect to this proposal.
There were no broker non-votes with respect to this proposal.
The shareholders ratified the selection, by the Board of Directors, of the
firm of Arthur Andersen LLP as independent auditors for the Company for 1996.
With respect to the proposal, out of a total of 20,166,562 shares of Common
Stock outstanding and entitled to vote, 16,461,875 voted "for", 340,900 voted
"against" and 3,086 shares abstained from voting. There were no broker non-votes
with respect to this proposal.
ITEM 5. OTHER INFORMATION
None
10
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 First Amendment to Coho Energy, Inc. 1993 Non-Employee Director
Stock Option Plan
10.2 Third Amendment to Coho Energy, Inc. 1993 Stock Option Plan
11 Statement re computation of per share earnings
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
Current report on Form 8-K dated April 3, 1996 regarding the sale of the
marketing and transportation segment of operations.
11
<PAGE> 14
COHO ENERGY, INC.
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.
COHO ENERGY, INC.
(Registrant)
By: JEFFREY CLARKE
--------------------------------
Jeffrey Clarke
(Chairman, President, and Chief
Executive Officer)
By: EDDIE M. LEBLANC, III
--------------------------------
Eddie M. LeBlanc, III
(Sr. Vice President and Chief
Financial Officer)
Date: August 13, 1996
12
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
10.1 First Amendment to Coho Energy, Inc. 1993 Non-Employee Director Stock Option Plan . . . . . . . . . . . . . 14
10.2 Third Amendment to Coho Energy, Inc. 1993 Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . 15
11 Statement re computation of per share earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
13
<PAGE> 1
EXHIBIT 10.1
FIRST AMENDMENT TO
COHO ENERGY, INC.
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
WHEREAS, the Board of Directors and the shareholders of Coho Energy,
Inc., a Texas corporation (the "Company"), have approved the Company's 1993
Non-Employee Director Stock Option Plan (the "Plan"); and
WHEREAS, the Board of Directors of the Company believes it to be in
the best interest of the Company to amend the Plan to provide that the total
number of shares of Common Stock, $.01 par value, of the Company with respect
to which options may be granted under the Plan be increased to 170,000 shares.
WITNESSETH:
The first paragraph of Section 3 of the Plan shall be amended to read
as follows in its entirety:
"The stock subject to the Options and other provisions of this
Plan shall be shares of the Company's Common Stock, $.01 par value per
share (the "Common Stock"). The total amount of the Common Stock with
respect to which Options may be granted shall not exceed 170,000
shares in the aggregate; provided that the class and aggregate number
of shares that may be subject to the Options granted hereunder shall
be subject to adjustment in accordance with the provisions of Section
12 hereof. Such shares may be treasury shares or authorized but
unissued shares."
14
<PAGE> 1
EXHIBIT 10.2
THIRD AMENDMENT TO
COHO ENERGY, INC.
1993 STOCK OPTION PLAN
WHEREAS, the Board of Directors and the shareholders of Coho Energy,
Inc., a Texas corporation (the "Company"), have approved the Company's 1993
Stock Option Plan (as amended by the First Amendment thereto and the Second
Amendment thereto, the "Plan"); and
WHEREAS, the Board of Directors of the Company believes it to be in
the best interest of the Company to amend the Plan to provide that the total
number of shares of Common Stock, $.01 par value, of the Company with respect
to which options may be granted under the Plan be increased to 1,269,500
shares.
WITNESSETH:
The first paragraph of Section 3 of the Plan shall be amended to read
as follows in its entirety:
"The stock subject to the Options and other provisions of this
Plan shall be shares of the Company's Common Stock, $.01 par value per
share (the "Common Stock"). The total amount of the Common Stock with
respect to which Options may be granted shall not exceed in the
aggregate 1,269,500 shares, provided that the class and aggregate
number of shares that may be subject to the Options granted hereunder
shall be subject to adjustment in accordance with the provisions of
Section 16 hereof. Such shares may be treasury shares or authorized
but unissued shares."
15
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 THREE MONTHS ENDED JUNE 30
--------------------------- --------------------------
1995 1996 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS
Net earnings (loss) from continuing operations . $ (501) $ 2,138 $ (361) $ 1,103
Dividends on preferred stock applicable to
continuing operations (1) . . . . . . . . . . . . (476) --- (246) ---
----------- ----------- ----------- -----------
Net earnings (loss) from continuing operations
applicable to common stock . . . . . . . . . . . $ (977) $ 2,138 $ (607) $ 1,103
=========== =========== =========== ===========
Net earnings (loss) from continuing operations
per common share . . . . . . . . . . . . . . . . $ (0.05) $ 0.11 $ (0.03) $ .06
=========== =========== =========== ===========
NET EARNINGS (LOSS)
Net earnings (loss) . . . . . . . . . . . . . . . $ (158) $ 2,138 $ (335) $ 1,103
Dividends on preferred stock . . . . . . . . . . $ (700) --- (362) ---
----------- ----------- ----------- -----------
Net earnings (loss) applicable to common stock . $ (858) $ 2,138 $ (697) $ 1,103
=========== =========== =========== ===========
Net earnings (loss) per common share . . . . . . $ (0.05) $ 0.11 $ (0.04) $ .06
=========== =========== =========== ===========
Weighted average common shares outstanding . . . 16,782,925 20,336,803 16,782,925 20,417,772
=========== =========== =========== ===========
</TABLE>
(1) Dividends on the preferred stock issued in connection with the
acquisition of ING were allocated between continuing operations and
discontinued operations based on the ratio of net assets discontinued
to the total net assets acquired from ING.
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 409
<SECURITIES> 0
<RECEIVABLES> 6,936
<ALLOWANCES> 0
<INVENTORY> 95
<CURRENT-ASSETS> 9,387
<PP&E> 299,597
<DEPRECIATION> 110,191
<TOTAL-ASSETS> 200,691
<CURRENT-LIABILITIES> 15,455
<BONDS> 95,959
<COMMON> 202
0
0
<OTHER-SE> 76,294
<TOTAL-LIABILITY-AND-EQUITY> 200,691
<SALES> 25,305
<TOTAL-REVENUES> 25,305
<CGS> 6,807
<TOTAL-COSTS> 17,991
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,233
<INCOME-PRETAX> 3,591
<INCOME-TAX> 1,453
<INCOME-CONTINUING> 2,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,138
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
