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 earliest event reported: April 22, 1999
SONAT INC.
(Exact name of registrant as specified in its charter)
Delaware 1-7179 63-0647939
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
AmSouth-Sonat Tower
Birmingham, Alabama 35203
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
205-325-3800
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Item 5. Other events.
On April 22, 1999, Sonat Inc. (the "Company") announced at its annual
meeting to stockholders and issued a press release regarding the Company's
results of operations for the first quarter of 1999, which included, among other
things, the effect of a $228.5 million, after tax, ceiling test charge under
full cost accounting provisions for its exploration and production business
segment. A copy of the press release, including first quarter results, is filed
as an exhibit to this report.
Item 7. Financial Statements, Pro Forma Financial
Information, and Exhibits
(c) Exhibits
The following documents are filed herewith as exhibits to this
Current Report:
Exhibit
No. Exhibit
99 Press Release dated April 22, 1999
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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 hereunto duly authorized.
Sonat Inc.
By: /s/ William A. Smith
William A. Smith
Executive Vice President and
General Counsel
Dated: April 22, 1999
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SONAT INC.
CURRENT REPORT ON FORM 8-K
EXHIBIT INDEX
EXHIBIT
NO. EXHIBIT
99* Press Release dated April 22, 1999
_________
*Filled herewith
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EXHIBIT 99
Bruce L. Connery FOR RELEASE: April 22, 1999
205 325 3898
Tom Barker
205 325 3586
SONAT REPORTS FIRST QUARTER RESULTS
BIRMINGHAM, Ala. -- Ronald L. Kuehn, Jr., chairman, president and chief
executive officer of Sonat Inc. (NYSE: SNT), announced today that Sonat earned
$16.3 million, or $.15 per share, for the three months ended March 31, 1999,
after eliminating a $228.5 million, or $2.08 per share, ceiling test charge
required by full cost accounting for its exploration and production business
segment. In the same 1998 period the company earned $53.8 million, or $.48 per
share, after eliminating a $25.8 million, or $.23 per share, ceiling test
charge. The decline in normalized earnings is principally due to sharply lower
oil and natural gas prices and lower production. In addition, first quarter 1999
earnings were negatively impacted by $4.1 million, or $.04 per share, of
expenses pertaining to Sonat's proposed merger with El Paso Energy Corporation
and unrealized tax credits.
Exploration and Production Results and Operations
Sonat Exploration Company's earnings before interest and taxes (EBIT) for
the first quarter of 1999 were $1.2 million, after eliminating the effect of the
$351.5 million pre-tax ceiling test charge. This compares with EBIT of $37.3
million in the same 1998 period, after eliminating the effect of a $39.7 million
pre-tax ceiling test charge. Total production declined from 78 billion cubic
feet of natural gas equivalent (Bcfe) to 55 Bcfe, primarily due to significant
producing property sales that took place during 1998.
Realized natural gas prices for the first quarter of 1999 were $1.66 per
thousand cubic feet (Mcf) as compared with $2.01 per Mcf last year. Realized oil
prices were $11.04 per barrel compared with $14.76 per barrel last year.
So far this year, Sonat Exploration has been successful on two of the five
exploratory wells that it has drilled in the Gulf of Mexico and currently has
three wells drilling in the Gulf. Onshore, Sonat Exploration has been successful
on three of the seven exploratory wells that it has drilled this year.
In the March Federal Lease Sale 172, Sonat Exploration was the apparent
successful bidder on 22 offshore tracts at a total cost of $6 million. Twelve of
these tracts have been awarded to date.
Natural Gas Transmission Results and Operations
First quarter EBIT for the natural gas transmission segment was $56.2
million compared with $68.9 million in the first quarter of 1998. The decrease
is primarily due to the impact of earnings contributions from a depreciation
adjustment and various other non-recurring items that took place in the first
quarter of 1998.
During the first quarter, Southern Natural and Carolina Power & Light
Company (CP&L) (NYSE:CPL) announced plans to form a 50/50 joint venture to
construct, own and operate the Palmetto Interstate Pipeline. This proposed
project is a 180-mile, 30-inch, natural gas pipeline extending from the terminus
of Southern Natural's pipeline system in Aiken, S.C., to an interconnect with
the North Carolina Natural Gas (NCNG) system in Robeson County, N.C. The initial
capacity of this pipeline is expected to be between 200 million and 300 million
cubic feet per day with an estimated cost of $200 million to $250 million. To
support this project, Southern Natural will significantly expand its system at a
cost that is expected to exceed $200 million.
Also during the first quarter, Southern Natural began construction on its
North Alabama Pipeline expansion. This 78 million-cubic-feet-per-day expansion,
which will serve the cities of Huntsville and Decatur and three other customers,
is expected to be in service in late 1999.
Energy Services Results
Sonat Energy Services Company's EBIT for the first quarter of 1999 was a
loss of $1.6 million, which compared with income of $836,000 in 1998. Lower
natural gas trading and origination margins were offset by higher margins at
Sonat Power Marketing L.P. However, the 50 percent-owned Mid-Georgia Cogen L.P.
power plant, which was not operational in the first quarter of 1998, reported a
loss during the quarter as the majority of the revenues for this plant are
earned during the second and third quarters of the year.
