-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rd0kwLRMG4E47160vL4C4U/dTXXg21KHRh5WgqnDyiiL7WDQOaMMh0pOm14Pz7kC nWsFEupemE5NkCX8eJAMuw== 0000899078-95-000125.txt : 19951031 0000899078-95-000125.hdr.sgml : 19951031 ACCESSION NUMBER: 0000899078-95-000125 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951030 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAIRN ENERGY USA INC CENTRAL INDEX KEY: 0000353153 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 232169839 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10156 FILM NUMBER: 95585468 BUSINESS ADDRESS: STREET 1: 8235 DOUGLAS AVE STE 1221 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2143690316 MAIL ADDRESS: STREET 1: 8235 DOUGLAS AVE STREET 2: STE 1221 CITY: DALLAS STATE: TX ZIP: 75225 FORMER COMPANY: FORMER CONFORMED NAME: OMNI EXPLORATION INC DATE OF NAME CHANGE: 19920703 10-Q 1 CAIRN ENERGY USA SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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: SEPTEMBER 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: 0-10156 CAIRN ENERGY USA, INC. (Exact name of registrant as specified in its charter) DELAWARE 23- 2169839 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8235 DOUGLAS AVENUE, SUITE 1221, DALLAS, TEXAS 75225 (Address of principal executive offices) (Zip Code) (214) 369-0316 (Registrant's telephone number, including area code) ____________________________________________________ (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 The number of shares outstanding of each of the issuer's classes of common stock as of October 27, 1995: 17,547,095 shares of common stock, par value $.01 CAIRN ENERGY USA, INC. INDEX Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Statements of Operations for the three and nine months ended September 30, 1995 and 1994 ............................... 3 Balance Sheets at September 30, 1995 and December 31, 1994. ...............4 Statement of Changes in Stockholders' Equity for the nine months ended September 30, 1995 ....................................6 Statements of Cash Flows for the nine months ended September 30, 1995 and 1994 .......................................7 Notes to Financial Statements ............................................8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......................................10 PART II. OTHER INFORMATION Item 1. Legal Proceedings .................................................14 Item 2. Changes in Securities .............................................14 Item 3. Defaults Upon Senior Securities ...................................14 Item 4. Submission of Matters to a Vote of Security Holders ...............14 Item 5. Other Information .................................................14 Item 6. Exhibits and Reports on Form 8-K ..................................15 PART I. FINANCIAL INFORMATION Item 1. Financial Statements CAIRN ENERGY USA, INC. STATEMENTS OF OPERATIONS For the Three and Nine months ended September 30, 1995 and 1994
Three months ended Nine months ended September 30, September 30, ---------------------- ---------------------- 1995 1994 1995 1994 -------- -------- -------- -------- (in thousands except per share amounts) Revenues: Natural gas and crude oil. . ...$ 7,131 $ 1,893 $19,940 $ 7,248 Other revenue .................. 75 100 150 126 -------- -------- -------- -------- Total revenues .................... 7,206 1,993 20,090 7,374 -------- -------- -------- -------- Expenses: Lease operating expenses and production taxes ......... 833 527 2,397 1,805 Depreciation, depletion and amortization ................. 3,909 926 10,680 3,244 Administrative expenses ........ 428 247 1,249 986 Interest ....................... 739 273 2,096 718 -------- -------- -------- -------- Total expenses .................... 5,909 1,973 16,422 6,753 -------- -------- -------- -------- Net income .......................$ 1,297 $ 20 $ 3,668 $ 621 ======== ======== ======== ======== Net income per common and common equivalent share .......$ 0.08 $ 0.00 $ 0.23 $ 0.05 ======== ======== ======== ======== Weighted average common and common equivalent shares outstanding .. 16,187 12,463 16,043 12,463 ======== ======== ======== ========
See accompanying notes. CAIRN ENERGY USA, INC. BALANCE SHEETS September 30, 1995 and December 31, 1994 ASSETS ---------
