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SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
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 1-11516
REMINGTON OIL AND GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-2369148
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8201 PRESTON ROAD,
SUITE 600,
DALLAS, TEXAS 75225-6211
(Address of principal executive offices)
(Zip code)
(214) 210-2650
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period than 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 [ ]
There were 21,759,313 outstanding shares of Common Stock, $0.01 par value,
on May 4, 2001.
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REMINGTON OIL AND GAS CORPORATION
INDEX
PART I FINANCIAL INFORMATION................................ 1
ITEM 1. FINANCIAL STATEMENTS.............................. 1
Condensed Consolidated Balance Sheets.................. 1
Condensed Consolidated Statements of Income............ 2
Condensed Consolidated Statements of Cash Flows........ 3
Notes to Condensed Consolidated Financial Statements... 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............... 5
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................ 9
PART II OTHER INFORMATION................................... 10
ITEM 1. LEGAL PROCEEDINGS................................. 10
ITEM 2. CHANGES IN SECURITIES............................. 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................... 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS................................................ 10
ITEM 5. OTHER INFORMATION................................. 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................. 10
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $ 34,579 $ 18,131
Restricted cash and cash equivalents........................ 800 2,592
Accounts receivable......................................... 22,464 21,142
Prepaid expenses and other current assets................... 2,735 2,375
--------- ---------
TOTAL CURRENT ASSETS.............................. 60,578 44,240
--------- ---------
PROPERTIES
Oil and natural gas properties (successful-efforts
method)................................................... 345,972 336,558
Other properties............................................ 2,740 2,701
Accumulated depreciation, depletion and amortization........ (200,608) (201,506)
--------- ---------
TOTAL PROPERTIES.................................. 148,104 137,753
--------- ---------
OTHER ASSETS
Cash collateral for Phillips judgment....................... 9,000 9,000
Other assets................................................ 1,311 1,481
--------- ---------
TOTAL OTHER ASSETS................................ 10,311 10,481
--------- ---------
TOTAL ASSETS...................................... $ 218,993 $ 192,474
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................... $ 28,736 $ 25,273
Short-term notes payable and current portion of long-term
notes payable............................................. 4,179 7,229
--------- ---------
TOTAL CURRENT LIABILITIES......................... 32,915 32,502
--------- ---------
LONG-TERM LIABILITIES
Phillips judgment........................................... 20,035 19,733
Notes payable............................................... 27,428 24,685
8 1/4% Convertible subordinated notes payable due in 2002... 5,875 5,880
Other long-term payables.................................... 6,186 6,966
Deferred income tax liability............................... 6,268 --
--------- ---------
TOTAL LONG-TERM LIABILITIES....................... 65,792 57,264
--------- ---------
TOTAL LIABILITIES................................. 98,707 89,766
--------- ---------
Commitments and contingencies (Note 2)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 25,000,000 shares
authorized, no shares outstanding......................... -- --
Common stock, $.01 par value, 100,000,000 shares authorized,
21,671,054 shares issued and 21,636,695 shares outstanding
in 2001, 21,598,605 shares issued and 21,564,246
outstanding in 2000....................................... 217 216
Additional paid-in capital.................................. 46,385 45,897
Restricted common stock..................................... 8,055 --
Unearned compensation....................................... (5,623) --
Retained earnings........................................... 71,252 56,595
--------- ---------
TOTAL STOCKHOLDERS' EQUITY........................ 120,286 102,708
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $ 218,993 $ 192,474
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
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REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------
REVENUES
Oil sales................................................... $ 8,014 $ 7,473
Gas sales................................................... 31,208 8,398
Other income................................................ 766 571
------- -------
TOTAL REVENUES.................................... 39,988 16,442
------- -------
COSTS AND EXPENSES
Operating costs............................................. 3,049 2,382
Exploration expense......................................... 1,416 282
Depreciation, depletion and amortization.................... 8,789 4,419
General and administrative expenses......................... 1,335 1,348
Stock based compensation.................................... 2,431 --
Royalty settlement.......................................... -- 3,216
Interest and financing costs................................ 1,304 1,016
------- -------
TOTAL COSTS AND EXPENSES.................................... 18,324 12,663
------- -------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST............ 21,664 3,779
