1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER 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 IRS Employer
File State of Identification
Number Registrant Incorporation Number
1-7810 Energen Corporation Alabama 63-0757759
2-38960 Alabama Gas Corporation Alabama 63-0022000
2101 Sixth Avenue North
Birmingham, Alabama 35203
Telephone Number 205/326-2700
Alabama Gas Corporation, a wholly owned subsidiary of Energen Corporation,
meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with
reduced disclosure format pursuant to General Instruction H(2).
Indicate by a check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrants were required to file such reports),
and (2) have been subject to such filing requirements for
the past 90 days. YES X NO ____
Indicate the number of shares outstanding of each of the issuers' classes
of common stock, as of May 5, 1995:
Energen Corporation, $0.01 par value 10,913,501 shares
Alabama Gas Corporation, $0.01 par value 1,972,052 shares
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ENERGEN CORPORATION AND ALABAMA GAS CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995
TABLE OF CONTENTS
Page
PART I: FINANCIAL INFORMATION (Unaudited)
Item 1. Financial Statements
(a) Consolidated Statements of Income of Energen
Corporation 4
(b) Consolidated Balance Sheets of Energen
Corporation 5
(c) Consolidated Statements of Cash Flows of Energen
Corporation 7
(d) Statements of Income of Alabama Gas
Corporation 8
(e) Balance Sheets of Alabama Gas Corporation 9
(f) Statements of Cash Flows of Alabama Gas Corporation 11
(g) Notes to Unaudited Financial Statements 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Selected Business Segment Data of Energen
Corporation 18
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
Energen Corporation and Subsidiaries
(Unaudited)
Three months ended Six months ended
March 31, March 31,
(in thousands, except share data) 1995 1994 1995 1994
Operating Revenues
Natural gas distribution $ 134,141 $158,268 $201,367 $ 237,261
Oil and gas production activities 6,311 6,170 12,242 12,371
Other 2,142 5,561 4,558 10,809
Intercompany eliminations (1,774) (1,912) (3,863) (4,435)
Total operating revenues 140,820 168,087 214,304 256,006
Operating Expenses
Cost of gas 67,966 93,912 99,016 137,286
Operations 23,462 23,697 45,589 46,840
Maintenance 2,642 2,438 4,906 4,689
Depreciation, depletion,
and amortization 7,194 6,796 14,160 13,507
Taxes, other than income taxes 9,254 10,874 14,895 17,601
Total operating expenses 110,518 137,717 178,566 219,923
Operating Income 30,302 30,370 35,738 36,083
Other Income (Expense)
Interest expense, net of amounts
capitalized (2,670) (2,823) (5,445) (5,745)
Other, net 536 648 1,260 844
Total other income (expense) (2,134) (2,175) (4,185) (4,901)
Income Before Income Taxes 28,168 28,195 31,553 31,182
Income taxes 6,454 6,003 7,103 6,690
Net Income $ 21,714 $22,192 $24,450 $24,492
Earnings Per Average Common Share $ 1.99 $ 2.03 $ 2.24 $ 2.28
Dividends Per Common Share $ 0.28 $ 0.27 $ 0.56 $ 0.54
Average Common Shares Outstanding 10,908 10,917 10,914 10,750
The accompanying Notes are an integral part of these statements.
5
CONSOLIDATED BALANCE SHEETS
Energen Corporation and Subsidiaries
(Unaudited)
March 31, September 30,
(in thousands) 1995 1994
ASSETS
Property, Plant and Equipment
Utility plant $ 480,615 $ 464,593
Less accumulated depreciation 239,632 231,327
Utility plant, net 240,983 233,266
Oil and gas properties, successful efforts method 101,693 92,355
Less accumulated depreciation, depletion and
amortization 46,983 43,052
Oil and gas properties, net 54,710 49,303
Other property, net 4,155 4,613
Total property, plant and equipment, net 299,848 287,182
Current Assets
Cash and cash equivalents 28,340 27,526
Accounts receivable, net of allowance for doubtful
accounts of $2,015 at March 31, 1995 and
$2,037 at September 30, 1994 43,643 34,145
Inventories, at average cost
Storage gas 14,467 24,363
Materials and supplies 8,101 7,589
Liquified natural gas in storage 3,421 3,349
Deferred gas costs 3,962 1,460
Regulatory asset 7,200 -
Deferred income taxes 12,223 7,542
Prepayments and other 1,452 3,117
Total current assets 122,809 109,091
Other Assets
Notes receivable 3,491 3,911
Deferred charges and other 10,973 11,130
Total other assets 14,464 15,041
TOTAL ASSETS $ 437,121 $ 411,314
The accompanying Notes are an integral part of these statements.
