SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ COMMISSION FILE NUMBER 1-3551 EQUITABLE RESOURCES, INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0464690 (State of incorporation or organization) (IRS Employer Identification No.) 420 BOULEVARD OF THE ALLIES, PITTSBURGH, PENNSYLVANIA 15219 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (412) 261-3000 ------------ NONE (Former name, former address and former fiscal year, if changed since last report) ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of issuer's classes of common stock, as of the close of the period covered by this report. Outstanding at Class March 31, 1996 Common stock, no par value 35,101,171 shares
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Index Page No. PART I. FINANCIAL STATEMENTS: Statements of Consolidated Income for the Three Months Ended March 31, 1996 and 1995, and the Twelve Months Ended March 31, 1996 and 1995 1 Statements of Consolidated Cash Flows for the Three Months Ended March 31, 1996 and 1995, and the Twelve Months Ended March 31, 1996 and 1995 2 Consolidated Balance Sheets, March 31, 1996 and 1995 and December 31, 1995 3 - 4 Long-Term Debt, March 31, 1996 and 1995 5 Notes to Consolidated Financial Statements 6 Gas Produced, Purchased and Sold 7 - 10 Information by Business Segment 11 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 - 18 PART II. OTHER INFORMATION 19 SIGNATURE 20
<TABLE> <CAPTION> EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Statements of Consolidated Income (Thousands Except Per Share Amounts) Three Months Ended Twelve Months Ended March 31, March 31, 1996 1995 1996 1995 <S> <C> <C> <C> <C> Operating Revenues................. $ 640,278 $ 404,691 $ 1,661,577 $ 1,362,433 Cost of Energy Purchased........... 475,471 258,557 1,128,272 903,816 ----------- ----------- ----------- ----------- Net operating revenues.......... 164,807 146,134 533,305 458,617 ----------- ----------- ----------- ----------- Operating Expenses: Operation....................... 52,661 48,314 202,848 190,225 Maintenance..................... 5,908 6,978 25,565 31,587 Depreciation and depletion...... 21,582 28,625 97,582 99,078 Impairment of assets............ - - 121,081 - Taxes other than income......... 15,253 13,905 43,186 40,146 ----------- ----------- ----------- ----------- Total operating expenses...... 95,404 97,822 490,262 361,036 ----------- ----------- ----------- ----------- Operating Income................... 69,403 48,312 43,043 97,581 Other Income........................ 2,169 (611) 3,167 2,220 Interest Charges................... 10,474 12,866 47,706 46,773 ----------- ----------- ----------- ----------- Income (Loss) Before Income Taxes.. 61,098 34,835 (1,496) 53,028 Income Taxes (Benefits)............ 22,372 7,081 (14,015) 904 ----------- ----------- ----------- ----------- Net Income......................... $ 38,726 $ 27,754 $ 12,519 $ 52,124 =========== =========== =========== =========== Average Common Shares Outstanding.............. 35,035 34,635 34,892 34,554 =========== =========== =========== =========== Earnings Per Share of Common Stock.................... $ 1.11 $ .80 $ .36 $ 1.51 =========== =========== =========== =========== Dividends Per Share of Common Stock.................... $ .59 $ .59 $ 1.18 $ 1.17 =========== =========== =========== =========== </TABLE>
<TABLE> <CAPTION> EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Statements of Consolidated Cash Flows (Thousands) Three Months Ended Twelve Months Ended March 31, March 31, 1996 1995 1996 1995 <S> <C> <C> <C> <C> Cash Flows from Operating Activities: Net income............................... $ 38,726 $ 27,754 $ 12,519 $ 52,124 ----------- ------------- ----------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Impairment of assets.................. - - 121,081 - Depreciation and depletion............ 21,582 28,625 97,582 99,078 Deferred income taxes (benefits)...... 12,824 (9,616) (51,908) (15,499) Other - net........................... 2,754 2,543 (556) 1,029 Changes in other assets and liabilities: Accounts receivable and unbilled revenues (89,321) (20,161) (143,435) 43,375 Gas stored underground.............. 9,758 11,412 3,525 (2,278) Material and supplies............... 2,068 2,774 (552) 2,397 Deferred purchased gas cost......... (8,583) 25,695 (19,548) 10,022 Prepaid expenses and other.......... (341) (2,657) (6,438) (8,026) Regulatory assets................... 365 21 2,154 (88) Accounts payable.................... 68,853 (10,397) 138,041 (52,030) Accrued taxes....................... 8,347 (3,684) 10,550 (16,657) Refunds due customers............... 672 2,792 (8,372) 8,932 Customer credit balances............ (8,716) (9,198) (186) 1,211 Deferred revenue.................... (5,426) - 124,448 - Other - net......................... 14,234 15,542 7,247 18,496 ----------- ------------- ----------- ---------- Total adjustments................... 