Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 42 244K
2: EX-4.3 Indenture Between Chase Manhattan and the Company 116 486K
3: EX-13 Portions of the Annual Report to Stockholders 26 188K
4: EX-21 Subsidiaries of the Company 1 6K
5: EX-23.1 Consent of Arthur Andersen LLP 1 6K
6: EX-23.2 Consent of Netherland, Sewell & Associates, Inc. 1 7K
7: EX-27 Financial Data Schedule 2 9K
8: EX-99.1 Letter Regarding U.S. Oil and Gas Reserve 4 19K
9: EX-99.2 Letter Regarding South America Oil and Gas Reserve 3 15K
EX-13 — Portions of the Annual Report to Stockholders
Exhibit Table of Contents
EXHIBIT 13
SUMMARY FINANCIAL AND OPERATING DATA
[Enlarge/Download Table]
==========================================================================================================================
YEARS ENDED DECEMBER 31, 1996 1995 1994 1993 1992
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
AND OPERATING DATA
Financial Data
Income Statement Data:
Oil and gas sales.......................... $ 258,368 $160,254 $141,357 $113,259 $ 61,194
Gathering revenues......................... 20,508 12,380 14,635 7,861 7,775
Gas marketing revenues..................... 31,920 20,912 27,285 36,175 31,097
Total revenues............................. 311,682 194,797 185,652 160,027 101,450
Operating expenses......................... 138,438 95,121 96,549 85,205 61,771
Depreciation, depletion and
amortization............................ 70,057 52,257 45,774 33,335 17,374
Interest................................... 30,109 20,178 12,002 6,943 4,497
Income before cumulative effect
of accounting change.................... 41,192 11,361 13,929 16,789 8,653
Net income................................. 41,192 11,361 13,929 18,514 8,653
Earnings per share before effect
of accounting change.................... 1.68 .53 .66 .81 .51
Earnings per share......................... 1.68 .53 .66 .89 .51
Dividends declared per share............... .11 .09 .07 .05 .02
------------- --------------- --------------- --------------- --------------
Balance Sheet Data (end of year):
Total assets............................... $ 813,950 $647,539 $407,752 $384,461 $259,887
Long-term debt, less current portion....... 372,390 315,846 186,548 174,164 127,993
Stockholders' equity....................... 265,105 223,960 155,993 143,392 78,696
------------- --------------- --------------- --------------- --------------
Operating Data
Production:
Oil (MBbls)................................ 11,939 7,608 6,657 4,785 1,978
Gas (MMcf)................................. 32,366 30,610 28,884 22,504 14,592
------------- --------------- --------------- --------------- --------------
Average Sales Prices:
Oil (per Bbl).............................. $ 16.73 $ 15.26 $ 13.53 $ 14.14 $ 17.88
Gas (per Mcf).............................. 1.81 1.46 1.78 2.03 1.77
------------- --------------- --------------- --------------- --------------
Proved Reserves (end of year):
Oil (MBbls)................................ 178,296 147,871 70,789 63,277 40,209
Gas (MMcf)................................. 382,846 310,762 281,638 273,142 206,582
------------- --------------- --------------- --------------- --------------
Present value of estimated future net
revenues before income taxes discounted
at 10 percent (in thousands):
Oil and gas properties............... $1,807,137 $894,249 $446,987 $359,978 $335,941
Gathering systems.................... 10,364 10,641 9,215 8,105 4,818
Standardized measure of discounted
future net cash flows (in thousands).... 1,392,841 736,546 385,721 339,701 274,443
------------- --------------- --------------- --------------- --------------
Significant acquisitions of producing oil and gas properties during 1993 and
1995 affect the comparability between the Financial and Operating Data for the
years presented above.
1996 ANNUAL REPORT 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Company's results of operations have been significantly affected by its
success in acquiring oil and gas properties and its ability to maintain or
increase production through its exploitation and exploration activities.
Fluctuations in oil and gas prices have also significantly affected the
Company's results. Principally through acquisitions, the Company has achieved
significant increases in its oil and gas production. The following table
reflects the Company's oil and gas production and its average oil and gas prices
for the periods presented:
[Download Table]
===============================================================================
YEARS ENDED DECEMBER 31, 1996 1995 1994
Production:
Oil (MBbls)-
U.S. ....................................... 7,694 6,647 6,657
Argentina .................................. 4,245 961 --
Total ...................................... 11,939 7,608 6,657
Gas, all U.S. (MMcf) ......................... 32,366 30,610 28,884
Total MBOE ................................... 17,333 12,710 11,471
--------- --------- ---------
Average Sales Prices:
Oil (per Bbl)-
U.S. ....................................... $17.19 $15.44 $13.53
Argentina .................................. 15.91 13.98 --
Total ...................................... 16.73 15.26 13.53
Gas, all U.S. (per Mcf) ...................... 1.81 1.46 1.78
--------- --------- ---------
Average U.S. oil prices received by the Company fluctuate generally with
changes in the West Texas Intermediate ("WTI") posted prices for oil. The
Company's Argentina oil production is sold at WTI spot prices less a specified
differential. The Company experienced a 10 percent increase in its average oil
price in 1996 compared to 1995. During 1996, the impact of oil hedges reduced
the Company's overall average oil price $2.00 to $16.73 per Bbl. The Company's
average U.S. oil price was reduced $1.47 to $17.19 per Bbl while its average
Argentina oil price was reduced $2.96 to $15.91 per Bbl. Approximately 67
percent of the Company's Argentina oil production and 38 percent of its U.S. oil
production (a combined 5.765 MMBbls) were covered by oil hedges in 1996.
The Company experienced a 13 percent increase in its average oil price in 1995
compared to 1994. Higher prices relative to WTI posted prices for the Company's
California oil production and the impact of one hedge (swap agreement) which
expired December 31, 1995, combined with higher WTI posted prices to account for
the increase. The Company's average realized oil price before the impact of oil
hedges increased from 87 percent of WTI posted prices in 1994 to 92 percent for
1996.
Average gas prices received by the Company fluctuate generally with changes in
spot market prices for gas, which may vary significantly by region. The
Company's average gas price for 1996, including the impact of hedging, was 24
percent higher than 1995. During 1996, the average gas price was negatively
impacted by five cents per Mcf as a result of certain gas hedges that were in
place for 40,000 Mcf of gas per day for the period January through March 1996.
The Company experienced an 18 percent decline in average gas prices in 1995
compared to 1994.
The Company has previously engaged in oil and gas hedging activities and will
continue to consider various hedging arrangements to realize commodity prices
which it considers favorable. Currently, oil hedges for the calendar year 1997
cover 2.738 MMBbls at an average NYMEX reference price of $19.26 per Bbl. Before
the impact of oil hedges, the Company's average realized oil price for 1996 was
$18.73 per Bbl, or approximately 85 percent of the average NYMEX reference
price.
Relatively modest changes in either oil or gas prices significantly impact the
Company's results of operations and cash flow. However, the impact of changes in
the market prices for oil and gas on the Company's average realized prices may
be reduced from time to time based on the level of the Company's hedging
activities. Based on 1996 oil production, a change in the average oil price
realized by the Company of $1.00 per Bbl would result in
26 VINTAGE PETROLEUM, INC.
a change in net income and cash flow before income taxes for the year of
approximately $8.7 million and $11.6 million, respectively. A 10 cent per Mcf
change in the average price realized by the Company for gas would result in a
change in net income and cash flow before income taxes for the year of
approximately $1.9 million and $3.1 million, respectively, based on 1996 gas
production.
Period to Period Comparisons
During 1995, the Company made various acquisitions which significantly impacted
the period to period comparisons for 1996 and 1995. These acquisitions (the
"1995 Acquisitions") include the purchase of certain oil and gas properties from
Texaco Exploration and Production, Inc. ("Texaco") in May 1995, the acquisition
in July 1995 of a controlling interest in Cadipsa S.A. ("Cadipsa"), an Argentine
oil and gas exploration company which was publicly traded in Argentina until
December 26, 1996, the acquisition of Vintage Oil Argentina, Inc., formerly
BG Argentina, S.A. ("Vintage Argentina"), in September 1995, and the acquisition
of certain Argentina oil and gas properties from Astra Compania Argentina de
Petroleo S.A. and Shell Compania Argentina de Petroleo S.A. in November 1995 and
December 1995, respectively.
The Company's consolidated revenues and expenses for 1996 and 1995 include the
consolidation of 100 percent of Cadipsa from the date of acquisition under the
purchase method of accounting. The minority interest in (income) loss of
subsidiary reflects the portion of Cadipsa's (income) loss attributable to the
minority ownership during the years ended December 31, 1996 and 1995. At
December 31, 1996, the Company owned 96.8 percent of Cadipsa.
Year ended December 31, 1996, Compared to Year ended December 31, 1995
Net income was $41.2 million for the year ended December 31, 1996, up
263 percent from $11.4 million in 1995. Increases in the Company's oil and gas
production of 36 percent on an equivalent barrel basis, an increase of
24 percent in natural gas prices, and an increase of 10 percent in oil prices
are primarily responsible for the increase in net income. The production
increases primarily relate to the 1995 Acquisitions.
Oil and gas sales increased $98.1 million (61 percent), to $258.4 million for
1996 from $160.3 million for 1995. A 57 percent increase in oil production and a
10 percent increase in average oil prices combined to account for $83.7 million
of the increase. A six percent increase in gas production and a 24 percent
increase in average gas prices contributed to an additional $14.4 million
increase.
Oil and gas gathering net margins (revenue less expenses) increased $600,000
(21 percent), to $3.5 million for 1996 from $2.9 million for 1995, due primarily
to improved profitability on a gathering system located in Texas, additional net
margins from a gathering system located in California acquired from Texaco in
May 1995 and increased gas prices.
Gas marketing net margins (revenue less expenses) increased $300,000
(14 percent), to $2.4 million for 1996 from $2.1 million for 1995, due primarily
to an increase in the reserve for doubtful accounts associated with gas sales in
1995 with no similar increase in 1996 and increased gas prices.
