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UNITED STATES
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, 1994, 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 1-8241
____________
PRESIDIO OIL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 95-3049484
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
5613 DTC PARKWAY, SUITE 750
ENGLEWOOD, COLORADO 80111-3065
(Address of principal executive offices) (Zip Code)
(303) 773-0100
(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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 25, 1994:
CLASS A COMMON STOCK: 25,316,685
CLASS B COMMON STOCK: 3,217,985
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PRESIDIO OIL COMPANY AND SUBSIDIARIES
INDEX
Page
----
Unaudited Consolidated Financial Statements:
Unaudited Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Operations -
For the Three Months Ended June 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Unaudited Consolidated Statements of Operations -
For the Six Months Ended June 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Unaudited Consolidated Statements of Cash Flows -
For the Six Months Ended June 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
ASSETS
June 30, December 31,
1994 1993
-------- ------------
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 10,164 $ 13,559
Accounts receivable:
Oil and gas sales 6,114 6,388
Joint interest owners and other 3,990 8,182
Other 927 2,394
-------- --------
Total current assets 21,195 30,523
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties using full
cost accounting 496,714 504,512
Other 3,822 3,611
-------- --------
Total 500,536 508,123
Less accumulated depletion,
depreciation and amortization 278,582 269,349
-------- --------
Net property, plant and equipment 221,954 238,774
-------- --------
OTHER ASSETS:
Deferred charges 8,337 8,833
Other 2,215 2,290
-------- --------
Total other assets 10,552 11,123
-------- --------
$253,701 $280,420
======== ========
See notes to unaudited consolidated financial statements.
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PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1994 1993
---------- -----------
(in thousands)
CURRENT LIABILITIES:
Accounts payable:
Oil and gas sales $ 3,842 $ 4,739
Trade and other 7,300 13,137
Accrued interest 3,882 3,621
Other accrued liabilities 5,453 6,206
-------- --------
Total current liabilities 20,477 27,703
-------- --------
BANK DEBT 7,500 15,000
-------- --------
SENIOR SECURED NOTES 75,000 75,000
-------- --------
GAS INDEXED NOTES 100,000 100,000
-------- --------
CONVERTIBLE SUBORDINATED DEBENTURES 50,000 50,000
-------- --------
OTHER NONCURRENT LIABILITIES 8,840 9,152
-------- --------
STOCKHOLDERS' EQUITY:
Class A Common stock, $.10 par value per share;
25,317,000 and 25,312,000 shares outstanding
at June 30, 1994 and December 31, 1993,
respectively 2,532 2,532
Class B Common stock, $.10 par value per share;
3,218,000 and 3,223,000 shares outstanding
at June 30, 1994 and December 31, 1993,
respectively 322 322
Additional paid-in capital 133,241 133,503
Deferred compensation (6,804) (7,317)
Retained deficit (137,407) (125,475)
-------- --------
Total stockholders' equity (8,116) 3,565
-------- --------
$253,701 $280,420
======== ========
See notes to unaudited consolidated financial statements.
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PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
Three Months Ended June 30,
------------------------------------
1994 1993
---------- ---------
(in thousands, except
per share amounts)
Oil and gas revenues $ 10,145 $ 12,352
Less - direct costs:
Lease operating 3,165 3,289
Production taxes 600 757
Depletion, depreciation and amortization 4,526 4,490
-------- --------
1,854 3,816
General and administrative expense (1,649) (1,285)
Interest expense (6,954) (6,062)
Other 544 (33)
-------- --------
Net loss $ (6,205) $ (3,564)
======== ========
Loss per share:
Class A Common Stock $ (.23) $ (.13)
======== ========
Class B Common Stock $ (.23) $ (.13)
======== ========
See notes to unaudited consolidated financial statements.