September 30, December 31, 1995 1994 ---------- ---------- (in thousands) Current assets: Cash and cash equivalents ...................................$ 2,945 $ 2,182 Accounts receivable ......................................... 4,525 2,031 Receivable from Cairn Energy PLC ............................ - 48 Prepaid expenses ............................................ 717 136 ---------- ---------- Total current assets .......................................... 8,187 4,397 Property and equipment at cost: Oil and gas properties, based on full cost accounting ....... 147,882 129,758 Other equipment ............................................. 652 564 ---------- ---------- 148,534 130,322 Less accumulated depreciation, depletion and amortization ... (56,972) (46,373) ---------- ---------- Net property and equipment ............................. 91,562 83,949 Deferred charges, net of amortization ......................... 623 835 ---------- ---------- Total assets .................................................$100,372 $ 89,181 ========== ==========
See accompanying notes. CAIRN ENERGY USA, INC. BALANCE SHEETS September 30, 1995 and December 31, 1994 LIABILITIES AND STOCKHOLDERS' EQUITY ----------
September 30, December 31, 1995 1994 ---------- ---------- (in thousands) Current liabilities: Accounts payable ...........................................$ 321 $ 1,286 Accrued lease operating expenses ............................ 581 528 Accrued well costs .......................................... 2,390 1,701 Deferred revenue ............................................ 15 152 Other accrued liabilities ................................... 400 216 Current maturities of long-term debt ........................ 3,625 - ---------- ---------- Total current liabilities ..................................... 7,332 3,883 Long-term debt ................................................ 10,875 23,500 Stockholders' equity: Common stock, $.01 par value; 30,000,000 shares authorized; Shares issued and outstanding: September 30, 1995 - 17,545,650 December 31, 1994 - 15,963,080 .......................... 175 160 Additional paid-in capital .................................. 94,667 77,983 Accumulated deficit ......................................... (12,677) (16,345) ---------- ---------- Total stockholders' equity .................................... 82,165 61,798 ---------- ---------- Total liabilities and stockholders' equity ....................$100,372 $ 89,181
See accompanying notes. CAIRN ENERGY USA, INC. Statement of Changes in Stockholders' Equity Nine months ended September 30, 1995 (in thousands)
Additional Total Common Stock Paid-In Accumulated Stockholders' SHARES AMOUNT CAPITAL DEFICIT EQUITY Balance at December 31, 1994 15,963 $160 $77,983 $(16,345) $61,798 Exercise of stock options 20 - 102 102 Common stock issued for cash, net 1,563 15 16,582 16,598 Net income 3,668 3,668 ------------------------------------------------------------ Balance at September 30, 1995 17,546 $175 $94,667 $(12,677) $82,165
==================================================================== See accompanying notes. CAIRN ENERGY USA, INC. STATEMENTS OF CASH FLOWS Nine months ended September 30, 1995 and 1994
September 30, September 30, 1995 1994 ---------- ---------- (in thousands) Increase (decrease) in cash and cash equivalents Cash flows from operating activities: Net income .................................................$ 3,668 $ 621 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization ................. 10,680 3,244 Amortization of loan costs ............................... 266 138 Change in operating assets and liabilities: Accounts receivable .................................... (2,494) 929 Prepaid expenses ....................................... (582) (1) Accounts payable ....................................... (966) 9 Accrued liabilities .................................... 236 (1,050) Deferred revenue ....................................... (137) - Advances (repayments) from (to) Cairn Energy PLC ....... 50 16 ---------- ---------- Net cash provided by operating activities ..................... 10,721 3,906 Cash flows from investing activities: Exploration and development expenditures ..................... (19,275) (11,697) Proceeds from sale of natural gas and crude oil properties ... 1,841 3,707 Increase in other equipment .................................. (169) (84) Other ........................................................ - (602) ---------- ---------- Net cash used in investing activities ......................... (17,603) (8,676) Cash flows from financing activities: Proceeds from long-term debt ................................. 10,000 5,500 Repayment of long-term debt .................................. (19,000) (100) Issuance of common stock, net ................................ 16,598 - Exercise of stock options .................................... 102 - Other ........................................................ (55) (131) ---------- ---------- Net cash provided by financing activities ..................... 7,645 5,269 ---------- ---------- Net change in cash and cash equivalents ....................... 763 499 Cash and cash equivalents at beginning of period .............. 2,182 343 ---------- ---------- Cash and cash equivalents at end of period ....................$ 2,945 $ 842 ========== ========== Supplemental cash flow information - Interest paid in cash ........................................$ 1,832 $ 602 ========== ==========