29,070 33,691 273,633 89,962 ----------- ------------- ----------- ---------- Net cash provided by operating activities...................... 67,796 61,445 286,152 142,086 ----------- ------------- ----------- ---------- Cash Flows from Investing Activities: Capital expenditures..................... (18,831) (30,724) (106,219) (152,362) Proceeds from sale of property........... 425 647 24,388 1,611 ----------- ------------- ----------- ---------- Net cash used in investing activities (18,406) (30,077) (81,831) (150,751) ----------- ------------- ----------- ---------- Cash Flows from Financing Activities: Issuance of common stock................. 543 658 2,641 1,970 Purchase of treasury stock............... - (69) (171) (464) Dividends paid........................... (20,702) (10,224) (51,575) (40,083) Proceeds from issuance of long-term debt. - - 17,836 (102) Repayments and retirements of long-term debt - - (24,500) - Increase (decrease) in short-term loans.. (3,654) (28,441) (109,513) 55,659 ----------- ------------- ------------ ---------- Net cash provided (used) by financing activities............ (23,813) (38,076) (165,282) 16,980 ----------- ------------- ----------- ---------- Increase (decrease) in cash and cash equivalents 25,577 (6,708) 39,039 8,315 Cash and cash equivalents at beginning of period 30,169 23,415 16,707 8,392 ----------- ------------- ----------- ---------- Cash and cash equivalents at end of period.. $ 55,746 $ 16,707 $ 55,746 $ 16,707 =========== ============= =========== ========== Cash paid during the period for: Interest (net of amount capitalized)..... $ 11,688 $ 13,418 $ 44,629 $ 41,737 =========== ============= =========== ========== Income taxes............................. $ 606 $ (465) $ 42,343 $ 14,914 =========== ============= =========== ========== </TABLE>
<TABLE> <CAPTION> EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Thousands) March 31, December 31, 1996 1995 1995 ASSETS <S> <C> <C> <C> Current Assets: Cash and cash equivalents............................... $ 55,746 $ 16,707 $ 30,169 Accounts receivable (less accumulated provision for doubtful accounts: March 31, 1996 $13,075; 1995 $13,224; December 31, 1995, $10,539)........................... 336,771 199,845 240,846 Unbilled revenues ...................................... 22,612 15,954 31,752 Gas stored underground - current inventory ............. 164 3,689 9,922 Material and supplies .................................. 10,509 10,102 12,577 Deferred purchased gas cost ............................ 18,743 (805) 10,160 Prepaid expenses and other ............................. 42,664 36,226 42,323 ------------- ------------ ------------- Total current assets............................... 487,209 281,718 377,749 ------------- ------------ ------------- Property, Plant and Equipment: Exploration and production (successful efforts method).. 875,867 998,625 869,329 Energy marketing........................................ 301,258 312,919 295,061 Natural gas distribution................................ 570,669 561,455 568,272 Natural gas transmission................................ 386,666 389,177 388,986 ------------- ------------ ------------- Total property, plant and equipment................ 2,134,460 2,262,176 2,121,648 Less accumulated depreciation and depletion .......... 682,507 666,217 664,065 ------------- ------------ ------------- Net property, plant and equipment.................. 1,451,953 1,595,959 1,457,583 ------------- ------------ ------------- Other Assets: Regulatory assets ...................................... 84,876 88,366 85,241 Other................................................... 49,567 26,722 41,235 ------------- ------------ ------------- Total other assets ................................... 134,443 115,088 126,476 ------------- ------------ ------------- Total.............................................. $ 2,073,605 $ 1,992,765 $ 1,961,808 ============= ============ ============= </TABLE>
<TABLE> <CAPTION> EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Thousands) March 31, December 31, 1996 1995 1995 CAPITALIZATION AND LIABILITIES <S> <C> <C> <C> Current Liabilities: Long-term debt payable within one year............. $ - $ 24,500 $ - Short-term loans................................... 131,346 240,859 135,000 Accounts payable................................... 251,038 112,997 182,185 Accrued taxes...................................... 26,454 15,904 18,107 Accrued interest................................... 12,639 11,421 14,842 Refunds due customers.............................. 16,675 25,047 16,003 Dividends payable.................................. 10,352 10,231 - Customer credit balances........................... 1,043 1,229 9,759 Other.............................................. 26,520 197 13,383 -------------- -------------- --------------- Total current liabilities..................... 