<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period _____________ to ____________
Commission File Number 0-22650
PETROCORP INCORPORATED
(Exact name of registrant as specified in its charter)
Texas 76-0380430
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
16800 Greenspoint Park Drive 77060-2391
Suite 300, North Atrium (Zip Code)
Houston, Texas
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (281) 875-2500
Not Applicable
(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 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 Registrant's classes of
stock, as of April 30, 1998:
Common Stock, $.01 per value 8,633,519
---------------------------- ---------
(Title of Class) (Number of Shares Outstanding)
<PAGE>
PETROCORP INCORPORATED
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheet at March 31, 1998 and December 31, 1997 1
Consolidated Statement of Operations for the three months ended 2
March 31, 1998 and 1997
Consolidated Statement of Cash Flows for the three months ended 3
March 31, 1998 and 1997
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosure about Market Risk 10
PART II. OTHER INFORMATION 11
SIGNATURES 12
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
PETROCORP INCORPORATED
CONSOLIDATED BALANCE SHEET
(in thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- --------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,086 $ 9,391
Accounts receivable, net 4,735 6,608
Other current assets 299 337
--------- --------
Total current assets 11,120 16,336
--------- --------
Property, plant and equipment:
Proved oil and gas properties, at cost, full cost method, net
of accumulated depreciation, depletion and amortization 101,570 99,038
Unproved oil and gas properties, not subject to depletion 8,263 9,592
Plant and related facilities, net 3,790 3,922
Other, net 1,610 1,717
--------- --------
115,233 114,269
--------- --------
Other assets, net 269 319
--------- --------
Total assets $ 126,622 $130,924
========= ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 4,696 $ 6,167
Accrued liabilities 3,692 3,345
Current portion of long-term debt 777 4,186
--------- --------
Total current liabilities 9,165 13,698
--------- --------
Long-term debt 43,547 42,192
--------- --------
Deferred revenue 559 685
--------- --------
Deferred income taxes 7,244 7,792
--------- --------
Commitments and contingencies (Note 5)
Shareholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized,
none issued 0 0
Common stock, $0.01 par value, 25,000,000 shares authorized,
8,616,216 shares issued and 8,591,519 shares outstanding 86 86
Additional paid-in capital 71,143 71,143
Retained earnings (accumulated deficit) (565) 71
Accumulated other comprehensive income (loss) (4,310) (4,496)
Treasury stock, at cost (24,697 shares) (247) (247)
--------- --------
Total shareholders' equity 66,107 66,557
--------- --------
Total liabilities and shareholders' equity $ 126,622 $130,924
========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
1
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PETROCORP INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
For the three months
ended March 31,
------------------
1998 1997
------- ------
REVENUES:
Oil and gas $ 6,173 $8,975
Plant processing 343 364
Other (10) 55
------- ------
6,506 9,394
------- ------
EXPENSES:
Production costs 1,789 1,818
Depreciation, depletion and amortization 3,951 3,847
General and administrative 1,178 1,256
Other operating expenses 38 116
------- ------
6,956 7,037
------- ------
INCOME (LOSS) FROM OPERATIONS (450) 2,357
------- ------
OTHER INCOME (EXPENSES):
Investment and other income 92 156
Interest expense (864) (794)
Other expenses (3) (7)
------- ------
(775) (645)
------- ------
INCOME (LOSS) BEFORE INCOME TAXES (1,225) 1,712
Income tax provision (benefit) (589) 737
------- ------
NET INCOME (LOSS) $ (636) $ 975
======= ======
Net income (loss) per common share-basic $ (0.07) $ 0.11
======= ======
Net income (loss) per common share-diluted $ (0.07) $ 0.11
======= ======
Weighted average number of common shares-basic 8,592 8,585
======= ======
Weighted average number of common shares diluted 8,592 8,694
======= ======
The accompanying notes are an integral part of this statement.
