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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 31,1995
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
_____ ____
Number of shares of common stock outstanding as of May 4, 1995: 50,028,980
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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,
1995 1994
----------- -----------
ASSETS:
Current Assets:
Cash and short-term cash investments . . . . . . . . . $ 24,824 $ 22,192
Accounts receivable-trade. . . . . . . . . . . . . . . 55,251 49,692
Materials and supplies inventories . . . . . . . . . . 3,572 3,591
Other current assets . . . . . . . . . . . . . . . . . 21,517 28,412
---------- ---------
Total Current Assets . . . . . . . . . . . . . . . . . 105,164 103,887
---------- ---------
Property, Plant and Equipment. . . . . . . . . . . . . . 1,612,119 1,588,459
Less: accumulated depreciation,
depletion and amortization . . . . . . . . . . . . . (793,663) (775,079)
---------- ----------
818,456 813,380
Other Assets. . . . . . . . . . . . . . . . . . . . . . . 17,950 16,249
---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . $ 941,570 $ 933,516
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 50,198 $ 46,473
Other current liabilities. . . . . . . . . . . . . . . . 27,486 21,747
Income taxes . . . . . . . . . . . . . . . . . . . . . . 3,768 3,768
---------- ----------
Total Current Liabilities. . . . . . . . . . . . . . . . 81,452 71,988
---------- ----------
Deferred Income Taxes. . . . . . . . . . . . . . . . . . . 62,012 61,802
---------- ----------
Other Deferred Credits and
Noncurrent Liabilities . . . . . . . . . . . . . . . . . 10,366 10,704
---------- ----------
Long-term Debt . . . . . . . . . . . . . . . . . . . . . . 376,965 376,956
---------- ----------
Shareholders' Equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . 171,839 171,790
Capital in excess of par value . . . . . . . . . . . . . 142,132 141,911
Retained earnings. . . . . . . . . . . . . . . . . . . . 112,222 113,783
---------- ----------
426,193 427,484
Less common stock in treasury
(at cost, 1,524,900 shares). . . . . . . . . . . . . . . (15,418) (15,418)
---------- ----------
Total Shareholders' Equity . . . . . . . . . . . . . . . 410,775 412,066
---------- ----------
Total Liabilities and Shareholders' Equity . . . . . . . $ 941,570 $ 933,516
========== ==========
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,
----------------------------
1995 1994
----- -----
REVENUES:
Oil and gas sales and royalties . . . . . . . . . . . . $73,821 $80,902
Gathering, marketing and processing . . . . . . . . . . 17,055
Other income . . . . . . . . . . . . . . . . . . . . . . 978 2,639
------- -------
91,854 83,541
------- -------
COSTS AND EXPENSES:
Oil and gas operations . . . . . . . . . . . . . . . . . 22,311 18,211
Oil and gas exploration . . . . . . . . . . . . . . . . 4,406 3,995
Gathering, marketing and processing . . . . . . . . . . 16,967
Depreciation, depletion and
amortization . . . . . . . . . . . . . . . . . . . . . 33,387 33,552
Selling, general and
administrative . . . . . . . . . . . . . . . . . . . . 9,517 9,233
Interest expense . . . . . . . . . . . . . . . . . . . . 5,248 7,595
Interest capitalized . . . . . . . . . . . . . . . . . . (693) (2,023)
------- -------
91,143 70,563
------- -------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . 711 12,978
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . 271(1) 4,561(1)
------- -------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . $ 440 $ 8,417
======= =======
NET INCOME PER SHARE . . . . . . . . . . . . . . . . . . . $.01(2) $.17(2)
======= =======
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,
----------------------------
1995 1994
----- -----
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 440 $ 8,417
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization . . . . . . 33,387 33,552
Amortization of undeveloped lease costs, net . . . . 1,036 1,408
Change in deferred credits . . . . . . . . . . . . (128) 8,056
Change in other noncash items, net. . . . . . . . (1,544) (2,479)
Changes in working capital, not including cash
(Increase) decrease in accounts receivable . . . . . (5,559) 4,149
(Increase) decrease in other current assets . . . . 6,929 3,495
Increase (decrease) in accounts payable . . . . . . 3,725 21,426
Increase (decrease) in other current liabilities . . 5,739 5,337
-------- --------
Net Cash Provided by Operating Activities . . . . . . . 44,025 83,361
-------- --------
Cash Flows From Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . (40,099) (44,834)
Proceeds from sale of plant and equipment . . . . . . 437 619
-------- --------
Net Cash Used in Investing Activities . . . . . . . . . (39,662) (44,215)
-------- --------
Cash Flows From Financing Activities:
Exercise of stock options . . . . . . . . . . . . . . 270 121
Cash dividends . . . . . . . . . . . . . . . . . . . (2,001) (1,997)
Repayment of short-term debt for property
acquisition . . . . . . . . . . . . . . . . . . . . . (95,600)
-------- --------
Net Cash Used in Financing Activities . . . . . . . . . (1,731) (97,476)
-------- --------
Increase (decrease) in Cash and Short-term Cash
Investments . . . . . . . . . . . . . . . . . . . . . . 2,632 (58,330)
Cash and Short-term Cash Investments at Beginning
of Period . . . . . . . . . . . . . . . . . . . . . . 22,192 176,432
-------- --------
Cash and Short-term Cash Investments at End of Period. . $ 24,824 $118,102
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capitalized) . . . . . . . . . $110 $ -0-
Income taxes (refund) . . . . . . . . . . . . . . . . $(5,000) $ -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, 1995 and December 31, 1994, and
the results of operations and the cash flows for the three month periods
ended March 31, 1995 and 1994. 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, 1994.
