Securities and Exchange Commission
Washington, DC 20549
---------------------
FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTER ENDED JUNE 30, 1997
Commission File Number 0-10077
EVERGREEN RESOURCES, INC.
(Exact Name of Registrant as Specified in its Charter)
COLORADO 84-0834147
(State or Other Jurisdiction (I.R.S. Employer Identification
of Incorporation of Organization) Number)
1000 WRITER SQUARE
1512 LARIMER STREET
DENVER, COLORADO 80202
(Address of Principal Executive (Zip Code)
Offices)
(303) 534-0400
(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.
X Yes No
--- ---
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest date.
CLASS OUTSTANDING AT JULY 24, 1997
Common Stock, No Par Value 9,412,500
EVERGREEN RESOURCES, INC.
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 3
Consolidated Statements of Operations for the Six and Three
Months Ended June 30, 1997 and June 30, 1996 4 - 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and June 30, 1996 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 13
PART II. OTHER INFORMATION 13
2
EVERGREEN RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS June 30, 1997 December 31, 1996
------ ------------- -----------------
CURRENT:
Cash and cash equivalents $ 2,596,274 $ 2,640,300
Accounts receivable:
Oil and gas sales 1,345,764 1,182,635
Joint interest billings and other 1,012,047 727,283
Other current assets 233,016 113,964
------------ ------------
TOTAL CURRENT ASSETS 5,187,101 4,664,182
------------ ------------
PROPERTY AND EQUIPMENT:
Proved oil and gas properties, based on
full-cost accounting 54,085,795 49,323,572
Unevaluated properties not subject to amortization 9,084,228 8,579,220
Gas gathering equipment 19,154,440 13,952,381
Support equipment 1,861,981 1,422,955
------------ ------------
84,186,444 73,278,128
Less accumulated depreciation, depletion and
amortization (13,770,685) (12,578,205)
------------ ------------
NET PROPERTY AND EQUIPMENT 70,415,759 60,699,923
------------ ------------
DESIGNATED CASH 1,468,626 1,493,114
OTHER ASSETS 1,598,834 1,386,376
------------ ------------
$ 78,670,320 $ 68,243,595
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 807,289 $ 3,223,047
Amounts payable to oil and gas property owners 2,484,817 1,068,532
Accrued expenses and other 395,595 415,748
Current portion - capital leases 570,380 275,348
------------ ------------
TOTAL CURRENT LIABILITIES 4,258,081 4,982,675
Production taxes payable 1,468,626 1,493,114
Obligations under capital leases 3,300,286 1,173,500
Notes payable 6,950,000 --
Other long term liabilities 2,430,878 2,230,798
------------ ------------
TOTAL LIABILITIES 18,407,871 9,880,087
------------ ------------
REDEEMABLE PREFERRED STOCK 6,000,000 6,000,000
------------ ------------
COMMON STOCKHOLDERS' EQUITY:
Common stock, shares issued and outstanding,
9,392,720 and 9,336,320 93,922 93,636
Additional paid-in capital 61,553,597 61,369,368
Accumulated deficit (7,538,600) (9,198,780)
Foreign currency translation adjustment 153,530 99,284
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 54,262,449 52,363,508
------------ ------------
$ 78,670,320 $ 68,243,595
------------ ------------
------------ ------------
See accompanying notes to consolidated financial statements
3
EVERGREEN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
---------------------------
1997 1996
---- ----
REVENUE:
Oil and gas production $ 4,958,501 $ 1,010,620
Oil and gas services 374,467 396,847
Interest 71,806 115,347
Other income --- 18,067
------------ ------------
TOTAL REVENUES 5,404,774 1,540,881
------------ ------------
COSTS AND EXPENSES:
Cost of production and operations 888,731 256,573
Gas gathering costs 77,675 93,462
Cost of oil and gas services 392,426 367,410
Depreciation, depletion and amortization 1,291,505 373,873
General and administrative expenses 576,329 363,231
Interest expense 271,590 11,386
Other expense 6,338 (5,454)
------------ ------------
TOTAL COSTS AND EXPENSES 3,504,594 1,460,481
------------ ------------
NET INCOME 1,900,180 80,400
PREFERRED STOCK DIVIDENDS 240,000 300,000
------------ ------------
NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON STOCK $ 1,660,180 $ (219,600)
------------ ------------
NET INCOME (LOSS) PER SHARE OF COMMON STOCK $ .18 $ (.04)
------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,392,720 5,900,000
------------ ------------
See accompanying notes to consolidated financial statements.
