UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(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: 1-10671
TEXAS MERIDIAN RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0319553
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15995 N. BARKERS LANDING, SUITE 300, HOUSTON, TEXAS 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 281-558-8080
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 and 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 [ ]
Number of shares of Common Stock outstanding at November 11, 1996 14,452,396
Page 1 of 17
TEXAS MERIDIAN RESOURCES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
PAGE
NUMBER
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations (unaudited)
for the Three Months and Nine Months Ended
September 30, 1995 and 1996 .......................... 3
Consolidated Balance Sheets as of December 31, 1995
and September 30, 1996 (unaudited) ................... 4
Consolidated Statements of Cash Flows (unaudited) for the
Nine Months Ended September 30, 1995 and 1996 ........ 6
Consolidated Statements of Changes in Stockholders'
Equity (unaudited) for the Nine Months Ended
September 30, 1995 and 1996 .......................... 7
Notes to Consolidated Financial Statements (unaudited) .. 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 10
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K ........................ 16
SIGNATURES ............................................................. 17
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TEXAS MERIDIAN RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------- -------------------
1996 1995 1996 1995
------- ------- -------- -------
(in thousands, except per share information)
REVENUES:
Oil and natural gas .......... $ 6,583 $ 2,615 $ 16,479 $ 7,236
Interest and other ........... 273 478 1,084 545
------- ------- -------- -------
6,856 3,093 17,563 7,781
------- ------- -------- -------
COSTS AND EXPENSES:
Oil and natural gas operating 203 161 619 454
Severance and ad valorem taxes 500 216 1,042 574
Depletion, depreciation
and amortization ......... 2,473 1,291 6,408 3,287
General and administrative ... 947 774 2,769 2,452
Interest ..................... 8 23 16 43
------- ------- -------- -------
4,131 2,465 10,854 6,810
------- ------- -------- -------
INCOME BEFORE
INCOME TAXES ................. 2,725 628 6,709 971
------- ------- -------- -------
INCOME TAX EXPENSE:
Current ...................... -- 6 (26) 26
Deferred ..................... 954 -- 2,058 --
------- ------- -------- -------
954 6 2,032 26
------- ------- -------- -------
NET INCOME ....................... $ 1,771 $ 622 $ 4,677 $ 945
======= ======= ======== =======
Net income per common
and common equivalent share .. $ 0.11 $ 0.04 $ 0.30 $ 0.07
======= ======= ======== =======
Weighted average number of common
and common equivalent shares . 15,727 15,336 15,622 12,902
======= ======= ======== =======
See notes to consolidated financial statements.
3
TEXAS MERIDIAN RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 15,871 $ 35,658
Accounts receivable (less allowance for
doubtful receivables of $121,000 in
1996 and 1995) ............................. 7,255 2,155
Due from affiliates ............................ 2,087 1,171
Prepaid expenses and other ..................... 223 141
-------- --------
Total current assets .................... 25,436 39,125
-------- --------
PROPERTY AND EQUIPMENT:
Oil and natural gas properties, full cost
method (including $16,593,000 [1996] and
$16,950,000 [1995] not subject to depletion,
depreciation and amortization) ............. 76,839 54,649
Land ........................................... 553 887
Equipment ...................................... 2,741 1,521
-------- --------
80,133 57,057
Less accumulated depletion,
depreciation and amortization .............. (16,167) (9,833)
-------- --------
63,966 47,224
-------- --------
OTHER ASSETS, NET .................................. 447 377
-------- --------
$ 89,849 $ 86,726
======== ========
See notes to consolidated financial statements.
