<PAGE> 1
[LOGO]
The
PHOENIX
RESOURCE COMPANIES, INC.
- --------------------------------------------------------------------------------
FIRST QUARTER 1995
QUARTERLY REPORT
[Graphic Artwork
of Egyptian Sphinx
and pyramids.]
<PAGE> 2
FINANCIAL & OPERATING HIGHLIGHTS
(In thousands except per share data, prices and production)
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31
--------------------------------
1995 1994 % CHANGE
--------- ---------- --------
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Operating Revenues .................................... $ 8,317 $ 6,696 +24%
Total Revenues ......................................... $ 8,687 $ 6,937 +25%
Net Income ............................................. $ 3,084 $ 2,441 +26%
Net Income Per Share ................................... $ 0.39 $ 0.29 +34%
FINANCIAL POSITION (AT END OF PERIOD)
Working Capital ........................................ $ 28,090 $ 28,026 --%
Total Assets ........................................... $ 59,761 $ 55,590 +8%
Debt ................................................... $ -- $ -- --%
Stockholders' Equity ................................... $ 34,910 $ 32,536 +7%
OPERATING HIGHLIGHTS
Khalda Daily Oil Production (gross bbls) ............... 31,372 31,244 --%
Average Oil Price ...................................... $ 16.83 $ 14.08 +20%
COMMON STOCK INFORMATION
Shares Outstanding ..................................... 7,784 8,474 -8%
High Sales Price ....................................... $ 24.94 $ 19.94
Low Sales Price ........................................ $ 18.75 $ 13.38
Closing Sales Price .................................... $ 21.75 $ 13.50
Cash Dividends Per Share ............................... $ 0.04 $ 0.025 +60%
</TABLE>
Front Cover:
The Sphinx is one of the most celebrated monuments in Egypt. It is the figure
of a recumbent lion hewn from natural rock with the head of a Pharaoh, wearing
the royal headcloth and cobra. Much damage has been wrought to the Sphinx over
time, due to weathering and deliberate mutilation; however, the Sphinx still
conveys a powerful impression of majesty and artistic achievement.
<PAGE> 3
PHOENIX HEADLINES -- 1ST QUARTER 1995
EARNINGS. First quarter earnings were $3,084,000, or $0.39 per share, compared
to $2,441,000, or $0.29 per share, for first quarter 1994. First quarter 1995
earnings were 26% higher than last year, and, on a per share basis, earnings
were up by 34%. Higher earnings were largely attributable to higher oil prices,
which were up 20% from first quarter of 1994. Per share earnings were also
positively influenced by share repurchases over the last 12 months which served
to reduce the weighted number of shares outstanding by 6%.
QARUN CONCESSION. Drilling operations continued in the two-million acre Qarun
Concession, where Phoenix is the operator and owns 50% of the contractor
interest. During the first quarter, the El Sagha #2 well was completed and
tested, resulting in the discovery of a second oil field. During initial
testing the well produced up to 1,370 barrels of oil per day.
In March 1995 a third well was spudded on the Qarun Concession, the El Sagha
#3, which is designed to appraise the oil field discovered by the El Sagha #1
well in 1994.
Preparations are being made to spud a new wildcat well in the Qarun Concession
in May. A 3-D seismic program will be shot over the El Sagha area, commencing
in the second quarter. Moreover, once a threshold of reserves is attained,
construction of facilities and pipelines will get underway along with
additional development drilling.
SOUTH KHALDA BLOCK. During April 1995 the Egyptian Parliament approved the
award of the South Khalda Block to the Khalda partners. This two-million acre
area surrounds the Khalda Concession and other producing areas in the Western
Desert. Assuming production is established from the South Khalda Block, the
area will be economically merged with the main Khalda Concession. Phoenix will
pay 40% of the costs incurred in this area and be entitled to 40% of the
contractor revenue. The Khalda partners will drill at least seven wells on this
acreage over the next four years. Exploratory operations are underway, but
drilling might not commence until early in 1996.
KHALDA DEVELOPMENT DRILLING. During the first quarter of 1995 two development
wells were drilled in the Khalda Concession. An additional nine Khalda
development wells are currently scheduled for 1995.
KHALDA PRODUCTION. During the first quarter of 1995, crude oil was produced
from the Khalda Concession at a gross rate of 31,372 barrels per day, slightly
higher than first quarter of 1994, but down 4% from the average for all of
1994.