476,067 442,385 389,279 -------------- -------------- --------------- Long--Term Debt ....................................... 415,692 397,026 415,527 -------------- -------------- --------------- Deferred and Other Credits: Deferred income taxes.............................. 277,377 344,875 265,737 Deferred investment tax credits.................... 20,716 21,816 20,991 Deferred revenue................................... 124,448 - 129,874 Other.............................................. 23,605 27,318 25,321 -------------- -------------- --------------- Total deferred and other credits.............. 446,146 394,009 441,923 -------------- -------------- --------------- Capitalization: Common stockholders' equity: Common stock, no par value, authorized 80,000 shares; shares issued March 31, 1996, 35,440; March 31, 1995, 35,329; December 31, 1995, 35,414..................... 224,500 227,086 223,854 Retained earnings ............................... 520,060 548,775 502,036 Treasury stock, shares at cost March 31, 1996, 339; March 31, 1995, 634; December 31, 1995, 407........................ (7,722) (15,002) (9,673) Foreign currency translation..................... (1,138) (1,514) (1,138) -------------- -------------- --------------- Total common stockholders' equity............. 735,700 759,345 715,079 -------------- -------------- --------------- Total..................................... $ 2,073,605 $ 1,992,765 $ 1,961,808 ============== ============== =============== </TABLE>
<TABLE> <CAPTION> EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Long-Term Debt (Thousands) Annual Maturities Debt Maturities After One Year March 31, March 31, 1996 1995 1996 1995 <S> <C> <C> <C> <C> 8 1/4% Debentures, due July 1, 1996 (a)............... $ $ $ 75,000 $ 75,000 7 1/2% Debentures, due July 1, 1999 ($75,000 principal amount net of unamortized original issue discount) (b).......... 71,540 70,675 9 1/2% Convertible subordinated debentures, due January 15, 2006.................. 652 851 9.9% Debentures, due April 15, 2013 (c)............... 75,000 75,000 Medium-Term Notes: 7.2% to 9.0% Series A, due 1998 thru 2021......... 100,000 100,000 5.1% to 7.6% Series B, due 2003 thru 2023......... 24,500 75,500 75,500 6.8% to 7.6% Series C, due 2007 thru 2018......... 18,000 -------- -------- ---------- ---------- Total.......................................... $ - $ 24,500 $ 415,692 $ 397,026 ======== ======== ========== ========== <FN> (a) 8 1/4% Debentures will be retired with proceeds from issuance of new long-term debt. (b) Not redeemable prior to maturity. (c) Annual sinking fund payments of $3,750,000 are required beginning in 1999. </FN> </TABLE>
Equitable Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements A. The accompanying financial statements should be read in conjunction with the Company's 1995 Annual Report on Form 10-K. B. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position as of March 31, 1996 and 1995 and the results of operations for the three and twelve months then ended and cash flows for the three and twelve months then ended. All of the adjustments are of a normal recurring nature. C. The results of operations for the three-month periods ended March 31, 1996 and 1995 are not indicative of results for a full year because of the seasonal nature of the Company's operations. D. At March 31, 1996, 2,591,000 shares of Common Stock were reserved as follows: 59,000 shares for conversion of the 9 1/2% Convertible Subordinated Debentures, 601,000 shares for issuance under the Key Employee Restricted Stock Option and Stock Appreciation Rights Incentive Compensation Plan, 1,726,000 shares for issuance under the Long-Term Incentive Plan, 76,000 shares for issuance under the Non-Employee Directors' Stock Incentive Plan, and 129,000 shares for issuance under the Company's Dividend Reinvestment and Stock Purchase Plan. E. The Company filed a shelf registration with the Securities and Exchange Commission in June 1994 to issue $100 million of Medium-Term Notes--Series C to be used to retire short-term loans. As of March 31, 1996, $18 million of Medium-Term Notes--Series C have been issued. F. Effective March 29,1996, the Company acquired all of the outstanding stock of Conogen, Inc. (Conogen) in exchange for 239,316 shares of the Company's common stock valued at $7 million and subject to an additional contingent amount to be paid by January 1998 based upon Conogen's financial performance. At the time of closing, the Company tendered 68,376 shares of common stock held in treasury with 170,940 shares to be tendered in July 1996. The effect of this acquisition on the consolidated financial statements of the Company is not material. Conogen is a design-builder and performance contractor in self-funded energy and resource efficiency projects for commercial, industrial and institutional customers.