Lease operating expenses, including production taxes, increased $25.1 million
(38 percent), to $91.9 million for 1996 from $66.8 million for 1995. The
increase in lease operating expenses is due primarily to the 1995 Acquisitions.
Lease operating expenses per equivalent barrel produced increased one percent to
$5.30 in 1996 from $5.25 for 1995.
General and administrative expenses increased $4.8 million (41 percent), to
$16.4 million for 1996 from $11.6 million for 1995, due primarily to the
acquisitions of Cadipsa and Vintage Argentina in the last half of 1995.
Depreciation, depletion and amortization increased $17.8 million (34 percent),
to $70.1 million for 1996 from $52.3 million for 1995, due primarily to the
36 percent increase in production on an equivalent barrel basis. Amortization
per equivalent barrel of the Company's U.S. oil and gas properties declined to
$3.78 in 1996 from $3.89 in 1995. Amortization per equivalent barrel of the
Company's Argentina oil and gas properties for 1996 was $4.12 as compared to
$4.28 for 1995.
Interest expense increased $9.9 million (49 percent), to $30.1 million for
1996 from $20.2 million for 1995, due primarily to a 24 percent increase in the
Company's total average outstanding debt related primarily to the 1995
Acquisitions.
Year ended December 31, 1995, Compared to Year ended December 31, 1994
Net income was $11.4 million for the year ended December 31, 1995, down
18 percent from $13.9 million in 1994. A decrease of 18 percent in natural gas
prices and a 68 percent increase in interest expense offset a 13 percent
increase in average oil prices and an 11 percent increase in production on an
equivalent barrel basis. In addition, certain oil and gas properties were shut-
in for a portion of the first six months of 1995 due to storm damage caused by
heavy rains in California and the resulting mudslides, reducing the Company's
overall production in the first half by approximately 70,000 Bbls of oil and
350,000 Mcf of gas.
1996 ANNUAL REPORT 27
Oil and gas sales increased $18.9 million (13 percent), to $160.3 million for
1995 from $141.4 million for 1994, due primarily to a 13 percent increase in
average oil prices and an 11 percent increase in production on an equivalent
barrel basis, partially offset by an 18 percent decline in average natural gas
prices. The production increases primarily relate to the 1995 Acquisitions. How-
ever, these production increases were partially offset by lower production from
the Company's properties affected by the California storms. In addition, oil and
gas sales for 1995 were reduced by $0.5 million reflecting the total settlement
of a class action lawsuit filed on June 8, 1990, on behalf of certain royalty
and mineral interest owners.
Oil and gas gathering net margins (revenues less expenses) increased $600,000
(26 percent), to $2.9 million in 1995 from $2.3 million in 1994, due primarily
to net margins from a gathering system located in California acquired from
Texaco in May 1995 and additional third party volumes transported through an
existing system located in Texas.
Gas marketing net margins (revenues less expenses) decreased $200,000 (9
percent), to $2.1 million in 1995 from $2.3 million in 1994, due primarily to an
increase in the reserve for doubtful accounts associated with gas sales and the
decline in average natural gas prices.
Other income decreased $1.1 million (46 percent) to $1.3 million in 1995 from
$2.4 million in 1994, due primarily to the recognition of a $0.9 million loss
from 1996 natural gas price hedges (swap agreements) which no longer qualified
as hedges.
Lease operating expenses, including production taxes, increased $7.5 million
(13 percent), to $66.8 million in 1995 from $59.3 million in 1994. The increase
in lease operating expenses is due primarily to the 1995 Acquisitions. Lease
operating expenses per equivalent barrel produced increased two percent to $5.25
in 1995 from $5.17 in 1994, due to the impact of the California storms on
production and costs incurred.
General and administrative expenses increased $2.7 million (30 percent), to
$11.6 million in 1995 from $8.9 million in 1994, due primarily to the
acquisition of Cadipsa and the addition of new personnel throughout 1994 and
1995 as a result of acquisitions made in 1994 and an increase in the Company's
exploitation efforts.
Depreciation, depletion and amortization increased $6.5 million (14 percent),
to $52.3 million in 1995 from $45.8 million in 1994, due primarily to the 11
percent increase in production on an equivalent barrel basis. Amortization per
equivalent barrel of the Company's U.S. oil and gas properties increased two
percent to $3.89 in 1995 from $3.82 in 1994. Amortization per equivalent barrel
of the Company's Argentina oil and gas properties for 1995 was $4.28. The
Company had no Argentina operations prior to 1995.
Interest expense increased $8.2 million (68 percent), to $20.2 million in 1995
from $12.0 million in 1994, due primarily to a 28 percent increase in the
average interest rate on the Company's floating-rate debt with banks to 7.4
percent per annum in 1995 from 5.8 percent per annum in 1994, an increase in
average outstanding advances under the Company's bank revolving credit facility
and bank term loan, and interest expense on third-party debt of the Company's
foreign subsidiaries.
Capital Expenditures
During 1996, the Company's domestic capital expenditures totaled $113.7 million
of which $50.5 million were for acquisitions of producing oil and gas
properties. The largest of these acquisitions was approximately $28.5 million
for producing oil and gas properties located in south Alabama acquired from
Exxon Company, U.S.A. Funds for these acquisitions were provided by advances
under the Company's revolving credit facility.
The Company's 1996 international capital expenditures of $90.3 million
included approximately $49.4 million in Argentina, primarily for exploitation
activities, and $37.0 million in Bolivia related to the acquisition of 100
percent of the outstanding common stock of Shamrock Ventures Boliviana Ltd. from
affiliates of Ultramar Diamond Shamrock Corporation. Funds for the purchase of
the stock were provided by advances under the Company's revolving credit
facility.
In February 1997, the Company reached an agreement with subsidiaries of
Burlington Resources Inc. to purchase certain producing oil and gas properties
and facilities located in the Gulf Coast of Texas and Louisiana for $114.1
million in cash, subject to closing adjustments. The effective date of the
transaction is January 1, 1997, with closing scheduled for April 1, 1997,
subject to board approvals by the Company and Burlington Resources Inc. and
satisfaction of other normal conditions to closing. Funds for this acquisition
will be provided by advances under the Company's revolving credit facility.
The timing of most of the Company's capital expenditures is discretionary with
no material long-term capital expenditure commitments. Consequently, the Company
has a significant degree of flexibility to adjust the level of such expenditures
as circumstances warrant. The Company primarily uses internally generated cash
flow to fund capital expenditures other than significant acquisitions and
anticipates that its cash flow, net of debt service
28 VINTAGE PETROLEUM, INC.
obligations, will be sufficient to fund its planned 1997 non-acquisition capital
expenditures of approximately $58 million in the U.S. and approximately $59
million in South America. The Company does not have a specific acquisition
budget since the timing and size of acquisitions are difficult to forecast. The
Company is actively pursuing additional acquisitions of oil and gas properties.
In addition to internally generated cash flow and advances under the Company's
revolving credit facility, the Company may seek additional sources of capital to
fund any future significant acquisitions (see "-Liquidity").
The Company's recent capital expenditure history is a follows:
[Enlarge/Download Table]
=====================================================================================
YEARS ENDED DECEMBER 31, 1996 1995 1994
IN THOUSANDS
Acquisition of oil and gas reserves ................. $ 91,282 $207,658 $36,544
Drilling ............................................ 51,175 21,343 9,593
Workovers and recompletions ......................... 33,482 18,313 13,984
Acquisition of undeveloped acreage and seismic ...... 14,847 7,684 1,869
Acquisition and construction of gathering systems ... 724 234 632
Other ............................................... 12,546 5,367 3,146
-------- -------- --------
Total ............................................. $204,056 $260,599 $65,768
-------- -------- --------
Liquidity
Internally generated cash flow and the borrowing capacity under its revolving
credit facility are the Company's major sources of liquidity. In addition, the
Company may use other sources of capital, including the issuance of additional
debt securities or equity securities, to fund any major acquisitions it might
secure in the future and to maintain its financial flexibility. The Company
funds its capital expenditures (excluding acquisitions) and debt service
requirements primarily through internally generated cash flows from operations.
Any excess cash flow is used to reduce outstanding advances under the Company's
revolving credit facility.
In the past, the Company has accessed the public markets to finance
significant acquisitions and provide liquidity for its future activities. In
conjunction with the purchase of substantial oil and gas assets in 1990, 1992
and 1995, the Company completed three public equity offerings, as well as a
public debt offering in 1995, which provided the Company with aggregate net
proceeds of approximately $272 million.
On February 5, 1997, the Company completed a public offering of 1,500,000
shares of common stock, all of which were sold by the Company. Net proceeds to
the Company of approximately $47.1 million were used to repay a portion of
existing indebtedness under the Company's revolving credit facility.
Also on February 5, 1997, the Company issued $100 million of its 8 5/8%
Senior Subordinated Notes Due 2009 (the "8 5/8% Notes"). Net proceeds to
the Company of approximately $96.4 million were used to repay a portion of
existing indebtedness under the Company's revolving credit facility.
The 8 5/8% Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after February 1, 2002. Upon a change in control (as
defined) of the Company, holders of the 8 5/8% Notes may require the Company to
repurchase all or a portion of the 8 5/8% Notes at a purchase price equal to 101
percent of the principal amount thereof, plus accrued and unpaid interest. The
8 5/8% Notes mature on February 1, 2009, with interest payable semiannually on
February 1 and August 1 of each year.
The 8 5/8% Notes are unsecured senior subordinated obligations of the
Company, rank subordinate in right of payment to all senior indebtedness (as
defined) and rank pari passu with the Company's 9% Senior Subordinated Notes Due
2005. The indenture for the 8 5/8% Notes contains limitations on, among other
things, additional indebtedness and liens, the payment of dividends and other
distributions, certain investments and transfers or sales of assets.
