<PAGE> 1
UNITED STATES
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 September 30, 1997
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)
Texas 75-2488635
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14785 Preston Road, Suite 860
Dallas, TX 75240
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 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.
Class Outstanding at November 6, 1997
- ---------------------------- -------------------------------
Common Stock, $.01 par value 25,601,012
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1996 and September 30, 1997...............................................1
Condensed Consolidated Statements of Earnings - three and nine
months ended September 30, 1996 and 1997...............................................2
Condensed Consolidated Statements of Cash Flows - nine months
ended September 30, 1996 and 1997......................................................3
Notes to Condensed Consolidated Financial Statements.................................4-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................................6-10
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.....................................................................11
Item 2. Changes in Securities.................................................................11
Item 3. Defaults Upon Senior Securities.......................................................11
Item 4. Submission of Matters to a Vote of Security Holders...................................11
Item 5. Other Information.....................................................................11
Item 6. Exhibits and Reports on Form 8-K......................................................11
Signatures.....................................................................................12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COHO ENERGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1996 1997
----------- ----------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,864 $ 1,245
Accounts receivable, principally trade 11,884 8,322
Deferred income taxes 913 913
Investment in marketable securities 1,962 --
Other current assets 995 1,011
--------- ---------
17,618 11,491
PROPERTY AND EQUIPMENT, at cost net of accumulated depletion
and depreciation, based on full cost accounting method (note 2) 210,212 251,441
OTHER ASSETS 2,211 2,193
--------- ---------
$ 230,041 $ 265,125
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, principally trade $ 5,752 $ 7,705
Accrued liabilities and other payables 5,043 8,121
Current portion of long term debt 161 38
--------- ---------
10,956 15,864
LONG TERM DEBT excluding current portion 122,777 144,791
DEFERRED INCOME TAXES 14,842 17,699
--------- ---------
148,575 178,354
--------- ---------
COMMITMENTS AND CONTINGENCIES (note 4)
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 and outstanding 20,465,330 shares 203 205
Additional paid-in capital 83,516 84,234
Retained earnings (deficit) (2,253) 2,332
--------- ---------
Total shareholders' equity 81,466 86,771
--------- ---------
$ 230,041 $ 265,125
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
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COHO ENERGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------- ----------------------
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Net crude oil and natural gas production $ 38,857 $ 45,506 $ 13,552 $ 15,985
-------- -------- -------- --------
OPERATING EXPENSES
Crude oil and natural gas production 8,250 10,012 2,709 3,899
Taxes on crude oil and natural gas production 1,989 1,629 723 559
General and administrative 5,079 5,048 1,780 1,425
Depletion and depreciation 12,043 14,072 4,158 5,112
-------- -------- -------- --------
Total operating expenses 27,361 30,761 9,370 10,995
-------- -------- -------- --------
OPERATING INCOME 11,496 14,745 4,182 4,990
-------- -------- -------- --------
OTHER INCOME AND EXPENSES
Interest and other income 541 169 31 20
Interest expense (6,264) (7,396) (2,031) (2,714)
-------- -------- -------- --------
(5,723) (7,227) (2,000) (2,694)
-------- -------- -------- --------
EARNINGS FROM OPERATIONS
BEFORE INCOME TAXES 5,773 7,518 2,182 2,296
INCOME TAX PROVISION 2,309 2,932 856 895
-------- -------- -------- --------
NET EARNINGS $ 3,464 $ 4,586 $ 1,326 $ 1,401
======== ======== ======== ========
EARNINGS PER COMMON SHARE (note 3) $ 0.17 $ 0.22 $ 0.06 $ 0.07
======== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE> 5
COHO ENERGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------
1996 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 3,464 $ 4,586
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depletion and depreciation 12,043 14,072
Deferred income taxes 2,135 2,857
Amortization of debt issue costs and other items 590 390
Changes in operating assets and liabilities:
Accounts receivable and other assets (4,091) 3,294
Accounts payable and accrued liabilities 704 935
Investment in marketable securities -- 1,962
-------- --------
Net cash provided by operating activities 14,845 28,096
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment (42,334) (55,302)
Changes in accounts payable and accrued liabilities related to exploration
and development 1,578 4,096
Net proceeds from sale of marketing and transportation operations 21,531 --
-------- --------
Net cash provided by (used in) investing activities (19,225) (51,206)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long term debt 32,460 33,000
Repayment of long term debt (28,169) (11,229)
Proceeds from exercise of stock options 109 720
-------- --------
Net cash provided by (used in) financing activities 4,400 22,491
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20 (619)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,430 1,864
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,450 $ 1,245
======== ========
CASH PAID (RECEIVED) DURING THE PERIOD FOR:
Interest $ 6,353 $ 6,897
Income taxes $ 443 $ 639
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 6
COHO ENERGY, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(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 nine month
period ended September 30, 1997 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, 1996.