<TABLE> <CAPTION> THREE MONTHS ENDED MARCH 31, 1996 Exploration Energy Natural Gas Natural Gas Intersegment and Production Marketing Distribution Transmission Eliminations Consolidated <S> <C> <C> <C> <C> <C> <C> Gas Produced, Purchased and Sold (MMcf): Produced .................................... 16,378 34 539 16,951 ------ ------- ------ ------- ------- ------- Purchased: Other producers........................... 135,184 16,683 2,636 154,503 Inter-segment purchases .................. 591 9,899 5,400 (15,890) ------ ------- ------ ------- ------- ------- Total purchases ....................... 591 145,083 22,083 2,636 (15,890) 154,503 ------ ------- ------ ------- ------- ------- Total produced and purchased ........ 16,969 145,083 22,117 3,175 (15,890) 171,454 Deduct: Net increase (decrease) in gas in storage. (5,299) (5,299) Extracted natural gas liquids (equivalent gas volumes) .............. 430 1,305 1,735 System use and unaccounted for............ 108 331 2,678 26 3,143 ------ ------- ------ ------- ------- ------- Total................................ 16,431 143,447 24,738 3,149 (15,890) 171,875 ====== ======= ====== ======= ======= ======= Gas Sales (MMcf): Residential.................................. 15,017 15,017 Commercial................................... 6,332 6,332 Industrial and Utility....................... 3,389 (447) 2,942 Production................................... 16,378 (295) 16,083 Marketing.................................... 53 143,447 3,149 (15,148) 131,501 ------ ------- ------ ------- ------- ------- Total................................ 16,431 143,447 24,738 3,149 (15,890) 171,875 ====== ======= ====== ======= ======= ======= Natural Gas Transported (MMcf).................. 30,277 2,324 34,870 (32,267) 35,204 ======= ====== ======== ======= ======= Oil Produced and Sold (thousands of bls)........ 450 450 ====== ======= Natural Gas Liquids Sold (thousands of gallons) 12,407 39,072 51,479 ====== ======= ======= Average Selling Price: Residential Gas Sales (per Mcf)............. $8.075 Commercial Gas Sales........................ 6.431 Industrial and Utility Gas Sales............ 3.963 Produced Natural Gas........................ $ 2.342 Marketed Natural Gas........................ 3.415 $2.896 $3.963 Oil (per barrel)............................ 16.927 Natural Gas Liquids (per gallon)............ .354 .321 </TABLE>
<TABLE> <CAPTION> THREE MONTHS ENDED MARCH 31, 1995 Exploration Energy Natural Gas Natural Gas Intersegment and Production Marketing Distribution Transmission Eliminations Consolidated <S> <C> <C> <C> <C> <C> <C> Gas Produced, Purchased and Sold (MMcf): Produced .................................... 17,262 29 532 17,823 ------ ------- ------ -------- ------- ------- Purchased: Other producers........................... 113,481 11,894 1,571 126,946 Inter-segment purchases .................. 958 10,744 5,030 (16,732) ------ ------- ------ -------- ------- ------- Total purchases ....................... 958 124,225 16,924 1,571 (16,732) 126,946 ------ ------- ------ -------- ------- ------- Total produced and purchased ........ 18,220 124,225 16,953 2,103 (16,732) 144,769 Deduct: Net increase (decrease) in gas in storage. (5,117) (171) (5,288) Extracted natural gas liquids (equivalent gas volumes)............... 467 1,593 2,060 System use and unaccounted for............ 131 407 4,210 225 4,973 ------ ------- ------ -------- ------- ------- Total................................ 17,622 122,225 17,860 2,049 (16,732) 143,024 ====== ======= ====== ======== ======= ======= Gas Sales (MMcf): Residential.................................. 13,414 13,414 Commercial................................... 1,778 1,778 Industrial and Utility....................... 2,668 1 2,669 Production................................... 17,262 (228) 17,034 Marketing.................................... 360 122,225 2,048 (16,504) 108,129 ------ ------- ------ -------- ------- ------- Total................................ 17,622 122,225 17,860 2,049 (16,732) 143,024 ====== ======= ====== ======== ======= ======= Natural Gas Transported (MMcf).................. 26,593 6,309 30,429 (27,720) 35,611 ======= ====== ======== ======= ======= Oil Produced and Sold (thousands of bls)........ 511 511 ====== ======= Natural Gas Liquids Sold (thousands of gallons) 15,047 48,233 63,280 ====== ======= ======= Average Selling Price: Residential Gas Sales (per Mcf)............. $9.155 Commercial Gas Sales........................ 9.468 Industrial and Utility Gas Sales............ 1.883 Produced Natural Gas........................ $ 1.612 Marketed Natural Gas........................ 1.347 $1.602 $2.073 Oil (per barrel)............................ 16.256 Natural Gas Liquids (per gallon)............ .349 .267 </TABLE>
