1
Filed by Westport Resources Corporation
Pursuant to Rule 425 under the Securities Act of 1933
And deemed filed pursuant to Rule 14a-12
Of the Securities Exchange Act of 1934
Subject Company: Belco Oil & Gas Corp.
Commission File No.: 001-14256
The following press release was made by Westport Resources Corporation on August
10, 2001.
WESTPORT RESOURCES CORPORATION REPORTS STRONG FINANCIAL AND PRODUCTION RESULTS
FOR SECOND QUARTER 2001 - UPDATE ON BELCO OIL & GAS CORP. MERGER
Denver, Colorado, August 10, 2001/ - - Westport Resources Corporation (NYSE:WRC)
today reported financial and operating results for the second quarter of 2001.
Revenues for the quarter increased 27% to $67.8 million compared to $53.2
million for the second quarter of 2000. Discretionary cash flow for the quarter
increased 42% to $51.4 million, or $1.34 per basic common share ($1.31 per
diluted common share), compared to $36.3 million, or $1.21 per basic common
share and diluted common share, for the same quarter of 2000. Net income for the
second quarter increased to $16.7 million, or $0.43 per basic common share
($0.42 per diluted common share), compared to net income of $9.2 million, or
$0.31 per basic and diluted common share, for the same quarter of 2000. Revenues
for the six months ended June 30, 2001 increased 107% to $162.7 million,
compared to revenues of $78.6 million for the first half of last year.
Discretionary cash flow for the first six months of 2001 increased 175% to
$126.3 million, or $3.29 per basic common share ($3.21 per diluted common
share), compared to $46.0 million, or $2.02 per basic common share ($2.00 per
diluted common share), for the first half of last year. Net income for the first
six months increased to $50.7 million, or $1.32 per basic common share ($1.29
per diluted common share), compared to net income of $10.6 million, or $0.47 per
basic common share ($0.46 per diluted common share), for the first half of last
year. The strong results reflect the merger with Equitable Production Gulf
Company ("EPGC") on April 7, 2000, increases in production, the impact of higher
gas prices and continuing cost controls.
2
SUMMARY DATA
(in thousands except per share data)
<Table>
<Caption>
Six months ended June 30 Quarter ended June 30
------------------------ -----------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Production
Oil (Mbbls) 1,838 1,707 912 912
Natural gas (Mmcf) 21,275 13,504 10,746 10,182
Mmcfe 32,303 23,746 16,218 15,654
Average prices
Oil (per bbl) $ 24.78 $ 26.46 $ 23.97 $ 26.57
Natural gas (per Mcf) 5.58 3.10 4.26 3.32
Hedging effect (per Mcfe) (.04) (.36) .01 (.31)
Oil and natural gas sales $ 162,732 $ 78,616 $ 67,803 $ 53,153
Lease operating expense 19,995 15,480 9,522 8,857
Per Mcfe .62 .65 .59 .57
General and administrative costs 6,710 3,204 3,188 2,039
Per Mcfe .21 .13 .20 .13
EBITDAX 128,939 51,233 52,432 39,510
Discretionary cash flow 126,342 45,945 51,401 36,270
Per diluted common share 3.21 2.00 1.31 1.21
Per Mcfe 3.91 1.93 3.17 2.32
Net income 50,688 10,606 16,657 9,209
Per diluted common share 1.29 .46 .42 .31
</Table>
<Table>
<Caption>
As of June 30, 2001
-------------------
Balance sheet data
Working capital 78,200
Total assets 626,789
Total debt 162
Stockholders' equity 512,078
Estimated proved reserves
Oil (Mbbls) 34,644
Natural gas (Mmcf) 236,692
Total Mmcfe 444,556
Percent proved developed 80.3%
Net present value (in thousands) 636,874
Reserve life index (in years) 6.9
</Table>
PRODUCTION AND OIL AND GAS PRICES
Total average daily production for the second quarter 2001 increased 4% to 178.2
Mmcfe/d (34% oil) compared to 172.0 Mmcfe/d for the prior year period. Total
daily production for the month of June 2001 averaged a record 197.8 Mmcfe/d.