Income tax expense.......................................... 7,007 --
Minority interest in income of subsidiaries................. -- (5)
------- -------
NET INCOME.................................................. $14,657 $ 3,784
======= =======
BASIC INCOME PER SHARE...................................... $ 0.68 $ 0.18
======= =======
DILUTED INCOME PER SHARE.................................... $ 0.60 $ 0.18
======= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
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REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------
CASH FLOW PROVIDED BY OPERATIONS
NET INCOME................................................ $ 14,657 $ 3,784
Adjustments to reconcile net income
Depreciation, depletion and amortization............... 8,789 4,419
Deferred income taxes.................................. 6,268 --
Amortization of deferred charges....................... 173 39
Dry hole costs......................................... 185 60
Minority interest in net income of subsidiaries........ -- (5)
Stock issued for directors fees........................ 44 46
Stock based compensation............................... 2,431 --
Royalty settlement..................................... -- 3,216
(Gain) on sale of properties........................... -- (13)
CHANGES IN WORKING CAPITAL
(Increase) in accounts receivable...................... (1,325) (2,056)
(Increase) decrease in prepaid expenses and other
current assets........................................ (360) 436
Increase in accounts payable and accrued expenses...... 3,765 2,849
Decrease in restricted cash............................ 1,792 --
-------- --------
NET CASH FLOW PROVIDED BY OPERATIONS........................ 36,419 12,775
-------- --------
CASH FROM INVESTING ACTIVITIES
Payments for capital expenditures......................... (19,325) (12,001)
Proceeds from property sales.............................. -- 232
-------- --------
NET CASH USED IN INVESTING ACTIVITIES....................... (19,325) (11,769)
-------- --------
CASH FROM FINANCING ACTIVITIES
Proceeds from note payable................................ -- 1,790
Payments on notes payable and long-term accounts
payable................................................ (1,092) (458)
Exercised stock options................................... 446 --
Dividends paid to minority stockholders of subsidiaries... -- (18)
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES....................................... (646) 1,314
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS......... 16,448 2,320
Cash and cash equivalents at beginning of period.......... 18,131 4,356
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........ $ 34,579 $ 6,676
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
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REMINGTON OIL AND GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
NOTE 1. ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Remington Oil and Gas Corporation is an independent oil and gas exploration
and production company incorporated in Delaware. Our oil and gas properties are
located in the offshore Gulf of Mexico and the onshore Gulf Coast.
We prepared these financial statements according to the instructions for
Form 10-Q. Therefore, the financial statements do not include all disclosures
required by generally accepted accounting principles. However, we have recorded
all transactions and adjustments necessary to fairly present the financial
statements included in this Form 10-Q. The adjustments made are normal and
recurring. The following notes describe only the material changes in accounting
policies, account details or financial statement notes during the first three
months of 2001. Therefore, please read these financial statements and notes to
the financial statements together with the audited financial statements and
notes to financial statements in our 2000 Form 10-K. The income statements for
the three months ended March 31, 2001, cannot necessarily be used to project
results for the full year.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities." As amended, the statement is effective for all fiscal
years beginning after June 15, 2000. As of January 1, 2001, we adopted this
statement. SFAS No. 133 requires that derivatives be reported on the balance
sheet at fair value. If the derivative is not designated as a hedging
instrument, changes in fair value must be recognized in the income statement in
the period of change. If the derivative is designated as a hedge and to the
extent such hedge is determined to be effective, changes in fair value are
either offset by the change in fair value of the asset or liability (if
applicable) or reported as a component of other comprehensive income in the
period of change, and subsequently recognized in the income statement when the
offsetting hedged transaction occurs. The definition of derivatives has also
been expanded to include contracts that require physical delivery of oil and gas
if the contract allows for net cash settlement. Currently we do not utilize any
derivative instruments that fall under the criteria defined in the accounting
standard. Accordingly, the adoption of SFAS No. 133 did not have a material
effect on our reported financial statements or disclosures.
NOTE 2. CONTINGENCIES
Phillips Petroleum Litigation
Our litigation with Phillips Petroleum Company is a material contingency.
We have included a complete discussion of this contingency in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
the topic "Phillips Petroleum Litigation" on pages 6 and 7 of this Form 10-Q.
Please read this discussion carefully.
We have no other material pending legal proceedings other than the
litigation mentioned above.