4
EVERGREEN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
---------------------------
1997 1996
---- ----
REVENUE:
Oil and gas production $ 2,520,800 $ 526,344
Oil and gas services 192,696 190,909
Interest 31,317 51,599
Other income --- 10,028
------------ ----------
TOTAL REVENUES 2,744,813 778,880
------------ ----------
COSTS AND EXPENSES:
Cost of production and operations 483,728 131,953
Gas gathering costs 41,413 43,898
Cost of oil and gas services 205,321 184,841
Depreciation, depletion and amortization 704,796 201,840
General and administrative expenses 283,413 149,270
Interest expense 165,654 9,385
Other expense 543 (2,337)
------------ ----------
TOTAL COSTS AND EXPENSES 1,884,868 718,850
------------ ----------
NET INCOME 859,945 60,030
PREFERRED STOCK DIVIDENDS 120,000 150,000
------------ ----------
NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON STOCK $ 739,945 $ (89,970)
------------ ----------
NET INCOME (LOSS) PER SHARE OF COMMON STOCK $ .08 $ (.02)
------------ ----------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,392,720 5,899,736
------------ ----------
See accompanying notes to consolidated financial statements.
5
EVERGREEN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
---------------------------
1997 1996
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,900,180 $ 80,400
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation, depletion and amortization 1,291,505 373,873
Other 44,160 45,347
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (448,018) (490,626)
Decrease (increase) in current assets (119,045) (137,181)
Increase (decrease) in accounts payable (637,185) 136,032
Increase (decrease) in accrued expenses (20,152) 155,756
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,011,445 163,601
------------ -----------
Cash flows from investing activities:
Investment in property and equipment (10,086,339) (3,128,737)
Proceeds from sale of oil and gas assets --- 310,413
Proceeds from sale of subsidiary --- 457,820
Designated cash 24,488 (164,478)
Change in production taxes payable (24,488) 164,478
Decrease (Increase) in other assets (191,711) 96,552
------------ -----------
NET CASH USED BY INVESTING ACTIVITIES (10,278,050) (2,263,952)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes payable and long-term debt 7,327,120 ---
Proceeds from sale of common stock --- 303,904
Debt issue costs (19,416) (13,598)
Principal payments on capital lease obligations (264,332) (39,012)
Payment of preferred stock dividends (240,000) (300,000)
Increase in cash held from operating oil
and gas properties 1,416,285 (3,935)
------------ -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 8,219,657 (52,641)
------------ -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 2,922 (53,051)
------------ -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (44,026) (2,206,043)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 2,640,300 3,646,492
------------ -----------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD $ 2,596,274 $ 1,440,449
------------ -----------
------------ -----------
See accompanying notes to consolidated financial statements.
6
EVERGREEN RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1997
1. In the opinion of Management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the Company's
financial position as of June 30, 1997 and the results of its operations and
changes in financial position for the three and six months then ended. All
such adjustments are of a normal recurring nature.
2. Certain information at December 31, 1996 has been condensed from the audited
financial statements included in the Company's most recent filing on Form
10-K.
3. The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Evergreen Operating Corporation ("EOC"),
Evergreen Resources (UK) Limited ("ERUK"), Primero Gas Marketing Co.
(Primero), and Powerbridge, Inc. ("PBI"). All significant intercompany
balances and transactions have been eliminated.
