1
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, 1995, 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 August 4, 1995:
CLASS A COMMON STOCK: 25,318,085
CLASS B COMMON STOCK: 3,216,585
1
2
PRESIDIO OIL COMPANY AND SUBSIDIARIES
INDEX
Page
----
Unaudited Consolidated Financial Statements:
Unaudited Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Operations -
For the Three Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . 5
Unaudited Consolidated Statements of Operations -
For the Six Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 6
Unaudited Consolidated Statements of Cash Flows -
For the Six Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
June 30, December 31,
1995 1994
-------- ------------
(Unaudited)
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 6,733 $ 6,423
Accounts receivable:
Oil and gas sales 5,379 6,759
Joint interest owners and other 2,969 6,828
Other 828 1,203
-------- --------
Total current assets 15,909 21,213
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties using full
cost accounting 507,187 511,870
Other 4,356 4,268
-------- --------
Total 511,543 516,138
Less accumulated depletion,
depreciation and amortization 295,434 287,463
-------- --------
Net property, plant and equipment 216,109 228,675
-------- --------
OTHER ASSETS:
Deferred charges 8,433 8,055
Other 1,176 1,629
-------- --------
Total other assets 9,609 9,684
-------- --------
$241,627 $259,572
======== ========
See notes to unaudited consolidated financial statements.
3
4
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1995 1994
-------- ------------
(Unaudited)
(in thousands)
CURRENT LIABILITIES:
Accounts payable:
Oil and gas sales $ 2,374 $ 3,368
Trade and other 4,650 12,724
Accrued interest 9,439 3,576
Other accrued liabilities 5,017 5,413
Current portion of long-term debt 246,413 -
-------- --------
Total current liabilities 267,893 25,081
-------- --------
BANK DEBT - 21,000
-------- --------
SENIOR SECURED NOTES - 75,000
-------- --------
GAS INDEXED NOTES - 100,000
-------- --------
CONVERTIBLE SUBORDINATED DEBENTURES - 50,000
-------- --------
OTHER NONCURRENT LIABILITIES 9,874 9,039
-------- --------
STOCKHOLDERS' DEFICIT:
Class A Common stock, $.10 par value per share;
25,318,000 and 25,317,000 shares outstanding
at June 30, 1995 and December 31, 1994,
respectively 2,532 2,532
Class B Common stock, $.10 par value per share;
3,217,000 and 3,218,000 shares outstanding
at June 30, 1995 and December 31, 1994,
respectively 322 322
Additional paid-in capital 128,882 129,029
Deferred compensation (2,146) (2,394)
Retained deficit (165,730) (150,037)
-------- --------
Total stockholders' deficit (36,140) (20,548)
-------- --------
$241,627 $259,572
======== ========
See notes to unaudited consolidated financial statements.
4
5
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
Three Months Ended June 30,
-----------------------------------
1995 1994
-------- --------
(in thousands, except
per share amounts)
Oil and gas revenues $ 8,093 $ 10,145
Less - direct costs:
Lease operating 2,933 3,165
Production taxes 448 600
Depletion, depreciation and amortization 3,739 4,526
-------- --------
973 1,854
General and administrative expense (2,291) (1,649)
Interest expense (7,265) (6,954)
Other 507 544
-------- --------
Net loss $ (8,076) $ (6,205)
======== ========
Loss per share:
Class A Common Stock $ (.30) $ (.23)
======== ========
Class B Common Stock $ (.30) $ (.23)
======== ========
See notes to unaudited consolidated financial statements.
5
6
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
Six Months Ended June 30,
-----------------------------------
1995 1994
-------- --------
(in thousands, except
per share amounts)
Oil and gas revenues $ 16,937 $ 20,687
Less - direct costs:
Lease operating 6,112 6,132
Production taxes 980 1,195
Depletion, depreciation and amortization 7,731 9,010
-------- --------
2,114 4,350
General and administrative expense (3,768) (3,313)
Interest expense (14,422) (13,952)
Other 383 983
-------- --------
Net loss $(15,693) $(11,932)
======== ========
Loss per share:
Class A Common Stock $ (.58) $ (.44)
======== ========
Class B Common Stock $ (.58) $ (.44)
======== ========
See notes to unaudited consolidated financial statements.
