SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
________________TO_____________
Commission file number 1-11413
ENSERCH EXPLORATION, INC.
(Exact name of registrant as specified in its charter)
Texas 75-2556975
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4849 Greenville Avenue, Suite 1500, Dallas, Texas 75206
(Address of principal executive offices) (Zip Code)
214-369-7893
(Registrant's telephone number, including Area Code)
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 twelve 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
---- ----
Number of shares of Common Stock of Registrant outstanding as of
August 12, 1996: 125,934,815.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENSERCH EXPLORATION,INC.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
----------------------- --------------------
1996 1995 1996 1995
------- ------- ------ -------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Revenues
Natural gas . . . . . . . . . . . . . . . . . . $57,779 $35,123 $111,880 $67,008
Oil and condensate. . . . . . . . . . . . . . . 24,567 11,730 43,933 20,677
Natural gas liquids . . . . . . . . . . . . . . 2,107 960 3,651 1,695
Other 483 174 883 268
------- ------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . 84,936 47,987 160,347 89,648
------- ------- -------- -------
Costs and Expenses
Production and operating. . . . . . . . . . . . 19,026 11,223 38,618 20,112
Exploration . . . . . . . . . . . . . . . . . . 3,308 2,483 6,168 5,474
Depreciation and amortization . . . . . . . . . 35,207 27,454 68,032 46,547
General, administrative and other . . . . . . . 8,261 7,653 16,512 14,369
Taxes, other than income. . . . . . . . . . . . 4,805 4,143 10,973 7,551
------- ------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . 70,607 52,956 140,303 94,053
------- ------- -------- -------
Operating Income (Loss) . . . . . . . . . . . . . 14,329 (4,969) 20,044 (4,405)
Other Income (Expense) - Net. . . . . . . . . . . (51) 21 (52) (3)
Interest Income . . . . . . . . . . . . . . . . . 1,026
Interest and Other Financing Costs. . . . . . . . (6,210) (2,994) (11,861) (3,599)
------- ------- -------- -------
Income (Loss) Before Income Taxes . . . . . . . . 8,068 (7,942) 8,131 (6,981)
Income Taxes (Benefit). . . . . . . . . . . . . . 2,795 (2,780) 2,774 (2,443)
------- ------- -------- -------
Net Income (Loss) . . . . . . . . . . . . . . . . $ 5,273 $(5,162) $ 5,357 $(4,538)
======= ======= ======== =======
Net Income (Loss) Per Share . . . . . . . . . . . $ .04 $ (.05) $ .04 $ (.04)
======= ======= ======== =======
Weighted Average Shares Outstanding . . . . . . . 125,867 105,695 125,848 105,695
======= ======= ======== =======
<FN>
See accompanying Notes.
</FN>
</TABLE>
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<CAPTION>
ENSERCH EXPLORATION, INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Six Months Ended
June 30
-------------------------
1996 1995
--------- --------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . $ 5,357 $ (4,538)
Depreciation and amortization. . . . . . . . . . . . . . . . . . 68,032 46,547
Deferred income-tax expense. . . . . . . . . . . . . . . . . . . 4,576 5,499
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,074) (14,400)
Changes in current operating assets and liabilities
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . (11,433) (9,273)
Other current assets . . . . . . . . . . . . . . . . . . . . . 504 (4,602)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . (11,085) 13,075
Other current liabilities. . . . . . . . . . . . . . . . . . . 1,410 5,519
--------- ---------
Net cash flows from operating activities . . . . . . . . . . 48,287 37,827
--------- ---------
INVESTING ACTIVITIES
Purchase of business, net of cash acquired . . . . . . . . . . (332,888)
Additions to property, plant and equipment . . . . . . . . . . (107,225) (90,057)
Sales and retirements of property, plant and equipment . . . . 13,738 2,715
Collection of note receivable from affiliated company. . . . . 86,077
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 (16,453)
--------- ---------
Net cash flows used for investing activities. . . . . . . . (93,090) (350,606)
--------- ---------
FINANCING ACTIVITIES
Borrowings under bank revolving credit agreement . . . . . . . 115,000 350,000
Borrowings under bridge loan . . . . . . . . . . . . . . . . . 150,000
Repayment of bank debt assumed in acquisition. . . . . . . . . (115,000)
Repayment of borrowings under bank revolving credit agreement. (53,000)
Change in temporary advances with affiliated companies . . . . . (21,433) (66,333)
Advances under leasing arrangements. . . . . . . . . . . . . . . 6,703
Payments of capital lease obligations. . . . . . . . . . . . . . (2,249) (1,997)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . 74
---------- ---------
Net cash flows from financing activities. . . . . . . . . . 45,095 316,670
---------- ---------
Net Increase in Cash . . . . . . . . . . . . . . . . . . . . . . 292 3,891
Cash at Beginning of Period. . . . . . . . . . . . . . . . . . . 1,546 234
---------- ---------
Cash at End of Period. . . . . . . . . . . . . . . . . . . . . . . $ 1,838 $ 4,125
========== =========
<FN>
See accompanying Notes.
