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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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: 0-7062
NOBLE AFFILIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 73-0785597
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
110 WEST BROADWAY
ARDMORE, OKLAHOMA 73401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(405) 223-4110
(Registrant's telephone number, including area code)
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
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Number of shares of common stock outstanding as of April 30, 1994: 49,945,990
Page 1 of 10 pages
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FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(UNAUDITED)
MARCH 31, DECEMBER 31,
1994 1993
---------- ------------
ASSETS:
Current Assets:
Cash and short-term cash investments. . . . . . . . . . . . . . . . . . . $ 118,102 $ 176,432
Accounts receivable-trade . . . . . . . . . . . . . . . . . . . . . . . . 62,165 66,314
Materials and supplies inventories. . . . . . . . . . . . . . . . . . . . 3,324 3,302
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,872 10,516
------------ ------------
Total Current Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 190,463 256,564
------------ ------------
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . 1,528,199 1,487,068
Less: accumulated depreciation,
depletion and amortization . . . . . . . . . . . . . . . . . . . . (724,102) (692,463)
------------- ------------
804,097 794,605
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,216 16,827
------------- ------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,013,776 $ 1,067,996
------------- ------------
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,780 $ 29,354
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 26,520 19,241
Short-term borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . 95,600
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401 2,343
------------ ------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 77,701 146,538
------------ ------------
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,962 45,108
Other Deferred Credits and
Noncurrent Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 8,360 7,158
Long-term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453,780 453,760
Shareholders' Equity:
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,564 171,535
Capital in excess of par value. . . . . . . . . . . . . . . . . . . . . . 140,795 140,703
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,032 118,612
------------ ------------
437,391 430,850
Less common stock in treasury
(at cost, 1,524,900 shares) . . . . . . . . . . . . . . . . . . . . . . . (15,418) (15,418)
------------- ------------
Total Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . . . 421,973 415,432
------------- ------------
Total Liabilities and Shareholders' Equity. . . . . . . . . . . . . . . . $ 1,013,776 $ 1,067,996
------------- ------------
------------- ------------
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 2
FORM 10-Q
NOBLE AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
---------------------------
1994 1993
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REVENUES:
Oil and gas sales and royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,902 $ 66,888
Other income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,639 2,966
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83,541 69,854
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COSTS AND EXPENSES:
Oil and gas operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,211 17,347
Oil and gas exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,995 10,229
Depreciation, depletion and
amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,552 21,749
Selling, general and
administrative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,233 8,702
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,595 5,095
Interest capitalized. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,023) (249)
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70,563 62,873
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INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,978 6,981
INCOME TAX PROVISION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,561 (1) 2,493 (1)
--------- ---------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,417 $ 4,488
--------- ---------
--------- ---------
NET INCOME PER SHARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .17 (2) $ .10 (2)
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SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 3
FORM 10-Q
NOBLE AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
---------------------------
1994 1993
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Cash Flows from Operating Activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,417 $ 4,488
Noncash charges (credits) included in income
Depreciation, depletion and amortization. . . . . . . . . . . . . . . . . . . . . . . . 33,552 21,749
Amortization of undeveloped lease costs, net. . . . . . . . . . . . . . . . . . . . . . 1,408 3,878
Change in deferred credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,056 3,174
Change in other noncash items, net. . . . . . . . . . . . . . . . . . . . . . . . . . . (2,479) 2,434
Changes in working capital, not including cash
(Increase) decrease in accounts receivable. . . . . . . . . . . . . . . . . . . . . . . 4,149 12,952
(Increase) decrease in other current assets . . . . . . . . . . . . . . . . . . . . . . 3,495 (1,629)
Increase (decrease) in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 21,426 (547)
Increase (decrease) in other current liabilities. . . . . . . . . . . . . . . . . . . . 5,337 4,535
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Net Cash Provided by Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . 83,361 51,034
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Cash Flows From Investing Activities:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,834) (21,610)
Proceeds from sale of plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . 619 6,904
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(44,215) (14,706)
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Cash Flows From Financing Activities:
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 1,783
Cash dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,997) (1,785)
Repayment of short-term debt for property acquisition . . . . . . . . . . . . . . . . . . (95,600)
--------- ---------
(97,476) (2)
--------- ---------
Increase (decrease) in Cash and Short-term Cash Investments . . . . . . . . . . . . . . . . (58,330) 36,326
Cash and Short-term Cash Investments at Beginning of Period . . . . . . . . . . . . . . . . 176,432 118,726
--------- ----------
Cash and Short-term Cash Investments at End of Period . . . . . . . . . . . . . . . . . . . $118,102 $155,052
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Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capitalized). . . . . . . . . . . . . . . . . . . . . . . . . . . $ -0- $ -0-
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -0- $ -0-
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 4
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting only of
necessary and normal recurring adjustments, necessary to present fairly the
Company's financial position as of March 31, 1994 and December 31, 1993, and the
results of operations and the cash flows for the three month periods ended March
31, 1994 and 1993. These consolidated, condensed financial statements should be
read in conjunction with the financial statements and the Notes thereto
incorporated in the Company's annual report on Form 10-K for the year ended
December 31, 1993.
