FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 1-8094
________________________________________________________
Seagull Energy Corporation
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Texas 74-1764876
________________________________________________________________________________
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 Fannin, Suite 1700, Houston, Texas 77002-6714
________________________________________________________________________________
(Address of principal executive offices) (Zip code)
(713) 951-4700
________________________________________________________________________________
(Registrant's telephone number, including area code)
None
________________________________________________________________________________
(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 .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT OCTOBER 31, 1996
------ -------------------------------
Common Stock, $.10 par value 62,743,687
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
INDEX
PAGE
Part I. Financial Information NUMBER
Presentation of Financial Information............................... 3
Consolidated Statements of Earnings - Three Months
Ended September 30, 1996 and 1995 (Unaudited)..................... 4
Consolidated Statements of Earnings - Nine Months
Ended September 30, 1996 and 1995 (Unaudited)..................... 5
Consolidated Balance Sheets - September 30, 1996
and December 31, 1995 (Unaudited)................................. 6
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1996 and 1995 (Unaudited)..................... 7
Notes to Consolidated Financial Statements (Unaudited).............. 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Unaudited)............................ 14
Part II. Other Information........................................... 28
Signatures............................................................ 30
-2-
PART I. FINANCIAL INFORMATION
PRESENTATION OF FINANCIAL INFORMATION
In the opinion of management, the following unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of Seagull Energy Corporation and Subsidiaries ("Seagull" or
the "Company") as of September 30, 1996, and the results of its operations for
the three and nine month periods ended September 30, 1996 and 1995, and cash
flows for the nine month periods then ended. As discussed in Note 1 to the
Company's Unaudited Consolidated Financial Statements, the shareholders of
Seagull and Global Natural Resources Inc. ("Global") approved a merger of a
wholly owned subsidiary of Seagull into Global on October 3, 1996 (the
"Merger"). Accordingly, the unaudited financial statements presented herein
include the results of Seagull (the "Primary Financial Information") and,
supplementally, the combined operations of Seagull and Global (the "Supplemental
Financial Information" or the "Combined Company"). Certain adjustments were made
to the Supplemental Financial Information to conform the accounting policies and
presentation used by Seagull and Global. The Supplemental Financial Information
does not include estimated transaction costs of the Merger of approximately
$8-10 million (before tax). The estimated transaction costs will be expensed in
the fourth quarter of 1996, the period in which the Merger was consummated. As
discussed in Note 2 to the Company's Unaudited Consolidated Financial
Statements, Seagull purchased all of the stock of Esso Suez Inc. and certain of
the assets of Esso Egypt Limited effective September 10, 1996. The Unaudited
Consolidated Financial Statements included herein include the results of
operations of Esso Suez Inc. and of the certain assets of Esso Egypt Limited
since September 10, 1996. All other adjustments made are of a normal, recurring
nature. The results of operations for the three and nine months ended September
30, 1996 are not necessarily indicative of the results to be expected for the
full year.
The financial information presented herein should be read in
conjunction with the consolidated financial statements and notes included in
Seagull's Annual Report on Form 10-K for the year ended December 31, 1995 and
Global's Annual Report on Form 10-K for the year ended December 31, 1995.
Item 2 of this document includes forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Although Seagull
believes that its expectations are based on reasonable assumptions, it can give
no assurance that its expectations will be achieved. Important factors that
could cause actual results to differ materially from those in the forward
looking statements include political developments in foreign countries, federal
and state regulatory developments, the timing and extent of changes in commodity
prices, the timing and extent of success discovering, developing and producing
or acquiring oil and gas reserves, and conditions of the capital and equity
markets during the periods covered by the forward looking statements.
-3-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Primary Financial Supplemental Financial
Information Information
-------------------------------- ----------------------------------
Three Months Ended Three Months Ended
September 30, September 30,
-------------------------------- ----------------------------------
1996 1995 1996 1995
--------------- ------------- --------------- --------------
Revenues:
Gas and oil operations................... $72,594 $ 55,732 $ 98,175 $ 73,026
Alaska transmission and distribution..... 12,611 12,355 12,611 12,355
--------------- ------------- --------------- --------------
85,205 68,087 110,786 85,381
Costs of Operations:
Alaska transmission and distribution
cost of gas sold....................... 4,517 4,779 4,517 4,779
Operations and maintenance............... 25,575 25,487 35,323 33,058
Exploration charges...................... 9,597 7,733 10,654 9,750
Depreciation, depletion and amortization. 30,629 29,633 36,533 35,668
--------------- ------------- --------------- --------------
70,318 67,632 87,027 83,255
--------------- ------------- --------------- --------------
Operating Profit........................... 14,887 455 23,759 2,126
Other (Income) Expense:
General and administrative............... 2,244 2,876 3,643 3,601
Interest expense......................... 10,781 13,568 10,795 13,605
Gain on sales of property,
plant and equipment, net............... (1,839) (82,028) (2,330) (81,963)
Interest income and other................ (262) 224 (1,986) (1,665)
--------------- ------------- --------------- --------------
10,924 (65,360) 10,122 (66,422)
--------------- ------------- --------------- --------------
Earnings Before Income Taxes............... 3,963 65,815 13,637 68,548
Income Tax Expense......................... 2,330 24,265 6,179 24,856
--------------- ------------- --------------- --------------
Net Earnings............................... $ 1,633 $ 41,550 $ 7,458 $ 43,692
=============== ============= =============== ==============
Earnings Per Share......................... $ 0.04 $ 1.13 $ 0.12 $ 0.70
=============== ============= =============== ==============
Weighted Average Number of Common Shares
Outstanding (in thousands)............... 37,011 36,768 63,934 62,752
=============== ============= =============== ==============
See Accompanying Notes to Unaudited Consolidated Financial Statements.
-4-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Primary Financial Supplemental Financial
Information Information
--------------------------------- ---------------------------------
Nine Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
-------------- --------------- -------------- --------------
Revenues:
Gas and oil operations................... $217,896 $178,219 $296,319 $230,198
Alaska transmission and distribution..... 63,744 66,205 63,744 66,205
-------------- --------------- -------------- --------------
281,640 244,424 360,063 296,403
Costs of Operations:
Alaska transmission and distribution
cost of gas sold....................... 26,974 31,267 26,974 31,267
Operations and maintenance............... 76,588 82,229 104,843 104,244
Exploration charges...................... 24,438 21,752 30,839 30,239
Depreciation, depletion and amortization. 92,949 96,217 111,731 114,386
Impairment of long-lived assets.......... - 44,376 - 48,842
-------------- --------------- -------------- --------------
220,949 275,841 274,387 328,978
-------------- --------------- -------------- --------------
Operating Profit (Loss).................... 60,691 (31,417) 85,676 (32,575)
Other (Income) Expense:
General and administrative............... 10,177 15,377 14,033 18,483
Interest expense......................... 33,435 41,499 33,478 41,613
Gain on sales of property,
plant and equipment, net............... (2,223) (82,365) (2,711) (82,316)
Interest income and other................ (730) (188) (2,988) (2,899)
-------------- --------------- -------------- --------------
40,659 (25,677) 41,812 (25,119)
-------------- --------------- -------------- --------------
Earnings (Loss) Before Income Taxes........ 20,032 (5,740) 43,864 (7,456)
Income Tax Expense (Benefit)............... 9,460 (1,615) 21,028 1,681
-------------- --------------- -------------- --------------
Net Earnings (Loss)........................ $ 10,572 $ (4,125) $ 22,836 $ (9,137)
============== =============== ============== ==============
Earnings (Loss) Per Share.................. $ 0.29 $ (0.11) $ 0.36 $ (0.15)
============== =============== ============== ==============
Weighted Average Number of Common Shares
Outstanding (in thousands)............... 37,046 36,128 63,828 62,071
============== =============== ============== ==============
See Accompanying Notes to Unaudited Consolidated Financial Statements.
