UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
X Quarterly Report pursuant to 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 1-7627
WAINOCO OIL CORPORATION
(Exact name of registrant as specified in its charter)
Wyoming 74-1895085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10000 Memorial Drive, Suite 600 77024-3411
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 688-9600
Not Applicable
Former name, former address and former fiscal year, if
changed since last report.
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 . . .
Registrant's number of common shares outstanding as of August 7, 1996:
27,258,502
- -------------------
WAINOCO OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II - Other Information 14
Definitions of Terms
mcf = thousand cubic feet
mmcf = million cubic feet
bbl(s) = barrel(s)
bpd = barrels per day
mbbls = thousand barrels
mmcfe = million cubic feet equivalent
Equivalent information is based on British Thermal Units at a ratio of six mcf
of natural gas to one bbl of oil. All dollar amounts are expressed in United
States dollars unless otherwise indicated as Canadian dollars (C$).
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Page 1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share)
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
--------- --------- --------- ---------
Revenues:
Refined products $ 175,341 $ 156,960 $ 100,037 $ 89,018
Oil and gas sales 8,580 14,280 3,595 6,582
Other 1,849 6,474 575 4,766
--------- --------- --------- ---------
185,770 177,714 104,207 100,366
--------- --------- --------- ---------
Costs and Expenses:
Refining operating costs 165,082 153,516 90,701 83,909
Oil and gas operating costs 2,366 5,426 1,185 2,404
Selling and general expenses 4,621 5,786 2,019 2,703
Depreciation, depletion and amortization 8,666 11,384 4,137 5,269
--------- --------- --------- ---------
180,735 176,112 98,042 94,285
--------- --------- --------- ---------
Operating Income 5,035 1,602 6,165 6,081
Interest Expense, Net 8,527 10,071 4,325 4,990
--------- --------- --------- ---------
Income (Loss) Before Income Taxes (3,492) (8,469) 1,840 1,091
Provision for Income Taxes 213 68 103 37
--------- --------- --------- ---------
Net Income (Loss) $ (3,705) $ (8,537) $ 1,737 $ 1,054
========= ========= ========= =========
Income (Loss) Per Share $ (.14) $ (.31) $ .06 $ .04
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
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Page 2
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except shares)
June 30, 1996 and December 31, 1995 1996 1995
--------- ---------
ASSETS
Current Assets:
Cash, including cash equivalents of
$481 in 1996 and $1,000 in 1995 $ 1,556 $ 6,045
Trade receivables 22,674 20,022
Joint operator and other receivables 4,772 2,345
Inventory of crude oil, products and other 28,764 19,736
Other current assets 531 708
--------- ---------
Total current assets 58,297 48,856
--------- ---------
Property and Equipment, at cost:
Oil and gas properties, on a full-cost basis 167,881 164,711
Refinery and pipeline 139,620 137,598
Furniture, fixtures and other equipment 4,574 4,416
--------- ---------
312,075 306,725
Less - Accumulated depreciation, depletion
and amortization 131,132 122,404
--------- ---------
180,943 184,321
Other Assets 4,874 5,205
--------- ---------
$ 244,114 $ 238,382
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 37,501 $ 35,909
Oil and gas proceeds payable 2,073 2,705
Accrued interest 5,229 5,230
Accrued turnaround cost 5,729 882
Other accrued liabilities 3,361 6,615
--------- ---------
Total current liabilities 53,893 51,341
--------- ---------
Long-Term Debt, net of current maturities:
Revolving credit facilities 7,600 -
12% Senior Notes 94,000 92,000
7 3/4% Convertible Subordinated Debentures 46,000 46,000
10 3/4% Subordinated Debentures 7,403 7,377
--------- ---------
155,003 145,377
Deferred Credits and Other 3,997 6,782
Deferred Income Taxes 2,418 2,418
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $100 par value, 500,000 shares
authorized, no shares issued - -
Common stock, no par, 50,000,000 shares
authorized, 27,313,502 shares issued 57,172 57,172
Paid-in capital 81,767 81,767
Retained earnings (deficit) (101,734) (98,029)
Cumulative translation adjustment (8,143) (8,187)
Treasury stock, 57,500 shares (259) (259)
--------- ---------
Total Shareholders' Equity 28,803 32,464
--------- ---------
$ 244,114 $ 238,382
========= =========
The accompanying notes are an integral part of these financial statements.