6
7
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
Six Months Ended June 30,
-----------------------------------
1995 1994
-------- --------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,693) $(11,932)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depletion, depreciation and amortization 7,971 9,237
Amortization of debt issuance costs
included in interest expense 626 613
Other 653 938
Changes in other assets and liabilities:
Decrease in accounts receivable 5,239 4,466
Decrease in other current assets 55 1,216
Payment of loan fees and costs - (117)
Decrease (increase) in other noncurrent assets (551) 75
Decrease in accounts payable (9,068) (6,734)
Increase (decrease) in accrued interest and liabilities 5,467 (492)
Increase (decrease) in other noncurrent liabilities 622 (708)
-------- --------
Net cash used in operating activities (4,679) (3,438)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (10,371) (14,216)
Proceeds from sale of oil and gas properties 14,947 21,798
-------- --------
Net cash provided by investing activities 4,576 7,582
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of bank debt 8,700 16,590
Payments of bank debt (8,287) (24,090)
Other noncurrent financing - (39)
-------- --------
Net cash provided by (used in)
financing activities 413 (7,539)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 310 (3,395)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 6,423 13,559
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 6,733 $ 10,164
======== ========
See notes to unaudited consolidated financial statements.
7
8
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the Three Months and Six Months Ended June 30, 1995 and 1994
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, 1994.
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 1,261,000 shares and 1,298,000 shares for the quarter and
six months ended June 30, 1995, respectively, and 1,540,000 shares and
1,566,000 shares for the quarter and six months ended June 30, 1994,
respectively.
3. Included in the Consolidated Statements of Cash Flows is $7,934,000 and
$13,039,000 of interest paid, net of amounts capitalized, during the six
months ended June 30, 1995 and 1994, respectively.
4. During the quarter and six months ended June 30, 1995, the Company
realized net proceeds of $2 million and $15 million, respectively, as the
result of the sale of certain oil and gas properties. The majority of
such proceeds were used to fund the Company's cash flow deficit and
capital expenditures.
5. The revenues and operating cash flows of the Company declined
significantly in 1994 and during the first six months of 1995, resulting
in substantial uncertainties regarding the Company's ability to continue
as a going concern in its current financial structure and regarding its
ability to service its debt. Because of its deteriorating financial
condition, on May 15, 1995, the Company did not pay the $3.317 million in
interest that became due on that date on its Senior Gas Indexed Notes Due
2002 (the "Senior GINs"). Although the indenture (the "Senior GIN
Indenture") governing the Senior GINs provides a 30-day grace period in
which the Company may cure payment defaults before an "Event of Default"
is declared thereunder, the Company did not make such interest payment on
or before June 14, 1995, and thus an Event of Default under the Senior GIN
Indenture has occurred and is continuing. In addition, on June 15, 1995,
the Company did not pay the $2.156 million of interest that became due on
that date on its 11.5% Senior Secured Notes Due 2000 (the "Senior Secured
Notes"). The Company did not make such interest payment on or before the
July 14, 1995 expiration of the 30-day grace period provided in the
indenture governing the Senior Secured Notes (the "Senior Secured Note
Indenture"), and thus an Event of Default under the Senior Secured Note
Indenture has occurred and is continuing. Moreover, to cure a previously
disclosed collateral deficiency, the Senior Secured Note Indenture
required the Company to offer to purchase at par approximately $7.3
million of Senior Secured Notes prior to June 22, 1995. The
8
9
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Company did not make such offer during the 30-day grace period subsequent to
June 22, 1995 as provided in the Senior Secured Note Indenture which also
resulted in an Event of Default. Although the Company is currently making
all payments due on its bank debt and will not default on an interest payment
on its 9% Convertible Subordinated Debentures Due 2002 (the "9% Debentures")
until September 15, 1995, the Events of Default described above have caused
an Event of Default under the Company's bank credit agreement ("Credit
Agreement") and could result in an Event of Default under the 9% Debentures.