-5-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
Primary Supplemental
Financial Information Financial Information
----------------------------------- ------------------------------------
September 30, December 31, September 30, December 31,
1996 1995 1996 1995
---------------- ---------------- ----------------- ----------------
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 17,828 $ 11,205 $ 32,937 $ 21,477
Short-term liquid investments..................... - - - 5,004
Accounts receivable, net.......................... 94,763 119,898 107,232 131,709
Inventories....................................... 12,577 4,947 14,080 6,969
Prepaid expenses and other........................ 8,989 11,331 11,106 16,272
---------------- ---------------- ----------------- ----------------
Total Current Assets............................ 134,157 147,381 165,355 181,431
Property, Plant and Equipment - at cost (successful
efforts method for gas and oil properties)........ 1,740,875 1,581,002 1,973,664 1,783,163
Accumulated Depreciation, Depletion and Amortization 656,801 569,587 751,857 652,985
---------------- ---------------- ----------------- ----------------
1,084,074 1,011,415 1,221,807 1,130,178
Other Assets........................................ 39,891 40,000 45,221 47,516
---------------- ---------------- ----------------- ----------------
Total Assets........................................ $1,258,122 $1,198,796 $1,432,383 $1,359,125
================ ================ ================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................. $ 75,426 $ 83,111 $ 84,945 $ 94,318
Accrued expenses.................................. 25,758 33,080 39,334 50,224
Current maturities of long-term debt.............. 7,227 1,214 8,914 1,650
---------------- ---------------- ----------------- ----------------
Total Current Liabilities....................... 108,411 117,405 133,193 146,192
Long-Term Debt...................................... 589,395 545,343 604,583 557,107
Other Noncurrent Liabilities........................ 52,948 52,276 53,620 53,237
Deferred Income Taxes............................... 45,802 36,104 40,665 29,586
Redeemable Bearer Shares............................ - - 16,103 16,591
Shareholders' Equity:
Common Stock, $.10 par value; authorized
100,000,000 shares; Primary - issued
36,776,878 shares and 36,561,290 shares,
respectively, and Supplemental - 62,980,843
shares and 62,562,187, respectively.............. 3,678 3,656 6,298 6,256
Additional paid-in capital........................ 329,942 326,918 481,667 477,018
Retained earnings................................. 135,163 124,591 103,471 80,635
Foreign currency translation adjustment........... 669 389 669 389
Less - note receivable from employee stock
ownership plan.................................. (4,922) (4,922) (4,922) (4,922)
Less - 308,812 shares of Common
Stock held in Treasury, at cost................. (2,964) (2,964) (2,964) (2,964)
---------------- ---------------- ----------------- ----------------
Total Shareholders' Equity...................... 461,566 447,668 584,219 556,412
Commitments and Contingencies.......................
---------------- ---------------- ----------------- ----------------
Total Liabilities and Shareholders' Equity.......... $1,258,122 $1,198,796 $1,432,383 $1,359,125
================ ================ ================= ================
See Accompanying Notes to Unaudited Consolidated Financial Statements.
-6-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Primary Financial Supplemental Financial
Information Information
--------------------------- ---------------------------
Nine Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ---------- ----------- ----------
Operating Activities:
Net earnings (loss).......................................... $ 10,572 $ (4,125) $ 22,836 $ (9,137)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization................... 95,478 98,624 114,260 116,793
Impairment of gas and oil properties....................... - 44,376 - 48,842
Amortization of deferred financing costs................... 2,362 2,570 2,362 2,570
Deferred income taxes...................................... 9,639 (7,506) 11,020 (10,459)
Dry hole expense........................................... 13,551 11,407 14,137 16,425
Gain on sales of property, plant and equipment, net........ (2,223) (82,365) (2,711) (82,316)
Other...................................................... 174 (395) 197 (439)
------------- ------------ ----------- -----------
129,553 62,586 162,101 82,279
Changes in operating assets and
liabilities, net of acquisitions:
Decrease in short-term liquid investments................ - - 5,010 22,084
Decrease in accounts receivable.......................... 32,138 26,705 31,480 27,967
Decrease in inventories, prepaid expenses and other...... 1,122 7,911 4,742 8,378
Decrease in accounts payable............................. (9,271) (35,939) (10,959) (38,963)
Decrease in accrued expenses and other................... (5,451) (12,910) (9,359) (15,763)
------------- ------------ ----------- -----------
Net Cash Provided By Operating Activities............. 148,091 48,353 183,015 85,982
Investing Activities:
Capital expenditures......................................... (95,124) (57,208) (135,946) (94,195)
Acquisitions, net of cash acquired........................... (100,153) - (100,153) -
Proceeds from sales of property, plant and equipment......... 2,861 102,865 5,879 103,301
Other........................................................ - - 1,897 (577)
------------- ------------ ----------- -----------
Net Cash Provided By (Used In) Investing Activities... (192,416) 45,657 (228,323) 8,529
Financing Activities:
Proceeds from revolving lines of credit and other borrowings. 267,259 550,296 272,559 557,996
Principal payments on revolving lines of credit and
other borrowings............................................ (210,393) (683,569) (211,018) (684,844)
Proceeds from monetary production payment.................... - 46,242 - 46,242
Principal payments on monetary production payment liability.. (7,088) - (7,088) -
Proceeds from sales of common stock.......................... 2,391 764 4,000 1,462
Other........................................................ (1,213) (1,493) (1,677) (2,583)
------------- ------------ ----------- -----------
Net Cash Provided by (Used in) Financing Activities... 50,956 (87,760) 56,776 (81,727)
Effect of Exchange Rate Changes on Cash........................ (8) (220) (8) (220)
------------- ------------ ----------- -----------
Increase In Cash And Cash Equivalents................. 6,623 6,030 11,460 12,564
Cash And Cash Equivalents At Beginning Of Period............... 11,205 6,432 21,477 10,313
------------- ------------ ----------- -----------
Cash And Cash Equivalents At End Of Period..................... $ 17,828 $ 12,462 $ 32,937 $ 22,877
============= ============ =========== ===========
See Accompanying Notes to Unaudited Consolidated Financial Statements.
-7-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation.
On October 3, 1996, the shareholders of Seagull Energy Corporation
("Seagull") and Global Natural Resources Inc. ("Global") approved a merger of a
wholly owned subsidiary of Seagull into Global (the "Merger"). Pursuant to the
Merger, each share of Global common stock was converted into 0.88 shares of
Seagull common stock. The Merger will be accounted for as a pooling of
interests. Accordingly, the unaudited financial statements presented herein
include the results of Seagull (the "Primary Financial Information") and,
supplementally, the combined operations of Seagull and Global (the "Supplemental
Financial Information" or the "Combined Company"). The Supplemental Financial
Information does not include estimated transaction costs of the Merger of
approximately $8-10 million (before tax). The estimated transaction costs of the
Merger will be expensed in the fourth quarter of 1996, the period in which the
Merger was consummated.
Changes in Financial Presentations.
Certain reclassifications have been made in the 1995 unaudited
financial statements to conform to the presentation used in 1996.
Supplemental Disclosures of Cash Flow Information.
(Dollars in Thousands)
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
-----------------------------
Primary
Financial Information
-----------------------------
1996 1995
------------ ------------
Cash paid during the period for:
Interest (net of amount capitalized)......... $37,975 $46,436
Income taxes................................. $ 3,142 $ 833
================================================================================
Gas and Oil Properties.
Effective March 31, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This SFAS
requires that an impairment loss be recognized when the carrying amount of an
asset exceeds the sum of the estimated future cash flows (undiscounted) of the
asset. Under SFAS No. 121, the Company reviewed the impairment of gas and oil
properties on a depletable unit basis. For each depletable unit determined to be
impaired, an impairment loss equal to the difference between the carrying value
and the fair value of the depletable unit was recognized. Fair value, on a
depletable unit basis, was estimated to be the present value of expected future
cash flows computed by applying estimated future gas and oil prices, as
determined by management, to estimated future production of gas and oil reserves
over the economic lives of the reserves. As a result of the adoption of SFAS No.
121,
-8-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the Company recognized a non-cash pre-tax charge against earnings during
the first quarter of 1995 of $44.4 million.
Earnings Per Share.
The weighted average number of common shares outstanding used in the
computation of earnings per share for the three months ended September 30, 1996
and 1995 and nine months ended September 30, 1996 gives effect to the assumed
exercise of dilutive stock options as of the beginning of the period. The effect
of the assumed exercise of stock options as of the beginning of the period has
an anti-dilutive effect on the computation of loss per share for the nine months
ended September 30, 1995 and has therefore not been included in the weighted
average number of common shares outstanding.
NOTE 2. ACQUISITIONS
On September 10, 1996, Seagull purchased the stock of Esso Suez Inc.