4. The Company follows the full-cost method of accounting for oil and gas
properties. Under this method, all productive and nonproductive costs
incurred in connection with the exploration for and development of oil and
gas reserves are capitalized. Such capitalized costs include lease
acquisition, geological and geophysical work, delay rentals, drilling,
completing and equipping oil and gas wells and other related costs. Normal
dispositions of oil and gas properties are accounted for as adjustments of
capitalized costs, with no gain or loss recognized.
5. Depreciation and depletion of proved oil and gas properties is computed on
the units-of-production method based upon estimates of proved reserves with
oil and gas being converted to a common unit of measure based on the
relative energy content. Unproved oil and gas properties, including any
related capitalized interest expense, are not amortized, but are assessed
for impairment either individually or on an aggregated basis.
6. Designated cash represents the cash withheld for payment of production taxes
from the Company and third party revenue interest owners for subsequent
distribution to county taxation authorities.
7. The functional currency for the Company's foreign operations is the
applicable local currency. The translation of the applicable foreign
currency into U.S. dollars is performed for balance sheet accounts using
current exchange rates in effect at the balance sheet date and for revenue
and expense accounts using a weighted average exchange rate during the
period. The gains or losses resulting from such translation are included in
stockholders' equity.
8. Effective with the period ended December 31, 1996, the Company elected to
begin utilizing a December 31 year-end. As a result of the change in fiscal
years the Statement of Operations for the six months ended June 30, 1996 has
been restated to include the results of operations for the three months
ended March 31, 1996 and the three months ended June 30, 1996.
7
EVERGREEN RESOURCES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
RATON BASIN
Since December 1991, Evergreen has acquired oil and gas leases covering
over 120,000 gross acres in the Raton Basin, Las Animas County in
Southeastern Colorado. This acreage position will support over 500 wells on
160 acre spacing. Independent engineering estimates indicate reserve
potential of approximately 1.5-2.0 billion cubic feet of gas per well.
On March 10, 1997, drilling commenced on 18 new development wells and 4
exploratory wells. All wells were drilled to the Vermejo coal intervals at
depths ranging from 900 feet to 3100 feet. The 18 development wells are
located in the Southern portion of the Spanish Peaks Unit and 17 are now
producing.
Two of the exploratory wells have been drilled in the Northern portion
of the Spanish Peaks Unit, and the other two exploratory wells have been
drilled in the central portion of the Sangre de Cristo Unit. The exploratory
wells will test production levels, provide additional geologic control, and
also will fulfill Unit obligations.
In July 1997, drilling commenced on an additional 20 development wells,
all of which are expected to be producing by year-end.
To date, Evergreen has drilled 79 coalbed methane gas wells in the
Vermejo coals at depths of 900 to 3,100 feet. Evergreen has a 100% interest
in these wells, 71 of which are in production. The remaining 8 wells are
awaiting completion. Gas sales began in January 1995 and production has
improved as new wells have been drilled to a present level of over 23 million
cubic feet (MMcf) per day gross. Evergreen's net sales are approximately 19
MMcf per day at present.
Effective January 1, 1997, the Company entered into a firm
transportation agreement for a ten-year term with Colorado Interstate Gas
Company ("CIG"). The agreement, at CIG's current tariff rates, allows the
Company to access Mid-continent natural gas markets. The Company is
obligated to transport at least 10 MMcf per day, and will be allowed to
transport an additional 15 MMcf per day at a fixed charge. The agreement
provides Evergreen access to markets beyond the Rockies and improves the
Company's gas marketing options.
The Company's MINIMUM natural gas price target for the full year is
$1.60 per Mcf. In order to help insure Evergreen's 1997 minimum target gas
price, the Company has entered into several contracts which collectively
represent approximately 80% of present Raton Basin sales volumes. The
contracts are all for the period May-October 1997. The average sales price
resulting from these sales contracts will be approximately $1.61/Mcf. By
entering into these contracts, Evergreen has also fulfilled all Raton Basin
volume commitments during May-October 1997 and now qualifies for reduced
transportation charges of approximately $0.20 per Mcf on all volumes sold
above the contracted levels during the six month period.