</FN>
</TABLE>
2
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<CAPTION>
ENSERCH EXPLORATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(June 30, 1996 Unaudited)
June 30 December 31
1996 1995
--------- -----------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,838 $ 1,546
Accounts receivable - trade. . . . . . . . . . . . . . . . . . 67,994 46,749
Accounts receivable - affiliated companies . . . . . . . . . . 10,834 20,646
Temporary advances - affiliated companies. . . . . . . . . . . 5,573
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,316 14,820
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . 100,555 83,761
---------- ----------
Property, Plant and Equipment (at cost)
Gas and oil properties (full-cost method). . . . . . . . . . . 2,687,232 2,602,454
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,997 20,684
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,708,229 2,623,138
Less accumulated depreciation and amortization . . . . . . . . 1,012,174 952,538
---------- ----------
Net property, plant and equipment . . . . . . . . . . . . . 1,696,055 1,670,600
---------- ----------
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 25,609 22,471
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,822,219 $1,776,832
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable - trade . . . . . . . . . . . . . . . . . . . $ 87,454 $ 95,386
Accounts payable - affiliated companies. . . . . . . . . . . . 4,080 6,836
Temporary advances - affiliated companies. . . . . . . . . . . 15,860
Advances under leasing arrangements. . . . . . . . . . . . . . 6,703
Current portion of capital lease obligations . . . . . . . . . 3,859 3,859
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,415 9,005
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . 112,511 130,946
---------- ----------
Bank Revolving Credit Agreement. . . . . . . . . . . . . . . . . 222,000 160,000
---------- ----------
Capital Lease Obligations. . . . . . . . . . . . . . . . . . . . 91,935 94,184
---------- ----------
Deferred Income Taxes. . . . . . . . . . . . . . . . . . . . . . 276,194 271,618
---------- ----------
Other Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 31,639 37,856
---------- ----------
Company-Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . 150,000 150,000
---------- ----------
Common Shareholders' Equity
Common stock (200,000 shares authorized;
125,933 and 125,883 shares outstanding). . . . . . . . . . . 125,933 125,883
Paid in capital. . . . . . . . . . . . . . . . . . . . . . . . 819,806 819,398
Retained deficit . . . . . . . . . . . . . . . . . . . . . . . (7,145) (12,502)
Unamortized restricted stock compensation. . . . . . . . . . . (654) (551)
---------- ----------
Common shareholders' equity . . . . . . . . . . . . . . . . 937,940 932,228
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,822,219 $1,776,832
========== ==========
<FN>
See accompanying Notes.
</FN>
</TABLE>
3
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ENSERCH EXPLORATION, INC.
Notes to Condensed Consolidated Financial Statements
1. Earnings per share applicable to common stock are based on the
weighted average number of common shares outstanding during the
period, including common equivalent shares when dilutive.
2. On April 15, 1996, ENSERCH Corporation announced that it had entered
into a definitive agreement with Texas Utilities Company providing for
a strategic business combination. The merger is to be preceded by the
distribution of ENSERCH's approximate 83% interest in Enserch
Exploration, Inc. to the ENSERCH shareholders.
