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 June 30, 1996, or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to _____
COMMISSION FILE NUMBER 000-20849
RUTHERFORD-MORAN OIL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 76-0499690
- ---------------------------------- ----------------------------------
(State or other jurisdiction (I.R.S. Employer
incorporation of organization) Identification No.)
5 Greenway Plaza, Suite 220, Houston, Texas 77046
(Address of principal executive offices and zip code)
(713) 622-5555
(Registrant's telephone number, including area code)
Not Applicable
(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 13, 1996, there were 25,600,000, shares of common stock, $.01
par value, of the registrant outstanding.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS - UNAUDITED
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
December 31, June 30,
1995 1996
------------ ---------
(Predecessors) (Company)
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 9,831 22,042
Value added tax refund receivable 631 1,677
Advances to operator 1,002 515
Other 35 29
--------- --------
Total current assets 11,499 24,263
Oil and gas properties, at cost
(full cost method) 55,951 86,496
Office furniture and fixtures 58 96
Accumulated depreciation (7) (11)
--------- --------
Net property, plant and equipment 56,002 86,581
Deferred costs (net of accumulated amortization of
$231 and $-0- at December 31, 1995 and June 30, 1996,
respectively) 168 557
--------- --------
$ 67,669 111,401
--------- --------
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 370 756
Loans from stockholders 8,490 11,842
Notes payable to a bank 34,385 -
Due to operator 977 6,927
Accrued interest on loans from predecessor stockholders 178 -
--------- --------
Total current liabilities 44,400 19,525
Deferred taxes - 1,921
Premium on written option - 557
Stockholders' equity:
Predecessor capital 24,682 -
Preferred stock, $0.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, $0.01 par value, 40,000,000 shares authorized,
25,000,000 shares issued and outstanding at June 30, 1996 - 250
Additional paid-in capital - 89,190
Deficit accumulated during the development stage (1,413) (42)
--------- --------
Total stockholders' equity 23,269 89,398
Commitments and contingencies
--------- --------
$ 67,669 111,401
--------- --------
--------- --------
See accompanying notes to unaudited condensed consolidated financial statements.
1
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
Three September 21,
months April 1, June 18, 1990 (date of
ended through through inception) to
June 30, June 17, June 30, June 30,
1995 1996 1996 1996
-------------- -------------- ---------- -------------
(Predecessors) (Predecessors) (Company)
Interest income $ 2 $ - $ 20 $ 186
Expenses:
Interest expense 38 136 7 958
Depreciation expense 2 1 - 11
Salaries and wages 21 74 15 470
General and administrative 23 126 40 890
---------- ---------- ---------- ----------
Total expenses 84 337 62 2,329
---------- ---------- ---------- ----------
Net loss before taxes (82) (337) (42) (2,143)
---------- ---------- ---------- ----------
Tax Expense - 1,921 - 1,921
---------- ---------- ---------- ----------
Net loss $ (82) $ (2,258) $ (42) $ (4,064)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net loss per share $ - $ (0.11) $ - $ (0.19)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding 21,000,000 21,000,000 25,000,000 21,022,835
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See accompanying notes to unaudited consolidated financial statements.
2
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
Six September 21,
months January 1, June 18, 1990 (date of
ended through through inception) to
June 30, June 17, June 30, June 30,
1995 1996 1996 1996
-------------- -------------- ---------- -------------
(Predecessors) (Predecessors) (Company)
Interest income $ 2 $ - $ 20 $ 186
Expenses:
Interest expense 75 395 7 958
Depreciation expense 2 4 - 11
Salaries and wages 42 108 15 470
General and administrative 71 180 40 890
---------- ---------- ---------- ----------
Total expenses 190 687 62 2,329
---------- ---------- ---------- ----------
Net loss before taxes (188) (687) (42) (2,143)
---------- ---------- ---------- ----------
Tax Expense - 1,921 - 1,921
---------- ---------- ---------- ----------
Net loss $ (188) $ (2,608) $ (42) $ (4,064)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net loss per share $ (0.01) $ (0.12) $ - $ (0.19)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding 21,000,000 21,000,000 25,000,000 21,022,835
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See accompanying notes to unaudited condensed consolidated financial statements.