("ESI") and certain assets of Esso Egypt Limited (the "EEL Assets") for a net
purchase price of approximately $74 million in cash (the "Esso Suez
Acquisition") financed through additional borrowings under Seagull's revolving
credit facilities (the "Credit Facilities"). ESI holds a 100% interest in the
East Zeit oil producing concession in the offshore Gulf of Suez, and the EEL
Assets consist of the entire working interest in the South Hurghada concession
located onshore on the coast of the Gulf of Suez approximately 250 miles
southeast of Cairo. As of September 10, 1996, the ESI concession area contained
approximately 17 million net barrels of proved oil reserves. The 63,000-acre
South Hurghada concession contains a number of currently drillable exploratory
prospects, plus two existing oil discoveries.
-9-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the unaudited pro forma results of the
combined operations of Seagull, Global, ESI and the EEL Assets for the nine
months ended September 30, 1996 and 1995 as though the Merger and Esso Suez
Acquisition had occurred on January 1, 1995. The Pro Forma Combined information
does not include estimated transaction costs of the Merger of approximately
$8-10 million (before tax). The estimated transaction costs will be expensed in
the fourth quarter of 1996, the period in which the Merger was consummated.
(Dollars in Thousands Except Per Share Amounts)
- ---------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1996
-------------------------------------------------------------------------------------------
Primary Esso
Financial Suez Seagull/ Pro Forma
Information (*) Adjustments Esso Suez Global Adjustments Combined
-------------------------------------------------------------------------------------------
Revenues................ $281,640 $34,314 $ - $315,954 $82,525 $(4,102) $394,377
Operating expenses...... 220,949 22,864 (5,636) 238,177 61,396 (7,958) 291,615
- ---------------------------------------------------------------------------------------------------------------------
Operating profit........ 60,691 11,450 5,636 77,777 21,129 3,856 102,762
Other (income) expense.. 40,659 (56) 3,105 43,708 (2,703) 3,856 44,861
- ---------------------------------------------------------------------------------------------------------------------
Earnings before
income taxes........... 20,032 11,506 2,531 34,069 23,832 - 57,901
Income tax expense...... 9,460 7,055 (1,087) 15,428 10,187 1,381 26,996
- ---------------------------------------------------------------------------------------------------------------------
Net earnings............ $ 10,572 $ 4,451 $ 3,618 $ 18,641 $13,645 $(1,381) $ 30,905
=====================================================================================================================
Earnings per share...... $ 0.29 $ 0.50 $ 0.48
=====================================================================================================================
(*) Represents the results of operations of ESI for the period January 1,
1995 through the date of the Esso Suez Acquisition, September 10, 1996.
The results of operations of ESI subsequent to the date of acquisition
are included in the Primary Financial Information.
Nine Months Ended September 30, 1995
-----------------------------------------------------------------------------------------
Primary
Financial Esso Seagull/ Pro Forma
Information Suez Adjustments Esso Suez Global Adjustments Combined
-----------------------------------------------------------------------------------------
Revenues.................. $244,424 $58,213 $ - $302,637 $55,252 $(3,273) $354,616
Operating expenses........ 275,841 27,180 (2,326) 300,695 55,050 (1,913) 353,832
- ---------------------------------------------------------------------------------------------------------------------
Operating profit (loss)... (31,417) 31,033 2,326 1,942 202 (1,360) 784
Other (income) expense.... (25,677) (34) 3,360 (22,351) (2,548) 3,106 (21,793)
- ---------------------------------------------------------------------------------------------------------------------
Earnings (loss) before
income taxes............. (5,740) 31,067 (1,034) 24,293 2,750 (4,466) 22,577
Income tax
expense (benefit)........ (1,615) 18,397 (1,176) 15,606 6,249 (2,953) 18,902
- ---------------------------------------------------------------------------------------------------------------------
Net earnings (loss)....... $ (4,125) $12,670 $ 142 $ 8,687 $(3,499) $(1,513) $ 3,675
=====================================================================================================================
Earnings (loss) per share. $ (0.11) $ 0.24 $ 0.06
=====================================================================================================================
-10-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table sets forth the combining supplemental balance
sheet information of Seagull and Global as though the Merger occurred on
September 30, 1996.
(Dollars in Thousands)
- ---------------------------------------------------------------------------------------------------------------------
September 30, 1996
------------------------------------------------------------------------
Primary Supplemental
Financial Financial
Information Global Adjustments Information
------------------------------------------------------------------------
Current Assets.......................... $ 134,157 $ 31,198 $ - $ 165,355
Property, Plant and Equipment, net...... 1,084,074 137,733 - 1,221,807
Other Assets............................ 39,891 5,330 - 45,221
- ---------------------------------------------------------------------------------------------------------------------
Total Assets............................ $1,258,122 $174,261 $ - $1,432,383
=====================================================================================================================
Current Liabilities..................... $ 108,411 $ 24,782 $ - $ 133,193
Long-term Debt.......................... 589,395 15,188 - 604,583
Other Noncurrent Liabilities............ 52,948 672 - 53,620
Deferred Income Taxes................... 45,802 - (5,137) 40,665
Redeemable Bearer Shares................ - 16,103 - 16,103
Shareholders' Equity.................... 461,566 117,516 5,137 584,219
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity.................. $1,258,122 $174,261 $ - $1,432,383
=====================================================================================================================
The unaudited pro forma information does not purport to be indicative
of actual results if the Merger and the Esso Suez Acquisition had been in effect
for the periods indicated, or of future results.
NOTE 3. LONG-TERM DEBT
On May 28, 1996, the Credit Facilities were amended to extend the
maturity date two years and reduce stated interest rate margins. The Credit
Facilities have a maximum commitment of $750 million. Under the new terms of the
Credit Facilities, the commitments thereunder begin to decline on March 31, 1999
in equal quarterly reductions of approximately $46 million and a final reduction
of approximately $56 million on December 31, 2002. The Credit Facilities bear
interest, at Seagull's option, at various market-sensitive rates plus an
applicable margin or competitive bid rate.
The amount of senior indebtedness available to Seagull is subject to a
borrowing base (the "Borrowing Base"), based upon the proved reserves of
Seagull's Gas and Oil Operations segment and the financial performance of
Seagull's other business segment. The Borrowing Base is generally determined
annually but may be redetermined one additional time each year, at the option of
either Seagull or the banks. With the Esso Suez Acquisition, Seagull requested
and received a $50 million increase in the Borrowing Base to $550 million on
October 1, 1996.
NOTE 4. COMMITMENTS AND CONTINGENCIES
The Company is a party to ongoing litigation in the normal course of
business. Management regularly analyzes current information and, as necessary,
provides accruals for probable liabilities on the eventual disposition of these
matters. While the outcome of lawsuits
-11-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
or other proceedings against the Company cannot be predicted with certainty,
management believes that the effect on its financial condition and results of
operations, if any, will not be material.
NOTE 5. SUPPLEMENTAL FINANCIAL INFORMATION
Changes in Financial Presentations.
Certain adjustments have been made to the Supplemental Financial
Information to conform the accounting principles and presentation used by
Seagull and Global.
Supplemental Disclosures of Cash Flow Information.
(Dollars in Thousands)
- --------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30,
---------------------------------
Supplemental
Financial Information
---------------------------------
1996 1995
--------------- -------------
Cash paid during the period for:
Interest (net of amount capitalized)..................................... $38,660 $46,493
Income taxes............................................................. $13,247 $ 6,607
====================================================================================================================
Gas and Oil Properties.
Global originally adopted SFAS No. 121 effective December 31, 1995 and
recorded a pre-tax non-cash charge against earnings of $1.7 million for the
impairment of proved oil and gas properties determined on the same basis as
Seagull's impairment described above. Global's impairment has been reclassified
to the first quarter of 1995 to conform to Seagull's date of adoption of SFAS
No. 121.
Other Property and Equipment.
Under SFAS No. 121, Global grouped and evaluated other property and
equipment for impairment based on the ability to identify separate cash flows
generated therefrom. As a result, Global recognized a pre-tax non-cash charge
against earnings of $2.8 million for impairment of other property and equipment.
Global's impairment has been reclassified to the first quarter of 1995 to
conform to the Seagull date of adoption of SFAS No. 121.
Earnings Per Share.
The weighted average number of common shares outstanding used in the
computation of earnings per share for the Supplemental Financial Information
assumed Global common stock was converted at a ratio of .88 shares of Seagull
common stock for each share of Global common stock and common stock equivalent.
-12-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Long-Term Debt.