(1) INCOME TAX PROVISION
For the three months ended March 31:
(IN THOUSANDS)
----------------------
1994 1993
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Current . . . . . . . . . . . . . . . . . . . . $ (2,293) $ 3,433
Deferred. . . . . . . . . . . . . . . . . . . . 6,854 (940)
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$ 4,561 $ 2,493
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(2) NET INCOME PER SHARE
The earnings per share of common stock was computed using the weighted
average number of shares of common stock outstanding during the period as
follows:
(IN THOUSANDS)
----------------------
1994 1993
---- ----
For the three months ended March 31:. . . . . . 49,941 44,657
(3) PLANNED REDEMPTION OF DEBT
On April 25, 1994 the Company announced that it intends to redeem on June
1, 1994 (the "Redemption Date") all the outstanding 10 1/8% Notes Due June 1,
1997 (the "Notes") of the Company being $125 million aggregate principal amount.
The redemption price for the Notes is 100% of the principal amount, together
with accrued interest to the Redemption Date of $50.625 per $1,000 principal
amount of Note. On and after June 1, 1994, interest on the Notes will cease to
accrue. The Company expects to redeem the Notes with its available cash and
short-term cash investments plus short-term borrowings from its line of credit
agreement with certain banks. The Company expects to reduce its annual interest
expense by approximately $7.5 million as a result of this redemption.
Page 5
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased to $83.4 million in the
three months ended March 31, 1994 from the $51.0 million in the same period of
1993. Cash and short-term cash investments decreased from $176.4 million at
December 31, 1993 to $118.1 million at March 31, 1994. This decrease in cash and
short-term cash investments is the result of the repayment in January 1994 of
$95.6 million of short-term debt which was issued in October 1993 to acquire a
producing property.
The Company has expended approximately $44.8 million of its $190.5 million
capital budget through March 31, 1994. The Company expects to fund the remainder
of the 1994 capital budget primarily from funds provided by operations. The
Company's $190.5 million capital budget includes no amounts for potential
acquisitions of producing properties. The Company continues to evaluate possible
strategic acquisitions and believes it could finance any significant
acquisitions from external sources based on the Company's current financial
condition.
On April 25, 1994 the Company announced that it intends to redeem on June
1, 1994 (the "Redemption Date") all the outstanding 10 1/8% Notes Due June 1,
1997 (the "Notes") of the Company being $125 million aggregate principal amount.
The redemption price for the Notes is 100% of the principal amount, together
with accrued interest to the Redemption Date of $50.625 per $1,000 principal
amount of Note. On and after June 1, 1994, interest on the Notes will cease to
accrue. The Company expects to redeem the Notes with its available cash and
short-term cash investments plus short-term borrowings from its line of credit
agreement with certain banks. The Company expects to reduce its annual interest
expense by approximately $7.5 million as a result of this redemption.
In May 1993, the Company redeemed its $100,000,000 of 7 1/4% Convertible
Debentures Due 2012. As a result of the call for redemption, owners of
$98,155,000 of the debentures elected to convert into a total of 5,001,373
shares of Company common stock.
On October 21, 1993, the Company issued $230,000,000 of 4 1/4% Convertible
Subordinated Notes Due 2003 and $100,000,000 of 7 1/4% Notes Due 2023. After the
planned redemption of the Notes on June 1, 1994, the outstanding long-term debt
of the Company will total $330 million.
The Company's current ratio (current assets divided by current liabilities)
was 2.45 at March 31, 1994 compared to 1.75 at December 31, 1993.
The Company follows an entitlements method of accounting for its gas
imbalances. The Company's estimated gas imbalance receivables were $12.4 million
at March 31, 1994 and $12.9 million at December 31, 1993. Gas imbalance
liabilities were $8.4 million at March 31, 1994 and $7.6 million at December 31,
1993. These imbalances are valued at the amount which is expected to be received
or paid to settle the imbalances. The settlement of the imbalances can occur
either during, or at the end of the life of a well, on a volume basis or by cash
settlement. The Company does not expect that a significant portion of the
settlements will occur in any one year. Thus, the Company believes the
settlement of gas imbalances will have little impact on its liquidity.
RESULTS OF OPERATIONS
For the first quarter of 1994, the Company had net income of $8.4 million,
or 17 cents per share, compared to net income of $4.5 million, or 10 cents per
share, in the first quarter of 1993. The results reflected higher oil and gas
production volumes and higher gas prices, offset by lower oil prices, in the
first three months of 1994.
Page 6
FORM 10-Q
Oil sales decreased 14 percent for the three months ended March 31, 1994,
compared to the same period of 1993. The decrease in sales is primarily due to
an average oil price decrease of 32 percent offset in part by a 25 percent
increase in production volumes in the first quarter of 1994 compared to the
first quarter of 1993.
Gas sales increased 48 percent for the three months ended March 31, 1994,
compared to the same period of 1993. The increase in sales is primarily due to
an average gas price increase of 14 percent and a production volume increase of
31 percent in the first quarter of 1994, compared to the first quarter of 1993.