Under its Credit Agreement dated August 29, 1996, as amended (the "Credit
Agreement"), certain banks have provided to the Company an unsecured revolving
credit facility. The Credit Agreement establishes a borrowing base (currently
$270 million) determined by the banks' evaluation of the Company's U.S. and
certain Argentina oil and gas reserves.
1996 ANNUAL REPORT 29
Outstanding advances under the revolving credit facility bear interest
payable quarterly at a floating rate based on Bank of Montreal's alternate base
rate (as defined) or, at the Company's option, at a fixed rate for up to six
months based on the eurodollar market rate ("LIBOR"). The Company's interest
rate increments above the alternate base rate and LIBOR vary based on the level
of outstanding senior debt and the portion of the borrowing base attributable to
the U.S. reserves at the time. As of February 19, 1997, the Company had elected
a fixed rate based on LIBOR for a substantial portion of its outstanding
advances which resulted in an average interest rate of approximately 6.2 percent
per annum. In addition, the Company must pay a commitment fee ranging from 0.25
to 0.375 percent per annum on the unused portion of the banks' commitment.
On a semiannual basis, the Company's borrowing base is redetermined by the
banks based upon their review of the Company's U.S. and certain Argentina oil
and gas reserves. If the sum of outstanding senior debt (excluding debt of the
Company's foreign subsidiaries) exceeds the borrowing base, as redetermined, the
Company must repay such excess. Any principal advances outstanding at October 1,
1999, will be payable in 12 equal consecutive quarterly installments commencing
January 1, 2000, with maturity at October 1, 2002.
The unused portion of the revolving credit facility was approximately $157
million at February 19, 1997. The unused portion of the revolving loan facility
and the Company's internally generated cash flow provide liquidity which may be
used to finance future capital expenditures, including acquisitions. As
additional U.S. and Argentina acquisitions are made and properties are added to
the borrowing base, the banks' determination of the borrowing base and their
commitment may be increased.
Inflation
In recent years inflation has not had a significant impact on the Company's
operations or financial condition.
Income Taxes
The total provision for U.S. income taxes is based on the Federal corporate
statutory income tax rate plus an estimated average rate for state income taxes.
The Company incurred a current provision for U.S. income taxes of approximately
$2.6 million in 1996 and a current benefit of approximately $1.0 million in
1995. The Company has a $5.4 million U.S. alternative minimum tax credit
carryforward which does not expire and is available to offset U.S. regular
income taxes in future years, but only to the extent that U.S. regular income
taxes exceed the U.S. alternative minimum tax in such years. An analysis of
income taxes is presented in Note 6 to the Company's December 31, 1996,
consolidated financial statements.
Earnings of the Company's foreign subsidiaries, Cadipsa and Vintage
Argentina, are subject to Argentina income taxes. Due to significant Argentina
net operating loss carryforwards for both companies, the Company does not expect
to pay any foreign income taxes related to these subsidiaries in 1997. No U.S.
deferred tax liability will be recognized related to the unremitted earnings of
these foreign subsidiaries, as it is the Company's intention, generally, to
reinvest such earnings permanently.
Foreign Operations
A majority of the Company's foreign operations are located in Argentina. The
Company believes Argentina offers a politically stable environment and does not
anticipate any significant change in the near future. The current democratic
form of government has been in place since 1983 and, since 1989, has pursued a
steady process of privatization, deregulation and economic stabilization and
reforms involving the reduction of inflation and public spending. Argentina's
12-month trailing inflation rate measured by the Argentine Consumer Price Index
declined from 200.7 percent as of June 1991 to 0.1 percent as of December 1996.
The Company believes that its Argentine operations present minimal currency
risk. All of the Company's Argentine revenues are U.S. dollar based, while a
large portion of its costs are Argentine peso denominated. The Argentina Central
Bank is obligated by law to sell dollars at a rate of one Argentine peso to one
U.S. dollar and has sought to prevent appreciation of the peso by buying dollars
at rates of not less than 0.998 peso to one U.S. dollar. As a result, the
Company believes that should any devaluation of the Argentine peso occur, its
revenues would be unaffected and its operating costs would not be significantly
increased. At the present time, there are no foreign exchange controls
preventing or restricting the conversion of pesos into dollars.
30 VINTAGE PETROLEUM, INC.
CONSOLIDATED BALANCE SHEETS
[Enlarge/Download Table]
----------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995
IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS
Assets
Current Assets:
Cash and cash equivalents............................................................... $ 2,774 $ 2,545
Accounts receivable -
Oil and gas sales.................................................................... 68,219 40,256
Joint operations..................................................................... 4,445 4,616
Prepaids and other current assets....................................................... 9,252 11,665
------------- -------------
Total current assets............................................................... 84,690 59,082
------------- -------------
Property, Plant And Equipment, at cost:
Oil and gas properties, full cost method................................................ 964,623 762,582
Oil and gas gathering systems........................................................... 13,489 12,765
Other ................................................................................. 8,439 7,733
------------- -------------
986,551 783,080
Less accumulated depreciation, depletion and amortization............................... 275,392 205,334
------------- -------------
711,159 577,746
------------- -------------
Other Assets, net....................................................................... 18,101 10,711
------------- -------------
$813,950 $647,539
------------- -------------
Liabilities And Stockholders' Equity
Current Liabilities:
Revenue payable......................................................................... $ 24,746 $ 16,855
Accounts payable - trade................................................................ 20,355 15,514
Other payables and accrued liabilities.................................................. 26,595 18,697
Current portion of long-term debt....................................................... 6,629 7,930
Acquisition costs payable............................................................... 35,051 --
------------- -------------
Total current liabilities............................................................ 113,376 58,996
------------- -------------
Long-Term Debt, less current portion above.............................................. 372,390 315,846
------------- -------------
Deferred Income Taxes................................................................... 57,610 37,753
------------- -------------
Other Long-Term Liabilities............................................................. 3,641 3,922
------------- -------------
Minority Interest In Subsidiary......................................................... 1,828 7,062
------------- -------------
Commitments And Contingencies (Note 4)
Stockholders' Equity, per accompanying statements:
Preferred stock, $.01 par, 5,000,000 shares authorized, zero shares issued and
outstanding............................................................................ -- --
Common stock, $.005 par, 40,000,000 shares authorized,
24,069,112 and 23,661,162 shares issued and outstanding.............................. 120 118
Capital in excess of par value.......................................................... 152,321 149,725
Retained earnings....................................................................... 112,664 74,117
------------- -------------
265,105 223,960
------------- -------------
$813,950 $647,539
------------- -------------
The accompanying notes are an integral part of these statements.
1996 ANNUAL REPORT 31
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
[Enlarge/Download Table]
FOR THE YEARS ENDED DECEMBER 31, 1996 1995 1994
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Revenues:
Oil and gas sales......................................................... $258,368 $160,254 $141,357
Oil and gas gathering..................................................... 20,508 12,380 14,635
Gas marketing............................................................. 31,920 20,912 27,285
Other income.............................................................. 886 1,251 2,375
-------- -------- --------
311,682 194,797 185,652
-------- -------- --------
Costs And Expenses:
Lease operating, including production taxes............................... 91,916 66,771 59,292
Oil and gas gathering..................................................... 16,985 9,511 12,294
Gas marketing............................................................. 29,537 18,839 24,963
General and administrative................................................ 16,441 11,601 8,889
Depreciation, depletion and amortization.................................. 70,057 52,257 45,774
Interest.................................................................. 30,109 20,178 12,002
-------- -------- --------
255,045 179,157 163,214
-------- -------- --------
Income before income taxes and minority interest.......................... 56,637 15,640 22,438
Provision For Income Taxes:
Current................................................................... 2,610 (955) 1,576
Deferred.................................................................. 12,328 6,034 6,933
Minority Interest In (Income) Loss Of Subsidiary.......................... (507) 800 -
-------- -------- --------
Net Income................................................................ $ 41,192 $ 11,361 $ 13,929
-------- -------- --------
Earnings Per Share........................................................ $ 1.68 $ .53 $ .66
-------- -------- --------
Weighted average common shares and common
equivalent shares outstanding.......................................... 24,537 21,276 21,174
-------- -------- --------
The accompanying notes are an integral part of these statements.
32 VINTAGE PETROLEUM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
================================================================================
[Enlarge/Download Table]
Common Stock
------------------ Capital Retained Total
Shares Amount In Earnings
Excess of
Par Value
IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS
Balance at December 31, 1993........................... 20,153 $101 $ 91,118 $ 52,173 $143,392
Net income........................................ -- -- -- 13,929 13,929
Exercise of stock options
and resulting tax effects...................... 10 -- 83 -- 83
Cash dividends declared ($.07 per share).......... -- -- -- (1,411) (1,411)
------- ---------- ------------ ----------- -----------
Balance at December 31, 1994........................... 20,163 101 91,201 64,691 155,993
Net income........................................ -- -- -- 11,361 11,361
Issuance of common stock.......................... 2,803 14 55,190 -- 55,204
Exercise of warrants.............................. 294 1 1,467 -- 1,468
Exercise of stock options
and resulting tax effects...................... 401 2 1,867 -- 1,869
Cash dividends declared ($.09 per share).......... -- -- -- (1,935) (1,935)
------- ---------- ------------ ----------- -----------
Balance at December 31, 1995........................... 23,661 118 149,725 74,117 223,960
Net income........................................ -- -- -- 41,192 41,192
Exercise of warrants.............................. 306 2 1,530 -- 1,532
Exercise of stock options
and resulting tax effects...................... 102 -- 1,066 -- 1,066
Cash dividends declared ($.11 per share).......... -- -- -- (2,645) (2,645)
------- ---------- ------------ ----------- -----------
Balance at December 31, 1996........................... 24,069 $120 $152,321 $112,664 $265,105
======= ========== ============ =========== ===========
The accompanying notes are an integral part of these statements.
