EXHIBIT 99.1
DALEN CORPORATION
Consolidated Financial Statements
As Of December 31, 1994 And 1993
Together With Auditor's Report
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
DALEN Corporation:
We have audited the accompanying consolidated balance sheets of DALEN
Corporation (formerly DALEN Resources Corp.) and subsidiaries as of December
31, 1994 and 1993 (as restated, see note 1), and the related consolidated
statements of operations, stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DALEN Corporation and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles.
As explained in Note 2 to the financial statements, effective January 1, 1993,
DALEN Corporation and subsidiaries adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Prior year financial
statements have not been restated.
ARTHUR ANDERSEN LLP
Dallas, Texas
February 24, 1995
DALEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the years ended December 31, 1994, 1993 and 1992
(stated in thousands of dollars)
1994 1993 1992
REVENUES:
Natural gas $115,593 $152,488 $111,779
Oil and gas liquids 51,054 73,852 82,003
Other 2,341 5,144 5,822
-------- -------- --------
168,988 231,484 199,604
-------- -------- --------
OPERATING EXPENSES:
Lease operating 43,533 56,367 52,389
General and administrative 18,057 17,783 18,788
Depreciation, depletion and amortization 101,151 128,364 109,294
Exploration 24,886 19,453 25,278
-------- -------- --------
187,627 221,967 205,749
-------- -------- --------
OPERATING INCOME (LOSS) (18,639) 9,517 (6,145)
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income 3,656 1,360 1,848
Interest expense (6,002) (7,255) (6,885)
Other, net 2,845 85 1,105
-------- -------- --------
499 (5,810) (3,932)
-------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (18,140) 3,707 (10,077)
INCOME TAX BENEFIT (EXPENSE):
Current 21,859 18,997 25,656
Deferred (6,653) (13,153) (22,125)
-------- -------- --------
15,206 5,844 3,531
-------- -------- --------
NET EARNINGS (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (2,934) 9,551 (6,546)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 7,958
-------- -------- --------
NET EARNINGS (LOSS) $ (2,934) $ 17,509 $ (6,546)
======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
DALEN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(stated in thousands of dollars)
1994 1993
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,888 $ 48,117
Accounts receivable:
Oil and gas 20,009 29,934
Trade 6,030 5,537
Affiliates 7,616 11,154
Inventories 2,125 3,802
Prepaid expenses 3,635 6,310
-------- --------
Total current assets 50,303 104,854
-------- --------
PROPERTY AND EQUIPMENT:
Oil and gas properties, based on successful
efforts method 787,579 916,354
Other property and equipment 6,671 5,808
-------- --------
794,250 922,162
Less: Accumulated depreciation, depletion
and amortization (362,548) (353,455)
-------- --------
Net property and equipment 431,702 568,707
-------- --------
OTHER ASSETS 655 1,745
-------- --------
TOTAL ASSETS $482,660 $675,306
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15,394 $ 25,641
Interest payable 67 954
Accrued liabilities 10,998 12,937
-------- --------
Total current liabilities 26,459 39,532
-------- --------
DEFERRED INCOME TAXES 72,529 65,876
ABANDONMENT, DISMANTLEMENT AND OTHER LIABILITIES 13,864 15,156
LONG-TERM DEBT 115,000 130,000
STOCKHOLDER'S EQUITY:
Common stock, $0.01 par value, 1,000 shares
authorized; 100 shares issued and outstanding 1 1
Additional paid-in capital 335,470 502,470
Accumulated deficit (80,663) (77,729)
-------- --------
Total stockholder's equity 254,808 424,742
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $482,660 $675,306
======== ========
<FN>
See accompanying notes to consolidated financial statements.
DALEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity
For the years ended December 31, 1994, 1993, and 1992
(stated in thousands of dollars, except common shares)
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Totals
------ ------ -------- ----------- --------
BALANCE AT JANUARY 1, 1992 100 $1 $637,470 $(88,692) $548,779
Dividends to Parent (135,000) (135,000)
Net loss (6,546) (6,546)
--- -- -------- -------- --------
BALANCE AT DECEMBER 31, 1992 100 1 502,470 (95,238) 407,233
Net earnings 17,509 17,509
--- -- -------- -------- --------
BALANCE AT DECEMBER 31, 1993 100 1 502,470 (77,729) 424,742
Dividends to Parent (167,000) (167,000)
Net loss (2,934) (2,934)
--- -- -------- -------- --------
BALANCE AT DECEMBER 31, 1994 100 $1 $335,470 $(80,663) $254,808
=== == ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
DALEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended December 31, 1994, 1993 and 1992
(stated in thousands of dollars)
1994 1993 1992
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (2,934) $ 17,509 $ (6,546)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation, depletion and amortization 101,151 128,364 109,424
Surrendered leases and impairments 9,461 9,344 12,983
Dry hole expense 9,352 4,143 7,482
Deferred income taxes 6,653 13,153 22,125
Loss (gain) on sale of assets (2,509) 146 (365)
Cumulative effect of change in
accounting principle (7,958) -
Other (769) (2,630) (737)
-------- -------- --------
120,405 162,071 144,366
-------- -------- --------
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 8,563 34,869 (13,141)
Decrease (increase) in prepaid expenses 2,534 54 (1,461)
Decrease in accounts payable (9,842) (11,985) (22,279)
Increase (decrease) in interest payable (887) (529) 556
Decrease in accrued liabilities and other (3,629) (544) (4,183)
-------- -------- --------
Net cash provided by operating activities 117,144 183,936 103,858
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (108,105) (94,442) (89,892)
Proceeds from sales of property and equipment 135,732 1,540 1,907
Receivable related to acquisition 5,573
-------- -------- --------
Net cash provided by (used in) investing
activities 27,627 (92,902) (82,412)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to Parent (167,000) (135,000)
Long-term debt borrowing 15,000 111,000
Repayment of long-term debt (30,000) (60,007) (6)
-------- -------- --------
Net cash used in financing activities (182,000) (60,007) (24,006)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (37,229) 31,027 (2,560)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 48,117 17,090 19,650
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 10,888 $ 48,117 $ 17,090
======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
DALEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
1. ORGANIZATION:
The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles and include
the accounts of DALEN Corporation (formerly DALEN Resources Corp.) and
its wholly-owned subsidiaries (the "Company"). All significant
intercompany balances and transactions are eliminated in consolidation.
The Company is a wholly-owned subsidiary of PG&E Enterprises ("Parent"),
which is 100% owned by Pacific Gas and Electric Company ("PG&E"). The
Company's primary business activity is the exploration, development and
production of natural gas and crude oil reserves in the continental
United States.
During 1994, the Parent determined that the Company did not fit within
its long-term corporate strategy. As a result, the Parent intends to
sell its 100% ownership interest in the Company through an initial
public offering of the Company's common stock or by other means. A
registration statement was filed on Form S-1 with the Securities and
Exchange Commission during 1994 to effect the disposition. The
accompanying prior year financial statements were restated in connection
with the filing of the Form S-1, resulting in an increase in 1993 net
earnings and stockholder's equity of $24.2 million.
2. ACCOUNTING POLICIES:
Property and Equipment
The Company uses the successful efforts method of accounting for oil and
gas properties. Under the successful efforts method, lease acquisition
costs are capitalized when incurred. Unproved leasehold costs are
periodically assessed on a property-by-property basis, and a loss is
recognized when assessment indicates a permanent impairment in value has
occurred. Any remaining unproved leasehold costs are charged to expense
upon abandonment of the respective leases.
Exploratory costs, excluding successful exploratory wells, are charged
to expense as incurred. Costs of drilling exploratory wells are
initially capitalized pending determination of whether the wells have
found proved reserves which justify commercial development. If proved
reserves are not found, the drilling costs are charged to expense.
Costs applicable to productive wells and development dry holes are
capitalized and amortized on the units-of-production method based on
estimated proved reserve quantities.
The Company periodically reviews the carrying value of its proved oil
and gas properties for impairment in value on a company-wide basis by
comparing capitalized costs of proved oil and gas properties with
undiscounted future net cash flows, after income taxes. Under this
policy, no impairment in carrying value has been required during 1994,
1993, or 1992. However, in November 1993 the Financial Accounting
Standards Board issued an exposure draft "Accounting for the Impairment
of Long-Lived Assets." Under this proposed standard, an assessment of
fair value of oil and gas properties will be required to be performed
using certain groupings of property costs. Fair value is to be measured
by market value, if an active market exists. If the market value is not
readily determinable, discounted future net cash flows, after income
taxes, are to be used to estimate fair value. The impact of adoption
of this proposed statement on the consolidated financial statements of
the Company has not been determined.