NOTE 3. STOCK BASED COMPENSATION AND RESTRICTED COMMON STOCK
In June 1999, the Board of Directors approved a contingent stock grant to
our employees and directors. The number of shares granted is relative to the
employee's salary (or base number in the case of directors) and the closing
stock price on June 17, 1999. In order for the grant to become effective, the
price of our stock had to increase from $4.19 per share to a trigger price of
$10.42 per share and close at or above $10.42 per share for 20 consecutive
trading days. The required increase in the stock price represented the
equivalent of a compounded annual rate of return of 20% for five years. This
trigger was achieved on January 24, 2001. When the stock grant became effective,
we recorded $8.1 million as restricted common stock, $5.7 million as
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REMINGTON OIL AND GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
unearned compensation reported as a separate reduction in stockholders' equity
on the balance sheet, and $2.4 million as stock based compensation expense. The
$5.7 million unearned compensation expense will be amortized quarterly over the
next five years as the shares vest. The shares will be issued only if the
employees and directors remain with the company through the vesting dates.
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion will assist in understanding our financial
position and results of operations. The information below should be read in
conjunction with the financial statements, the related notes to financial
statements, and our Form 10-K for the year ended December 31, 2000.
Our discussion contains both historical and forward-looking information. We
assess the risks and uncertainties about our business, long-term strategy, and
financial condition before we make any forward-looking statements, but we cannot
guarantee that our assessment is accurate or that our goals and projections can
or will be met. Statements concerning results of future exploration,
exploitation, development and acquisition expenditures as well as expense and
reserve levels are forward-looking statements. We make assumptions about
commodity prices, drilling results, production costs, administrative expenses,
and interest costs that we believe are reasonable based on currently available
information of known facts and trends.
This discussion is primarily an update to the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our 2000
Form 10-K. We recommend that you read this discussion in conjunction with the
Form 10-K.
Our long-term strategy is to increase shareholder value by economically
increasing reserves, production, and cash flow on an annual basis. At the same
time, we believe it is important to maintain a strong balance sheet by keeping
our total debt at a manageable level. We will balance our capital expenditures,
financed primarily by cash, operating cash flow, and bank debt, among
exploration, development, and acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 2001, our current assets exceeded our current liabilities by
$27.7 million. Our current ratio was 1.84 to 1. From December 31, 2000, to March
31, 2001, our current assets increased by $16.3 million due primarily to net
cash flow from operations.
Net cash flow from operations before changes in working capital increased
by $21.0 million, or 182%, primarily because of increased oil and gas revenues
during the first quarter of 2001. Gas sales increased by $22.8 million, or 272%,
and oil sales increased by $541,000, or 7%. The increase in oil and gas sales
relates to increased production and prices.
During the first quarter of 2001, we incurred capital expenditures totaling
$19.3 million. The capital expenditures included drilling six successful wells
and one unsuccessful well in the Gulf of Mexico and five successful wells in the
Gulf Coast area. In addition, we incurred costs to complete wells and upgrade
and complete platforms and facilities on Eugene Island Block 135, West Cameron
Block 170, High Island Block 441, and East Cameron Blocks 305, 344, and 364. We
have budgeted $70.7 million for capital expenditures during the remainder of the
year, which includes costs to build 4 platforms, complete 2 offshore wells and
drill approximately 30 additional wells. We expect that our cash and cash flow
from operations will be adequate to fund the capital budget for the reminder of
this year.
Effective May 3, 2001, we entered into a new credit facility that has a
borrowing base of $50.0 million. As of May 3, 2001, we had $24.5 million
borrowed under the facility. The banks review the borrowing base semi-annually
and may increase or decrease the borrowing base relative to a redetermined
estimate of proved oil
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and gas reserves. Our oil and gas properties are pledged as collateral for the
line of credit. Additionally, we have agreed not to pay dividends. The line of
credit expires on May 3, 2004, when all principal becomes due.