3
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
Deficit
Common stock accumulated
-------------------- Additional during the Total
Predecessor Shares paid-in development stockholders'
capital outstanding Amount capital stage equity
----------- ----------- ------ ---------- ----------- -------------
Balance at December 31, 1994 $ 16,385 - $ - $ - $ (901) $15,484
Capital contributions 8,297 - - - - 8,297
Net loss - - - - (512) (512)
--------- ---------- ---- -------- ------- -------
Balance at December 31, 1995 24,682 - - (1,413) 23,269
Net loss from January 1, 1996 to
June 17, 1996 (unaudited) - - - - (2,608) (2,608)
Transfer of interests and issuance of
common stock in initial public offering (24,682) 25,000,000 250 104,680 4,021 84,269
Redemption of Rutherford-Moran
Exploration Company stock by
majority shareholders - - - (12,360) - (12,360)
Exercise of call option on Thai Romo
Limited stock - - - (3,130) - (3,130)
Net loss from June 18, 1996 to
June 30, 1996 (unaudited) - - - - (42) (42)
--------- ---------- ---- -------- ------- -------
Balance at June 30, 1996 (unaudited) $ - 25,000,000 $250 $ 89,190 $ (42) $89,398
--------- ---------- ---- -------- ------- -------
--------- ---------- ---- -------- ------- -------
See accompanying notes to unaudited condensed consolidated financial statements.
4
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
September 21,
Six months January 1, June 18, 1990 (date of
ended through through inception) to
June 30, June 17, June 30, June 30,
1995 1996 1996 1996
-------------- ------------- --------- --------------
(Predecessors) (Predecessors) (Company)
Cash flows from operating activities:
Net loss $ (188) (2,608) (42) (4,064)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 2 4 -- 11
Deferred income taxes 1,921 -- 1,921
Changes in working capital (1,203) 5,605 -- 5,462
-------- ------- ------- -------
Cash used in operating activities (1,389) 4,922 (42) 3,330
Cash flows from investing activities:
Investment in oil and gas properties (9,184) (30,377) -- (86,096)
Other capital expenditures -- (38) -- (96)
-------- ------- ------- -------
Cash used in investing activities (9,184) (30,415) -- (86,192)
Cash flows from financing activities:
Exercise of call option on Thai Romo Limited stock -- -- (3,130) (3,130)
Capital contributions 391 -- -- 26,488
Proceeds from initial public offering -- -- 84,269 84,269
Redemption of Rutherford-Moran Exploration
Company stock by majority stockholders -- -- (12,360) (12,360)
Proceeds from loans from shareholders 587 15,654 -- 24,993
Payments on loans from shareholders -- -- (12,302) (13,151)
Capital distributions -- -- -- (2,205)
Borrowings under bank notes 9,479 29,164 -- 63,549
Repayments of bank notes -- (13,885) (49,664) (63,549)
-------- ------- ------- -------
Cash provided by financing activities 10,457 30,933 6,813 104,904
-------- ------- ------- -------
Net increase (decrease) in cash (116) 5,440 6,771 22,042
Cash and cash equivalents, beginning of period 424 9,831 15,271 --
-------- ------- ------- -------
Cash and cash equivalents, end of period $ 308 15,271 22,042 22,042
-------- ------- ------- -------
-------- ------- ------- -------
Supplemental disclosures of cash flow information-
cash paid during the period for interest $ -- 767 -- 1,240
-------- ------- ------- -------
-------- ------- ------- -------
Supplemental disclosures of noncash investing
and financing activities:
Issuance of partnership interest in Thai Romo
Limited for loan acquisition costs $ -- -- -- 400
-------- ------- ------- -------
-------- ------- ------- -------
Capitalization of amortized loan acquisition costs $ -- 168 -- 400
-------- ------- ------- -------
-------- ------- ------- -------
Interests in Thai Romo Limited and Rutherford
Moran Exploration Company contributed for
common stock $ -- 24,682 -- 24,682
-------- ------- ------- -------
-------- ------- ------- -------
Predecessor retained earnings reclassified
to additional paid-in capital $ -- -- 4,021 4,021
-------- ------- ------- -------
-------- ------- ------- -------
Premium deferred and premium on written option $ -- 557 -- 557
-------- ------- ------- -------
-------- ------- ------- -------
See accompanying notes to unaudited condensed consolidated financial statements.
5
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements include, in
the opinion of management, all adjustments necessary to present fairly the
consolidated financial position of Rutherford-Moran Oil Corporation (RMOC
or the Company) at June 30, 1996 and its results of operations and cash
flows for the three and six months ended June 30, 1995 and 1996. The
financial statements should be read in conjunction with the historical
financial statements and notes to the combined historical financial
statements of Rutherford-Moran Exploration Company (RMEC) and Thai Romo
Limited (Thai Romo) as of and for the year and period ended December 31,
1995.
