<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No 0-26484
DLB OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-1358299
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
1601 NORTHWEST EXPRESSWAY, SUITE 700
OKLAHOMA CITY, OKLAHOMA 73118-1401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 848-8808
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 report),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
The number of shares outstanding of Registrant's common stock, $.001
par value, as of April 30, 1996 was 12,975,000.
<PAGE> 2
DLB OIL & GAS, INC.
TABLE OF CONTENTS
FORM 10-Q QUARTERLY REPORT
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
March 31, 1996 (Unaudited) and December 31, 1995 (Audited) 3
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended
March 31, 1996 and1995 4
Statements of Consolidated Shareholders' Equity
As of December 31, 1994 and 1995 (Audited)
and March 31, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended
March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 18
</TABLE>
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
Item 1.
DLB OIL & GAS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------ -------------
1996 1995
------------ -------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,344,000 $ 14,313,000
Accounts receivable 3,212,000 4,850,000
Prepaid expenses 199,000 324,000
------------ -------------
Total current assets 12,755,000 19,487,000
Property and equipment - at cost, based on the full cost ------------ -------------
method of accounting for oil and natural gas properties (Notes 6&7):
Oil and natural gas properties subject to amortization 64,510,000 62,275,000
Oil and natural gas properties not subject to amortization 12,737,000 10,037,000
Natural gas processing plants and gathering systems 1,111,000 3,094,000
Saltwater disposal system 1,119,000 1,119,000
Other property and equipment 1,021,000 948,000
------------ -------------
80,498,000 77,473,000
Accumulated depreciation, depletion and amortization (19,908,000) (18,812,000)
------------ -------------
60,590,000 58,661,000
------------ -------------
Investments (Note 3) 3,675,000 --
Other assets 58,000 59,000
------------ -------------
Total assets $ 77,078,000 $ 78,207,000
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 2,172,000 $ 3,853,000
Revenue and royalty distributions payable 1,108,000 1,527,000
Drilling advances and other liabilities 511,000 190,000
Accrued liabilities 210,000 193,000
------------ -------------
Total current liabilities 4,001,000 5,763,000
------------ -------------
Deferred income tax liability (Note 4) 13,209,000 12,900,000
Shareholders' equity (Note 5):
Preferred stock, 5,000,000 shares authorized; no shares
issued and outstanding -- --
Common stock, 130,000,000 shares authorized; 13,000,000
shares issued; 12,975,000 and 13,000,000 outstanding
at March 31, 1996 and December 31, 1995, respectively 13,000 13,000
Additional paid in capital 57,910,000 57,910,000
Retained earnings 2,126,000 1,621,000
Treasury stock (25,000 shares at March 31, 1996, at cost) (181,000) --
------------ -------------
Total shareholders' equity 59,868,000 59,544,000
------------ -------------
Total liabilities and shareholders' equity $ 77,078,000 $ 78,207,000
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
DLB OIL & GAS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Oil and natural gas sales $ 4,481,000 $ 4,240,000
Natural gas gathering, processing and transportation, net 77,000 664,000
Interest 183,000 26,000
Other 13,000 339,000
----------- -----------
4,754,000 5,269,000
Expenses:
Lease operating 1,211,000 1,238,000
Depreciation, depletion, and amortization 1,794,000 1,631,000
General and administrative 727,000 329,000
Interest -- 179,000
Loss on sale of assets (Note 6) 208,000 --
----------- -----------
3,940,000 3,377,000
----------- -----------
Income before income taxes 814,000 1,892,000
Deferred income taxes (Note 4) 309,000 --
Pro forma income taxes (Note 4) -- 757,000
----------- -----------
Net income $ 505,000 $ 1,135,000
=========== ===========
Net income per common share $ 0.04 $ 0.11
=========== ===========
Weighted average common shares outstanding 12,987,500 10,000,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
DLB OIL & GAS, INC.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
------------------ -------------------------
MARCH 31, 1996 1995 1994
------------------ ----------- ----------
(UNAUDITED) (AUDITED) (AUDITED)
<S> <C> <C> <C>
Common stock - shares outstanding:
Balance, beginning of period 13,000,000 -- --