4
TEXAS MERIDIAN RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(unaudited)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................... $ 2,344 $ 6,348
Revenues and royalties payable ................. 5,390 3,366
Accrued liabilities ............................ 3,417 5,473
-------- --------
Total current liabilities ............... 11,151 15,187
-------- --------
DEFERRED INCOME TAXES .............................. 2,058 --
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value
(25,000,000 shares authorized,
none issued and outstanding) ............... -- --
Common Stock, $0.01 par value
(100,000,000 share authorized,
14,452,395 [1996] and 14,430,176 [1995]
issued and outstanding) .................... 145 144
Additional paid-in capital ..................... 74,727 74,141
Accumulated earnings (deficit) ................. 1,931 (2,746)
Unamortized deferred compensation .............. (163) --
-------- --------
Total stockholders' equity .............. 76,640 71,539
-------- --------
$ 89,849 $ 86,726
======== ========
See notes to consolidated financial statements.
5
TEXAS MERIDIAN RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
----------------------
1996 1995
-------- --------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................... $ 4,677 $ 945
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depletion, depreciation and amortization ... 6,335 3,253
Amortization of other assets ............... 73 34
Deferred income taxes ...................... 2,058 --
Non-cash compensation ...................... 297 --
Changes in assets and liabilities:
Increase in accounts receivable ............ (5,100) (681)
Increase in due from affiliates ............ (916) (374)
Increase in prepaid expenses and other
current assets ........................... (82) (79)
Increase (decrease) in accounts payable .... (4,004) 3,231
Increase in revenues and royalties payable . 2,024 1,373
Increase in accrued liabilities ............ 500 714
-------- --------
Net cash provided by operating activities ...... 5,862 8,416
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions, net ...... (25,632) (14,853)
Other ...................................... (135) 6
-------- --------
Net cash used in investing activities .......... (25,767) (14,847)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
borrowings ............................... -- 2,800
Reductions in long-term debt ............... -- (2,800)
Deferred loan costs ........................ (9) (192)
Common Stock offering, net of
issuance costs ........................... -- 36,876
Exercise of stock options .................. 127 152
-------- --------
Net cash provided by financing
activities ................................... 118 36,836
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS ............ (19,787) 30,405
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD ......................... 35,658 4,111
-------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ............................... $ 15,871 $ 34,516
======== ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Interest paid .................................. $ -- $ 39
======== ========
Income taxes paid .............................. $ -- $ 37
======== ========
See notes to consolidated financial statements.
6
TEXAS MERIDIAN RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
(in thousands)
ACCUMU-
COMMON STOCK ADDITIONAL LATED UNAMORTIZED
NO. OF PAR PAID-IN EARNINGS DEFERRED
SHARES VALUE CAPITAL (DEFICIT) COMPENSATION TOTAL
------ ---- ------- ------- ------------ -------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996:
Balance, January 1, 1996 ............... 14,430 $144 $74,141 $(2,746) $-- $71,539
Exercise of stock options .......... 16 -- 127 -- -- 127
Company's 401(k) Plan
contribution ................... 6 -- 80 -- -- 80
Issuance of rights to
Common Stock ................... -- 1 379 -- (380) --
Compensation expense ............... -- -- -- -- 217 217
Net income ......................... -- -- -- 4,677 -- 4,677
------ ---- ------- ------- ----- -------
Balance, September 30, 1996 ............ 14,452 $145 $74,727 $ 1,931 $(163) 76,640
====== ==== ======= ======= ===== =======
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995:
Balance, January 1, 1995 ............... 10,593 $106 $37,151 $(4,899) $-- $32,358
Common Stock offering,
net of issuance costs .......... 3,795 38 36,838 -- -- 36,876
Exercise of stock options .......... 42 -- 152 -- -- 152
Net income ......................... -- -- -- 945 -- 945
------ ---- ------- ------- ----- -------
Balance, September 30, 1995 ............ 14,430 $144 $74,141 $(3,954) -- $70,331
====== ==== ======= ======= ----- =======
See notes to consolidated financial statements.
7
TEXAS MERIDIAN RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
These consolidated financial statements reflect the accounts of Texas
Meridian Resources Corporation ("TMRC") and its subsidiaries after elimination
of all significant intercompany transactions and balances. The financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in TMRC's Annual Report on Form 10-K for
the year ended December 31, 1995, as filed with the Securities and Exchange
Commission ("SEC").
