UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1997 COMMISSION FILE NO. 0-25214
KELLEY OIL & GAS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0447267
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
601 JEFFERSON ST.
SUITE 1100
HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (713) 652-5200
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.
TITLE OF CLASS OUTSTANDING AT APRIL 30, 1997
Common Stock 98,315,093
<PAGE>
Kelley Oil and Gas Corporation hereby amends and restates the following
sections of its Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 to include the effect of cumulative preferred stock dividends, whether
declared or not, on net income (loss) applicable to common stock and on income
(loss) per share disclosures:
Part 1, Item 1. Financial Statements
Part 2, Item 6. Exhibits and Reports on Form 8-K
See Note 1 in the Notes to Consolidated Financial Statements (Unaudited)
for further discussion of the restatement.
FORWARD-LOOKING STATEMENTS
FROM TIME TO TIME, THE COMPANY MAY PUBLISH FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, RELATING TO
MATTERS SUCH AS ANTICIPATED OPERATING AND FINANCIAL PERFORMANCE, BUSINESS
PROSPECTS, DEVELOPMENTS AND RESULTS OF THE COMPANY. ACTUAL PERFORMANCE,
PROSPECTS, DEVELOPMENTS AND RESULTS MAY DIFFER MATERIALLY FROM ANY OR ALL
ANTICIPATED RESULTS DUE TO ECONOMIC CONDITIONS AND OTHER RISKS, UNCERTAINTIES
AND CIRCUMSTANCES PARTLY OR TOTALLY OUTSIDE THE CONTROL OF THE COMPANY,
INCLUDING RATES OF INFLATION, NATURAL GAS PRICES, RESERVE ESTIMATES, RATES AND
TIMING OF FUTURE PRODUCTION OF OIL AND GAS, AND CHANGES IN THE LEVEL AND TIMING
OF FUTURE COSTS AND EXPENSES RELATED TO DRILLING AND OPERATING ACTIVITIES.
WORDS SUCH AS "ANTICIPATED," "EXPECT," "ESTIMATE," "PROJECT" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING
STATEMENTS MAY BE MADE IN MANAGEMENT'S STATEMENTS (ORALLY OR IN WRITING)
INCLUDING PRESS RELEASES, AND IN FILINGS OF THE SEC, INCLUDING THIS REPORT.
1
<PAGE>
KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
PAGE
----
Consolidated Balance Sheets as of December 31, 1996 and March 31, 1997
(unaudited)............................................................ 3
Consolidated Statements of Income (Loss) for the three months ended
March 31, 1996 and 1997 (unaudited).................................... 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1997 (unaudited).................................... 5
Notes to Consolidated Financial Statements (unaudited).................. 6
PART II. OTHER INFORMATION ............................................... 7
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, MARCH 31,
1996 1997
--------- ---------
(UNAUDITED)
ASSETS:
Cash and cash equivalents .......................... $ 4,070 $ 573
Accounts receivable ................................ 22,519 17,949
Accounts receivable - drilling programs ............ 1,533 720
Prepaid expenses and other current assets .......... 1,347 1,859
--------- ---------
Total current assets ............................. 29,469 21,101
--------- ---------
Oil and gas properties, successful efforts method:
Unproved properties, net ......................... 12,521 11,821
Properties subject to amortization ............... 338,794 350,349
Pipelines and other transportation assets, at cost . 4,689 4,689
Furniture, fixtures and equipment .................. 1,700 1,904
--------- ---------
357,704 368,763
Less: Accumulated depreciation, depletion
and amortization .................................. (199,236) (205,216)
--------- ---------
Total property and equipment, net ................ 158,468 163,547
--------- ---------
Other non-current assets, net ...................... 1,290 1,394
--------- ---------
TOTAL ASSETS ..................................... $ 189,227 $ 186,042
========= =========
LIABILITIES:
Accounts payable and accrued expenses .............. $ 31,093 $ 38,401
Accounts payable - drilling programs ............... 4,416 735
--------- ---------
Total current liabilities ........................ 35,509 39,136
--------- ---------
Long term debt ..................................... 184,253 175,735
--------- ---------
TOTAL LIABILITIES ................................ 219,762 214,871
--------- ---------
STOCKHOLDERS' DEFICIT:
Preferred stock, $1.50 par value, 20,000 shares
authorized at December 31, 1996 and March 31,
1997; 1,746 and 1,745 shares outstanding at
December 31, 1996 and March 31, 1997,
respectively (liquidation value at December 31,
1996 and March 31, 1997 of $48,219 and $49,363,
respectively) ..................................... 2,618 2,618
Common stock, $.01 par value, 200,000 shares
authorized at December 31, 1996 and March 31,
1997, respectively; 98,293 and 98,295 shares
outstanding at December 31, 1996 and March 31,
1997, respectively ................................ 983 983
Additional paid-in capital ......................... 273,096 273,099
Accumulated deficit ................................ (307,232) (305,529)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT ....................... (30,535) (28,829)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ........ $ 189,227 $ 186,042
========= =========
See Notes to Consolidated Financial Statements.
