UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 June 30, 1997
-------------
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 1-10537
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NUEVO ENERGY COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 76-0304436
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1331 Lamar, Suite 1650, Houston, Texas 77010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 713/652-0706
-----------------------------
Not Applicable
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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
------- ----
As of August 5, the number of outstanding shares of the Registrant's common
stock was 19,664,546.
NUEVO ENERGY COMPANY
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INDEX
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PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets:
June 30, 1997 (Unaudited) and December 31, 1996.............. 3
Condensed Consolidated Statements of Operations (Unaudited):
Three and six months ended June 30, 1997 and
June 30, 1996............................................... 5
Condensed Consolidated Statements of Cash Flows (Unaudited):
Six months ended June 30, 1997 and
June 30, 1996............................................... 7
Notes to Condensed Consolidated Financial Statements
(Unaudited).................................................. 9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 15
PART II. OTHER INFORMATION................................... 27
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NUEVO ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
ASSETS
------
June 30, 1997 December 31, 1996
-------------- ------------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents.................. $ 4,874 $ 13,636
Accounts receivable........................ 40,660 43,204
Product inventory.......................... 2,824 2,731
Prepaid expenses and other................. 2,837 4,067
---------- ----------
Total current assets..................... 51,195 63,638
---------- ----------
PROPERTY AND EQUIPMENT, AT COST:
Land....................................... 49,696 49,696
Buildings and improvements................. 5,435 5,304
Oil and gas properties (full cost method).. 1,133,540 1,031,057
Pipeline and other facilities.............. 47,653 46,887
Gas plant facilities....................... 15,000 41,694
---------- ----------
1,251,324 1,174,638
Accumulated depreciation, depletion and
amortization............................. (434,620) (392,977)
---------- ----------
816,704 781,661
---------- ----------
OTHER ASSETS................................ 16,121 18,504
---------- ----------
$ 884,020 $ 863,803
========== ==========
See accompanying notes to condensed consolidated financial statements.
3
NUEVO ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
(Amounts in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, 1997 December 31, 1996
-------------- -----------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable............................................ $ 10,184 $ 18,720
Accrued interest............................................ 3,943 4,736
Accrued liabilities......................................... 18,647 11,236
Current maturities of long-term debt........................ 3,716 5,408
-------- --------
Total current liabilities................................ 36,490 40,100
-------- --------
OTHER LONG-TERM LIABILITIES................................... 2,969 3,864
DEFERRED REVENUE.............................................. 3,136 4,828
LONG-TERM DEBT, NET OF CURRENT MATURITIES..................... 294,292 287,038
DEFERRED TAXES................................................ 48,066 35,153
MINORITY INTEREST............................................. 699 704
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S
CONVERTIBLE DEBENTURES (TECONS).............................. 115,000 115,000
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 50,000,000 shares authorized,
19,664,046 and 19,852,478 shares issued and outstanding
at June 30, 1997 and December 31, 1996, respectively......... 202 199
Additional paid-in capital.................................. 347,807 340,126
Treasury stock, at cost, 542,491 shares..................... (21,173) ---
Retained earnings........................................... 56,532 36,791
-------- --------
Total stockholders' equity.............................. 383,368 377,116
-------- --------
$884,020 $863,803
======== ========
See accompanying notes to condensed consolidated financial statements.
4
NUEVO ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in Thousands, Except per Share Data)
Three Months Ended June 30,
---------------------------
1997 1996
-------- --------
REVENUES:
Oil and gas revenues............................ $79,206 $83,484
Gas plant revenues.............................. 2,773 7,776
Pipeline and other revenues..................... 1,240 1,643
Gain on sale of asset........................... 3,039 ---
Interest and other income....................... 351 612
------- -------
86,609 93,515
------- -------
COSTS AND EXPENSES:
Lease operating expenses........................ 28,602 29,849
Gas plant operating expenses.................... 2,349 6,863
Pipeline and other operating expenses........... 975 1,557
Depreciation, depletion and amortization........ 22,628 23,473
General and administrative expenses............. 3,816 3,017
Management fees................................. 4,200 3,811
Interest expense................................ 7,263 12,445
Dividends on Guaranteed Preferred
Beneficial Interests in Company's
Convertible Debentures (TECONS)............... 1,655 ---
Other expense..................................... 10 31
------- -------
71,498 81,046
------- -------
Income before income taxes, minority interest,
and extraordinary item........................... 15,111 12,469
Provision for income taxes........................ 6,083 5,308
Minority interest................................. 9 (27)
------- -------
Income before extraordinary item.................. $ 9,019 $ 7,188
======= =======
Extraordinary loss on early extinguishment
of debt, net of income tax benefit.............. 3,024 ---
------- -------
NET INCOME........................................ $ 5,995 $ 7,188
======= =======
Dividends on Preferred Stock...................... --- 264
------- -------
EARNINGS AVAILABLE TO COMMON STOCKHOLDERS......... $ 5,995 $ 6,924
======= =======
Earnings per common and common equivalent share:
Earnings before extraordinary item.............. $ .45 $ .38
Extraordinary item (net of tax benefit)......... (.15) ---
------- -------
Net earnings................................... $ .30 $ .38
======= =======
Earnings per common and common equivalent
share assuming full dilution..................... $ .30 $ .37
======= =======
Average common and common equivalent shares
outstanding...................................... 20,298 18,292
======= =======
Average common and common equivalent shares
outstanding assuming full dilution.............. 20,298 19,579
======= =======
See accompanying notes to condensed consolidated financial statements.
