1
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 September 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 November 6, 1996, there were 25,600,000 shares of common stock,
$.01 par value, of the registrant outstanding.
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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, September 30,
1995 1996
----------- ---------
(Predecessors) (Company)
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 9,831 732
Value added tax refund receivable 631 2,175
Advances to operator 1,002 2,133
Other 35 24
--------- --------
Total current assets 11,499 5,064
Oil and gas properties, at cost
(full cost method) 55,951 101,163
Office furniture and fixtures 58 194
Accumulated depreciation (7) (27)
--------- --------
Net property, plant and equipment 56,002 101,330
Deferred costs (net of accumulated amortization of
$231 and $-0- at December 31, 1995 and
September 30, 1996, respectively) 168 2,689
--------- --------
$ 67,669 109,083
--------- --------
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 370 389
Loans from stockholders 8,490 -
Notes payable to a bank 34,385 -
Due to operator 977 2,301
Accrued interest on loans from predecessor stockholders 178 -
--------- --------
Total current liabilities 44,400 2,690
Note payable to bank - 2,000
Deferred taxes - 1,769
Premium on written option - 1,000
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,
25,600,000 shares issued and outstanding at September 30, 1996 - 256
Additional paid-in capital - 103,203
Deficit accumulated during the development stage (1,413) (711)
Unearned compensation - (1,124)
--------- --------
Total stockholders' equity 23,269 101,624
Commitments and contingencies
--------- --------
$ 67,669 109,083
--------- --------
--------- --------
See accompanying notes to unaudited condensed
consolidated financial statements.
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RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
Three Three September 21,
months months 1990 (date of
ended ended inception) to
September 30, September 30, September 30,
1995 1996 1996
-------------- -------------- -----------
(Predecessors) (Company)
Interest income $ - $ 138 $ 324
Expenses:
Interest expense 24 241 1,199
Depreciation expense 2 16 27
Salaries and wages 30 150 620
General and administrative 33 552 1,442
---------- ---------- ----------
Total expenses 89 959 3,288
---------- ---------- ----------
Net loss before taxes (89) (821) (2,964)
---------- ---------- ----------
Tax Expense (Benefit) - (152) 1,769
---------- ---------- ----------
Net loss $ (89) $ (669) $ (4,733)
---------- ---------- ----------
---------- ---------- ----------
Net loss per share $ - $ (0.03) $ (0.22)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of
shares outstanding 21,000,000 25,495,652 21,209,723
---------- ---------- ----------
---------- ----------- ----------
See accompanying notes to unaudited consolidated financial statements.
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RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
Nine September 21,
months January 1, June 18, 1990 (date of
ended through through inception) to
September 30, June 17, September 30, September 30,
1995 1996 1996 1996
-------------- -------------- ------------- -------------
(Predecessors) (Predecessors) (Company)
Interest income $ 2 $ - $ 158 $ 324
Expenses:
Interest expense 99 395 248 1,199
Depreciation expense 4 4 16 27
Salaries and wages 72 108 165 620
General and administrative 104 180 592 1,442
---------- ---------- ---------- ----------
Total expenses 279 687 1,021 3,288
---------- ---------- ---------- ----------
Net loss before taxes (277) (687) (863) (2,964)
---------- ---------- ---------- ----------
Tax Expense (Benefit) - 1,921 (152) 1,769
---------- ---------- ---------- ----------
Net loss $ (277) $ (2,608) $ (711) $ (4,733)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net loss per share $ (0.01) $ (0.12) $ (0.03) $ (0.22)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding 21,000,000 21,000,000 25,438,462 21,209,723
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
See accompanying notes to unaudited condensed
consolidated financial statements.
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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 Unearned stockholders'
capital outstanding Amount capital stage Compensation 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 - - - - (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)
Issuance of common stock for initial
public offering over-allotment - 600,000 6 12,828 - - 12,834
Grant of restricted stock awards - - - 1,185 - (1,185) -
Amortization of restricted stock awards - - - - - 61 61
Net loss from June 18, 1996 to
September 30, 1996 - - - - (711) - (711)
---------- ----------- -------- -------- ------- --------- --------
Balance at September 30, 1996 $ - 25,600,000 $ 256 $ 103,203 $ (711) (1,124) $101,624
---------- ----------- -------- -------- ------- --------- --------
---------- ----------- -------- -------- ------- --------- --------
See accompanying notes to unaudited condensed
consolidated financial statements.