Issuance of stock in connection with the Merger -- 10,000,000 --
Sale of stock in connection with the public offering, net of costs -- 3,000,000 --
------------ ------------ ------------
Balance, end of period 13,000,000 13,000,000 --
============ ============ ============
Common stock - amount:
Balance, beginning of period $ 13,000 $ -- $ --
Issuance of stock in connection with the Merger -- 10,000 --
Sale of stock in connection with the public offering, net of costs -- 3,000 --
------------ ------------ ------------
Balance, end of period $ 13,000 $ 13,000 $ --
============ ============ ============
Additional paid in capital:
Balance, beginning of period $ 57,910,000 $ -- $ --
Issuance of stock in connection with the Merger -- 31,017,000 --
Sale of stock in connection with the public offering, net of costs -- 26,893,000 --
------------ ------------ ------------
Balance, end of period $ 57,910,000 $ 57,910,000 $ --
============ ============ ============
Retained earnings:
Balance, beginning of period $ 1,621,000 $ -- $ --
Post-public offering net income -- 1,621,000 --
Net income 505,000 -- --
------------ ------------ ------------
Balance, end of period $ 2,126,000 $ 1,621,000 $ --
============ ============ ============
Treasury stock:
Balance, beginning of period $ -- $ -- $ --
Repurchase of stock (Note 5) (181,000) -- $ --
------------ ------------ ------------
Balance, end of period $ (181,000) $ -- $ --
============ ============ ============
Total:
Balance, beginning of period $ 59,544,000 $ -- $ --
Issuance of stock in connection with the Merger -- 31,027,000 --
Sale of stock in connection with the public offering, net of costs -- 26,896,000 --
Post-public offering net income -- 1,621,000 --
Repurchase of stock (Note 5) (181,000) -- --
Net income 505,000 -- --
------------ ------------ ------------
Balance, end of period $ 59,868,000 $ 59,544,000 $ --
============ ============ ============
Combined shareholders' equity:
Balance, beginning of period $ -- $ 39,012,000 $ 30,164,000
Contributed capital -- 4,000 2,138,000
Distributions to stockholders -- (1,192,000) (3,196,000)
Pre-public offering net income (loss) -- (6,797,000) 9,906,000
Issuance of stock in connection with the Merger -- (31,027,000) --
------------ ------------ ------------
Balance, end of period $ -- $ -- $ 39,012,000
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
DLB OIL & GAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 505,000 $ 1,135,000
Adjustments to reconcile net income
to net cash provided by operating activites:
Depreciation, depletion, and
amortization 1,794,000 1,631,000
Pro forma income taxes -- 757,000
Deferred income taxes 309,000 --
Loss on sale of assets 208,000 --
(Increase) decrease in accounts receivable 1,638,000 (107,000)
(Increase) decrease in prepaid expenses 125,000 (188,000)
Decrease in accounts payable, distributions payable
and accrued liabilities (2,082,000) (1,955,000)
Increase (decrease) in drilling advances and other liabilities 321,000 (208,000)
------------ ------------
Net cash provided by operating activities 2,818,000 1,065,000
------------ ------------
Cash flows from investing activities:
Expenditures for property and equipment (5,303,000) (3,138,000)
Purchase of investments and note advances (3,683,000) (26,000)
Proceeds from sales of assets 1,380,000 --
------------ ------------
Net cash used in investing activities (7,606,000) (3,164,000)
------------ ------------
Cash flows from financing activities
Proceeds of long-term debt -- 1,000,000
Contributed capital -- 4,000
Distributions to shareholders -- (481,000)
Purchase of treasury stock (181,000) --
------------ ------------
Net cash provided by (used in) financing activities (181,000) 523,000
------------ ------------
Net increase (decrease) in cash and cash equivalents: (4,969,000) (1,576,000)
Cash and cash equivalents beginning of year 14,313,000 3,059,000
------------ ------------
Cash and cash equivalents end of year $ 9,344,000 $ 1,483,000
============ ============
Supplemental cash flow information:
Cash payments for interest $ -- $ 186,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE> 7
DLB OIL & GAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
DLB Oil & Gas, Inc. (DLB or the Company) engages primarily in the
exploration for and development of shallow crude oil and natural gas
fields. The Company focuses its efforts and is one of the most active
explorers in Oklahoma and Kansas. The Company also engages to a
lesser extent, in the gathering, processing, transportation and
marketing of hydrocarbons and conducts secondary oil recovery
activities.