KHALDA EXPLORATION. During the first quarter of 1995 a wildcat well spudded in
late December on the Khalda Concession, the Nabil 2X, was plugged and abandoned
as a dry hole. The number of additional wildcat wells scheduled to be drilled
on Khalda during 1995 has been increased from four to seven. It is expected
that the Khalda exploratory drilling will be sequential and continuous for most
of the remainder of the year.
STOCK REPURCHASES. During the first quarter of 1995, the Company repurchased
70,000 shares of its Common Stock at an average price of $20.30 per share.
Since the beginning of 1994, the Company has repurchased almost 700,000 shares
of its Common Stock, or over 8% of the shares outstanding.
STOCK SPLIT. During January 1995 a two-for-one stock split was effected.
DIVIDENDS. For the first quarter of 1995, a regular quarterly dividend of
$0.04 per share was declared and paid on March 31, 1995. This dividend rate is
60% higher than the quarterly dividends paid in 1994.
RESEARCH REPORTS. Current research reports about the Company have been
published by Howard Weil, Oppenheimer & Co. and Petrie Parkman. To receive
copies of any of these reports call Investor Relations at (405) 728-5100.
OKLAHOMA CITY EXPLOSION. Phoenix's Oklahoma City employees appreciate the
calls and letters of concern which followed the tragic bombing of the federal
building in Oklahoma City. While none of our employees or their family members
were injured in the blast, we, like all other proud citizens of Oklahoma City,
have been touched by the shock and grief.
<PAGE> 4
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended
MARCH 31, 1995
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 1-547
______________________________
THE PHOENIX RESOURCE COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1927105
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6525 North Meridian Avenue
Oklahoma City, Oklahoma 73116-1491
(Address of Principal Executive Offices) (Zip Code)
(405) 728-5100
(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 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 by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
At April 27, 1995 there were 7,784,098 shares of the registrant's
common stock outstanding.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PART I
Consolidated Statement of Income -
Three Months Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheet at March 31, 1995 and December 31, 1994 . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 6
Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 8
</TABLE>
2
<PAGE> 6
THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Revenues:
Oil and gas revenues . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,486 $ 4,474
Revenues dedicated to foreign tax liability . . . . . . . . . . . . . 2,831 2,222
------ -------
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . 8,317 6,696
Interest and other income . . . . . . . . . . . . . . . . . . . . . . 370 241
------ -------
8,687 6,937
------ -------
Costs and Expenses:
Production costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,377 1,102
Depreciation, depletion and amortization . . . . . . . . . . . . . . . 795 372
General and administrative . . . . . . . . . . . . . . . . . . . . . . 547 748
------ -------
2,719 2,222
------ -------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . 5,968 4,715
Provision for income taxes:
U.S. alternative minimum tax . . . . . . . . . . . . . . . . . . . . . 53 52
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,831 2,222
------ -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,084 $ 2,441
====== =======
Income Per Share:
Weighted average common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 7,992 8,490
====== =======
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.39 $ 0.29
====== =======
</TABLE>
Prior year has been restated to reflect the change to full cost accounting.
The accompanying notes are an integral part of this statement.
3
<PAGE> 7
THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, December 31,
1995 1994
------------- --------------
Current Assets: (Unaudited)
<S> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 24,145 $ 26,536
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 4,549 2,561
Receivable for payment of foreign taxes . . . . . . . . . . . . . 10,657 10,657
Other current assets . . . . . . . . . . . . . . . . . . . . . . . 418 491
-------- --------
39,769 40,245
-------- --------
Property and Equipment, at cost:
Oil and gas properties (using full cost accounting) . . . . . . . 20,331 18,624
Other property and equipment . . . . . . . . . . . . . . . . . . . 1,926 1,909
-------- --------
22,257 20,533
Less: Accumulated depreciation, depletion and amortization . . . . . 14,558 13,800
-------- --------
Net Property and Equipment . . . . . . . . . . . . . . . . . . . . 7,699 6,733
Deferred Receivable for payment of foreign taxes . . . . . . . . . . 12,041 9,211
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 252
-------- --------
$ 59,761 $ 56,441
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 459 $ 1,062
Accrued foreign taxes . . . . . . . . . . . . . . . . . . . . . . 10,657 10,657
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . 563 857
-------- --------
11,679 12,576
-------- --------
Long-Term Obligations:
Deferred foreign taxes . . . . . . . . . . . . . . . . . . . . . . 12,041 9,211
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 1,131 1,096
-------- --------
13,172 10,307
-------- --------
Commitments and Contingencies (Note 4)
Stockholders' Equity:
Preferred stock, par value $0.01 (authorized 5,000 shares, none
outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock, par value $0.01 (authorized 10,000 shares, 7,784