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RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
September 21,
Nine months January 1, June 18, 1990 (date of
ended through through inception) to
September 30, June 17, September 30, September 30,
1995 1996 1996 1996
-------------- ------------ ------------ ------------
(Predecessors) (Predecessors) (Company)
Cash flows from operating activities:
Net loss $ (277) (2,608) (711) (4,733)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 4 4 16 27
Amortization of deferred financing costs - - 168 168
Amortization of unearned compensation - - 61 61
Deferred income taxes 1,921 (152) 1,769
Changes in working capital 11 5,605 (7,104) (1,642)
-------- ------- -------- -------
Cash provided by (used in) operating activities (262) 4,922 (7,722) (4,350)
-------- ------- -------- -------
Cash flows from investing activities:
Investment in oil and gas properties (18,465) (30,377) (14,835) (100,931)
Other capital expenditures (8) (38) (98) (194)
-------- ------- ------- -------
Cash used in investing activities (18,473) (30,415) (14,933) (101,125)
-------- ------- -------- -------
Cash flows from financing activities:
Deferred financing costs - - (1,689) (1,689)
Exercise of call option on Thai Romo Limited stock - - (3,130) (3,130)
Capital contributions 529 - - 26,488
Proceeds from initial public offering - - 97,103 97,103
Redemption of Rutherford-Moran Exploration
Company stock by majority stockholders - - (12,360) (12,360)
Proceeds from loans from shareholders 737 15,654 - 24,993
Payments on loans from shareholders - - (24,144) (24,993)
Capital distributions - - - (2,205)
Borrowings under bank notes 17,101 29,164 2,000 65,549
Repayments of bank notes - (13,885) (49,664) (63,549)
-------- ------- -------- -------
Cash provided by financing activities 18,367 30,933 8,116 106,207
-------- ------- -------- -------
Net increase (decrease) in cash (368) 5,440 (14,539) 732
Cash and cash equivalents, beginning of period 424 9,831 15,271 -
-------- ------- -------- -------
Cash and cash equivalents, end of period $ 56 15,271 732 732
-------- ------- -------- -------
-------- ------- -------- -------
Supplemental disclosures of cash flow information-
cash paid during the period for interest $ - 767 56 1,296
-------- ------- -------- -------
-------- ------- -------- -------
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 $ -- 557 443 1,000
-------- ------- -------- ------
-------- ------- -------- ------
See accompanying notes to unaudited condensed
consolidated financial statements.
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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
September 30, 1996 and its results of operations and cash flows
for the three and nine months ended September 30, 1995 and 1996.
The financial statements should be read in conjunction with the
historical combined 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 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 Holdings, Inc. RMEC and Thai Romo
Holdings, Inc. collectively own the outstanding shares of Thai
Romo Limited. During June 1996, 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 in Thai Romo
held by Red Oak Holdings, Inc. for $3.1 million and repaid
outstanding debt owed stockholders and banks of $62 million. On
June 18, 1996 the stockholder's equity accounts were adjusted to
reflect the deficit accumulated during the development stage to
additional paid-in capital upon RMEC and Thai Romo becoming
subject to federal income taxes. During July 1996, an additional
2.4% of RMOC's common stock was sold when the underwriters
exercised their over-allotment option.
The consolidated financial statements for the period from June 18,
1996 to September 30, 1996 include the accounts of RMOC and its
wholly owned subsidiaries, RMEC and Thai Romo Holdings, Inc. All
material intercompany accounts and transactions have been
eliminated in the consolidation.
The financial statements for the nine months ended September 30,
1995, and the period from January 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)
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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 its 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 Limited 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.
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) CREDIT FACILITY
On September 20, 1996, the Company entered into a $150,000,000
Revolving Credit Facility (the "Revolving Credit Facility") with a
group of commercial lenders. The Revolving Credit Facility has a
final maturity of September 30, 1999 and a borrowing base limitation
at September 30, 1996 of $60,000,000. The Revolving Credit
Facility is secured by the stock of certain subsidiaries of
the Company.
(Continued)
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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 at the Base Rate (defined as the
greater of the Federal Funds Rate plus .5% or the agent
bank's prime rate) plus .25% or the Eurodollar Rate
(defined as an average of the London Interbank
Offered Rate of two banks) plus 1.75%, at the Company's option.
Interest is payable quarterly. The Company is also assessed a
commitment fee equal to .5% per annum on the average daily balance
of the unused borrowing base. The Revolving Credit Facility
provides for semi-annual borrowing base redeterminations as well
as certain restrictions, including limitations on additional
indebtedness, payment of dividends and an interest coverage ratio.
At September 30, 1996, $2,000,000 was outstanding under the Credit
Facility at an interest rate of 7.25% per annum.
(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 September 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 October 31, 1996, the Company estimates the
cost of liquidating this position to be approximately $7.0
million.
Also, the Company sold to an affiliate of the lender an option to
purchase 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 September 30, 1996, the Company estimates the fair
market value of this position to be $1 million and has recorded
the amount as a liability on the Balance Sheet.