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Page 3
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
For the six months ended June 30, 1996 1995
--------- ---------
OPERATING ACTIVITIES
Loss $ (3,705) $ (8,537)
Depreciation, depletion and amortization 8,666 11,384
Gain on sale of interest in gas marketing company - (1,780)
Deferred credits and other 445 547
--------- ---------
5,406 1,614
Change in working capital from operations (12,719) (224)
--------- ---------
Net cash (used in) provided by operating activities (7,313) 1,390
INVESTING ACTIVITIES
Additions to property and equipment (7,632) (11,287)
Sales of oil and gas properties 879 13,761
Sale of interest in gas marketing company - 1,824
Net cash received (distributed) as operator of properties 143 (93)
--------- ---------
Net cash (used in) provided by investing activities (6,610) 4,205
FINANCING ACTIVITIES
Long-term borrowings -
Bank debt 12,743 26,300
12% Senior Notes 2,000 -
Repayments of long-term bank debt (5,143) (34,000)
Other (170) (254)
--------- ---------
Net cash provided by (used in) financing activities 9,430 (7,954)
Effect of exchange rate changes on cash 4 (61)
--------- ---------
Decrease in Cash and Cash Equivalents (4,489) (2,420)
Cash and Cash Equivalents, beginning of period 6,045 5,831
--------- ---------
Cash and Cash Equivalents, end of period $ 1,556 $ 3,411
========= =========
The accompanying notes are an integral part of these financial statements.
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Page 4
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
1. Financial statement presentation and earnings per share
Financial statement presentation
The condensed consolidated financial statements include the accounts of
Wainoco Oil Corporation, a Wyoming Corporation, and its wholly owned
subsidiaries, including Frontier Holdings Inc. ("Frontier" or the "Refinery")
and Wainoco Oil & Gas Company, collectively referred to as Wainoco or the
Company. These financial statements have been prepared by the registrant
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC) and include all adjustments (comprised of only
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although Wainoco believes that the
disclosures are adequate to make the information presented not misleading. It
is suggested that the financial statements included herein be read in
conjunction with the financial statements and the notes thereto included in
Wainoco's annual report on Form 10-K for the year ended December 31, 1995.
Earnings per share
Primary and fully diluted earnings per share have been computed on the
weighted average number of common shares outstanding and assume the exercise
of stock option shares for the three and six month periods ended June 30, 1996
and 1995. The effect of dilution for the fully diluted computation was
immaterial. No effect was given for the addition of dilutive stock options
for the six months ended June 30, 1996 and 1995 as a loss was incurred. The
primary and fully diluted average shares outstanding for the three months and
six months ended June 30, 1996 were 27,330,233 and 27,256,002 and in 1995 were
27,319,328 and 27,251,760, respectively.
2. Schedule of major components of inventory
June 30, December 31,
1996 1995
--------- ---------
(in thousands)
Crude oil $ 5,588 $ 2,517
Unfinished products 5,123 4,016
Finished products 11,309 6,629
Chemicals and in-transit inventory 881 1,060
Repairs and maintenance supplies and other 5,863 5,514
--------- ---------
$ 28,764 $ 19,736
========= =========
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Page 5
3. Accounting policy for oil and gas properties
Wainoco follows the accounting policy (commonly referred to as "full-cost"
accounting) of capitalizing costs incurred in the acquisition, exploration and
development of oil and gas reserves. No gains or losses are recognized upon
the sale or disposition of oil and gas properties, except for significant
transactions.
Wainoco computes the provision for depreciation, depletion and
amortization (DD&A) of oil and gas properties, by country, on a quarterly
basis using the composite unit-of-production method based on future gross
revenue attributable to proved reserves.
Capitalized oil and gas property costs, by country, are limited to the
present value of future net income from estimated production of proved oil and
gas reserves discounted at 10%, plus the value of unproved properties.
As of June 30, 1996, the present value of future net income from estimated
Canadian oil and gas proved reserves exceeded the limitation on capitalized
property costs. Future price declines, if any, might require Wainoco to
provide additional provisions for DD&A in future periods.
4. Restructuring of operations
In the third quarter of 1994, Wainoco announced its intention to cease all
exploration in the United States and sell its United States oil and gas
assets. During 1995, Wainoco completed the sales process and ended its
production activities in the United States. In the fourth quarter of 1995,
Wainoco accrued restructuring losses of $1.7 million, net of a $.7 million
property disposition gain. With respect to the restructuring loss, during the
six months ended June 30, 1996, the Company paid liabilities of approximately
$1.6 million, reduced related accruals of $93,000 (which together with the
reduction of other accruals resulted in other income of $841,000) and has a
remaining restructuring accrual approximating $.7 million.