The financial statements included herein as of September 30, 1996, and
for the three and nine month periods ended September 30, 1995 and 1996 are
unaudited, and, in the opinion of management, the information furnished reflects
all material adjustments, consisting of normal recurring adjustments, necessary
for a fair statement of the results for the interim periods presented. Certain
items in the prior year statements have been reclassified to conform with the
current year presentation.
2. STOCKHOLDERS' EQUITY
STOCK OPTIONS
Options to purchase the Company's Common Stock have been granted to
officers, employees, nonemployee directors and certain key individuals, under
various stock option plans. Options generally become exercisable in 25%
cumulative annual increments, beginning with the date of grant, and expire at
the end of ten years. At September 30, 1996, 530,811 shares were available for
grant under the plans. A summary of option transactions during the first nine
months of 1996 are as follows:
NUMBER
OF OPTION PRICE
SHARES PER SHARE
------- -----------
Outstanding at December 31, 1995 ............. 741,750 $1.13-13.13
Granted ................................... 189,750 9.00-12.25
Exercised ................................. (16,250) 5.38-10.38
Canceled .................................. (29,250) 5.38-11.00
-----------
Outstanding at September 30, 1996 ............ 886,000 1.13-13.13
===========
Shares exercisable at September 30, 1996 ..... 515,559 1.13-13.13
-----------
The weighted average exercise price of options outstanding at September
30, 1996 was $7.41.
8
DEFERRED COMPENSATION
In July 1996, the Company through the Compensation Committee of the
Board of Directors granted to Messrs. Reeves and Mayell (the Company's Chief
Executive Officer and President, respectively) rights to the Company's Common
Stock in lieu of cash compensation pursuant to the Company's Long-Term Incentive
Plan. Under such grants, Messrs. Reeves and Mayell each elected to defer
$180,000 and $400,000 of their compensation for 1996 and 1997, respectively. The
Company also granted to each officer a 100% matching deferral, which is subject
to a one-year vesting. Under the terms of the grants, the employee and matching
deferrals are allocated to a Common Stock account in which units are credited to
the accounts of the officer based on the number of shares that could be
purchased at the market price of the Common Stock at June 28, 1996, for the
deferrals of 1996 and at December 31, 1996, for the deferrals of 1997. At
September 30, 1996, 33,333 rights have been granted and under this plan 250,000
shares of Common Stock have been reserved for future issuance. No actual shares
of Common Stock are issued and the officer has no rights with respect to any
shares unless and until there is a distribution. Distributions are to be made
upon the death, retirement or termination of employment of the officer.
The obligations of the Company with respect to the deferrals are
unsecured obligations of the Company. The shares of Common Stock that may be
issuable upon distribution of deferrals have been treated as a Common Stock
equivalent in the financial statements of the Company. The compensation expense
relating to these grants is reflected as a general and administrative expense.
3. EARNINGS PER SHARE
Earnings per share are calculated by dividing net income by the weighted
average common shares and (in periods in which they have a dilutive effect)
common share equivalents outstanding during the period. Shares of Common Stock
issuable under stock options and warrants are treated as common share
equivalents when dilutive.
For 1995 and 1996 there is no difference between primary and fully
diluted earnings per share.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following is a discussion of the Company's financial operations for
the three and nine month periods ended September 30, 1996 and 1995. The notes to
the Company's consolidated financial statements included in this report, as well
as the Company's Annual Report on Form 10-K for the year ended December 31, 1995
(and the notes attached thereto), should be read in conjunction with this
discussion.
OVERVIEW
The Company recognized record earnings and operating cash flow during
the three and nine month periods ended September 30, 1996. These results reflect
significant production gains resulting from the Company's successful exploration
and development activities in recent periods and an increase in the Company's
capital expenditures for exploration and development in 1996. The Company has
also benefitted during 1996 through increases in oil and natural gas prices as
well as reduced operating expenses, depletion, depreciation and amortization
expense, and general and administrative expenses as a percentage of revenues due
to the Company's increased levels of production.
