SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
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 0-9408
PRIMA ENERGY CORPORATION
| Delaware | 84-1097578 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
| incorporation or organization) |
1099 18th Street, Suite 400, Denver CO 80202
(Address of principal executive offices) (Zip Code)
(303) 297-2100
(Registrant’s telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed from 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 [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12-b-2 of the Exchange Act). Yes [x] No [ ]
As of October 31, 2003, the Registrant had 12,910,142 shares of Common Stock, $0.015 Par Value, outstanding.
1
PRIMA ENERGY CORPORATION
INDEX
| Page | ||||||
Part I – Financial Information |
||||||
Item 1. Financial Statements
|
||||||
Unaudited Consolidated Balance Sheets
|
3 | |||||
Unaudited Consolidated Statements of Income
|
5 | |||||
Unaudited Consolidated Statements of Comprehensive Income
|
6 | |||||
Unaudited Consolidated Statements of Cash Flows
|
7 | |||||
Notes to Unaudited Consolidated Financial Statements
|
8 | |||||
Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
|
14 | |||||
Item 3. Quantitative and Qualitative Disclosures About Market
Risk |
23 | |||||
Item 4. Controls and Procedures
|
24 | |||||
Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the
Private Securities Litigation Reform Act of 1995
|
24 | |||||
Part II – Other Information |
||||||
Item 6. Exhibits and Reports on Form 8-K
|
25 | |||||
Signatures
|
27 | |||||
Certifications
|
28 | |||||
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRIMA ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
| September 30, | December 31, | ||||||||
| 2003 | 2002 | ||||||||
| (Unaudited) | |||||||||
CURRENT ASSETS |
|||||||||
Cash and cash equivalents
|
$ | 50,358,000 | $ | 36,263,000 | |||||
Available for sale securities, at market
|
1,517,000 | 1,744,000 | |||||||
Receivables (net of allowance for doubtful
accounts: 9/30/03, $302,000; 12/31/02,
$304,000) |
10,581,000 | 7,492,000 | |||||||
Derivatives, at fair value
|
131,000 | — | |||||||
Tubular goods inventory
|
995,000 | 940,000 | |||||||
Other
|
519,000 | 818,000 | |||||||
Total current assets
|
64,101,000 | 47,257,000 | |||||||
OIL AND GAS PROPERTIES, at cost, accounted
for using the full cost method
|
169,353,000 | 151,518,000 | |||||||
Less accumulated depreciation, depletion
and amortization |
(71,928,000 | ) | (62,980,000 | ) | |||||
Oil and gas properties – net
|
97,425,000 | 88,538,000 | |||||||
PROPERTY AND EQUIPMENT, at cost |
|||||||||
Oilfield service equipment
|
9,961,000 | 9,457,000 | |||||||
Furniture and equipment
|
687,000 | 712,000 | |||||||
Field office, shop and land
|
478,000 | 478,000 | |||||||
| 11,126,000 | 10,647,000 | ||||||||
Less accumulated depreciation
|
(6,430,000 | ) | (5,808,000 | ) | |||||
Property and equipment – net
|
4,696,000 | 4,839,000 | |||||||
OTHER ASSETS
|
1,298,000 | 1,293,000 | |||||||
| $ | 167,520,000 | $ | 141,927,000 | ||||||
See accompanying notes to unaudited consolidated financial statements.
3
PRIMA ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (cont’d.)
LIABILITIES AND STOCKHOLDERS’ EQUITY
| September 30, | December 31, | ||||||||
| 2003 | 2002 | ||||||||
| (Unaudited) | |||||||||
CURRENT LIABILITIES |
|||||||||
Accounts payable
|
$ | 3,620,000 | $ | 3,129,000 | |||||
Amounts payable to oil and gas property owners
|
3,089,000 | 3,192,000 | |||||||
Ad valorem and production taxes payable
|
2,663,000 | 3,864,000 | |||||||
Accrued and other liabilities
|
1,648,000 | 893,000 | |||||||
Derivatives, at fair value
|
— | 225,000 | |||||||
Total current liabilities
|
11,020,000 | 11,303,000 | |||||||
AD VALOREM TAXES, non-current
|
3,084,000 | 2,077,000 | |||||||
ASSET RETIREMENT OBLIGATIONS
|
1,860,000 | — | |||||||
DEFERRED TAX LIABILITY
|
26,491,000 | 21,281,000 | |||||||
Total liabilities
|
42,455,000 | 34,661,000 | |||||||
STOCKHOLDERS’ EQUITY |
|||||||||
Preferred stock, $0.001 par value, 2,000,000 shares
authorized; no shares issued or outstanding
|
— | — | |||||||
Common stock, $0.015 par value, 35,000,000 shares
authorized; 13,258,548 and 13,064,048 shares
issued |
199,000 | 196,000 | |||||||
Additional paid-in capital
|
7,554,000 | 5,250,000 | |||||||
Retained earnings
|
124,708,000 | 107,470,000 | |||||||
Accumulated other comprehensive income (loss)
|
250,000 | (115,000 | ) | ||||||
Treasury stock, 348,406 and 236,538 shares at cost
|
(7,646,000 | ) | (5,535,000 | ) | |||||
Total stockholders’ equity
|
125,065,000 | 107,266,000 | |||||||
| $ | 167,520,000 | $ | 141,927,000 | ||||||
See accompanying notes to unaudited consolidated financial statements.