Other property and equipment are depreciated on a straight-line basis
over their estimated useful lives ranging from 5 to 20 years. Major
renewals and betterments, which improve or extend the life of the asset,
are capitalized. The costs of repairs and maintenance are charged to
expense as incurred.
Abandonment and Dismantlement Costs
Estimated abandonment and dismantlement costs of offshore wells and
platforms are accrued as liabilities on the units-of-production method
based on estimated proved reserves of the property. At December 31,
1994, total estimated future abandonment and dismantlement costs
associated with proved developed properties were $11.3 million, of which
$6.2 million was accrued.
Inventories
Inventories, consisting principally of equipment and oil field supplies,
are recorded at cost which approximates market value.
Gas Balancing Arrangements
The Company only recognizes revenue associated with volumes sold to
which it is entitled under respective property divisions of interest.
Proceeds received for natural gas volumes in excess of entitlements are
deferred and recognized as revenue when the gas is made up to the other
interest owners. Accounts receivable and payable resulting from gas
balancing arrangements were not significant at December 31, 1994 or
1993.
Hedging Transactions
The Company periodically enters into oil and natural gas hedging
transactions to minimize the risk of price decreases. Such hedging
transactions also limit revenues which might result from potential price
increases. Under the hedging transactions, the Company receives or
makes payments based on the differential between a specified price and
the actual quote market price of oil and natural gas. The Company does
not use derivative financial instruments for trading purposes.
Gains and losses resulting from hedging activities are recognized in the
same period that revenues on hedged volumes are recorded. Net gains
(losses) of $2.4 million, ($8.9) million and ($12.8) million resulting
from such transactions are included in oil and natural gas revenues for
the years ended December 31, 1994, 1993 and 1992, respectively. The
Company had no open hedging positions at December 31, 1994.
Income Taxes
The operations of the Company are ultimately included in the
consolidated tax return of PG&E. A tax-sharing agreement between PG&E
and the Parent provides that the Parent pay its proportionate share of
state and federal income taxes and that PG&E reimburse the Parent for
related tax benefits to the extent realized in the consolidated tax
return. The Parent then allocates its proportionate share of income
taxes to the Company based on its contribution to the consolidated tax
liability or benefit.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS No. 109"), which requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have
been included in the financial statement or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates. The cumulative effect of adopting
SFAS No. 109 at January 1, 1993 resulted in an increase in oil and gas
properties and deferred income taxes of $22.0 million and $14.0 million,
respectively, and a cumulative gain of $8.0 million. The financial
statements for 1992 have not been restated.
Prior to 1993, the provision for income taxes was based on income and
expenses included in the consolidated statements of operations.
Differences between taxes computed on financial earnings and taxes
currently payable under applicable state and federal statutes and
regulations were classified as deferred taxes.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments", defines the fair value of a
financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties. The
Company's financial instruments are comprised of short-term investments,
accounts receivable, accounts payable and long-term debt. The carrying
amount of the Company's financial instruments approximate fair value
because of the short maturity of the instruments or because the interest
rates of the instruments are based on current market rates.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all
highly liquid cash investments with an original maturity of three months
or less to be cash equivalents.
Supplemental cash flow information is as follows (stated in thousands
of dollars):
Year Ended December 31,
1994 1993 1992
------- ------- -------
Cash paid for interest during the year $ 6,889 $ 7,656 $ 6,329
======= ======= =======
Cash received from Parent for income
tax benefit $25,196 $25,041 $14,433
======= ======= =======
3. RELATED PARTY TRANSACTIONS:
The Company sells natural gas to PG&E and to other affiliates. These sales
were made on terms approximating spot market prices at the time of the
transactions. During 1994, 1993 and 1992, such sales totaled
approximately $1.2 million, $1.7 million and $2.8 million, respectively.
The Company's employee benefit plans and insurance programs are
administered or combined with affiliated companies under the Parent's
control. The Company has paid its proportionate share of related costs
(administration fees to third parties and premiums) which approximates the
cost of obtaining such programs for non-affiliates.