5
NUEVO ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in Thousands, Except per Share Data)
Six Months Ended June 30,
---------------------------
1997 1996
------------- ------------
REVENUES:
Oil and gas revenues............................. $170,319 $109,071
Gas plant revenues............................... 11,597 14,798
Pipeline and other revenues...................... 2,737 3,345
Gain on sale of asset............................ 3,039 ---
Interest and other income........................ 942 726
-------- --------
188,634 127,940
-------- --------
COSTS AND EXPENSES:
Lease operating expenses......................... 59,361 35,982
Gas plant operating expenses..................... 10,220 12,454
Pipeline and other operating expenses............ 2,301 2,781
Depreciation, depletion and amortization......... 44,872 31,533
General and administrative expenses.............. 7,956 4,316
Management fees.................................. 8,295 5,569
Interest expense................................. 14,008 16,183
Dividends on Guaranteed Preferred Beneficial
Interests in Company's convertible
debentures (TECONS)............................ 3,270 ---
Other expense.................................... 259 49
-------- --------
150,542 108,867
-------- --------
Income before income taxes, minority
interest, and extraordinary item................. 38,092 19,073
Provision for income taxes........................ 15,332 7,725
Minority interest................................. (5) (41)
-------- --------
Income before extraordinary item.................. $ 22,765 $ 11,389
======== ========
Extraordinary loss on early extinguishment
of debt, net of income tax benefit.............. 3,024 ---
-------- --------
NET INCOME........................................ $ 19,741 $ 11,389
======== ========
Dividends on Preferred Stock...................... --- 529
-------- --------
EARNINGS AVAILABLE TO COMMON STOCKHOLDERS......... $ 19,741 $ 10,860
======== ========
Earnings per common and common equivalent share:
Earnings before extraordinary item............... $ 1.11 $ .71
Extraordinary item (net of tax benefit).......... (.15) ---
-------- --------
Net earnings................................... $ .96 $ .71
======== ========
Earnings per common and common equivalent
share assuming full dilution.................... $ .96 $ .68
======== ========
Average common and common equivalent
shares outstanding.............................. 20,572 15,260
======== ========
Average common and common equivalent shares
outstanding assuming full dilution.............. 20,572 16,647
======== ========
See accompanying notes to condensed consolidated financial statements.
6
NUEVO ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in Thousands, Except per Share Data)
Six Months Ended June 30,
---------------------------
1997 1996
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................... $ 19,741 $ 11,389
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization.... 44,872 31,533
Amortization of other costs................. 821 187
Gain on sale of asset....................... (3,039) ---
Extraordinary loss on early extinguishment
of debt, net of income tax benefit......... 3,024 ---
Deferred revenues........................... (1,692) (2,189)
Deferred taxes.............................. 14,982 7,725
Minority interest........................... (5) (41)
Stock bonus awards.......................... 646 ---
--------- ---------
79,350 48,604
Change in assets and liabilities:
Accounts receivable........................... 654 (43,625)
Accounts payable and accrued liabilities...... 594 42,146
Minority interest distributions............... --- (160)
Other......................................... 307 (8,592)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 80,905 38,373
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties............. (102,482) (481,958)
Additions to gas plant facilities............... (704) (603)
Additions to pipeline and other facilities...... (897) (49,540)
Proceeds from sale of gas plant................. 24,992 ---
Proceeds from sales of properties............... 2,150 28,793
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES............. (76,941) (503,308)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings........................ 140,500 408,000
Payments of long-term debt...................... (135,651) (74,608)
Premium to retire long-term debt................ (3,440) ---
Proceeds from sale of put options............... 1,630 ---
Treasury stock purchase......................... (21,173) ---
Preferred stock dividends....................... --- (529)
Proceeds from issuance of common stock.......... 5,408 136,988
--------- ---------
NET CASH (USED IN)/PROVIDED BY FINANCING
ACTIVITIES...................................... (12,726) 469,851
--------- ---------
Net (decrease)/increase in cash and cash
equivalents................................... (8,762) 4,916
Cash and cash equivalents at beginning of
period........................................ 13,636 5,765
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........ $ 4,874 $ 10,681
========= =========
7
NUEVO ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued (Unaudited)
(Amounts in Thousands, Except per Share Data)
(AMOUNTS IN THOUSANDS)
Six Months Ended June 30,
-------------------------
1997 1996
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of $1,661 capitalized
during six months ended June 30, 1997)......... $15,366 $12,094
Income taxes................................... $ 350 $ ---
See accompanying notes to condensed consolidated financial statements.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with instructions to Form 10-Q and, therefore, do
not include all disclosures required by generally accepted accounting
principles. However, in the opinion of management, these statements include
all adjustments, which are of a normal recurring nature, necessary to present
fairly the financial position at June 30, 1997 and December 31, 1996 and the
results of operations and changes in cash flows for the periods ended June
30, 1997 and 1996. These financial statements should be read in conjunction
with the financial statements and notes to the financial statements in the
1996 Form 10-K of Nuevo Energy Company (the "Company") that was filed with
the Securities and Exchange Commission.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes derivative financial instruments to reduce its exposure
to changes in the market price of natural gas and crude oil. Commodity
derivatives utilized as hedges include futures and swap contracts, which are
used to hedge natural gas, and option contracts, which are used to hedge oil.