(6) STOCKHOLDERS' EQUITY
Common and Preferred Stock
The Certificate of Incorporation of the Company authorizes the
issuance of up to 40,000,000 shares of common stock and 10,000,000
shares of preferred stock, the terms, preferences, rights and
restrictions of which will be established by the Board of Directors
of the Company. All shares of common stock have equal voting rights
of one vote per share on all matters to be voted upon by
stockholders. Cumulative voting for the election of directors is not
permitted.
On June 17, 1996, the Company sold 4,000,000 shares of its common
stock in an initial public offering. During July 1996, the Company
issued an additional 600,000 shares when the underwriters exercised
their over- allotment option.
(Continued)
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RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Key Employee Stock Plan
During 1996, the Company established its 1996 Key Employee Stock
Plan (the Stock Plan). Under the Stock Plan, an aggregate of
500,000 shares will be available for the granting of either stock
options or restricted stock awards. The Compensation Committee of
the Board of Directors administers this plan.
Stock options issued under the Stock Plan may not exceed a term of
more than ten years and the stock option price may not be less than
the fair market value of the shares at the time the option is
granted. The options are exercisable six months after the date of
grant. At September 30, 1996, a total of 105,750 stock options were
granted under the Stock Plan, none of which are currently
exercisable. The exercise price of all options granted to date is
$23.
The Compensation Committee may award shares of restricted stock to
employees for no payment by the employee or for a payment below the
fair market value on the date of grant. Issuance of the stock may be
subject to certain restrictions, but in no case can the conditions
continue for more than ten years from the date of the award. As the
shares vest, each employee
receiving such restricted stock has all of the rights of a
stockholder, including without limitation, the right to vote such
shares. At September 30, 1996, restricted stock awards for 51,338
shares had been granted, at no cost to the employees. Deferred
compensation is recorded at the date of the restricted stock award
and is amortized into compensation expense over the vesting period.
At September 30, 1996, deferred compensation of $1,185,000 was
recorded and related compensation
expense of $61,000 was recognized during the three months ended
September 30, 1996. Substantially all restricted stock awards
outstanding at September 30, 1996 vest ratably over a five year
period.
Non-Employee Director Stock Option Plan
During 1996, the Company established its 1996 Non-Employee Director
Stock Option Plan (the Director Plan). Under the Director Plan,
an aggregate of 50,000 shares of common stock will be available
for the granting of stock options. The exercise price of a stock
option granted pursuant to the Director Plan may not be less than
the fair market value of the common stock on the date of grant and
the stock option term may not exceed ten years. Stock options
granted under the Director Plan are exercisable in full after the
first anniversary of grant. The Director Plan provides for an
initial grant of stock options to each non-employee director to
purchase 2,500 shares of common stock contemporaneously with the
initial public offering and the annual grant of stock options to
acquire 1,000 shares of stock to each non-employee director serving
on the board of directors following each annual meeting of the
stockholders. As of September 30, 1996, non-employee directors have
been granted stock options to acquire 10,000 shares of common stock,
none of which are exercisable. The exercise price of all options
granted to date is $23.
(Continued)
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RUTHERFORD-MORAN OIL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company applies Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related
interpretations in accounting for its Stock Plan and Director Plan.
Accordingly, no compensation has been recognized for stock-based
compensation other than for restricted stock awards. Had
compensation cost for the stock options issued under the Stock Plan
and Director Plan been determined based upon the fair value at the
grant date for awards under these plans consistent with the
methodology prescribed under Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the
Company's net loss and net loss per share would have been increased
by approximately $864,000, or $0.03 per share. The fair value of the
stock options granted during the three-month period ended September
30, 1996 is estimated as $13.90 on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
dividend yield of 0%, volatility of 36%, risk-free interest rate of
6.50%, assumed forfeiture rate of0%, and an expected life of 10
years.
At September 30, 1996, 342,912 and 40,000 shares of common stock
were reserved for issuance pursuant to the Stock Plan and the
Director Plan, respectively.
10
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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 SEPTEMBER 30, 1996 COMPARED WITH THREE MONTHS
ENDED SEPTEMBER 30, 1995.
The Company's net loss of $669,000 for the three months ended
September 30, 1996 increased from the Company's net loss of
$89,000 for the three months ended September 30, 1995 primarily
due to increases in interest expense, salaries and wages, and
general and administrative expenses, offset partially by interest
income and an income tax benefit.
Interest income of $138,000 for the three months ended September
30, 1996 increased from $-0- for the three months ended September
30, 1995. This increase is due to the increase in cash available
for investment from the proceeds of an initial public offering.