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PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
Six Months Ended June 30,
--------------------------------------
1994 1993
---------- ----------
(in thousands, except
per share amounts)
Oil and gas revenues $ 20,687 $ 24,681
Less - direct costs:
Lease operating 6,132 6,633
Production taxes 1,195 1,530
Depletion, depreciation and amortization 9,010 9,237
-------- --------
4,350 7,281
General and administrative expense (3,313) (2,833)
Interest expense (13,952) (11,947)
Other 983 160
-------- --------
Net loss $(11,932) $ (7,339)
======== ========
Loss per share:
Class A Common Stock $ (.44) $ (.27)
======== ========
Class B Common Stock $ (.44) $ (.27)
======== ========
See notes to unaudited consolidated financial statements.
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PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
Six Months Ended June 30,
--------------------------------------
1994 1993
---------- -----------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(11,932) $ (7,339)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depletion, depreciation and amortization 9,237 9,489
Amortization of debt issuance costs
included in interest expense 613 1,072
Other 938 855
Changes in other assets and liabilities:
Decrease in accounts receivable 4,466 4,358
Decrease in other current assets 1,216 30
Payment of loan fees and costs (117) (1,465)
Decrease (increase) in other noncurrent assets 75 (92)
Decrease in accounts payable (6,734) (6,309)
Decrease in accrued interest and liabilities (492) (3,412)
Decrease in other noncurrent liabilities (708) (203)
-------- --------
Net cash used in operating activities (3,438) (3,016)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (14,216) (8,328)
Proceeds from sale of oil and gas properties 21,798 971
--------- --------
Net cash provided by (used in)
investing activities 7,582 (7,357)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term bank debt 16,590 29,400
Payments of long-term bank debt (24,090) (24,400)
Other noncurrent financing (39) 32
--------- --------
Net cash provided by (used in)
financing activities (7,539) 5,032
--------- --------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (3,395) (5,341)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 13,559 11,457
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 10,164 $ 6,116
======== ========
See notes to unaudited consolidated financial statements.
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PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the Three Months and Six Months Ended June 30, 1994 and 1993
1. The accompanying financial statements are unaudited; however,
management believes all material adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation have
been made. These financial statements and notes should be read in
conjunction with the financial statements and related notes included
in Presidio Oil Company's (the "Company" or "Presidio") annual report
on Form 10-K for the year ended December 31, 1993.
The Company's Senior Subordinated Gas Indexed Notes, Senior Gas
Indexed Notes and Senior Secured Notes (collectively the "Notes") are
guaranteed by all significant subsidiaries of the Company (the
"Guarantors"). Separate financial statements of the Guarantors are
not included herein because the Guarantors have fully,
unconditionally, jointly and severally guaranteed the Company's
obligations with respect to the Notes and the Company (which is
primarily a holding company and whose operating income is generated by
its subsidiaries) has no separate operations of its own. The
operations, assets, liabilities and equity of the subsidiaries of the
Company that are not Guarantors are inconsequential.
2. The computation of loss per share excludes the weighted average number
of unallocated shares held by the Company's Employee Stock Ownership
Plan which totaled 1,540,000 shares and 1,566,000 shares for the
quarter and six months ended June 30, 1994, respectively, and
1,473,000 shares and 1,500,000 shares for the quarter and six months
ended June 30, 1993, respectively.
3. Included in the Consolidated Statements of Cash Flows is $13,039,000
and $10,965,000 of interest paid, net of amounts capitalized, during
the six months ended June 30, 1994 and 1993, respectively.
4. In January 1994 the Company realized $22 million as a result of
certain oil and gas property sales, including $7 million from its
ongoing program to sell miscellaneous small, non-operated oil and gas
properties, as well as $15 million from the sale of a 50% interest in
a partly-developed gas field in Louisiana. Approximately $5 million
of the net cash proceeds from these sales was utilized to prepay all
of the then outstanding indebtedness under the Company's $25 million
revolving credit facility and the remaining $17 million was added to
the Company's working capital and is to be utilized to fund a portion
of the Company's 1994 capital expenditure program.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the Company's successful drilling operations, the Company's gas
production increased to 4.4 billion cubic feet ("BCF") for the quarter ended
June 30, 1994 which continued the Company's recent upward trend in gas
production. The Company's gas production totaled 4.1 BCF and 4.2 BCF in the
1993 fourth quarter and the 1994 first quarter, respectively, notwithstanding
the January 1994 property sales which had accounted for approximately .3 BCF
of gas production per quarter. Moreover, as of June 30, 1994, four of the
Company's gas wells, which were capable of producing approximately .3 BCF per
quarter, were shut-in awaiting pipeline hook-up. All of such shut-in wells
are anticipated to be on production during the 1994 third quarter.