Natural gas basis swaps are sometimes used to hedge the basis differential
between the derivative financial instrument index price and the natural gas
field price. In order to qualify as a hedge, price movements in the
underlying commodity derivative must be highly correlated with the hedged
commodity. Settlement of gains and losses on price swap contracts are
realized monthly, generally based upon the difference between the contract
price and the average closing New York Mercantile Exchange ("NYMEX") price
and are reported as a component of oil and gas revenues and operating cash
flows in the period realized.
Gains and losses on option and futures contracts that qualify as a hedge of
firmly committed or anticipated purchases and sales of oil and gas
commodities are deferred on the balance sheet and recognized in income and
operating cash flows when the related hedged transaction occurs. Premiums
paid on option contracts are deferred and amortized over the terms of the
respective option contracts. Gains or losses attributable to the termination
of a derivative financial instrument are deferred on the balance sheet and
recognized in revenue when the hedged crude oil and natural gas is sold.
There were no such deferred gains or losses at June 30, 1997 or December 31,
1996. Gains or losses on derivative financial instruments that do not
qualify as a hedge are recognized in income currently.
As a result of hedging transactions, oil and gas revenues were increased by
$.1 million and decreased by $.9 million in the second quarter of 1997 and
1996, respectively. During the first six months of 1997 and 1996, oil and
gas revenues were reduced by $1.7 million and $1.1 million, respectively, as
a result of these transactions.
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
USE OF ESTIMATES
In order to prepare these financial statements in conformity with generally
accepted accounting principles, management of the Company has made a number
of estimates and assumptions relating to the reporting of assets and
liabilities, the disclosure of contingent assets and liabilities and reserve
information (which affects the depletion calculation as well as the
computation of the full cost ceiling limitation). Actual results could
differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications of prior year amounts have been made to conform
with current reporting practices.
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
(Unaudited)
2. INDUSTRY SEGMENT INFORMATION
The Company's operations are concentrated primarily in two segments; the
exploration and production of oil and natural gas and gas plant, pipeline and
gas storage operations.
For the Six Months Ended
------------------------
June 30, June 30,
1997 1996
-------- --------
Sales to unaffiliated customers:
Oil and gas/(1)/........................ $170,319 $109,071
Gas plant, pipelines and other.......... 14,334 18,143
-------- --------
Total sales................................ 184,653 127,214
Gain on sale of asset................... 3,039 ---
Other revenues.......................... 942 726
-------- --------
Total revenues............................. $188,634 $127,940
======== ========
Operating profit before income taxes:
Oil and gas/(1)/........................ $ 68,060 $ 43,571
Gas plant, pipelines and other.......... 180 959
-------- --------
68,240 44,530
Unallocated corporate expenses............. 12,870 9,274
Interest expense........................... 14,008 16,183
Dividends on Guaranteed Beneficial
Interests in Company's Convertible
Debentures (TECONS)...................... 3,270 ---
-------- --------
Income before income taxes, minority
interest, and extraordinary item........ $ 38,092 $ 19,073
======== ========
Depreciation, depletion and amortization:
Oil and gas............................. $ 42,898 $ 29,518
Gas plant, pipelines and other.......... 1,633 1,949
-------- --------
$ 44,531 $ 31,467
======== ========
/(1)/ Oil and gas sales and operating profit before income taxes include
revenues associated with gas plant facilities in California, which process
immaterial amounts of third party gas.
11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
(Unaudited)
3. ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard No. 128, "Earnings per Share," was
issued by the Financial Accounting Standards Board ("FASB") in February 1997.
This statement addresses the computation, presentation, and disclosure
requirements for earnings per share ("EPS"). The Company is required to adopt
the new standard in its year-end 1997 financial statements. All prior period
EPS information (including interim EPS) is required to be restated at that
time. Early adoption is not permitted. Proforma EPS, as if the Company
adopted SFAS No. 128 on January 1, of each period presented, are as follows:
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
Basic EPS.... $ .30 $ .39 $ .99 $ .74
Diluted EPS.. $ .30 $ .37 $ .96 $ .68
4. PROPERTIES AND EQUIPMENT
In March 1997, Nuevo Ghana, Inc., a wholly-owned subsidiary of the Company,
signed a petroleum agreement (the "Agreement") with the Republic of Ghana and
the Ghana National Petroleum Corporation for petroleum rights covering
approximately 1.7 million acres offshore of Ghana in the East Cape Three
Points Prospect area. The Company is the operator with a 75% working
interest and a third party holds the remaining 25% working interest. Plans
for the remainder of 1997 include reprocessing existing seismic and shooting
additional seismic in preparation for drilling the first exploration well in
1998. This Agreement was ratified by the Parliment in Ghana on August 1,
1997.