2
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PETROCORP INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
-------------------
1998 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (636) $ 975
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation, depletion and amortization 3,951 3,847
Deferred income tax provision (benefit) (589) 737
------- -------
2,726 5,559
Change in operating assets and liabilities:
Accounts receivable 1,873 3,583
Other current assets 38 (90)
Accounts payable (1,471) 2,744
Accrued liabilities 347 216
Other (126) (214)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,387 11,798
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (5,482) (4,481)
Additions to plant and related facilities (36) (67)
Additions to other property, plant and equipment (48) (26)
Additions to other assets 0 (6)
Proceeds from sale of oil and gas properties 977 0
------- -------
NET CASH USED IN INVESTING ACTIVITIES (4,589) (4,580)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 82 46
Repayment of long-term debt (2,193) (188)
------- -------
NET CASH USED IN FINANCING ACTIVITIES (2,111) (142)
------- -------
Effect of exchange rate changes on cash 8 (20)
------- -------
Net increase (decrease) in cash and cash equivalents (3,305) 7,056
Cash and cash equivalents at beginning of period 9,391 8,859
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,086 $15,915
======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
PETROCORP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The unaudited consolidated financial statements of PetroCorp Incorporated (the
"Company" or "PetroCorp") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments, consisting of normal and recurring
adjustments necessary for a fair presentation, have been included. For further
information, refer to the consolidated financial statements and footnotes
thereto for the year ended December 31, 1997, included in the Company's 1997
Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. Interim period results are not necessarily indicative of
results of operations or cash flows for a full-year period.
NOTE 2 - COMPREHENSIVE INCOME:
The Company implemented Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," effective January 1, 1998. This statement
establishes new requirements for reporting comprehensive income and its
components which includes the Company's foreign currency translation. Adoption
of this statement has no impact on the Company's net income (loss) as presented
on the accompanying consolidated statement of operations. The Company's
comprehensive income (loss) for the three months ended March 31, 1998 and 1997
are as follows (amounts in thousands):
For the three
-------------
months ended
------------
March 31,
---------
1998 1997
----- -----
Net income (loss) $ (636) $ 975
Foreign currency translation 186 (239)
------ -----
Comprehensive income (loss) $ (450) $ 736
====== =====
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:
The Company accounts for its oil and gas properties using the full cost
accounting rules promulgated by the Securities and Exchange Commission whereby
all productive and nonproductive exploration and development costs incurred for
the purpose of finding oil and gas reserves are capitalized. Such capitalized
costs include lease acquisition, geological and geophysical work, delay rentals,
drilling, completing and equipping oil and gas wells, together with internal
costs directly attributable to property
4
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acquisition, exploration and development activities. No gains or losses are
recognized upon the sale or other disposition of oil and gas properties, except
in unusually significant transactions.
The costs of the Company's oil and gas properties, including estimated future
development and dismantlement costs, are depreciated on a country-by-country
basis using a composite unit-of-production rate. An additional valuation
adjustment is made on a country-by-country basis if net capitalized costs of the
Company's oil and gas properties exceed the capitalization ceiling, which is
calculated on a quarterly basis as the sum of (1) the present value (10%) of
future net revenues from estimated production of proved oil and gas reserves
plus (2) the lower of cost or estimated fair value of the unproved properties,
less (3) the related income tax effects.
Product prices declined significantly during the first quarter and continue to
be volatile subsequent to March 31, 1998. Companies that follow the full cost
accounting method are required to make the quarterly "ceiling test" calculations
using product prices in effect at that time. In the future, should product
prices decline further and depending on drilling results, the Company could be
required to record a valuation adjustment to its oil and gas property balances,
resulting in a non-cash charge against earnings.