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CONSOLIDATED BALANCE SHEETS
Energen Corporation and Subsidiaries
(Unaudited)
March 31, September 30,
(in thousands, except share data) 1995 1994
CAPITAL AND LIABILITIES
Capitalization
Preferred stock, cumulative $0.01 par value, 5,000,000
shares authorized $ - $ -
Common shareholders' equity
Common stock, $0.01 par value; 30,000,000 shares authorized,
10,903,977 shares outstanding at March 31, 1995 and
10,917,904 shares outstanding at September 30, 1994 109 109
Premium on capital stock 81,161 81,073
Capital surplus 2,802 2,802
Retained earnings 101,381 83,042
Treasury stock at cost, 16,600 shares (361) -
Total common shareholders' equity 185,092 167,026
Long-term debt 114,660 118,302
Total capitalization 299,752 285,328
Current Liabilities
Long-term debt due within one year 4,629 10,123
Notes payable to banks - 6,000
Accounts payable 34,867 27,480
Accrued taxes 18,032 13,083
Customers' deposits 18,561 17,462
Amounts due customers 18,852 11,734
Accrued wages and benefits 11,716 9,662
Other 15,558 15,129
Total current liabilities 122,215 110,673
Deferred Credits and Other Liabilities
Deferred income taxes 1,960 1,706
Accumulated deferred investment tax credits 4,347 4,590
Other 8,847 9,017
Total deferred credits and other liabilities 15,154 15,313
Commitments and Contingencies - -
TOTAL CAPITAL AND LIABILITIES $ 437,121 $ 411,314
The accompanying Notes are an integral part of these statements.
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CONSOLIDATED STATEMENTS OF CASH FLOW
Energen Corporation and Subsidiaries
(Unaudited)
Six months ended March 31, (in thousands) 1995 1994
Operating Activities
Net Income $ 24,450 $ 24,492
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 14,160 13,507
Deferred income taxes, net (4,770) (5,643)
Deferred investment tax credits, net (243) (243)
Gain on sale of equity securities - (1,375)
Net change in:
Accounts receivable (9,498) (16,455)
Inventories 9,312 (17,257)
Accounts payable 7,387 14,789
Other current assets and liabilities 7,612 13,475
Other, net (158) 149
Net cash provided by operating activities 48,252 25,439
Investing Activities
Additions to property, plant and equipment (26,469) (16,090)
Proceeds from sale of equity securities - 3,305
Payments on notes receivable 420 1,073
Other, net 131 1,588
Net cash used in investing activities (25,918) (10,124)
Financing Activities
Payment of dividends on common stock (6,113) (5,745)
Issuance of common stock 90 14,692
Purchase of treasury stock (361) -
Reduction of long-term debt and preferred stock
of subsidiary (9,136) (10,460)
Proceeds from issuance of medium-term notes - 49,670
Net change in short-term debt (6,000) (40,000)
Net cash provided by (used in) financing activities (21,520) 8,157
Net change in cash and cash equivalents 814 23,472
Cash and cash equivalents at beginning of period 27,526 15,008
Cash and Cash Equivalents at End of Period $28,340 $38,480
The accompanying Notes are an integral part of these statements.