Therefore, the current portion of long-term debt on the Company's June 30,
1995 balance sheet is comprised of the following which includes all of the
Company's public debt and its bank debt.
June 30, 1995
Current Portion of
Long-Term Debt
------------------
(in thousands)
Bank Debt $ 21,413
Senior Secured Notes 75,000
Gas Indexed Notes 100,000
9% Convertible Subordinated Debentures 50,000
--------
Total current portion of long-term debt $246,413
========
6. The Company follows the full cost method of accounting for oil and gas
producing activities whereby all costs incurred in the acquisition,
exploration and development of oil and gas properties are capitalized.
Sales of oil and gas properties are recorded as an adjustment of
capitalized costs, with no gain or loss recognized. Capitalized costs are
subject to a ceiling limitation test based on a computed value of the
Company's present value of estimated future net revenues from proved
reserves using current prices (with consideration of price changes only to
the extent provided by contractual arrangements), discounted at 10%, after
adjusting for tax effects at the end of each period. The calculation of
the ceiling limitation also assumes that the Company will generally
continue with its historical development program; and, for the Company to
do so, it will be required to complete a Restructuring, or other
transaction, all as discussed in Item 2 of this report.
Moreover, assuming that, as of June 30, 1995 (i) the Company's average
realized gas price was $1.02 per MCF (which is the average price realized
by the Company in respect of August 1995), instead of the actual $1.24 per
MCF being realized as of June 30, 1995, and (ii) no other changes were
made in respect of the Company's proved oil and gas reserve estimates
(including related oil pricing, hydrocarbon production and capital
expenditure data) as of June 30, 1995, the Company would have been
required to reduce the carrying value of its oil and gas properties by
approximately $33 million as of June 30, 1995. Nonetheless, it should
be recognized that such a reduction would have been a non-cash charge to
earnings and would be excluded in the making of calculations under the
covenants contained in the Company's Credit Agreement and the indentures
relating to the Senior GINs, Senior Secured Notes and 9% Debentures.
9
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
CURRENT FINANCIAL CONDITION AND RECENT DEVELOPMENTS
Current Financial Condition. During the first six months of 1995, the
financial condition and operating cash flows of the Company were materially and
adversely affected by a significant industry-wide decline in the price of
natural gas. The Company's revenues and operating cash flows thus declined
significantly during such period, continuing the substantial uncertainties
regarding the Company's ability to continue as a going concern in its current
financial structure. Because of its deteriorating financial condition, on May
15, 1995, the Company did not pay the $3.317 million in interest that became
due on that date on its Senior Gas Indexed Notes Due 2002 (the "Senior GINs").
Although the indenture (the "Senior GIN Indenture") governing the Senior GINs
provides a 30-day grace period in which the Company may cure payment defaults
before an "Event of Default" is declared thereunder, the Company did not make
such interest payment on or before June 14, 1995, and thus an Event of Default
under the Senior GIN Indenture has occurred and is continuing. In addition, on
June 15, 1995, the Company did not pay the $2.156 million of interest that
became due on that date on its 11.5% Senior Secured Notes Due 2000 (the "Senior
Secured Notes"). The Company did not make such interest payment on or before
the July 14, 1995 expiration of the 30-day grace period provided in the
indenture governing the Senior Secured Notes (the "Senior Secured Note
Indenture"), and thus an Event of Default under the Senior Secured Note
Indenture has occurred and is continuing. Moreover, to cure a previously
disclosed collateral deficiency, the Senior Secured Note Indenture required the
Company to offer to purchase at par approximately $7.3 million of Senior
Secured Notes prior to June 22, 1995. The Company did not make such offer
during the 30-day grace period subsequent to June 22, 1995 as provided in the
Senior Secured Note Indenture, which also resulted in an Event of Default under
the Senior Secured Note Indenture. Although the Company is currently making
all payments due on its bank debt, the Events of Default described above have
caused an Event of Default under the Company's bank credit agreement (the
"Credit Agreement") and could result in a number of adverse consequences to the
Company, which are described below under "Ability to Service Debt". Subsequent
to June 30, 1995, the price of natural gas has continued to decline such that
the Company's average price received was $1.12 per thousand cubic feet ("MCF")
for July 1995 and $1.02 per MCF for August 1995, further adversely affecting
the Company's revenues and cash flow.