1996 ANNUAL REPORT 33
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Enlarge/Download Table]
============================================================================================================================
FOR THE YEARS ENDED DECEMBER 31, 1996 1995 1994
IN THOUSANDS
Cash Flows From Operating Activities:
Net income.................................................................... $ 41,192 $ 11,361 $ 13,929
Adjustments to reconcile net income to cash provided by operating activities -
Depreciation, depletion and amortization................................... 70,057 52,257 45,774
Minority interest in income (loss) of subsidiary........................... 507 (800) -
Provision for deferred income taxes........................................ 12,328 6,034 6,933
----------- ----------- ------------
124,084 68,852 66,636
Decrease (increase) in receivables............................................ (24,614) (11,836) 3,005
Increase (decrease) in payables and accrued liabilities....................... 14,619 (1,012) (9,487)
Other......................................................................... 2,493 (1,805) (1,484)
----------- ----------- ------------
Cash provided by operating activities...................................... 116,582 54,199 58,670
----------- ----------- ------------
Cash Flows From Investing Activities:
Additions to property, plant and equipment -
Oil and gas properties..................................................... (162,129) (141,490) (65,136)
Gathering systems and other................................................ (1,430) (3,256) (1,832)
Proceeds from sales of oil and gas properties................................. 1,291 604 711
Purchase of companies, net of cash acquired................................... (9,160) (45,886) -
Other......................................................................... (3,233) 2,777 (4,411)
----------- ----------- ------------
Cash used by investing activities.......................................... (174,661) (187,251) (70,668)
----------- ----------- ------------
Cash Flows From Financing Activities:
Sale of common stock.......................................................... 2,528 51,191 -
Sale of 9% Senior Subordinated Notes Due 2005................................. - 145,137 -
Advances on revolving credit facility and other borrowings.................... 149,014 178,264 51,134
Payments on revolving credit facility and other borrowings.................... (90,720) (237,679) (37,959)
Dividends paid................................................................ (2,514) (1,747) (1,308)
----------- ----------- ------------
Cash provided by financing activities...................................... 58,308 135,166 11,867
----------- ----------- ------------
Net Increase (Decrease) In Cash............................................... 229 2,114 (131)
Cash And Cash Equivalents, beginning of year.................................. 2,545 431 562
----------- ----------- ------------
Cash And Cash Equivalents, end of year........................................ $ 2,774 $ 2,545 $ 431
----------- ----------- ------------
The accompanying notes are an integral part of these statements.
34 VINTAGE PETROLEUM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
[1] Business and Significant Accounting Policies
Consolidation
Vintage Petroleum, Inc. is an independent energy company with operations
primarily in the exploration and production, gas marketing and gathering
segments of the oil and gas industry. Approximately 95 percent of the Company's
operations are within the exploration and production segment based on 1996
operating income. Its core areas of exploration and production operations
include California, the Gulf Coast, East Texas and Mid-Continent areas of the
United States, and the San Jorge Basin of Argentina. Argentina exploration and
production operations commenced in 1995 as a result of the acquisitions
discussed in Note 7.
The consolidated financial statements include the accounts of Vintage
Petroleum, Inc. and its wholly- and majority-owned subsidiaries (collectively,
the "Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities, if any, at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Oil and Gas Properties
Oil and gas properties are accounted for using the full cost method which
provides for the capitalization of all acquisition, exploration and development
costs incurred for the purpose of finding oil and gas reserves, including
salaries, benefits and other internal costs directly attributable to these
activities. The Company capitalized $5.5 million, $4.4 million and $2.3 million
of internal costs in 1996, 1995 and 1994, respectively. The unamortized
capitalized costs of oil and gas properties, including estimated future
development and abandonment costs, are amortized using the units-of-production
method based on proved reserves on a country-by-country basis. The Company's
unamortized costs of oil and gas properties are limited, on a country-by-country
basis, to the sum of the future net revenues attributable to proved oil and gas
reserves discounted at 10 percent plus the cost of any unproved properties. If
the Company's unamortized costs in oil and gas properties exceed this ceiling
amount, a provision for additional depreciation, depletion and amortization is
required. At December 31, 1996, 1995 and 1994, the Company's cost of oil and gas
properties by country did not exceed such ceiling amounts. Amortization per
equivalent barrel of the Company's U.S. oil and gas properties was $3.78, $3.89
and $3.82 for the years ended December 31, 1996, 1995 and 1994, respectively.
Amortization per equivalent barrel of the Company's Argentina oil and gas
properties for the years ended December 31, 1996 and 1995, was $4.12 and $4.28,
respectively. The Company had no Argentina operations prior to 1995.
Revenue Recognition
Natural gas revenues are recorded using the sales method. Under this method, the
Company recognizes revenues based on actual volumes of gas sold to purchasers.
The Company and other joint interest owners may sell more or less than their
entitlement share of the natural gas volumes produced. A liability is recorded
and revenue is deferred if the Company's excess sales of natural gas volumes
exceed its estimated remaining recoverable reserves.
Hedging Policy
The Company periodically uses hedges (swap agreements) to reduce the impact of
oil and natural gas price fluctuations. Gains or losses on swap agreements are
recognized as an adjustment to sales revenue when the related transactions being
hedged are finalized. Gains or losses from swap agreements that do not qualify
for accounting treatment as hedges are recognized currently as other income or
expense. The cash flows from such agreements are included in operating
activities in the consolidated statements of cash flows.
Depreciation
Depreciation of property, plant and equipment (other than oil and gas
properties) is provided using both straight-line and accelerated methods based
on estimated useful lives ranging from three to ten years.
Income Taxes
Deferred income taxes are provided on transactions which are recognized in
different periods for financial and tax
1996 ANNUAL REPORT 35
reporting purposes. Such temporary differences arise primarily from the
deduction of certain oil and gas exploration and development costs which are
capitalized for financial reporting purposes and differences in the methods of
depreciation.
Statements of Cash Flows
Cash equivalents consist of highly liquid money-market mutual funds and bank
deposits with initial maturities of three months or less.
During the years ended December 31, 1996, 1995 and 1994, the Company made
cash payments for interest totaling $29.6 million, $21.6 million and $11.3
million, respectively, and cash payments for U.S. income taxes of $1.3 million,
$0.5 million and $3.1 million, respectively. Cash payments of $0.1 million were
made during 1996 for foreign tax withholdings. No cash payments were made during
1995 for foreign income taxes and the Company had no foreign operations prior to
1995.
During 1995, the Company purchased a majority interest in Cadipsa (see
Note 7). The value of the non-cash consideration is not reflected in the
Company's 1995 Consolidated Statement of Cash Flows. Such non-cash consideration
consisted of $5.7 million of the Company's common stock, $3.2 million cash
payable in 1996, and approximately $58.1 million of net liabilities and a $7.9
million minority interest added through consolidation of Cadipsa.
In December 1995, the Company purchased certain oil and gas properties from
Shell (see Note 7). Deferred payments valued at $5.1 million represent non-cash
consideration and are not reflected in the Company's 1995 Consolidated Statement
of Cash Flows.
In November 1996, the Company agreed to acquire 100 percent of the
outstanding common stock of Shamrock Ventures Boliviana Ltd. Acquisition costs
of $35.1 million remained unpaid at December 31, 1996, and are reflected in the
accompanying balance sheet as acquisition costs payable, a current liability.
These unpaid acquisition costs are not reflected in the Company's 1996
Consolidated Statement of Cash Flows.
Earnings Per Share
Earnings per share are based on the weighted average common shares and common
share equivalents outstanding, computed using the treasury stock method assuming
the exercise of all common stock options and warrants (except where the effect
is anti-dilutive).
General and Administrative Expense
The Company receives fees for operation of jointly-owned oil and gas properties
and records such reimbursements as reductions of general and administrative
expense. Such fees totaled approximately $2.3 million, $2.9 million and $2.3
million in 1996, 1995 and 1994, respectively.
Revenue Payable
Amounts payable to royalty and working interest owners resulting from sales of
oil and gas from jointly-owned properties and from purchases of oil and gas by
the Company's marketing and gathering segments are classified as revenue payable
in the accompanying financial statements.
Accounts Receivable
The Company's oil and gas, gas marketing and gathering sales are to a variety of
purchasers, including intrastate and interstate pipelines or their marketing
affiliates, independent marketing companies and major oil companies. The
Company's joint operations accounts receivable are from a large number of major
and independent oil companies, partnerships, individuals and others who own
interests in the properties operated by the Company.
[2] Long-Term Debt
Long-term debt at December 31, 1996 and 1995, consists of the following:
================================================================================
[Download Table]
1996 1995
IN THOUSANDS
Revolving credit facility.......................... $200,800 $ 74,300
9% Senior Subordinated
Notes Due 2005,
less unamortized discount........................ 149,633 149,592
Bank term loan..................................... - 36,736
5.92% Senior note.................................. - 9,948
Subsidiary debt -
International Finance
Corporation notes.............................. 25,986 28,000
Other subsidiary debt.............................. 2,600 5,200
Bank of Boston senior note......................... - 20,000
--------- ---------
379,019 323,776
Less - Current portion of
long-term debt................................... 6,629 7,930
--------- ---------
$372,390 $315,846
--------- ---------
36 VINTAGE PETROLEUM, INC.
Subsidiary debt relates to borrowings of the Company's foreign subsidiaries,
the recourse of which is solely to such subsidiaries, except for $8.4 million
advanced by the International Finance Corporation which is guaranteed by the
Company.
Aggregate maturities of long-term debt for each of the years ending
December 31, 1997, through December 31, 2001, are $6.6 million, $4.0 million,
$4.0 million, $71.0 million and $69.7 million, with $223.7 million thereafter.
Revolving Credit Facility
The Company has available an unsecured revolving credit facility under the
Credit Agreement dated August 29, 1996, as amended (the "Credit Agreement"),
between the Company and certain banks. The Credit Agreement establishes a
borrowing base (currently $270 million) based on the banks' evaluation of the
Company's U.S. and certain Argentina oil and gas reserves.