3
<PAGE>
KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
RESTATED
--------------------
THREE MONTHS
ENDED MARCH 31,
--------------------
1996 1997
-------- --------
Oil and gas revenues .................................... $ 12,704 $ 18,398
Gas marketing revenues, net ............................. 394 549
Interest and other income ............................... 314 163
-------- --------
Total revenues ........................................ 13,412 19,110
-------- --------
Production expenses ..................................... 2,572 2,370
Exploration costs ....................................... 1,640 1,049
General and administrative expenses ..................... 2,633 2,180
Interest and other debt expenses ........................ 6,398 5,828
Depreciation, depletion and amortization ................ 5,681 5,980
-------- --------
Total expenses ........................................ 18,924 17,407
-------- --------
Net income (loss) before income taxes ................... (5,512) 1,703
Income taxes ............................................ -- --
-------- --------
Net income (loss) ....................................... (5,512) 1,703
Less: Preferred stock dividends ......................... (1,603) (1,145)
-------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK ............ $ (7,115) $ 558
======== ========
Income (loss) per share:
Primary and assuming full dilution:
Net income (loss) ................................... $ (.10) $ .01
======== ========
Average common and common equivalent shares outstanding . 68,305 100,162
See Notes to Consolidated Financial Statements.
4
<PAGE>
KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
--------------------
1996 1997
-------- --------
OPERATING ACTIVITIES:
Net income (loss) ...................................... $ (5,512) $ 1,703
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization ............. 5,681 5,980
Dry hole and impairment costs ........................ (40) --
Accretion and amortization of debt expenses .......... 1,117 1,064
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable ........... (3,145) 5,383
Increase in prepaid expenses and other current assets (1,425) (512)
Increase in other non-current assets ................. (1,074) (186)
Increase in accounts payable and accrued expenses .... 1,022 3,627
-------- --------
Net cash provided by (used in) operating activities .... (3,376) 17,059
-------- --------
INVESTING ACTIVITIES:
Capital expenditures ................................... (7,139) (11,059)
Proceeds from sale of equipment ........................ 251 --
-------- --------
Net cash used in investing activities .................. (6,888) (11,059)
-------- --------
FINANCING ACTIVITIES:
Proceeds from long term borrowings ..................... 8,000 4,000
Principal payments on long term borrowings ............. (30,000) (13,500)
Proceeds from sale of common stock ..................... 48,000 3
Syndication costs charged to equity .................... (3,968) --
-------- --------
Net cash provided by (used in) financing activities .... 22,032 (9,497)
-------- --------
Increase (decrease) in cash and cash equivalents ....... 11,768 (3,497)
Cash and cash equivalents, beginning of period ......... 6,352 4,070
-------- --------
Cash and cash equivalents, end of period ............... $ 18,120 $ 573
======== ========
See Notes to Consolidated Financial Statements.
5
<PAGE>
KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements of Kelley Oil & Gas
Corporation (the "Company") have been prepared by the Company in accordance with
generally accepted accounting principles and reflect all adjustments (consisting
of normal recurring adjustments) necessary for a fair statement in all material
respects of the results for the interim periods presented. The results of
operations for the three months ended March 31, 1997 are not necessarily
indicative of results to be expected for the full year. The accounting policies
followed by the Company are set forth in Note 1 to the financial statements in
its Annual Report on Form 10-K for the year ended December 31, 1996.
Certain financial statement items in the interim 1996 period have been
reclassified to conform to the interim 1997 presentation. In addition, gas
marketing revenues and cost of gas sold have been presented on a net basis for
the periods presented and are reflected in the "Gas marketing revenues, net" on
the Consolidated Statements of Income (Loss).