On July 16, 1996, the credit agreement dated May 19, 1995 (the "Global
Credit Agreement") was amended to extend the maturity date one year and increase
the maximum commitment. The Global Credit Agreement has a maximum commitment of
$41.6 million, subject to a borrowing base. The bank has agreed to extend
letters of credit not exceeding the lesser of (i) $20 million or (ii) the
Aggregate Commitments (as defined in the Global Credit Agreement) minus the
aggregate principal amount of all loans then outstanding under the Global Credit
Agreement. As of September 30, 1996 and December 31, 1995, under this agreement,
there were no loans outstanding and approximately $18 million in letters of
credit had been issued. These letters of credit are primarily associated with
the Redeemable Bearer Shares (see below). Subsequent to the Merger, the Global
Credit Agreement has been canceled and the letters of credit reissued under the
Credit Facilities.
Redeemable Bearer Shares.
In August 1993, Global received $19.2 million from the Hambros Channel
Islands Trust Corporation Limited in the form of an interest-free loan. The loan
is repayable on demand only to the extent necessary to redeem bearer share
warrants presented for exchange until July 2008. Each bearer share warrant
presented during this period will be redeemed for $6.66. As of September 30,
1996, there were 2,480,740 outstanding bearer share warrants. The loan is
secured by a letter of credit which is issued under the Global Credit Agreement.
During 1996 and 1995 there were no drawings under the letter of credit. In July
2008, the obligation of the Company to holders of bearer share warrants will
cease, the interest-free loan will terminate, and any remaining cash will revert
to the Company and will be accounted for as an increase in additional paid-in
capital.
-13-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
GENERAL
On October 3, 1996, the shareholders of Seagull Energy Corporation
("Seagull" or the "Company") and Global Natural Resources Inc. ("Global")
approved a merger of a wholly owned subsidiary into Global (the "Merger"). The
Merger will be accounted for as a pooling of interests. Accordingly, the
unaudited financial statements presented herein include the results of Seagull
(the "Primary Financial Information") and, supplementally, the combined
operations of Seagull and Global (the "Supplemental Financial Information" or
the "Combined Company"). The following discussion is intended to assist in an
understanding of both the Primary Financial Information and the Supplemental
Financial Information for each of the periods indicated. See the discussion
immediately below regarding the Primary Financial Information and see page 22 of
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the discussion regarding the Supplemental Financial Information.
The accompanying unaudited financial statements and the notes thereto, and the
consolidated financial statements and notes included in Seagull's Annual Report
on Form 10-K for the year ended December 31, 1995 and Global's Annual Report on
Form 10-K for the year ended December 31, 1995 contain detailed information that
should be referred to in conjunction with the following discussion.
RESULTS OF OPERATIONS - PRIMARY FINANCIAL INFORMATION
CONSOLIDATED HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- Percent -------------------------- Percent
1996 1995 Change 1996 1995 Change
-------------------------------------------------------------------------------
Revenues:
Gas and oil operations (*)...... $72,594 $55,732 + 30 $217,896 $178,219 + 22
Alaska transmission and
distribution................ 12,611 12,355 + 2 63,744 66,205 - 4
------------------------------------------------------------------------------------------------------------------
$85,205 $68,087 + 25 $281,640 $244,424 + 15
==================================================================================================================
Operating Profit (Loss):
Gas and oil operations (*)...... $13,602 $ (452) +3,109 $ 45,516 $(45,252) +201
Alaska transmission and
distribution................ 1,285 907 + 42 15,175 13,835 + 10
------------------------------------------------------------------------------------------------------------------
$14,887 $ 455 +3,172 $ 60,691 $(31,417) +293
==================================================================================================================
Net Earnings (Loss)............... $ 1,633 $41,550 - 96 $ 10,572 $ (4,125) +356
Earnings (Loss) Per Share......... $ 0.04 $ 1.13 - 96 $ 0.29 $ (0.11) +364
Net Cash Provided by Operating
Activities Before Changes in
Operating Assets and
Liabilities................... $42,351 $15,767 + 169 $129,553 $ 62,586 +107
Net Cash Provided by Operating
Activities.................... $45,208 $12,123 + 273 $148,091 $ 48,353 +206
Weighted Average Number of Common
Shares Outstanding (in
thousands).................... 37,011 36,768 + 1 37,046 36,128 + 3
==================================================================================================================
(*) The Company restated its results of operations for the three and nine
months ended September 30, 1995, to combine the former Exploration and
Production segment and Pipeline and Marketing segment into Gas and Oil
Operations. Substantially all of the Company's gas processing and gas
gathering assets were sold in September 1995. These assets disposed of
contributed $5.2 million and $17.6 million in revenues and $2.1 million
and $6.2 million in operating profit for the three and nine months
ended September 30, 1995, respectively.
-14-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
PRIMARY FINANCIAL INFORMATION
CONSOLIDATED HIGHLIGHTS, Continued
The increase in net earnings for the nine months ended September 30,
1996 was due to the increase in operating profit and decreases in general and
administrative ("G&A") expense and interest expense, which were partially offset
by the absence of the pre-tax gain on sale of certain pipeline assets (the
"Pipeline Assets") of $82 million and an increase in income taxes. The decrease
in net earnings for the 1996 third quarter versus the 1995 third quarter was due
to the absence of the pre-tax gain on sale of the Pipeline Assets of $82 million
partially offset by an increase in operating profit and a decrease in income
taxes. Revenues and operating profit are discussed in the respective segment
sections. G&A expense and interest expense are discussed under the "Other
(Income) Expense" section, and income taxes are discussed under the "Income
Taxes" section.
Net cash provided by operating activities before and after changes in
operating assets and liabilities increased for the three and nine month periods
of 1996 versus 1995 primarily due to increases in exploration and production
("E&P") revenues which were due to increases in natural gas prices.
On September 25, 1995, Seagull and three other sellers completed the
sale of their disparate interests in 19 natural gas gathering systems and a gas
processing plant. Net proceeds after payment of transaction costs were used to
reduce Seagull's borrowings under Seagull's revolving credit facilities (the
"Credit Facilities"). For the three and nine months ended September 30, 1995,
the Pipeline Assets contributed $5.2 million and $17.6 million, respectively in
revenues and $2.1 million and $6.2 million, respectively, to the operating
profit of the Gas and Oil Operations segment. With the sale of the Pipeline
Assets, Seagull's former Exploration and Production segment and the Pipeline and
Marketing segment have been combined into Gas and Oil Operations.
Natural gas is stated herein in billion cubic feet ("Bcf"), million
cubic feet ("MMcf") or thousand cubic feet ("Mcf"). Oil, condensate and natural
gas liquids ("NGL") are stated in barrels ("Bbl"). MMcfe and Mcfe represent the
equivalent of one million and one thousand cubic feet of natural gas,
respectively. Oil, condensate and NGL are converted to gas at a ratio of one
barrel of liquids per six Mcf of gas, based on relative energy content. MBOE and
BOE represent the equivalent of one thousand barrels and one barrel of oil,
respectively, on the same basis described above.
-15-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
PRIMARY FINANCIAL INFORMATION
GAS AND OIL OPERATIONS (*)
- -------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Unit Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ Percent ----------------------- Percent
1996 1995 Change 1996 1995 Change
---------------------------------------------------------------------
Revenues:
Gas ..................................... $59,845 $41,754 + 43 $180,973 $134,512 + 35
Oil and NGL.............................. 9,558 5,509 + 73 22,607 17,396 + 30
Other.................................... 3,191 8,469 - 62 14,316 26,311 - 46
- -------------------------------------------------------------------------------------------------------------------
Total Revenues........................... 72,594 55,732 + 30 217,896 178,219 + 22
Direct Operating Expense.................... 17,404 18,001 - 3 52,388 55,955 - 6
General Operating Expense................... 3,338 2,811 + 19 8,540 11,107 - 23
Exploration Charges......................... 9,597 7,734 + 24 24,438 21,753 + 12
Depreciation, Depletion and Amortization.... 28,653 27,638 + 4 87,014 90,280 - 4
Impairment of long-lived assets............. - - - - 44,376 -100
- -------------------------------------------------------------------------------------------------------------------
Operating Profit (Loss)..................... $13,602 $ (452) +3,109 $ 45,516 $(45,252) +201
===================================================================================================================
(*) The Company restated its results of operations for the three and nine
months ended September 30, 1995 to combine the former Exploration and
Production segment and Pipeline and Marketing segment into Gas and Oil
Operations. Substantially all of the Company's gas processing and gas
gathering assets were sold in September 1995. These assets disposed of
contributed $5.2 million and $17.6 million in revenues and $2.1 million
and $6.2 million in operating profit for the three and nine months
ended September 30, 1995, respectively.