Outstanding advances under the Company's revolving credit facility bear
interest payable quarterly at a floating rate based on Bank of Montreal's
alternate base rate (as defined) or, at the Company's option, at a fixed rate
for up to six months based on the eurodollar market rate ("LIBOR"). The
Company's interest rate increments above the alternate base rate and LIBOR vary
based on the level of outstanding senior debt and the portion of the borrowing
base attributable to the U.S. reserves at the time. In addition, the Company
must pay a commitment fee ranging from 0.25 to 0.375 percent per annum on the
unused portion of the banks' commitment. Total outstanding advances at
December 31, 1996, were $200.8 million at an average interest rate of
approximately 6.7 percent.
On a semiannual basis, the Company's borrowing base is redetermined by the
banks based upon their review of the Company's U.S. and certain Argentina oil
and gas reserves. If the sum of outstanding senior debt (excluding debt of the
Company's foreign subsidiaries) exceeds the borrowing base, as redetermined, the
Company must repay such excess. Any principal advances outstanding at October 1,
1999, will be payable in 12 equal consecutive quarterly installments commencing
January 1, 2000, with maturity at October 1, 2002.
The terms of the Credit Agreement impose certain restrictions on the Company
regarding the pledging of assets and limitations on, among other things,
additional indebtedness and the payment of dividends and other distributions. In
addition, the Credit Agreement requires the maintenance of a minimum current
ratio (as defined) and tangible net worth (as defined) of $200 million plus 75
percent of the net proceeds of any future equity offerings.
9% Senior Subordinated Notes
On December 20, 1995, the Company issued $150 million of its 9% Senior
Subordinated Notes Due 2005 (the "9% Notes"). The 9% Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after December 15,
2000. Upon a change in control (as defined) of the Company, holders of the 9%
Notes may require the Company to repurchase all or a portion of the 9% Notes at
a purchase price equal to 101 percent of the principal amount thereof, plus
accrued and unpaid interest. The 9% Notes mature on December 15, 2005, with
interest payable semiannually on June 15 and December 15 of each year.
The 9% Notes are unsecured senior subordinated obligations of the Company,
rank subordinate in right of payment to all senior indebtedness (as defined) and
rank pari passu with the new 8 5/8% Notes (see below). The indenture for the
9% Notes contains limitations on, among other things, additional indebtedness
and liens, the payment of dividends and other distributions, certain investments
and transfers or sales of assets.
8 5/8% Senior Subordinated Notes
On February 5, 1997, the Company issued $100 million of its 8 5/8% Senior
Subordinated Notes Due 2009 (the "8 5/8% Notes"). The 8 5/8% Notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after February 1, 2002. Upon a change in control (as defined) of the Company,
holders of the 8 5/8% Notes may require the Company to repurchase all or a
portion of the 8 5/8% Notes at a purchase price equal to 101 percent of the
principal amount thereof, plus accrued and unpaid interest. The 8 5/8% Notes
mature on February 1, 2009, with interest payable semiannually on February 1 and
August 1 of each year.
The 8 5/8% Notes are unsecured senior subordinated obligations of the Company,
rank subordinate in right of payment to all senior indebtedness (as defined) and
rank pari passu with the 9% Notes. The indenture for the 8 5/8% Notes contains
limitations similar to those contained in the indenture for the 9% Notes. The
net proceeds
1996 ANNUAL REPORT 37
to the Company from the sale of the 8 5/8% Notes (approximately $96.4 million)
and the concurrent sale of common stock (approximately $47.1 million--see Note
3) were used to repay approximately $143.5 million of the existing indebtedness
under the Company's revolving credit facility.
[3] Capital Stock
Public Offerings and Other Issuances
On July 5, 1995, the Company issued 302,808 shares of common stock valued at
$5.7 million as partial consideration to acquire a controlling interest in
Cadipsa (see Note 7).
On December 20, 1995, the Company completed a public offering of 2,793,700
shares of common stock, of which 2,500,000 shares were sold by the Company and
293,700 shares were sold by a stockholder. Net proceeds to the Company were
approximately $49.5 million. The net proceeds were used to repay advances made
under the revolving credit facility to fund the acquisition of a portion of the
Astra/Shell Properties (see Note 7) and to finance a substantial portion of the
acquisition of the remaining portion of the Astra/Shell Properties.
A portion of a stock subscription warrant was exercised on December 20, 1995,
for the purchase of 293,700 shares of the Company's common stock at an exercise
price of $5.00 per share yielding net proceeds to the Company of approximately
$1.5 million. The remaining portion of the stock subscription warrant was
exercised on January 4, 1996, for the purchase of 306,300 shares of the
Company's common stock at an exercise price of $5.00 per share yielding net
proceeds to the Company of approximately $1.5 million. The Company had no stock
subscription warrants outstanding as of December 31, 1996.
On February 5, 1997, the Company completed a public offering of 1,500,000
shares of common stock, all of which were sold by the Company. Net proceeds to
the Company of approximately $47.1 million were used to repay a portion of
existing indebtedness under the Company's revolving credit facility.
Stock Plans
The Company has three fixed plans which reserve shares of common stock for
issuance to key employees and non-management directors. The Company accounts for
these plans under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB 25") and has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation ("SFAS No. 123"). Accordingly, no compensation cost
has been recognized. Had compensation cost for these plans been determined
consistent with the provisions of SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:
================================================================================
[Download Table]
1996 1995
IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS
Net income - as reported......................... $41,192 $11,361
Net income - pro forma........................... 40,781 11,320
Earnings per share - as reported................. 1.68 .53
Earnings per share - pro forma................... 1.66 .53
The pro forma effect on net income for 1996 and 1995 may not be
representative of the pro forma effect on net income in future years because
SFAS No. 123 has not been applied to options granted prior to January 1, 1995.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model. The weighted average assumptions used
for options granted in 1996 include a dividend yield of 0.4 percent, expected
volatility of approximately 29.5 percent, a risk-free interest rate of
approximately 6.2 percent, and expected lives of 4.2 years. The weighted average
assumptions used for options granted in 1995 include a dividend yield of 0.4
percent, expected volatility of approximately 31.3 percent, a risk-free interest
rate of approximately 5.9 percent, and expected lives of 4.2 years.
Under the 1983 Stock Option Plan, as amended (the "1983 Plan"), incentive
stock options were granted to key employees of the Company. Generally, options
granted under the 1983 Plan are exercisable for a two to seven year period
beginning three years from the date granted. As of December 31, 1996, all
available options have been granted under the 1983 Plan.
Under the 1990 Stock Plan, as amended (the "1990 Plan"), a total of up to
2,250,000 shares of common stock are available for issuance to key employees of
the Company. The 1990 Plan permits the granting of any or all of the following
types of awards: (a) stock options, (b) stock appreciation rights, and (c)
restricted stock. As of December 31, 1996, awards for a total of 778,000 shares
of common stock remain available for grant under the 1990 Plan.
The 1990 Plan is administered by the Compensation Committee appointed by the
Board of Directors of the Company (the "Committee"). Subject to the terms of the
38 VINTAGE PETROLEUM, INC.
1990 Plan, the Committee has the authority to determine plan participants, the
types and amounts of awards to be granted and the terms, conditions and
provisions of awards. Options granted pursuant to the 1990 Plan may, at the
discretion of the Committee, be either incentive stock options or non-qualified
stock options. The exercise price of incentive stock options may not be less
than the fair market value of the common stock on the date of grant and the term
of the option may not exceed 10 years. In the case of non-qualified stock
options, the exercise price may not be less than 85 percent of the fair market
value of the common stock on the date of grant. Any stock appreciation rights
granted under the 1990 Plan will give the holder the right to receive cash in an
amount equal to the difference between the fair market value of the share of
common stock on the date of exercise and the exercise price. Restricted stock
under the 1990 Plan will generally consist of shares which may not be disposed
of by participants until certain restrictions established by the Committee
lapse.
Under the Non-Management Director Stock Option Plan (the "Director Plan"),
30,000 shares of common stock are available for issuance to the outside
directors of the Company. Each outside director receives an initial option to
purchase 5,000 shares of common stock during the director's first year of
service to the Company. Annually thereafter, options to purchase 1,000 shares of
common stock are to be granted to each outside director. Options granted
pursuant to the Director Plan are non-qualified stock options with terms not to
exceed 10 years and the option exercise price must equal the fair market value
of the common stock on the date of grant. As of December 31, 1996, options for a
total of 14,000 shares of common stock remain available for grant under the
Director Plan.
The following is an analysis of all option activity under the 1983 Plan, the
1990 Plan and the Director Plan for 1996, 1995 and 1994:
================================================================================
[Enlarge/Download Table]
1996 1995 1994
----------------------- ----------------------- ----------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------------------- ----------------------- ----------------------
Beginning stock options outstanding............. 1,133,102 $14.81 1,457,000 $11.64 1,193,000 $10.34
Stock options granted........................... 315,000 19.41 98,000 20.23 274,000 17.04
Stock options cancelled......................... (2,000) 19.38 (20,000) 18.13 - -
Stock options exercised......................... (101,650) 9.88 (401,898) 4.47 (10,000) 4.89
Ending stock options outstanding................ 1,344,452 $16.25 1,133,102 $14.81 1,457,000 $11.64
----------------------- ----------------------- ----------------------
Ending stock options exercisable................ 599,387 $13.86 341,796 $11.16 338,014 $ 4.74
----------------------- ----------------------- ----------------------
Weighted average fair value of options granted.. $ 6.33 $ 6.75
------ ------
Of the 1,344,452 options outstanding at December 31, 1996: (a) 343,102
options have exercise prices between $3.39 and $11.88, with a weighted average
exercise price of $9.58 and a weighted average contractual life of 5.4 years
(319,406 of these options are exercisable at a weighted average price of $9.82);
(b) 1,001,350 options have exercise prices between $16.75 and $25.56, with a
weighted average exercise price of $18.54 and a weighted average contractual
life of 8.1 years (279,981 of these options are exercisable at a weighted
average price of $18.48).