5. Nonrecurring transactions
In the first quarter of 1995 the Company received $856,000 in settlement
of a Frontier contract dispute. During the second quarter of 1995 the
Company's Canadian operations sold its interest in a Canadian gas marketing
company for a net gain of $1,780,000. Additionally, during the second quarter
of 1995 the Company's United States oil and gas operations recorded $2,206,000
resulting from the settlement of a breach of contract claim against a former
gas purchaser. All such amounts have been classified as other revenues in the
Consolidated Statement of Operations.
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Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six months ended June 30, 1996 compared with the same period in 1995
The Company had a loss for the six months ended June 30, 1996 of $3,705,000,
or $.14 per share, compared to a loss of $8,537,000, or $.31 per share, for
the same period in 1995. Operating income increased $3,433,000 in 1996 to
$5,035,000, attributable to an increase in refining operating income of
$5,640,000, offset by a decrease in Canadian oil and gas operating income of
$1,411,000.
In 1996, other income decreased $4,625,000 to $1,849,000. Other income in
1996 includes $841,000 associated with the disposition of United States oil
and gas operations due to the reduction of certain accruals. Other income for
the first six months of 1995 included $856,000 received in settlement of a
contract dispute which was included in refining operating income, the sale by
the Canadian oil and gas operations of its interest in a Canadian gas
marketing company for a net gain of $1,780,000, and the United States oil and
gas operations settlement of a breach of contract claim against a former gas
purchaser in amount of $2,206,000.
Refining operating income increased in 1996 versus 1995 due to an increase
in refined product revenues partially offset by an increase in refining
operating costs. Refined products revenues increased $18,381,000 or 12%. The
increase in refined products revenues resulted from a $2.73 per bbl or 12%
increase in average product sales prices. Refined product sales volumes were
flat to 1995 levels. Yields of gasoline and distillates were also relatively
unchanged from the same period in 1995.
Refining operating costs increased $11,566,000 or 8% over 1995 levels
primarily as a result of an increase in material costs offset by a decrease in
refinery operating expense. Material costs increased approximately 10% or
$1.90 per bbl in 1996 due to a general oil price increase. Additionally, the
sweet/sour spread declined 16% to average $2.55 per bbl in 1996, as a result
of the increased competition for Wyoming sour crude oil and the alternate sour
crudes. During the first six months of 1996, the Refinery increased its use
of sour crude by 3% which favorably impacted material costs. Refinery
operating expense decreased $.14 per bbl to $3.21 per bbl in 1996 as a result
of Frontier's recovery in the first quarter of 1996 of approximately $1.3
million of repair costs related to the 1995 gas pipeline explosion. The
repair costs approximating $1.3 million in 1995, and related recovery in 1996,
were both included in refinery operating expense. The strike by approximately
150 union employees which commenced May 8, 1996 and settled July 29, 1996 did
not adversely impact operating costs.
Oil and gas revenues decreased $5,700,000 or 40% in the first six months of
1996 due to the disposition in 1995 of oil and gas operations in the United
States (1995 - $5,038,000, 1996 - $nil), and a 7% decrease in Canadian oil and
gas revenues of $662,000 in 1996.
The decrease in Canadian oil and gas operating income for the six months
ended June 30, 1996 was due to a decrease in Canadian oil and gas revenues
offset by decreased Canadian operating costs versus 1995 and by the gain from
sale of its interest in a Canadian gas marketing company of $1,780,000
reflected in 1995. In 1996, Canadian oil revenue increased 49% over 1995
levels to $2,730,000 as a result of a 39% increase in sales volumes and a 7%
increase in average oil price. The average price increase was attributable to
an increase in the price of crude oil, together with an increase in the
weighting of oil versus liquids in 1996 as a result of commencement of
production from the Company's 1995 oil discoveries. In the first six months
of 1996, Canadian gas revenue decreased $1,559,000 or 21%, attributable to a
22% decrease in sales volume offset by a 2% improvement in gas price over
1995. The gas sales volume decline in 1996 was attributable to production
declines at various areas, operating difficulties encountered due to the
prolonged abnormally cold winter conditions in 1996, and a two week
unscheduled operating interruption encountered by a major third party gas
processor in June 1996.