To eliminate its current cash flow deficit and improve its financial condition,
the Company is continuing to negotiate with its bank lenders and with certain
institutional holders of its Senior Secured Notes, Senior GINs, and 9%
Convertible Subordinated Debentures Due 2002 (the "9% Debentures") with
respect to a restructuring (a "Restructuring") of the Company's debt
obligations. Additionally, the Company is considering the possible sale of its
oil, gas and related assets in connection with such a Restructuring. A data
room and procedures for providing potential buyers with information as to such
assets have been established, and potential buyers are reviewing such
information. No decision has been made to sell the Company's assets, and the
Company is continuing to examine other alternatives that may be available to
alleviate its current financial difficulties, including a Restructuring wherein
the Company would retain all or most of its oil, gas and related assets.
Although the Company and its financial advisors continue to work toward
improving the Company's financial condition, no assurance can be given that the
Company will be able to successfully conclude a Restructuring or any other
arrangement currently being considered to alleviate its financial difficulties
and, in addition, assuming that the Company is successful in respect of
concluding a Restructuring or one of
10
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
the other arrangements currently being considered, no assurance can be given as
to the value of the Company's existing debt and equity securities that may be
realized by the holders of such securities subsequent to the conclusion of such
a Restructuring. If the Company is unsuccessful in its current efforts to
improve its financial condition, it is likely that the Company will incur the
adverse consequences described below under "Ability to Service Debt".
Ability to Service Debt. Because of its current financial condition and
operating cash flow deficit, the Company believes that, absent a successful
Restructuring, it will not make further interest payments on the Senior Secured
Notes, the Senior GINs and the 9% Debentures as they become due during the
remainder of 1995. In addition, substantially all of the Company's oil and gas
reserves are pledged to secure the Company's bank debt and the Senior Secured
Notes, with the result that the Company is not able to sell such assets in
order to fund the above-mentioned interest payments. The failure to make
interest payments during the quarter ended June 30, 1995 has caused an Event of
Default under the Senior Secured Note Indenture and the Senior GIN Indenture,
and the failure to make the interest payment on the 9% Debentures on September
15, 1995 will constitute an Event of Default under the indenture governing the
9% Debentures if such interest payment is not made during the 30-day grace
period after such interest payment date.
As a result of the Event of Default with respect to the Senior Secured Notes,
the outstanding $75 million of Senior Secured Notes could be declared to be
immediately due and payable, and the trustee under the Senior Secured Notes
Indenture would be entitled to exercise various remedies, including foreclosure
of a mortgage on a substantial portion of the Company's oil and gas properties.
As a result of the Event of Default with respect to the Senior GINs, the
outstanding $100 million of Senior GINs could be declared immediately due and
payable. If an Event of Default occurs with respect to the 9% Debentures, the
outstanding $50 million of 9% Debentures could also be declared due and
payable.
In addition, the failure to pay interest on the Senior Secured Notes and the
Senior GINs has constituted an Event of Default under the Credit Agreement and
thus the Company is prohibited from borrowing additional funds thereunder and
could lead to the $21.4 million outstanding thereunder at August 8, 1995 being
declared immediately due and payable, and the subsequent foreclosure of a
mortgage on substantially all of the Company's oil and gas properties not
pledged to secure the Senior Secured Notes. In any event, a scheduled
principal payment of $1.2 million is also due on October 1, 1995 and from
January 1, 1996 through July 1, 1999 quarterly principal payments of $1.4
million are due.
