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 March 31, 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 No. 001-14745
3TEC ENERGY CORPORATION
(Exact name of Registrant as specified in its charter)
| DELAWARE |
63-1081013 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
700 MILAM, SUITE 1100
HOUSTON, TX 77002
(Address of principal executive offices)
(713) 821-7100
(Registrant’s telephone number, including area code)
N/A
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of 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 12b-2 of the Exchange Act). Yes x
No ¨
Number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common stock, $0.02 par value
16,696,597 shares as of April 30, 2003
3TEC ENERGY CORPORATION AND SUBSIDIARIES
| PAGE NO. | ||
| 1 | ||
| 1 | ||
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
|
Item 2. Management’s Discussion and Analysis of |
9 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
15 | |
| 15 | ||
| 16 | ||
| 16 |
P ART I. FINANCIAL INFORMATION
3TEC ENERGY CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
| MARCH 31, 2003 |
DECEMBER 31, 2002 |
|||||||
| (Unaudited) |
(Audited) |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS |
||||||||
| Cash and cash equivalents |
$ |
1,846 |
|
$ |
2,249 |
| ||
| Accounts receivable |
|
25,386 |
|
|
17,486 |
| ||
| Other current assets |
|
3,004 |
|
|
1,285 |
| ||
| Total current assets |
|
30,236 |
|
|
21,020 |
| ||
| PROPERTY AND EQUIPMENT (AT COST) |
||||||||
| Oil and gas-successful efforts method |
|
455,393 |
|
|
435,591 |
| ||
| Other property and equipment |
|
3,918 |
|
|
3,931 |
| ||
|
|
459,311 |
|
|
439,522 |
| |||
| Accumulated depreciation, depletion and amortization |
|
(125,167 |
) |
|
(112,732 |
) | ||
| Net Properties and Equipment |
|
334,144 |
|
|
326,790 |
| ||
| OTHER ASSETS |
|
1,280 |
|
|
1,375 |
| ||
| TOTAL ASSETS |
$ |
365,660 |
|
$ |
349,185 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES |
||||||||
| Accounts payable |
$ |
14,411 |
|
$ |
13,440 |
| ||
| Accrued liabilities |
|
1,819 |
|
|
1,340 |
| ||
| Series C Preferred stock redemption payable |
|
1,255 |
|
|
1,272 |
| ||
| Derivative fair value liability |
|
2,968 |
|
|
3,551 |
| ||
| Asset retirement obligation |
|
261 |
|
|
— |
| ||
| Other current liabilities |
|
2,244 |
|
|
3,055 |
| ||
| Total current liabilities |
|
22,958 |
|
|
22,658 |
| ||
| Long-term debt |
|
106,000 |
|
|
99,000 |
| ||
| Asset retirement obligation |
|
4,835 |
|
|
— |
| ||
| Deferred income taxes |
|
46,259 |
|
|
44,563 |
| ||
| TOTAL LIABILITIES |
|
180,052 |
|
|
166,221 |
| ||
| STOCKHOLDERS’ EQUITY |
||||||||
| Preferred stock, $0.02 par, 20,000,000 shares authorized, 266,667 shares designated Series B, 2,300,000 shares designated Series C and 725,167 shares designated Series D, none other designated |
|
— |
|
|
— |
| ||
| Convertible preferred stock Series D, 5% $24.00 redemption value, 613,919 shares issued and outstanding at March 31, 2003 and December 31, 2002. $14,734 aggregate liquidation preference |
|
7,475 |
|
|
7,475 |
| ||
| Common stock, $.02 par value, 60,000,000 shares authorized, 16,850,572 shares issued at March 31, 2003 and December 31, 2002 |