(2) PRINCIPLES OF PRESENTATION
In April 1996, Rutherford/Moran Oil Corporation changed its name to RMEC.
Effective June 17, 1996 the stockholders of RMEC and the partners of Thai
Romo exchanged their interests for shares of common stock of a newly formed
entity, RMOC. RMOC is the parent company of RMEC and Thai Romo.
RMOC sold 16% of its common stock in an initial public offering (the
Offering) in conjunction with the consummation of the exchange of RMEC
common stock and Thai Romo interests for common stock of RMOC. In
conjunction with the Offering, RMEC redeemed for $12.4 million
approximately 56,000 shares of its common stock from Patrick R.
Rutherford and John A. Moran, majority stockholders of RMEC (the
Redemption), exercised RMEC's Call Option on 3% of the partners'
interest of Thai Romo held by Red Oak Holdings, Inc. for $3.2 million
and repaid outstanding debt owed stockholders and banks of $62 million.
The stockholders' equity on June 18, 1996 reflects the reclassification
of the deficit accumulated during the development stage to additional
paid-in capital upon RMEC and Thai Romo becoming subject to federal
income taxes.
The consolidated financial statements for the period from June 18, 1996 to
June 30, 1996 include the accounts of RMOC and its wholly owned
subsidiaries, RMEC and Thai Romo. All material intercompany accounts and
transactions have been eliminated in the consolidation.
The financial statements for the six months ended June 30, 1995, the period
from January 1, 1996 to June 17, 1996 and the period from April 1, 1996 to
June 17, 1996 include the accounts of RMEC and Thai Romo (combined). All
material intercompany accounts and transactions have been eliminated in the
combination. The combined financial statements are presented due to the
commonality of the stockholders and partners of RMEC and Thai Romo.
(Continued)
6
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company's planned principal operations have commenced, but there has
been no revenue; therefore, the Company is considered a development stage
company.
(3) ORGANIZATION
RMEC was formed on September 21, 1990 (date of inception) for the purpose
of holding an interest in an oil and gas concession in Thailand through
Thai Romo. RMEC paid all of the expenses of the concession on behalf of
Thai Romo through November 4, 1993.
Effective September 24, 1990, the stockholders of RMEC elected to have it
treated as an S Corporation under the Internal Revenue Code of 1986, as
amended. As such, RMEC did not incur federal income taxes at the corporate
level prior to June 18, 1996, and its taxable income or loss was passed
through to its stockholders based on their interests. In the event of an
examination of RMEC's tax return, the income tax liability of the
stockholders prior to June 18, 1996 could be changed if an adjustment to
taxable income or loss is sustained by the taxing authorities.
In June 1991, Thai Romo was organized as a foreign corporation under the
laws of the Kingdom of Thailand for the purpose of holding an interest in
an oil and gas concession. In August 1991, Thai Romo, with two other
companies, was awarded a petroleum concession (the Concession) to explore
for petroleum from the Ministry of Industry of Thailand. A subsidiary of
Pogo Producing Company is the operator of the Tantawan Field within the
Concession and the remainder of the Concession is operated by Maersk Oil
(Thailand) Ltd. In November 1993, Thai Romo amended its Articles of
Association so that it will be treated as a partnership for U.S. income
tax purposes. As such, Thai Romo was not subject to federal income taxes
from November 1993 to June 17 1996. Income and losses earned by Thai Romo
were passed through to the partners on the basis of their interest in Thai
Romo. In the event of an examination of Thai Romo's tax return, the income
tax liability of the partners prior to June 18, 1996 could be changed if
an adjustment to taxable income or loss is sustained by the taxing
authorities.
As RMEC and Thai Romo are now part of the Company's consolidated tax
return, RMEC and Thai Romo recorded a deferred tax liability and expense
of $1,921,000 for the difference between the book basis and tax basis of
oil and gas properties on June 17, 1996.
(4) PROPOSED CREDIT FACILITY
The Company is currently negotiating a $100,000,000 revolving credit
facility (the "Revolving Credit Facility") with a commercial lender for the
purpose of financing ongoing development of Block B8/32 as well as for
general corporate purposes. The proposed Revolving Credit Facility will be
subject to borrowing base limitations and will have a three year final
maturity. Initial availability under the borrowing base will be
$60,000,000. The commercial lender intends to syndicate the credit
facility with a group of financial institutions acceptable to the Company.
(Continued)
7
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Under the terms of the Revolving Credit Facility, outstanding borrowings
will bear interest based either on the base rate of the commercial lender
or a reserve adjusted Eurodollar rate plus a margin of 1.75%, at the
Company's option.