4
PRIMA ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
REVENUES |
|||||||||||||||||
Oil and gas sales
|
$ | 15,259,000 | $ | 5,455,000 | $ | 41,605,000 | $ | 17,460,000 | |||||||||
Gains (losses) on derivatives instruments, net |
680,000 | (143,000 | ) | 1,986,000 | (2,780,000 | ) | |||||||||||
Oilfield services
|
2,207,000 | 1,964,000 | 6,335,000 | 6,403,000 | |||||||||||||
Interest, dividend and other income
|
83,000 | 156,000 | 353,000 | 474,000 | |||||||||||||
| 18,229,000 | 7,432,000 | 50,279,000 | 21,557,000 | ||||||||||||||
EXPENSES |
|||||||||||||||||
Depreciation, depletion and amortization: |
|||||||||||||||||
Depletion of oil and gas properties
|
3,599,000 | 2,320,000 | 10,358,000 | 6,757,000 | |||||||||||||
Depreciation of property and equipment
|
236,000 | 202,000 | 798,000 | 846,000 | |||||||||||||
Lease operating expense
|
805,000 | 685,000 | 2,600,000 | 2,261,000 | |||||||||||||
Ad valorem and production taxes
|
1,444,000 | 448,000 | 4,010,000 | 1,413,000 | |||||||||||||
Cost of oilfield services
|
1,470,000 | 1,779,000 | 4,917,000 | 5,258,000 | |||||||||||||
General and administrative
|
837,000 | 772,000 | 2,471,000 | 2,388,000 | |||||||||||||
| 8,391,000 | 6,206,000 | 25,154,000 | 18,923,000 | ||||||||||||||
Income before income taxes and cumulative effect
of change in accounting principle
|
9,838,000 | 1,226,000 | 25,125,000 | 2,634,000 | |||||||||||||
Provision for income taxes
|
3,245,000 | 200,000 | 8,290,000 | 340,000 | |||||||||||||
Net income before cumulative effect of change in
accounting principle
|
6,593,000 | 1,026,000 | 16,835,000 | 2,294,000 | |||||||||||||
Cumulative effect of change in accounting
principle |
— | — | 403,000 | — | |||||||||||||
NET INCOME
|
$ | 6,593,000 | $ | 1,026,000 | $ | 17,238,000 | $ | 2,294,000 | |||||||||
Basic net income per share before cumulative effect
of change in accounting principle
|
$ | 0.51 | $ | 0.08 | $ | 1.32 | $ | 0.18 | |||||||||
Cumulative effect of change in accounting
principle |
— | — | 0.03 | — | |||||||||||||
BASIC NET INCOME PER SHARE
|
$ | 0.51 | $ | 0.08 | $ | 1.35 | $ | 0.18 | |||||||||
Diluted net income per share before cumulative
effect of change in accounting principle
|
$ | 0.50 | $ | 0.08 | $ | 1.29 | $ | 0.17 | |||||||||
Cumulative effect of change in accounting
principle |
— | — | 0.03 | — | |||||||||||||
DILUTED NET INCOME PER SHARE |
$ | 0.50 | $ | 0.08 | $ | 1.32 | $ | 0.17 | |||||||||
Weighted Average Common Shares Outstanding |
12,817,576 | 12,772,513 | 12,790,069 | 12,768,043 | |||||||||||||
Weighted Average Common Shares Outstanding
Assuming Dilution
|
13,080,193 | 13,221,889 | 13,039,712 | 13,261,851 | |||||||||||||
See accompanying notes to unaudited consolidated financial statements.