Revenues increased by 126% for the first nine months of 1996 over the
same period in 1995. The revenue increase reflects a balance between
substantially higher oil and natural gas production and increased oil and
natural gas prices. Oil production for the first nine months ended September 30,
1996 was up 150% and natural gas production increased 32% over the respective
levels in the prior year. Oil prices increased 18% for the 1996 nine month
period to $21.04 per barrel compared to the first nine months of 1995, while gas
prices were 49% higher at $2.46 per MCF. The Company expects fourth quarter
production to continue to increase with the addition of a full quarter's
production from the Henry No. 27-2 well and production from the successful TMRX
Ben Todd No. 1 well that was placed on production in October.
In July 1995, the Company completed a public offering of 3,795,000
shares of Common Stock and raised approximately $36.9 million net of offering
expenses. The net proceeds from this offering are being used to help fund an
expansion of the Company's exploration and development program. The Company has
currently developed various 3-D seismic surveys and has two covering a total of
80 square miles in the evaluation phase and three covering a total of 180 square
miles in the acquisition phase. The Company anticipates starting at least one
more survey by year end. The Company currently has 2 wells drilling and expects
to drill between 15 and 20 exploratory and development wells during 1997.
The Company has also entered into a definitive agreement with the
Louisiana Land and Exploration Company ("LL&E") to form a joint venture alliance
to pursue exploration prospects in the coastal transition zones of south
Louisiana. Under the alliance, the Company and LL&E have designated an
approximate 1,500 square mile area of mutual interest in which they will jointly
pursue prospectus utilizing 3-D seismic data and computer assisted technology.
The alliance includes a joint drilling program following the acquisition of
seismic data, geological options and leases in the exploration area. The Company
currently expects the acquisition of 200 square miles of seismic data prior to
year end and the commencement of drilling the first
10
prospects under this alliance in the first or second quarter of 1997.
Although there can be no assurance as to the results of the Company's
current drilling program, the increase in the Company's exploration activities
is expected to result in increased revenue and income for the remainder of 1996
and into 1997. Future results, however, will be subject to the level of success
in the program, performance of existing producing wells and prevailing prices of
crude oil and natural gas.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1996, the Company's liquidity needs were
met from oil and natural gas production sales and from cash reserves. As of
September 30, 1996, the Company had a cash balance of $15.9 million and working
capital of $14.3 million.
Capital expenditures for the first three quarters of 1996 consisted of
$26.1 million for property and equipment additions related to exploration and
development of various prospects, including lease, seismic data acquisitions,
drilling and completion costs. An insurance claim of $3.9 million has been
offset against the year's first nine months capital expenditures resulting in
additions of $25.6 million which are reflected on this period's cash flow
statement. The Company has budgeted approximately $8.0 million in capital
expenditures for the fourth quarter of 1996 and anticipates capital expenditures
in excess of $45.0 million during 1997 for the further development and drilling
of its south Louisiana and southeast Texas prospects.
Future cash requirements are expected to be provided from existing cash,
cash flow from current properties and newly-drilled properties developed on the
Company's exploration prospects and borrowings under the Company's credit
facility with Chase Manhattan Bank. Cash requirements beyond 1996 will be
dependent upon the success of the Company's current drilling program, the scope
of the activities to be undertaken by the Company under the exploration joint
venture with LL&E and capital expenditures required for ongoing exploration and
development activities.
In management's opinion, the Company has sufficient capital resources
available to fund its exploration and development drilling plans as well as any
other obligations and liquidity requirements.
It is the policy of the Company to retain its existing cash for
reinvestment in the businesses of the Company and not to pay dividends with
respect to its Common Stock. This policy is expected to continue in the
foreseeable future.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED
TO THE THREE MONTHS ENDED SEPTEMBER 30, 1995
OPERATING REVENUES. Third quarter 1996 oil and natural gas revenues increased
$4.0 million compared to third quarter 1995 revenues due to a significant
increase in oil production and a strong rise in average natural gas prices.