<TABLE> <CAPTION> TWELVE MONTHS ENDED MARCH 31, 1996 Exploration Energy Natural Gas Natural Gas Intersegment and Production Marketing Distribution Transmission Eliminations Consolidated <S> <C> <C> <C> <C> <C> <C> Gas Produced, Purchased and Sold (MMcf): Produced..................................... 64,100 145 2,567 66,812 ------- -------- ------- ------- -------- -------- Purchased: Other producers........................... 485,254 46,715 9,101 541,070 Inter-segment purchases................... 2,779 52,711 13,919 - (69,409) ------- -------- ------- ------- -------- -------- Total purchases........................ 2,779 537,965 60,634 9,101 (69,409) 541,070 ------- -------- ------- ------- -------- -------- Total produced and purchased......... 66,879 537,965 60,779 11,668 (69,409) 607,882 Deduct: Net increase (decrease) in gas in storage. (1,577) (105) (1,682) Extracted natural gas liquids (equivalent gas volumes)............... 1,834 6,252 8,086 System use and unaccounted for............ 534 1,574 3,499 (474) 5,133 ------- -------- ------- ------- -------- -------- Total................................ 64,511 530,139 58,857 12,247 (69,409) 596,345 ======= ======== ======= ======= ======== ======== Gas Sales (MMcf): Residential.................................. 31,097 31,097 Commercial................................... 9,048 9,048 Industrial and Utility....................... 18,712 (1) (10,796) 7,915 Production................................... 64,100 (532) 63,568 Marketing.................................... 411 530,139 12,248 (58,081) 484,717 ------- -------- ------- ------- -------- -------- Total................................ 64,511 530,139 58,857 12,247 (69,409) 596,345 ======= ======== ======= ======= ======== ======== Natural Gas Transported (MMcf).................. 126,089 12,118 123,531 (102,945) 158,793 ======== ======= ======= ======== ======== Oil Produced and Sold (thousands of bls)........ 1,871 1,871 ======= ======== Natural Gas Liquids Sold (thousands of gallons) 60,407 188,779 249,186 ======= ======== ======== Average Selling Price: Residential Gas Sales (per Mcf)............. $8.532 Commercial Gas Sales........................ 7.039 Industrial and Utility Gas Sales............ 2.439 Produced Natural Gas........................ $ 1.773 Marketed Natural Gas........................ 2.063 $1.973 $2.494 Oil (per barrel)............................ 16.602 Natural Gas Liquids (per gallon)............ .327 .279 </TABLE>
<TABLE> <CAPTION> TWELVE MONTHS ENDED MARCH 31, 1995 Exploration Energy Natural Gas Natural Gas Intersegment and Production Marketing Distribution Transmission Eliminations Consolidated <S> <C> <C> <C> <C> <C> <C> Gas Produced, Purchased and Sold (MMcf): Produced..................................... 64,486 157 1,995 66,638 ------- -------- ------- ------- -------- -------- Purchased: Other producers........................... 422,557 44,933 6,144 473,634 Inter-segment purchases................... 2,962 45,209 13,265 165 (61,601) ------- -------- ------- ------- -------- -------- Total purchases........................ 2,962 467,766 58,198 6,309 (61,601) 473,634 ------- -------- ------- ------- -------- -------- Total produced and purchased......... 67,448 467,766 58,355 8,304 (61,601) 540,272 Deduct: Net increase (decrease) in gas in storage. 1,085 (352) 733 Extracted natural gas liquids (equivalent gas volumes)............... 1,787 6,703 8,490 System use and unaccounted for............ 525 1,629 9,328 358 11,840 ------- -------- ------- ------- -------- -------- Total................................ 65,136 459,434 47,942 8,298 (61,601) 519,209 ======= ======== ======= ======= ======== ======== Gas Sales (MMcf): Residential.................................. 27,527 27,527 Commercial................................... 6,276 6,276 Industrial and Utility....................... 14,139 100 (3,303) 10,936 Production................................... 64,486 (5,787) 58,699 Marketing.................................... 650 459,434 8,198 (52,511) 415,771 ------- -------- ------- ------- -------- -------- Total................................ 65,136 459,434 47,942 8,298 (61,601) 519,209 ======= ======== ======= ======= ======== ======== Natural Gas Transported (MMcf).................. 108,588 11,798 118,570 (93,403) 145,553 ======== ======= ======= ======== ======== Oil Produced and Sold (thousands of bls)........ 1,987 1,987 ======= ======== Natural Gas Liquids Sold (thousands of gallons) 57,637 199,272 256,909 ======= ======= ======== Average Selling Price: Residential Gas Sales (per Mcf)............. $9.388 Commercial Gas Sales........................ 7.774 Industrial and Utility Gas Sales............ 2.190 Produced Natural Gas........................ $ 1.723 Marketed Natural Gas........................ 1.578 $1.751 $2.084 Oil (per barrel)............................ 15.772 Natural Gas Liquids (per gallon)............ .316 .267 </TABLE>