2. PROPERTY AND EQUIPMENT
<TABLE>
December 31, September 30,
1996 1997
------------ -------------
<S> <C> <C>
Crude oil and natural gas leases and rights
including exploration, development and
equipment thereon, at cost $ 328,836 $ 384,136
Accumulated depletion and depreciation (118,624) (132,695)
--------- ---------
$ 210,212 $ 251,441
========= =========
</TABLE>
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 $1,764,000 and
$2,834,000 for the nine months ended September 30, 1996 and 1997, respectively.
During the nine months ended September 30, 1996 and 1997, the Company did
not capitalize any interest or other financing charges on funds borrowed to
finance unproved properties or major development projects.
At December 31, 1996 and September 30, 1997, unproved crude oil and natural
gas properties totalling $8,284,000 and $11,275,000, 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.
3. 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 nine
months ended September 30, 1996 and 1997, of 20,396,871 and 21,143,059,
respectively, and for the three months ended September 30, 1996 and 1997, of
20,515,179 and 21,409,178, respectively.
4
<PAGE> 7
COHO ENERGY, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED)
(UNAUDITED)
4. 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; however, an unfavorable outcome
could have a material adverse effect on the current year results.
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 10,000 million British
thermal units ("Mmbtu") of natural gas production per day hedged over the period
from October 1997 through March 1998, at a minimum price of $2.70 per Mmbtu and
a maximum price of $3.28 per Mmbtu. The Company has also entered into certain
arrangements which fix a minimum West Texas Intermediate ("WTI") price per
barrel of $19.00 and a maximum WTI price of $23.90 for 4,000 barrels of oil
production per day through December 31, 1997.
5. SUBSEQUENT EVENT
On October 3, 1997, the Company issued 5 million shares of common stock at
$10.50 per share and issued $150 million of 8 7/8% senior subordinated notes due
2007 pursuant to two public offerings with combined estimated net proceeds of
$193.6 million. The Company repaid the outstanding borrowings of $144.8 million
under the Company's Restated Credit Agreement from the net proceeds. The
remaining proceeds and the undrawn balance under the Company's Restated Credit
Agreement will be used to fund capital expenditures and for general corporate
purposes.
5
<PAGE> 8
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 crude
oil and natural 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 nine months
ended September 30, 1997, 74% of production revenues were attributable to the
sale of crude oil and the remaining 26% were derived from natural gas as
compared to 75% from crude oil sales and 25% from natural gas sales during the
same period in 1996.
The Company increased its crude oil production in the first nine months of
1997 as a result of ongoing development activities on its existing properties in
Mississippi. Average net daily barrel of oil equivalent ("BOE") production was
10,904 BOE for the nine months ended September 30, 1997 as compared to 9,672 BOE
for the same period in 1996. For purposes of determining BOE herein, natural gas
is converted to barrels ("Bbl") on a 6 thousand cubic feet ("Mcf") to 1 Bbl
basis.
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 nine months ended September 30, 1997, cash flow
generated from operating activities was $28.1 million compared with $14.8
million for the same period in 1996. Production increases of 12% and 14% in
crude oil and natural gas, respectively, for the nine months ended September 30,
1997, compared to the same period in 1996 and price increases of 3% and 9% for
crude oil and natural gas, respectively, realized in 1997 are the major factors
contributing to this increase. See "Results of Operations" for a discussion of
operating results.
As of September 30, 1997, the amount available to the Company ("Borrowing
Base") under its revolving credit facility (the "Restated Credit Agreement") was
$150 million, with an additional $20 million immediately available to the
Company to provide bridge financing for acquisitions. Outstanding advances under
the Restated Credit Agreement at September 30, 1997 were $144.8 million, all of
which are classified as long term. The Restated Credit Agreement permits
advances and repayments until January 1, 2000, at which time the loan converts
to a term facility that requires quarterly principal repayments until the loan
is fully repaid in 2003.