The accompanying consolidated financial statements covering periods
prior to July 20, 1995, the date of the merger of Davidson Oil and
Gas, Inc. (Davidson) into DLB, include each of their accounts and
their proportionate share of a venture involved in the production of
oil and natural gas and in the gathering, processing and transporting
of natural gas. Due to the nature of a joint venture agreement
between the Company and Davidson, the Company and Davidson were
considered to be under common control prior to the merger.
The accompanying consolidated financial statements covering periods on
or after July 20, 1995, include the consolidated accounts of the
Company and its wholly owned subsidiaries, and its proportionate share
of a venture involved in the production of oil and natural gas and in
the gathering, processing and transporting of natural gas. All
intercompany transactions and balances have been eliminated in
consolidation.
(2) INITIAL PUBLIC OFFERING
On July 25, 1995, the Company issued 3,000,000 shares of common stock
through a public offering at $10 per share. Net proceeds to the
Company from the offering, after selling and offering costs, were
$26,896,000. The Company used $11,231,000 of these proceeds to retire
indebtedness under its revolving line of credit facilities.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements and notes thereto
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The accompanying
consolidated financial statements and notes thereto should be read in
conjunction with the consolidated financial statements and notes
included in DLB's 1995 annual report on Form 10-K.
7
<PAGE> 8
DLB OIL & GAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In the opinion of DLB's management, all adjustments (all of which are
normal and recurring) have been made which are necessary to fairly
state the consolidated financial position of the Company and its
subsidiaries as of March 31, 1996, and the results of their operations
and their cash flows for the three month periods ended March 31, 1996
and 1995.
Other Investments
During the first three months of 1996, the Company acquired
$11,627,000 of senior unsecured notes in open market transactions for
$3,675,000. The notes were issued by an oil and gas company that had
previously filed for Chapter 11 reorganization.
(4) INCOME TAXES
Prior to the merger and initial public offering, the Company and
Davidson filed separate income tax returns as Subchapter S
corporations under the provisions of the Internal Revenue Code. The
Company's S election terminated upon the merger and initial public
offering. As a result of the Company's termination of the S election,
the Company recognized a charge against operations in the amount of
$11,500,000 for deferred income taxes during 1995. The charge
represented the tax effect of the difference between the financial
statement carrying values and the income tax basis of the Company's
assets and liabilities on the date the S election was terminated.
Tax strategies implemented by the shareholders prior to the merger are
not reflective of the results that the Company would have achieved if
the Company had been directly subject to income taxes. Therefore,
results of the operations for the periods prior to the offering,
reflect a pro forma provision for income tax expense at a rate of
approximately 40% (based upon blended Federal and state rates) of
income before taxes.
(5) SHAREHOLDERS' EQUITY
Effective with the merger of the Company and Davidson, the capital
structure of the Company consisted of 130,000,000 authorized common
shares ($.001 par value) with 10,000,000 shares outstanding along with
5,000,000 authorized preferred shares with no preferred shares
outstanding. The former shareholders of DLB and Davidson hold
10,000,000 shares of the Company's common stock. For financial
reporting purposes, combined shareholder's equity at the date of the
merger was converted into the Company's common stock and additional
paid-in-capital.
8
<PAGE> 9
DLB OIL & GAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
As detailed in Note 2, the Company issued 3,000,000 shares of common
stock through a public offering at $10 per share.
On February 8, 1996, the Company announced a common stock repurchase
plan. Under terms of the plan, up to $5,000,000 of common stock can
be repurchased from time to time. On February 7, 1996, approximately
25,000 shares were repurchased for $181,000. Repurchased stock is
held as treasury stock by the Company.
In connection with the public offering, the Company issued stock
options covering 1,625,000 shares of common stock to its employees.