|
337 |
|
|
337 |
| ||
| Additional paid-in capital |
|
157,557 |
|
|
157,557 |
| ||
| Retained earnings |
|
22,117 |
|
|
19,520 |
| ||
| Treasury stock; 69,807 shares at March 31, 2003 and December 31, 2002. |
|
(1,049 |
) |
|
(1,049 |
) | ||
| Deferred compensation |
|
(829 |
) |
|
(876 |
) | ||
| TOTAL STOCKHOLDERS’ EQUITY |
|
185,608 |
|
|
182,964 |
| ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
365,660 |
|
$ |
349,185 |
| ||
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1
3TEC ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
| THREE MONTHS ENDED MARCH 31 |
||||||||
| (Unaudited) 2003 |
(Unaudited) 2002 |
|||||||
| REVENUES |
||||||||
| Oil, natural gas and plant income |
$ |
48,372 |
|
$ |
17,851 |
| ||
| Gain on sale of properties |
|
59 |
|
|
77 |
| ||
| Gain (loss) on derivative fair value |
|
583 |
|
|
(21,410 |
) | ||
| Gain (loss) on derivatives settlements |
|
(14,993 |
) |
|
6,883 |
| ||
| Other |
|
53 |
|
|
188 |
| ||
| TOTAL REVENUES |
|
34,074 |
|
|
3,589 |
| ||
| EXPENSES |
||||||||
| Production— |
||||||||
| Lease operations |
|
4,155 |
|
|
3,495 |
| ||
| Production, severance and ad valorem taxes |
|
2,735 |
|
|
1,248 |
| ||
| Gathering, transportation and other |
|
1,106 |
|
|
806 |
| ||
| Geological and geophysical |
|
3,608 |
|
|
180 |
| ||
| Dry hole and impairments |
|
2,161 |
|
|
54 |
| ||
| General and administrative |
|
2,528 |
|
|
2,207 |
| ||
| Stock compensation (general and administrative) |
|
47 |
|
|
— |
| ||
| Accretion |
|
84 |
|
|
— |
| ||
| Interest |
|
831 |
|
|
1,023 |
| ||
| Depreciation, depletion and amortization |
|
10,634 |
|
|
8,755 |
| ||
| Merger costs |
|
894 |
|
|
— |
| ||
| TOTAL EXPENSES |
|
28,783 |
|
|
17,768 |
| ||
| INCOME (LOSS) BEFORE INCOME TAX EXPENSE AND DIVIDENDS TO PREFERRED STOCKHOLDERS |
|
5,291 |
|
|
(14,179 |
) | ||
| Income tax (benefit) expense |
|
2,064 |
|
|
(5,531 |
) | ||
| INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE |
|
3,227 |
|
|
(8,648 |
) | ||
| Cumulative effect of a change in accounting principle (net of tax) |
|
446 |
|
|
— |
| ||
| NET INCOME (LOSS) |
|
2,781 |
|
|
(8,648 |
) | ||
| Dividends to preferred stockholders |
|
184 |
|
|
185 |
| ||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS |
$ |
2,597 |
|
$ |
(8,833 |
) | ||
| NET INCOME (LOSS) PER COMMON SHARE (before cumulative effect of a change in accounting principle) |
||||||||
| BASIC |
$ |
0.18 |
|
$ |
(0.54 |
) | ||
| DILUTED |
$ |
0.17 |
|
$ |
(0.54 |
) | ||
| NET INCOME (LOSS) PER COMMON SHARE (after cumulative effect of a change in accounting principle) |
||||||||
| BASIC |
$ |
0.16 |
|
$ |
(0.54 |
) | ||
| DILUTED |
$ |
0.15 |
|
$ |
(0.54 |
) | ||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
||||||||
| BASIC |
|
16,695,581 |
|
|
16,488,579 |
| ||
| DILUTED |
|
19,066,387 |
|
|
16,488,579 |
| ||
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2
3TEC ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| THREE MONTHS ENDED MARCH 31 |
||||||||
| (Unaudited) 2003 |
(Unaudited) 2002 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net income (loss) |
$ |
2,781 |
|
$ |
(8,648 | |||