Realized gas prices for the quarter averaged $4.26 per Mcf, an increase of 28%
compared to $3.32 per Mcf for the prior year period. Oil prices averaged $23.97
per barrel for the quarter a 9.8% decrease compared to $26.57 per barrel for
second quarter 2000. Hedging transactions had the effect of increasing oil and
natural gas revenues by $0.2 million, or
3
$0.01 per Mcfe for the six months ended June 30, 2001, and reduced oil and
natural gas revenues by $4.9 million, or $0.31 per Mcfe, for the three months
ended June 30, 2001 and 2000, respectively. The Company currently has three
hedges in place for the year 2001, covering an average of 26,181 Mmbtu/d. All
three hedges are costless collars, having an average floor of $4.89 per Mcf and
an average ceiling of $6.79 per Mcf. The Company also has two costless collar
hedges in place for 2002. The first is for 10,000 Mmbtu/d, having a floor of
$4.50 per Mmbtu and a ceiling of $6.75 per Mmbtu, and the second is for 2,000
Bbls/d, having a floor of $25.00 per barrel and a ceiling of $28.00 per barrel.
A costless collar hedge is in place for 2003 for 2,000 Bbls/d with a floor of
$23.25 per barrel and a ceiling of $26.00 per barrel.
MID-YEAR RESERVE REPORT
In connection with the proposed merger with Belco Oil & Gas Corp., the Company
updated its reserve forecast to June 30, 2001. As of June 30, 2001 Westport
reported 444.6 Bcfe of proved reserves compared to 454.3 Bcfe as of December 31,
2000. During the six month period the Company added 38.4 Bcfe of reserves due to
positive revisions relating to property performance, exploitation activities,
discoveries and extensions, produced 32.2 Bcfe and had negative revisions of
15.9 Bcfe due primarily to the decline in natural gas prices from approximately
$9.50 per Mcf at December 31, 2000 to $3.22 per Mcf at June 30, 2001.
SECOND QUARTER OPERATIONAL HIGHLIGHTS AND OUTLOOK
ONSHORE
Through the end of the second quarter of 2001 the Company participated in the
drilling of four horizontal wells in the South Fryburg Area of the Williston
Basin, in which Westport's working interest averages 50%. Production from these
wells is averaging approximately 200 Bbls of oil per day per well. Westport is
currently drilling an additional horizontal well in the field and plans to
participate in five or six additional horizontal wells during the second half of
2001. Westport is also planning to drill a vertical Tyler formation well in
September.
During the second quarter of 2001 Westport continued its successful horizontal
drilling program in the Wiley Field of North Dakota, in which Westport holds a
54% working interest. Seven horizontal wells were drilled in the second quarter
resulting in an increase in production of 900 Bbls of oil per day. Westport
plans to drill an additional ten horizontal wells in the Wiley Field during the
second half of 2001.
OFFSHORE
At East Cameron Block 104 production commenced in June at initial rates of 9
Mmcf/d gross. Westport owns a 60% working interest and is operator.
Production on West Cameron Block 370 commenced in May at the initial rate of 33
Mmcf/d gross. Westport owns a 60% working interest and is operator.
During the second quarter the Company drilled a second well in East Cameron
Block 369 with an estimated 149 net feet of pay. A platform is expected to be
set later this year and production is scheduled to commence within the first
half of 2002. Westport owns a 60% working interest and is operator.
4
Production began from the Eugene Island 45 #1 well in June at an initial rate of
4.5 Mmcf/d gross. A third well drilled on this block in the second quarter
encountered 49 net feet of pay. Production from this well is expected to
commence in the second half of 2001 at similar rates as the #1 well.
The Mississippi Canyon Block 322 #2 well was drilled in the second quarter by
Walter Oil and Gas with an estimated 50 net feet of pay. A second well was also
drilled which encountered 36 net feet of pay. Both wells have been completed and
production is expected to commence in the first half of 2002. Westport owns a
25% working interest.
Westport drilled two dry holes in the second quarter, one on Vermilion Block 236
at a net cost of $2.83MM and one on East Cameron Block 348 at a net cost of
$2.28MM.
Westport plans a high level of Gulf of Mexico exploration activity in the second
half of 2001, with rigs moving in to the following prospects:
<Table>
<Caption>
Estimated Range of
Westport Working Gross Unrisked
Lease Block Interest % Reserves (BCFE) Status
----------- ---------------- ------------------ -------------
HI 197 25 40-50 Drilling
WD 143 50 75-85 Drilling
WC 198 A-5 52.5 40-50 Drilling
HI 84/85 52 25-35 Drilling
ST 316 50 50-60 To be drilled
MC 489 30 60-70 To be drilled
</Table>
MANAGEMENT COMMENT ON THE PROPOSED MERGER WITH BELCO
"We continue to be excited about our proposed merger with Belco", Donald D.