The Company will be required to pay a commitment fee of .5% per annum on
the average daily balance of the unused borrowing base.
The Revolving Credit Facility will contain covenants restricting the
activities of the Company, including among others, restrictions on
investments, disposition of assets, indebtedness and the granting of liens,
dividends and distributions and an agreement to remain within its current
line of business. Following commencement of production in the Tantawan
Field, the Company will be required to maintain an interest coverage ratio
of not less than 3:1. Failure to comply with such covenants and
restrictions would constitute an event of default under the Revolving
Credit Facility.
Definitive agreements evidencing the Revolving Credit Facility have not
been entered into, however the ultimate agreement is not expected to
deviate materially from the described terms. Management of the Company
expects that a credit facility will be in place by the end of the third
quarter of 1996.
(5) CRUDE OIL HEDGING ACTIVITIES
During the first quarter of 1996, the Company entered into crude oil price
swaps with an affiliate of its lender. While the swaps are intended to
reduce the Company's exposure to declines in the market price of crude oil,
they may limit the Company's gain from increases in the market price. At
June 30, 1996, the crude oil price swap agreements incorporated one million
barrels (MMBbl) of oil volumes from April through December 1997 at a
weighted average price of $15.92 per Bbl and 1.75 MMBbl of oil volumes
from January through December 1998 at a weighted average price of $15.92
per Bbl. At August 7, 1996, the Company estimates the fair market value of
unwinding this position to be approximately $2.1 million.
Also, the Company has provided to the affiliate of the lender a swap option
for 1.25 MMBbl of aggregate oil volumes from January through December 1999
at a price of $18.30 per Bbl. The Company has accounted for the swap
option separately as it does not qualify as a hedge. At June 30, 1996, the
Company estimates the fair market value of this position to be $557,000 and
has recorded the amount as a liability on the Balance Sheet.
(Continued)
8
RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(6) SUBSEQUENT EVENTS
Pursuant to the Company's underwriting agreement, the underwriters of the
Company's initial public offering exercised their over-allotment option and
purchased 600,000 shares of the Company's stock, providing the Company with
net proceeds and additional equity of $12.8 million on July 16, 1996.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the audited
combined financial statements of RMEC and Thai Romo as of and for the year
ended December 31, 1995.
OVERVIEW
To date, the Company's exploration and development activities have not
generated revenues. As a result, the Company's historical results of
operations and period-to-period comparisons of such results and certain
financial data may not be meaningful or indicative of future results. In
this regard, future results of the Company will be materially dependent
upon the success of the Company's operations within Block B8/32. Due to
the nature of the Company's business activities and the general risks
relating to exploratory and development drilling for crude oil and natural
gas, there can be no assurance as to the success of these efforts.
The Company uses the full cost method of accounting for its investment in
its interest in oil and gas properties. Under the full cost method of
accounting, all costs of acquisition, exploration and development of oil
and natural gas reserves are capitalized into a "full cost pool" as
incurred, and properties in the pool are depleted and charged to operations
using the unit-of-production method based on the ratio of current
production to total proved oil and natural gas reserves.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30,
1995.
The Company's net loss of $2,300,000 for the three months ended June 30,
1996 increased from the Company's net loss of $82,000 for the three months
ended June 30, 1995 due primarily to increases in income taxes due to a
one time charge of $1,921,000 and less significantly due to increases in
interest expense, salaries and wages, and general and administrative
expenses.
As RMEC and Thai Romo are now part of the Company's consolidated federal
tax return, RMEC and Thai Romo recorded a deferred tax liability and
expense of $1,921,000 for the difference between the book basis and tax
basis of oil and gas properties on June 17,1996.
Interest expense of $143,000 for the three months ended June 30, 1996
increased compared to $38,000 for the three months ended June 30, 1995.
This increase is caused by additions of debt due to shareholders and
banks. However, those notes were repaid in June 1996 with proceeds from
an initial public offering.
Salaries and wages and general administrative expenses of $89,000 and
$166,000 for the three months ended June 30, 1996 increased compared to
$21,000 and $23,000 for the three months ended June 30, 1995. This
increase is due to the Company capitalizing a greater portion of salaries
and wages and costs related to the oil and gas property development in 1995
compared to 1996.
(Continued)
10
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30,
1995.
The Company's net loss of $2,650,000 for the six months ended June 30, 1996
increased from the Company's net loss of $188,000 for the six months ended
June 30, 1995 due primarily to increases in income taxes due to a one time
charge of $1,921,000 and less significantly due to decreases in interest
expense, salaries and wages, and general and administrative expenses.