shares outstanding in 1995 and 7,854 in 1994) . . . . . . . . . 85 85
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 39,396 39,396
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 5,702 2,929
Treasury stock, at cost (697 shares in 1995 and 627 shares in
1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,273) (8,852)
-------- --------
34,910 33,558
-------- --------
$ 59,761 $ 56,441
======== ========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
4
<PAGE> 8
THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from purchasers . . . . . . . . . . . . . . . . . . . . $ 3,746 $ 4,856
Cash paid to suppliers and employees . . . . . . . . . . . . . . . . . (2,502) (2,054)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . (23) --
Interest and other cash receipts . . . . . . . . . . . . . . . . . . . 315 194
-------- --------
Net cash provided by operating activities . . . . . . . . . . . . . 1,536 2,996
-------- --------
Cash flows from investing activities:
Capital expenditures and prepaid well costs . . . . . . . . . . . . . (2,195) (975)
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . . . (2,195) (975)
-------- --------
Cash flows from financing activities:
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . (1,421) --
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (311) (212)
Proceeds from stock options exercised . . . . . . . . . . . . . . . . -- 9
-------- --------
Net cash used in financing activities . . . . . . . . . . . . . . . (1,732) (203)
-------- --------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . (2,391) 1,818
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 26,536 25,248
-------- --------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . $ 24,145 $ 27,066
======== ========
Reconciliation of net income to net cash provided
by operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,084 $ 2,441
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization . . . . . . . . . . . . . . 795 372
Capitalized general and administrative . . . . . . . . . . . . . . . (172) (180)
(Increase) decrease in accounts receivable related to operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,988) 244
(Decrease) increase in accounts payable related to operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78) 273
Decrease in accrued liabilities related to operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (294) (165)
Other noncash items . . . . . . . . . . . . . . . . . . . . . . . . 189 11
-------- --------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . (1,548) 555
-------- --------
Net cash provided by operating activities . . . . . . . . . . . $ 1,536 $ 2,996
======== ========
</TABLE>
Prior year has been restated to reflect the change to full cost accounting.
The accompanying notes are an integral part of this statement.
5
<PAGE> 9
THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES:
All references herein to the "Company" mean The Phoenix Resource
Companies, Inc. and/or one or more of its wholly-owned subsidiaries. The
accompanying unaudited consolidated financial statements and notes thereto have
been prepared in accordance with accounting policies set forth in the Company's
1994 Annual Report on Form 10-K and should be read in conjunction with the
Notes to Consolidated Financial Statements therein. The financial statements
reflect all adjustments, consisting of normal recurring accruals, which the
Company considers necessary for a fair presentation of the financial position
and the results of operations for such periods.
NOTE 2 -- CHANGE IN ACCOUNTING PRINCIPLE:
During the fourth quarter of 1994 the Company changed its method of
accounting for oil and gas operations from the successful efforts method to the
full cost method. The 1994 financial statements presented herein have been
restated to reflect the change.
NOTE 3 -- CAPITAL STOCK AND OPTIONS:
Capital Stock - A two-for-one split of the number of shares of Common
Stock outstanding was effected in January 1995. All references in the
accompanying 1994 financial statements to the number of common shares and per
share amounts have been restated to reflect the split.
During the first quarter of 1995 the Company purchased 70,000 shares
of its Common Stock in open market transactions at an average price of $20.30
per share. As of March 31, 1995 a total of 696,862 shares of Common Stock were
held as Treasury Stock.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES:
The Company conducts almost all of its business in Egypt. The
business environment in foreign countries varies greatly. Relevant factors
include the laws of a country, its political stability, the political stability
of its region of the world, its attitude toward foreign investments,
availability and skill of its work force and the technological sophistication
of its business community. Adverse developments in the business environment in
Egypt would likely have a material adverse effect on the Company. The Company
does not insure against political risks.
Egypt retains the right of requisition of production from Egyptian
concessions and cancellation of the concession agreements upon the occurrence
of specific events, including a national emergency due to war, imminent
expectation of war or internal causes, unauthorized assignment of interests in
the concession, the concession holder being adjudicated bankrupt by a court of
competent jurisdiction and intentional extraction of any mineral not authorized
by the concession agreement. Requisition or cancellation of the Company's
concession agreements as a result of the foregoing or for any other reasons
would have a material adverse effect on the Company.