<TABLE> <CAPTION> EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Information by Business Segment (Thousands) Three Months Ended Twelve Months Ended March 31, March 31, 1996 1995 1996 1995 <S> <C> <C> <C> <C> OPERATING REVENUES: Exploration and production.. $ 55,374 $ 46,344 $ 243,895 $ 190,003 Energy marketing............ 431,494 211,005 1,109,792 867,857 Natural gas distribution.... 183,522 162,281 402,291 373,083 Natural gas transmission ... 38,329 31,645 125,545 111,936 Sales between segments ..... (68,441) (46,584) (219,946) (180,446) --------- ---------- ----------- ----------- Total.................. $ 640,278 $ 404,691 $ 1,661,577 $ 1,362,433 ========= ========== =========== =========== OPERATING INCOME (LOSS): Exploration and production.. $ 15,565 $ 1,731 $ 11 $ 21,220 Energy marketing ........... 5,549 2,247 (15,543) 4,879 Natural gas distribution.... 35,068 32,787 25,802 39,205 Natural gas transmission ... 13,221 11,547 32,773 32,277 --------- ---------- ----------- ----------- Total.................. $ 69,403 $ 48,312 $ 43,043 $ 97,581 ========= ========== =========== =========== CAPITAL EXPENDITURES: Exploration and production.. $ 6,330 $ 16,384 $ 34,732 $ 87,060 Energy marketing............ 6,851 3,327 27,688 17,987 Natural gas distribution.... 5,584 9,522 38,257 36,259 Natural gas transmission.... 66 1,491 5,542 11,056 --------- ---------- ----------- ----------- Total.................. $ 18,831 $ 30,724 $ 106,219 $ 152,362 ========= ========== =========== =========== </TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Consolidated net income for the quarter ended March 31, 1996 was $38.7 million or $1.11 per share, compared with $27.8 million or $.80 per share for the quarter ended March 31, 1995. The increase in income is due to a 45 percent increase in average wellhead gas prices, increased retail gas sales reflecting weather that was 11 percent colder than the prior quarter, higher margins for natural gas marketing and lower depreciation and depletion and interest expense. These increases were partially offset by lower fuels tax credits as a result of the sale of certain gas properties in November 1995 and lower production of natural gas. Consolidated net income for the twelve months ended March 31, 1996 was $12.5 million or $.36 per share, compared with $52.1 million or $1.51 per share for the twelve months ended March 31, 1995. Earnings for the current period include an after-tax charge of $74.2 million or $2.12 per share recorded in the fourth quarter of 1995 for the recognition of impairment of assets of $121.2 million, pursuant to the methodology of Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". The results for the current period also include a non-recurring after-tax gain of $29.1 million or $.83 per share related to the Columbia Gas Transmission (Columbia) bankruptcy settlement and $6.6 million or $.19 per share, resulting from regulatory approval for accelerated recovery of future gas costs recognized in the fourth and third quarters of 1995, respectively. Net income, excluding the charge for impairment of assets and the effect of the settlements, remained substantially the same as the 1995 period. Lower nonconventional fuels tax credits and higher operating expenses were offset by increased retail gas sales reflecting weather that was 16 percent colder than the prior year and higher margins for natural gas marketing RESULTS OF OPERATIONS EXPLORATION AND PRODUCTION Operating revenues, which are derived from the sale of produced natural gas, oil and natural gas liquids and from contract drilling were $55.4 million for the quarter ended March 31, 1996 compared with $46.3 million for the quarter ended March 31, 1995. The increase in operating revenues is due to a 45 percent increase in average wellhead prices for natural gas, partially offset by lower production of natural gas and natural gas liquids. Operating revenues for the twelve months ended March 31, 1996 were $244.0 million compared with $190.0 million for the twelve months ended March 31, 1995. The 1996 revenues include $40.2 million of nonrecurring amounts from the Columbia bankruptcy settlement, and $11.0 million of additional revenue from direct bill settlements. The increase in revenues, excluding the nonrecurring amounts, is due primarily to higher wellhead prices for natural gas and increased production and prices for natural gas liquids.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, EXPLORATION AND PRODUCTION 1996 1995 1996 1995 OPERATING REVENUES (THOUSANDS): Natural Gas.......... $38,361 $ 27,828 $113,646 $111,132 Oil.................. 7,617 8,307 31,063 31,339 Natural Gas Liquids.. 4,387 5,252 19,736 18,197 Contract Drilling.... 3,164 2,846 14,642 14,799 Direct Billing Settlements - - 32,582 7,815 Other................ 1,845 2,111 32,226 6,721 ------- -------- ------- -------- Total Revenues..... $55,374 $ 46,344 $243,895 $190,003 ======= ======== ======== ======== SALES QUANTITIES: Natural Gas (MMcf)... 16,378 17,262 64,100 64,486 Oil (MBls)........... 