As RMEC and Thai Romo are now part of the Company's consolidated federal
tax return, RMEC and Thai Romo recorded a deferred tax liability and
expense of $1,921,000 for the difference between the book basis and tax
basis of oil and gas properties on June 17, 1996.
Interest expense of $402,000 for the six months ended June 30, 1996
increased compared to $75,000 for the six months ended June 30, 1995. This
increase is caused by additions of debt due to shareholders and banks.
However, these notes were repaid in June 1996 with proceeds from an initial
public offering.
Salaries and wages and general administrative expenses of $123,000 and
$220,000 for the six months ended June 30, 1996 increased compared to
$42,000 and $71,000 for the six months ended June 30, 1995. This increase
is due to the Company capitalizing a greater portion of salaries and wages
and costs related to the oil and gas property development in 1995 compared
to 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company is currently negotiating a $100,000,000 revolving credit
facility (the "Revolving Credit Facility") with a commercial lender for the
purpose of financing ongoing development of Block B8/32 as well as for
general corporate purposes. The proposed Revolving Credit Facility will be
subject to borrowing base limitations and will have a three year final
maturity. Initial availability under the borrowing base will be
$60,000,000. The commercial lender intends to syndicate the credit
facility with a group of financial institutions acceptable to the Company.
Under the terms of the Revolving Credit Facility, outstanding borrowings
will bear interest based either on the base rate of the commercial lender
or a reserve adjusted Eurodollar rate plus a margin of 1.75%, at the
Company's option.
The Company will be required to pay a commitment fee of .5% per annum on
the average daily balance of the unused borrowing base.
To explore and develop Block B8/32, the Company anticipates capital
expenditures of approximately $60 million for fiscal 1996. Of such
capital expenditures, approximately $47 million is budgeted for development
of the Tantawan Field which the Company believes will commence production
in early 1997. For the remainder of 1996, the Company anticipates capital
expenditures, general and administrative expenses and other working capital
requirements to total approximately $40 million. The Company anticipates
that it will finance such expenditures with cash on hand and borrowings
under the Revolving Credit Facility.
(Continued)
11
ACCOUNTING PRONOUNCEMENTS
On October 23, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-
BASED COMPENSATION, which establishes a fair value method of accounting
for stock-based compensation plans either through recognition or
disclosure. The Company adopted this standard in 1996 and will disclose
the pro forma net income/(loss) and earnings/(loss) per share amounts
assuming the fair value method was adopted on January 1, 1995 in its
financial statements as of and for the year ended December 31, 1996. The
adoption of this standard will not impact the Company's consolidated
results of operations or financial position.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
Current levels of inflation do not significantly affect the Company's
operations.
The Company does not currently hold significant amounts of cash, cash
equivalents, long-term financial instruments or investments denominated in
foreign currencies. Prior to or upon commencement of oil and natural gas
production, the Company may have such holdings. So long as the Company
expects the Thai Baht/U.S. dollar exchange rate to continue to remain
stable, it does not intend to mitigate the foreign currency risks
associated with such holdings through currency rate hedging transactions.
CHANGING OIL PRICES
The Company is dependent on crude oil prices, which have historically been
volatile. The Company uses crude oil price swaps and other similar
arrangements to hedge against potential adverse effects of fluctuations in
future prices for the Company's future oil production. While the swaps are
intended to reduce the Company's exposure to declines in the market price
of crude oil, they may limit the Company's gain from increases in the
market price. At June 30, 1996, the crude oil price swap agreements
incorporated one million barrels (MMBbl) of oil volumes from April through
December 1997 at a weighted average price of $15.92 per Bbl and 1.75 MMBbl
of oil volumes from January through December 1998 at a weighted average
price of $15.92 per Bbl. At August 7, 1996, the Company estimates the fair
market value of unwinding this position to be approximately $2.1 million.
Also, the Company has provided to the affiliate of the lender a swap option
for 1.25 MMBbl of aggregate oil volumes from January through December 1999
at a price of $18.30 per Bbl. The Company has accounted for the swap
option separately as it does not qualify as a hedge. At June 30, 1996, the
Company estimates the fair market value of this position to be $557,000 and
has recorded the amount as a liability on the Balance Sheet.
12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Page
----
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports were filed on Form 8-K in the three month
period ended June 30, 1996.
13
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 hereunto duly authorized.
Dated: August 13, 1996 RUTHERFORD-MORAN OIL CORPORATION
By: /s/ David F. Chavenson
-------------------------------------
David F. Chavenson
Vice President, Finance and Chief
Financial Officer and Treasurer
14