The Restated Credit Agreement contains certain financial and other covenants
including (i) the maintenance of minimum amounts of shareholders' equity ($65
million plus 50% of consolidated net income beginning in 1994), (ii) maintenance
of minimum ratios of cash flow to interest expense (2.5 : 1) as well as current
assets (including unused Borrowing Base) to current liabilities (1 : 1), (iii)
limitations on the Company's ability to incur additional debt and (iv)
restrictions on the payment of dividends.
On October 3, 1997, the Company issued 5 million shares of common stock at
$10.50 per share and issued $150 million of 8 7/8% senior subordinated notes due
2007 ("Senior Notes") pursuant to two public offerings with combined estimated
net proceeds of $193.6 million. The Company repaid the outstanding borrowings of
$144.8 million under the Restated Credit Agreement from the net proceeds. The
remaining proceeds and the undrawn balance under the Restated Credit Agreement
will be used to fund capital expenditures and for general corporate purposes.
Interest on the Senior Notes will be payable semi-annually on April 15 and
October 15 of each year, commencing on April 15, 1998. The Senior Notes
indenture contains certain covenants, including covenants that limit (i)
indebtedness, (ii) restricted payments, (iii) issuances and sales of capital
stock of restricted subsidiaries, (iv) sale/leaseback transactions,
6
<PAGE> 9
(v) transactions with affiliates, (vi) liens, (vii) asset sales, (viii)
dividends and other payment restrictions affecting restricted subsidiaries and
(ix) mergers and consolidations.
Capital Expenditures. During the first nine months of 1997, the Company
incurred capital expenditures of $55.3 million compared with $42.3 million for
the first nine months of 1996. The capital expenditures incurred during the
first nine months of 1997 were largely in connection with the continuing
development efforts, including recompletions, workovers and waterfloods, on
existing wells in the Company's Brookhaven, Laurel, Martinville and Soso fields.
In addition, during the first nine months of 1997, the Company drilled twenty
three wells as follows: four producing oil wells in the Laurel field, two
producing oil wells and one dry hole in the Martinville field, one producing oil
well in the Soso field, two producing oil wells and one producing gas well in
the Brookhaven field, nine producing gas wells and one dry hole in the Monroe
field and two producing offshore gas wells in the North Padre field. The Company
also had five drilling wells at September 30, 1997, one in each of the
Martinville and Soso fields and three in the Brookhaven field. General and
administrative costs directly associated with the Company's exploration and
development activities were $2.8 million for the first nine months of 1997,
compared with $1.8 million for the first nine months of 1996, and are included
in total capital expenditures. The increase in capitalized general and
administrative cost is primarily due to increased capitalization of the
Company's exploitation department resulting from an increased staff combined
with a greater percentage of time allocation of existing staff to meet the
requirements of the Company's increased exploration and development activities.
The Company has no material capital commitments and is consequently able to
adjust the level of its expenditures as circumstances warrant.
7
<PAGE> 10
RESULTS OF OPERATIONS
Selected Operating Data
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------- -----------------
1996 1997 1996 1997
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER DAY,
PER BBL AND PER MCF DATA)
<S> <C> <C> <C> <C>
Production
Crude Oil (Bbl/day) 6,658 7,466 6,748 8,219
Natural Gas (Mcf/day) 18,084 20,628 18,374 22,685
BOE (Bbl/day) 9,672 10,904 9,811 12,000
Average Sales Prices
Crude Oil per Bbl $ 15.99 $ 16.44 $ 16.53 $ 15.45
Natural Gas per Mcf $ 1.96 $ 2.13 $ 1.94 $ 2.06
Other
Production costs per BOE (1) $ 3.86 $ 3.91 $ 3.80 $ 4.04
Depletion per BOE $ 4.54 $ 4.73 $ 4.61 $ 4.63
Revenues
Production revenues
Crude Oil $29,167 $33,504 $10,265 $11,678
Natural Gas 9,690 12,002 3,287 4,307
------- ------- ------- -------
$38,857 $45,506 $13,552 $15,985
======= ======= ======= =======
</TABLE>
(1) Includes lease operating expenses and production taxes.