11
Oil and natural gas production rose by 207% and 27%, respectively, due
in large part to the successful completion of several wells in south Louisiana
and southeast Texas. Oil and natural gas prices rose during the three months
ended September 30, 1996, by 27% and 53%, respectively, over the third quarter
in 1995 due to, among other things, stronger demand associated with economic
growth and weather conditions coupled with low fuel oil inventories and natural
gas storage levels.
The following table summarizes operating revenues, production volumes
and average sales prices for the Company for the three months ended September
30, 1995 and 1996.
1996
THREE MONTHS ENDED 1996 PERCENTAGE
SEPTEMBER 30, INCREASE INCREASE
1996 1995 (DECREASE) (DECREASE)
------ ------ ---------- ----------
Volume:
Oil (Mbbl) ........... 138 45 93 207%
Natural Gas (Mmcf) ... 1,469 1,158 311 27%
Average Price Per Unit:
Oil (Bbl) ............ $21.78 $17.16 $ 4.62 27%
Natural Gas (Mcf) .... $ 2.44 $ 1.59 $ .85 53%
Gross Revenues (000's):
Oil .................. $3,006 $ 772 $2,234 289%
Natural Gas .......... 3,577 1,843 1,734 94%
------ ------ ------ ---
Total ............ $6,583 $2,615 $3,968 152%
====== ====== ====== ===
OPERATING EXPENSES. Oil and natural gas operating expenses of $0.2 million for
the three months ended September 30, 1996 remained flat to the same period of
1995. Operating expenses were maintained at this level notwithstanding
additional wells being on stream during the third quarter of 1996 compared to
the same period during 1995. As a percentage of revenues, operating expenses
declined from 5.2% to 3.0%.
SEVERANCE AND AD VALOREM TAXES. Third quarter 1996 severance and ad valorem
taxes increased by $0.3 million from $0.2 million during the same period in
1995. This increase was caused by higher oil and natural gas revenues and a
significant increase of Louisiana oil production, which has a higher severance
tax relative to natural gas.
INTEREST AND OTHER INCOME. Interest and other income during the third quarter
1996 decreased $0.2 million from the same quarter of 1995. This decrease was the
result of lower cash balances as the Company continues to invest its cash
resources in exploration activities.
DEPLETION, DEPRECIATION AND AMORTIZATION. Depletion, depreciation and
amortization expense
12
("DD&A") increased during the quarter ended September 30, 1996, to $2.5 million
from $1.3 million for the comparable period of 1995. DD&A increased primarily as
a result of increased total production. The Company uses the unit of production
method to amortize its oil and natural gas properties. As a percentage of
revenues, DD&A decreased from 41.7% to 36.1% in the third quarter of 1996
compared to the third quarter of 1995.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased
$0.1 million during the third quarter of 1996 compared to the third quarter of
1995, but declined as a percentage of revenues. The increase is due primarily to
an expansion of the Company's exploration and production activities.
INCOME TAX EXPENSE. As a result of the Company's income position, a provision
for deferred income taxes of $1.0 million was recorded in the third quarter of
1996 for financial reporting purposes, while no provision was required in 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED
TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995
OPERATING REVENUES. Oil and natural gas revenues for the nine months ended
September 30, 1996, increased $9.2 million, or 128%, compared to the nine months
ended September 30, 1995. This increase was attributable to increases in both
production and prices of oil and natural gas.
The following table summarizes operating revenues, production volumes
and average sales prices for the Company for the nine months ended September 30,
1995 and 1996.