All of the outstanding options are exercisable at various times in years 1997
through 2006. All incentive stock options and non-qualified options were granted
at fair market value on the date of grant. As of December 31, 1996, no awards
other than incentive and non-qualified stock options have been granted under the
1990 Plan. Generally, options granted under the 1990 Plan have a 10-year term
and provide for vesting after three years.
At December 31, 1996, a total of 2,136,452 shares of the Company's common
stock are reserved for issuance pursuant to the 1983 Plan, the 1990 Plan and the
Director Plan.
1996 ANNUAL REPORT 39
Preferred Stock
Preferred stock at December 31, 1996, consists of 5,000,000 authorized but
unissued shares. Preferred stock may be issued from time to time in one or more
series, and the Board of Directors, without further approval of the
stockholders, is authorized to fix the dividend rates and terms, conversion
rights, voting rights, redemption rights and terms, liquidation preferences,
sinking fund and any other rights, preferences, privileges and restrictions
applicable to each series of preferred stock.
[4] Commitments and Contingencies
Rent expense was $1.0 million, $0.8 million and $0.5 million for 1996, 1995 and
1994, respectively. The future minimum commitments under long-term
noncancellable leases for office space are $0.8 million and $0.3 million for
1997 and 1998, respectively.
The Company has $7.8 million in letters of credit outstanding at December 31,
1996. These letters of credit relate primarily to bonding requirements of
various state regulatory agencies for oil and gas operations and various
obligations for acquisition and exploration activities in South America.
During 1995, the Company entered into an exploration contract on Block 19 in
Ecuador for a term of four years. Under the terms of the contract, the Company
is required to participate in the drilling of a minimum of two wells. The
Company estimates its share of the costs to drill these wells to be
approximately $4.5 million.
The Company assumed a commitment related to an exploration program within the
Chaco Block in Bolivia. The exploration program requires performance of 1,400
work units, which could include reprocessing of existing seismic, acquisition of
new seismic and the drilling of exploratory wells. The entire obligation,
however, can be fulfilled by the drilling of a 15,000 foot well. The Company
estimates the cost of this well to be approximately $4.5 million and expects to
fulfill the obligation by drilling such a well in the second half of 1997.
On November 5, 1996, the Province of Santa Cruz, Argentina brought suit
against Cadipsa in the Corte Suprema de Justicia de la Nacion (the Supreme Court
of Justice of the Argentine Republic, Buenos Aires, Argentina), Dossier No.
s-1451, seeking to recover approximately $10.6 million (which sum includes
interest) allegedly due as additional royalties on four concessions granted in
1990 in which the Company currently owns a 100 percent working interest. The
Company and its predecessors in title have been paying royalties at an eight
percent rate; the Province of Santa Cruz claims the rate should be 12 percent.
The amount of such claim will increase at the differential of these royalty
rates until this claim is resolved. With respect to the 50 percent interest in
the two concessions that the Company acquired from British Gas, plc, the Company
believes that it is entitled to indemnification by British Gas, plc for any loss
sustained by the Company as a result of this claim. Such indemnification equals
approximately $4.0 million of the $10.6 million claim. The Company has no
indemnification from its predecessors in title with respect to the payment of
royalties on the other two concessions. Although the Company cannot predict the
outcome of this litigation, based upon the advice of counsel, the Company does
not expect this claim to have a material adverse impact on the Company's
financial position or results of operations.
The Company is a defendant in various other lawsuits and is a party in
governmental proceedings from time to time arising in the ordinary course of
business. In the opinion of management, none of the various other pending
lawsuits and proceedings should have a material adverse impact on the Company's
financial position or results of operations.
[5] Financial Instruments
Price Risk Management
The Company periodically uses hedges (swap agreements) to reduce the impact of
oil and natural gas price fluctuations on its operating results and cash flows.
These swap agreements typically entitle the Company to receive payments from (or
require it to make payments to) the counterparties based upon the differential
between a fixed price and a floating price based on a published index. The
Company's hedging activities are conducted with major investment and commercial
banks which the Company believes are minimal credit risks.
At December 31, 1996, the Company was a party to oil price swap agreements
for calendar 1997 covering 2.738 MMBbls at an average NYMEX reference price of
$19.26
40 VINTAGE PETROLEUM, INC.
per Bbl. At December 31, 1995, the Company was a party to natural gas price swap
agreements for the period January through March 1996 covering 3.64 Bcf at an
average NYMEX reference price of $2.05 per Mcf.
Fair Value of Financial Instruments
The Company values financial instruments as required by Statement of Financial
Accounting Standards No. 107, Disclosures About Fair Value of Financial
Instruments. The Company estimates the value of the 9% Notes based on quoted
market prices. The Company estimates the value of its other long-term debt based
on the estimated borrowing rates currently available to the Company for long-
term loans with similar terms and remaining maturities. The estimated fair value
of the Company's long-term debt at December 31, 1996 and 1995, was $383.9
million and $323.2 million, respectively, compared with a carrying value of
$379.0 million and $323.8 million, respectively.
The fair value of commodity swap agreements is the amount at which they could
be settled, based on quoted market prices. At December 31, 1996 and 1995, the
Company would have been required to pay approximately $9.2 million and $2.2
million, respectively, to terminate its swap agreements.
The carrying value of other financial instruments approximates fair value
because of the short maturity of those instruments.
[6] Income Taxes
Income before income taxes and minority interest is composed of the following:
================================================================================
[Download Table]
1996 1995 1994
IN THOUSANDS
Domestic..................................... $38,016 $15,536 $22,438
Foreign...................................... 18,621 104 -
--------- --------- ---------
$56,637 $15,640 $22,438
--------- --------- ---------
The total provision for income taxes consists of the following:
================================================================================
[Download Table]
1996 1995 1994
IN THOUSANDS
Current:
Federal.................................. $ 2,360 $ (955) $1,119
State.................................... 250 - 457
Foreign.................................. - - -
--------- -------- --------
2,610 (955) 1,576
Deferred................................... 12,328 6,034 6,933
--------- -------- --------
$14,938 $5,079 $8,509
--------- -------- --------
A reconciliation of the federal statutory income tax rate to the effective rate
is as follows:
================================================================================
[Download Table]
1996 1995 1994
Statutory income
tax rate.................................... 35.0% 35.0% 35.0%
State income tax, less
federal benefit............................. 3.9 3.9 3.9
Federal income
tax credits................................. (3.1) (7.4) -
Tax impact of foreign
operations.................................. (8.2) 1.3 -
Other......................................... (1.2) (0.3) (1.0)
------- ------- -------
26.4% 32.5% 37.9%
------- ------- -------
The components of the Company's net deferred tax liability as of December 31,
1996 and 1995, are as follows:
================================================================================
[Download Table]
1996 1995
IN THOUSANDS
Deferred Tax Liabilities:
Differences between book
and tax basis of property.................... $ 62,735 $ 41,699
Other.......................................... 778 -
--------- ---------
63,513 41,699
--------- ---------
Deferred Tax Assets:
Argentina net operating loss
carryforwards................................ 14,472 20,467
Alternative minimum tax
credit carryforward.......................... 5,403 3,538
Other.......................................... 500 408
--------- ---------
20,375 24,413
Valuation allowance.............................. (14,472) (20,467)
--------- ---------
5,903 3,946
--------- ---------
Net deferred tax liability....................... $ 57,610 $ 37,753
--------- ---------
1996 ANNUAL REPORT 41
Earnings of the Company's foreign subsidiaries, Cadipsa and Vintage Oil
Argentina, Inc. (see Note 7), are subject to Argentina income taxes. Due to
significant Argentina net operating loss carryforwards for both companies, the
Company does not expect to pay any foreign income taxes related to these
subsidiaries in 1997. No U.S. deferred tax liability will be recognized related
to the unremitted earnings of these foreign subsidiaries, as it is the Company's
intention, generally, to reinvest such earnings permanently.
As of December 31, 1996, the Company has an alternative minimum tax ("AMT")
credit carryforward of approximately $5.4 million. The AMT credit carryforward
does not expire and is available to offset regular income taxes in future years,
but only to the extent that regular income taxes exceed the AMT in such years.
As of December 31, 1996, the Company has net operating loss carryforwards for
Argentina income tax reporting purposes of approximately $44 million which can
be used to offset taxable income in Argentina. These carryforwards expire
beginning 1997 through 2001.
[7] Significant Acquisitions
In May 1995, the Company acquired certain U.S. oil and gas properties from
Texaco Exploration and Production, Inc. for approximately $26.7 million cash
(the "Texaco Acquisition").
Through a series of transactions during the last six months of 1995, the
Company purchased approximately 71.6 percent of the outstanding common stock of
Cadipsa S.A. ("Cadipsa"), a publicly-traded Argentine oil and gas exploration
and production company, for 302,808 shares of the Company's common stock (valued
at $5.7 million) and $12.4 million cash (the "Cadipsa Acquisition").
Approximately $58.1 million of net liabilities and a $7.9 million minority
interest result from the consolidation of Cadipsa as of the acquisition date. As
of December 31, 1996, the Company owned 96.8 percent of the outstanding common
stock of Cadipsa. Effective December 26, 1996, Cadipsa was delisted with the
Argentina Stock Exchange and is no longer a publicly-traded company.
On September 29, 1995, the Company purchased 100 percent of the outstanding
common stock of BG Argentina, S.A. ("BG Argentina") from British Gas, plc for
$37 million cash (the "BG Acquisition"). BG Argentina was subsequently renamed
Vintage Oil Argentina, Inc.
On November 3, 1995, the Company purchased a 35 percent interest in certain
Argentina oil and gas properties (the "Astra/Shell Properties") from Astra
Compania Argentina de Petroleo S.A. for $17.9 million cash. On December 28,
1995, the Company purchased the remaining 65 percent interest in the Astra/Shell
Properties from Shell Compania Argentina de Petroleo S.A. for $32.8 million cash
and deferred payments valued at $5.1 million.