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STATEMENTS OF INCOME
Alabama Gas Corporation
(Unaudited)
Three months ended Six months ended
March 31, March 31,
(in thousands) 1995 1994 1995 1994
Operating Revenues $134,141 $158,268 $201,367 $237,261
Operating Expenses
Cost of gas 68,835 94,930 100,829 139,540
Operations 19,852 18,282 38,209 36,530
Maintenance 2,607 2,342 4,835 4,495
Depreciation 4,784 4,441 9,521 8,868
Income taxes
Current 14,568 15,119 15,630 15,480
Deferred, net (4,657) (5,787) (4,775) (5,819)
Deferred investment tax credits, net (121) (121) (243) (243)
Taxes, other than income taxes 8,997 10,577 14,389 16,980
Total operating expenses 114,865 139,783 178,395 215,831
Operating Income 19,276 18,485 22,972 21,430
Other Income
Allowance for funds used
during construction 223 111 409 187
Other, net 85 189 243 (19)
Total other income 308 300 652 168
Interest Charges
Interest on long-term debt 1,680 1,659 3,437 3,078
Other interest expense 637 438 1,169 1,136
Total interest charges 2,317 2,097 4,606 4,214
Net Income Available for Common $ 17,267 $16,688 $19,018 $17,384
The accompanying Notes are an integral part of these statements.
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BALANCE SHEETS
Alabama Gas Corporation
(Unaudited)
March 31, September 30,
(in thousands) 1995 1994
ASSETS
Property, Plant and Equipment
Utility plant $ 480,615 $ 464,593
Less accumulated depreciation 239,632 231,327
Utility plant, net 240,983 233,266
Other property, net 180 183
Current Assets
Cash and cash equivalents 13,786 156
Accounts receivable
Gas 34,293 22,209
Merchandise 994 1,326
Other 1,814 1,512
Allowance for doubtful accounts (2,000) (2,000)
Inventories, at average cost
Storage gas 14,467 24,363
Materials and supplies 5,632 5,688
Liquified natural gas in storage 3,421 3,349
Deferred gas costs 3,962 1,460
Regulatory asset 7,200 -
Deferred income taxes 10,381 5,724
Prepayments and other 1,096 2,595
Total current assets 95,046 66,382
Deferred Charges and Other Assets 9,007 9,074
TOTAL ASSETS $ 345,216 $ 308,905
The accompanying Notes are an integral part of these statements.
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BALANCE SHEETS
Alabama Gas Corporation
(Unaudited)
March 31, September 30,
(in thousands, except share data) 1995 1994
CAPITAL AND LIABILITIES
Capitalization
Common shareholder's equity
Common stock, $0.01 par value; 3,000,000 shares
authorized, 1,972,052 shares outstanding at
March 31, 1995 and September 30, 1994 $ 20 $ 20
Premium on capital stock 31,682 31,682
Capital surplus 2,802 2,802
Retained earnings 93,990 81,087
Total common shareholder's equity 128,494 115,591
Cumulative preferred stock, $0.01 par value, 120,000
shares authorized, issuable in series-$4.70 Series - -
Long-term debt 82,750 84,391
Total capitalization 211,244 199,982
Current Liabilities
Long-term debt due within one year 2,854 2,823
Notes payable to banks - 4,000
Accounts payable
Other 28,846 19,002
Affiliated companies 4,711 132
Accrued taxes 19,015 14,241
Customers' deposits 18,561 17,462
Supplier refunds due customers 3,205 832
Other amounts due customers 15,647 10,902
Accrued wages and benefits 6,671 5,659
Other 8,602 7,605
Total current liabilities 108,112 82,658
Deferred Credits and Other Liabilities
Deferred income taxes 13,929 13,704
Accumulated deferred investment tax credits 4,347 4,590
Regulatory liability 6,522 6,960
Customer advances for construction and other 1,062 1,011
Total deferred credits and other liabilities 25,860 26,265
Commitments and Contingencies - -
TOTAL CAPITAL AND LIABILITIES $ 345,216 $ 308,905
The accompanying Notes are an integral part of these statements.