Interest expense of $241,000 for the three months ended September
30, 1996 increased compared to $24,000 for the three months ended
September 30, 1995. This increase is due to the amortization of
deferred financing costs and the capitalization of a greater
portion of interest expense related to the oil and gas property
development in 1995 compared to 1996.
Salaries and wages and general administrative expenses of $150,000
and $552,000 respectively for the three months ended September 30,
1996 increased compared to $30,000 and $33,000 for the three
months ended September 30, 1995. This increase is primarily due to
the capitalization of a greater portion of salaries and wages and
costs related to the oil and gas property development in 1995
compared to 1996 and, to a lesser extent, an increase in salaries
and wages attributable to additional personnel employed during
1996.
As the Company is now a tax-paying entity, an income tax benefit
of $152,000 was recorded during the three months ended September
30, 1996 for the operating loss generated.
(Continued)
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NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS
ENDED SEPTEMBER 30, 1995.
The Company's net loss of $3,319,000 for the nine months ended
September 30, 1996 increased from the Company's net loss of
$277,000 for the nine months ended September 30, 1995 due
primarily to increases in deferred income taxes caused by a one
time non-cash charge of $1,921,000 and less significantly due to
increases in interest expense, salaries and wages, and general and
administrative expenses, offset partially by an increase in
interest income.
As RMEC and Thai Romo are now part of the Company's consolidated
federal tax return, RMEC and Thai Romo recorded an income tax
expense and a corresponding deferred tax liability expense of
$1,921,000 for the difference between the book basis and tax basis
of oil and gas properties on June 17, 1996. This charge was offset
by a benefit of $152,000 recorded in the third quarter for the
operating loss generated by the Company.
Interest income of $158,000 for the nine months ended September
30, 1996 increased compared to $2,000 for the nine months ended
September 30, 1995. This increase is due to the increase in cash
available from the proceeds of an initial public offering.
Interest expense of $643,000 for the nine months ended September
30, 1996 increased compared to $99,000 for the nine months ended
September 30, 1995. This increase is caused by higher levels of
outstanding debt and due to a decrease in the capitalization of
interest to oil and gas property development and the amortization
of deferred financing costs. Those debts were repaid in June 1996
with proceeds from an initial public offering.
Salaries and wages and general and administrative expenses of
$273,000 and $772,000 for the nine months ended September 30, 1996
increased compared to $72,000 and $104,000 respectively for the
nine months ended September 30, 1995. These increases are
primarily due to the capitalization of a greater portion of
salaries and wages and costs related to oil and gas property
development in 1995 compared to 1996 and to a lesser extent an
increase in salaries and wages attributable to additional
personnel employed in 1996.
LIQUIDITY AND CAPITAL RESOURCES
On September 20, 1996, the Company entered into a $150,000,000
Revolving Credit Facility (the "Revolving Credit Facility") with a
group of commercial lenders. The Revolving Credit Facility has a
final maturity of September 30, 1999 and a borrowing base
limitation at September 30, 1996 of $60,000,000. The Revolving
Credit Facility is secured by the stock of certain subsidiaries of
the Company.
Under the terms of the Revolving Credit Facility, outstanding
borrowings will bear interest at the Base Rate (defined as the
greater of the Federal Funds Rate plus .5% or the agent bank's
prime rate) plus .25% or the Eurodollar Rate (defined as an
average of the London Interbank Offered Rate of two banks) plus
1.75%, at the Company's option. Interest is payable quarterly.
The Company is also assessed a commitment fee equal to .5% per
annum on the average daily balance of the unused borrowing base.
The Revolving Credit Facility provides for semi-annual borrowing
base redeterminations as well as certain restrictions, including
limitations on additional indebtedness, payment of dividends
and an interest coverage ratio.
At September 30, 1996, $2,000,000 was outstanding under the Credit
Facility at an interest rate of 7.25% per annum.
To explore and develop Block B8/32, the Company anticipates
capital expenditures of approximately $60 million for 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 $17 million. The Company
anticipates that it will finance such expenditures with cash
on hand and borrowings under the Revolving Credit Facility.
(Continued)
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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 will likely have
such holdings. As the Company expects the Thai Baht/U.S. dollar
exchange rate to continue to remain stable, it does not currently
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 may use 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.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4 -- Credit Agreement
27 -- Financial Data Schedule
(b) Reports on Form 8-K
No reports were filed on Form 8-K in the three month
period ended September 30, 1996.
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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: November 6, 1996 RUTHERFORD-MORAN OIL CORPORATION
By: /s/ David F. Chavenson
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David F. Chavenson
Vice President, Finance and Chief
Financial Officer and Treasurer
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EXHIBIT INDEX
4 -- Credit Agreement
27 -- Financial Data Schedule