The Company accounted for the Cadipsa Acquisition and the BG Acquisition
under the purchase method. The consolidated statements of income include the
operating results of the above acquisitions since their acquisition date.
The Company completed on December 20, 1995, a public offering of 2,793,700
shares of the Company's common stock (the "Common Stock Offering"), of which
2,500,000 shares were sold by the Company and 293,700 shares were sold by a
certain stockholder (see Note 3). The net proceeds to the Company of
approximately $49.5 million were used to fund a substantial portion of the
purchase of the Astra/Shell Properties.
The Company's unaudited pro forma revenues, net income and earnings per share
for the years ended December 31, 1995 and 1994, presented below have been
prepared assuming the Common Stock Offering, the Texaco Acquisition, the Cadipsa
Acquisition, the BG Acquisition and the acquisition of the Astra/Shell
Properties had been consummated as of January 1, 1994. However, such pro forma
information is not necessarily indicative of what actually would have occurred
had the transactions occurred on such date.
================================================================================
[Download Table]
1995 1994
Revenues (in thousands)............................. $244,921 $255,489
Net income (in thousands)........................... 18,712 9,059
Earnings per share.................................. .78 .37
[8] Segment Information
The Company operates in the oil and gas exploration and production industry in
the United States and South America. Operations in the gathering and gas
marketing industries are in the United States.
42 VINTAGE PETROLEUM, INC.
The following is industry segment data for the years ended December 31, 1996,
1995 and 1994:
================================================================================
[Enlarge/Download Table]
1996 1995 1994
IN THOUSANDS
Revenues:
Exploration and production -
U.S............................................................................ $190,839 $146,819 $141,357
Argentina...................................................................... 67,529 13,435 -
Gas marketing..................................................................... 62,851 49,775 61,480
Gathering......................................................................... 34,917 22,289 17,630
Other income...................................................................... 886 1,251 2,375
Elimination of intersegment sales................................................. (45,340) (38,772) (37,190)
------------ ---------- ----------
$311,682 $194,797 $185,652
------------ ---------- ----------
Income Before Income Taxes And Minority Interest:
Exploration and production -
U.S............................................................................ $ 70,382 $ 39,524 $ 38,234
Argentina...................................................................... 29,110 4,114 -
Other international............................................................ (841) - -
Gas marketing..................................................................... 2,383 2,073 2,322
Gathering......................................................................... 2,186 1,568 1,058
Other income...................................................................... 886 1,251 2,375
------------ ---------- ----------
Operating income.................................................................. 104,106 48,530 43,989
Corporate expenses................................................................ (17,360) (12,712) (9,549)
Interest expense.................................................................. (30,109) (20,178) (12,002)
------------ ---------- ----------
$ 56,637 $ 15,640 $ 22,438
------------ ---------- ----------
Identifiable Assets:
Exploration and production -
U.S............................................................................ $499,439 $431,391 $386,824
Argentina...................................................................... 228,002 180,488 -
Other international............................................................ 44,473 1,269 -
Gas marketing..................................................................... 8,422 5,431 5,850
Gathering......................................................................... 10,249 11,084 8,918
Corporate......................................................................... 23,365 17,876 6,160
------------ ----------- ----------
$813,950 $647,539 $407,752
------------ ----------- ----------
Depreciation, Depletion And Amortization:
Exploration and production -
U.S............................................................................ $ 49,466 $ 45,730 $ 43,831
Argentina...................................................................... 17,494 4,115 -
Other international............................................................ 841 - -
Gathering......................................................................... 1,337 1,301 1,283
Corporate......................................................................... 919 1,111 660
------------ ----------- ----------
$ 70,057 $ 52,257 $ 45,774
------------ ----------- ----------
Capital Additions:
Exploration and production -
U.S............................................................................ $113,037 $ 88,149 $ 65,136
Argentina...................................................................... 49,429 170,947 -
Other international............................................................ 40,866 1,269 -
Gathering ........................................................................ 724 234 632
Corporate......................................................................... 706 3,023 1,200
------------ ----------- ----------
$204,762 $263,622 $ 66,968
------------ ----------- ----------
During 1996, 1995 and 1994, sales to one crude oil purchaser represented
approximately 15 percent, 17 percent and 14 percent, respectively, of the
Company's total revenues (exclusive of eliminations of intersegment sales and
the impact of hedges).
1996 ANNUAL REPORT 43
[9] Quarterly Results (Unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1996 and 1995:
================================================================================
[Enlarge/Download Table]
QUARTER ENDED March 31 June 30 Sept. 30 Dec. 31
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
1996
Revenues............................................................... $71,340 $76,043 $75,952 $88,347
Operating income....................................................... 21,619 26,714 23,979 31,794
Net income............................................................. 7,174 9,796 9,827 14,395
Earnings per share..................................................... .30 .40 .40 .58
1995
Revenues............................................................... $41,042 $45,230 $50,101 $58,424
Operating income....................................................... 8,999 11,778 13,041 14,713
Net income............................................................. 1,608 3,244 2,724 3,786
Earnings per share..................................................... .08 .15 .13 .17
[10] Supplementary Financial Information for Oil and Gas Producing Activities
Results of Operations from Oil and Gas
Producing Activities
The following sets forth certain information with respect to the Company's
results of operations from oil and gas producing activities for the years ended
December 31, 1996, 1995 and 1994. The Company began operations in Argentina
through various acquisitions in the last two quarters of 1995 (see Note 7).
Prior to 1995, all of the Company's oil and gas producing activities were
located in the United States.
================================================================================
[Enlarge/Download Table]
1996
-----------------------------------------------------
Other
U.S. Argentina International Total
-----------------------------------------------------
IN THOUSANDS
Revenues............................................................... $190,839 $67,529 $ - $258,368
Production (lifting) costs............................................. 70,991 20,925 - 91,916
Depreciation, depletion and amortization............................... 49,466 17,494 841 67,801
-----------------------------------------------------
Results of operations before income taxes.............................. 70,382 29,110 (841) 98,651
Income tax expense..................................................... 25,197 - (327) 24,870
-----------------------------------------------------
Results of operations (excluding corporate overhead and interest costs) $ 45,185 $29,110 $ (514) $ 73,781
-----------------------------------------------------
1995 1994
-----------------------------------------------------
U.S. Argentina Total Total
-----------------------------------------------------
IN THOUSANDS
Revenues............................................................... $146,819 $13,435 $160,254 $141,357
Production (lifting) costs............................................. 61,565 5,206 66,771 59,292
Depreciation, depletion and amortization............................... 45,730 4,115 49,845 43,831
-----------------------------------------------------
Results of operations before income taxes.............................. 39,524 4,114 43,638 38,234
Income tax expense..................................................... 12,332 - 12,332 14,529
-----------------------------------------------------
Results of operations (excluding corporate overhead and interest costs) $ 27,192 $ 4,114 $ 31,306 $ 23,705