1996
NINE MONTHS ENDED 1996 PERCENTAGE
SEPTEMBER 30, INCREASE INCREASE
1996 1995 (DECREASE) (DECREASE)
------- ------ ---------- ----------
Volume:
Oil (Mbbl) .......... 320 128 192 150%
Natural Gas (Mmcf) .. 3,967 3,008 959 32%
Average Price Per Unit:
Oil (Bbl) ........... $ 21.04 $17.84 $ 3.20 18%
Natural Gas (Mcf) ... $ 2.46 $ 1.65 $ 0.81 49%
Gross Revenues (000's):
Oil ................. $ 6,733 $2,283 $4,450 195%
Natural Gas ......... 9,746 4,953 4,793 97%
------- ------ ------ ---
Total ........... $16,479 $7,236 $9,243 128%
======= ====== ====== ===
13
OPERATING EXPENSES. Oil and natural gas operating expenses increased $0.2
million to $0.6 million for the nine months ended September 30, 1996, compared
to $0.5 million for the nine months ended September 30, 1995. This increase was
primarily related to the additional wells brought on production during the last
twelve months. As a percentage of revenues, operating expenses declined from
5.8% to 3.5% in the first nine months of 1996 compared to the same period of
1995.
SEVERANCE AND AD VALOREM TAXES. Severance and ad valorem taxes increased $0.5
million for the first three quarters of 1996 compared to the same period of
1995. The increase was a direct result of higher oil and natural gas revenues
and a significant increase of Louisiana oil production with its associated
higher severance tax burden.
INTEREST AND OTHER INCOME. Interest and other income during the first nine
months of 1996 increased $0.5 million compared to the first nine months of 1995.
This increase was the result of a significant increase in the average cash
balances following the Company's July 1995 public offering of Common Stock.
DEPLETION, DEPRECIATION AND AMORTIZATION. DD&A increased during the nine months
ended September 30, 1996 to $6.4 million from $3.3 million for the comparable
period of 1995. DD&A increased primarily as a result of increased total
production. The Company uses the unit of production method to amortize its oil
and natural gas properties. As a percentage of revenues, DD&A decreased from
42.2% to 38.9% in the nine months ended September 30, 1996 compared to the first
nine months of 1995.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased
$0.3 million to $2.8 million for the first three quarters of 1996 compared to
$2.5 million for the first three quarters of 1995, but declined as a percentage
of revenues. The increase is due primarily to an expansion of the Company's
exploration and production activities.
INCOME TAX EXPENSE. As a result of the Company's income position, a provision
for deferred income taxes of $2.0 million was recorded in the first nine months
of 1996 for financial reporting purposes.
OTHER
From time to time, the Company may make certain statements that contain
"forwardlooking" information (as defined in the Private Securities Litigation
Reform Act of 1995) and that involve risk and uncertainty. These forward-looking
statements may include, but are not limited to, exploration and seismic
acquisition plans, anticipated results from current and future exploration
prospects, the anticipated results of wells based on logging data and production
tests, future sales of production, earnings, margins, production levels and
costs, market trends in the oil and gas industry and the exploration and
development sector thereof, environmental and other expenditures and various
business trends. Forward-looking statements may be made by management orally or
in writing including, but not limited to, the Management's Discussion and
Analysis and Financial Condition Results of Operation section and other sections
of the Company's filings with the Securities and Exchange Commission under the
Securities Act of 1933 and the Securities Exchange Act of 1934.
14
Actual results and trends in the future may differ materially depending
on a variety of factors including, but not limited to, the success of the
Company's exploration and development program, changes in the price of oil and
natural gas, world-wide political stability and economic growth, the Company's
successful execution of internal exploration, development and operating plans,
environmental regulation and costs, regulatory uncertainties and legal
proceedings.
15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.1 Deferred Compensation Agreement dated July 31, 1996, between
Texas Meridian Resources Corporation and Joseph A. Reeves, Jr.
10.2 Deferred Compensation Agreement dated July 31, 1996, between
Texas Meridian Resources Corporation and Michael J. Mayell.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
The Registrant filed no reports on Form 8-K during the quarter covered
by this report.
16
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.
TEXAS MERIDIAN RESOURCES CORPORATION AND SUBSIDIARIES
(Registrant)
Date: November 12, 1996 By: /s/ LLOYD V. DELANO
Lloyd V. DeLano
Vice President - Director of Accounting
(Chief Financial and Accounting Officer)
17