Oil and gas operating costs decreased $3,060,000 or 56% in the first six
months of 1996 of which $2,603,000 was related to United States oil and gas
operations discontinued in 1995. In Canada, operating costs decreased
$457,000 or 16% in 1996 due to various cost reduction factors including
production curtailment or disposition of abnormally high operating cost areas,
implementation of cost reduction procedures, and inclusion in 1996 of certain
annual joint venture adjustments at areas operated by Wainoco.
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Page 7
Selling and general expenses decreased $1,165,000 or 20% to $4,621,000 for
the six months ended June 30, 1996 primarily as a result of staff reductions
associated with disposition of United States oil and gas operations in late
1995. The six months ended June 30, 1996 also includes $235,000 of salary and
related expense of certain United States employees who were not retained
subsequent to March 31, 1996.
Depreciation, depletion and amortization decreased $2,718,000 or 24% in the
1996 six-month period as compared to the same period in 1995 of which
$2,231,000 related to United States oil and gas operations included in 1995.
In 1996, Canadian oil and gas DD&A decreased $820,000 or 16% as a result of an
11% decline in the average DD&A rate and lower oil and gas revenues in the
first six months of 1996 versus 1995. In Canada, the oil and gas DD&A rate as
a percentage of sales decreased from 54% in 1995 to 48% in 1996, primarily as
a result of oil reserves discovered throughout 1995 and the improved oil price
in 1996 versus 1995.
The interest expense decrease of $1,544,000 or 15% in 1996 was attributable
to the repayment of long term debt in 1995 utilizing the sale proceeds on
disposition of the United States oil and gas properties. Average long term
debt for the first six months decreased from $172 million in 1995 to $152
million in 1996.
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Page 8
RESULTS OF OPERATIONS
Three months ended June 30, 1996 compared with the same period in 1995
The Company had net income for the three months ended June 30, 1996 of
$1,737,000, or $.06 per share, compared to net income of $1,054,000, or $.04
per share, for the same period in 1995. Operating income increased $84,000 in
1996 to $6,165,000, attributable to an increase in refining operating income
of $3,914,000, offset by a decrease in Canadian oil and gas operating income
of $2,299,000 and a decrease in United States oil and gas operating income
from $1,724,000 due to the disposition of those operations.
In 1996, other income decreased $4,191,000 to $575,000. Other income in
1996 includes $110,000 associated with the disposition of United States oil
and gas operations due to the reduction of certain accruals. Other income for
the second quarter of 1995 included a gain of $1,780,000 related to the sale
of a Canadian gas marketing company, and the United States oil and gas
operations settlement of a breach of contract claim against a former gas
purchaser in amount of $2,206,000.
Refining operating income increased in 1996 versus 1995 due to an increase
in the refined product spread to $5.77 per bbl from $4.32 per bbl partially
offset by an increase in refining operating expense. Refined products
revenues increased $11,019,000 or 12%. The increase in refined products
revenues resulted from a $3.72 per bbl increase in average product sales
prices. The Refinery benefited from lower nationwide inventories of light
products which resulted in increased sales prices in the second quarter of
1996, especially distillates which were $6.95 per bbl over 1995. Refined
product sales volumes decreased 3% in 1996 from 1995 levels. Yields of
gasoline and distillates declined 8% and 9% respectively from 1995 levels in
spite of increased crude charges, as available intermediate inventories were
lower in 1996 than 1995.
Refining operating costs increased $6,792,000 or 8% over 1995 levels
primarily as a result of an increase in material costs and an increase in
refinery operating expense. Material costs increased approximately 12% or
$2.27 per bbl in 1996 due to a general increase in oil price. Additionally,
the sweet/sour spread declined 10% to average $2.58 per bbl in 1996, as a
result of the increased competition for Wyoming sour crude oil and the
alternate sour crudes. Refinery operating expense increased $.27 per bbl to
$3.26 per bbl in 1996 due to higher utility and energy costs. The strike by
approximately 150 union employees which commenced May 8, 1996 and settled July
29, 1996 did not adversely impact operating costs.
Oil and gas revenues decreased $2,987,000 or 45% in the second quarter of
1996 due to the disposition in 1995 of oil and gas operations in the United
States (1995 - $1,890,000, 1996 - $nil), and a 23% decrease in Canadian oil
and gas revenues of $1,097,000 in 1996.