The Company had no oil or gas hedges in place, or any hedge related
deposits, at March 31, 1994 or at December 31, 1993.
Certain selected oil and gas operating statistics follows:
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
1994 1993
---- ----
Oil Sales. . . . . . . . . . . . . . . . . . $24,768,000 $28,890,000
Average daily oil - BBLs . . . . . . . . . . 22,775 18,049
Average oil price per BBL. . . . . . . . . . $ 12.22 $ 18.09
Gas Sales. . . . . . . . . . . . . . . . . . $54,045,000 $36,505,000
Average daily gas - MCFs . . . . . . . . . . 269,800 205,653
Average gas price per MCF. . . . . . . . . . $ 2.26 $ 1.99
<FN>
BBLs - barrels
MCF - thousand cubic feet
Oil and gas exploration expense decreased $6.2 million to $4.0 million for
the three months ended March 31, 1994, compared to the same period in 1993. The
decrease resulted in part from a $2.6 million decrease in dry hole expense, a
$2.5 million decrease in undeveloped lease impairment relating to offshore
properties and by a $1.5 million decrease in abandoned assets.
Depreciation, depletion and amortization (DD&A) expense increased 54
percent to $33.6 million for the three months ended March 31, 1994, compared to
the same period in 1993. The increase is due primarily to higher production
volumes and higher unit rates on properties acquired effective October 1, 1993.
The unit rate of DD&A per equivalent barrel, converting gas to oil on a 6:1
basis, was $5.50 for the first three months of 1994 compared to $4.62 for the
same period of 1993. The Company has recorded, through charges to DD&A, a
reserve for future liabilities related to dismantlement and reclamation costs
for offshore facilities. This reserve is based on the best estimates of Company
engineers of such costs to be incurred in future years.
Interest expense increased 49 percent to $7.6 million for the three months
ended March 31, 1994, compared to the same period of 1993 as a result of the
increase in long-term debt mentioned under "Liquidity and Capital Resources"
above.
Interest capitalized increased from $249,000 for the three months ended
March 31, 1993 to $2,023,000 for the three months ended March 31, 1994. This
increase is primarily due to the increase in the capitalization of interest on
the development of properties in the Gulf of Mexico.
Page 7
FORM 10-Q
FUTURE TRENDS
Both oil and gas production in the first quarter of 1994 was higher than
for the same period a year ago. This increase was due in part to properties
acquired from Freeport-McMoRan Inc. on October 1, 1993. The Company anticipates
its oil and gas production volumes will continue to increase in 1994 as a result
of the properties acquired from Freeport-McMoRan Inc. as well as new oil and gas
properties coming on line in 1994.
Management believes that the Company is well positioned with its balanced
reserves of oil and gas to take advantage of future price increases that may
occur. However, the uncertainty of oil and gas prices continues to affect the
domestic oil and gas industry. Due to the volatility of oil and gas prices, the
Company, from time to time, uses hedging and plans to do so in the future as a
means of controlling its exposure to price changes. The Company cannot predict
the extent to which its revenues will be affected by inflation, government
regulation or changing prices.
Page 8
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders of the Company was held at 10:00 a.m.,
local time, on Tuesday, April 26, 1994 in Ardmore, Oklahoma.
(b) Proxies were solicited by the Board of Directors of the Company pursuant to
Regulation 14A under the Securities Exchange Act of 1934. There was no
solicitation in opposition to the Board of Directors' nominees as listed in
the proxy statement and all of such nominees were duly elected.
(c) Out of a total of 49,943,530 shares of common stock of the Company
outstanding and entitled to vote, 49,244,110 shares were present in person
or by proxy, representing approximately 98 percent. The only matter voted
on by the shareholders, as fully described in the proxy statement for the
annual meeting, was the election of directors of the Company. The results
of voting were as follows:
Number of Shares
Number of Shares WITHHOLDING AUTHORITY
Voting FOR Election to Vote for Election
as Director As Director
------------------- ---------------------
Roy Butler. . . . . . . . . 48,946,103 298,007
Edward F. Cox . . . . . . . 49,092,756 151,354
James C. Day. . . . . . . . 48,941,204 302,906
Robert Kelley . . . . . . . 48,946,493 297,617
Harold F. Kleinman. . . . . 48,934,169 309,941
George J. McLeod. . . . . . 48,940,293 303,817
Guy W. Nichols. . . . . . . 49,098,267 145,843
John F. Snodgrass . . . . . 48,946,731 297,379
(d) Inapplicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are filed as a part of this Form 10-Q.
(b) The Company did not file any reports on Form 8-K during the three months
ended March 31, 1994.
Page 9
FORM 10-Q
SIGNATURE
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.
NOBLE AFFILIATES, INC.
------------------------------
(Registrant)
Date May 13, 1994 WM. D. DICKSON
------------------------------
WM. D. DICKSON, Vice President-
Finance and Treasurer
(Principal Financial Officer
and Authorized Signatory)
Page 10