PHILLIPS PETROLEUM LITIGATION
In 1977, Phillips Petroleum Company assigned its interest in South Pass 89,
offshore Louisiana, to OKC Limited Partnership, predecessor to Remington Oil and
Gas Corporation. The assignment was accomplished through a farmout agreement in
which Phillips retained a 33% net profits interest. Phillips had obtained,
through a predecessor corporation, the lease from the Minerals Management
Service, which only granted rights to oil and gas from production. Paragraph IV
of the farmout states that Phillips' net profits shall be "thirty-three percent
(33%) of one-fourth ( 1/4) of eight-eighths (8/8)" of production. Paragraph IV
(a) states that Phillips "shall look exclusively to the oil, gas, condensate,
and other hydrocarbons, . . . produced from the subject lease for the
satisfaction and realization of the net profits interest." Subparagraph IV
(d)(4) states the net profits account shall be credited with "an amount equal to
the proceeds of all judgments and claims collected on account of its ownership
of the subject lease." Subparagraph IV (d)(5) states the net profits account
shall be credited with "an amount equal to all monies and things of value
received by or inuring to the benefit by virtue of its ownership interest in the
subject lease" of Remington. The interpretation of Paragraph IV and its
subparagraphs has been the primary subject of the recent litigation between
Phillips and us. Our claim, upheld by the trial court and the appellate court,
is that Phillips can look only to actual production for satisfaction of the net
profits interest according to the clear language of Paragraph IV. It is our
position that Subparagraphs IV(d)(4) and (5) merely define types of production
to be credited to the net profits account. Phillips claims that Subparagraphs
IV(d)(4) and (5) should stand alone and not as subsets of Paragraph IV and
entitle Phillips to amounts received by us regardless of whether they represent
revenues from or associated with production from the lease. We believe that if
Phillips, as drafter of the farmout agreement, intended Subparagraphs IV(d)(4)
and (5) to be so controlling, no reference to production would have been
necessary in the farmout.
The current litigation between Phillips and us involves three issues
related to the interpretation of Paragraph IV and its subparagraphs -- the TETCO
issue, the Overriding Royalty issue, and the Pipeline Tariff issue detailed
below.
TETCO -- We entered into a gas purchase agreement with TETCO in 1982
dedicating our gas from South Pass 89 to TETCO for specified prices. In
1989, TETCO sued us claiming the contract was terminated. In November of
1990, we settled with TETCO and received $69.6 million to "settle all
causes of action, claims and controversies between them pertaining to the
Litigation." Furthermore, we agreed to a new contract price for gas sold to
TETCO in exchange for its agreement to drop its legal challenges to the gas
contract. TETCO also paid us an additional $5.4 million (over and above the
$69.6 million) for past production which we credited to the net profits
account. This payment has not been subject to any litigation. In May of
1991, we allocated $5.8 million of the $69.6 million as production to the
net profits account. Phillips claims the remaining $63.8 million should
have been credited to the net profits account. After a three-week trial in
1997, the Louisiana trial court ruled that we should have credited $41.2
million to the net profits account as proceeds from production and thus
owed an additional $9.3 million plus interest to Phillips. As part of its
ruling, the trial court supported our claim that Phillips could only look
to actual production for its net profits interest, that federal law applied
to the contract, and that the remaining $28.4 million of the TETCO payment
was for settlement of Remington's counterclaims against TETCO. Phillips
appealed this ruling and on December 15, 2000, the Court of Appeal upheld
the trial court's opinion.
Overriding Royalty -- Phillips claimed that in months when no net
profits are achieved, its net profits interest should revert to an
overriding royalty. We claimed that once net profits are achieved,
Phillips' net profits interest does not revert to an overriding royalty
until cumulative net profits are depleted. The trial court ruled in
Phillips' favor and awarded Phillips $1.6 million plus interest. We
appealed this issue, but the appellate court upheld the trial court's
ruling. We will not appeal the issue further.
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Pipeline Tariff -- The farmout agreement allows transportation costs
to be charged to the net profits account. Initially, Marathon constructed
and operated the oil pipeline from the South Pass complex to Venice,
Louisiana, and charged us a tariff of $2.75 per barrel for transportation.