The decrease in Canadian oil and gas operating income for the three months
ended June 30, 1996 is primarily due to a significant decline in gas revenue
in 1996, and by the gain from sale of its interest in a Canadian gas marketing
company of $1,780,000 reflected in 1995. In the second quarter 1996,
Canadian oil revenue increased 24% over 1995 levels to $1,229,000 as a result
of a 20% increase in sales volumes and a 4% increase in average oil price.
The average price increase was attributable to an increase in the price of
crude oil, together with an increase in the weighting of oil versus liquids in
1996 as a result of commencement of production from the Company's 1995 oil
discoveries. In the second quarter of 1996, Canadian gas revenue decreased
$1,337,000 or 36%, attributable to a 32% decrease in sales volume and a 6%
decrease in gas price from 1995. The gas sales volume decline in 1996 was
attributable to production declines at various areas and a two week
unscheduled operating interruption encountered by a major third party gas
processor in June 1996.
Oil and gas operating costs decreased $1,219,000 or 51% in the second
quarter of 1996 of which $1,051,000 was related to United States oil and gas
operations included in 1995. In Canada, operating costs decreased $168,000 or
12% in 1996 due to various cost reduction factors including production
curtailment or disposition of abnormally high operating cost areas, and
implementation of cost reduction procedures.
Selling and general expenses decreased $684,000 or 25% to $2,019,000 for the
three months ended June 30, 1996 primarily as a result of staff reductions
associated with disposition of United States oil and gas operations in late
1995.
Depreciation, depletion and amortization decreased $1,132,000 or 21% in the
1996 three-month period as compared to the same period in 1995 of which
$761,000 related to United States oil and gas operations included in 1995. In
1996, Canadian oil and gas DD&A decreased $546,000 or 23% as a result of lower
oil and gas revenues in the second quarter of 1996 versus 1995, while the DD&A
rate as a percentage of sales remained flat at 51% in 1996 and 1995.
The interest expense reduction of $665,000 or 13% in 1996 was attributable
to the repayment of long term debt in 1995 utilizing the sale proceeds on
disposition of the United States oil and gas properties. Average long term
debt for the second quarter decreased from $172 million in 1995 to $154
million in 1996.
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Page 9
OPERATING EARNINGS BY SEGMENT
The following (in thousands) presents the operating income (loss) by
operating segment, by country for the six months and three months ended June
30, 1996 and 1995. Operating income (loss) is income (loss) before net
interest expense and provision for income taxes and does not include
unallocated net corporate expenses of $1,343,000 and $1,246,000 in the six
months ended June 30, 1996 and 1995, respectively, and $431,000 and $624,000
in the three months ended June 30, 1996 and 1995, respectively. In 1995, the
Company completed disposition of the oil and gas assets located in the United
States, and accordingly the segmented information below reflects only the oil
and gas activity conducted in Canada.
Oil and Gas
Refining Canada Total
--------- --------- ---------
Six Months Ended June 30,
1996 - Operating margin $ 10,804 $ 6,677 $ 17,481
Selling and general expenses 2,089 1,213 3,302
Depreciation, depletion and amortization 4,452 4,190 8,642
--------- --------- ---------
Operating income $ 4,263 $ 1,274 $ 5,537
========= ========= =========
1995 - Operating margin $ 5,110 $ 8,831 $ 13,941
Selling and general expenses 2,344 1,136 3,480
Depreciation, depletion and amortization 4,143 5,010 9,153
--------- --------- ---------
Operating income (loss) $ (1,377) $ 2,685 $ 1,308
========= ========= =========
Oil and Gas
Refining Canada Total
--------- --------- ---------
Three Months Ended June 30,
1996 - Operating margin $ 9,619 $ 2,592 $ 12,211
Selling and general expenses 1,026 586 1,612
Depreciation, depletion and amortization 2,241 1,872 4,113
--------- --------- ---------
Operating income $ 6,352 $ 134 $ 6,486
========= ========= =========
1995 - Operating margin $ 5,658 $ 5,353 $ 11,011
Selling and general expenses 1,130 502 1,632
Depreciation, depletion and amortization 2,090 2,418 4,508
--------- --------- ---------
Operating income $ 2,438 $ 2,433 $ 4,871
========= ========= =========
The 1996 segmented operating earnings disclosed above excludes other income of
$841,000 and $110,000 for the six and three month periods ended June 30, 1996
associated with the disposition of United States oil and gas operations, due
to the reduction of certain accruals. The 1995 segmented operating earnings
disclosed above exclude operating income of $1,540,000 and $1,834,000
attributable to United States oil and gas operations for the six and three
months ended June 30, 1995, respectively.