NOTE 4- DEFERRED REVENUE:
In March 1996, the Company sold its SW Oklahoma City Field gas gathering
system for $3.8 million. The Company's total gain on the sale was $3.1 million,
with $1.0 million being recognized in the first quarter of 1996 in "investment
and other income" on the consolidated statement of operations while the
remaining $2.1 million of the gain was deferred. The $2.1 million deferred
revenue will be recognized in future periods as a component of gas revenues by
partially offsetting the gas gathering fees paid by the Company over the
productive life of the Company's SW Oklahoma City Field. Through March 31, 1998,
$1.5 million has been recognized, leaving a balance of $559,000 million in
"deferred revenue" on the consolidated balance sheet as of March 31, 1998.
NOTE 5 - COMMITMENTS AND CONTINGENCIES:
There are claims and actions pending against the Company. In the opinion of
management, the amounts, if any, which may be awarded in connection with any of
these claims and actions would not be material to the Company's consolidated
financial position or results of operations.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Company's principal line of business is the production and sale of its oil
and natural gas reserves located in North America. Results of operations are
dependent upon the quantity of production and the price obtained for such
production. Prices received by the Company for the sale of its oil and natural
gas have fluctuated significantly from period to period. Such fluctuations
affect the Company's ability to maintain or increase its production from
existing oil and gas properties and to explore, develop or acquire new
properties.
The following table reflects certain operating data for the periods presented:
For the three
-------------
months ended
------------
March 31,
---------
1998 1997
---- ----
PRODUCTION:
United States:
Oil (MBbls)........................................ 121 149
Gas (MMcf)......................................... 1,164 1,116
Oil equivalents (MBOE)............................. 315 335
Canada:
Oil (MBbls)........................................ 32 32
Gas (MMcf)......................................... 1,102 994
Oil equivalents (MBOE)............................. 216 198
Total:
Oil (MBbls)........................................ 153 181
Gas (MMcf)......................................... 2,266 2,110
Oil equivalents (MBOE)............................. 531 533
AVERAGE SALES PRICES:
United States:
Oil (per Bbl)...................................... $14.42 $22.00
Gas (per Mcf)...................................... 2.20 2.92
Canada:
Oil (per Bbl)...................................... 12.88 20.98
Gas (per Mcf)...................................... 1.32 1.77
Weighted average:
Oil (per Bbl)...................................... 14.10 21.82
Gas (per Mcf)...................................... 1.77 2.38
SELECTED DATA PER BOE:
Average sales price.................................... $11.63 $16.84
Production costs....................................... 3.37 3.41
General and administrative expenses.................... 2.22 2.36
Oil and gas depreciation, depletion and amortization... 6.68 6.39
6
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ACQUISITIONS
The Company completed the purchase of Millarville Oil and Gas Ltd., a
privately held Alberta corporation that owns and operates oil and gas properties
in Alberta, Canada, in December 1996 for a cash acquisition price of $11.8
million (the Millarville Acquisition). In July 1997, the Company completed the
purchase of producing properties located primarily in Louisiana for $9.2 million
(the Gulf Coast Acquisition). Both acquisitions had a significant impact on the
Company's results of operations for the first quarter of 1998 while the
Millarville Acquisition also had a significant impact on the first quarter of
1997 results of operations.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Overview. As a result of a 35% decrease in oil prices coupled with a 26%
decrease in gas prices, though production remained level and cash operating
expenses declined 6%, cash flow before changes in operating assets and
liabilities decreased 51% to $2.7 million in the first quarter of 1998. This
compares to $5.6 million in the first quarter of 1997. Additionally, due to
lower prices, the Company recorded a net loss of $636,000, or $0.07 per share,
in the first quarter of 1998 compared to net income of $975,000, or $0.11 per
share, recorded in the prior year.
Revenues. Total revenues decreased 31% to $6.5 million in the first quarter
of 1998 compared to $9.4 million in the first quarter of 1997. Though the
Company's overall production remained level at 531 MBOE, natural gas production
increased 7% to 2,266 MMcf from 2,110 MMcf but was offset by a 15% decline in
oil production to 153 MBbls from 181 MBbls. The increase in natural gas
production reflects the impact of the Gulf Coast Acquisition completed in July
1997 coupled with increases resulting from the drilling of horizontal lateral
wells in the Hanlan-Robb area located in Canada. The decline in oil production
reflects normal production declines at the Hunter waterflood unit located in
northern Oklahoma and the Maynor Creek field in Mississippi.