3. Authorized capital includes 2 million shares of Preferred Stock. At
December 31, 1995, fifteen shares of Adjustable Rate Cumulative
Preferred Stock, Series A, were issued to a subsidiary, which were
eliminated in consolidation. In June 1996, EEX repurchased at par the
fifteen shares held by the wholly-owned subsidiary for $150 million
through the issuance of a demand note in that amount. The demand note
is eliminated in consolidation.
4. In the opinion of management, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the
results of operations for the interim periods included herein have
been made.
4
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INDEPENDENT ACCOUNTANTS' REPORT
Enserch Exploration, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Enserch Exploration, Inc. and subsidiaries (the "Company") as of June 30,
1996, and the related condensed statements of consolidated operations for the
three months and six months ended June 30, 1996 and 1995, and the condensed
statements of consolidated cash flows for the six months ended June 30, 1996
and 1995. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1995, and the related statements of consolidated operations, cash flows and
owners' equity for the year then ended (not presented herein); and in our
report dated February 9, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1995, is fairly stated in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Dallas, Texas
July 29, 1996
5
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Quarters Ended June 30, 1996 and 1995 - Enserch Exploration, Inc. (EEX) had
second-quarter 1996 net income of $5.3 million ($.04 per share), significantly
improved from the $5.2 million net loss ($.05 per share loss) in the second
quarter of 1995. Operating income for the second quarter of 1996 was
$14.3 million, compared with an operating loss of $5.0 million for the like
period a year ago, reflecting higher average prices and increased sales
volumes for both natural gas and oil.
Second-quarter revenues rose to $85 million from $48 million for the second
quarter of 1995, representing a $23 million improvement in natural-gas
revenues and a $14 million increase in oil and other revenues. Average daily
natural-gas production of 285 million cubic feet (MMcf) increased 29% over
second-quarter 1995, principally due to production from properties acquired
in a major acquisition in June 1995. The average price received for natural
gas for the second quarter was $2.23 per thousand cubic feet (Mcf), up 27%
from $1.75 per Mcf for the second quarter last year. Average daily oil
production for the second quarter of 1996 of 14.2 thousand barrels (MBbls) was
89% higher than the 1995 second quarter, primarily due to production from the
properties acquired and start-up of production from the Cooper project in the
Garden Banks area in the Gulf of Mexico. Oil sales for the second quarter
averaged $19.01 per barrel, up 11% from $17.12 per barrel for the second
quarter last year.
Costs and expenses for the second quarter of 1996 totaled $71 million versus
$53 million for the second quarter of 1995. About $16 million of the increase
is attributable to production costs, depreciation and amortization and
production and ad valorem taxes associated with operating the properties
acquired in June 1995, and some $7 million of the increase is related to
direct costs of the Cooper project. Lower amortization expense as a result
of lower production from other properties partially offset these increases.
Interest and other financing costs of $6.2 million were $3.2 million higher
than in the second quarter last year, resulting primarily from financings
associated with the 1995 acquisition and from interest and financing costs
associated with the fourth-quarter 1995 start-up of the Cooper project.
Six Months Ended June 30, 1996 and 1995 - For the first six months of 1996,
EEX had net income of $5.4 million ($.04 per share) versus a net loss of
$4.5 million ($.04 per share loss) in the 1995 period. Operating income for
the first half of 1996 was $20 million, compared with an operating loss of
$4.4 million in the like period a year ago.
Revenues for the first half of 1996 of $160 million were $71 million (79%)
greater than in the same period of 1995. Natural-gas revenues for the six
months were $45 million higher than in the 1995 period, with the average sales
price of $2.20 per Mcf up 13% and average daily production of 280 MMcf 47%
higher than for the year-earlier period, primarily due to production from the
6
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properties acquired in June 1995. Oil revenues for the first half of 1996 of
$44 million were more than double the year-ago period, with the average sales
price of $18.51 per barrel up 9% and average daily production of 13.0 MBbls
94% greater than the same period of 1995 due to production from the acquired
properties and the Cooper project.
Operating expenses for the year-to-date period of $140 million were
$46 million higher than in the 1995 period, including $38 million attributable
to production costs, depreciation and amortization and production and ad
valorem taxes associated with the acquired properties and $13 million of
direct costs associated with the Cooper project. There was a $5 million net
decrease in all other expense categories, primarily due to lower amortization
expense as a result of lower production from other properties.