See accompanying notes. CAIRN ENERGY USA, INC. Notes to Financial Statements 1. Basis of Presentation In the opinion of management, the accompanying unaudited financial statements reflect all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the financial position of the Company at June 30, 1995, the results of its operations for the three and nine months ended September 30, 1995 and 1994 and the results of its cash flows for the nine months ended September 30, 1995 and 1994. These financial statements should be read in conjunction with the notes to the Company's annual financial statements, which were included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994, filed with the Securities and Exchange Commission (the "Commission") on March 15, 1995. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. 2. Long-term debt. Long-term debt at September 30, 1995 and December 31, 1994, consisted of the following: September 30, December 31, 1995 1994 ------------- ------------ Revolving credit agreement .............$14,500,000 $23,500,000 Less: Current maturities of long-term debt .................... 3,625,000 - ------------- ------------ Long-term debt less current maturities ...$10,875,000 $23,500,000 ============= ============ On December 20, 1994, the Company entered into a credit agreement (the INCC Restated Credit Agreement) with Internationale Nederlanden (U.S.) Capital Corporation (INCC) and MeesPierson, N.V. (MeesPierson) for the establishment of a credit facility with a maximum loan amount of $50 million. On April 19, 1995, the current borrowing base was established at $45 million. The INCC Restated Credit Agreement is a revolving line of credit secured by substantially all of the Company's assets. It contains financial covenants which require the Company to maintain a ratio of current assets to current liabilities (excluding the current portion of related debt) of no less than 1.0 to 1.0 and a tangible net worth of not less than $40 million. The Company is currently in compliance with all such financial covenants. At September 30, 1995, the Company had outstanding borrowings of $14.5 million under this facility. Outstanding borrowings accrue interest at either INCC's fluctuating base rate or INCC's reserve adjusted Eurodollar rate plus 1.50%, at the Company's option. The Company is obligated to pay a quarterly fee equal to one-half of 1% per annum of the unused portion of the borrowing base under the facility. On March 31, 1996, the borrowings outstanding under this facility will be converted to a term loan that requires various quarterly principal payments from June 30, 1996 through December 31, 1998. The Company has submitted a request to INCC and MeesPierson that the revolving period under the facility be extended to March 31, 1997 with a consequent deferral of the term loan repayments to June 30, 1997 through December 31, 1999. There can be no assurance that the extension on the revolving period of the facility will be granted. The INCC Restated Credit Agreement does not permit the Company to pay or declare any cash or property dividends or otherwise make any distribution of capital. The Company's ability to borrow under the INCC Credit Agreement is dependent upon the reserve value of its oil and gas properties. If the reserve value of the Company's borrowing base declines, the amount available to the Company under the INCC Restated Credit Agreement will be reduced and, to the extent that the borrowing base is less than the amount then outstanding under the INCC Restated Credit Agreement , the Company will be obligated to repay such excess amount on thirty-day's notice from INCC or to provide additional collateral. INCC and MeesPierson have substantial discretion in determining the reserve value of the borrowing base. 3. Income Taxes. At December 31, 1994, the Company had net operating loss carryforwards for federal income tax purposes of approximately $38 million. The net operating losses will expire principally in 2005 through 2009, if not previously utilized. Utilization of approximately $2 million of net operating losses is subject to an annual limitation of $114,000 because of a change of control, as defined in the Internal Revenue