5. FINANCING ACTIVITIES
On June 16, 1997, the Company redeemed its 12 1/2% Senior Subordinated Notes
at a total cost of $78.0 million, representing $75.0 million face value of
the debt plus a 4% premium of $3.0 million. The redemption resulted in an
extraordinary loss on early extinguishment of debt, net of the related tax
benefit, of $3.0 million. The Company used proceeds from its bank facility
to fund the redemption.
In connection with the sale of its interest in NuStar Joint Venture, the
Company used a portion of the proceeds from the sale, $5.9 million, to repay
the project financing associated with the Benedum Gas Plant.
The borrowing base on the Company's credit facility with a bank group led by
NationsBank of Texas, N.A., was increased during the quarter, from $289.0
million to $330.0 million.
12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
(Unaudited)
6. STOCKHOLDERS' EQUITY
In March 1997, the Company adopted a Shareholder Rights Plan (the "Plan") to
protect the Company's shareholders from coercive or unfair takeover tactics.
Under the Plan, each outstanding share and each share of subsequently issued
Common Stock has attached to it one Right. Generally, in the event a person
or group ("Acquiring Person") acquires or announces an intention to acquire
beneficial ownership of 15% or more of the outstanding shares of Common Stock
without the prior consent of the Company, or the Company is acquired in a
merger or other business combination, or 50% or more of its assets or earning
power is sold, each holder of a Right will have the right to receive, upon
exercise at the exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will
have a market price of two times the exercise price of the Right. The
Company may redeem each Right for $.01 at any time before a person or group
becomes an Acquiring Person without prior approval. The Rights will expire
on March 21, 2007, subject to earlier redemption by the Board of Directors of
the Company.
In March 1997, the Board of Directors of the Company authorized the open
market repurchase of up to one million shares of outstanding Common Stock
during 1997, at times and prices deemed attractive by management. During
April 1997, the Company repurchased 500,000 shares of Common Stock in open
market transactions, at an average purchase price of $38.94 per share, plus
42,491 shares acquired from the cancellation of warrants issued during 1996.
In May 1997, the Company sold put options on its Common Stock to a third
party. The options give the purchaser the right to sell the Company 500,000
shares of its Common Stock. The contract gives the Company the choice of net
cash, net share, or physical settlement. Any repurchased shares will be
treated as Treasury Stock. The Company generated $1.6 million in option
premium from these transactions which is reflected as additional paid-in
capital on the balance sheet.
During July 1997, the Board of Directors of the Company adopted a plan to
encourage senior executives to personally invest in the shares of the
Company, and to regularly review executives' ownership versus targeted
ownership objectives. These incentives include a deferred compensation plan
(the "Plan") that gives executives the ability to defer all or a portion of
their salaries and bonuses and invest in Common Stock of the Company at a
discount to market prices. Stock acquired at a discount will be restricted
for a two-year period, and the Plan does not permit investment in a
diversified equity portfolio until and unless targeted levels of Common Stock
ownership in the Company are achieved and maintained. Target levels of
ownership will be based on multiples of base salary and will be administered
by the Compensation Committee of the Board of Directors. Initially, the Plan
will apply to all executives at a level of Vice-President and above.
13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
(Unaudited)
7. CONTINGENCIES
The Company has been named as a defendant in certain lawsuits incidental to
its business. Management does not believe that the outcome of such
litigation will have a material adverse impact on the Company's operating
results or financial condition. However, these actions and claims in the
aggregate seek substantial damages against the Company and are subject to the
inherent uncertainties in any litigation. The Company is defending itself
vigorously in all such matters.
The Company's international investments involve risks typically associated
with investments in emerging markets such as uncertain political, economic,
legal and tax environments and expropriation and nationalization of assets.
In addition, if a dispute arises in its foreign operations, the Company may
be subject to the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdiction of the United
States. The Company attempts to conduct its business and financial affairs
so as to protect against political and economic risks applicable to
operations in the various countries where it operates, but there can be no
assurance the Company will be successful in so protecting itself.
In connection with their respective acquisitions of two subsidiaries owning
interests in the Yombo field offshore West Africa (each a "Congo
subsidiary"), the Company and a wholly-owned subsidiary of CMS NOMECO Oil &
Gas Co. ("CMS") agreed with the seller not to claim certain tax losses
incurred by such subsidiaries prior to the acquisitions. Pursuant to the
agreement, the Company and CMS may be liable to the seller for the recapture
of these tax losses utilized by the seller in years prior to the acquisitions
if certain triggering events occur. A triggering event will not occur,
however, if a subsequent purchaser enters into certain agreements specified
in the consolidated return regulations intended to insure that such losses
will not be claimed. The Company's potential direct liability could be as
much as $54.0 million if a triggering event with respect to the Company
occurs, and the Company believes that CMS's liability (for which the Company
would be jointly liable with an indemnification right against CMS) could be
as much as $72.0 million. The Company does not expect a triggering event to
occur with respect to it or CMS and does not believe the agreement will have
a material adverse effect upon the Company.
8. PROPERTY SALES
On May 2, 1997, Nuevo Liquids, a wholly-owned subsidiary of the Company, sold
its 95% interest in NuStar Joint Venture, which held the Company's investment
in the Benedum Plant System, for proceeds of $25.0 million. The effective
date of the sale is January 1, 1997. Proceeds from the sale were used to
reduce outstanding debt under the Company's revolving credit facility, as
well as project debt related to the Benedum Gas Plant in the amount of $5.9
million. The Company recorded a pre-tax gain of $3.0 million relating to the
sale during the second quarter of 1997.