Options for 1,300,000 shares vest and are exercisable at $10 per share
in 20 equal quarterly installments which commenced with the quarter
ended October 31, 1995. The remaining 325,000 options vest in five
equal annual installments commencing January 1, 1996 and are
exercisable at $10 per share. As of March 31, 1996, 195,000 options
have vested and are exercisable.
(6) SETTLEMENT OF CONTINGENCY
In February 1996, the Company settled claims that it had submitted to
arbitration against a joint venture partner alleging breach of
contract and tortuous conduct. The claims arose under the terms of
the Carmen Field Joint Venture Agreement dated May 26, 1993, between
the Company and Magic Circle Acquisition Corporation ("Magic Circle").
The Company settled its claims by the agreement dated February 9,
1996. The settlement agreement provided for mutual releases of all
claims arising out of the Carmen Field Joint Venture ("CFJV"),
dissolution of the CFJV, assignment to the Company of its interest in
the CFJV oil and natural gas properties, the payment of $3,349,000 to
the Company, the transfer to the Company of its share of a small
gathering system in Stephens County, Oklahoma, and the transfer to
Magic Circle of gathering, processing and compression facilities in
Alfalfa and Woodward Counties, Oklahoma. The Company recognized a net
loss of $208,000, which included $212,000 of legal and accounting
expenses, related to the transfer of the gathering, processing and
compression facilities.
(7) SUBSEQUENT EVENTS
On April 16, 1996, the Company agreed to purchase, effective January
1, 1996, all of the Oklahoma oil and gas producing properties, mineral
rights and leasehold acreage of Amerada Hess Corporation, except two
fields in southwestern Oklahoma. The purchase price of $35,028,000
will be adjusted for the properties' revenues and expenses from the
effective date to the date of closing. Closing is anticipated to be
May 31, 1996. The acquisition will be financed primarily by
borrowings under the Company's credit facility.
9
<PAGE> 10
DLB OIL & GAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The acquisition includes ownership in 44 fields, nine of which DLB
will operate, and 1,196 wells. Proved reserves attributable to the
acquisition are independently estimated at approximately 7.22 Mmboe
(million barrels of oil equivalent) and are divided approximately 43%
oil and 57% natural gas. If the acquisition had been made January 1,
1996, the Company's total proved reserves would have increased
approximately 77% from 9.4 Mmboe to approximately 16.6 Mmboe.
DLB intends to use this strategically located property base to
increase exploration and exploitation operations in its core area.
The Company will also acquire approximately 15,100 miles of
proprietary seismic data, geologic and well data, 67,981 net acres of
leasehold rights, 11,358 net acres of mineral rights and interests in
certain gas gathering and processing assets.
10
<PAGE> 11
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion is intended to assist in an understanding of
the Company's financial position as of March 31, 1996, and its results of
operations for the three month periods ended March 31, 1996 and 1995. The
Consolidated Financial Statements and Notes included in this report contain
additional information and should be referred to in conjunction with this
discussion. It is presumed that the readers have read or have access to DLB's
1995 annual report on Form 10-K.
11
<PAGE> 12
RESULTS OF OPERATIONS
The following table sets forth certain financial and production information of
the Company.
<TABLE>
<CAPTION>
FINANCIAL DATA (in thousands) THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1995
--------- --------
<S> <C> <C>
Revenues
Oil $ 2,671 $ 2,917
Natural gas 1,810 1,323
--------- --------
4,481 4,240
--------- --------
Natural gas gathering, processing & trans. 77 664
Interest & other income 196 365
--------- --------
4,754 5,269
--------- --------
Expenses
Lease operating (1) 1,211 1,238
General & administrative 727 329
Loss on sale of assets 208 --
--------- --------
2,146 1,567
EBITDA (2) 2,608 3,702
Depreciation, depletion & amortization 1,794 1,631
Earnings before interest and taxes 814 2,071
Interest expense -- 179
Earnings before taxes 814 1,892
Income taxes
Pro forma -- 757
Deferred 309 --
-------- --------
Net income $ 505 $ 1,135
======== ========
PER SHARE DATA
Net income $ 0.04 $ 0.11
======== ========
Average shares outstanding (in thousands) 12,988 10,000
PRODUCTION DATA(in thousands except prices)
Oil (Mbbl) 143 179
Natural gas (Mmcf) 883 756
Barrel oil equivalent (MBOE) 290 305
Oil ($/Bbl) $ 18.65 $ 16.30
Gas ($/Mcf) 2.05 1.75
$/BOE 15.43 13.90
EXPENSE DATA($/BOE)
Lease operating $ 4.18 $ 4.06
Depreciation, depletion and amortization (3) 5.76 4.98
General and administrative 2.50 1.08
--------------------------------------------
</TABLE>
(1) The components of lease operating expense may vary
substantially among wells depending on the methods of recovery
employed and other factors, but generally include production
taxes, administrative overhead, maintenance and repairs, labor
and utilities.