This tariff was charged to the net profits account with no complaint from
Phillips from inception of production in 1982 until 1989, four years after
CKB Petroleum purchased the pipeline. In 1985, CKB Petroleum, Inc.
purchased an interest in the pipeline and entered into a 20-year
transportation agreement with us to transport all of our oil for $2.75 per
barrel. Before CKB Petroleum purchased its interest, Phillips was given the
right to purchase the interest under a preferential right clause of the
pipeline operating agreement, but declined to do so. Phillips claims that
we should charge only a lesser amount which Phillips claims was our "actual
cost" of transportation, not what we paid to CKB Petroleum, Inc. Phillips
has tried to claim that we somehow profited from charging the net profits
account with the tariff amount that we paid to CKB Petroleum. Such a charge
was clearly permitted by the farmout agreement. The trial court dismissed
this claim. On December 15, 2000, the Court of Appeal upheld the trial
court's opinion on this issue. The $2.75 per barrel tariff has been the
market rate for the pipeline for us and our partners from inception through
the trial date.
The total judgment awarded by the trial court in 1998 including interest
was $18.0 million. We recorded an $18.0 million charge to income in the third
quarter of 1998 and continue to accrue interest on this liability each quarter.
The present total liability is $20.0 million. Currently, we have $9.0 million in
restricted cash set aside for this litigation.
Phillips has filed an application for a supervisory writ with the Louisiana
Supreme Court to which we have filed a response. In the application, Phillips
has presented no new facts and no new issues of policy, law or equity. The
Supreme Court has indicated that it wants to review briefs from both parties as
well as review the trial and appellate court records but has not yet indicated
whether it will hear oral arguments. Unless the parties receive extensions for
filing briefs, Phillips' brief is due on May 22, 2001, while our reply is due on
June 11, 2001. In all probability, it will be several months before a decision
is rendered regarding oral argument and final disposition of the case by the
Supreme Court. After the Supreme Court issues a final ruling on the case, it is
likely, depending on the ruling, that various elements will be remanded to the
trial court to resolve certain technical issues in accordance with the court
rulings. It may take several months to resolve these issues in the trial court.
When the litigation is concluded and the amount of our liability is finally
determined, we intend to use a combination of cash, debt financing, and/or
property sales to fulfill the amount of any judgment. We believe that there will
be sufficient time from final determination by the appellate court of last
resort and a final determination by the trial court on remand to allow us to
make provision for any required payment. Final resolution of this matter through
the courts may take up to several years.
In August of 1998, we terminated the TETCO gas contract and received $49.8
million. Phillips has claimed that this full $49.8 million payment should be
credited to the net profits account. Litigation on this issue was initiated in
Collin County, Texas, and subsequently stayed pending the resolution of all the
appeals in Phillips' Louisiana suit. Based on the trial court and appellate
court opinions stating that Phillips can look only to production for its net
profits interest and that federal law applies, we anticipate that this case will
be dismissed or resolved through summary proceedings. Total liability for this
claim would be $16.4 million plus statutory interest until the date of
settlement. The trial and any appeals regarding this issue, if necessary, could
take an additional two years to resolve once the current Louisiana litigation is
concluded.
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RESULTS OF OPERATIONS
The following table reflects oil and gas revenues, production, and prices
during the first quarter of 2001 compared to the first quarter of 2000.
THREE MONTHS ENDED MARCH 31,
-----------------------------
% INCREASE
2001 (DECREASE) 2000
------- ---------- ------
Oil production volume (MBbls)........................... 305 4% 292
Oil sales revenue....................................... $ 8,014 7% $7,473
Price per barrel........................................ $ 26.24 3% $25.59
Increase in oil sales revenue due to:
Change in prices...................................... $ 190
Change in production volume........................... 351
-------
Total increase in oil sales revenue..................... $ 541
=======
Gas production volume (MMcf)............................ 5,202 65% 3,154
Gas sales revenue....................................... $31,208 272% $8,398
Price per Mcf........................................... $ 6.00 126% $ 2.66
Increase in gas sales revenue due to:
Change in prices...................................... $10,534
Change in production volume........................... 12,276
-------
Total increase in gas sales revenue..................... $22,810
=======
Oil revenues increased $541,000, or 7%, because of the 4% increase in
production and the 3% increase in the average price per barrel. Oil production
from the Gulf of Mexico increased by 9% to 194,000 barrels primarily because of
production from new wells drilled on West Cameron block 170. Oil production from
our Gulf Coast properties including Mississippi and South Texas decreased
slightly by 2% because of the sale of certain properties in August 2000
partially offset by increased production from new wells drilled during the
second half of 2000.