The increase in operating profit for the three and nine months ended
September 30, 1996 was primarily due to the Gas and Oil Operations segment's 35%
and 32%, respectively, increase in domestic natural gas prices. Operating profit
for the nine months ended September 30, 1996 also benefited from the absence of
the pre-tax non-cash impairment of long-lived assets of $44.4 million recorded
in the first quarter of 1995.
-16-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
PRIMARY FINANCIAL INFORMATION
GAS AND OIL OPERATIONS, continued
EXPLORATION AND PRODUCTION REVENUE DATA
- --------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ Percent -----------------------Percent
1996 1995 Change 1996 1995 Change
---------------------------------------------------------------------
DOMESTIC:
Natural Gas Sales:
Net Daily Production (MMcf)............... 276.3 250.1 +10 286.0 274.4 + 4
Average Sales Price ($ per Mcf)........... 2.14 1.59 +35 2.08 1.58 +32
Oil and NGL Sales:
Net Daily Production (Bbl)................ 3,393 3,025 +12 3,334 3,109 + 7
Average Sales Price ($ per Bbl)........... 18.74 15.06 +24 17.76 15.82 +12
- -------------------------------------------------------------------------------------------------------------------
CANADA:
Natural Gas Sales:
Net Daily Production (MMcf)............... 57.5 58.3 - 1 56.1 59.2 - 5
Average Sales Price ($ per Mcf)........... 1.05 0.96 + 9 1.18 0.98 +20
Oil and NGL Sales:
Net Daily Production (Bbl)................ 1,011 1,372 -26 991 1,158 -14
Average Sales Price ($ per Bbl)........... 15.51 10.45 +48 15.16 12.57 +21
- -------------------------------------------------------------------------------------------------------------------
EGYPT:
Oil Sales:
Net Daily Production (Bbl)(*)............. 1,174 - NA 394 - NA
Average Sales Price ($ per Bbl)........... 20.97 - NA 20.97 - NA
===================================================================================================================
(*) Oil production in Egypt reflects the Esso Suez Acquisition (see below)
on September 10, 1996. Net daily oil and NGL production presented
above reflects the Company's production divided by the number of days
in the appropriate period. Net daily oil production based on the
number of days the Egyptian assets were owned by Seagull (September 10
through September 30, 1996) would be 5,413 Bbl.
The increase in revenues for the three and nine months ended September
30, 1996 as compared to 1995 was primarily the net result of two factors - (i)
increases in the Company's average realized price of natural gas for its
domestic E&P activities; and (ii) decreases in revenues related to the sale of
the Pipeline Assets. While the Company had voluntary curtailments during 1995 as
a result of the low natural gas price environment, there have been no voluntary
curtailments in the U.S. since October 1995. The resulting increases in natural
gas and oil production were partially offset by normal declines in domestic and
Canadian production from developed properties combined with the impact of
substantially lower levels of development expenditures in late 1994 and all of
1995, which was also a result of the low natural gas price environment. Oil
production in Egypt reflects the Company's purchase, on September 10, 1996, of
the stock of Esso Suez Inc. ("ESI") and certain assets of Esso Egypt Limited
(the "EEL Assets") (the "Esso Suez Acquisition").
In late 1995, Seagull initiated an active risk management program for
both its own E&P production and third party activities, utilizing such
derivative financial instruments as futures contracts, options and swaps. The
primary objective of the risk management program is to help ensure more stable
cash flow. The risk management program is also an important part of Seagull's
third-party marketing efforts, allowing Seagull to convert a customer's
requested price to a price structure that is consistent with Seagull's overall
pricing strategy. Seagull accounts for its commodity derivative contracts as
hedging activities and, accordingly, the effect of hedging activities is
included in revenues when the commodities are produced. Seagull's outstanding
-17-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
PRIMARY FINANCIAL INFORMATION
GAS AND OIL OPERATIONS, continued
contracts for commodity hedging activities at September 30, 1996 are not
expected to have a material impact on the results of operations or financial
condition of Seagull.
Direct operating expenses decreased for the nine months ended September
30, 1996 primarily due to the absence of the operations and maintenance costs
attributable to the Pipeline Assets sold in September 1995. This decrease in
direct operating expense was partially offset by an increase in direct operating
expenses for the Company's E&P activities; however direct operating expenses per
equivalent unit of production were essentially unchanged from the prior year.
Effective March 31, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." As a result of
the adoption of SFAS No. 121, the Company recognized a pre-tax non-cash
impairment of $44.4 million during the first quarter of 1995. The Company's
average domestic depreciation, depletion and amortization ("DD&A") rate
decreased for both the three and nine months ended September 30, 1996 versus
1995 primarily as the result of the cumulative effect of several small changes
in the components of DD&A expense, including an upward revision of proved
reserves for certain properties. Results for the nine months ended September 30,
1996 also benefited from a reduction in the DD&A rate due to the impairment
charge recorded in the first quarter of 1995.
-18-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
PRIMARY FINANCIAL INFORMATION
ALASKA TRANSMISSION AND DISTRIBUTION
- -------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- Percent ---------------------- Percent
1996 1995 Change 1996 1995 Change
------------------------------------------------------------------
Revenues.......................................... $12,611 $12,355 + 2 $63,744 $66,205 - 4
Cost of Gas Sold.................................. 4,517 4,779 - 5 26,974 31,267 -14
- -------------------------------------------------------------------------------------------------------------------
Gross Margin...................................... 8,094 7,576 + 7 36,770 34,938 + 5
Operations and Maintenance Expense................ 4,833 4,674 + 3 15,660 15,166 + 3
Depreciation, Depletion and Amortization.......... 1,976 1,995 - 1 5,935 5,937 -
- -------------------------------------------------------------------------------------------------------------------
Operating Profit.................................. $ 1,285 $ 907 +42 $15,175 $13,835 +10
===================================================================================================================
OPERATING DATA:
Degree Days (*)................................... 948 732 +30 6,771 6,417 + 6
Volumes (Bcf):
Gas Sold........................................ 2.9 2.7 + 7 17.2 17.7 - 3
Gas Transported................................. 5.3 5.5 - 4 15.3 13.2 +16
Combined........................................ 8.2 8.2 - 32.5 30.9 + 5
Margins ($ per Mcf):
Gas Sold........................................ 2.06 2.03 + 1 1.73 1.67 + 4
Gas Transported................................. 0.41 0.38 + 8 0.45 0.40 +13
Combined........................................ 0.99 0.93 + 6 1.13 1.13 -
Customers (end of period)......................... 93,176 91,174 + 2 93,176 91,174 + 2
===================================================================================================================
(*) A measure of weather severity calculated by subtracting the mean
temperature for each day from 65 degrees Fahrenheit. More degree days
equate to colder weather.
Operating profit of the Alaska transmission and distribution segment
(ENSTAR Natural Gas Company, a division of the Company, and Alaska Pipeline
Company, a wholly owned subsidiary, (collectively referred to herein as "ENSTAR
Alaska")) for the nine month period ended September 30, 1996 improved from the
1995 period primarily as a result of slightly higher volumes due to colder
weather and an increased number of customers.
This segment's business is seasonal with approximately 65% of its
sales made in the first and fourth quarters of each year.