The Company has recently entered into a contract to sell a portion of
its gas at $2.05/Mcf for November 1997 through March 1998.
8
Colorado Interstate Gas Company ("CIG") plans to construct a new 120
- -mile, 16 inch pipeline from Trinidad to Campo, Colorado. Capacity of this
new pipeline will initially be approximately 100 million cubic feet per day.
CIG expects that this new line will be in service in August of 1998.
The Company has executed an agreement for transportation on this
pipeline, which is subject to the outcome of an "open season" filed by CIG to
solicit additional firm-volume commitments. The open season will be
completed in mid-August, at which time the terms of the agreement will be
finalized in accordance with the "open season" provisions mandated by the
Federal Energy Regulatory Commission.
UNITED KINGDOM
Under a new onshore Licensing regime implemented by the UK Department of
Trade and Industry (DTI), Evergreen has converted its existing onshore
Exploration Licenses to new onshore Licenses, called Petroleum Exploration
and Development Licenses. These new Licenses will provide up to a 30 year
term with optional periodic relinquishment of portions of the licenses,
subject to future development plans. There are no royalties or burdens
encumbering the Licenses. Work commitments on the Licenses have been
fulfilled through 1997 as a result of Evergreen's prior UK activity.
The DTI has approved the Company's request to relinquish 259,461
presently licensed acres, which were not considered highly prospective for
coalbed methane (CBM) development. The Company retains 371,018 acres, which
were high-graded for CBM and conventional hydrocarbon potential. Work
commitments for acreage retained will include remote sensing studies,
additional seismic studies and the drilling of three wells, one per year
beginning in 1999.
Evergreen is continuing to hold discussions with various funding
sources, including potential industry partners, for the purpose of resuming
evaluation and development of the Licenses.
SHAREHOLDER RIGHTS PLAN
On July 7, 1997 the Board of Directors adopted a Shareholder Rights Plan
("Rights Plan"), pursuant to which stock purchase rights will be distributed
as a dividend to its common stockholders at a rate of one Right for each
share of common stock held of record as of July 22, 1997.
The Rights Plan is designed to enhance the Board's ability to prevent an
acquiror from depriving stockholders of the long-term value of their
investment and to protect shareholders against attempts to acquire the
Company by means of unfair or abusive takeover tactics that have been
prevalent in many unsolicited takeover attempts.
This action is not taken in response to any pending or threatened
takeover effort to acquire the Company.
Under the Rights Plan, the rights will become exercisable only if a
person or a group (except for existing 20% shareholders) acquires or
commences a tender offer for 20% or more of the Company's common stock.
Until they become exercisable, the Rights attach to and trade with the
Company's common stock. The Rights will expire July 22, 2007. The Rights may
be redeemed by the continuing members of the Board at $.001 per Right prior
to the day after a person or group has accumulated 20% or more of the
Company's common stock.
9
In the event that a person or group acquires 20% of the Company's common
stock, the rights would then be modified to represent the right to receive
for the exercise price, Company common stock having a value worth twice the
exercise price.
In the event that the Company is involved in a merger or other business
combination at any time after a person or group has acquired 20% or more of
the Company's common stock, the Rights will be modified so as to entitle a
holder to buy a number of shares of common stock of the acquiring entity
having a market value of twice the exercise price of each Right.
All Rights held or acquired by a person or group holding 20% or more of
the Company's shares are void. The Rights are not triggered by continued
stock ownership of the Company's existing 20% shareholders, unless these
Shareholders increase their holdings in the Company above 30%.
Additional details of the Shareholder Rights plan were outlined in a
letter recently mailed to the Company's stockholders.
LIQUIDITY AND CAPITAL RESOURCES
Evergreen currently has a $30.0 million revolving line of credit with
Hibernia National Bank of New Orleans, Louisiana, which is available through
May 1999. Advances pursuant to this line of credit are limited to the
borrowing base, which is presently $30.0 million. Interest accrues at prime
plus or minus a margin of -.25% to .25%, with margins determined on the
average outstanding borrowings under the line of credit. The borrowing base
is redetermined semi-annually by the bank based upon reserve evaluations of
the Company's oil and gas properties. As of July 24, 1997, the Company had
$6.1 million of borrowings under the line.
