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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 JUNE 30, 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 JULY 31, 1997
-------------- ----------------------------
Common Stock 98,556,094
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<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 June 30,
1997 to include the effect of cumulative preferred stock dividends, whether
declared or not, on net loss applicable to common stock and on 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 futher 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 June 30, 1997
(unaudited) and December 31, 1996 ...................................... 3
Consolidated Statements of Income (Loss) for the three
months and six months ended June 30, 1997 and 1996 (unaudited).......... 4
Consolidated Statements of Cash Flows for the six months ended
June 30, 1997 and 1996 (unaudited)...................................... 5
Notes to Consolidated Financial Statements (unaudited).................... 6
PART II. OTHER INFORMATION................................................. 8
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash and cash equivalents.............................................$ 80 $ 4,070
Accounts receivable................................................... 17,472 22,519
Accounts receivable - drilling programs............................... 668 1,533
Prepaid expenses and other current assets............................. 1,228 1,347
-------- --------
Total current assets................................................ 19,448 29,469
-------- --------
Oil and gas properties, successful efforts method:
Unproved properties, net............................................ 10,712 12,521
Properties subject to amortization.................................. 362,306 338,794
Pipelines and other transportation assets, at cost ................... 4,689 4,689
Furniture, fixtures and equipment..................................... 2,089 1,700
-------- --------
379,796 357,704
Less: Accumulated depreciation, depletion and amortization...........(211,301) (199,236)
-------- --------
Total property and equipment, net................................... 168,495 158,468
-------- --------
Other non-current assets, net......................................... 1,455 1,290
-------- --------
TOTAL ASSETS........................................................$189,398 $189,227
======== ========
LIABILITIES:
Accounts payable and accrued expenses.................................$ 28,952 $ 31,093
Accounts payable - drilling programs.................................. 689 4,416
-------- --------
Total current liabilities........................................... 29,641 35,509
-------- --------
Long term debt........................................................ 194,216 184,253
-------- --------
TOTAL LIABILITIES................................................... 223,857 219,762
-------- --------
STOCKHOLDERS' DEFICIT:
Preferred stock, $1.50 par value, 20,000,000 shares
authorized at June 30, 1997 and December 31, 1996;
1,745,431 and 1,745,500 shares outstanding at
June 30, 1997 and December 31, 1996, respectively
(liquidation value at June 30, 1997 and December 31, 1996
of $45,927 and $48,219, respectively)............................... 2,618 2,618
Common stock, $.01 par value, 200,000,000 shares authorized
at June 30, 1997 and December 31, 1996, respectively;
98,495,094 and 98,293,458 shares outstanding at June 30, 1997
and December 31, 1996, respectively................................. 985 983
Additional paid-in capital............................................ 273,297 273,096
Accumulated deficit...................................................(311,359) (307,232)
-------- --------
TOTAL STOCKHOLDERS' DEFICIT......................................... (34,459) (30,535)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT...........................$189,398 $189,227
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
RESTATED
-----------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Oil and gas revenues...........................$ 15,642 $ 12,619 $ 34,040 $ 25,323
Gas marketing revenues, net.................... 536 314 1,085 708
Interest and other income...................... 71 215 234 529
-------- -------- -------- --------
Total revenues............................... 16,249 13,148 35,359 26,560
-------- -------- -------- --------
Production expenses............................ 2,561 2,595 4,931 5,167
Exploration costs.............................. 833 1,413 1,882 3,053
General and administrative expenses............ 1,807 2,193 3,987 4,826
Interest and other debt expenses............... 6,211 5,911 12,039 12,309
Restructuring expense.......................... -- 2,000 -- 2,000
Depreciation, depletion and amortization....... 6,085 3,872 12,065 9,553
-------- -------- -------- --------
Total expenses............................... 17,497 17,984 34,904 36,908
-------- -------- -------- --------
Net income (loss) before income taxes.......... (1,248) (4,836) 455 (10,348)
Income taxes................................... -- -- -- --
-------- -------- -------- --------
Net income (loss).............................. (1,248) (4,836) 455 (10,348)
Less: Preferred stock dividends................ (1,146) (688) (2,291) (2,291)
--------- -------- -------- --------
Net loss applicable to common stock............$ (2,394) $ (5,524) $ (1,836) $(12,639)
======== ======== ======== ========
Loss per share:
Primary and assuming full dilution:
Net loss...................................$ (.02) $ (.06) $ (.02) $ (.15)
======== ======== ======== ========
Average common and common equivalent shares
outstanding:
Primary and assuming full dilution........... 98,338 95,391 98,316 81,848
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
KELLEY OIL & GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)....................................................$ 455 $(10,348)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization........................... 12,065 9,553
Dry hole and impairment costs...................................... -- 201
Accretion and amortization of debt expenses........................ 2,128 2,684
Restructuring expense.............................................. -- 1,716
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable......................... 5,912 (1,708)
Decrease (increase) in prepaid expenses and other current assets... 119 (1,313)
Increase in other non-current assets............................... (330) (1,629)
Decrease in accounts payable and accrued expenses.................. (5,868) (4,297)
-------- --------
Net cash provided by (used in) operating activities.................. 14,481 (5,141)
-------- --------
INVESTING ACTIVITIES:
Capital expenditures................................................. (22,092) (16,346)
Proceeds from sale of equipment...................................... -- 293
-------- --------
Net cash used in investing activities................................ (22,092) (16,053)
-------- --------
FINANCING ACTIVITIES:
Proceeds from long term borrowings................................... 42,000 8,000
Principal payments on long term borrowings........................... (34,000) (30,000)
Proceeds from sale of common stock, net.............................. 203 43,961
Dividends on preferred stock......................................... (4,582) --
-------- --------
Net cash provided by financing activities............................ 3,621 21,961
-------- --------
Increase (decrease) in cash and cash equivalents....................... (3,990) 767
Cash and cash equivalents, beginning of period......................... 4,070 6,352
-------- --------
Cash and cash equivalents, end of period...............................$ 80 $ 7,119
======== ========
</TABLE>
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 unaudited interim consolidated financial statements of
Kelley Oil & Gas Corporation (the "Company") have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
in accordance with generally accepted accounting principles for interim
financial information. These financial statements 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 periods ended June 30, 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. These
unaudited consolidated interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's 1996 Annual Report on Form 10-K.
Certain 1996 financial statement items have been reclassified to conform
to the 1997 presentation.
The Company has restated net loss applicable to common stock and net
loss per common share on the Consolidated Statements of Income (Loss) for the
three months and six months ended June 30, 1997 and 1996 to include the effect
of cumulative preferred stock dividends, whether declared or not. These amounts,
as previously reported, included the effect of preferred stock dividends only
when declared. The restatement for the three months ended June 30, 1997 and 1996
changes previously reported net loss applicable to common stock from $(5.8)
million and $(4.8) million to $(2.4) million and $(5.5) million, respectively
and changes previously reported net loss per common share from $(0.06) and
$(0.05) to $(0.02) and $(0.06), respectively. The restatement for the six months
ended June 30, 1997 and 1996 changes previously reported net loss applicable to
common stock from $(4.1) million and $(10.3) million to $(1.8) million and
$(12.6) million, respectively and changes previously reported net loss per
common share from $(0.04) and $(0.13) to $(0.02) and $(0.15), respectively.
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. 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.
As of June 30, 1997, $2.3 million or $1.31 per share in dividends were in
arrears, increasing the total liquidation value to $45.9 million or $26.31 per
share.
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
6
<PAGE>
disbursements contemplated by the stipulation to $1.5 million, plus interest
from March 3, 1995 through the payment date. On April 29, 1997, the U.S. Court
of Appeals for the Fifth Circuit affirmed the final judgment and order of the
District Court. On August 4, 1997, the Company made a cash payment of $1.7
million which included $0.2 million of interest (fully accrued at June 30,
1997).
7
<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
second quarter of 1997.
8
<PAGE>
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 Financial Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<PERIOD-START> JAN-01-1997
<CASH> 80
<SECURITIES> 0
<RECEIVABLES> 18,140
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,448
<PP&E> 379,796
<DEPRECIATION> 211,301
<TOTAL-ASSETS> 189,398
<CURRENT-LIABILITIES> 29,641
<BONDS> 194,216
0
2,618
<COMMON> 985
<OTHER-SE> (38,062)
<TOTAL-LIABILITY-AND-EQUITY> 189,398
<SALES> 34,040
<TOTAL-REVENUES> 35,359
<CGS> 0
<TOTAL-COSTS> 6,813
<OTHER-EXPENSES> 16,052
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,039
<INCOME-PRETAX> 455
<INCOME-TAX> 0
<INCOME-CONTINUING> 455
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 455
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