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STATEMENTS OF CASH FLOW
Alabama Gas Corporation
(Unaudited)
Six months ended March 31, (in thousands) 1995 1994
Operating Activities
Net Income $ 19,018 $ 17,384
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,521 8,868
Deferred income taxes, net (4,775) (5,819)
Deferred investment tax credits (243) (243)
Net change in:
Accounts receivable (12,054) (16,783)
Inventories 9,880 (17,512)
Accounts payable 9,911 18,017
Other current assets and liabilities 6,797 15,189
Other, net (345) 684
Net cash provided by operating activities 37,710 19,785
Investing Activities
Additions to property, plant and equipment (16,729) (13,745)
Net advances to holding company - 87
Other, net (138) (118)
Net cash used in investing activities (16,867) (13,776)
Financing Activities
Payment of dividends on common stock (6,115) (5,745)
Reduction of long-term debt (1,610) (9,860)
Proceeds from issuance of medium-term notes - 49,670
Proceeds from equity infusion from parent - 10,000
Net advances from affiliates 4,512 5,490
Net change in short-term debt (4,000) (29,000)
Net cash provided by (used in) financing
activities (7,213) 20,555
Net change in cash and cash equivalents 13,630 26,564
Cash and cash equivalents at beginning of period 156 480
Cash and Cash Equivalents at End of Period $ 13,786 $ 27,044
The accompanying Notes are an integral part of these statements.
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NOTES TO UNAUDITED FINANCIAL STATEMENTS
Energen Corporation and Alabama Gas Corporation
1. BASIS OF PRESENTATION
All adjustments to the unaudited financial statements which are, in
the opinion of management, necessary for a fair statement of the
results of operations for the interim periods have been recorded.
Such adjustments consisted only of normal recurring items. The
consolidated financial statements and notes thereto should be read
in conjunction with the financial statements and notes for the years
ended September 30, 1994, 1993, and 1992 included in the 1994
Annual Report of Energen Corporation (the Company) on Form 10-
K. Certain reclassifications were made to conform prior years'
financial statements to the current quarter presentation. The
Company's primary business is seasonal in character and influenced
by weather conditions. Results of operations for the interim periods
are not necessarily indicative of the results which may be expected
for the fiscal year.
2. REGULATORY
As an Alabama utility, Alagasco is subject to regulation by the
Alabama Public Service Commission (APSC) which, in 1983,
established the Rate Stabilization and Equalization (RSE) rate-
setting process. RSE was extended for the third time on December
3, 1990, for a three-year period. Under the terms of that extension,
RSE shall continue after November 30, 1993, unless, after notice to
the Company, the Commission votes to either modify or discontinue
its operation. On October 4, 1993, the Commission unanimously
voted to extend RSE until such time as certain hearings mandated
by the Energy Policy Act of 1992 (Energy Act) in connection with
integrated resource planning and demand side management
programs are completed. The Energy Act proceedings are expected
to conclude during fiscal 1995 at which time it is expected that the
Commission will begin reviewing Alagasco's RSE. No time table
for review has yet been established.
Under RSE as extended, the APSC conducts quarterly reviews to
determine, based on Alagasco's projections and fiscal year-to-date
performance, whether Alagasco's return on equity for the fiscal
year will be within the allowed range of 13.15 percent to 13.65
percent. Reductions in rates can be made quarterly to bring the
projected return within the allowed range; increases, however, are
allowed only once each fiscal year, effective December 1, and
cannot exceed 4 percent of prior-year revenues. RSE limits the
utility's equity upon which a return is permitted to 60 percent of
total capitalization and provides for certain cost control measures
designed to monitor the Company's operations and maintenance
(O&M) expense. If O&M expense per customer falls within 1.25
percentage points above or below the Consumer Price Index For All
Urban Customers (index range), no adjustment is required. If,
however, O&M expense per customer exceeds the index range,
three-quarters of the difference will be returned to the customers.
To the extent O&M expense per customer is less than the index
range, the utility will benefit by one-half of the difference through
future rate adjustments. Effective December 15, 1990, the APSC
approved a temperature adjustment to customers' monthly bills to
remove the effect of departures from normal temperature on
Alagasco's earnings. The calculation is performed monthly, and the
adjustment to customers' bills is made in the same month the
weather variation occurs. Under RSE as extended, a $1.1 million
decrease in revenue became effective October 1, 1994, and a $5.2
million annual increase in revenue became effective December 1,
1994.