The Company has a $6.0 million equipment lease line with Hibernia with
interest at prime for a term of five years including options to purchase the
equipment at a nominal amounts at the end of the lease term. The Company
primarily leases compressors for the Raton Basin gas gathering system and
other related production equipment. At July 24, 1997, the Company had
utilized approximately $4 million under the lease line.
The Company anticipates drilling 40-60 wells and expanding and upgrading
gas gathering facilities during fiscal 1997. Capital requirements for the
remainder of fiscal 1997 are estimated to be approximately $9 million. The
Company believes that cash flow from operations and funds under its line of
credit will be sufficient to fulfill the 1997 development objectives. Leases
expiring in fiscal 1997 are not material and do not require significant
drilling expenditures.
Cash flows provided by operating activities were $2,011,500 for the six
months ended June 30, 1997 as compared to cash provided by operating
activities of $163,600 in the prior year. The significant increase in the
cash flows provided by operating activities is due primarily to improved
operating results as a result of higher gas production and higher gas prices.
Cash flows used by investing activities were $10,278,000 during the six
months ended June 30, 1997 versus $2,264,000 during the same period in 1996.
The increase was due to the continued development of the Raton Basin
including an upgrade of the gas gathering system.
10
Cash flows provided by financing activities were $8,220,000 during the
six months ended June 30, 1997 as compared to cash flows used by financing
activities of $52,600 in the prior period. The increase was due primarily to
increased borrowings to fund the drilling and gathering system development in
the Raton Basin.
The Company's production from its San Juan basin properties has not met
the minimum volume requirements under its transportation agreements with El
Paso Field Services ("El Paso"). As of June 30, 1997, the cumulative
obligation of the Company to El Paso resulting from this shortfall was
$2,431,000. At current rates of production, this liability would increase to
over $3 million by the end of the contract term in July 1998. The Company is
currently in discussions with El Paso concerning alternative resolutions to
the shortfall, including the purchase by the Company of a portion of El
Paso's pipeline system. However, there is no assurance that an alternative
agreement will be reached.
Some of the information contained herein is forward-looking. Actual
results could materially differ and could be affected by, among other things,
natural gas prices, and/or general economic conditions.
On March 3, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
(SFAS No. 128). This pronouncement provides a different method of
calculating earnings per share than is currently used in accordance with
Accounting Principles Board Opinion (APB) No. 15, "Earnings Per Share". SFAS
128 provides for the calculation of "Basic" and "Diluted" earnings per share.
Basic earnings per share includes no dilution and is computed by dividing
income available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution of securities that could share in the
earnings of an entity, similar to fully diluted earnings per share. The
Company will adopt SFAS No. 128 in 1997 and its implementation is not
expected to have a material effect on the consolidated financial statements.
11
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997
The Company reported net income of $1,660,200 or $0.18 per common share
for the six months ended June 30, 1997, compared to a net loss of $219,600 or
$0.04 per common share for the same period in 1996.
For the three months ended June 30, 1997, the Company reported net
income of $739,900 or $0.08 per common share compared to a net loss of
$89,900 or $0.02 per common share for the same period in 1996.
EBITDA (earnings before interest, taxes, depreciation, depletion and
amortization) improved to $3.2 million or $0.34 per common share for the six
months ended June 30, 1997 vs. $165,600 or $0.03 per common share for the
same period in 1996.
Natural gas revenues were $4,958,500 during the six months ended June
30, 1997, compared to $1,010,600 for the same period in the prior year.
During the three months ended June 30, 1997, natural gas revenues were
$2,520,800 vs. $526,300 in the prior year. The Company has no significant
oil reserves, production or revenues.
The significant year-to-year increase in natural gas revenue during the
three and six months ended June 30, 1997, is attributable to sharply higher
Raton Basin production volumes and improved natural gas prices.