The Company's composite average oil price decreased 35% to $14.10 per barrel
in the first quarter of 1998 from $21.82 per barrel in the first quarter of
1997. The Company's average U.S. natural gas price decreased 25% to $2.20 per
Mcf in the first quarter of 1998 from $2.92 per Mcf in the prior year quarter,
while the average Canadian natural gas price decreased 25% to $1.32 per Mcf from
$1.77 per Mcf. Though production volumes remained level between quarters on a
barrel equivalent basis, the significant decline in prices resulted in a
decrease in oil and gas revenues of 31% to $6.1 million in the first quarter of
1998 from $9.0 million in the prior year quarter.
Production Costs. Production costs decreased 2% to $1.8 million in the first
quarter of 1998 and production costs per BOE slightly decreased to $3.37 per
BOE from $3.41 per BOE.
Depreciation, Depletion & Amortization (DD&A). Total DD&A increased 3% to
$3.9 million in the first quarter of 1998 from $3.8 million in the first quarter
of 1997 primarily as a result of a 5% increase in the oil and gas DD&A rate to
$6.68 per BOE from $6.39 per BOE.
General and Administrative Expenses. General and administrative expenses
decreased 6% to $1.2 million in the first quarter of 1998 from $1.3 million in
the first quarter of 1997 as a result of the Company's focus on reducing costs.
Investment and Other Income. Investment and other income decreased 41% to
$92,000 in the first
7
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quarter of 1998 from $156,000 in the first quarter of 1997 as less funds were
available for investment.
Interest Expense. Interest expense increased 9% to $864,000 in the first
quarter of 1998 from $794,000 in the prior year quarter, reflecting the impact
of increased debt associated with the Gulf Coast Acquisition completed in July
1997.
Income Taxes. The Company recorded a $589,000 income tax benefit with an
effective tax rate of 48% on a pre-tax loss of $1.2 million in the first quarter
of 1998 compared to an income tax provision of $737,000 with an effective tax
rate of 43% on pre-tax income of $1.7 million in the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its capital expenditures and working
capital requirements with its cash flow from operations, debt and equity capital
and participation by institutional investors. As of March 31, 1998, the Company
had working capital of $2.0 million as compared to $2.6 million at December 31,
1997. Cash provided by operating activities before changes in operating assets
and liabilities were $2.7 million and $5.6 million for the quarters ended March
31, 1998 and 1997, respectively.
The Company's total capital expenditures, including capitalized internal
costs, were $5.6 million and $4.6 million for the quarters ended March 31, 1998
and 1997, respectively, and primarily related to exploration and development.
Sales of non-strategic oil and gas properties totaled $977,000 in the first
quarter of 1998 while there were no property sales in the first quarter of 1997.
In March 1996, the Company sold its SW Oklahoma City Field gas gathering
system for $3.8 million. The Company's total gain on the sale was $3.1 million,
with $1.0 million being recognized in the first quarter of 1996 in "investment
and other income" on the consolidated statement of operations while the
remaining $2.1 million of the gain was deferred. The $2.1 million deferred
revenue will be recognized in future periods as a component of gas revenues by
partially offsetting the gas gathering fees paid by the Company over the
productive life of the Company's SW Oklahoma City Field. Through March 31,
1998, $1.5 million has been recognized, leaving a balance of $559,000 in
"deferred revenue" on the consolidated balance sheet as of March 31, 1998.
The Company has entered into a $50.0 million revolving credit agreement dated
June 26, 1997 with the Toronto-Dominion Bank, the agent, and the Bank of Nova
Scotia. Initial borrowing availability under this facility was $25.0 million.