450 511 1,871 1,987 Natural Gas Liquids (thousands of gallons) 12,407 15,047 60,407 57,637 Energy purchased amounted to $4.9 million for the quarter ended March 31, 1996 compared with $2.8 million for the quarter ended March 31, 1995. The increase for the quarter is due to higher prices. Energy purchased for the twelve months ended March 31, 1996 amounted to $13.0 million compared with $10.7 million for the twelve months ended March 31, 1995. The increase in purchased energy for the twelve month period is due to higher requirements, reflecting increased production of natural gas liquids and higher prices. Other operating expenses were $34.9 million for the quarter ended March 31, 1996 compared with $41.8 million for the quarter ended March 31, 1995. The decrease for the quarter is due to decreased depreciation and depletion reflecting lower depletion rates and lower production. Other operating expenses for the twelve months ended March 31, 1996 of $230.9 million, excluding a charge of $73.9 million for impairment of assets, were substantially the same as the $158.1 million for the twelve months ended March 31, 1995. Operating income was $15.6 million for the quarter ended March 31, 1996 compared with $1.7 million for the quarter ended March 31, 1995. The increase in operating income for the quarter reflects higher wellhead prices for natural gas and lower depreciation and depletion, partially offset by lower production of natural gas and natural gas liquids. Operating income for the twelve months ended March 31, 1996 was $.1 million compared with $21.2 million for the twelve months ended March 31, 1995. The increase in operating income, excluding the effect of the nonrecurring items is due to higher wellhead prices for natural gas and higher prices and production of natural gas liquids.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ENERGY MARKETING Operating revenues, which are derived primarily from the marketing of natural gas, sale of produced natural gas liquids, and intrastate transportation of natural gas in Louisiana, were $431.5 million for the quarter ended March 31, 1996 compared with $211.0 million for the quarter ended March 31, 1995. The increase in revenues is due to an 81 percent increase in the average price of marketed gas and a 17 percent increase in marketed gas volumes. Operating revenues for the twelve months ended March 31, 1996 were $1,109.8 million compared with $867.9 million for the twelve months ended March 31, 1995. The increase in revenues is due to a 13 percent increase in the average price of marketed gas and a 15 percent increase in marketed gas volumes. Revenues from sale of natural gas liquids for the current periods were about the same as the 1995 amounts reflecting higher prices for natural gas liquids offset by lower production. THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, ENERGY MARKETING 1996 1995 1996 1995 OPERATING REVENUES (THOUSANDS): Natural Gas Marketing... $415,379 $195,755 1,045,767 $804,582 Natural Gas Liquids..... 12,534 12,884 52,669 53,256 Transportation.......... 1,723 2,293 8,835 9,672 Other................... 1,858 73 2,521 347 -------- -------- -------- -------- Total Revenues........ $431,494 $211,005 $1,109,792 $867,857 ======== ======== ========== ======== SALES QUANTITIES: Marketed Natural Gas (MMcf) 143,447 122,225 530,139 459,434 Natural Gas Liquids (thousands of gallons) 39,072 48,233 188,779 199,272 Transportation Deliveries (Mmcf) 30,277 26,593 126,089 108,588 Energy purchased was $419.3 million for the quarter ended March 31, 1996 compared with $201.3 million for the quarter ended March 31, 1995. Energy purchased for the twelve months ended March 31, 1996 was $1,072.4 million compared with $833.3 million for the twelve months ended March 31, 1995. The increase in energy purchased for the current periods reflects higher gas prices and an increase in purchased volumes. Other operating expenses were $6.6 million for the quarter ended March 31, 1996 compared with $7.5 million for the quarter ended March 31, 1995. The decrease for the quarter is due primarily to lower gas processing expenses reflecting lower production of natural gas liquids. Other operating expenses for the twelve months ended March 31, 1996 were $52.8 million compared with $29.7 million for the twelve months ended March 31, 1995. Other operating expenses for the 1996 period include a charge of $21.2 million for impairment of assets. The increase for the current period, excluding the charge, reflects marketing and administrative expenses associated with the gas storage service that began in early 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Operating results for the quarter ended March 31, 1996 were $5.6 million compared with $2.2 million for the quarter ended March 31, 1995. The increase is due to higher margins and sales for marketed gas. Operating results for the twelve months ended March 31, 1996 were a loss of $15.4 million compared with income of $4.9 million for the twelve months ended March 31, 1995. The