Code, of the Company's predecessor company, Omni Exploration, Inc. As a result of a change in control of the Company, as defined, which occurred in 1993, due to certain changes in ownership of Cairn Energy PLC (a former stockholder of the Company) and the Company, the Company estimates that utilization of $22 million of the net operating losses will be limited to approximately $2 million per year. Utilization of approximately $10.3 million of net operating losses is subject to an annual limitation of approximately $1 million per year due to the change in control of Smith Offshore Exploration Company II ("Smith"), the assets of which were acquired by the Company in 1994. The transactions in connection with the acquisition of the Smith properties and sales of Common Stock by Cairn Energy PLC in 1994 caused a further change in ownership of the Company as defined in the Internal Revenue Code. The Company's annual limitation due to this change in ownership exceeds $5 million per year. Additional net operating loss limitations may be imposed because of subsequent changes in stock ownership of the Company. 4. Property and Equipment. The Company capitalized approximately $941,000 and $629,000 of internal costs during the nine months ended September 30, 1995 and 1994, respectively. Such capitalized costs include salaries and related benefits of individuals directly involved in the Company's acquisition, exploration, and development activities, based on a percentage of their time devoted to such activities. CAIRN ENERGY USA, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following table sets forth certain information regarding the production volumes of, average sales prices received for, average production costs associated with, and average depletion rate associated with the Company's sales of oil and gas for the periods indicated.
Three months Nine months ended September 30, ended September 30, ----------------- ----------------- 1995 1994 1995 1994 ------ ------ ------ ------ Net Production: Gas (MMcf) ................. 2,930 844 8,187 2,914 Oil (MBbl) .................. 130 18 350 72 Average Sales Price: Gas (per Mcf) (1) .......... $ 1.61 $ 1.85 $ 1.64 $ 2.10 Oil (per Bbl) ............... $18.03 $15.34 $18.19 $13.74 Average Production Costs: (per Mcfe) (2) .............. $ 0.22 $ 0.55 $ 0.23 $ 0.54 Depletion rate: (per Mcfe) ... $ 1.05 $ 0.96 $ 1.03 $ 0.96
------------------ (1) Includes natural gas liquids. (2) Includes direct lifting costs (labor, repairs and maintenance, materials and supplies) and the administrative costs of production offices, insurance and property and severance taxes. Three months ended September 30, 1995 and 1994 Revenues. Total revenues increased $5.2 million (262%) to $7.2 million for the three months ended September 30, 1995 from $2.0 million for the three months ended September 30, 1994. The primary reason for the increase was new production from the Company's interest in East Cameron Blocks 331/332, Matagorda Block 710 and Ship Shoal Block 251. Lower gas prices partially offset the increased revenues from production. Expenses. Total expenses increased $3.9 million (199%) to $5.9 million for the three months ended September 30, 1995 from $2.0 million for the three months ended September 30, 1994. An increase in depreciation, depletion and amortization ("DD&A") is the primary reason for the increase in expenses. DD&A increased $3.0 million (322%) to $3.9 million for the three months ended September 30, 1995 from $926,000 for the same period in 1994 mainly due to increased production but also due to an increase in the depletion rate. Interest expense increased by $466,000 (170%) to $739,000 for the quarter ended September 30, 1995 from $273,000 for the three months ended September 30, 1994. Interest expense increased because of an increase in average outstanding debt coupled with higher average interest rates for the quarter ended September 30, 1995 than for the same period in 1994. Lease operating expenses and production taxes increased $307,000 (58%) to $833,000 for the three months ended September 30, 1995 from $526,000 for the same period in 1994. Lease operating expenses are up because of increased production. Reflected in the 1994 lease operating expenses amount are expenses related to the Texas Panhandle properties that were sold in August 1994 and also the properties in Texas and Oklahoma which were sold with effect from April 1, 1995. Production costs on a per unit basis decreased significantly because East Cameron Blocks 331/332, Matagorda Block 710 and Ship Shoal Block 251 all have a low per unit operating cost, while the Texas Panhandle properties sold in August 1994 and the properties in