14
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FORWARD LOOKING STATEMENTS
This document includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"). All
statements other than statements of historical facts included in this
document, including without limitation, statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, estimated quantities and net
present values of reserves, business strategy, plans and objectives of
management of the Company for future operations and covenant compliance, are
forward-looking statements. Although the Company believes that the
assumptions upon which such forward-looking statements are based are
reasonable, it can give no assurances that such assumptions will prove to
have been correct. Important factors that could cause actual results to
differ materially from the Company's expectations ("Cautionary Statements")
are disclosed below and elsewhere in this document. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified by the Cautionary Statements.
CAPITAL RESOURCES AND LIQUIDITY
Since the formation of the Company, management's strategy has been to
purchase and develop producing oil and gas properties, participate in gas
processing, gas gathering and pipeline investments and to participate
selectively in exploration activities. The funding of these activities was
provided by operating cash flows, debt and bank financing, private and public
placements of equity, property divestitures and joint ventures with industry
participants. Net cash provided by operating activities was $80.9 million
and $38.4 million for the six months ended June 30, 1997 and 1996,
respectively. The Company invested $102.5 million and $482.0 million in oil
and gas properties for the six months ended June 30, 1997 and 1996,
respectively. The Company also has $14.7 million of working capital and
unused commitments under the revolving credit line of $201.5 million, subject
to borrowing base determination. The Company believes its working capital,
cash flow from operations, and available financing sources are sufficient to
meet its obligations as they become due and to finance its exploration and
development programs.
15
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
CAPITAL EXPENDITURES
The Company has identified substantial development and exploitation
opportunities for 1997, which it believes offer meaningful opportunities to
grow reserves and increase production. The Company anticipates spending an
additional $50.0 million on development activities during the remainder of
1997, primarily in California and in the Congo.
The Company also has an active and growing exploration program targeting
high-potential reserve opportunities in California and the onshore Gulf Coast
region. The Company anticipates spending an additional $5.0 million during
the remainder of 1997 on exploration projects.
EXPLORATION AND DEVELOPMENT ACTIVITIES
During the first six months of 1997, the Company drilled or participated in a
total of 140 wells. Following is a description of significant exploration and
development activity during the quarter.
Domestic Exploration
The Bardsdale Irwin Berylwood #8, located in Ventura County, California, was
successfully completed in April 1997, and tested at a rate of 1,241 barrels
of oil per day, and sustainable production is expected to average between 500
and 600 barrels of oil per day. This oil is 33.8 gravity. The Company is the
operator and owns a 98% net revenue interest in this well. Also completed as
successful in California was the A-28 exploration well in the Tranquillon
Ridge Unit in offshore California, a newly identified structure southeast of
the existing Point Pedernales production and platform. The Company believes
that this new unit may establish significant additional reserves. This well
tested at a rate of 1,173 barrels of oil per day and 569 million cubic feet
(mcf) of gas per day. The Company is the operator and owns an 80% working
interest in the well.
The No. 1 Maximus well, an exploratory well located in Fayette County, Texas,
was horizontally drilled and completed as a dual-lateral in the Austin Chalk
formation. The well tested at a rate of 1,207 barrels of oil per day and 2.0
mcf of gas per day. The Company owns a 25% working interest in this well.
International Exploration
In the Republic of Congo, the Company completed the B-14 well in the Yombo
field. The well initially tested at rates exceeding 3,600 gross barrels of
oil per day. The Company owns a 43.75% working interest in the well. Also in
the Republic of Congo, the Masseko #4 well has tested at rates exceeding
3,000 gross barrels of oil per day from the Mid-Sendji formation. The Company
is currently working with the operator and vendors on developing and sizing a
platform for this new structure.
16
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Development Activity
During the first six months of 1997, the Company participated in
several oil and gas development projects. These projects include
workovers, recompletions, development drilling, secondary and tertiary
recovery operations and other production enhancement techniques to
maximize current production and the ultimate recovery of reserves.
The Company has identified in excess of 1,000 exploitation projects on
its existing properties which it believes offer meaningful
opportunities to grow reserves and increase production, irrespective
of acquisition or exploration successes.
In California, the Company continued successful development drilling
at Cymric East Wellport. During the first six months of 1997, the
Company drilled six additional wells and increased production from 300
to 1,300 barrels of oil per day. The Company also continued its
successful workover program in the Belmont field with four additional
workovers. As a result of these workovers, field production has
increased from 1,750 to 2,500 barrels of oil per day. The Company
also utilized frac-pac technology for the first time in offshore
California at Santa Clara. Two completions performed with this
technology are each producing at a rate of 500 barrels of oil per day.
The Company continued a two rig drilling program in the Oakhill field
in East Texas that began in July 1996. Initial rates from these wells
have averaged 2.0 mmcf of gas per day per well. Three significant
Austin Chalk wells in the Giddings field were drilled and completed
during the six months ended July 30, 1997. The Que Pasa #4 tested at
rates of 16.9 mmcf of gas per day, the Robinson #2-H tested at rates of
21.8 mmcf of gas per day, and the Jolly #1-H tested at rates of 19.1
mmcf of gas per day. The Company owns at 50% working interest in each
of these Austin Chalk wells.