Wolf, CEO and Chairman, said. "We anticipate a number of benefits as a result of
the combination. The expanded asset base and operational presence in our core
operating areas should allow us to operate more efficiently and compete more
aggressively for business opportunities in those areas. We expect to benefit
from greater economies of scale to reduce our costs. Our balance sheet, combined
with Belco's, should give us greater financial flexibility and lower our cost of
capital. The expansion of the public float in our common stock will improve
market liquidity for shareholders and should improve our access to capital
through the public equity markets." On August 1, 2001 Belco filed a registration
statement and joint proxy statement with the Securities and Exchange Commission
dated July 31, 2001, which describes the proposed transaction. Each Company has
scheduled a shareholder meeting to vote on the merger on August 21, 2001. If
approved by the shareholders of each company, the merger is expected to close on
August 21, 2001.
The Company estimates that for the full year 2001 on a combined basis Westport
and Belco would have oil and gas production of approximately 125 to 135 Bcfe and
EBITDAX of $330 million to $340 million, assuming average NYMEX oil and gas
prices of approximately $27.00 per barrel of oil and $4.90 per Mcf of gas.
Westport expects the combined level of full year 2001 capital expenditures to be
approximately $260 million.
5
CONFERENCE CALL
The Company will host a conference call on Monday, August 13, 2001, beginning at
11:00 a.m. EDT, 9:00 a.m. MDT to discuss these results. To participate in the
call, please dial 1-877-270-9495 for calls within the United States and Canada,
or 706-679-5434 for International calls. Calls should be made 10 minutes before
the conference call is scheduled to start. A replay of the call will also be
available through August 20, 2001 by dialing 1-800-642-1687 (US/Canada) or
706-645-9291 (International). The access code is 1468154. In addition, the
conference call will be webcast live and archived on Westport's web site,
www.westportresourcescorp.com.
Westport is an independent energy company engaged in oil and natural gas
exploitation, acquisition and exploration activities primarily in the Gulf of
Mexico, the Rocky Mountains, West Texas/Mid-Continent and the Gulf Coast.
FORWARD - LOOKING STATEMENTS
The statements in this report regarding estimated reserves, projected capital
expenditures and financial results, expected drilling and development activity,
reserves exposure, and anticipated merger benefits and impacts, and any other
forecasts, projections or guidance that are not statements of historical fact,
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended. Such statements are inherently uncertain, and actual
results may differ materially from those estimated or projected. Factors that
can affect the Company's ability to achieve projected results are described in
the Company's filings with the Securities and Exchange Commission, including
without limitation in the Company's 10-K report filed with the SEC on March 16,
2001, and the Company's 10-Q reports for the first and second quarters of 2001
filed with the SEC on May 9 and August 14, 2001, and the registration statement
and joint proxy statement dated July 31, 2001 and filed with the SEC on August
1, 2001 by Belco Oil & Gas Corp. These factors include, among others, the
uncertainties inherent in reserve estimations especially for estimates of
non-proved reserves and for unrisked estimates on undrilled blocks, operational
risks inherent in drilling operations, especially in the offshore environment,
with corresponding exposure to delays and significant cost overruns, the highly
competitive nature of activity in the oil and gas industry with corresponding
shortages of equipment and personnel, the risk of exploratory drilling, the
uncertain cost and pricing environment in the oil and gas industry, the
Company's inability to control operations on properties it does not operate,
availability of capital, regulatory requirements, and uncertainties related to
integrating Westport and Belco. The Company has no obligation to update the
statements contained in this report or to take action that is described herein
or otherwise presently planned.