OTHER (INCOME) EXPENSE
- --------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- Percent ------------------------ Percent
1996 1995 Change 1996 1995 Change
------------- ----------- ----------- ------------ ----------- ----------
General and Administrative................. $ 2,244 $ 2,876 - 22 $10,177 $ 15,377 - 34
Interest Expense .......................... 10,781 13,568 - 21 33,435 41,499 - 19
Gains on Sale of Property, Plant and
Equipment, net........................... (1,839) (82,028) - 98 (2,223) (82,365) - 97
Interest Income and Other.................. (262) 224 -217 (730) (188) +288
- --------------------------------------------------------------------------------------------------------------------
$10,924 $(65,360) +117 $40,659 $(25,677) +258
====================================================================================================================
G&A expenses decreased for the nine months ended September 30, 1996 in
comparison to 1995 primarily due to the absence of one-time pre-tax charges of
$8 million recorded during the second quarter of 1995 to account for expenses
involved in the Company's workforce reduction and consolidation and decreases in
costs associated with compensation plans that are
-19-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
PRIMARY FINANCIAL INFORMATION
OTHER (INCOME) EXPENSE, Continued
tied directly to the price of Seagull Common Stock, partially offsett by
increases in accrued incentive compensation expense. G&A expenses also decreased
for the three ended September 30, 1996 in comparison to 1995 primarily due to
decreases in costs associated with compensation plans that are tied directly to
the price of Seagull Common Stock, partially offset by increases in accrued
incentive compensation expense. The closing price of Seagull Common Stock
decreased 12% for the nine months ended September 30, 1996 from $22.25 at
December 31, 1995 to $19.625 on September 30, 1996, compared to a 6% increase in
the 1995 period. The closing price of Seagull Common Stock decreased 22% in the
third quarter of 1996 from $25.00 at June 30, 1996 to $19.625 on September 30,
1996 compared to a 23% increase in the 1995 period.
Decreases in interest expense for the three and nine months ended
September 30, 1996 over 1995 were a result of both lower average debt levels and
lower average interest rates on the Credit Facilities. With the proceeds from
the sale of the Pipeline Assets in September 1995, the Company repaid a portion
of the balances outstanding under the Credit Facilities. The Esso Suez
Acquisition net cash purchase price of approximately $74 million was financed
through additional borrowings under the Credit Facilities. The average interest
rates on the Credit Facilities were 6.1% and 7.2% for the nine months ended
September 30, 1996 and 1995, respectively, and 5.8% and 7.1% for the three
months ended September 30, 1996 and 1995, respectively.
The decrease in the gain on sale of property, plant and equipment for
both the three and nine month periods ended September 30, 1996 as compared to
the comparable 1995 periods is primarily due to the $82 million pre-tax gain on
sale of the Pipeline Assets recorded in the third quarter of 1995.
INCOME TAXES
The increase in income taxes for the nine months ended September 30,
1996 was primarily the net result of the increase in earnings before income
taxes for the period and the absence of Internal Revenue Code Section 29 Tax
Credits ("Section 29 Credits") which reduced Seagull's 1995 projected annual
effective tax rate. The decrease in income taxes for the third quarter of 1996
versus the third quarter of 1995 was primarily due to the decrease in earnings
before income taxes for the period partially offset by the absence of Section 29
Credits.
-20-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
PRIMARY FINANCIAL INFORMATION
LIQUIDITY AND CAPITAL RESOURCES -
PRIMARY FINANCIAL INFORMATION
On May 28, 1996, the Credit Facilities were amended to extend the
maturity date two years and reduce stated interest rate margins. The Credit
Facilities have a maximum commitment of $750 million. Under the new terms of the
Credit Facilities, the commitments thereunder begin to decline on March 31, 1999
in equal quarterly reductions of approximately $46 million and a final reduction
of approximately $56 million on December 31, 2002. The Credit Facilities bear
interest, at the Company's option, at various market-sensitive rates (LIBOR,
Banker's Acceptance or the prime rate of the agent bank) plus the applicable
margin or a competitive bid rate.
The amount of senior indebtedness available to the Company is subject
to a borrowing base (the "Borrowing Base"), based upon the proved reserves of
the Company's Gas and Oil Operations segment and the financial performance of
the Company's other business segment. The Borrowing Base is generally determined
annually but may be redetermined one additional time each year, at the option of
either the Company or the banks, and upon the sale of certain assets included in
the Borrowing Base. With the Esso Suez Acquisition, Seagull requested and
received a $50 million increase in the Borrowing Base to $550 million on October
1, 1996.
Currently, the available commitment under the Credit Facilities is
subject to a $550 million Borrowing Base and is determined after consideration
of outstanding borrowings under the Company's other senior debt facilities. As
of November 7, 1996, borrowings outstanding under the Credit Facilities were
$251 million, leaving immediately available unused commitments of approximately
$151 million, net of outstanding letters of credit of $20 million, $100.0
million of borrowings outstanding under the Company's senior notes and $28
million in borrowings under other debt agreements.
On September 10, 1996, Seagull consummated the Esso Suez Acquisition
for a net purchase price of approximately $74 million in cash financed through
additional borrowings under the Credit Facilities. ESI holds a 100% interest in
the East Zeit oil producing concession in the offshore Gulf of Suez, and the EEL
Assets consist of the entire working interest in the South Hurghada concession
located onshore on the coast of the Gulf of Suez approximately 250 miles south
of Cairo. On September 10, 1996, the ESI concession area contained approximately
17 million net barrels of proved oil reserves. The 63,000-acre South Hurghada
concession contains a number of currently drillable exploratory prospects, plus
two existing oil discoveries.
In addition to the facilities discussed above, the Company has money
market facilities with two major U. S. banks with a combined maximum commitment
of $70 million. These lines of credit bear interest at rates made available by
the banks at their discretion and may be canceled at either the Company's or the
banks' discretion. The lines are subject to annual renewal.
-21-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
RESULTS OF OPERATIONS -
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED HIGHLIGHTS (1)
------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- Percent ------------------------- Percent
1996 1995 Change 1996 1995 Change
-------------------------------------------------------------------------------
Revenues:
Gas and oil operations (2)........ $ 98,175 $73,026 + 34 $296,319 $230,198 + 29
Alaska transmission and
distribution.................. 12,611 12,355 + 2 63,744 66,205 - 4
------------------------------------------------------------------------------------------------------------------
$110,786 $85,381 + 30 $360,063 $296,403 + 21
==================================================================================================================
Operating Profit (Loss):
Gas and oil operations (2)........ $ 22,474 $ 1,219 +1,744 $ 70,501 $(46,410) +252
Alaska transmission and
distribution.................. 1,285 907 + 42 15,175 13,835 + 10
------------------------------------------------------------------------------------------------------------------
$ 23,759 $ 2,126 +1,018 $ 85,676 $(32,575) +363
==================================================================================================================
Net Earnings (Loss)................. $ 7,458 $43,692 - 83 $ 22,836 $ (9,137) +350
Earnings (Loss) Per Share........... $ 0.12 $ 0.70 - 83 $ 0.36 $ (0.15) +340
Net Cash Provided by Operating
Activities Before Changes in
Operating Assets and
Liabilities..................... $ 53,354 $19,748 + 170 $162,101 $ 82,279 + 97
Net Cash Provided by Operating
Activities...................... $ 58,934 $17,493 + 237 $183,015 $ 85,982 +113
Weighted Average Number of Common
Shares Outstanding (in
thousands)...................... 63,934 62,752 + 2 63,828 62,071 + 3
==================================================================================================================
(1) The Supplemental Financial Information does not include estimated
transaction costs of the Merger of approximately $8-10 million (before
tax). The estimated transaction costs will be expensed in the fourth
quarter of 1996, the period in which the Merger was consummated.
(2) The Company restated its results of operations for the three and nine
months ended September 30, 1995, to combine the former Exploration and
Production segment and Pipeline and Marketing segment into Gas and Oil
Operations. Substantially all of the Company's gas processing and gas
gathering assets were sold in September 1995. These assets disposed of
contributed $5.2 million and $17.6 million in revenues and $2.1 million
and $6.2 million in operating profit for the three and nine months
ended September 30, 1995, respectively.
The increase in net earnings for the nine months ended September 30,
1996 was due to the increase in operating profit and decreases in G&A expense
and interest expense, which were partially offset by the absence of the pre-tax
gain on sale of the Pipeline Assets of $82 million and an increase in income
taxes. Net earnings for the three months ended September 30, 1996 decreased from
the third quarter of 1995 primarily due to the absence of the pre-tax gain on
the sale of the Pipeline Assets, but benefited from an increase in operating
profit and a decrease in income tax expense. The increase in operating profit
for the three and nine months ended September 30, 1996 was primarily due to the
Gas and Oil Operations segment's increases in natural gas prices and
international production. Revenues and operating profit are discussed in the
respective segment sections.