FINANCING ACTIVITIES
On June 16, 1997, the Company redeemed its 12 1/2% Senior Subordinated
Notes, at a total cost of $78.0 million, representing $75.0 million face
value of the debt, plus a 4% premium of $3.0 million. The redemption
resulted in an extraordinary loss on early extinguishment of debt, net of
the related tax benefit, of $3.0 million. The Company used proceeds from
its bank facility to fund the redemption.
In connection with the sale of its interest in NuStar Joint Venture, the
Company used a portion of the proceeds from the sale, $5.9 million, to
repay the project debt associated with the Benedum Gas Plant.
The borrowing base on the Company's credit facility with a bank group led
by NationsBank of Texas, N.A., was increased during the quarter, from
$289.0 million to $330.0 million.
17
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes derivative financial instruments to reduce its exposure
to changes in the market price of natural gas and crude oil. Commodity
derivatives utilized as hedges include futures and swap contracts, which are
used to hedge natural gas, and option contracts, which are used to hedge oil.
Natural gas basis swaps are sometimes used to hedge the basis differential
between the derivative financial instrument index price and the natural gas
field price. In order to qualify as a hedge, price movements in the
underlying commodity derivative must be highly correlated with the hedged
commodity. Settlement of gains and losses on price swap contracts are
realized monthly, generally based upon the difference between the contract
price and the average closing New York Mercantile Exchange ("NYMEX") price
and are reported as a component of oil and gas revenues and operating cash
flows in the period realized.
Gains and losses on option and futures contracts that qualify as a hedge of
firmly committed or anticipated purchases and sales of oil and gas
commodities are deferred on the balance sheet and recognized in income and
operating cash flows when the related hedged transaction occurs. Premiums
paid on option contracts are deferred and amortized over the terms of the
respective option contracts. Gains or losses attributable to the termination
of a derivative financial instrument are deferred on the balance sheet and
recognized in revenue when the hedged crude oil and natural gas is sold.
There were no such deferred gains or losses at June 30, 1997 or December 31,
1996. Gains or losses on derivative financial instruments that do not
qualify as a hedge are recognized in income currently.
As a result of hedging transactions, oil and gas revenues were increased by
$.1 million and decreased by $.9 million in the second quarter of 1997 and
1996, respectively. During the first six months of 1997 and 1996, oil and
gas revenues were reduced by $1.7 million and $1.1 million, respectively, as
a result of these transactions.
For the period July 1997 through December 1997, the Company has purchased put
option contracts on 19,100 barrels per day of West Texas Intermediate Crude
at a strike price of $19.00 per barrel. The total cost of these options was
$1.8 million, which will be amortized into revenue over the six month term
beginning July 1997. The effect of these put options is to establish a floor
price on a large percentage of the Company's estimated oil production in the
third and fourth quarters.
18
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard No. 128, "Earnings per Share," was
issued by the Financial Accounting Standards Board ("FASB") in February 1997.
This statement addresses the computation, presentation, and disclosure
requirements for earnings per share ("EPS"). The Company is required to
adopt the new standard in its year-end 1997 financial statements. All prior
period EPS information (including interim EPS) is required to be restated at
that time. Early adoption is not permitted. Proforma EPS, as if the Company
adopted SFAS No. 128 on January 1, of each period presented, are as follows:
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- ---------
Basic EPS.... $ .30 $ .39 $ .99 $ .74
Diluted EPS.. $ .30 $ .37 $ .96 $ .68
CONTINGENCIES
The Company has been named as a defendant in certain lawsuits incidental to
its business. Management does not believe that the outcome of such
litigation will have a material adverse impact on the Company's operating
results or financial condition. However, these actions and claims in the
aggregate seek substantial damages against the Company and are subject to the
inherent uncertainties in any litigation. The Company is defending itself
vigorously in all such matters.
The Company's international investments involve risks typically associated
with investments in emerging markets such as uncertain political, economic,
legal and tax environments and expropriation and nationalization of assets.
In addition, if a dispute arises in its foreign operations, the Company may
be subject to the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdiction of the United
States. The Company attempts to conduct its business and financial affairs
so as to protect against political and economic risks applicable to
operations in the various countries where it operates, but there can be no
assurance the Company will be successful in so protecting itself.
In connection with their respective acquisitions of two subsidiaries owning
interests in the Yombo field offshore West Africa (each a "Congo
subsidiary"), the Company and a wholly-owned subsidiary of CMS NOMECO Oil &
Gas Co. ("CMS") agreed with the seller not to claim certain tax losses
incurred by such subsidiaries prior to the acquisitions. Pursuant to the
agreement, the Company and CMS may be liable to the seller for the recapture
of these tax losses utilized by the seller in years prior to the acquisitions
if certain triggering events occur. A triggering event will not occur,
however, if a subsequent purchaser enters into certain agreements specified
in the consolidated return regulations intended to insure that such losses
will not be claimed. The Company's potential
19
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
direct liability could be as much as $54.0 million if a triggering event with
respect to the Company occurs, and the Company believes that CMS's liability
(for which the Company would be jointly liable with an indemnification right
against CMS) could be as much as $72.0 million. The Company does not expect a
triggering event to occur with respect to it or CMS and does not believe the
agreement will have a material adverse effect upon the Company.
