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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 22, 1998
SONAT INC.
(Exact name of registrant as specified in its charter)
DELAWARE 01-07179 63-0647939
(State or other jurisdiction of Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
1900 FIFTH AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 325-3800
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SONAT INC.
TABLE OF CONTENTS
FOR
CURRENT REPORT ON FORM 8-K
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Page
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Item 5. Other Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 7. Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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ITEM 5. OTHER EVENTS.
On January 22, 1998, Sonat Inc. issued the press release attached
hereto as Exhibit 99.1 relating to, among other things, its 1997 results
of operations.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following material is filed as an
exhibit to this Current Report on Form 8-K:
Exhibit
Number Description of Exhibit
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99.1 Press Release dated January 22, 1998
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SIGNATURE
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.
SONAT INC.
By: /s/ William A. Smith
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William A. Smith
Title: Executive Vice President
Dated: January 22, 1998
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EXHIBIT INDEX
Exhibit
Number Description
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99.1 Press Release dated January 22, 1998
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Bruce L. Connery FOR RELEASE: January 22, 1998
205 325 3898
Thomas W. Barker, Jr.
205 325 3586
SONAT REPORTS 1997 RESULTS,
DECLARES DIVIDEND
BIRMINGHAM, Ala. -- Ronald L. Kuehn, Jr., chairman, president and
chief executive officer of Sonat Inc. (NYSE: SNT), announced today that the
company earned $201.3 million, or $2.35 per share, in 1997 after excluding a
third quarter $25.4 million, or $.30 per share, write-down of Gulf of Mexico
properties. This compares with $201.2 million, or $2.33 per share, in 1996.
For the fourth quarter of 1997, the company's earnings were $59.9
million, or $.70 per share. This compares with $67 million, or $.78 per share,
for the same 1996 period.
EXPLORATION AND PRODUCTION RESULTS AND OPERATIONS
Sonat Exploration Company's operating income for the fourth quarter of
1997 was $41 million compared with $65 million in the fourth quarter of 1996.
Natural gas and oil production rose from 65 billion cubic feet of natural gas
equivalent (Bcfe) to 67 Bcfe. The primary reasons for lower financial results
in the
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fourth quarter of 1997 versus the 1996 fourth quarter were lower natural gas
and oil prices and higher operating expenses. Realized natural gas prices
declined from $2.57 per thousand cubic feet (Mcf) in the fourth quarter of 1996
to $2.32 in 1997, while realized oil prices declined to $19.16 from $19.97 per
barrel.
Sonat Exploration's year-end proved reserves rose 10 percent to 2.2
trillion cubic feet of natural gas equivalent. For the year, the company
replaced 200 percent of its production.
Currently Sonat Exploration is completing three successful wells in
the Cotton Valley Pinnacle Reef trend in east Texas as well as one successful
Cotton Valley lime well. These wells will begin producing at various times in
February 1998. Sonat Exploration's success rate in the Cotton Valley Pinnacle
Reef trend is now 85 percent.
NATURAL GAS TRANSMISSION RESULTS AND OPERATIONS
Fourth quarter operating income for the natural gas transmission
segment rose to $47 million from $45 million in 1996 primarily due to lower
general and administrative expenses. Southern Natural Gas Company's
market-area throughput rose to 172 Bcf from 169 Bcf last year while
production-area throughput rose to 107 Bcf from 73 Bcf.
Quarterly equity in earnings of Citrus Corp. rose from $6 million to
$10 million due to a gain recognized on the restructuring of Sonat and Enron
Corp.'s marketing arrangement for Citrus Trading Company. Throughput on the
Florida Gas Transmission Company system rose from 104 Bcf to 107 Bcf.
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During the fourth quarter of 1997, Southern Natural completed a $36
million expansion that added 45 million cubic feet per day of firm capacity,
primarily for customers in Georgia. Southern Natural also entered into a joint
venture with AGL Resources Inc. to construct a liquefied natural gas facility
in Polk County, Georgia, outside Atlanta. This new facility will cost
approximately $90 million and is scheduled to be completed in time for the
2001-02 winter heating season, assuming timely Federal Energy Regulatory
Commission approval. In addition to this project, Southern Natural has four
pipeline expansion projects totaling $216 million in various stages of
construction or permitting.
ENERGY MARKETING RESULTS AND OPERATIONS
Fourth quarter financial results for the energy marketing segment were
up sharply from last year's levels as operating income rose to $9 million from
a loss of $1 million the previous year. The principal reasons for the increase
were the recognition of mark-to-market income from origination activities plus
improved margins. Sonat Marketing Company's natural gas sales volumes rose 22
percent, and trading margins were higher. At year end, its sales volumes
reached 4.2 Bcf per day, up from 3.3 Bcf per day at the beginning of the year.
Sonat Power Marketing increased its sales volumes to 2.1 million megawatt hours
from 1.3 million megawatt hours in the fourth quarter of 1996.
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SONAT BOARD EXTENDS STOCK REPURCHASE PROGRAM
The Sonat Board of Directors has extended the company's stock
repurchase program to December 31, 1998, and authorized the purchase of an
additional 1 million shares. The company has purchased approximately 3.4
million shares since May 1994 and will continue to purchase shares from time to
time in the open market or in privately negotiated transactions.