Gas revenues increased $22.8 million, or 272%, because of the 65% increase
in production and the 126% increase in the average price per Mcf. Offshore Gulf
of Mexico gas production increased by 2.3 Bcf, or 95%. The increased production
primarily came from new discoveries on East Cameron block 364, West Cameron
block 170, and Eugene Island block 297. However, gas production from the onshore
gulf coast decreased by 0.2 Bcf, or 32%, because of the sale of certain South
Texas properties in August 2000. Average gas prices per Mcf increased by $3.34,
or 126%, which added an additional $10.5 million to total gas revenue.
Operating expenses, including transportation and net profits expense,
increased by $667,000, or 28%, because of additional producing properties.
Exploration expenses increased primarily because we purchased additional 3-D
seismic data during the first quarter of 2001, and we incurred an impairment
charge from the final dismantling of the platform located on Main Pass block
262. Depreciation, depletion, and amortization increased by $4.4 million, or
99%, primarily due to new producing properties. General and administrative
expenses did not change significantly.
In June 1999, the Board of Directors approved a contingent stock grant to
our employees and directors. The number of shares granted is relative to the
employee's salary (or base number in the case of directors) and the closing
stock price on June 17, 1999. In order for the grant to become effective, the
price of our stock had to increase from $4.19 per share to a trigger price of
$10.42 per share and close at or above $10.42 per share for 20 consecutive
trading days. The required increase in the stock price represented the
equivalent of a compounded annual rate of return of 20% for five years. This
trigger was achieved on January 24, 2001. When the stock grant became effective,
we recorded $8.1 million as restricted common stock, $5.7 million as unearned
compensation reported as a separate reduction in stockholders' equity on the
balance sheet, and $2.4 million as stock based compensation expense. The $5.7
million unearned compensation expense will be
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amortized quarterly over the next five years as the shares vest. The shares will
be issued only if the employees or directors remain with the company through the
vesting dates.
In May 2000, we reached an agreement with the Minerals Management Service
concerning the royalties due on the settlement of a 1990-gas purchase contract.
Because of the agreement, we recorded an expense of $3.2 million in the first
quarter of 2000. This claim by the MMS was the same claim made by Phillips in
our ongoing litigation with them. The MMS agreed with the trial court and the
appellate court that $41.3 million of the $69.6 million payment was production
related and therefore subject to royalties.
Interest and financing costs increased due to increased weighted average
rates and an increase in the total debt outstanding. During the first quarter of
2001, we recorded income tax expense totaling $7.0 million, of which an
estimated $6.3 million is deferred. We fully utilized our net deferred income
tax benefit during 2000 and the first quarter of 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk sensitive instrument at March 31, 2001, is a revolving line
of credit from a bank. At March 31, 2001, the unpaid principal balance under the
line was $27.4 million, and has since been paid down to $24.5 million. The
interest rate on this debt is sensitive to market fluctuations, however, we do
not believe that significant fluctuations in the market rate of interest have a
material effect on our consolidated financial position, results of operations,
or cash flow from operations.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Incorporated herein by reference is the discussion of litigation set forth
in Part I, Item 1, Notes to Condensed Consolidated Financial Statements -- Note
2. Contingencies of this Form 10-Q.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.0++ -- Agreement and Plan of Merger dated as of June 22, 1998,
by and between Remington Oil and Gas Corporation and
S-Sixteen Holding Company.
3.1* -- Certificate of Incorporation, as amended.
3.2++++++ -- Certificate of Amendment of Certificate of Incorporation
of Box Energy Corporation.
3.2.1++ -- Certificate of Amendment of Certificate of Incorporation
of Remington Oil and Gas Corporation.
3.3+++ -- By-Laws as amended.
4.1* -- Form of Indenture, Box Energy Corporation to United
States Trust Company of New York, Trustee, dated December
1, 1992, 8 1/4% Convertible Subordinated Notes due
December 1, 2002.
10.1* -- Farmout Agreement with Aminoil USA, Inc., effective May
1, 1977, dated May 9, 1977.
10.2* -- Transportation Agreement with CKB Petroleum, Inc. dated
March 1, 1985, as amended on April 19, 1989.
10.3* -- Agreement of Compromise and Amendment to Farmout
Agreement, dated July 3, 1989.
10.4** -- Pension Plan of Box Energy Corporation, effective April
16, 1992.