6
WESTPORT RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
------------ ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents .................................................. $ 81,727 $ 20,154
Accounts receivable, net ................................................... 32,249 49,200
Derivative asset ........................................................... 7,401 --
Prepaid expenses ........................................................... 4,235 4,670
------------ ------------
Total current assets ................................................... 125,612 74,024
------------ ------------
Property and equipment, at cost:
Oil and natural gas properties, successful efforts method:
Proved properties ........................................................ 654,002 591,367
Unproved properties ...................................................... 42,288 40,653
Office furniture and equipment ............................................. 2,945 2,642
Leasehold improvements ..................................................... 501 501
------------ ------------
699,736 635,163
Less accumulated depletion, depreciation and amortization ...................... (198,789) (157,739)
------------ ------------
Net property and equipment ............................................. 500,947 477,424
------------ ------------
Other assets ................................................................... 230 383
------------ ------------
Total assets ........................................................... $ 626,789 $ 551,831
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ........................................................... $ 22,700 $ 28,547
Accrued expenses ........................................................... 16,977 19,827
Ad valorem taxes payable ................................................... 7,188 4,788
Income taxes payable ....................................................... 547 375
------------ ------------
Total current liabilities .............................................. 47,412 53,537
------------ ------------
Long-term debt ................................................................. 162 162
Deferred income taxes .......................................................... 65,633 38,503
Other liabilities .............................................................. 1,504 1,573
------------ ------------
Total liabilities ...................................................... 114,711 93,775
------------ ------------
Stockholders' equity:
Common stock , $0.01 par value; 70,000,000 authorized; 38,468,341 and
38,419,041 shares issued and outstanding at June 30, 2001 and
December 31, 2000, respectively ......................................... 385 384
Additional paid-in capital ................................................. 474,227 472,576
Retained earnings (accumulated deficit) .................................... 35,785 (14,904)
Other comprehensive income ................................................. 1,681 --
------------ ------------
Total stockholders' equity .............................................. 512,078 458,056
------------ ------------
Total liabilities and stockholders' equity ............................. $ 626,789 $ 551,831
============ ============
</Table>
7
WESTPORT RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Operating revenues:
Oil and natural gas sales .............................. $ 67,803 $ 53,153 $ 162,732 $ 78,616
Commodity price risk management activities:
Non-hedge cash settlements ........................... 390 -- 467 --
Non-hedge non-cash change in fair value of
derivatives ........................................ 4,669 -- 6,766 --
------------ ------------ ------------ ------------
Net revenues .................................. 72,862 53,153 169,965 78,616
Operating costs and expenses:
Lease operating expense ................................ 9,522 8,857 19,995 15,480
Production taxes ....................................... 2,415 2,376 5,933 4,644
Transportation costs ................................... 1,290 591 2,685 1,068
Exploration ............................................ 8,259 4,392 10,870 6,263
Depletion, depreciation and amortization ............... 20,788 16,404 41,029 22,576
Impairment of unproved properties ...................... 743 1,306 1,748 1,541
Stock compensation expense ............................. 727 -- 1,271 3,383
General and administrative ............................. 3,188 2,039 6,710 3,204
------------ ------------ ------------ ------------
Total operating expenses .......................... 46,932 35,965 90,241 58,159
------------ ------------ ------------ ------------
Operating income .................................. 25,930 17,188 79,724 20,457
------------ ------------ ------------ ------------
Other income (expense):
Interest expense ....................................... (302) (3,240) (591) (5,288)
Interest income ........................................ 704 182 1,066 375
Gain (loss) on sale of assets, net ..................... -- 6 -- (11)
Other .................................................. (100) 32 (375) 32
------------ ------------ ------------ ------------
302 (3,020) 100 (4,892)
------------ ------------ ------------ ------------
Income before income taxes ................................. 26,232 14,168 79,824 15,565
Provision for income taxes:
Current ................................................ (729) -- (2,006) --
Deferred ............................................... (8,846) (4,959) (27,130) (4,959)
------------ ------------ ------------ ------------
Total provision for income taxes .................. (9,575) (4,959) (29,136) (4,959)
------------ ------------ ------------ ------------
Net income ................................................. $ 16,657 $ 9,209 $ 50,688 $ 10,606
============ ============ ============ ============
Weighted average number of common shares outstanding:
Basic ............................................. 38,458 29,862 38,447 22,785
============ ============ ============ ============
Diluted ........................................... 39,433 30,046 39,342 22,975
============ ============ ============ ============
Net income per common share:
Basic ............................................. $ 0.43 $ 0.31 $ 1.32 $ 0.47
============ ============ ============ ============
Diluted ........................................... $ 0.42 $ 0.31 $ 1.29 $ 0.46
============ ============ ============ ============
</Table>
8
WESTPORT RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
FOR THE SIX MONTHS ENDED
----------------------------