Finally, any of the Events of Default described herein could provide the
opportunity for creditors of the Company to initiate proceedings against the
Company under the United States Bankruptcy Code.
Collateral Value Requirement for the Senior Secured Notes. The Senior Secured
Notes are secured by a lien on certain proved oil and gas reserves (the
"Pledged Assets") pursuant to a pledged assets agency agreement (the "Pledged
Assets Agency Agreement"). The Pledged Assets Agency Agreement requires that,
as of various dates, the Security Value (as defined below) of the Pledged
Assets and the Security Value of the Pledged Assets that are proved developed
producing reserves (the "Pledged Producing Assets") must be equal to or greater
than certain specified percentages of the then outstanding amount of Senior
Secured Notes. For the purposes of this discussion, "Security Value" means the
aggregate present value (computed at a discount rate equal to 10% per annum) of
the future net revenues of proved oil and gas reserves, calculated in
accordance with the rules of the Securities and Exchange Commission.
11
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
On March 23, 1995, the Company calculated the Security Values of the Pledged
Assets and the Pledged Producing Assets as of the preceding December 31.
Because of the severe decline in gas prices during the second half of 1994, the
Security Values of both the Pledged Assets and the Pledged Producing Assets as
of December 31, 1994 were less than the required percentages, resulting in
deficiencies (the "Deficiencies") in respect of Pledged Assets and Pledged
Producing Assets of $4 million and $7.3 million, respectively.
The Company did not comply with the requirements in respect of curing the
Deficiencies by the dates set forth for such compliance; and, as a result, an
Event of Default under the Senior Secured Notes Indenture has occurred and the
trustee under such indenture and the holders of Senior Secured Notes have the
remedies described above in respect of an Event of Default under the Senior
Secured Notes Indenture. See "Ability to Service Debt" above.
Ability to Replace Reserves Produced and Maintain Production Levels. The
ability of the Company to maintain and/or increase its current levels of oil
and gas production and to find and develop new proved reserves of oil and gas
to replace the reserves being produced in 1995 depends on the availability of
funds for capital expenditures. Due to the Company's current financial
condition and operating cash flow deficit, the Company has limited funds
available for drilling operations during 1995. See "Capital
Expenditures/Property Sales" below. Unless the Company is able to restructure
its debt so as to enable it to spend significant amounts on capital
expenditures during the remainder of 1995, the Company's production and volumes
of proved oil and gas reserves are likely to decline significantly during 1995.
Such a decline in production would increase the Company's operating cash flow
deficit, and a decline in reserve volumes would adversely affect the ability of
the Company to raise capital and could cause further Deficiencies under the
collateral value requirement relating to the Senior Secured Notes. See
"Collateral Value Requirement for the Senior Secured Notes" above.
CAPITAL EXPENDITURES/PROPERTY SALES
During the quarter and six months ended June 30, 1995, the Company realized net
cash proceeds of $2 million and $15 million, respectively, as the result of the
sale of certain oil and gas properties. The majority of such proceeds were
used to fund the Company's cash flow deficit and capital expenditures during
such periods.
The Company's capital expenditures for its oil and gas operations totaled
approximately $10.4 million during the six months ended June 30, 1995, of which
$5.7 million was used in development and recompletion activities, $2.1 million
was used in exploratory activities, and $2.6 million was used in various other
activities, including acquisitions of producing properties and undeveloped
acreage. The Company funded its capital expenditures during such period with
the proceeds of asset sales. Due to the current uncertainty as to its
financial condition and future trends in gas pricing, the Company has
determined to limit its capital expenditures, subject to the availability of
funds (as to which no assurance can be given), during the remainder of 1995 to
those that are required to maintain its producing oil and gas properties as
well as certain essential development and other drilling operations. Except
for a requirement under the Credit Agreement that the Company spend $5 million
per year on the Mortgaged Properties during the three-year period ending
October 1, 1996, the timing of most of the Company's capital expenditures is
discretionary and there are currently no material long-term commitments
associated with the Company's capital expenditure plans. The unavailability of
funds for capital projects could also materially and
12
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
adversely impact the value of the Company's interest in properties it owns
jointly with others. Pursuant to the operating agreements governing these
joint ownership relationships, the Company could be forced to contribute funds
for capital projects in respect to these properties or suffer "non-consent"
penalties. Such penalties could materially and adversely affect the value of
the Company's ownership interest in any such properties.