On June 30, 1997, the Company was advanced $13.0 million to fund the Gulf Coast
Acquisition and to replace amortizing principal payments under the Series A and
B Notes of the Company. The Company repaid $2.0 million in January 1998 with
$11.0 million remaining outstanding and classified as "long-term" on the
accompanying consolidated balance sheet as of March 31, 1998. The facility is
for a five-year term through July 1, 2002 with quarterly borrowing base
amortization beginning September 30, 2000. The borrowings can be funded by
either Eurodollar loans or Prime loans. The interest rate on the borrowings is
equal to an interest rate spread plus either the Eurodollar rate or the Prime
rate. The interest spread is determined from a sliding scale based on the
Company's borrowing base percentage utilization in effect from time to time.
The spread ranges from 5/8% to 1 1/4% on Eurodollar loans and 1/8% to 1/4% on
Prime loans. The Company's average interest rate under this facility was 6.4%
during the first quarter of 1998.
On December 30, 1996, the Company, through a wholly-owned Canadian subsidiary,
entered into
8
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a long-term borrowing agreement with the Royal Bank of Canada (RBC) whereby the
Company borrowed $3.5 million to partially fund the Millarville Acquisition.
Such agreement was amended on November 20, 1997. The amended agreement allows
the Company to forego principal payments during the first year and a half.
Additionally, the Company may elect to pay interest only (Interest Only Period)
in subsequent years if the Company's Canadian subsidiary meets certain borrowing
base tests. Otherwise, the loan becomes payable over a three-year period
beginning as of July 1, 1998 as follows: $1,510,000 in the first year,
$1,147,000 in the second year and $839,000 in the third year (the Term Period).
The borrowings may be funded by RBC Prime loans or Bankers' Acceptances (BA)
loans. During the Interest Only Period, the Company pays interest at the RBC
prime rate plus 1/2% on Prime loans and pays the BA rate plus 1/2% and an
acceptance fee on BA loans. During the Term Period, the Company pays interest at
the RBC prime rate plus 3/4% on Prime loans and pays the BA rate plus 3/4% and
an acceptance fee on BA loans. The Company's average interest rate under this
agreement was 6.5% during the first quarter of 1998.
In July 1993, PetroCorp issued $40.0 million in senior notes. The Note
Purchase Agreement established $10.0 million of Senior Adjustable Rate Notes
Series A, due June 30, 1999 (the Series A Notes), payable to a subsidiary of
USF&G Corporation (a 20% shareholder of the Company), and $30.0 million of 7.55%
Senior Notes Series B, due June 30, 2008 (the Series B Notes), payable to two
wholly-owned subsidiaries of CIGNA Corporation (formerly an 18% shareholder of
the Company) and to four unaffiliated institutional investors in amounts
totaling $20.0 million and $10.0 million, respectively. Mandatory redemptions
commenced on December 31, 1994 for the Series A Notes and commenced on December
31, 1995 for the Series B Notes. As of March 31, 1998, the remaining principal
balances for the Series A and B Notes were $2.5 million and $23.4 million,
respectively, for a total of $25.9 million, of which $4.7 matures in 1998.
Interest on the Series A Notes is adjustable, based on a spread of 115 basis
points over the London Interbank Offered Rate (LIBOR). The Company may select a
rate which may be applicable for a one-, three- or six-month period. Interest
is payable in arrears at the end of the selected period. Interest on the Series
B Notes is fixed at a rate of 7.55% and is payable semiannually in arrears.
The Company's Canadian subsidiary redeemed its redeemable preferred stock on
August 9, 1994 for $7.0 million and simultaneously issued $7.0 million in
nonrecourse long-term notes payable with similar financial terms. At March 31,
1998, the nonrecourse long-term notes payable balance was $4.0 million, of which
$777,000 was classified as "current."
As the Company has both the ability and intent to refinance $5.8 million of
its current maturities of long-term debt utilizing its revolving credit
facility, $5.8 million has been reclassified from "current" to "long-term"
on the Company's accompanying consolidated balance sheet as of March 31, 1998.