The Company has restated net income (loss) applicable to common stock
and net income (loss) per common share on the Consolidated Statements of Income
(Loss) for the three months ended March 31, 1997 and 1996 to include the effect
of cumulative preferred stock dividends, whether declared or not. The
restatement changes previously reported net income applicable to common stock
from $1.7 million to $0.6 million and changes previously reported net income per
common share from $0.02 to $0.01 for the three months ended March 31, 1997. The
restatement changes previously reported net loss applicable to common stock from
$(5.5) million to $(7.1) million and changes previously reported net loss per
common share from $(0.08) to $(0.10)for the three months ended March 31, 1996.
NOTE 2 - PREFERRED STOCK
In January 1996, the Company suspended the payment of the quarterly
dividend on its $2.625 Convertible Exchangeable Preferred Stock (the "Preferred
Stock") scheduled for February 1, 1996. As of March 31, 1997, $5.7 million or
$3.28 per share in dividends were in arrears, increasing the total liquidation
value to $49.4 million. On April 15, 1997, the Board of Directors of the Company
declared a dividend of $2.625 per preferred share (approximately $4.6 million)
which was paid on May 1, 1997. Future dividends on the Preferred Stock are
prohibited under the Company's existing credit facility.
NOTE 3 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128") "Earnings Per
Share." SFAS 128 establishes standards for computing and presenting earnings per
share ("EPS") and applies to entities with publicly held common stock or
potential common stock. This statement simplifies the standards for computing
EPS previously found in Accounting Principles Board Opinion No. 15, "Earnings
Per Share," and makes them comparable to international EPS standards. This
statement is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. This statement requires restatement of all prior-period EPS data
presented. Considering the guidelines as prescribed by SFAS 128, management
believes that the adoption of this statement will not have a material effect on
EPS and thus pro forma EPS, as suggested for all interim and annual periods
prior to required adoption, have been omitted.
NOTE 4 - LEGAL PROCEEDINGS
As previously disclosed, following Kelley Oil's announcement of the
initial proposal for the consolidation in August 1994, four separate lawsuits
were filed against Kelley Oil and its directors relating to the consolidation.
In November 1994, Kelley Oil entered into a memorandum of understanding with the
plaintiffs in three of the lawsuits, providing for a proposed settlement based
on a revised consolidation proposal negotiated by a special committee of Kelley
Oil's non-management directors and the settling plaintiffs. A stipulation and
agreement of compromise, settlement and release reflecting the terms of the
proposed settlement was filed in the United States District Court for the
Southern District of Texas on November 23, 1994. At a hearing held on the same
date, the court approved the consolidation of all four lawsuits and the
certification of a Unitholder class requested by the settling parties. On March
3, 1995, following a hearing on the fairness of the settlement, the court
entered a final order approving the settlement, dismissing the consolidated
lawsuits with prejudice and reducing the award of attorneys' fees and
disbursements contemplated by the stipulation to $1,479,000, payable $300,000 in
cash and the balance at the election of the Company in either cash or common
stock, the market value of the common stock to be determined by the weighted
average sales prices of shares of common stock for the ten (10) business days
immediately preceding the payment date, plus interest from the date the case is
no longer subject to review in any court.
On April 29, 1997, the U.S. Court of Appeals for the Fifth Circuit
affirmed the final judgment and order of the District Court.
6
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Exhibit
------ -------
27 Amended Financial Data Schedule (included only in
the electronic filing of this document).
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the first
quarter of 1997.
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.
KELLEY OIL & GAS CORPORATION
Date: March 27, 1998 By: /s/ DAVID C. BAGGETT
David C. Baggett
Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer)
(Principal Accounting Officer)
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 573
<SECURITIES> 0
<RECEIVABLES> 18,669
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,101
<PP&E> 368,763
<DEPRECIATION> 205,216
<TOTAL-ASSETS> 186,042
<CURRENT-LIABILITIES> 39,136
<BONDS> 175,735
0
2,618
<COMMON> 983
<OTHER-SE> (32,430)
<TOTAL-LIABILITY-AND-EQUITY> 186,042
<SALES> 18,398
<TOTAL-REVENUES> 19,110
<CGS> 0
<TOTAL-COSTS> 3,419
<OTHER-EXPENSES> 8,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,828
<INCOME-PRETAX> 1,703
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,703
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