10.5+++++ -- First Amendment to the Pension Plan of Box Energy
Corporation dated December 16, 1993.
10.6++++ -- Second Amendment to the Pension Plan of Box Energy
Corporation dated December 31, 1994.
10.7*** -- Agreement by and between Box Energy Corporation and James
A. Watt.
10.8++++++ -- Box Energy Corporation Severance Plan.
10.9+ -- Box Energy Corporation 1997 Stock Option Plan (as amended
June 17, 1999).
10
13
10.10++++++ -- Box Energy Corporation Non-Employee Director Stock
Purchase Plan.
10.11sec. -- Form of Employment Agreement effective September 30,
1999, by and between Remington Oil and Gas Corporation
and two executive officers.
10.12sec. -- Form of Employment Agreement effective September 30,
1999, by and between Remington Oil and Gas Corporation
and an executive officer.
10.13sec.sec. -- Employment Agreement effective January 31, 2000, by and
between Remington Oil and Gas Corporation and James A.
Watt.
10.14sec.sec.sec. -- Form of Contingent Stock Grant Agreement -- Directors.
10.15sec.sec.sec. -- Form of Contingent Stock Grant Agreement -- Employees.
10.16sec.sec.sec. -- Form of Amendment to Contingent Stock Grant
Agreement -- Directors.
10.17sec.sec.sec. -- Form of Amendment to Contingent Stock Grant
Agreement -- Employees.
11.1 -- Statement regarding computation of income per share.
(b) No Forms 8-K were filed during the quarter ended March 31, 2001.
---------------
* Incorporated by reference to the Company's Registration Statement on Form
S-2 (file number 33-52156) filed with the Commission and effective on
December 1, 1992.
** Incorporated by reference to the Company's Form 10-K (file number 0-19967)
for the fiscal year ended December 31, 1992, filed with the Commission and
effective on or about March 30, 1993.
+++++ Incorporated by reference to the Company's Form 10-K (file number 0-19967)
for the fiscal year ended December 31, 1993, filed with the Commission and
effective on or about March 30, 1994.
++++ Incorporated by reference to the Company's Form 10-K (file number 0-19967)
for the fiscal year ended December 31, 1994, filed with the Commission and
effective on or about March 30, 1995.
+ Incorporated by reference to the Company's Form 10-Q (file number 1-11516)
for the fiscal quarter ended June 30, 1999, filed with the Commission and
effective on or about August 13, 1999.
*** Incorporated by reference to the Company's Form 10-Q (file number 1-11516)
for the fiscal quarter ended June 30, 1997, filed with the Commission and
effective on or about August 12, 1997.
++++++ Incorporated by reference to the Company's Form 10-K (file number
1-11516) for the fiscal year ended December 31, 1997, filed with the
Commission and effective on or about March 30, 1998.
++ Incorporated by reference to the Company's Registration Statement on Form
S-4 (file number 333-61513) filed with the Commission and effective on
November 27, 1998.
+++ Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 1998, filed with the Commission and
effective on or about March 30, 1999.
sec. Incorporated by reference to the Company's Form 10-Q (file number
1-11516) for the fiscal quarter ended September 30, 1999, filed with the
Commission and effective on or about November 12, 1999.
sec.sec. Incorporated by reference to the Company's Form 10-K (file number
1-11516) for the fiscal year ended December 31, 1999, filed with the
Commission and effective on or about March 30, 2000.
sec.sec.sec. Incorporated by reference to the Company's Form 10-K (file number
1-11516) for the fiscal year ended December 31, 2000, filed with
the Commission and effective on or about March 16, 2001.
11
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REMINGTON OIL AND GAS CORPORATION
Date: May 9, 2001 By: /s/ JAMES A. WATT
------------------------------------
James A. Watt
President and Chief Executive
Officer
Date: May 9, 2001 By: /s/ J. BURKE ASHER
------------------------------------
J. Burke Asher
Vice President/Finance
12
15
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
2.0++ -- Agreement and Plan of Merger dated as of June 22, 1998,
by and between Remington Oil and Gas Corporation and
S-Sixteen Holding Company.
3.1* -- Certificate of Incorporation, as amended.
3.2++++++ -- Certificate of Amendment of Certificate of Incorporation
of Box Energy Corporation.