Shares purchased under the program are expected to be reissued in
connection with employee stock option and restricted stock programs. At
December 31, 1997, Sonat had 85,788,685 common shares outstanding.
QUARTERLY DIVIDEND DECLARED
Kuehn also announced that a regular quarterly dividend of $.27 per
share was declared for Sonat's common stock. The dividend, payable on March
13, 1998, to stockholders of record on February 27, 1998, is the 236th
consecutive quarterly dividend paid on the company's common stock.
Sonat, headquartered in Birmingham, is an integrated oil and natural
gas company engaged in exploration and production of oil and natural gas,
interstate transmission of natural gas, and natural gas and electric power
marketing.
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SONAT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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3 Months 12 Months
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Periods Ended December 31, 1997 1996 1997 1996
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(In Thousands, Except Per-Share Amounts)
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Revenues $1,263,646 $962,284 $4,174,624 $3,039,014
Costs and Expenses 1,167,360 853,639 3,877,423 2,697,737
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Operating Income 96,286 108,645 297,201 341,277
Other Income 12,670 9,145 45,531 35,820
Interest Expense, Net (23,450) (19,999) (86,275) (82,793)
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Income before Income Taxes 85,506 97,791 256,457 294,304
Income Tax Expense 25,625 30,800 80,537 93,115
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Net Income (1) $ 59,881 $ 66,991 $ 175,920 $ 201,189
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Earnings Per Share of Common Stock $ .70 $ .78 $ 2.05 $ 2.33
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Earnings Per Share of Common Stock-
Assuming Dilution $ .69 $ .76 $ 2.01 $ 2.30
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Weighted Average Shares Outstanding 85,747 86,280 85,941 86,211
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Weighted Average Shares Outstanding-
Assuming Dilution 87,096 87,960 87,511 87,564
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Cash Dividends Paid Per Common Share $ .27 $ .27 $ 1.08 $ 1.08
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(1) Net income for the 1997 twelve-month period includes a charge of $25.4
million, or $.30 per share, related to the impairment of certain oil
and gas properties.
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SONAT INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
(Unaudited)
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3 Months 12 Months
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Periods Ended December 31, 1997 1996 1997 1996
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(In Thousands)
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BUSINESS SEGMENTS
Revenues:
Exploration and production $ 162,158 $ 174,016 $ 558,456 $ 565,654
Natural gas transmission 97,591 105,007 393,292 420,427
Energy marketing 1,155,773 833,455 3,723,932 2,592,703
Other 7,352 12,264 32,937 44,352
Intersegment revenue (159,228) (162,458) (533,993) (584,122)
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$1,263,646 $ 962,284 $4,174,624 $3,039,014
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Operating Income (Loss):
Exploration and production $ 41,257 $ 64,699 $ 102,945 $ 161,893
Natural gas transmission 46,613 44,914 178,348 165,587
Energy marketing 8,598 (1,450) 10,613 10,184
Other, net of corporate
expenses (182) 482 5,295 3,613
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$ 96,286 $ 108,645 $ 297,201 $ 341,277
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OTHER INCOME:
Equity in earnings of
unconsolidated affiliates:
Exploration and production $ 155 $ 118 $ 445 $ 408
Natural gas transmission 14,033 8,480 40,526 32,532
Energy marketing 148 9 817 9
Other 242 319 1,233 1,262
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14,578 8,926 43,021 34,211
Minority interest (3,150) 289 (4,394) (4,907)
Other 1,242 (70) 6,904 6,516
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$ 12,670 $ 9,145 $ 45,531 $ 35,820
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INTEREST EXPENSE, NET:
Interest income $ 987 $ 842 $ 3,681 $ 4,153
Interest expense (25,309) (22,017) (93,733) (92,040)
Interest capitalized 872 1,176 3,777 5,094
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$ (23,450) $ (19,999) $ (86,275) $ (82,793)
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SONAT INC. AND SUBSIDIARIES
OPERATIONAL DATA
(Unaudited)
EXPLORATION AND PRODUCTION OPERATIONS
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Three Months Twelve Months
Ended December 31, Ended December 31,
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1997 1996 1997 1996
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Net Sales Volumes:
Gas (Bcf) 55 53 203 205
Oil and condensate (MBbls) 1,504 1,397 4,612 5,145
Natural gas liquids (MBbls) 510 582 1,764 2,161
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Average Sales Prices:
Gas ($/Mcf) $ 2.32 $ 2.57 $ 2.18 $ 2.20
Oil and condensate ($/Bbl) 19.16 19.97 20.05 19.25
Natural gas liquids ($/Bbl) 12.04 15.46 11.96 12.03
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NATURAL GAS TRANSMISSION
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Three Months Twelve Months
Ended December 31, Ended December 31,
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1997 1996 1997 1996
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(Billion Cubic Feet)
Southern Volumes:
Market transportation 172 169 611 630
Supply transportation 107 73 396 315
Intrastate - 10 - 38
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Total Volumes 279 252 1,007 983
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Florida Gas Volumes (100%) 107 104 471 457
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ENERGY MARKETING
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Three Months Twelve Months
Ended December 31, Ended December 31,
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1997 1996 1997 1996
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Sonat Marketing Sales Volumes (100%)
(Billion Cubic Feet) 346 283 1,288 968
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Sonat Power Marketing Sales Volumes (100%)
(Thousands of Megawatt Hours) 2,106 1,285 8,768 2,969
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