Texas and Oklahoma which were sold with effect from April 1, 1995 had a high per unit operating cost. Administrative expenses increased $181,000 (73%) to $428,000 for the three months ended September 30, 1995 from $247,000 for the same period in 1994 due primarily to an increase in legal, salary and printing expenses partially offset by increased overhead capitalization relating to technical staff associated with exploration activity. Net Income. Net income increased $1.3 million, or $0.08 per share to $1.3 million, or $0.08 per share for the three months ended September 30, 1995 from $20,000, or $0.00 per share for the same period in 1994. The primary reason for the increase in net income was the increase in production. Nine months ended September 30, 1995 and 1994 Revenues. Total revenues increased $12.7 million (172%) to $20.1 million for the nine months ended September 30, 1995, from $7.4 million for the nine months ended September 30, 1994. The primary reason for the increase was new production from the Company's interest in East Cameron Blocks 331/332, Matagorda Block 710 and Ship Shoal Block 251 coupled with higher oil prices. Lower gas prices partially offset the increased revenues from production. Expenses. Total expenses increased $9.6 million (143%) to $16.4 million for the nine months ended September 30, 1995 from $6.8 million for the nine months ended September 30, 1994. An increase in DD&A is the primary reason for the increase in expenses. DD&A increased $7.5 million (229%) to $10.7 million for the nine months ended September 30, 1995 from $3.2 million for the same period in 1994 due to increased production coupled with an increase in the depletion rate. Interest expense increased by $1.4 million (192%) to $2.1 million for the nine months ended September 30, 1995 from $718,000 for the nine months ended September 30, 1994 because of an increase in average outstanding debt and higher average interest rates. Lease operating expenses and production taxes increased $592,000 (33%) to $2.4 million for the nine months ended September 30, 1995 from $1.8 million for the same period in 1994. Lease operating expenses increased because of increased production. Reflected in the 1994 lease operating expenses amount are expenses related to the Texas Panhandle properties that were sold in August 1994. Production costs on a per unit basis decreased significantly because East Cameron Blocks 331/332, Matagorda Block 710 and Ship Shoal Block 251 all have a low per unit operating cost, while the Texas Panhandle properties sold in August 1994 had a high per unit operating cost. Administrative expenses increased $262,000 (27%) to $1.2 million for the nine months ended September 30, 1995 from $987,000 for the same period in 1994 due primarily to an increase in legal, salary and printing expenses partially offset by increased overhead capitalization relating to technical staff associated with exploration activity. Net Income. Net income increased $3.0 million (491%), or $0.18 per share to $3.7 million, or $0.23 per share for the nine months ended September 30, 1995 from $621,000, or $0.05 per share for the same period in 1994. The primary reason for the increase in net income was the increase in production. Capital Resources and Liquidity At September 30, 1995, the Company had existing cash and cash investments of $2.9 million. Net cash provided by operating activities was $10.7 million for the nine months ended September 30, 1995 compared with $3.9 million for the same period in 1994. The primary reason for this increase in cash provided by operating activities was higher results of operations (or earnings before depreciation, depletion and amortization) partially offset by increased working capital requirements. Net cash used in investing activities for the nine months ended September 30, 1995 was $17.6 million compared with $8.7 million for the same period in 1994. This increase was principally due to expenditures for exploration and development prospects. Net cash provided by financing activities for the first nine months of 1995 was $7.6 million compared with $5.3 million for the same period in 1994. The cash provided by financing activities for the period consisted of $16.6 million in net proceeds from a public offering of common stock, borrowings under the Company's revolving credit facility of $10.0 million and the exercise of stock options. Proceeds from the stock offering along with funds from operations were used to paydown $19.0 million on the Company's revolving credit facility. Subsequently, the Company will utilize the amount of the revolving line of credit made available by such reduction to finance a portion of the