The Company's rate schedules for natural gas distribution charges
contained a Gas Supply Adjustment rider which permits the pass-
through of changes in gas costs to customers and gas supply
realignment surcharges imposed by the Company's suppliers
resulting from changes in gas supply purchases related to the
implementation of FERC Order 636.
In accordance with APSC-directed regulatory accounting
procedures, Alagasco in 1989 began returning excess utility
deferred taxes which resulted from a reduction in the federal
statutory tax rate from 46 percent to 34 percent using the average
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rate assumption method. This method provides for the return to
ratepayers of excess deferred taxes over the lives of the related
assets. In 1993 those excess taxes were reduced as a result of a
federal tax rate increase from 34 percent to 35 percent.
Approximately $3.1 million of remaining excess utility deferred
taxes is being returned to ratepayers over approximately 16 years.
FERC Regulation On March 15, 1995 Southern Natural Gas
Company (Southern) filed a comprehensive settlement with the
Federal Energy Regulatory Commission (FERC) in the form of a
Stipulation and Agreement (the Settlement) to resolve all issues in
Southern's six pending rate cases, as well as to resolve all gas
supply realignment and transition cost issues resulting from the
implementation of FERC Order 636. The Settlement is supported
by parties representing over 90% of the firm transportation demand
on Southern's system, including local distribution companies
(including Alagasco), municipal distribution systems, major gas
producers, large industrial end users, marketers, and state
commissions (including the APSC). The Settlement is subject to
FERC approval which has not yet occurred as of the date of this
filing.
Specifically, the Settlement provides for the following: (1) the
resolution of all cost of service and rate design issues in Southern's
six pending rate cases and the establishment of reduced rates for the
purpose of calculating rate case refunds; (2) the implementation of
reduced settlement rates on an interim basis for supporting parties
commencing March 1, 1995 (by order dated April 4, 1995 FERC
approved these interim rates pending its final review of the merits
of the Settlement); (3) the resolution of all Gas Supply Realignment
(GSR) and other transition cost issues resulting from FERC Order
636; (4) lower GSR cost recovery through the reduction and earlier
payout of GSR costs; (5) a three-year moratorium on general rate
increases; and (6) the resolution and disposition of all rate case and
GSR refunds for supporting parties. With respect to this last point,
the Settlement provides that all rate case refunds will be used to
offset a portion of Southern's remaining GSR liability. In the
Settlement filing with FERC, Southern has represented that the
Settlement will allow Southern and the supporting parties to resolve
all issues relating to GSR and other transition costs, the majority of
which costs will be collected by the end of 1995. Alagasco
estimates that it has a remaining GSR liability of approximately
$6.0 million to be paid through December 1995 and approximately
$1.2 million in other transition costs to be paid through March
1998, and has recorded such amounts in the financial statements.
Because these costs will be recovered in full from Alagasco's
customers in a timely manner through the GSA rider of Alagasco's
Tariff (approved by APSC order dated October 4, 1993 in docket
U-3497), the Company has recorded a corresponding regulatory asset
in the accompanying financial statements.
In addition, as a result of the recalculated GSR surcharges for the
period January 1, 1994 to February 28, 1995, Southern will refund
over-collected GSR costs. Neither the total amount of this refund
nor Alagasco's share has yet been determined, therefore, no amounts
have been recorded in the financial statements.