Year-to-date interest and other financing costs of $11.9 million were
$8.3 million higher than for the 1995 period, principally due to the debt
incurred to finance the 1995 acquisition and costs associated with the start-
up of the Cooper project. Interest income of $1.0 million for the first six
months last year represents interest received on an intercompany note
receivable from an affiliate of ENSERCH Corporation (ENSERCH) that was repaid
during the first quarter of 1995.
For the first six months this year, losses from the Cooper project during
ramp-up of production detracted $3.5 million from operating income and
$4.2 million from net income. The project had a negligible impact on second-
quarter operating income and detracted $1.0 million from second-quarter net
income. The equipment lease costs and some production costs are essentially
fixed, declining on a per unit basis as production increases. In late July,
it was announced that mechanical difficulties had prevented completion of the
A-1 development well at the Cooper project. Numerous attempts to remedy the
problems were unsuccessful. EEX and its partner in the project will evaluate
alternate drilling strategies to develop the extensive proven hydrocarbon
column at this location. An exploratory test well is underway on Garden Banks
Block 387. EEX expects to have a 100% interest in this well.
It was also announced in late July that EEX and its partners have identified
alternate development scenarios that have the potential to significantly
reduce the total cost of the Allegheny project in the Green Canyon 254 area.
The additional engineering study and design will delay the project from its
previously planned early 1999 start up. However, the design changes should
substantially enhance the project's economics. A revised schedule for
development will be announced later.
HEDGING ACTIVITIES - EEX manages a portion of the risk associated with
fluctuations in the price of natural gas and oil through the use of hedging
techniques such as gas and oil swaps, collars and futures agreements. As a
result of such hedging to fix the net prices received, losses or gains occur
and either offset or add to actual prices received to achieve the net fixed
prices. In total, gas and oil price hedging reduced revenues for the second
quarter of 1996 by $2.0 million but increased revenues by $.7 million in the
second quarter of 1995. For the first six months of 1996, gas and oil price
hedging activities reduced total revenues by $7.7 million but increased
revenues by $3.5 million in the first half of 1995. At June 30, 1996, EEX had
7
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outstanding swaps, collars and futures agreements that were entered into as
hedges extending through July 31, 1996 to exchange payments on 5.1 billion
cubic feet (Bcf) of natural gas and 1.8 million barrels of oil. At June 30,
1996, there were $3.9 million of net unrealized and unrecognized hedging costs
based on the difference between the strike price and the NYMEX futures price
for the applicable trading month. In addition, there were $.7 million of
costs on hedging activities which were deferred and will be applied as a
reduction in revenues in the month of physical sale of production.
CAPITALIZED COSTS - Gas and oil prices are subject to seasonal and other
fluctuations. A decline in prices from June 1996 levels or other factors,
without mitigating circumstances, could cause a future write-down of
capitalized costs and a non-cash charge against income under the full-cost
accounting method cost center ceiling limitation.
LIQUIDITY AND FINANCIAL RESOURCES - EEX has funded its activities through cash
provided from operations, borrowings from bank credit facilities and both
operating and capital lease arrangements with an ENSERCH Company.
Cash Flows - Operating activities for the first six months of 1996 provided
net cash flows of $48 million, a $10 million increase from the $38 million
provided in the first half of 1995. Income before depreciation and
amortization and deferred income taxes for the first six months this year was
$78 million versus $48 million for the 1995 period. Changes in current
operating assets and liabilities for the first six months this year required
$21 million versus $5 million provided in the 1995 period, which benefited
from the recovery of expenditures on the Cooper project as a result of
transfer to the leasing program.
Investing activities required net cash flows of $93 million, compared with
$351 million required in the year-ago period, which included a $333 million
requirement for a major acquisition and $86 million provided from the
collection of a note receivable from an affiliated company. Planned property,
plant and equipment additions for 1996 total $187 million, compared with 1995
additions of $189 million.