RESULTS OF OPERATIONS
The Company had a net loss of $8,076,000 and $15,693,000 for the quarter and
six months ended June 30, 1995, respectively, compared to a net loss of
$6,205,000 and $11,932,000 for the quarter and six months ended June 30, 1994.
The increased losses during 1995 are due primarily to a decrease in the
Company's revenues and cash flows during the 1995 periods as compared to the
1994 periods. Such decreases are a result of lower gas prices and lower oil
and gas production, as partially offset by increased oil prices. The decrease
in gas production and approximately 70% of the decrease in oil production
during the 1995 periods as compared to the 1994 periods is the result of
property sales during 1994 and 1995.
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, 1995 and 1994:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Average Price:
Oil and condensate (per barrel) $16.45 $14.63 $15.72 $12.78
Gas (per thousand cubic feet) $1.19 $1.37 $1.21 $1.54
Production:
Oil and condensate (barrels) 212,000 285,000 454,000 593,000
Gas (thousand cubic feet) 3,862,000 4,352,000 8,102,000 8,508,000
Equivalent barrel (1) 856,000 1,010,000 1,804,000 2,011,000
(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.
The reduced amount of depletion, depreciation and amortization during the 1995
periods as compared to the 1994 periods is due to a decrease in production (on
an equivalent barrel basis) and a decrease in the Company's depletion rate as a
result of an increase in the Company's reserves during 1994 at a finding cost
substantially below its depletion rate. Lease operating expenses have
increased on a unit of production basis for the 1995 periods as compared to the
1994 periods, primarily due to the production decline on the Company's
properties and the sale of certain low operating cost properties.
13
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
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, 1995 and 1994:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1995 1994 1995 1994
----- ----- ----- -----
(per equivalent barrel)
Production Costs $3.95 $3.73 $3.93 $3.64
Depletion, Depreciation and
Amortization $4.37 $4.48 $4.29 $4.48
The increase in general and administrative expenses for the 1995 periods as
compared to the 1994 periods is due to a charge during the quarter ended June
30, 1995 of $900,000 relating to severance costs incurred during such periods
in connection with a reduction in personnel.
14
15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
On May 15, 1995, a Form 8-K was filed dated May 15, 1995, which
reports under Item 5 "Other Events" that the Company did not
pay the $3.317 million of interest that became due on that date
on its Senior Gas Indexed Notes Due 2002 (the "Senior Gas
Indexed Notes").
On June 15, 1995, a Form 8-K was filed dated June 13, 1995,
which reports under Item 5 "Other Events" that the interest
rate on the Company's Senior Subordinated Gas Indexed Notes Due
1999 and Senior Gas Indexed Notes was to be 13.250% for the
period August 15, 1995 to November 14, 1995.
On July 12, 1995, a Form 8-K was filed dated June 30, 1995,
which reports under Item 5 "Other Events" that Events of
Default have occurred under the indenture governing the
Company's Senior Gas Indexed Notes and under the Company's bank
credit agreement. Additionally, the Company is considering the
possible sale of its oil, gas and related assets in connection
with a restructuring.
15
16
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: August 10, 1995 /s/ Robert L. Smith
------------------------------
Robert L. Smith
President and
Chief Operating Officer
DATE: August 10, 1995 /s/ Charles E. Brammeier
------------------------------
Charles E. Brammeier
Controller
(Principal Accounting Officer)
16
17
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
27 Financial Data Schedule (Submitted to the SEC for its
information).