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3. SUPPLEMENTAL CASH FLOW INFORMATION
Energen Corporation
Six months ended March 31, (in thousands) 1995 1994
Interest paid, net of amounts capitalized $ 6,675 $ 5,919
Income taxes paid $ 2,615 $ 3,984
Noncash investing activities (capitalized
depreciation and allowance for funds used
during construction) $ 487 $ 269
Noncash financing activities (debt issuance costs) $ - $ 330
Alabama Gas Corporation
Six months ended March 31, (in thousands) 1995 1994
Interest paid $ 5,531 $ 4,420
Income taxes paid $ 6,647 $ 4,612
Noncash investing activities (capitalized
depreciation and allowance for funds used
during construction) $ 487 $ 269
Noncash financing activities (debt issuance costs) $ - $ 330
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Consolidated net income for the second quarter was $21,714,000
($1.99 per share), a slight decline from the prior year's $22,192,000
($2.03 per share). Decreased earnings from Taurus Exploration
(Taurus) and the absence of contribution from W & J Propane,
which was sold in the third quarter of the prior year, were largely
offset by increased earnings from Alagasco as it continued to earn
its allowed return on a higher level of equity. Taurus's contribution
to consolidated earnings declined 9 percent primarily due to lower
natural gas prices and the timing of recognition of nonconventional
fuel tax credits on an interim basis. Partially offsetting the impact
of these items was a one time gain of $0.5 million associated with
the buyout of a sales contract. Consolidated net income for the six
months was $24,450,000 ($2.24 per share), compared to
$24,492,000 ($2.28 per share) in the prior year. The factors
primarily influencing earnings were the same as for the quarter.
Two factors created the majority of the 15 percent decrease in
utility natural gas revenues for the quarter and year to date. The
benefit of lower commodity cost of gas was passed through to
customers in reduced rates. Additionally, warmer than normal
weather resulted in a significant reduction in gas sales volumes to
residential customers for both periods; partially offsetting that
impact on revenues was the recovery of margins associated with
departures from normal weather allowed by Alagasco's temperature
adjustment provision.
A significant decrease in natural gas prices heavily influenced
operating fees and natural gas production revenues at Taurus.
Operating fees on certain coalbed methane properties are impacted
by a variety of factors as defined by the operating agreements,
including production volume, operating expenses and the price of
natural gas. The decrease in the current quarter's operating fees is
attributable almost exclusively to a 34 percent decrease in the
average index price of natural gas. With respect to gas production
revenues, after giving effect to hedged volumes, the average sales
price per Mcf was $1.76 compared to $1.95 in the prior year.
Similar to the quarter, the decrease in the six month's operating fees
is largely due to a 31 percent decrease in the average index price of
natural gas. Likewise, gas production revenues were impacted by
a lower average sales price, which, after giving effect to hedged
volumes, was $1.78 per Mcf compared to $1.98 per Mcf in the
prior year. Offsetting the effect of pricing in both the quarter and
year to date was the buyout of the five remaining years of a
long-term sales contract ($0.8 million) which covered a portion of the
Company's coalbed methane production. A new contract has been
executed which should provide a market for all of the Company's
production for five years at prices tied to spot market indices.
To hedge its exposure to energy price fluctuations on oil and gas
production over the remainder of this fiscal year, Taurus has
entered into contracts for the sale of 3 Bcf of its gas production at
an average contract price of $1.94 per Mcf, and for the sale of 54
MBbl of its oil production at an average contract price of $18.42
per Bbl. Based on current estimates for fiscal 1995 production
(excluding additional producing property acquisitions),
approximately 65 percent of gas production and 55 percent of oil
production are hedged. At March 31, 1995, the Company's deferred
gains related to its futures contracts totalled $0.4 million. Current
year earnings are expected to decrease compared to 1994 due to the
price risk associated with both unhedged production volumes and
operating fees. The program has been extended into fiscal 1996 for
the sale of 3.9 Bcf of gas production with an average contract price
of $1.78 per Mcf.
Other revenues for the quarter and year to date were significantly
lower than in the prior year primarily due to the absence of
revenues from W & J Propane. Excluding the effect of propane
revenues, other revenues would have decreased slightly in both
periods as a result of lower merchandise sales.
As with natural gas revenues, decreased commodity cost coupled
with decreased sales volumes associated with warmer weather
created a majority of the 28 percent decrease in cost of gas in both
periods.
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For the quarter and year to date, consolidated operations and
maintenance (O&M) expense was relatively constant as the impact
of the sale of propane operations in the prior year was offset by
increases at Alagasco and Taurus. Excluding the effect of propane
operations, O&M expense would have increased 9 percent for the
quarter primarily due to labor and related expenses at Alagasco.