A portion of the Company's operating revenues represents the sale of
crude oil produced from the Khalda Concession and allocated to the Company for
reimbursement of operating, development and exploration costs. These costs are
subject to review and approval by EGPC. Management does not expect the amount
of costs rejected for reimbursement by EGPC to have a material adverse effect
on the Company's financial position or results of operations.
6
<PAGE> 10
Various lawsuits are pending against the Company. Management is of
the opinion, based on advice of independent legal counsel, that the ultimate
outcome of all pending litigation is highly unlikely to have a material effect
on the financial position or results of operations of the Company.
The Company is committed, under certain circumstances, to pay
approximately $1.7 million pursuant to various employment contracts with
certain key employees.
7
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion and analysis of the quarter ended March 31,
1995 compared to March 31, 1994 should be read in conjunction with the
Consolidated Financial Statements and Notes thereto. The first quarter of 1994
has been restated to reflect the change to full cost accounting.
Net income for the first quarter of 1995 was $3.1 million, a 26%
increase compared to the same period of 1994. Oil and gas revenues for the
first quarter of 1995 increased $1 million, or 23%, compared to the first
quarter of 1994. The increases in net income and oil and gas revenues were
primarily due to higher oil prices received for Khalda Concession oil. The
average price for the first quarter of 1995 was $16.83 per barrel, 20% higher
than the $14.08 per barrel received in the first quarter of 1994. Average
daily gross oil production from the Khalda Concession was 31,372 barrels per
day for the first quarter of 1995 compared to 31,244 barrels per day in the
same period of 1994.
Depreciation, depletion and amortization for the first quarter of 1995
increased $0.4 million, or 114%, compared to the first quarter of 1994
primarily due to the inclusion from the Qarun Concession of capitalized costs,
future development costs and reserves commencing in the fourth quarter of 1994.
General and administrative expense for the first quarter of 1995
decreased $0.2 million, or 27%, compared to the first quarter of 1994 primarily
due to expenses incurred in the first quarter of 1994 related to a secondary
offering of shares of the Company's Common Stock.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1995 the Company's working capital (current assets
less current liabilities) was $28 million, which included cash and cash
equivalents of $24 million. Net cash provided by operating activities for the
quarter ended March 31, 1995 was $1.5 million. Cash utilized for financing
activities for the quarter ended March 31, 1995 was $1.7 million, which was
used to repurchase the Company's Common Stock and pay dividends on the
Company's Common Stock. The Company currently has no long-term debt. Cash
utilized in investing activities was $2.2 million, which was primarily used for
exploration costs.
Currently, the Company's short-term and long-term sources of liquidity
are working capital and cash flow from operations. These sources of liquidity
would be available to fund a portion of the development of any of the Company's
exploratory successes, including any successes in the Qarun Concession and the
newly acquired South Khalda block; to participate in the development of natural
gas reserves in the Khalda Concession; and to pursue other oil and gas
opportunities that may be identified by the Company. The Company is currently
seeking project financing for its share of capital expenditures related to the
initial development of the Qarun Concession, including construction of
facilities and pipeline. The Company believes that it will be successful in
obtaining external sources of capital which, coupled with working capital and
cash flow from operations, will provide sufficient sources of short-term and
long-term liquidity.
8
<PAGE> 12
SIGNATURE
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.
THE PHOENIX RESOURCE COMPANIES, INC.
------------------------------------
(Registrant)
/s/ Cheryl A. Rich
------------------------------------------
Cheryl A. Rich
Vice President & Chief Financial Officer
(Principal Financial & Accounting Officer)
DATE: May 2, 1995
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 24,145
<SECURITIES> 0
<RECEIVABLES> 4,549
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 39,769
<PP&E> 22,257
<DEPRECIATION> 14,558
<TOTAL-ASSETS> 59,761
<CURRENT-LIABILITIES> 11,679
<BONDS> 0
<COMMON> 85
0
0
<OTHER-SE> 34,825
<TOTAL-LIABILITY-AND-EQUITY> 59,761
<SALES> 8,317
<TOTAL-REVENUES> 8,687
<CGS> 1,377
<TOTAL-COSTS> 2,719
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,968
<INCOME-TAX> 2,884
<INCOME-CONTINUING> 3,084
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,084
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