20
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
RESULTS OF OPERATIONS (THREE MONTHS ENDED JUNE 30, 1997, AND 1996)
The following table sets forth certain operating information of the Company
(inclusive of the effect of crude oil and natural gas price swaps) for the
periods presented:
Three Months
Ended June 30,
--------------- %
Increase/
1997 1996 (Decrease)
------ ------- -----------
Production:
Oil and condensate (MBBLS)............... 4,309 4,096 5.2%
Natural gas (MMCF)....................... 8,806 10,457 (15.8%)
Natural gas liquids (MBBLS).............. 67 --- ---
Average Sales Price:
Oil and condensate ($ per barrel)........ $14.49 $ 15.48 (6.4%)
Natural gas ($ per mcf).................. $ 1.80 $ 1.90 (5.3%)
Average unit production cost/(1)/ per BOE..... $ 4.89 $ 5.11 (4.3%)
Average unit depletion rate per BOE-Domestic.. $ 3.95 $ 4.02 (1.7%)
Average unit depletion rate per BOE-Congo..... $ .75 $ .75 ---
/(1)/ Costs incurred to operate and maintain wells and related equipment and
facilities, including ad valorem and severance taxes.
21
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
REVENUES
Oil and gas revenues for the three months ended June 30, 1997 were $79.2
million, or 5% lower than oil and gas revenues of $83.5 million for the same
period in 1996, primarily attributable to lower gas production due to the sale
of a significant portion of the Austin Chalk properties in the second quarter of
1996, as well as lower average oil and gas prices during the period, partially
offset by higher crude oil production.
Gas plant revenues of $2.8 million and $7.8 million are reflected in the three
months ended June 30, 1997 and 1996, respectively. The 64% decrease in gas plant
revenues is due to the sale of the Company's investment in the Benedum Plant
System during the second quarter.
Pipeline and other revenues for the three months ended June 30, 1997 were $1.2
million, or 25% lower than pipeline and other revenues of $1.6 million for the
same period in 1996, primarily due to the sale of the West Delta 152 pipeline
during July 1996, as well as decreased throughput volumes on the Illini and
Bright Star pipelines.
EXPENSES
Lease operating expenses for the three months ended June 30, 1997 totaled $28.6
million, or 4% lower than $29.8 million for the three months ended June 30,
1996, primarily due to production efficiencies gained in California. Lease
operating expenses per barrel of oil equivalent were $4.89 in the second quarter
of 1997, compared to $5.11 in the same period in 1996, also due to the
efficiencies gained in California.
Plant operating expenses totaled $2.3 million for the three months ended June
30, 1997 as compared to $6.9 million for the three months ended June 30, 1996.
The 67% decrease in gas plant expense is due to the sale of the Company's
investment in the Benedum Plant System during the second quarter of 1997.
Pipeline and other operating expenses for the three months ended June 30, 1997
were $1.0 million, or 38% lower than pipeline and other operating expenses of
$1.6 million for the same period in 1996, which is primarily attributable to
reduced costs on both the Illini and Bright Star pipelines associated with lower
throughput volumes.
Depreciation, depletion and amortization of $22.6 million for the three months
ended June 30, 1997 reflects a 4% decrease from $23.5 million in the same period
in 1996 due to a decreased depletion rate per barrel of oil equivalent caused by
an increase in estimated proved oil and gas reserves.
General and administrative expenses were $3.8 million for the three months ended
June 30, 1997, as compared to $3.0 million for the same period in 1996. This 27%
increase is due to increased compensation costs as well as a reduction in the
amount of capitalized administrative costs.
Management fees totaled $4.2 million for the three months ended June 30, 1997,
as compared to $3.8 million for the same period in 1996. This 11% increase is
22
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
primarily associated with the increase in assets under management during the
period.
Interest expense decreased to $7.3 million for the three months ended June 30,
1997 from $12.4 million in the same period of 1996. The decrease in interest
expense is primarily the result of decreased borrowings under the credit
facility.
NET INCOME
Income before extraordinary items of $9.0 million was generated for the three
months ended June 30, 1997 as compared to $7.2 million in the same period of
1996. Earnings available to common stockholders after extraordinary items
totaled $6.0 million for the three months ended June 30, 1997 versus $6.9
million for the same period in 1996, after deductions for preferred stock
dividends.
23
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
RESULTS OF OPERATIONS (SIX MONTHS ENDED JUNE 30, 1997 AND 1996)
The following table sets forth certain operating information of the Company
(inclusive of the effect of crude oil and natural gas price swaps) for the
periods presented:
Six Months
Ended June 30,
------------------- %
Increase/
1997 1996 (Decrease)
---------- ------- -----------
Production:
Oil and condensate (MBBLS)............... 8,457 4,987 69.6%
Natural gas (MMCF)....................... 17,760 16,292 9.0%
Natural gas liquids (MBBLS).............. 130 --- ---
Average Sales Price:
Oil and condensate ($ per barrel)........ $ 15.51 $ 15.56 (.3%)
Natural gas ($ per mcf).................. $ 2.02 $ 1.90 6.3%
Average unit production cost/(1)/ per BOE..... $ 5.14 $ 4.67 10.1%
Average unit depletion rate per BOE-Domestic.. $ 3.94 $ 4.12 (4.4%)
Average unit depletion rate per BOE-Congo..... $ .75 $ .75 ---
/(1)/ Costs incurred to operate and maintain wells and related equipment and
facilities including ad valorem and severance taxes.