5
PRIMA ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
Net income
|
$ | 6,593,000 | $ | 1,026,000 | $ | 17,238,000 | $ | 2,294,000 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Change in fair value of hedges
|
321,000 | (126,000 | ) | 500,000 | (897,000 | ) | ||||||||||
Reclassification adjustment for realized losses
(gains)
on hedges included in net income
|
(350,000 | ) | 254,000 | 9,000 | 413,000 | |||||||||||
Deferred income tax (expense) benefit related to
change in fair value of hedges
|
11,000 | (47,000 | ) | (188,000 | ) | 179,000 | ||||||||||
Change in fair value of available-for-sale
securities |
(46,000 | ) | 20,000 | 11,000 | 45,000 | |||||||||||
Reclassification adjustment for realized
(gains) losses
included in net income
|
— | (27,000 | ) | 59,000 | (66,000 | ) | ||||||||||
Deferred income tax (expense) benefit related to
change in fair value of available-for-sale
securities |
16,000 | 3,000 | (26,000 | ) | 8,000 | |||||||||||
| (48,000 | ) | 77,000 | 365,000 | (318,000 | ) | |||||||||||
COMPREHENSIVE INCOME
|
$ | 6,545,000 | $ | 1,103,000 | $ | 17,603,000 | $ | 1,976,000 | ||||||||
See accompanying notes to unaudited consolidated financial statements.
6
PRIMA ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2003 | 2002 | ||||||||||
OPERATING ACTIVITIES |
|||||||||||
Net income
|
$ | 17,238,000 | $ | 2,294,000 | |||||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
|||||||||||
Depreciation, depletion and amortization
|
11,156,000 | 7,603,000 | |||||||||
Deferred income taxes
|
4,931,000 | (823,000 | ) | ||||||||
Cumulative effect of change in accounting
principle |
(403,000 | ) | — | ||||||||
Unrealized losses on derivatives
instruments |
154,000 | 4,500,000 | |||||||||
Tax benefit from exercise of employee stock
options |
1,411,000 | 824,000 | |||||||||
Other
|
(64,000 | ) | 6,000 | ||||||||
Changes in operating assets and liabilities: |
|||||||||||
Receivables
|
(3,094,000 | ) | (206,000 | ) | |||||||
Inventory
|
(55,000 | ) | 183,000 | ||||||||
Other current assets
|
147,000 | 67,000 | |||||||||
Accounts payable and payables to owners
|
388,000 | 1,220,000 | |||||||||
Production taxes payable
|
(194,000 | ) | (1,739,000 | ) | |||||||
Accrued and other liabilities
|
755,000 | (603,000 | ) | ||||||||
Net cash provided by operating
activities |
32,370,000 | 13,326,000 | |||||||||
INVESTING ACTIVITIES |
|||||||||||
Additions to oil and gas properties
|
(18,287,000 | ) | (12,040,000 | ) | |||||||
Proceeds from sales of oil and gas properties
|
1,664,000 | 13,544,000 | |||||||||
Purchases of other property, net
|
(793,000 | ) | (496,000 | ) | |||||||
Proceeds from sales of available for sale
securities, net |
356,000 | 692,000 | |||||||||
Net cash provided by (used in)
investing activities |
(17,060,000 | ) | 1,700,000 | ||||||||
FINANCING ACTIVITIES |
|||||||||||
Treasury stock purchased
|
(2,111,000 | ) | (1,669,000 | ) | |||||||
Proceeds from common stock issued
|
896,000 | 477,000 | |||||||||
Net cash used in financing
activities |
(1,215,000 | ) | (1,192,000 | ) | |||||||
INCREASE CASH AND CASH EQUIVALENTS |
14,095,000 | 13,834,000 | |||||||||
CASH AND CASH EQUIVALENTS, beginning of period |
36,263,000 | 23,337,000 | |||||||||
CASH AND CASH EQUIVALENTS, end of period |
$ | 50,358,000 | $ | 37,171,000 | |||||||
See accompanying notes to unaudited consolidated financial statements.
7
PRIMA ENERGY CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
Prima Energy Corporation is an independent oil and gas company primarily engaged in the exploration for, and the acquisition, development and production of, crude oil and natural gas. Through wholly owned subsidiaries, we also conduct operations in oil and gas property management, oilfield services and natural gas gathering, marketing and trading. These activities have been conducted predominantly in the Rocky Mountain region of the United States.
Our consolidated financial statements include the accounts of Prima Energy Corporation and its subsidiaries, which are collectively referred to in this report as “Prima.” All significant intercompany transactions have been eliminated.
Financial information presented herein as of September 30, 2003 and for the nine-month periods ended September 30