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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported) June 30, 1997
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MESA INC.
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(Exact name of registrant as specified in its charter)
1-10874
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Commission File Number
Texas 75-2394500
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas (214) 444-9001 75039
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(Address of Principal (Registrant's (Zip Code)
Executive Offices) Telephone Number)
Not Applicable
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(Former name or former address if changed since last report)
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Item 5. Other Events
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On July 29, 1997, MESA Inc. announced its financial and operating results
for the second quarter of 1997.
Item 7. Financial Statements and Exhibits
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(c) Exhibits
Item Exhibit
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99 Press Release issued by MESA Inc. on July 29, 1997.
SIGNATURE
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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.
MESA INC.
(Registrant)
By:/s/ M. Garrett Smith
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M. Garrett Smith
Vice President,
Corporate Acquisitions
Date: July 29, 1997
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INDEX TO EXHIBITS
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Item
Number Exhibit
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99 Press Release issued by MESA Inc. on July 29, 1997.
EXHIBIT 99
FOR IMMEDIATE RELEASE July 29, 1997
Research Analyst Contact: Investor Contact:
Deanna Miller (972)402-7054 Malcolm Gorrie (972)402-7087
MESA REPORTS SECOND QUARTER RESULTS
(IRVING, Texas) -- MESA Inc. ("MESA") today announced financial and
operating results for the second quarter of 1997 and the six months ended June
30, 1997.
Second Quarter 1997
===================
MESA reported a net loss applicable to its common stock of $19.8
million, or $0.31 per share, during the second quarter of 1997 as compared
with net income of $4.5 million, or $0.07 per share, during the second quarter
of 1996. Second quarter 1997 revenues increased 9 percent to $78.0 million
from $71.3 million in the second quarter of 1996. Operating income fell 37
percent to $13.3 million in the second quarter of 1997 as compared with $21.1
million in the same period in 1996.
Garrett Smith, MESA's acting chief financial officer, stated that the
net loss comparison is magnified by a one time loss in 1997 and a one time
gain in 1996. The second quarter 1997 results include a loss of $5 million
associated with the sales of MESA's remaining natural gas vehicle businesses.
Such loss is reflected in impairment and other income. The second quarter
1996 results include a gain of $15.0 million from the revaluation of certain
reserves and contingencies associated with acquisitions and contract
settlements which occurred in the mid-to-late 1980's, and a $3.6 million
charge associated with a reduction of personnel. MESA's operating results
were positively impacted by the increase in oil and condensate production as
a result of the acquisitions to date in 1997. In addition, the
recapitalization and restructuring in the summer of 1996 lowered interest
rates and general and administrative expenses.
Year-to-Date 1997
=================
MESA reported a net loss applicable to its common stock of $13.1
million, or $0.20 per share, during the first six months of 1997 as compared
with net income of $5.6 million, or $0.09 per share, during the same period
in 1996. Revenues for the first six months of 1997 increased 13 percent to
$172.1 million from $152.0 million during the first six months of 1996 and
cash flow from operations increased 12 percent to $87.8 million for the first
six months of 1997 from $78.6 million for the same period in 1996.
Production and Prices
=====================
MESA's production and average prices are summarized below.
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1997 1996 1997 1996
------- ------- ------- -------
Production:
Natural gas equivalents (MMcfe) 33,649 31,471 64,875 65,384
Natural gas (MMcf) . . . . . . 17,851 20,965 36,969 43,076
Natural gas liquids (MBbls). . 1,548 1,517 3,236 3,240
Oil and condensate (MBbls) . . 1,085 234 1,415 478
Helium (MMcf). . . . . . . . . 50 53 106 109
Average Prices:
Natural gas (per Mcf). . . . . $ 1.92 $ 2.06 $ 2.40 $ 2.17
Natural gas liquids (per Bbl). 13.13 13.17 15.57 13.52
Oil and condensate (per Bbl) . 18.15 19.54 18.43 18.55
Helium (per Mcf) . . . . . . . 25.85 26.73 26.99 26.45
*Equivalent natural gas production is based on a factor of six Mcf per barrel
of liquids.
MESA's natural gas production declined in 1997 as a result of natural
production declines in the Hugoton field and the Gulf Coast and a post-payout
reduction in MESA's working interest in certain Gulf Coast wells in early
1997. MESA's combined natural gas liquids and oil and condensate production
increased in 1997 as a result of the acquisition of condensate and natural gas
liquid interests from MAPCO effective January 1, 1997, and the acquisition of
Greenhill Petroleum Corporation effective April 15, 1997.
MESA anticipates that total production for 1997 will increase over 1996
as a result of the previously mentioned acquisitions and ongoing development
activities. A field compression expansion program currently underway in the
Hugoton field is expected to increase production in the second half of 1997.
The recently completed East Cameron 322/323 drilling program is also expected
to increase Gulf Coast production in the second half of 1997.
Prices for all of MESA's production fell in the second quarter of 1997
in comparison to the second quarter of 1996. The lower recognized prices
reflect the decline in energy commodity prices but were partially offset by
MESA's hedging activities.