Operating Revenues. During the first nine months of 1997, production
revenues increased 17% to $45.5 million as compared to $38.9 million for the
same period in 1996. This increase was principally due to a 12% increase in
crude oil production, a 14% increase in natural gas production, and increases in
the prices received for crude oil and natural gas (including hedging gains and
losses discussed below) of 3% and 9%, respectively. For the three months ended
September 30, 1997, production revenue increased 18% to $16 million as compared
to $13.6 million for the same period in 1996. This increase was principally due
to a 22% increase in crude oil production, a 23% increase in natural gas
production and a 6% increase in the price received for natural gas partially
offset by a 7% decrease in the price received for crude oil.
The 14% increase in daily natural gas production during the first nine
months of 1997 is primarily a result of the continued positive response from the
Company's development efforts in the Martinville and Brookhaven fields. The 12%
increase in daily crude oil production during the first nine months of 1997 is
due to significant production increases made in the Martinville, Soso and
Brookhaven fields, with production increasing by 154%, 56% and 86%,
respectively. These production increases were partially offset by production
decreases in the Summerland and Laurel fields due to the unusually high
frequency of weather-related power outages and mechanical problems during the
first quarter of 1997. In addition, the Summerland field is experiencing normal
production declines due to the maturity of the field.
8
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Average crude oil prices, including hedging gains and losses, increased
during the first nine months of 1997 compared to the same period in 1996 due to
the strong demand for crude oil and higher oil prices in the first quarter of
1997 as compared to the first quarter of 1996. The effect of higher first
quarter prices was partially offset by lower oil prices in the second and third
quarters of 1997 as compared to the same quarters in 1996 due to a softening in
the market demand. The posted price for the Company's crude oil averaged $18.61
for the nine months ended September 30, 1997, a 5% decrease from the average
posted price of $19.61 experienced in the first nine months of 1996. The price
per barrel received by the Company is adjusted for the quality and gravity of
the crude oil and is generally lower than the posted price.
The realized price for the Company's natural gas, including hedging gains
and losses, increased 9% from $1.96 in the first nine months of 1996 to $2.13 in
the first nine months of 1997, due to increased heating needs during the winter
season and an overall tightening of supply in the market. Natural gas prices
softened in the second quarter of 1997 so the effect of the higher gas prices
received in the first and third quarters of 1997 as compared to first and third
quarters of 1996 was partially offset by lower natural gas prices in the second
quarter of 1997 as compared to the same quarter in 1996.
Production revenues for the nine months ended September 30, 1997 included
crude oil hedging losses of $396,000 ($.19 per Bbl) compared to hedging losses
of $2.6 million ($1.41 per Bbl) for the same period in 1996. Production revenues
in 1997 also included natural gas hedging gains of $142,000 ($.03 per Mcf)
compared to natural gas hedging losses of $1.2 million ($.25 per Mcf) for the
same period in 1996. There were no crude oil hedging gains or losses for the
three months ended September 30, 1997 compared to crude oil hedging losses of
$1.3 million ($2.05 per Bbl) for the same period in 1996. Production revenues
for the third quarter of 1997 included natural gas hedging gains of $56,000
($.03 per Mcf) compared to natural gas hedging losses of $139,000 ($.08 per Mcf)
for the same period in 1996. Additionally, the Company has entered into certain
arrangements that fix a minimum WTI price per barrel of $19.00 and a maximum WTI
price of $23.90 for 4,000 barrels of production per day through December 31,
1997. The Company also has 10,000 Mmbtu of natural gas production per day hedged
from October 1997 through March 1998 at a minimum price of $2.70 per Mmbtu and a
maximum price of $3.28 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 New York Mercantile Exchange 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.
Interest and other income decreased to $169,000 in the first nine months of
1997 from $541,000 for the same period in 1996 primarily due to $472,000 of
interest earned during 1996 on the receivable from the sale of the marketing and
pipeline segment of the Company's operations, partially offset by $137,000 of
interest received in the first quarter of 1997 on a federal tax refund.