PG&E and the Parent perform certain other administrative functions,
including cash management services, for the Company. Costs associated
with such services for 1994, 1993 and 1992 were not significant. At
December 31, 1994 and 1993, $8.9 million and $46.1 million, respectively,
of the Company's cash was held by PG&E, at the Company's option, for cash
management purposes. The average interest rate received by the Company on
such cash investments was 4.9% in 1994 and 3.8% in 1993, which
approximates market rates.
Accounts receivable from affiliates at December 31, 1994 and 1993 result
primarily from income tax benefits due from the Parent, and are liquidated
upon the filing of the annual consolidated tax return of PG&E. Other
accounts receivable and payable to affiliates resulting from the above
activities are liquidated by receipts and payments in the normal course of
business.
4. LONG-TERM DEBT:
The Company's credit agreement (the "Agreement"), as amended February 22,
1995, provides for a two-year revolving loan (expiring February 1997),
which is convertible at the Company's option, to a five year term loan.
The revolving loan may be extended annually by consent of the banks. The
Agreement has a maximum commitment from the banks of $200 million, with
actual commitment amounts potentially limited by the periodic
determination of a "Borrowing Base" (determined based on discount future
net revenues expected from the Company's proved oil and gas reserves,
using various parameters set forth in the Agreement). The Borrowing Base
at December 31, 1994, was approximately $168.5 million, of which
$115 million in loans was outstanding.
The Agreement, at the request of the banks, shall be secured by the
Company's interest in the Borrowing Base assets, including all related
property and equipment.
Interest on loans outstanding is based on the Agent Bank's Reference Rate,
as defined, or on the Agent Bank's CD Rate, or an adjusted Offshore Rate,
and is payable quarterly. At December 31, 1994, the interest rate in
effect was 7.0%. The Company is also required to pay certain fees in
connection with the facility, as well as comply with various covenants set
forth in the Agreement.
The aggregate maturities of long-term debt outstanding as of December 31,
1994 are as follows (stated in thousands of dollars):
Year Ending
December 31, Amount
------------ --------
1995 $
1996
1997 23,000
1998 23,000
1999 23,000
Thereafter 46,000
--------
$115,000
========
5. INCOME TAXES:
The components of the income tax benefit (expense), before cumulative
effect of change in accounting principle, are as follows (stated in
thousands of dollars):
Year Ended December 31,
1994 1993 1992
------- ------- -------
Current income taxes:
Federal $19,368 $17,216 $21,982
State 2,491 1,781 3,674
------- ------- -------
21,859 18,997 25,656
------- ------- -------
Deferred income taxes:
Federal (5,455) (11,176) (18,619)
State (1,198) (1,977) (3,506)
------- ------- -------
(6,653) (13,153) (22,125)
------- ------- -------
Total income tax benefit $15,206 $ 5,844 $ 3,531
======= ======= =======
A reconciliation of income tax benefit computed by applying the federal
statutory income tax rate to earnings (loss) before income taxes is as
follows (stated in thousands of dollars):
Year Ended December 31,
1994 1993 1992
------- ------- -------
Expected federal tax benefit (expense)
at statutory rate $ 6,349 $(1,297) $ 3,426
State tax benefit (expense) 1,097 (224) 619
Section 29 tight sands gas
tax credits 6,112 7,434 2,128
Permanent differences arising from
acquisitions and other 1,648 (69) (2,642)
------- ------- -------
Total income tax benefit $15,206 $ 5,844 $ 3,531
======= ======= =======
The sources of deferred tax benefit (expense) and their tax effect are as
follows (stated in thousands of dollars):
Year Ended December 31,
1994 1993 1992
------- -------- --------
Sale of oil and gas properties $16,498 $ $
Oil and gas property impairments 4,782 2,250 5,694
Depreciation, depletion and
amortization 1,779 13,079 1,392
Intangible drilling costs (29,712) (28,482) (29,211)
------- -------- --------
Total deferred income tax expense $(6,653) $(13,153) $(22,125)
======= ======== ========
The net deferred tax liability reflected in the Company's consolidated
balance sheet at December 31, 1994 and 1993 results primarily from
temporary differences in the treatment of costs of oil and gas properties
for financial and income tax reporting purposes.