The following table shows the effects of MESA's hedging activities on
its prices for the periods indicated:
Quarter Ended June 30, 1997 Six Months Ended June 30, 1997
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Natural Natural Oil and Natural Natural Oil and
Gas Gas Liquids Condensate Gas Gas Liquids Condensate
($/Mcf) ($/Bbl) ($/Bbl) ($/Mcf) ($/Bbl) ($/Bbl)
------- ----------- ---------- ------- ----------- ----------
Actual price
received . . $ 1.91 $ 12.91 $ 17.65 $ 2.32 $ 15.44 $ 14.28
Effect of
hedging. . . 0.01 0.22 0.50 0.08 0.13 4.15
------- ----------- ---------- ------- ----------- ----------
Average price $ 1.92 $ 13.13 $ 18.15 $ 2.40 $ 15.57 $ 18.43
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As a result of physical sales contracts and other hedging arrangements,
MESA's estimated fixed price profile is as follows:
Percent of Floor Ceiling
Production Price Price
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Last Six Months of 1997
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Natural Gas ($/MMBtu net to MESA) . . . 55% $ 2.22 $ 2.24
Natural Gas Liquids ($/Bbl net to MESA) 10% $ 17.13 $ 17.13
Crude Oil ($/Bbl NYMEX equivalent). . . 36% $ 20.56 $ 22.63
Calendar Year 1998
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Natural Gas ($/MMBtu net to MESA) . . . 16% $ 2.67 $ 2.73
Crude Oil ($/Bbl NYMEX equivalent). . . 6% $ 19.90 $ 19.90
In addition to these hedges, MESA entered into an eight-year agreement
covering 13,000 MMBtus of natural gas per day beginning January 1, 1997.
Under this agreement, MESA will receive the NYMEX Henry Hub natural gas price
plus $0.52 per MMBtu for the first two years and ten percent of the NYMEX West
Texas Intermediate crude oil price for the remaining six years.
Pioneer Natural Resources
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On June 27, 1997, the Securities and Exchange Commission declared
effective the Joint Proxy Statement/Prospectus for the proposed merger of MESA
Inc. and Parker & Parsley Petroleum Company to form Pioneer Natural Resources
Company. Both companies have scheduled special meetings of stockholders on
August 7, 1997, to consider and vote on the proposed merger.
Forward Looking Statements
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This announcement 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 Such forward-looking
statements include, without limitation, estimates with respect to reserves,
production levels, cash flows and capital expenditures Although MESA believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct Forward-looking statements are qualified as may be provided in
MESA's annual, quarterly and current reports and registration statements filed
with the Securities and Exchange Commission.
Results of Operations
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Shown below are the unaudited condensed consolidated results of
operations for the three- and six-month periods ended June 30, 1997 and 1996
(in thousands, except per share data):
Three Months Ended Six Months Ended
June 30 June 30
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1997 1996 1997 1996
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Revenues:
Natural gas. . . . . . . . . . $ 34,246 $ 44,243 $ 88,810 $ 94,810
Natural gas liquids. . . . . . 20,395 19,979 50,439 43,115
Oil and condensate . . . . . . 19,709 4,484 26,087 8,847
Other. . . . . . . . . . . . . 3,644 2,616 6,801 5,193
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77,994 71,322 172,137 151,965
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Costs and Expenses:
Lease operating expense
and production taxes . . . . 23,351 16,970 47,329 35,338
Exploration. . . . . . . . . . 2,134 2,270 8,067 2,814
General and administrative (1) 5,476 8,954 9,277 14,538
Depreciation, depletion and
amortization . . . . . . . . 30,787 22,068 56,510 46,064
Impairment of long-lived assets 2,907 -- 2,907 6,828
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64,655 50,262 124,090 105,582
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Operating Income . . . . . . . . 13,339 21,060 48,047 46,383
-------- -------- -------- --------
Other Income (Expense):
Interest expense, net of
interest income . . . . . . (25,314) (32,417) (47,571) (66,949)
Gains from investments . . . . -- 586 -- 9,349
Other . . . . . . . . . . . . (2,263) 15,318 (2,493) 16,821
-------- -------- -------- --------
(27,577) (16,513) (50,064) (40,779)
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Net Income (Loss). . . . . . . . $(14,238) $ 4,547 $ (2,017) $ 5,604
-------- -------- -------- --------
Dividends on Preferred Stock . . (5,609) -- (11,105) --
-------- -------- -------- --------
Net Income Applicable to
Common Stock . . . . . . . . . $(19,847) $ 4,547 $(13,122) $ 5,604
======== ======== ======== ========
Net Income Per Common Share. . . $ (0.31) $ 0.07 $ (0.20) $ 0.09
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Weighted Average Common
Shares Outstanding . . . . . . 64,280 64,507 64,280 64,053
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(1) Includes $3.6 million charge associated with a reduction in personnel in
the second quarter of 1996.
Financial Position
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Shown below are the condensed consolidated balance sheets as of June 30,
1997 and December 31, 1996 (in thousands):
June 30, December 31,
1997 1996
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(unaudited)
Assets:
Current assets. . . . . . . . . . . . . $ 70,832 $ 84,277
Property, plant and equipment, net. . . 1,351,732 1,046,384
Other assets. . . . . . . . . . . . . . 82,894 83,218
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$ 1,505,458 $ 1,213,879
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Liabilities:
Current liabilities . . . . . . . . . . $ 58,950 $ 69,500
Long-term debt. . . . . . . . . . . . . 1,102,999 802,772
Deferred revenue and other liabilities. 80,032 76,113
Stockholders' Equity. . . . . . . . . . . . . 263,477 265,494
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$ 1,505,458 $ 1,213,879
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Cash Flows
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The following is an unaudited summary of cash flows from operating
activities for the six months ended June 30, 1997 and 1996 (in thousands):
Six Months Ended
June 30
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1997 1996
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Net income (loss) . . . . . . . . . . . . . . . . $ (2,017) $ 5,604
Depreciation, depletion and amortization. . . . . 56,510 46,064
Impairment of long-lived assets . . . . . . . . . 2,907 6,828
Accreted interest on discount notes . . . . . . . 9,227 (215)
Investment activity, net. . . . . . . . . . . . . (405) 38,276
Changes in operating receivables and payables . . 11,554 (20,053)
Other . . . . . . . . . . . . . . . . . . . . . . 9,986 2,069
-------- --------
Cash provided by (used in)operating activities $ 87,762 $ 78,573
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