(1) INCOME TAX PROVISION
For the three months ended March 31:
(IN THOUSANDS)
---------------
1995 1994
---- -------
Current........................................ $ 62 $(2,293)
Deferred....................................... 209 6,854
---- -------
$271 $ 4,561
==== =======
(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)
---------------
1995 1994
------ ------
For the three months ended March 31............ 50,017 49,941
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 decreased to $44.0 million in the
three months ended March 31, 1995 from the $83.4 million in the same period
of 1994. Cash and short-term cash investments increased from $22.2 million at
December 31, 1994 to $24.8 million at March 31, 1995.
The Company has expended approximately $40.1 million of its $205 million
capital budget through March 31, 1995. The Company expects to fund internally
its remaining 1995 capital budget. The Company's $205 million capital budget
includes $20 million for potential acquisitions of producing properties. The
Company continues to evaluate possible strategic acquisitions and believes it
is positioned to access external sources of funding should it be necessary or
desirable in connection with an acquisition.
During 1994 the Company reduced its debt $220.6 million by utilizing
available cash balances and its bank line of credit. On January 4, 1994, the
Company paid the $95.6 million installment note used to acquire a producing
property in 1993. On June 1, 1994, the Company borrowed $48 million from its
bank credit facility and used the proceeds, plus available cash, to redeem
its $125,000,000 10 1/8% notes which were due June 1, 1997.
On May 1, 1995 the Company announced that its wholly owned subsidiary,
Samedan Oil Corporation (Samedan), has become a party to a comprehensive
producer settlement agreement which was entered into with Columbia Gas
Transmission Corporation ("Columbia Transmission") and Columbia Gas System,
Inc. in connection with their plans of reorganization filed in the Bankruptcy
Court on April 17, 1995. The producer settlement, if approved, would provide
Samedan with a right to receive a distribution, upon confirmation of a
Columbia Transmission plan of reorganization, in the amount of $48,925,000,
which amount would be based on an agreed claim against Columbia Transmission
of $71,034,483. In addition, the proposed settlement would give Samedan a
contingent right to receive approximately $2,575,000 upon the resolution of
certain other contested producer claims. For additional information
concerning the proposed settlement reference is made to the Company's press
release dated May 1, 1995, a copy of which is filed as Exhibit 99.1 to this
Form 10-Q and hereby incorporated herein by reference.
The Company's current ratio (current assets divided by current liabilities)
was 1.29 at March 31, 1995 compared to 1.44 at December 31, 1994.
The Company follows an entitlements method of accounting for its gas
imbalances. The Company's estimated gas imbalance receivables were $11.1
million at March 31, 1995 and $11.7 million at December 31, 1994. Estimated
gas imbalance liabilities were $10.3 million at March 31, 1995 and $10.5
million at December 31, 1994. 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 over the life of, 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 1995, the Company had net income of $.4 million,
or 1 cent per share, compared to net income of $8.4 million, or 17 cents per
share, in the first quarter of 1994. The results primarily reflected
depressed gas prices in the first three months of 1995 compared with the
previous year.
Oil sales increased 36 percent for the three months ended March 31, 1995,
compared to the same period of 1994. The increase in sales is primarily due
to an average oil price increase of 35 percent in the first quarter of 1995
compared to the first quarter of 1994.
Page 6
FORM 10-Q
Gas sales, excluding third party sales by Noble Gas Marketing, Inc. (NGM),
a wholly owned subsidiary of the Company, decreased 29 percent for the three
months ended March 31, 1995, compared to the same period of 1994. The
decrease in sales is primarily due to an average gas price decrease of 29
percent in the first quarter of 1995, compared to the first quarter of 1994.
NGM began marketing the Company's natural gas in June 1994. The Company
records all of NGM's sales as gathering, marketing and processing revenues.