EEX intends to utilize substantially all of its internally generated cash
flows for growth of the business. Internally generated cash flows may be
supplemented by borrowings to fund temporary cash deficiencies. EEX has a
$350 million four-year revolving credit agreement, $128 million of which was
unused at June 30, 1996. In addition, EEX has a $50 million borrowing
arrangement with ENSERCH to meet working capital needs, which was unused at
June 30, 1996. EEX does not anticipate paying cash dividends in the
foreseeable future.
Capital Structure - Total capitalization at June 30, 1996 was $1.4 billion
versus $1.3 billion at year-end 1995. Common shareholders' equity at June 30,
1996 was 67% of capitalization, compared with 70% at the end of 1995. In
addition, EEX is obligated under operating lease arrangements with ENSERCH
companies for the facilities used on the Cooper project.
SALE OF PROPERTIES - EEX has reached agreements to sell substantially all of
its Rocky Mountain area properties. The sales, which are effective April 1,
are expected to close by the end of September 1996 and to provide total
8
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proceeds of approximately $120 million, less closing costs and income from the
April effective date to the closing date of approximately $7 million. EEX
intends to use the proceeds from the sales to reduce its debt. These
properties were mostly acquired as part of the major acquisition in 1995 and
are being sold because they are not within the core area of EEX's other
properties. The properties being sold represent proved reserves of
approximately 150 Bcf of natural gas equivalent and average daily production
of approximately 45 MMcf of natural gas equivalent. In accordance with the
full-cost accounting method, EEX will credit the proceeds from the sales to
the carrying value of gas and oil properties.
RECENT EVENT - On April 15, 1996, ENSERCH announced that it had entered into
a definitive agreement with Texas Utilities Company (TUC) to merge. As a
result of this strategic action, the ENSERCH business units, Lone Star Gas
Company and Lone Star Pipeline Company, the local distribution and pipeline
companies of ENSERCH, and other businesses, will become a part of TUC. Prior
to the merger, ENSERCH's approximate 83% interest in EEX, represented by
approximately 105 million shares of EEX common stock, will be distributed to
ENSERCH shareholders. In connection with this distribution, and prior to the
merger, a special meeting of the shareholders of EEX will be held to approve
the merger of EEX into a subsidiary of ENSERCH. This preliminary merger is
believed necessary to enable the distribution to be tax free to ENSERCH and
its shareholders.
The agreement is subject to approval of ENSERCH and TUC shareholders. The
agreement is also subject to a favorable ruling from the Internal Revenue
Service as to the tax-free nature of the distribution of EEX shares, and a
request for that ruling has been submitted. The requisite filings with the
Federal Trade Commission and the Department of Justice under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 have been made. The required filing
with the Securities and Exchange Commission (SEC) under the Public Utilities
Holding Companies Act of 1935 will be made in the near future. In connection
with this 1935 Act filing, the Railroad Commission of Texas has advised the
SEC that it has no objection to the proposed transaction and will rely on its
existing authority and resources to protect the public interest and ratepayers
subject to its jurisdiction, that there is no hindrance under Texas natural
gas utility regulatory law to the proposed transaction and that the Commission
intends to exercise its authority in accordance with applicable law. Closing
of the transaction is expected to occur around year-end 1996.
At its regularly scheduled meeting on August 6, 1996, the Board of Directors
of EEX took several actions to prepare for status as a fully-independent
corporation after the distribution of ENSERCH-owned shares. As a result of
these actions, the Company has retained a firm to search for a Chairman and
Chief Executive Officer (CEO) to replace David W. Biegler, who will remain
with the ENSERCH entities merging with TUC. Several upper management
positions have been or are being filled to solidify the independent management
team. A plan for Board governance is being developed to ensure proper
transitional governance as well as the most suitable Board structure and
composition after the distribution. A joint committee of Directors, two each
from EEX and ENSERCH, has been appointed to participate in the Chairman and
CEO search process and to develop the plan for Board governance.
9
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<CAPTION>
ENSERCH EXPLORATION INC.