Sonat Inc., headquartered in Birmingham, is a diversified energy
company engaged in exploration and production of oil and natural gas,
interstate transmission of natural gas, and energy services. Visit Sonat's
web site at www.sonat.com.
Cautionary Statement Concerning Forward-Looking Statements
This press release includes certain forward-looking statements, which are based
on assumptions the company believes are reasonable, but a variety of factors
could cause the company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in management's
forward-looking statements. Such statements are made in reliance on the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Changes in business conditions in the oil and gas industry and at Sonat
Exploration Company could change its current plans for its onshore and offshore
exploration programs. Such changes would include material changes in oil and gas
prices and drilling rig rates. In addition, there can be no assurance that
definitive joint venture agreements for the Palmetto Interstate Pipeline will be
executed, or that the project will receive regulatory approval or be placed in
service as planned. There can also be no assurance that construction of the
North Alabama Pipeline project will be completed on schedule.
Additional factors that may affect the company can be found under the caption
"Cautionary Statement Concerning Forward-Looking Statements" in the company's
1998 Annual Report on Form 10-K. In addition, Sonat and El Paso Energy
Corporation have filed a Registration Statement on S-4/Joint Proxy in
conjunction with their announced merger agreement. These reports, which are
filed with the Securities and Exchange Commission, are hereby referenced in
their entirety for further information about the company, its operations and its
financial statements.
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SONAT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
3 Months
Periods Ended March 31, 1999 1998
- ---------------------------------------------------------------------------
(In Thousands, Except
Per-Share Amounts)
Revenues $ 773,740 $1,109,143
Costs and Expenses 1,079,634 1,049,669
---------- ----------
Operating Income (Loss) (305,894) 59,474
Other Income 8,531 9,824
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Earnings (Loss) Before Interest and Taxes (297,363) 69,298
Interest Expense, Net (29,948) (28,506)
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Income (Loss) before Income Taxes (327,311) 40,792
Income Tax Expense (Benefit) (115,095) 12,842
---------- ----------
Net Income (1) $ (212,216) $ 27,950
========== ==========
Earnings (Loss) Per Share of Common Stock $ (1.93) $ .25
========== ==========
Earnings (Loss) Per Share of Common Stock-
Assuming Dilution $ (1.93) $ .25
========== ==========
Weighted Average Shares Outstanding 110,046 109,966
========== ==========
Weighted Average Shares Outstanding-
Assuming Dilution (2) 110,046 111,134
========== ==========
Cash Dividends Paid Per Common Share $ .27 $ .27
========== ==========
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(1) Net income for the three-month periods of 1999 and 1998 include charges
of $228.5 million, or $2.08 per share, and $25.8 million, or $.23 per
share, respectively, for ceiling test write-downs related to the
Company's oil and gas operations.
(2) The 1999 period excludes common stock equivalents applicable to
outstanding stock options because they would be antidilutive in the
computation of earnings per share.
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SONAT INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
(Unaudited)
3 Months
Periods Ended March 31, 1999 1998
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(In Thousands)
BUSINESS SEGMENT
Revenues:
Exploration and production $ 91,691 $ 161,862
Natural gas transmission 100,704 105,501
Energy services 661,845 937,055
Other 13,355 12,376
Intersegment revenue (93,855) (107,651)
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$ 773,740 $1,109,143
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Earnings Before Interest and Taxes:
Exploration and production $ (350,302) $ (2,445)
Natural gas transmission 56,182 68,915
Energy services (1,592) 836
Other, net of corporate expenses (1,651) 1,992
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$ (297,363) $ 69,298
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INTEREST EXPENSE, NET:
Interest income $ 1,939 $ 2,200
Interest expense (35,307) (32,130)
Interest capitalized 3,420 1,424
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$ 29,948 $ (28,506)
========== ==========
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March 31, December 31,
1999 1998
(In Thousands)
Assets $3,974,665 $4,361,094
Total Debt 2,059,616 1,929,680
Stockholders' Equity 1,086,820 1,329,251
Debt to Capitalization 65% 59%
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SONAT INC. AND SUBSIDIARIES
OPERATIONAL DATA
(Unaudited)
Exploration and Production
Three Months
Ended March 31,
1999 1998
Net Sales Volumes:
Gas (Bcf) 46 63
Oil and condensate (MBbls) 1,258 1,950
Natural gas liquids (MBbls) 201 584
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Average Sales Prices:
Gas ($/Mcf) $ 1.66 $ 2.01
Oil and condensate ($/Bbl) 11.04 14.76
Natural gas liquids ($/Bbl) 7.29 9.73
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Natural Gas Transmission
Three Months
Ended March 31,
1999 1998
(Billion Cubic Feet)
Southern Volumes:
Market transportation 177 185
Supply transportation 89 95
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Total Volumes 266 280
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Florida Gas Volumes (100%) 105 102
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Energy Services
Three Months
Ended March 31,
1999 1998
Sonat Marketing Sales Volumes (100%)
(Bcf) 290 360
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Sonat Power Marketing Sales Volumes (100%)
(Thousands of Megawatt Hours) 3,009 3,170
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Financial Volumes Notional Settlements Third
Parties-Natural Gas (Bcf) 1,875 628
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