Income for the first quarter of 1995 includes $17.1 million of gathering,
marketing and processing revenues and $17 million of gathering, marketing and
processing expense relating to third party gas sales. All intercompany sales
and costs have been eliminated.
The Company uses oil and gas swap agreements to hedge both fixed term
sales and sales of its own oil and gas production in order to obtain a fixed
margin and minimize price risk. The marketing of natural gas results in price
risk due to a fixed supply cost and a variable market or, conversely, a
variable supply cost and a fixed market. NGM employs various hedging
techniques to lock in profits or limit exposure to price risk. During the
first quarter of 1995, the Company had swap transactions with broker-dealers
that represented approximately 38,000 MMBTU per day at prices ranging from
$1.35 to $2.02 per MMBTU. At March 31, 1995 the Company had swaps for April
1995 through January 1996 representing 23,000 MMBTU per day at prices ranging
from $1.47 to $1.56 per MMBTU. The Company had no oil hedges in place, or any
related deposits, at March 31, 1995. The Company records hedging gains or
losses relating to fixed term sales in gathering, marketing and processing
revenues in the period the related contract is completed, and records hedging
gains or losses relating to its own oil and gas production in oil and gas
sales and royalties.
Certain selected oil and gas operating statistics follow:
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------
1995 1994
----------- -----------
Oil sales.......................................... $33,585,000 $24,768,000
Average daily oil - BBLs........................... 23,374 22,775
Average oil price per BBL.......................... $ 16.37 $ 12.22
Gas sales.......................................... $38,377,000 $54,045,000
Average daily gas - MCFs........................... 271,635 269,800
Average gas price per MCF.......................... $ 1.61 $ 2.26
BBLS - BARRELS
MCF - THOUSAND CUBIC FEET
Oil and gas operations expense increased $4.1 million to $22.3 million for
the three months ended March 31, 1995, as compared to the same period of
1994. On a barrel of oil equivalent (BOE) basis (converting gas to oil on the
basis of 6 MCF per barrel), operations expense increased $.62 per BOE for the
three months ended March 31, 1995, as compared to the same period of 1994.
This increase is due primarily to an increase in expenses relating to the
number of offshore properties and platforms in the Gulf of Mexico and to new
properties not yet fully on line, as well as increases in costs of certain
acquired properties.
Depreciation, depletion and amortization (DD&A) expense remained flat at
$33.4 million for the three months ended March 31, 1995, compared to the same
period in 1994. The unit rate of DD&A per equivalent barrel, converting gas
to oil on a the basis of 6 MCF per barrel, was $5.40 for the first three
months of 1995 compared to $5.50 for the same period of 1994. 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 decreased 31 percent to $5.2 million for the three months
ended March 31, 1995, compared to the same period of 1994. The decrease is
due to the reduction in borrowings mentioned in the Liquidity and Capital
Resources section above.
Page 7
FORM 10-Q
Interest capitalized decreased from $2.0 million for the three months
ended March 31, 1994 to $.7 million for the three months ended March 31,
1995. This decrease resulted from the completion and discontinuation of
capitalized interest on the Company's East Cameron 331/332 property in the
Gulf of Mexico.
FUTURE TRENDS
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 25, 1995 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 50,024,356 shares of common stock of the Company
outstanding and entitled to vote, 45,841,076 shares were present in
person or by proxy, representing approximately 92 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......................... 45,526,558 314,518
Michael A. Cawley.................. 45,532,273 308,803
Edward F. Cox...................... 45,372,349 448,727
James C. Day....................... 45,501,048 340,028
Robert Kelley...................... 45,532,923 308,153
Harold F. Kleinman................. 45,638,060 203,016
George J. McLeod................... 45,521,458 319,618
Guy W. Nichols..................... 45,676,257 164,819
John F. Snodgrass.................. 45,522,458 318,618
(d) Inapplicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The information required by this Item 6 (a) is set forth in the Index to
Exhibits accompanying this quarterly report and is incorporated herein
by reference.
(b) The Company did not file any reports on Form 8-K during the three months
ended March 31, 1995.
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 12, 1995 WM. D. DICKSON
-------------- ------------------------------------
WM. D. DICKSON, Vice President-Finance
and Treasurer
(Principal Financial Officer
and Authorized Signatory)
Page 10
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------- ------- ------------
10.1 Credit agreement dated as of May 27, 1994,
among the Registrant, Texas Commerce Bank
National Association, as Agent, and the banking
institutions listed in Annex I thereto.
27.1 Financial Data Schedule.
99.1 Press Release of Noble Affiliates, Inc. dated
May 1, 1995 regarding proposed settlement
agreement with Columbia Gas Transmission
Corporation.
Page 11