JUNE 30,
----------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income ...................................................................... $ 50,688 $ 10,606
Adjustments to reconcile net income to cash provided by operating activities:
Depletion, depreciation and amortization ...................................... 41,029 22,576
Exploratory dry hole costs .................................................... 6,239 1,739
Impairment of unproved properties ............................................. 1,748 1,541
Deferred income taxes ......................................................... 27,130 4,959
Stock compensation expense .................................................... 1,271 --
Change in derivative fair value ............................................... (6,394) --
Director retainers settled for stock .......................................... -- 30
Loss on sale of assets ........................................................ -- 11
Changes in assets and liabilities, net of effects of acquisitions:
Decrease (increase) in accounts receivable ................................. 16,951 (18,458)
Decrease (increase) in prepaid expenses .................................... 588 (239)
Increase (decrease) in accounts payable .................................... (5,846) 799
Decrease in accrued expenses ............................................... (1,216) (4,402)
Increase in ad valorem taxes payable ....................................... 2,400 1,016
Increase in income taxes payable ........................................... 306 --
Decrease in other liabilities .............................................. (69) (1,331)
------------ ------------
Net cash provided by operating activities ........................................... 134,825 18,847
------------ ------------
Cash flows from investing activities:
Additions to property and equipment ........................................... (68,458) (27,892)
Proceeds from sales of assets ................................................. 654 57
Merger with EPGC .............................................................. -- (42,403)
Other acquisitions ............................................................ (5,695) (1,454)
Other ......................................................................... -- (279)
------------ ------------
Net cash used in investing activities ............................................... (73,499) (71,971)
------------ ------------
Cash flows from financing activities:
Repayment of long-term debt ................................................... -- (667)
Proceeds from issuance of long-term debt ...................................... -- 50,000
Proceeds from issuance of common stock ........................................ 247 --
------------ ------------
Net cash provided by financing activities ........................................... 247 49,333
------------ ------------
Net increase (decrease) in cash and cash equivalents ................................ 61,573 (3,791)
Cash and cash equivalents, beginning of period ...................................... 20,154 19,475
------------ ------------
Cash and cash equivalents, end of period ............................................ $ 81,727 $ 15,684
============ ============
Supplemental cash flow information:
Cash paid for interest ........................................................ $ 117 $ 3,753
============ ============
Cash paid for income taxes .................................................... $ 1,700 $ --
============ ============
Supplemental schedule of noncash investing and financing activities:
Common stock issued in connection with the EPGC merger ........................ $ -- $ 165,363
============ ============
Liabilities assumed in connection with the EPGC merger ........................ $ -- $ 1,850
============ ============
EPGC merger costs paid by parent ............................................ $ -- $ 2,895
============ ============
</Table>
9
INVESTOR NOTICES
This press release includes "forward-looking statements" as defined by the
Securities and Exchange Commission. Such statements are those concerning
Westport's and the combined company's merger and strategic plans, expectations
and objectives for future operations. All statements included in this press
release that address activities, events or developments that Westport expects,
believes or anticipates will or may occur in the future are forward-looking
statements. This includes completion of the proposed merger, reserve estimates,
production, cash flow and EBITDAX estimates, future financial performance and
other matters. These statements are based on certain assumptions made by
Westport based on its experience and perception of historical trends, current
conditions, expected future developments and other factors it believes are
appropriate in the circumstances. Such statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond the control of
Westport. Statements regarding future production are subject to all of the risks
and uncertainties normally incident to the exploration for and development and
production of oil and gas. These risks include, but are not limited to,
inflation or lack of availability of goods and services, environmental risks,
drilling risks and regulatory changes. Investors are cautioned that any such
statements are not guarantees of future performance and that actual results or
developments may differ materially from those projected in the forward-looking
statements.
Investors and security holders are urged to read the proxy statement/prospectus
that is included in the Registration Statement on Form S-4 filed by Westport and
Belco with the SEC in connection with the proposed merger. Investors and
security holders may obtain a free copy of the proxy statement/prospectus and
other documents filed by Westport and Belco with the SEC at the SEC's web site
at www.sec.gov. The proxy statement/prospectus and such other documents relating
to Westport may also be obtained for free from Westport by directing such
request to: Westport Resources Corporation, 410 Seventeenth Street, Suite 2300,
Denver, CO 80202-4436, Attention: Investor Relations; telephone: (303) 573-5404;
e-mail: lmccain@westportog.com.
Westport, its directors, executive officers and certain members of management
and employees may be considered "participants in the solicitation" of proxies
from Westport's shareholders in connection with the merger. Information
regarding such persons and a description of their interests in the merger is
contained in the Registration Statement on Form S-4.