6. OVERRIDING ROYALTY INTEREST:
The Company's interest in certain gas properties acquired in 1991 is
subject to a previously existing undivided overriding royalty interest
("ORRI") held by an unaffiliated party. The ORRI entitles the holder to
receive natural gas production (aggregating 4.0 Bcf at December 31, 1994)
through March 1996, subject to various daily and annual limitations.
Shortfalls in production from the wells subject to the ORRI must be made
up by the Company with production from other properties or through
purchases on the spot market. At December 31, 1994, $1.6 million in
accrued liabilities has been provided for future lease operating expenses
on the subject properties and for potential production shortfalls.
7. EMPLOYEE BENEFIT PLAN:
The Company participates in a 401(k) savings plan ("Plan") sponsored by
the Parent. Under the Plan, eligible employees are permitted to defer
receipt of up to 7% of their compensation (subject to certain limitations
by the Internal Revenue Code of 1986, as amended). After one year of
service, the Company will contribute an amount equal to 5% of an
employee's salary into the Plan, and the Company will match employee
contributions on a 100% basis, up to 5% of the employee's salary. Amounts
held under the Plan are invested among various investment funds at the
direction of the individual employee. Employee contributions are 100%
vested at the date of contribution. Company contributions are vested 100%
after five years of employment. For the years ended December 31, 1994,
1993 and 1992, the Company expensed $1.1 million, $1.2 million and $1.2
million, respectively, for contributions made under the Plan.
8. MAJOR CUSTOMERS:
The Company markets its oil and gas production to numerous purchasers
under a combination of short and long-term contracts. One customer
accounted for 11.1% of the Company's consolidated revenues in 1993. There
were no individual customers which accounted for more than 10% of total
revenues in 1994 or 1992. Management believes that the loss of any major
customers would not have a material adverse effect on the Company due to
the availability of other purchasers for the Company's production.
9. COMMITMENTS AND CONTINGENCIES:
The Company leases office space under noncancelable leases, which extend
through 2002. In addition, certain office space no longer in use is being
subleased.
The future minimum rental payments required under the leases, net of
sublease income, are as follows (stated in thousands of dollars):
Year Ending
December 31, Amount
----------- -------
1995 $ 1,990
1996 2,075
1997 1,998
1998 1,703
1999 1,479
Thereafter 3,822
-------
$13,067
=======
The Company has established a $1.9 million reserve as of December 31, 1994
for rent payments on office space no longer in use. The reserve is net of
expected sublease proceeds of $2.5 million under sublease agreements
currently in effect.
The Company has sublet certain of the unused office space to PG&E for
which payments received aggregated $.4 million for each of the three years
in the period ended December 31, 1994. As of December 31, 1994, future
sublease payments from PG&E are expected to aggregate $1.5 million through
1998.
The Company has entered into an agreement to acquire 3-D seismic data in
1995 and 1996 for payments aggregating $3.9 million.
The Company's revenues are derived principally from uncollateralized sales
to customers in the oil and gas industry. The concentration of credit
risk in a single industry affects the Company's overall exposure to credit
risk because customers may be similarly affected by changes in economic
and other conditions. The Company has not experienced significant credit
losses on such receivables.
The Company is directly or indirectly involved in various pending lawsuits
and claims. Reserves for lawsuits and claims are provided for when a loss
is determined to be probable and the amount can be reasonably estimated.
In the opinion of management, the ultimate outcome of such claims will not
have a material impact on the results of operations of the Company.
10. OIL AND GAS PROPERTIES:
The following table sets forth certain information with respect to costs
incurred in connection with the Company's oil and gas producing activities
(stated in thousands of dollars):
Year Ended December 31,
1994 1993 1992
-------- ------- --------
Property acquisitions:
Proved $ 14,119 $ 1,001 $ 14,308
Unproved 23,477 4,944 3,665
Development costs 49,050 76,099 70,771
Exploratory costs 26,921 9,653 11,263
-------- ------- --------
$113,567 $91,697 $100,007
======== ======= ========
Capitalized costs for oil and gas properties are as follows (stated in
thousands of dollars):
December 31,
1994 1993
--------- ---------
Oil and gas properties:
Proved $ 739,361 $ 880,198
Unproved 48,218 36,156
--------- ---------
787,579 916,354
Accumulated depreciation, depletion
and amortization (359,331) (351,105)
--------- ---------
$ 428,248 $ 565,249
========= =========
In the third quarter of 1994, the Company sold certain oil and gas
properties (the "Non-Strategic Properties") that did not fit within the
Company's current business strategy. The Company sold the Non-Strategic
Properties, which had a net book value of $131.7 million, to unrelated
third parties for $134.0 million in cash, resulting in a pre-tax gain of
$2.3 million, which is included in other income in the accompanying
consolidated statement of operations.