For the six month period O&M expense would have increased 6
percent due to labor and related expenses at Alagasco and increased
exploration expense at Taurus.
Depreciation expense for the quarter and year to date increased 5
percent and 4 percent, respectively, as the effects of normal plant
growth at Alagasco and an increased DD &A rate at Taurus were
offset in part by the absence of depreciation on propane assets in
the current year.
The Company's expense for taxes other than income taxes primarily
reflects various state and local business taxes paid by Alagasco as
well as various payroll-related taxes. State and local business taxes
generally are based on gross receipts of Alagasco and fluctuate
accordingly.
A significant reduction in average short-term debt outstanding and
the early repayment of certain long-term notes more than offset the
effect of medium-term notes issued in December and January of the
prior fiscal year; the resulting decrease in interest expense for both
the quarter and year to date was 5 percent.
Other income did not vary significantly for the quarter; for the
six-month period increased AFUDC and the inclusion of redemption
fees in the prior year related to the Company's refinancing of a
significant portion of its long-term debt created the increase.
The variance in income tax expense for the quarter and year to date
was due largely to the timing of recognition of nonconventional fuel
tax credits on an interim basis as pretax income did not vary
significantly. Nonconventional fuel tax credits are available on
production from qualifying wells through the year 2002; therefore,
the Company anticipates effective tax rates to remain lower than
statutory rates through that period as it expects to recognize all tax
credits generated for financial statement purposes.
As previously discussed, the Company's business is seasonal in
character and influenced by weather conditions. Results of operations
for the interim periods are not necessarily indicative of
the results that may be expected for the year. As more fully
discussed in Note 2, Alagasco is subject to regulation by the APSC,
which is expected to consider renewal of the utility's rate-setting
mechanism following the completion of its review of certain
mandates under the Energy Policy Act of 1992. Changes, if any,
to the utility's present rate-setting assumptions or provisions could
have an impact on its net income.
Liquidity and Capital Resources
The item primarily responsible for the significant change in cash
provided by operations was the prior year initial investment in
underground storage working gas that represented a use of cash
totaling $18 million at March 31, 1994. In the current year, while
the total volumes maintained in storage have not materially changed,
a 20 percent decrease in the average cost per Mcf of storage gas
resulted in a $9.9 million source of cash at March 31, 1995.
Fluctuations in receivables and payables are generally the result of
timing of payments.
Net cash used in investing activities primarily was influenced by
two factors. Capital expenditures exceeded those of the prior year
due to Alagasco's acquisition of the 2,200-customer Alabaster gas
system and Taurus's investment in proved properties of $6.0 million
adding 9 Bcf of oil and gas reserves. Additionally, the inclusion in
the prior year of proceeds related to the sale of equity securities
served to reduce that quarter's cash used in investing activities.
The change in net cash provided by (used in) financing activities is
attributable to several occurrences in the prior year. The issuance
of 550,000 shares of Energen common stock in November 1993
generated $13.5 million, and Alagasco issued $49.6 million in
medium-term notes in the prior year. These proceeds were used to
fund the investment in underground working storage gas, redeem its
8.75 percent debentures, reduce short-term debt outstanding, and
fund additional capital needs. During the current year, the Company
has acquired 16,600 shares of common stock through its stock
repurchase program.
Future Capital Expenditures and Liquidity: Capital and exploration
expenditures could approximate $66 million in fiscal
1995, excluding municipal gas system acquisitions, and primarily
represent additions for normal distribution system expansion, the
development of a new customer information system at Alagasco,
and oil and gas development activities. With respect to oil and gas
activities, the Company is attempting to invest a significant portion
of its capital expenditures in proven property acquisitions. However,
the market for acquisitions has been limited and the
economics of current pricing has delayed exploration opportunities;
therefore, capital expenditures may not reach targeted levels. In
addition, Alagasco will maintain an investment in storage working
gas which is anticipated to average $19 million for the fiscal year.