Company's capital expenditures with respect to its exploration and development activities. In general, because the Company's oil and gas reserves are depleted by production, the success of its business strategy is dependent on a continuous exploration and development program. Therefore, the Company's capital requirements relate primarily to the acquisition of undeveloped leasehold acreage and exploration and development activities. In addition to pursuing a number of existing exploration prospects, the Company was the high bidder on three blocks in the Western Gulf of Mexico lease sale held in September 1995. To date, one block has been awarded by the Minerals Management Service ("MMS"). The Company's interest in these blocks ranges from 50 to 100 percent. If all three blocks are awarded, the Company's obligation for the lease rentals and bonuses will be approximately $282,000 and will be funded from cash flow from operations. The Company's average net production for the quarter ended September 30, 1995 was approximately 31.8 MMcf of gas per day and 1,412 Bbls of oil and condensate per day compared with average per day production during the same quarter in 1994 of 0.9 MMcf of gas and 197 Bbls of oil and condensate. The average net production for the nine months ended September 30, 1995 was 30.0 MMcf of gas per day and 1,282 Bbls of oil and condensate per day compared with average per day production during the same period in 1994 of 10.7 MMcf of gas and 263 Bbls of oil and condensate. The Company's operating needs and capital spending programs have been funded by borrowings under its bank credit facilities, proceeds of public offerings of its common stock and cash flow from operations. The Company expects to continue with an active exploration program and to drill up to a further 6 exploration wells in the last quarter of the year. The Company expects capital expenditures during 1995 to total approximately $40 million. At September 30, 1995, the Company's capital resources consisted primarily of available borrowing capacity under the INCC Restated Credit Agreement and cash flow from operations. Management believes that cash flow from operations along with the amount available under the INCC Restated Credit Agreement will be sufficient to finance the currently planned exploration and development expenditures. If the Company is successful in substantially all of its currently scheduled exploration prospects, additional funds may be required in order to conduct the necessary development activities. If necessary, the Company may seek to raise additional capital in public or private equity or debt markets. No assurance can be given that the Company will be able to raise such capital if needed or on terms that are favorable to the Company. Any resulting lack of sufficient capital may require the Company to reduce its interest in such properties or to forego developing such reserves. In addition, the Company does not act as operator with respect to any of its properties. The Company may not be able to control the development activities or the associated costs with respect to properties operated by other parties. The Company's revenues and the value of its oil and gas properties have been and will continue to be affected by changes in oil and gas prices. The Company's ability to maintain current borrowing capacity and to obtain additional capital on attractive terms is also substantially dependent on oil and gas prices (Note 2). Oil and gas prices are subject to significant seasonal and other fluctuations that are beyond the Company's ability to control or predict. Although certain of the Company's costs and expenses are affected by the level of inflation, inflation has not had a significant effect on the Company's results of operations during 1994 or the first nine months of 1995. In an effort to reduce the effects of the volatility of the price of oil and gas on the Company's operations, management has adopted a policy of hedging oil and gas prices, usually when such prices are at or in excess of the prices anticipated in the Company's operating budget, through the use of commodity futures, options, forward contracts and swap agreements. Hedging transactions are limited by the Board of Directors to 50% of budgeted production for the succeeding 12 months and no more than 75% of budgeted production in any one month. The Company has entered into four commodity swap transactions governed by the terms of a Master Agreement with INCC (the "Master Agreement"). Under one commodity swap transaction, which has now expired, the Company received a fixed price of $19.50 per barrel and paid a floating price of WTI-NYMEX for the first nearby month