24
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
REVENUES
Oil and gas revenues for the six months ended June 30, 1997 were $170.3 million,
or 56% higher than oil and gas revenues of $109.1 million for the same period in
1996. The increase in oil and gas revenues was attributable primarily to
production from certain upstream oil and gas properties located onshore and
offshore California (the "California Properties") which were acquired during the
second quarter of 1996.
Gas plant revenues of $11.6 million and $14.8 million are reflected in the six
months ended June 30, 1997 and 1996, respectively. The 22% decrease in revenues
is due to the sale of the Company's interest in the Benedum Plant System during
the second quarter of 1997.
Pipeline and other revenues for the six months ended June 30, 1997 were $2.7
million, or 18% less than pipeline and other revenues of $3.3 million for the
same period in 1996. The decrease is primarily due to the sale of the West
Delta pipeline during the second quarter of 1996, as well as decreased
throughput on both the Illini and Bright Star pipelines.
EXPENSES
Lease operating expenses for the six months ended June 30, 1997 totaled $59.4
million, compared to $36.0 million for the same period in 1996. This 65%
increase is a result of the acquisition of the California Properties in the
second quarter of 1996. Lease operating expenses per BOE were $5.14 in the
first half of 1997 when compared to $4.67 in the same period in 1996 due
primarily to higher lifting costs associated with the California Properties.
Plant operating expenses of $10.2 million are reflected in the six months ended
June 30, 1997 as compared to $12.5 million for the six months ended June 30,
1996. The 18% decrease in gas plant expenses is due to the sale of the
Company's interest in the Benedum Plant System during the second quarter of
1997.
Pipeline and other operating expenses for the six months ended June 30, 1997
were $2.3 million, or 18% lower than pipeline operating expenses of
approximately $2.8 million for the same period in 1996, due to decreased
operating expenses on both the Illini and Bright Star pipelines associated with
decreased throughput volumes.
Depreciation, depletion and amortization of $44.9 million for the six months
ended June 30, 1997 reflects an increase of 43% from $31.5 million in the same
period in 1996 due to increased oil and gas production volumes as a result of
the acquisition of the California Properties partially offset by a decreased
depletion rate per barrel of oil equivalent as a result of increased estimated
proved oil and gas reserves.
General and administrative expenses were $8.0 million for the three months ended
June 30, 1997, as compared to $4.3 million for the same period in 1996. This 86%
increase is primarily due to an increase in administrative expenses associated
with the California Properties acquired during the second quarter of 1996.
25
NUEVO ENERGY COMPANY
--------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
Management fees totaled $8.3 million for the three months ended June 30, 1997,
as compared to $5.6 million for the same period in 1996. This 48% increase is
due to the increase in assets under management during the period, primarily
associated with the acquisition of the California Properties during the second
quarter of 1996.
Interest expense decreased to $14.0 million for the six months ended June 30,
1997 from $16.2 million in the same period of 1996. The decrease in interest
expense is primarily the result of decreased borrowings under the credit
facility.
NET INCOME
Income before extraordinary items of $22.8 million was generated for the six
months ended June 30, 1997, as compared to $11.4 million in the same period of
1996. Earnings available to common stockholders after extraordinary items
totaled $19.7 million for the six months ended June 30, 1997 versus $10.9
million for the same period in 1996, after deductions for preferred stock
dividends.
26
NUEVO ENERGY COMPANY
--------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of the stockholders of the Company, held on
May 14, 1997, the following matters were voted on with the
following results:
(1) Michael D. Watford, Thomas D. Barrow, Isaac Arnold, Jr.,
Robert L. Gerry, III, Robert H. Allen, T. Michael Long, and James
T. Hackett continue their terms as directors. J. P. Bryan, Gary
R. Petersen, and John B. Connally, III, were elected as directors
with a total of 12,261,283 voting in favor and 27,245 withheld
authority.
(2) The Stockholders approved a proposal to ratify the selection
of KPMG Peat Marwick, L.L.P, as the Company's independent
auditors for the year ending December 31, 1997, with a total of
12,270,632 shares voting in favor, a total of 8,256 shares voting
against and a total of 9,640 shares abstaining.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None.
b. Reports on Form 8-K.
None.
27
NUEVO ENERGY COMPANY
--------------------
PART II. OTHER INFORMATION (CONTINUED)
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.
NUEVO ENERGY COMPANY
--------------------
(Registrant)
Date: August 13, 1997 By: /s/ Michael D. Watford
--------------------------- -----------------------------
Michael D. Watford
President, Chief Executive
Officer and Chief Operating
Officer
Date: August 13, 1997 By: /s/ Robert M. King
--------------------------- ------------------------------
Robert M. King
Chief Financial Officer
28