-22-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
SUPPLEMENTAL FINANCIAL INFORMATION
GAS AND OIL OPERATIONS (*)
- --------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Unit Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ Percent ------------------------- Percent
1996 1995 Change 1996 1995 Change
---------------------------------------------------------------------
Revenues:
Gas ..................................... $71,196 $48,745 + 46 $216,482 $158,679 + 36
Oil and NGL.............................. 20,259 12,342 + 64 54,705 34,834 + 57
Other.................................... 6,720 11,939 - 44 25,132 36,685 - 31
- -------------------------------------------------------------------------------------------------------------------
Total Revenues........................... 98,175 73,026 + 34 296,319 230,198 + 29
Direct Operating Expense.................... 25,271 24,090 + 5 75,637 74,105 + 2
General Operating Expense................... 5,219 4,293 + 22 13,546 14,972 - 10
Exploration Charges......................... 10,654 9,701 + 10 30,839 30,240 + 2
Depreciation, Depletion and Amortization.... 34,557 33,723 + 2 105,796 108,449 - 2
Impairment of Long-Lived Assets............. - - - - 48,842 -100
- -------------------------------------------------------------------------------------------------------------------
Operating Profit (Loss)..................... $22,474 $ 1,219 +1,744 $ 70,501 $(46,410) +252
===================================================================================================================
(*) The Company restated its results of operations for the three and nine
months ended September 30, 1995, to combine the former Exploration and
Production segment and Pipeline and Marketing segment into Gas and Oil
Operations. Substantially all of the Company's gas processing and gas
gathering assets were sold in September 1995. The Pipeline Assets
contributed $5.2 million and $17.6 million in revenues and $2.1 million
and $6.2 million in operating profit for the three and nine months
ended September 30, 1995, respectively.
The increase in operating profit of the Gas and Oil Operations segment
for the three and nine months ended September 30, 1996 as compared to the 1995
periods was primarily due to a 34% and 29% increase, respectively, in revenues
due to increases in domestic natural gas prices and international production. In
addition, the nine month period of 1996 benefited from the absence of a $48.8
million pre-tax non-cash charge for impairment of long-lived assets recorded
during 1995.
EXPLORATION AND PRODUCTION REVENUE BY AREA
- --------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ Percent ----------------------- Percent
1996 1995 Change 1996 1995 Change
---------------------------------------------------------------------
Gas Revenues:
Domestic................................. $61,370 $40,998 + 50 $185,298 $133,967 + 38
Canada................................... 5,547 5,173 + 7 18,192 15,811 + 15
Cote d'Ivoire............................ 581 - NA 1,996 - NA
Indonesia................................ 3,698 2,574 + 44 10,996 8,901 + 24
- -------------------------------------------------------------------------------------------------------------------
$71,196 $48,745 + 46 $216,482 $158,679 + 36
===================================================================================================================
Oil and NGL Revenues:
Domestic................................. $ 7,290 $ 5,100 + 43 $ 21,505 $ 16,549 + 30
Canada................................... 1,443 1,318 + 9 4,113 3,973 + 4
Egypt.................................... 5,223 - NA 10,182 - NA
Cote d'Ivoire............................ 2,273 1,574 + 44 7,334 2,256 +225
Russia................................... 3,529 4,121 - 14 10,595 11,374 - 7
Indonesia................................ 501 229 +119 976 682 + 43
- -------------------------------------------------------------------------------------------------------------------
$20,259 $12,342 + 64 $ 54,705 $ 34,834 + 57
===================================================================================================================
-23-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
SUPPLEMENTAL FINANCIAL INFORMATION
GAS AND OIL OPERATIONS, Continued
EXPLORATION AND PRODUCTION REVENUE DATA
- --------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ Percent ----------------------- Percent
1996 1995 Change 1996 1995 Change
---------------------------------------------------------------------
DOMESTIC:
Natural Gas Sales:
Net Daily Production (MMcf)............... 312.6 284.3 +10 323.3 312.8 + 3
Average Sales Price ($ per Mcf)........... 2.13 1.57 +36 2.09 1.57 + 33
Oil and NGL Sales:
Net Daily Production (Bbl)................ 4,163 3,622 +15 4,351 3,772 + 15
Average Sales Price ($ per Bbl)........... 19.04 15.30 +24 18.04 16.07 + 12
- -------------------------------------------------------------------------------------------------------------------
CANADA:
Natural Gas Sales:
Net Daily Production (MMcf)............... 57.5 58.3 - 1 56.1 59.2 - 5
Average Sales Price ($ per Mcf)........... 1.05 0.96 + 9 1.18 0.98 + 20
Oil and NGL Sales:
Net Daily Production (Bbl)................ 1,011 1,372 -26 991 1,158 - 14
Average Sales Price ($ per Bbl)........... 15.51 10.45 +48 15.16 12.57 + 21
- -------------------------------------------------------------------------------------------------------------------
EGYPT:
Oil and NGL Sales:
Net Daily Production (Bbl)................ 2,680 - NA 1,851 - NA
Average Sales Price ($ per Bbl)........... 21.19 - NA 20.07 - NA
- -------------------------------------------------------------------------------------------------------------------
COTE D'IVOIRE:
Natural Gas Sales:
Net Daily Production (MMcf)............... 3.5 - NA 4.2 - NA
Average Sales Price ($ per Mcf)........... 1.79 - NA 1.74 - NA
Oil and NGL Sales:
Net Daily Production (Bbl)................ 1,258 1,118 +13 1,421 543 +162
Average Sales Price ($ per Bbl)........... 19.64 15.30 +28 18.83 15.22 + 24
- -------------------------------------------------------------------------------------------------------------------
RUSSIA:
Oil and NGL Sales:
Net Daily Production (Bbl)................ 3,102 3,216 - 4 2,898 2,792 + 4
Average Sales Price ($ per Bbl)........... 12.37 13.93 -11 13.34 14.92 - 11
===================================================================================================================
In addition to the factors affecting revenues discussed in the Primary
Financial Information section of Management's Discussion and Analysis of
Financial Condition and Results of Operations, oil and NGL revenues increased
for the three and nine months ended September 30, 1996 compared to 1995 as
production in Cote d'Ivoire and Egypt began in April 1995 and November 1995,
respectively.
Indonesian liquid natural gas ("LNG") liftings for the nine months
ended September 30, 1996 and 1995 totaled 358 and 314, respectively. Indonesian
LNG liftings for the three months ended September 30, 1996 and 1995 totaled 116
and 96, respectively. The Company has not been advised as to specific price or
production changes which would affect Indonesian oil and gas revenues.
-24-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
SUPPLEMENTAL FINANCIAL INFORMATION
GAS AND OIL OPERATIONS, Continued
EXPLORATION AND PRODUCTION LIFTING COSTS (*)
- --------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ Percent ----------------------- Percent
1996 1995 Change 1996 1995 Change
---------------------------------------------------------------------
$ PER MCFE:
Domestic................................. 0.45 0.44 + 2 0.46 0.44 + 5
Canada................................... 0.52 0.52 - 0.52 0.45 +16
Egypt.................................... 0.62 - NA 0.59 - NA
Cote d'Ivoire............................ 0.58 0.53 + 9 0.59 0.54 + 9
Russia................................... 1.27 0.92 +38 1.24 0.95 +31
- --------------------------------------------------------------------------------------------------------------------
0.51 0.48 + 6 0.51 0.46 +11
====================================================================================================================
$ PER BOE:
Domestic................................. 2.72 2.64 + 2 2.79 2.63 + 5
Canada................................... 3.12 3.12 - 3.12 2.73 +16
Egypt.................................... 3.70 - NA 3.54 - NA
Cote d'Ivoire............................ 3.48 3.20 + 9 3.53 3.25 + 9
Russia................................... 7.60 5.51 +38 7.45 5.72 +31
- --------------------------------------------------------------------------------------------------------------------
3.03 2.87 + 6 3.05 2.78 +11
====================================================================================================================
(*) Lifting costs represent costs incurred to operate and maintain wells
and related equipment and facilities. These costs include, among other
things, repairs and maintenance, labor, materials, supplies, property
taxes, insurance, severance taxes and transportation costs.
In addition to the factors affecting direct operating expenses discussed in
the Primary Financial Information section of Management's Discussion and
Analysis of Financial Condition and Results of Operations, direct operating
expenses also increased for the three and nine months ended September 1996 over
1995 due to the loss of the 1995 Russian export tariff exemption and an increase
in excise tax rate. Because the Company has not received its export tariff
exemption for 1996, it does not have priority access to export pipelines and
must compete with Russian production associations for limited pipeline capacity
to export markets. The first quarter of 1996 was the first period during which
the Company did not export all of its Russian production. The Company cannot
predict what percentage of its future production will be sold on the Russian
domestic market.