The Company's oil production totaled 285,000 barrels for the quarter ended June
30, 1994 which resulted in a continued decline in oil production which had
totaled 354,000 barrels and 308,000 barrels in the 1993 fourth quarter and 1994
first quarter, respectively. Such decline in oil production principally
resulted from the sale of certain oil producing properties in January 1994
which had accounted for 42,000 barrels of oil production per quarter, as well as
lower production rates in several mature fields. The Company anticipates that
it will be able to stabilize its oil production in the second half of 1994 at
an average rate somewhat in excess of the production rate for the quarter
ended June 30, 1994, as a result of the increased level of capital
expenditures currently planned for the 1994 second half, as discussed in
detail below.
The Company's revenues and associated cash flows for the quarter ended June 30,
1994 were adversely affected by the above described decrease in oil production
and a decrease in the Company's average realized gas price to $1.37 per MCF, as
compared to $1.79 per MCF and $1.71 per MCF for the 1993 fourth quarter and the
1994 first quarter, respectively. Such decrease in the Company's oil
production and average realized gas price more than offset the above-described
gas production increase and an increase in the Company's average realized oil
price from $12.81 per barrel for the 1993 fourth quarter to $14.63 per barrel
for the 1994 second quarter. As of July 25, 1994, the Company's average
realized oil and gas prices were $15.42 per barrel and $1.34 per MCF,
respectively.
The Company estimates that, in respect of the second half of 1994, (i) if the
Company's average realized oil price increased by $1.00 per barrel, its net
income and cash flow for the six month period would increase by approximately
$.6 million; and (ii) if the Company's average realized gas price increased by
$.10 per MCF, its net income and cash flow for the six month period would
increase by approximately $1 million.
The Company's capital expenditures for its oil and gas operations totaled
approximately $14.2 million during the six months ended June 30, 1994, of which
$9.9 million was used in development drilling and other operations, $2.1
million was used in exploratory drilling and $2.2 million was used in various
other activities, including the acquisition of producing properties and
undeveloped acreage. During the remainder of 1994, the Company currently
anticipates that it will make not less than $18 million of capital
expenditures, of which $16 million will be used in development operations and
in the acquisition of producing properties. Moreover, during the 1995 - 1996
period, the Company currently plans to spend a minimum of $32 million per annum
on capital expenditures, with a substantial portion of such expenditures being
devoted to the development of the Company's proved undeveloped hydrocarbon
reserves, which totaled 3.1 million barrels of oil and 138.4 BCF of gas as of
December 31, 1993. Except for the Company's commitment to spend $5 million
per year during the three-year period
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
ending October 1, 1996, as contained in its revolving credit facility, the
timing of most of the Company's capital expenditures is discretionary, and thus
the Company has a significant degree of flexibility to adjust the level of
expenditures as circumstances warrant.
The Company funded its capital expenditures during the six months ended June
30, 1994 with a portion of the $22 million of proceeds realized from the sale
of certain oil and gas properties in January 1994 and with borrowings under
its revolving credit facility. The Company currently plans to fund most of its
remaining 1994 capital expenditures with additional borrowings under such
revolving credit facility. In 1995 and thereafter, the Company plans to
principally rely upon increasing levels of cash flow from its oil and gas
operations to fund its ongoing capital expenditures, as well as to meet its
long-term debt service obligations and any indebtedness outstanding under its
revolving credit facility, as the Company benefits from the increased levels of
oil and gas production and related revenues and cash flows that are anticipated
to result from its 1994-1996 capital expenditures. There can be no assurance,
however, that such capital expenditures will be successful and result in a
sufficient level of revenues and cash flow to both fund the Company's ongoing
capital expenditures and enable it to meet its debt service and other
obligations; and, accordingly, in such circumstances, the Company's
discretionary capital spending would have to be correspondingly reduced or it
would have to make further asset sales, in order to continue with its capital
expenditures and meet its debt service and other obligations. In addition, oil
and gas price declines would adversely impact the value of the Company's cash
flow.