The Company anticipates funding these capital requirements through
internally generated capital and the utilization of short-term credit
facilities. Energen has short-term credit facilities totaling $110
million available for working capital needs, with no amounts
outstanding at March 31, 1995 or 1994.
17
SELECTED BUSINESS SEGMENT DATA
Energen Corporation
Three months ended Six months ended
March 31, March 31,
(in thousands, except share data) 1995 1994 1995 1994
Natural Gas Distribution
Operating revenues (in thousands)
Residential $ 92,102 $110,586 $136,452 $162,184
Commercial and industrial - small 31,887 39,523 47,432 58,635
Commercial and industrial - large 219 710 250 733
Transportation 9,267 8,248 16,833 16,056
Other 666 (799) 400 (347)
Total $134,141 $158,268 $201,367 $237,261
Volumes sold and transported (thousands of Mcf)
Residential 15,219 16,841 20,506 23,773
Commercial and industrial - small 5,871 6,429 8,338 9,502
Commercial and industrial - large 8 86 16 91
Transportation 15,796 13,747 30,086 26,915
Total 36,894 37,103 58,946 60,281
Other data
Depreciation and amortization $ 4,784 $ 4,441 $ 9,521 $ 8,868
Capital expenditures $ 7,438 $ 8,678 $ 17,216 $ 14,014
Operating income $ 29,066 $ 27,696 $ 33,584 $ 30,848
Oil and Gas Exploration and Production
Operating revenues
Natural gas $ 3,564 $ 4,136 $ 7,512 $ 8,155
Oil 903 649 1,695 1,461
Other 1,844 1,385 3,035 2,755
Total $ 6,311 $ 6,170 $ 12,242 $ 12,371
Sales volume - natural gas
(thousands of Mcf) 2,028 2,126 4,209 4,117
Sales volume - oil (thousands of barrels) 59 50 109 104
Average sales price - natural gas
(per Mcf) $ 1.76 $ 1.95 $ 1.78 $ 1.98
Average sales price - oil (per barrel) $ 15.31 $ 12.98 $ 15.55 $ 14.05
Other data
Depreciation, depletion and
amortization $ 2,304 $ 2,090 $ 4,422 $ 4,045
Capital expenditures $ 6,728 $ 315 $ 9,735 $ 2,148
Exploration expenditures $ 187 $ 139 $ 616 $ 194
Operating income $ 1,465 $ 1,913 $ 2,619 $ 4,011
Other Business
Operating revenues $ 2,142 $ 5,561 $ 4,558 $ 10,809
Depreciation and amortization $ 106 $ 265 $ 217 594
Capital expenditures $ 5 $ 51 $ 5 $ 197
Operating income $ 43 $ 1,071 $ 247 $ 1,845
Eliminations and Corporate Expenses
Operating loss $ (272) $ (310) $ (712) $ (621)
18
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. At the annual meeting of shareholders held on January 25, 1995, the Energen
shareholders elected the following Director to serve for three year
terms:
Director Votes cast for Votes withheld
Stephen D. Ban 8,801,899 354,361
George S. Shirley 8,796,850 356,410
Wm. Michael Warren, Jr. 8,729,939 426,321
b. The shareholders also approved a proposal to amend the Restated
Certificate of Incorporation of the Company by the
addition of a new Article XI restricting and limiting under certain
circumstances the liability of directors of the Company
to the Company and its shareholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27.1 Financial data schedule of Energen Corporation (for SEC
purposes only)
27.2 Financial data schedule of Alabama Gas Corporation (for SEC
purposes only)
b. Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended
March 31, 1995.
19 Intentionally left blank.
20
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ENERGEN CORPORATION
ALABAMA GAS CORPORATION
May 15, 1995 By/s/ Wm. Michael Warren, Jr.
Wm. Michael Warren, Jr.
President and Chief Operating Officer
May 15, 1995 By/s/ G. C. Ketcham
G. C. Ketcham
Executive Vice President, Chief
Financial Officer and Treasurer
May 15, 1995 By/s/ J. T. McManus
J. T. McManus
Vice President-Finance and Corporate
Development of Energen and Vice
President-Finance and Planning of
Alagasco