During the quarter ended June 30, 1997, Raton Basin gas production
represented approximately 93% of the Company's total gas production, compared
to 73% for the same period in the prior year. At June 30, 1997, there were
67 producing Raton Basin wells compared to 31 producing wells at June 30,
1996.
Production costs and taxes (lifting costs) for the six months ended June
30, 1997, were $888,700 compared to $256,600 for the same period in 1996. On
an equivalent Mcf basis (Mcfe), lifting costs declined from $0.36 per Mcf in
the six months ended June 30, 1996 to $0.32 per Mcfe in the current year.
Six Months Ended Three Months Ended
June 30, June 30,
----------------- ------------------
1997 1996 1997 1996
Gas Production (Mcf) 2,757,000 719,400 1,459,200 395,100
Gas Revenues 4,958,500 1,010,600 2,520,800 526,300
Avg. Price per Mcf $1.80 $1.40 $1.73 $1.33
Production Cost per Mcfe $0.32 $0.36 $0.33 $0.33
Oil and gas service revenues and cost of oil and gas services are
attributable to the Company's wholly owned subsidiary Evergreen Operating
Corporation (EOC), which is primarily responsible for drilling, evaluation
and production activities associated with various properties and for
negotiating the sales of oil and gas production from the properties. As of
July 23, 1997, EOC was serving as Operator for approximately 185 producing
wells owned by the Company and also by other unaffiliated third parties.
12
During the six months ended June 30, 1997, oil and gas service revenues
were $374,500, versus $396,800 for the six months ended June 30, 1996, a 6%
decrease. Costs of oil and gas services during the six months ended June 30,
1997 were $392,400 vs. $367,400 for the prior year, a 6% increase.
Depreciation, depletion and amortization expense for the six months
ended June 30, 1997, was $1,291,500 compared to $373,900 in the prior year.
The increase is due to the significant increase in gas production in the
Raton Basin and the increase in capital costs for drilling and the gas
gathering system.
General and administrative expenses were $576,300 during the six months
ended June 30, 1997 as compared to $363,200 during the same period in 1996.
The $213,100 (or 58%) increase is due to an increase in overall corporate
activity, associated with an expanded drilling program.
Interest income for the six months ended June 30, 1997 was $71,800
compared to $115,300 in 1996. The $43,500 (or 38%) decrease is due to less
cash to invest as a result of the continued Raton Basin development.
Interest expense for the six months ended June 30, 1997 was $271,600
versus $11,400 during the same period in 1996. The $260,200 increase in
interest expense is due to increased borrowings to fund the Raton Basin
development.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not engaged in any material pending legal proceedings to
which the Company or its subsidiaries is a party or to which any of its
property is subject.
On June 25, 1997, Evergreen Resources, Inc filed in the Las Animas
County District Court for a declaratory judgment against Amoco Production
Company ("Amoco") regarding the sale by Amoco of certain property located
in Las Animas County, Colorado. Amoco entered into a Purchase and Sale
Agreement with another entity to sell, oil and gas properties which were
subject to a preferential purchase right under a Unit Operating Agreement.
Evergreen, as a working interest owner in the Unit, tendered its notice to
Amoco of its intent to exercise its preferential right to purchase certain
properties covered by the Purchase and Sale Agreement. Amoco contends that
it did not receive a valid election of the preferential purchase rights from
Evergreen. Evergreen is seeking a declaratory judgment against Amoco
declaring that it properly exercised its preferential right of purchase, and
that Amoco is obligated to sell the properties covered by that preferential
right of purchase to Evergreen.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's Annual Meeting on May 28, 1997 Shareholders elected Alain
Blanchard and Scott D. Sheffield to new three-year terms and Larry D.
Estridge to a new two-year term.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A report on Form 8-K describing the Shareholder Rights Plan was filed on July
7, 1997.
14
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.
EVERGREEN RESOURCES, INC.
(Registrant)
DATE: July 24, 1997 By: /s/ Kevin R. Collins
--------------------------------
Kevin R. Collins
VP - Finance
Chief Financial Officer
15