-----------------------------------------------------
44 VINTAGE PETROLEUM, INC.
Capitalized Costs and Costs Incurred Relating to Oil and Gas Producing
Activities The Company's net investment in oil and gas properties at December
31, 1996 and 1995, was as follows:
================================================================================
[Enlarge/Download Table]
1996
-----------------------------------------------------------
Other
U.S. Argentina Bolivia International Total
-----------------------------------------------------------
IN THOUSANDS
Unproved properties not being amortized............................ $ 16,420 $ - $ - $5,087 $ 21,507
Proved properties being amortized.................................. 685,692 220,376 37,048 - 943,116
-----------------------------------------------------------
Total capitalized costs............................................ 702,112 220,376 37,048 5,087 964,623
Less accumulated depreciation, depletion and amortization.......... 240,059 21,609 - 841 262,509
-----------------------------------------------------------
Net capitalized costs........................................... $462,053 $198,767 $37,048 $4,246 $702,114
1995
-----------------------------------------------
Other
U.S. Argentina International Total
-----------------------------------------------
IN THOUSANDS
Unproved properties not being amortized........................................ $ 8,505 $ - $ 1,269 $ 9,774
Proved properties being amortized.............................................. 581,861 170,947 - 752,808
-----------------------------------------------
Total capitalized costs........................................................ 590,366 170,947 1,269 762,582
Less accumulated depreciation, depletion and amortization...................... 190,593 4,115 - 194,708
-----------------------------------------------
Net capitalized costs....................................................... $399,773 $166,832 $ 1,269 $567,874
-----------------------------------------------
The following sets forth certain information with respect to costs incurred
(exclusive of general support facilities) in the Company's oil and gas
activities during 1996, 1995 and 1994:
================================================================================
[Enlarge/Download Table]
1996
-----------------------------------------------------------
Other
U.S. Argentina Bolivia International Total
-----------------------------------------------------------
IN THOUSANDS
Acquisition:
Undeveloped properties.......................................... $ 9,868 $ 2,080 $ - $3,818 $ 15,766
Producing properties............................................ 50,480 3,754 37,048 - 91,282
Costs incurred:
Exploratory..................................................... 6,502 1,383 - - 7,885
Development..................................................... 46,187 42,212 - - 88,399
-----------------------------------------------------------
Total costs incurred.......................................... $113,037 $ 49,429 $37,048 $3,818 $203,332
-----------------------------------------------------------
1995 1994
-----------------------------------------------------------
Other
U.S. Argentina International Total Total
-----------------------------------------------------------
IN THOUSANDS
Acquisition:
Undeveloped properties.......................................... $ 6,415 $ - $ 1,269 $ 7,684 $ 1,869
Producing properties............................................ 38,896 168,762 - 207,658 36,544
Costs incurred:
Exploratory..................................................... 2,037 - - 2,037 3,349
Development..................................................... 40,801 2,185 - 42,986 23,374
-----------------------------------------------------------
Total costs incurred.......................................... $ 88,149 $170,947 $ 1,269 $260,365 $ 65,136
-----------------------------------------------------------
1996 ANNUAL REPORT 45
Estimated Quantities of Proved Oil and Gas
Reserves (Unaudited)
Proved reserves are estimated quantities of crude oil, natural gas and natural
gas liquids which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and operating conditions. Proved developed reserves are those which
are expected to be recovered through existing wells with existing equipment and
operating methods. The following is an analysis of the Company's proved oil and
gas reserves which are located in the United States. Argentina and Bolivia
(including its proportionate share of reserves of its limited partnerships and
joint venture) as estimated by the Company's independent petroleum consultants,
Netherland, Sewell & Associates, Inc.:
================================================================================
[Enlarge/Download Table]
U.S. Argentina Bolivia Total
--------------------------------------------------------------------------------
Oil Gas Oil Oil Gas Oil Gas
(MBbls) (MMcf) (MBbls) (MBbls) (MMcf) (MBbls) (MMcf)
--------------------------------------------------------------------------------
Proved reserves at
December 31, 1993................ 63,277 273,142 - - - 63,277 273,142
Revisions of previous estimates..... 8,577 4,131 - - - 8,577 4,131
Extensions, discoveries and
other additions.................. 6 4,139 - - - 6 4,139
Production.......................... (6,657) (28,884) - - - (6,657) (28,884)
Purchase of reserves-in-place....... 5,645 29,655 - - - 5,645 29,655
Sales of reserves-in-place.......... (59) (545) - - - (59) (545)
--------------------------------------------------------------------------------
Proved reserves at
December 31, 1994................ 70,789 281,638 - - - 70,789 281,638
Revisions of previous estimates..... 7,160 18,405 2,952 - - 10,112 18,405
Extensions, discoveries
and other additions.............. 338 2,015 - - - 338 2,015
Production.......................... (6,647) (30,610) (961) - - (7,608) (30,610)
Purchase of reserves-in-place....... 8,840 39,486 65,653 - - 74,493 39,486
Sales of reserves-in-place.......... (253) (172) - - - (253) (172)
--------------------------------------------------------------------------------
Proved reserves at
December 31, 1995................ 80,227 310,762 67,644 - - 147,871 310,762
Revisions of previous estimates..... 13,382 21,834 12,449 - - 25,831 21,834
Extensions, discoveries
and other additions.............. 458 5,445 308 - - 766 5,445
Production.......................... (7,694) (32,366) (4,245) - - (11,939) (32,366)
Purchase of reserves-in-place....... 8,095 20,787 2,849 4,953 57,758 15,897 78,545
Sales of reserves-in-place.......... (130) (1,374) - - - (130) (1,374)
--------------------------------------------------------------------------------
Proved reserves at
December 31, 1996................ 94,338 325,088 79,005 4,953 57,758 178,296 382,846
--------------------------------------------------------------------------------
Proved developed reserves at:
December 31, 1994................... 55,037 220,112 - - - 55,037 220,112
--------------------------------------------------------------------------------
December 31, 1995................... 63,791 270,427 36,928 - - 100,719 270,427
--------------------------------------------------------------------------------
December 31, 1996................... 79,250 289,464 46,582 1,007 51,276 126,839 340,740
--------------------------------------------------------------------------------
46 VINTAGE PETROLEUM, INC.
Standardized Measure of Discounted Future
Net Cash Flows Relating to Proved Oil and Gas
Reserves (Unaudited)
The Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves ("Standardized Measure") is a disclosure requirement under
SFAS No. 69. The Standardized Measure does not purport to present the fair
market value of proved oil and gas reserves. This would require consideration of
expected future economic and operating conditions which are not taken into
account in calculating the Standardized Measure.
Under the Standardized Measure, future cash inflows were estimated by applying
year-end prices, adjusted for fixed and determinable escalations, to the
estimated future production of year-end proved reserves. Future cash inflows
were reduced by estimated future production, development and abandonment costs
based on year-end costs to determine pre-tax cash inflows. Future income taxes
were computed by applying the statutory tax rate to the excess of pre-tax cash
inflows over the Company's tax basis in the associated proved oil and gas
properties. Tax credits and permanent differences were also considered in the
future income tax calculation. Future net cash inflows after income taxes were
discounted using a 10 percent annual discount rate to arrive at the Standardized
Measure.
Set forth below is the Standardized Measure relating to proved oil and gas
reserves at December 31, 1996 and 1995:
================================================================================
[Enlarge/Download Table]
1996
----------------------------------------------
U.S. Argentina Bolivia Total
----------------------------------------------
IN THOUSANDS
Future cash inflows.................................................... $3,110,810 $1,743,483 $188,211 $5,042,504
Future production costs................................................ 1,063,823 575,101 51,578 1,690,502
Future development and abandonment costs............................... 133,243 134,219 14,804 282,266
----------------------------------------------
Future net cash inflows before income tax expense...................... 1,913,744 1,034,163 121,829 3,069,736
Future income tax expense.............................................. 611,554 229,649 38,268 879,471
----------------------------------------------
Future net cash flows.................................................. 1,302,190 804,514 83,561 2,190,265
10 percent annual discount for estimated timing of cash flows.......... 484,288 285,896 27,240 797,424
----------------------------------------------
Standardized Measure of discounted future net cash flows............... $ 817,902 $ 518,618 $ 56,321 $1,392,841
----------------------------------------------
1995
------------------------------------
U.S. Argentina Total
------------------------------------
IN THOUSANDS
Future cash inflows............................................................. $1,786,545 $1,083,551 $2,870,096
Future production costs......................................................... 751,312 409,734 1,161,046
Future development and abandonment costs........................................ 118,784 119,916 238,700
------------------------------------
Future net cash inflows before income tax expense............................... 916,449 553,901 1,470,350
Future income tax expense....................................................... 232,036 86,162 318,198
------------------------------------
Future net cash flows........................................................... 684,413 467,739 1,152,152
10 percent annual discount for estimated timing of cash flows................... 224,078 191,528 415,606
------------------------------------
Standardized Measure of discounted future net cash flows........................ $ 460,335 $ 276,211 $ 736,546
------------------------------------
1996 ANNUAL REPORT 47
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves (Unaudited)
The following is an analysis of the changes in the Standardized Measure during
1996, 1995 and 1994:
================================================================================
[Enlarge/Download Table]
1996 1995 1994
IN THOUSANDS
Standardized Measure - Beginning of year...................... $ 736,546 $385,721 $339,701
Increases (decreases) -
Sales, net of production costs............................. (166,452) (93,483) (82,065)
Net change in sales price, net of production costs......... 644,367 131,697 54,864
Discoveries and extensions, net of related future
development and production costs......................... 20,085 4,585 4,724
Changes in estimated future development costs.............. (69,433) (31,210) (17,276)
Development costs incurred................................. 77,174 37,600 20,228
Revisions of previous quantity estimates................... 251,736 59,319 34,428
Accretion of discount...................................... 88,411 44,699 35,078
Net change in income taxes................................. (248,427) (86,296) (50,189)
Purchase of reserves-in-place.............................. 149,900 311,449 47,718
Sales of reserves-in-place................................. (1,859) (661) (694)
Timing of production of reserves and other................. (89,207) (26,874) (796)
----------- ---------- ----------
Standardized Measure - End of year............................ $1,392,841 $736,546 $385,721
----------- ---------- ----------
[11] Subsequent Events
In February 1997, the Company reached an agreement with subsidiaries of
Burlington Resources Inc. to purchase certain producing oil and gas properties
and facilities located in the Gulf Coast of Texas and Louisiana for $114.1
million in cash, subject to closing adjustments. The effective date of the
transaction is January 1, 1997, with closing scheduled for April 1, 1997,
subject to board approvals by the Company and Burlington Resources Inc. and
satisfaction of other normal conditions to closing.
On February 5, 1997, the Company issued $100 million of its 8 5/8% Senior
Subordinated Notes Due 2009 (see Note 2) and completed a public offering of
1,500,000 shares of common stock (see Note 3). The net proceeds to the Company
from the sale of the 8 5/8% Notes (approximately $96.4 million) and the
concurrent sale of common stock (approximately $47.1 million) were used to repay
approximately $143.5 million of existing indebtedness under the Company's
revolving credit facility.
48 VINTAGE PETROLEUM, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Vintage Petroleum, Inc.:
We have audited the accompanying consolidated balance sheets of Vintage
Petroleum, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Vintage Petroleum, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Tulsa, Oklahoma ARTHUR ANDERSEN LLP
February 19, 1997
1996 ANNUAL REPORT 49
STOCKHOLDER INFORMATION
Stock Price Information
The Company's common stock trades on the New York Stock Exchange.
The table below reflects the high and low sales prices and dividends paid
per share during each quarter of 1995 and 1996.
[Download Table]
--------------------------------------------------------------------------------
Quarter Ended High Low Dividends
Paid
March 31, 1995............... $20 $16 $.02
June 30, 1995................ 21-5/8 18-1/4 .02
September 30, 1995........... 21-3/4 17 .02
December 31, 1995............ 22-1/2 19-1/8 .025
March 31, 1996............... 22-1/2 19-1/8 .025
June 30, 1996................ 26-3/4 19 .025
September 30, 1996........... 29-7/8 22-3/8 .025
December 31, 1996............ 34-3/4 28-3/4 .03
Dividend Policy
The Company began paying a quarterly dividend in the fourth quarter of 1992 and
expects to continue paying a regular quarterly cash dividend.
Number of Stockholders
Substantially all of the Company's stockholders maintain their shares in "street
name" accounts and are not, individually, stockholders of record. There were 82
stockholders of record at December 31, 1996.
1996 ANNUAL REPORT 51
Dates Referenced Herein and Documents Incorporated by Reference
↑Top
Filing Submission 0000930661-97-000709 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Thu., Mar. 28, 7:26:56.1pm ET