(2) EBITDA is defined as earnings before interest, taxes,
depreciation, depletion and amortization.
(3) The DD&A reflected on a BOE basis excludes DD&A associated
with gas plant, salt water disposal system,
and other non-oil and gas property and equipment.
12
<PAGE> 13
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THE THREE MONTHS ENDED MARCH
31,1995
Revenues. Total revenues for the three months ended March 31, 1996 were $4.8
million, a reduction of $0.5 million from the comparable period in 1995. This
decrease is primarily related to the dissolution of the CFJV. (See Note 6 to
the Consolidated Financial Statements). The dissolution resulted in the sale
of certain gas gathering and compression assets, which reduced gas gathering,
processing and transportation revenues to $0.1 million for the three months
ended March 31, 1996 from $0.7 million for the three months ended March 31,
1995. Additionally, other income for the three months ended March 31, 1996
was $0.2 million as compared to $0.4 million for the three months ended March
31, 1995. This decrease resulted from the loss of a one-time management fee
associated with the termination of the Company's management agreement with
LEDCO, Inc. in February, 1995.
Production of oil and gas was 143 Mbbl and 883 Mmcf, respectively, in the first
three months of 1996, as compared to 179 Mbbl and 756 Mmcf, respectively, in
the same period of 1995. The increase in oil and gas sales revenues for the
three months ended March 31, 1996, of $0.2 million was due to an increase in
oil and gas prices from the same period in 1995. The average price received
for oil increased to $18.65 per barrel in the first three months of 1996 from
$16.30 in the three months ended March 31, 1995. The average price received
for natural gas increased to $2.05 per Mcf in the three months ended March 31,
1996 from $1.75 per Mcf for the same period in 1995. Declines in oil
production slightly exceeded increases in gas production on a BOE basis.
Lease operating expense. Lease operating expenses remained constant at $1.2
million for the three months ended March 31, 1996 and 1995. On a BOE basis,
lease operating expense was $4.17 per BOE for the three months ended March 31,
1996 as compared to $4.06 per BOE in the comparable period of 1995 due to a
slight decline in production.
Depreciation, depletion and amortization expense. Depreciation, depletion and
amortization (DD&A) expense was $1.8 and $1.6 million for the three months
ended March 31, 1996 and 1995, respectively. The DD&A rate related to oil and
gas properties was $5.76 and $4.98 per BOE for the three months ended March 31,
1996 and 1995, respectively. The increase in DD&A per BOE resulted primarily
from increased level of capital expenditures for exploration, development,
waterfloods, property acquisitions, gas plant and gathering facilities and
other property and equipment in the three months ended March 31, 1996 and as
compared to1995.
General and administrative expense. General and administrative expense
increased to $0.7 million for the three months ended March 31, 1996, from $0.3
million in the comparable period in 1995. This increase was primarily
attributable to general corporate expenses associated with being a publicly
held company and the Company's higher level of activity following the July,
1995 initial public offering.
Net loss on sale of assets. The Company recognized a net loss of $0.2 million
on the sale of assets for the three months ended March 31, 1996 as a result of
the dissolution of the CFJV and the related sale of gathering, processing and
compression facilities. (See Note 6 to the Consolidated Financial Statements).
Net income. Net income decreased to $0.5 million for the three months ended
March 31, 1996 from $1.1 million for the three months ended March 31, 1995, as
a result of the items discussed above.