Exploration charges increased slightly for the three and nine months
ended September 30, 1996 due to increases in domestic seismic costs, partially
offset by decreases in dry hole costs over the comparable prior year periods.
Dry hole costs decreased to $14.1 million from $16.4 million for the nine months
ended September 30, 1996 and 1995, respectively, and to $4.8 million from $6.7
million for the three months ended September 30, 1996 and 1995, respectively.
-25-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
SUPPLEMENTAL FINANCIAL INFORMATION
GAS AND OIL OPERATIONS, Continued
EXPLORATION AND PRODUCTION DEPRECIATION, DEPLETION
AND AMORTIZATION RATE
- --------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ Percent ----------------------- Percent
1996 1995 Change 1996 1995 Change
---------------------------------------------------------------------
$ PER MCFE:
Domestic................................. 0.87 0.94 - 7 0.87 0.97 -10
Canada................................... 0.72 0.78 - 8 0.73 0.74 - 1
Egypt.................................... 0.67 - NA 0.84 - NA
Cote d'Ivoire............................ 0.91 1.64 -45 0.92 1.54 -40
Russia................................... 0.40 0.34 +18 0.42 0.32 +31
===================================================================================================================
0.83 0.90 - 8 0.84 0.92 - 9
===================================================================================================================
$ PER BOE:
Domestic................................. 5.23 5.67 - 7 5.23 5.66 -10
Canada................................... 4.31 4.70 - 8 4.40 4.46 - 1
Egypt.................................... 4.03 - NA 5.04 - NA
Cote d'Ivoire............................ 5.48 9.81 -45 5.54 9.24 -40
Russia................................... 2.40 2.02 +18 2.51 1.92 +31
===================================================================================================================
4.97 5.42 - 8 5.05 5.52 - 9
===================================================================================================================
Effective March 31, 1995, the Combined Company adopted SFAS No. 121 and
recognized a non-cash pre-tax charge against earnings during the 1995 first
quarter of $48.8 million.
LIQUIDITY AND CAPITAL RESOURCES - SUPPLEMENTAL FINANCIAL INFORMATION
CAPITAL EXPENDITURES AND ACQUISITIONS
- -------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Three months ended Nine months ended
September 30, September 30,
----------------------- Percent --------------------- Percent
1996 1995 Change 1996 1995 Change
--------------------------------------------------------------------
Capital Expenditures:
Exploration and Production:
Lease acquisitions..................... $ 4,420 $ 3,602 + 23 $ 9,767 $ 8,041 +21
Exploration costs...................... 18,535 8,479 +119 48,790 31,180 +56
Development costs...................... 33,118 20,746 + 60 68,137 48,443 +41
------------------------------------------------------------------------------------------------------------------
56,073 32,827 + 71 126,694 87,664 +45
Alaska Transmission and Distribution..... 3,458 2,178 + 59 6,805 4,992 +36
Other.................................... 1,147 518 +121 2,447 1,539 +59
------------------------------------------------------------------------------------------------------------------
Total Capital Expenditures............... $60,678 $35,523 + 71 $135,946 $94,195 +44
==================================================================================================================
Acquisitions............................... $74,484 - NA $100,153 - NA
==================================================================================================================
Current plans for 1996 call for capital expenditures of approximately
$209 million, including about $196 million in exploration and production, of
which about $74 million is exploration.
-26-
Item 2. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)
SUPPLEMENTAL FINANCIAL INFORMATION
LIQUIDITY AND CAPITAL RESOURCES, Continued
For additional discussion of Seagull's liquidity and capital
resources, see "Liquidity and Capital Resources" in the Primary Financial
Information section of Management's Discussion and Analysis of Financial
Condition and Results of Operations.
On July 16, 1996, the credit agreement dated May 19, 1995 (the "Global
Credit Agreement") was amended to extend the maturity date one year and increase
the maximum commitment. The Global Credit Agreement has a maximum commitment of
$41.6 million. In addition, the bank has agreed to extend letters of credit not
exceeding the lesser of (i) $20 million or (ii) the Aggregate Commitments (as
defined in the Global Credit Agreement) minus the aggregate principal amount of
all loans then outstanding under the Global Credit Agreement. As of September
30, 1996 and December 31, 1995, under this agreement, there were no loans
outstanding and approximately $18 million in letters of credit had been issued.
These letters of credit are primarily associated with the Redeemable Bearer
Shares. Subsequent to the Merger, the Global Credit Agreement has been canceled
and the letters of credit reissued under the Credit Facilities.
-27-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At a Special Meeting of Shareholders of the Company held on October 3,
1996, the shareholders voted to approve the issuance of up to 27,580,486 shares
of common stock pursuant to the Merger and elect three new directors.
Broker
For Against Abstained Non-Vote
-------------- ------------- -------------- ----------------
Approval of the Issuance of Shares of Common Stock
Pursuant to the Merger........................ 26,086,919 2,178,915 68,357 83,160
Election of R.A. Walker as a Director of the Company
(to serve until the 1997 Annual Meeting of
Shareholders)................................. 25,617,313 2,800,038 - -
Election of Sidney R. Petersen as a Director of the
Company (to serve until the 1998 Annual Meeting
of Shareholders).............................. 25,617,379 2,799,972 - -
Election of Robert F. Vagt as a Director of the
Company (to serve until the 1999 Annual Meeting
of Shareholders).............................. 25,568,179 2,849,172 - -
Subsequent to the Special Meeting of Shareholders, the class
designations of various directors were modified by a unanimous action of the
Board of Directors. Accordingly, the Board of Directors is classified as
follows:
Class I (term expires at the 1999 Annual Meeting of Shareholders):
John W. Elias
Peter J. Fluor
Sam F. Segnar
Robert F. Vagt
Class II (term expires at the 1997 Annual Meeting of Shareholders):
J. Evans Attwell
Richard J. Burgess
Barry J. Galt
Dee S. Osborne
Sidney R. Petersen
Class III (term expires at the 1998 Annual Meeting of Shareholders):
Thomas H. Cruikshank
William R. Grant
Dean P. Guerin
Richard M. Morrow
R. A. Walker
-28-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
*#10.1 Seagull Energy Corporation Executive Supplemental Retirement Plan, as
amended.
*#10.2 Executive Supplemental Retirement Plan Membership Agreement between
the Company and Barry J. Galt dated as of February 3, 1986, as
amended.
*#10.3 Seagull Thrift Plan, as amended and restated effective September 1,
1996.
* 27.1 Financial Data Schedule.
- --------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
(b) Reports on Form 8-K:
The Company filed a current report on Form 8-K dated July 22, 1996
with respect to Seagull's acquisition of all the outstanding common stock of
Esso Suez Inc. and certain assets of Esso Egypt Limited. The items reported in
such current report were Item 5 (Other Events) and Item 7 (Financial Statements
and Exhibits). The following financial statements were included in this report:
(a) Financial statements of business acquired.
The financial statements of Esso Suez Inc. For the
years ended December 31, 1995, 1994 and 1993 and the
six months ended June 30, 1996 and 1995.
The Company filed a current report on Form 8-K dated September 10,
1996 with respect to Seagull's acquisition of all the outstanding common stock
of Esso Suez Inc. and certain assets of Esso Egypt Limited. The items reported
in such current report were Item 2 (Acquisition or Disposition of Assets) and
Item 7 (Financial Statements and Exhibits). The following financial statements
were included in this report:
(a) Financial statements of business acquired.
The financial statements of Esso Suez Inc. For the
years ended December 31, 1995, 1994 and 1993 and the
six months ended June 30, 1996 and 1995 (incorporated
by reference to Exhibit 99.1 of the Company's Current
Report on Form 8-K filed with the Securities and
Exchange Commission on August 28, 1996).
-29-
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
William L. Transier, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: November 13, 1996
By: /s/ Gordon L. McConnell
Gordon L. McConnell, Vice President
and Controller
(Principal Accounting Officer)
Date: November 13, 1996
-30-
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
*#10.1 Seagull Energy Corporation Executive Supplemental
Retirement Plan, as amended.
*#10.2 Executive Supplemental Retirement Plan Membership
Agreement between the Company and Barry J. Galt
dated as of February 3, 1986, as amended.
*#10.3 Seagull Thrift Plan, as amended and restated
effective September 1, 1996.
* 27.1 Financial Data Schedule.
- --------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.