Expenses. Production expenses (including production taxes) were $11.6
million for the first nine months of 1997 compared to $10.2 million for the
first nine months of 1996 and $4.5 million for the third quarter of 1997
compared to $3.4 million for the same period in 1996. On a BOE basis, production
costs increased 1% to $3.91 per BOE in 1997 compared to $3.86 per BOE in 1996
for the nine month periods and increased 6% to $4.04 per BOE in 1997 compared to
$3.80 per BOE in 1996 for the three month periods. The increase for the
comparable nine month periods is primarily due to additional production volumes.
The increase for the comparable three month periods is a result of a $412,000
increase in production expenses associated with the Company's Louisiana gas
properties. The increase is primarily due to maintenance and repair work on the
gas gathering system and lost gas associated with numerous line leaks and the
related repairs. Maintenance and repairs are generally performed during summer
months when water levels have receded as the properties are generally underwater
during the winter and spring months. Such repair and maintenance costs were
higher than normal due to the recent long, wet winter season which increased the
occurrences of gathering line damage.
General and administrative costs remained stable for the first nine months
of 1997 as compared to the first nine months of 1996 and decreased 2% from $1.8
million in the third quarter of 1996 to $1.5 million in the third quarter of
1997. The 2% decrease is primarily due to an increase in capitalization of
salaries and other general and administrative costs directly associated with the
Company's increased exploration and development activities.
Interest expense increased 34% and 18% for the three and nine month periods
ended September 30, 1997, respectively, compared to the same periods in 1996,
due to higher borrowing levels during 1997 as compared to 1996. The borrowing
levels increased throughout 1997 due to additional borrowings to fund Coho's
capital expenditure program.
9
<PAGE> 12
Depletion and depreciation expense increased 18% to $14.1 million for the
nine months ended September 30, 1997 from $12.0 million for the comparable
period in 1996. Depletion and depreciation expense increased to $5.1 million for
the three months ended September 30, 1997 as compared to $4.2 million for the
comparable period in 1996. These increases are primarily the result of increased
production volumes and an increased rate per BOE, which increased to $4.73 in
1997 versus $4.54 in 1996 for the comparable nine month periods and to $4.63 in
1997 versus $4.61 in 1996 for the comparable three month periods.
The Company's net earnings for the three and nine months ended September 30,
1997 were $1.3 million and $4.5 million, respectively, as compared to net
earnings of $1.3 million and $3.5 million, respectively, for the same periods in
1996 for the reasons discussed above.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
None
10
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 30, 1997, an amended complaint was filed against Chevron
Corp., the Company, and other defendants in the Circuit Court of Hinds County,
Mississippi. The complaint names as plaintiffs numerous individuals allegedly
owning property or living in or around the Brookhaven field. The complaint
alleges personal injury resulting from naturally occurring radioactive
materials and pollution of underground water and property damage resulting from
the operation of the Brookhaven field prior to the time of ownership by the
Company. The complaint also seeks punitive damages and remediation of property.
No specific amounts are alleged and the complaint does not specify the property
allegedly owned by individual plaintiffs. While the Company is unable to
determine with precision any amount of exposure at the early stages of this
litigation, the Company believes that these claims will have no material
adverse effect on its financial position.
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
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
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)
Date: November 12, 1997
By: /s/ Jeffrey Clarke
-------------------------------
Jeffrey Clarke
(Chairman, President, and Chief Executive Officer)
By: /s/ Eddie M. LeBlanc,III
-------------------------------
Eddie M. LeBlanc, III
(Sr. Vice President and Chief Financial Officer)
12
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
27 Financial Data Schedule.................................................14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,245
<SECURITIES> 0
<RECEIVABLES> 8,322
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,491
<PP&E> 384,136
<DEPRECIATION> 132,695
<TOTAL-ASSETS> 265,125
<CURRENT-LIABILITIES> 15,864
<BONDS> 144,791
0
0
<COMMON> 205
<OTHER-SE> 86,566
<TOTAL-LIABILITY-AND-EQUITY> 265,125
<SALES> 45,506
<TOTAL-REVENUES> 45,506
<CGS> 11,641
<TOTAL-COSTS> 30,761
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,396
<INCOME-PRETAX> 7,518
<INCOME-TAX> 2,932
<INCOME-CONTINUING> 4,586
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,586
<EPS-PRIMARY> .22
<EPS-DILUTED> 0
</TABLE>