SUMMARY OF OPERATING DATA (UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ----------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating Income (Loss) (in millions) . . . . . . . . $ 14.3 $ (5.0) $ 20.0 $ (4.4)
====== ====== ====== ======
Revenues (in millions)
Natural gas . . . . . . . . . . . . . . . . . . . . $ 57.8 $ 35.1 $111.9 $ 67.0
Oil and condensate. . . . . . . . . . . . . . . . . 24.5 11.7 43.9 20.7
Natural gas liquids . . . . . . . . . . . . . . . . 2.1 1.0 3.6 1.7
Other . . . . . . . . . . . . . . . . . . . . . . . .5 .2 .9 .2
------ ------ ------ ------
Total . . . . . . . . . . . . . . . . . . . . . $ 84.9 $ 48.0 $160.3 $ 89.6
====== ====== ====== ======
Sales Volumes
Natural gas (MMcf) . . . . . . . . . . . . . . . . 25,939 20,092 50,910 34,453
Oil and condensate (MBbls). . . . . . . . . . . . . 1,292 685 2,374 1,218
Natural gas liquids (MBbls) . . . . . . . . . . . . 197 88 363 154
Total volumes (MMcfe) (a). . . . . . . . . . . . 34,873 24,730 67,332 42,685
Average Sales Price
Natural gas (per Mcf) . . . . . . . . . . . . . . . $ 2.23 $ 1.75 $ 2.20 $ 1.94
Oil and condensate (per Bbl). . . . . . . . . . . . 19.01 17.12 18.51 16.98
Natural gas liquids (per Bbl) . . . . . . . . . . . 10.70 10.91 10.06 11.01
Total product revenue (per Mcfe) (a) . . . . . . 2.42 1.93 2.37 2.09
Cost and Expenses (per Mcfe)(a)
Production and operating (b). . . . . . . . . . . . $ .55 $ .45 $ .57 $ .47
Exploration . . . . . . . . . . . . . . . . . . . . .09 .10 .09 .13
Depreciation and amortization . . . . . . . . . . . 1.01 1.11 1.01 1.09
General, administrative and other . . . . . . . . . .24 .31 .25 .34
Taxes, other than income. . . . . . . . . . . . . . .14 .17 .16 .18
Net Wells
Drilled . . . . . . . . . . . . . . . . . . . . . . 36 24 54 39
Productive. . . . . . . . . . . . . . . . . . . . . 25 16 42 26
<FN>
(a) Oil and natural gas liquids have been converted to Mcf equivalents (Mcfe) on the basis of one barrel equals 6.0
Mcfe.
(b) Excludes related production, severance and ad valorem taxes.
</FN>
</TABLE>
10
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT (15)- Letter of Deloitte & Touche LLP dated
August 12, 1996, regarding unaudited
interim financial statements.
(b) Reports on Form 8-K
Current Report on Form 8-K dated April 13, 1996. (Merger Agreement
between ENSERCH Corporation and Texas Utilities Company; spin-off
of EEX.)
11
<PAGE>
<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.
ENSERCH EXPLORATION, INC.
(Registrant)
Dated August 12, 1996 By /s/J. Philip McCormick
-------------------------------
J. Philip McCormick
Senior Vice President and
Chief Financial Officer
Dated August 12, 1996 By /s/J. W. Pinkerton
------------------------------
J. W. Pinkerton
Vice President and Controller
12
<PAGE>
<PAGE>
EXHIBIT (15)
Enserch Exploration, Inc:
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited interim
condensed consolidated financial information of Enserch Exploration, Inc.
and subsidiaries for the periods ended June 30, 1996 and 1995, as indicated
in our report dated July 29, 1996; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, is
incorporated by reference in Registration Statements No. 33-57715 and No. 33-
60587 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000931006
<NAME> ENSERCH EXPLORATION, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,838
<SECURITIES> 0
<RECEIVABLES> 78,828
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100,555
<PP&E> 2,708,229
<DEPRECIATION> (1,012,174)
<TOTAL-ASSETS> 1,822,219
<CURRENT-LIABILITIES> 112,511
<BONDS> 222,000
150,000
0
<COMMON> 937,940
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,822,219
<SALES> 0
<TOTAL-REVENUES> 160,347
<CGS> 0
<TOTAL-COSTS> 140,303
<OTHER-EXPENSES> 52
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,861
<INCOME-PRETAX> 8,131
<INCOME-TAX> 2,774
<INCOME-CONTINUING> 5,357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,357
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