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Page 10
REFINING OPERATING STATISTICAL INFORMATION
Six Months Ended Three Months Ended
June 30, June 30,
---------------- -----------------
1996 1995 1996 1995
-------- -------- -------- --------
Raw material input (bpd)
Sweet crude 5,640 5,631 6,177 6,265
Sour crude 29,662 28,779 31,768 30,898
Other feed and blend stocks 4,882 5,047 4,351 5,239
-------- -------- -------- --------
Total 40,184 39,457 42,296 42,402
Manufactured product yields (bpd)
Gasoline 17,318 17,061 16,969 18,485
Distillates 13,369 13,513 14,169 15,573
Asphalt and other 7,844 7,430 9,501 6,754
-------- -------- -------- --------
Total 38,531 38,004 40,639 40,812
Total product sales (bpd)
Gasoline 20,129 20,462 20,317 21,534
Distillates 12,441 12,959 12,756 14,176
Asphalt and other 6,174 5,770 7,837 6,554
-------- -------- -------- --------
Total 38,744 39,191 40,910 42,264
Operating margin information (per sales bbl)
Average sales price $ 24.86 $ 22.13 $ 26.87 $ 23.15
Material costs (under FIFO inventory accounting) 20.20 18.30 21.10 18.83
-------- -------- -------- --------
Product spread 4.66 3.83 5.77 4.32
Operating expenses excluding depreciation 3.21 3.35 3.26 2.99
Depreciation .61 .57 .59 .53
-------- -------- -------- --------
Operating margin $ .84 $ (.09) $ 1.92 $ .80
Manufactured product margin
before depreciation (per bbl) $ 1.45 $ .49 $ 2.51 $ 1.33
Purchase product margin (per purchased product bbl) $ - $ (.23) $ - $ -
Sweet/sour spread (per bbl) $ 2.55 $ 3.04 $ 2.58 $ 2.86
Average sales price (per sales bbl)
Gasoline $ 27.47 $ 25.12 $ 29.89 $ 26.77
Distillates 27.47 22.62 30.19 23.24
Asphalts and other 11.13 10.38 13.66 11.03
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Page 11
OIL AND GAS EXPLORATION AND PRODUCTION STATISTICAL INFORMATION
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Oil and gas revenue (in thousands)
Net oil and condensate sales
Canada $ 2,730 $ 1,833 $ 1,229 $ 989
United States - 4,228 - 1,626
--------- --------- --------- ---------
2,730 6,061 1,229 2,615
--------- --------- --------- ---------
Net gas sales -
Canada 5,850 7,409 2,366 3,703
United States - 810 - 264
--------- --------- --------- ---------
5,850 8,219 2,366 3,967
--------- --------- --------- ---------
$ 8,580 $ 14,280 $ 3,595 $ 6,582
========= ========= ========= =========
Production
Net oil and condensate (bbls)
Canada 174,000 125,000 77,000 65,000
United States - 259,000 - 96,000
--------- --------- --------- ---------
174,000 384,000 77,000 161,000
========= ========= ========= =========
Net gas (mmcf)
Canada 6,456 8,316 2,917 4,312
United States - 496 - 150
--------- --------- --------- ---------
6,456 8,812 2,917 4,462
========= ========= ========= =========
Price
Average oil and condensate sales (per bbl)
before deduction for production taxes
Canada $ 15.71 $ 14.68 $ 15.88 $ 15.27
United States - 16.31 - 16.98
Weighted average 15.71 15.78 15.88 16.29
Average gas sales (per mcf) before
deduction for production taxes
Canada $ .91 $ .89 $ .81 $ .86
United States - 1.63 - 1.76
Weighted average .91 .93 .81 .89
C$/US$
Period end $ .7333 $ .7287 $ .7333 $ .7287
Average .7318 .7204 .7330 .7296
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Page 12
The following presents Canadian production information which is equivalent
to reporting used by other Canadian oil and gas companies. Gross volumes
represent the Company's working interest plus associated freehold, provincial
and other royalties.