In October and November 1994, the Company acquired producing and non-
producing oil and gas properties located in Louisiana, Texas and offshore
Gulf of Mexico for approximately $28.1 million in cash.
11. SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED):
The estimates of proved oil and gas reserves utilized in the preparation
of the consolidated financial statements were prepared by independent
petroleum engineers at December 31, 1994. Such estimates are in
accordance with guidelines established by the Securities and Exchange
Commission and the Financial Accounting Standards Board, which require
that reserve reports be prepared under existing economic and operating
conditions with no provision for price and cost escalations except by
contractual arrangements. All of the Company's reserves are located in
the United States.
The Company emphasizes that reserve estimates are inherently imprecise.
Accordingly, the estimates are expected to change as more current
information becomes available. In addition, a portion of the Company's
proved reserves is undeveloped, which increases the imprecision inherent
in estimating reserves which may ultimately be produced.
Proved oil and gas reserve information, together with the changes therein,
are as follows (oil in MBbls, gas in MMcf):
Year Ended December 31,
------------------------------------------------
1994 1993 1992
--------------- --------------- --------------
Oil Gas Oil Gas Oil Gas
------ ------- ------ ------- ------ -------
Proved reserves:
Beginning of year 20,074 364,181 23,861 414,099 23,255 406,332
Revisions (25) (27,253) (740) (15,631) 3,257 (11,110)
Extensions and
discoveries 3,960 80,850 1,582 39,644 1,633 71,300
Purchases and
minerals-in-place 557 12,529 74 2,656 433 16,900
Sales of
minerals-in-place (9,346) (62,722)
Production (3,525) (60,223) (4,703) (76,587) (4,717)(69,323)
------ ------- ------ ------- ------ -------
End of year 11,695 307,362 20,074 364,181 23,861 414,099
====== ======= ====== ======= ====== =======
Proved developed
reserves:
Beginning of year 17,508 335,476 21,670 390,830 19,944 352,285
====== ======= ====== ======= ====== =======
End of year 11,134 262,819 17,508 335,476 21,670 390,830
====== ======= ====== ======= ====== =======
The standardized measure of discounted future net cash flows relating to
proved reserves is as follows (stated in thousands of dollars):
Year Ended December 31,
1994 1993 1992
--------- ---------- ----------
Future cash inflows $ 651,143 $1,073,395 $1,322,489
Future costs:
Production (185,726) (313,606) (335,634)
Development (45,437) (42,604) (41,961)
Income taxes (74,250) (111,229) (186,259)
--------- ---------- ----------
Future net cash flows 345,730 605,956 758,635
10% discount factor (83,691) (156,009) (204,473)
--------- ---------- ----------
Standardized measure of
discounted future net
cash flows $ 262,039 $ 449,947 $ 554,162
========= ========== ==========
Changes in the standardized measure of discounted future net cash flows
relating to proved reserves are as follows (stated in thousands of
dollars):
Year Ended December 31,
1994 1993 1992
--------- --------- ---------
Standardized measure,
beginning of year $ 449,947 $ 554,162 $ 531,868
Net changes in sales prices,
net of production costs (105,808) (64,251) 59,647
Revisions of quantity estimates (22,467) (21,132) 10,585
Changes in future development
costs, including development
costs incurred 12,722 8,155 15,504
Accretion of discount 47,490 62,254 56,310
Extension and discoveries 69,331 44,267 91,800
Purchases of minerals-in-place 12,848 1,814 19,695
Sales of minerals-in-place (82,300)
Sales, net of production costs (121,457) (180,775) (156,480)
Net change in income taxes 679 43,429 (37,149)
Changes in timing and other 1,054 2,024 (37,618)
--------- --------- ---------
Standardized measure, end of year $ 262,039 $ 449,947 $ 554,162
========= ========= =========