3.2.1++ -- Certificate of Amendment of Certificate of Incorporation
of Remington Oil and Gas Corporation.
3.3+++ -- By-Laws as amended.
4.1* -- Form of Indenture, Box Energy Corporation to United
States Trust Company of New York, Trustee, dated December
1, 1992, 8 1/4% Convertible Subordinated Notes due
December 1, 2002.
10.1* -- Farmout Agreement with Aminoil USA, Inc., effective May
1, 1977, dated May 9, 1977.
10.2* -- Transportation Agreement with CKB Petroleum, Inc. dated
March 1, 1985, as amended on April 19, 1989.
10.3* -- Agreement of Compromise and Amendment to Farmout
Agreement, dated July 3, 1989.
10.4** -- Pension Plan of Box Energy Corporation, effective April
16, 1992.
10.5+++++ -- First Amendment to the Pension Plan of Box Energy
Corporation dated December 16, 1993.
10.6++++ -- Second Amendment to the Pension Plan of Box Energy
Corporation dated December 31, 1994.
10.7*** -- Agreement by and between Box Energy Corporation and James
A. Watt.
10.8++++++ -- Box Energy Corporation Severance Plan.
10.9+ -- Box Energy Corporation 1997 Stock Option Plan (as amended
June 17, 1999).
10.10++++++ -- Box Energy Corporation Non-Employee Director Stock
Purchase Plan.
10.11sec. -- Form of Employment Agreement effective September 30,
1999, by and between Remington Oil and Gas Corporation
and two executive officers.
10.12sec. -- Form of Employment Agreement effective September 30,
1999, by and between Remington Oil and Gas Corporation
and an executive officer.
10.13sec.sec. -- Employment Agreement effective January 31, 2000, by and
between Remington Oil and Gas Corporation and James A.
Watt.
10.14sec.sec.sec. -- Form of Contingent Stock Grant Agreement -- Directors.
10.15sec.sec.sec. -- Form of Contingent Stock Grant Agreement -- Employees.
10.16sec.sec.sec. -- Form of Amendment to Contingent Stock Grant
Agreement -- Directors.
10.17sec.sec.sec. -- Form of Amendment to Contingent Stock Grant
Agreement -- Employees.
11.1 -- Statement regarding computation of income per share.
---------------
* Incorporated by reference to the Company's Registration Statement on Form
S-2 (file number 33-52156) filed with the Commission and effective on
December 1, 1992.
** Incorporated by reference to the Company's Form 10-K (file number 0-19967)
for the fiscal year ended December 31, 1992, filed with the Commission and
effective on or about March 30, 1993.
+++++ Incorporated by reference to the Company's Form 10-K (file number 0-19967)
for the fiscal year ended December 31, 1993, filed with the Commission and
effective on or about March 30, 1994.
16
++++ Incorporated by reference to the Company's Form 10-K (file number 0-19967)
for the fiscal year ended December 31, 1994, filed with the Commission and
effective on or about March 30, 1995.
+ Incorporated by reference to the Company's Form 10-Q (file number 1-11516)
for the fiscal quarter ended June 30, 1999, filed with the Commission and
effective on or about August 13, 1999.
*** Incorporated by reference to the Company's Form 10-Q (file number 1-11516)
for the fiscal quarter ended June 30, 1997, filed with the Commission and
effective on or about August 12, 1997.
++++++ Incorporated by reference to the Company's Form 10-K (file number
1-11516) for the fiscal year ended December 31, 1997, filed with the
Commission and effective on or about March 30, 1998.
++ Incorporated by reference to the Company's Registration Statement on Form
S-4 (file number 333-61513) filed with the Commission and effective on
November 27, 1998.
+++ Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 1998, filed with the Commission and
effective on or about March 30, 1999.
sec. Incorporated by reference to the Company's Form 10-Q (file number
1-11516) for the fiscal quarter ended September 30, 1999, filed with the
Commission and effective on or about November 12, 1999.
sec.sec. Incorporated by reference to the Company's Form 10-K (file number
1-11516) for the fiscal year ended December 31, 1999, filed with the
Commission and effective on or about March 30, 2000.
sec.sec.sec. Incorporated by reference to the Company's Form 10-K (file number
1-11516) for the fiscal year ended December 31, 2000, filed with
the Commission and effective on or about March 16, 2001.