13
<PAGE> 14
CAPITAL EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY
The following table presents comparative cash flows of the Company for the
three months ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 2,818 $ 1,065
Net cash used in investing activities (7,606) (3,164)
Net cash provided by (used in) financing activities (181) 523
</TABLE>
Net cash provided from operating activities increased to $2.8 million from $1.1
million from 1995. This increase of $1.7 million relates primarily to a
decrease in accounts receivable from the receipt of cash proceeds upon the
dissolution of the CFJV. (See Note 6 to the Consolidated Financial
Statements.)
Net cash used in investing activities was $7.6 million for the first three
months of 1996, as compared to $3.2 million in the first three months of 1995.
The increase of $4.4 million is primarily attributable to additional
expenditures for exploration, development, acquisitions of property and
equipment and investments in senior unsecured notes. (See Note 3 to the
Consolidated Financial Statements.)
As of March 31, 1996, the Company had cash balances of $9.3 million and working
capital of $8.8 million. The decrease in working capital of $4.9 million as of
March 31, 1996, from $13.7 million as of December 31, 1995, is a result of
capital expenditures made during the first three months of 1996.
Capital expenditures. The following table sets forth the Company's
expenditures for exploration, development, waterfloods and property
acquisition, gas plant and gathering facilities and other property and
equipment for the three months ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Exploration costs $ 3,957 $ 1,245
Development costs 375 1,576
Waterflood costs 570 242
Property acquisition costs 34 16
Gas plant and gathering facilities 294 15
Other property and equipment 73 44
------------ ------------
$ 5,303 $ 3,138
============ ============
</TABLE>
The Company intends to finance its capital expenditures with its remaining
offering proceeds, cash flows provided by operations and borrowings under the
credit facility. The Company expects to spend a total of $60.0 million on
capital expenditures in 1996. Of this amount, $5.3 million had been
14
<PAGE> 15
expended as of March 31, 1996, which includes $1.0 million related to the Osage
Tribe of Indians Exploration and Development Agreement. In addition, as a
result of the Amerada Hess acquisition, which is scheduled to close during the
second quarter of 1996, the Company will spend approximately $35.0 million.
(See Note 7 to the Consolidated Financial Statements.) The remaining budget of
$19.7 million will be used for 2-D and 3-D seismic surveys, drilling activity
and the acquisition of other mineral interests and leasehold properties. The
aggregate level of capital expenditures in 1996 and the allocation thereof is
highly dependent upon the Company's success rate on exploration drilling and
prevailing conditions in the oil and gas industry. Accordingly, the actual
level of capital expenditures may vary materially from the above estimates.
Capital resources. Since DLB began operations in 1991, the Company's cash
requirements were met primarily through capital contributions from
shareholders, cash generated from operations and borrowings under its credit
facilities. Such sources were inadequate to fund the Company's desired level
of activities, and the Company undertook an initial public offering of its
common stock, which was closed in July 1995. Net proceeds from the offering
were approximately $26.9 million. Since its initial public offering, the
Company has used offering proceeds along with cash flows from operations for
cash requirements. The Company expects to borrow approximately $30.0 million
to finance the Amerada Hess property acquisition. (See Note 7 to Consolidated
Financial Statements). The proved oil and gas reserves added by this
acquisition will increase the Company's borrowing base under its credit
facility and should provide an additional $20.0 million of borrowing capacity.
The Company expects that internal cash sources and borrowing capacity to be
sufficient at least through December 31, 1996 to meet its capital expenditure
plans. Capital needs beyond that period will depend substantially on the
Company's success in employing working capital in exploration and development
activities and the level of future activities as well as factors affecting the
oil and gas industry generally.
Liquidity. The ability of the Company to satisfy its obligations will depend
upon its future performance, which will be subject to prevailing economic
conditions and to financial and business conditions and other factors, many of
which are beyond its control, supplemented, if necessary, with existing cash
balances and borrowings under the credit facilities. The Company believes its
capital resources are adequate to fund the capital expenditure program through
at least the end of 1996.