RESULTS OF OPERATIONS
The Company had a net loss of $6,205,000 and $11,932,000 for the quarter and
six months ended June 30, 1994, respectively, compared to a net loss of
$3,564,000 and $7,339,000 for the quarter and six months ended June 30, 1993.
The Company's revenues and cash flows have decreased during the 1994 periods as
compared to the 1993 periods due to lower oil and gas prices and lower oil
production, as partially offset by increases in gas production.
The following table reflects the average prices received by the Company for oil
and gas and the amount of its oil and gas production for the three months and
six months ended June 30, 1994 and 1993:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
Average Price:
Oil and condensate (per barrel) $ 14.63 $ 15.99 $ 12.78 $ 15.92
Gas (per thousand cubic feet) $ 1.37 $ 1.85 $ 1.54 $ 1.75
Production:
Oil and condensate (barrels) 285,000 353,000 593,000 740,000
Gas (thousand cubic feet) 4,352,000 3,628,000 8,508,000 7,356,000
Equivalent barrel(1) 1,010,000 958,000 2,011,000 1,966,000
(1) Oil and gas are converted to a common unit of measure on the basis of six
MCF of gas to one barrel of oil.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Depletion, depreciation and amortization decreased on a unit of production
basis for the 1994 periods as compared to the 1993 periods due to a decrease in
the Company's depletion rate as a result of an increase in the Company's
reserves during 1993 at a finding cost substantially below its depletion rate.
Lease operating expenses decreased on a unit of production basis for the 1994
periods as compared to the 1993 periods, primarily due to the sale in January
1994 of certain relatively high operating cost properties, and also due to
operating efficiencies realized by the Company.
The following table shows the costs associated with the Company's oil and gas
revenues per equivalent barrel of oil for the three months and six months ended
June 30, 1994 and 1993:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1994 1993 1994 1993
-------- -------- -------- --------
(per equivalent barrel)
Production Costs $3.73 $4.22 $3.64 $4.15
Depletion, Depreciation and
Amortization $4.48 $4.69 $4.48 $4.70
The increase in general and administrative expenses for the 1994 periods as
compared to the 1993 periods is due to a general increase in the Company's
expenses together with certain non-recurring legal and other costs incurred
during the first six months of 1994.
The Company's interest expense increased for the quarter and six months ended
June 30, 1994 as compared to the comparable periods in 1993 as a result of (i)
the Company's issuance of $75 million of its 11.5% Senior Secured Notes Due
2000 in the second half of 1993 and the utilization of the net proceeds thereof
to repay an equivalent amount of bank debt with a 7.1% borrowing rate during
the 1993 periods and (ii) an increase in the interest rate on the Company's Gas
Indexed Notes to 14% for the quarter and six months ended June 30, 1994 as
compared to 13.3% for comparable periods in 1993.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) Reports on Form 8-K
On June 15, 1994, a Form 8-K was filed dated June 10, 1994,
which reports under Item 5 "Other Events" the interest rate on
the Company's Senior Subordinated Gas Indexed Notes Due 1999
and Senior Gas Indexed Notes Due 2002 to be 13.900% for the
period August 16, 1994 to November 15, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PRESIDIO OIL COMPANY
-----------------------------
Registrant
DATE: July 26, 1994 /s/ Christopher S. Hardesty
---------------------- -----------------------------
Christopher S. Hardesty
Chief Financial Officer
and Treasurer
(Principal Financial Officer)
DATE: July 26, 1994 /s/ Charles E. Brammeier
---------------------- -----------------------------
Charles E. Brammeier
Controller
(Principal Accounting Officer)
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