for 500 barrels per day for the period June 1 to September 30, 1995. Under a second swap transaction, which has also expired, the Company received a fixed price of $1.75 per MMBtu and paid a floating price of Natural Gas - NYMEX for the first nearby contract month for 5,000 MMBtu per day for the contract months July to September 1995. Under a third commodity swap transaction the Company is receiving a fixed price of $1.7525 per MMBtu and is paying a floating price of Natural Gas-NYMEX for the first nearby contract month for 5,000 MMBtu per day for the contract months September 1995 to February 1996. Under a fourth commodity swap transaction the Company is receiving a fixed price of $1.80 per MMBtu and is paying a floating price of Natural Gas-NYMEX for 5,000 MMBtu per day for the contract months October 1, 1995 to December 31, 1995. CAIRN ENERGY USA, INC. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS No new material developments. 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 On Mustang Island Block 858, all three wells have been successfully flow- tested and completed. Installation of the deck and facility is scheduled for December. Pipeline installation will follow immediately. First production from the field is expected in late December or early in the first quarter of 1996. The Company owns a 17.5% working interest in this block. Completion operations are underway on the Company's Vermilion Block 203 development. Four successful exploration wells have been drilled targeting certain shallow formations on this block. One well has been successfully completed and flow-tested. The remaining three will be completed with first production expected to begin in late December 1995. It is expected that a well to target certain deeper formations on the block will begin drilling prior to year-end 1995. The Company owns a 50% working interest in this block. On Main Pass Block 262, one of the blocks that the Company acquired in the Gulf of Mexico Central Lease Sale held in May, 1995, the Company and partners have purchased a jacket and deck for an accelerated development on this block. Installation of the jacket is scheduled for mid-November. This will be immediately followed by the drilling of two wells which are expected to be completed by the end of January 1996. One of the wells will target a gas reservoir which is currently being produced from an adjacent block by another operator. The second well will target a similar structure which has been identified on the block. First production from the block is scheduled for February 1996. The Company owns a 33% working interest in this block. Production from the East Cameron 331/332 field is currently slightly lower than expected due to mechanical problems with completions on two of the wells in the field. A program of remedial work is currently underway, and it is expected that production will remain at current levels through December 1995. Six exploratory wells and one development well are currently scheduled to begin drilling in the fourth quarter of 1995. These are wells on Main Pass Block 262 (2 wells), East Cameron Blocks 350 and 356, Ship Shoal Blocks 251 and 261 and a well to test certain deeper targets on Vermilion Block 203. Three or four of these wells should reach target depth before year-end and the results from all seven wells are expected no later than the end of the first quarter 1996. The Company and Phemus Corporation completed a public sale of 1,562,500 shares and 2,750,000 shares, respectively, of Company common stock on September 14, 1995, at a price of $11.25 per share. Net proceeds to the company from the stock offering of $16.6 million were used to paydown a portion of the Company's revolving credit facility. Subsequently, the Company will utilize the amount of the revolving line of credit made available by such reduction to finance a portion of the Company's capital expenditures with respect to its exploration and development activities. The sale was made pursuant to a registration statement filed on Form S-3 under the Securities Act of 1933, as amended. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K None 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. CAIRN ENERGY USA, INC. (Registrant) Date: October 30, 1995 /S/ MICHAEL R. GILBERT Michael R. Gilbert President /S/ J. MUNRO M. SUTHERLAND J. Munro M. Sutherland Senior Vice President and Treasurer (Principal Financial Officer) EX-27 2
5 0000353153 CAIRN ENERGY USA INC 1000 9-MOS DEC-13-1995 SEP-30-1995 2,945 0 4,525 0 0 8,187 148,534 56,972 100,372 7,332 0 175 0 0 81,990 100,372 7,131 7,206 0 0 5,170 0 739 0 0 1,297 0 0 0 1,297 .08 .08
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