15
<PAGE> 16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by item 602 of Regulation S-K are as
follows:
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 Amended and Restated Bylaws (1)
10.1 Lease of office space, Oklahoma City, Oklahoma (1)
10.2 Credit Agreement dated December 28, 1995, between
Registrant and First Union National Bank of North
Carolina (2)
10.3 Stock Option Agreement by and between Registrant and
Mike Liddell (1)
10.4 Stock Option Agreement by and between Registrant and
Mark Liddell (1)
10.5 Employment Agreement by and between Registrant and
Mike Liddell (1)
10.6 Employment Agreement by and between Registrant and
Mark Liddell (1)
10.7 DLB Oil & Gas Stock Option Plan (1)
10.8 DLB Oil & Gas Omnibus Equity Compensation Plan (1)
10.9 Shareholder's Agreement by and among Charles E.
Davidson, Mike Liddell and Mark Liddell dated May
25, 1995 (1)
10.10 Agreement for Dissolution of Joint Venture dated
February 9, 1996, between DLB Oil & Gas, Inc., Magic
Circle Acquisition Corporation and Magic Circle
Energy Corporation, Carmen Field Limited
Partnership, and Carmen Field Joint Venture (2)
_________________
(1) Previously filed as an exhibit to Registration No.
33-92786 on Form S-1 and incorporated herein by
reference.
(2) Previously filed as an exhibit to Form 10-K for the year
ended December 31, 1995, and incorporated herein by
reference.
Copies of the foregoing exhibits filed with this report or
incorporated by reference are available from the Company upon
written request and payment of a reasonable copying fee.
16
<PAGE> 17
(b) Registrant filed the following reports on Form 8-K's
filed the quarter ended March 31, 1996:
Form 8-K filed January 16, 1996, disclosing Registrant's 1995
activity and its 1996 outlook;
Form 8-K filed February 16, 1996, disclosing Registrant's 1995
activity and its 1996 outlook;
Form 8-K filed February 26, 1996, disclosing the dissolution
of Registrant's Carmen Field Joint Venture with Magic Circle
Energy Corporation;
Form 8-K filed March 25, 1996, disclosing Registrant's fourth
quarter and 1995 financial and operating results; and
Form 8-K filed March 25, 1996, disclosing an exploration and
development agreement with Osage Tribe of Indians of Oklahoma.
Registrant filed a Form 8-K on April 22, 1996, disclosing an
agreement to acquire oil and gas properties from Amerada Hess
Corporation.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
DLB OIL & GAS, INC.
Date May 13, 1996 /s/ MARK LIDDELL
-------------- ------------------------------------------
Mark Liddell, President
Date May 13, 1996 /s/ RONALD D. YOUTSEY
-------------- ------------------------------------------
Ronald D. Youtsey, Chief Financial Officer
18
<PAGE> 19
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 Amended and Restated Bylaws (1)
10.1 Lease of office space, Oklahoma City, Oklahoma (1)
10.2 Credit Agreement dated December 28, 1995, between
Registrant and First Union National Bank of North
Carolina (2)
10.3 Stock Option Agreement by and between Registrant and
Mike Liddell (1)
10.4 Stock Option Agreement by and between Registrant and
Mark Liddell (1)
10.5 Employment Agreement by and between Registrant and
Mike Liddell (1)
10.6 Employment Agreement by and between Registrant and
Mark Liddell (1)
10.7 DLB Oil & Gas Stock Option Plan (1)
10.8 DLB Oil & Gas Omnibus Equity Compensation Plan (1)
10.9 Shareholder's Agreement by and among Charles E.
Davidson, Mike Liddell and Mark Liddell dated May
25, 1995 (1)
10.10 Agreement for Dissolution of Joint Venture dated
February 9, 1996, between DLB Oil & Gas, Inc., Magic
Circle Acquisition Corporation and Magic Circle
Energy Corporation, Carmen Field Limited
Partnership, and Carmen Field Joint Venture (2)
27 Financial Data Schedule
_________________
(1) Previously filed as an exhibit to Registration No.
33-92786 on Form S-1 and incorporated herein by
reference.
(2) Previously filed as an exhibit to Form 10-K for the year
ended December 31, 1995, and incorporated herein by
reference.
Copies of the foregoing exhibits filed with this report or
incorporated by reference are available from the Company upon
written request and payment of a reasonable copying fee.
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