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Gross volume
Oil (bbls) 195,000 141,000 88,000 75,000
Gas (mmcf) 7,213 9,469 3,269 4,848
Royalty
ARTC oil (bbls) 8,000 7,000 4,000 3,000
ARTC gas (mmcf) 176 206 101 103
Other (mmcfe) (1,107) (1,497) (543) (717)
Net volume
Oil (bbls) 174,000 125,000 77,000 65,000
Gas (mmcf) 6,456 8,316 2,917 4,312
Gross revenue (in thousands)
Oil $ 3,089 $ 2,075 $ 1,405 $ 1,143
Gas 6,592 8,365 2,661 4,150
Royalty
Provincial and other (1,437) (1,505) (656) (754)
ARTC 336 307 185 153
Net revenue (in thousands)
Oil $ 2,730 $ 1,833 $ 1,229 $ 989
Gas 5,850 7,409 2,366 3,703
--------- --------- --------- ---------
$ 8,580 $ 9,242 $ 3,595 $ 4,692
========= ========= ========= =========
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Page 13
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1996, $7,313,000 of cash flows were used in
operating activities primarily by the Refinery operations for an inventory
increase of $9,028,000. These cash flows were provided primarily by net bank
borrowings of $7,600,000 under the Frontier line of credit and the proceeds on
resale of $2,000,000 of 12% Senior Notes. During the first six months of 1995,
$1,390,000 of cash flows were provided by operating activities and $4,205,000
provided by investing activities primarily by the sale of oil and gas
properties. These cash flows together with an increase in borrowings under
the Frontier line of credit of $1,300,000 were used to repay reserve-based
bank borrowings of $9,000,000 in 1995.
At June 30, 1996, the Company had $13,112,000 available under its
C$18,000,000 oil and gas line of credit and $12,400,000 under the Frontier
line of credit. The Company had working capital of $4,404,000 at June 30,
1996 compared with $3,593,000 at June 30, 1995. The estimated five-year
maturities of long-term debt are $2,500,000 in 1997, $5,000,000 in 1998,
$2,300,000 in 2000 and $2,300,000 in 2001, assuming that the existing oil and
gas reserve-based credit facility is extended. As of June 30, 1996 , the
reserve-based credit facility is scheduled to convert to a two-year term loan
on December 31, 1997 with payments commencing on March 31, 1998. As of June
30, 1996 there is no outstanding debt on this reserve-based credit facility.
At June 30, 1996, the Company violated fixed charge coverage and tangible net
worth covenants under the reserve-based facility and has obtained bank
waivers. If any of the violations continue, the Company expects to be able to
obtain additional waivers or arrange alternate sources of financing.
Investing activities include proceeds from the sale of Canadian oil and
gas properties of $879,000 for the six months ended June 30, 1996, a decrease
from $15,585,000 in 1995 of which $12,908,000 was attributable to United
States properties and $2,677,000 was related to Canadian properties including
proceeds of $1,824,000 for the sale of its interest in a Canadian gas
marketing company. Additions to property and equipment in the first six
months decreased $3,655,000 from the first six months in 1995. In the first
six months of 1996, capital expenditures in Canada decreased approximately
$1.9 million to $5.1 million primarily as a result of a prolonged spring
breakup and wet weather conditions, expenditures at the Refinery decreased
approximately $1.2 million to $2.5 million, and expenditures related to United
States oil and gas operations decreased approximately $.5 million below 1995
levels. Capital expenditures of approximately $15 million are currently
budgeted for 1996, of which $6.1 million had been incurred as of June 30,
1996. The Company anticipates funding the remaining 1996 capital expenditures
with cash provided by operations, currently arranged lines of credit or other
sources if necessary.
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Page 14
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings -
None, which in the opinion of management would have a material impact
on the registrant.
ITEM 2. Changes in Securities -
There have been no changes in the constituent instruments defining
the rights of the holders of any class of registered securities
during the current quarter.
ITEM 3. Defaults Upon Senior Securities -
None.
ITEM 4. Submission of Matters to a Vote of Security Holders -
The annual meeting of the registrant was held May 16, 1996 with no
significant proposals brought to a vote of the shareholders.
ITEM 5. Other Information -
None.
ITEM 6. Exhibits -
10.01 - Executive Employment Agreement dated April 1, 1996 between
the Company and Joel M. Mann
27 - Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WAINOCO OIL CORPORATION
By: /s/ Joel M. Mann
---------------------------
Joel M. Mann
Vice President - Controller
Date: August 7, 1996