Product prices declined significantly during the first quarter and continue to
be volatile subsequent to March 31, 1998. Under rules promulgated by the
Securities and Exchange Commission, companies that follow the full cost
accounting method are required to make quarterly "ceiling test" calculations, by
country, using product prices in effect at that time (see Note 3 to the
Consolidated Financial Statements--Property, Plant and Equipment). In the
future, should prices decline further and depending on drilling results, the
Company could be required to record a valuation adjustment to its oil and gas
property balances, resulting in a non-cash charge against earnings.
The Company's Board of Directors has approved a capital budget of $12.0
million for 1998. The approved 1998 capital budget includes expenditures for
exploration and development projects and for producing property acquisitions.
However, actual levels of expenditures for planned exploration and development
projects and producing property acquisitions may vary significantly due to many
factors,
9
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including drilling results, oil and gas prices, industry conditions and
acquisition opportunities, among others.
The Company plans to finance its 1998 capital expenditures with its cash flow
from operations and working capital. If the Company increases its exploration,
development and acquisition activities in the future, capital expenditures may
require additional funding obtained through borrowings from commercial banks and
other institutional sources, public offerings of equity or debt securities and
existing and future relationships with institutional investment partners.
YEAR 2000 ISSUES
The Year 2000 presents significant issues for many computer systems. Much of
the software in use today may not be able to accurately process data beyond the
year 1999. The vast majority of computer systems process transactions using two
digits for the year of the transaction, rather than the full four digits, making
such systems unable to distinguish January 1, 2000 from January 1, 1900. Such
systems may encounter significant processing inaccuracies or become inoperable
when Year 2000 transactions are processed. Such matters could not only impact
the Company in its day-to-day operations but also impact the Company's financial
institutions, customers and vendors. The Company's Management is in the process
of identifying or remediating Year 2000 issues and does not expect any issues to
arise that would materially impact the Company's financial condition or
operations.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
The information discussed herein includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All statements other than statements of
historical facts included herein regarding planned capital expenditures,
increases in oil and gas production, the number of anticipated wells to be
drilled after the date hereof, the Company's financial position, business
strategy and other plans and objectives for future operations, are forward-
looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, they do involve
certain assumptions, risks and uncertainties, and the Company can give no
assurance that such expectations will prove to have been correct. The Company's
actual results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors. Among the factors that could
cause actual results to differ materially are the timing and success of the
company's drilling activities, the volatility of the prices and supply and
demand for oil and gas, the numerous uncertainties inherent in estimating
quantities of oil and gas reserves and actual future production rates and
associated costs, the usual hazards associated with the oil and gas industry
(including blowouts, cratering, pipe failure, spills, explosions and other
unforeseen hazards), and increases in regulatory requirements, as well as other
risks described more fully in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 filed with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable
10
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PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
Not Applicable
Item 2 - Changes in Securities
Not Applicable
Item 3 - Defaults upon Senior Securities
Not Applicable
Item 4 - Submission of Matters to Vote of Security Holders
Not Applicable
Item 5 - Other Information
Not Applicable
Item 6 -
(a) Exhibits
3.1* Amended and Restated Articles of Incorporation of PetroCorp
Incorporated. Incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-1 (Registration No. 33-36972)
initially filed with the Securities and Exchange Commission on
August 26, 1993 (the "Registration Statement").
3.2* Amended and Restated Bylaws of PetroCorp Incorporated.
Incorporated by reference to Exhibit 3.2 to the Form 10-Q for
the quarterly period ended June 30, 1996.
27 Financial Data Schedule
______________________________
* Incorporated by reference.
(b) Reports on Form 8-K
Not Applicable
11
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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.
PETROCORP INCORPORATED
-------------------------------
(Registrant)
Date: May 14, 1998 /s/ CRAIG K. TOWNSEND
-------------------------------
Craig K. Townsend
Vice President -Finance, Secretary and Treasurer
(On behalf of the Registrant and as the
Principal Financial Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITY EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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