increase in operating income for the twelve-month period, excluding the charge for impairment of assets, reflects higher margins and sales for marketed gas. NATURAL GAS DISTRIBUTION Operating revenues, which are derived from the sale and transportation of natural gas primarily to retail customers at state regulated rates, were $183.5 million for the quarter ended March 31, 1996 compared with $162.3 million for the quarter ended March 31, 1995. The increase in revenues is due primarily to an increase in retail gas sales, reflecting weather that was 11 percent colder than the 1995 quarter, a change in the mix of industrial and utility gas sales and the effect of commercial customers switching from transportation service to gas sales, partially offset by lower retail rates to pass through decreased purchased gas costs to customers. Operating revenues for the twelve months ended March 31, 1996 were $402.3 million compared with $373.1 million for the twelve months ended March 31, 1995. The increase in revenues is due to an increase in retail gas sales reflecting weather that was 16 percent colder than the 1995 period, a change in the mix of industrial and utility gas sales and the effect of commercial customers switching from transportation to gas sales. THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, NATURAL GAS DISTRIBUTION 1996 1995 1996 1995 OPERATING REVENUES (THOUSANDS): Residential Gas Sales $121,268 $122,807 $265,316 $258,433 Commercial Gas Sales. 40,722 16,834 63,692 48,789 Industrial and Utility Gas Sales 13,432 5,025 45,635 30,961 Transportation Service 5,951 16,292 21,389 30,328 Other................ 2,149 1,323 6,259 4,572 ------- -------- -------- -------- Total Revenues..... $183,522 $162,281 $402,291 $373,083 ======== ======== ======== ======== SALES QUANTITIES (MMCF): Residential Gas Sales 15,017 13,414 31,097 27,527 Commercial Gas Sales. 6,332 1,778 9,048 6,276 Industrial and Utility Gas Sales 3,389 2,668 18,712 14,139 Transportation Deliveries 2,324 6,309 12,118 11,798 Heating Degree Days.. 3,090 2,796 6,042 5,221
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Energy purchased amounted to $108.9 million for the quarter ended March 31, 1996 compared with $96.7 million for the quarter ended March 31, 1995. Energy purchased for the twelve months ended March 31, 1996 was $233.9 million compared with $221.9 million for the twelve months ended March 31, 1995. The increase in energy costs for the current periods is due to higher gas sales, partially offset by the pass-through of lower costs in rates to retail customers. Other operating expenses were $39.5 million for the quarter ended March 31, 1996 compared with $32.8 million for the quarter ended March 31, 1995. Other operating expenses were $142.6 million for the twelve months ended March 31, 1996 compared with $112.0 million for the twelve months ended March 31, 1995. Other operating expenses for the current twelve month period includes a charge of $20.8 million for impairment of assets. The increase in other operating expenses for the three- and twelve month periods, excluding the charge, is due to increased labor and outside consultant expenses related to the Company's reengineering efforts. Operating income for the quarter ended March 31, 1996 was $35.1 million compared with $32.8 million for the quarter ended March 31, 1995. Operating income was $25.8 million for the twelve months ended March 31, 1996 compared with $39.2 million for the twelve months ended March 31, 1995. The increase in operating income for the current periods, excluding the charge for impairment of assets, is due primarily to higher margins reflecting higher gas sales, partially offset by increased operating expenses. NATURAL GAS TRANSMISSION Operating revenues, which are derived from the interstate transportation and storage of natural gas subject to federal regulation, and the marketing of natural gas, were $38.3 million for the quarter ended March 31, 1996 compared with $31.6 million for the quarter ended March 31, 1995. Operating revenues for the twelve months ended March 31,1996 were $125.6 million compared with $111.9 million for the twelve months ended March 31, 1995. Operating revenues for the current twelve month period include $4.8 million related to the Columbia bankruptcy settlement. The increase in revenues for the three- and twelve-month periods, excluding the effect of the settlement, is due primarily to higher selling prices and increased volumes of marketed natural gas. THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, NATURAL GAS TRANSMISSION 1996 1995 1996 1995 OPERATING REVENUES (THOUSANDS): Industrial and Utility Gas Sales $ 363 $ 363 $ 1,451 $ 1,329 Marketed Gas Sales... 12,479 4,245 30,542 17,088 Transportation Service 20,380 20,849 67,497 69,459 Storage Service...... 3,620 4,391 15,138 17,451 Other................ 1,487 1,797 10,917 6,609 ------- -------- -------- -------- Total Revenues..... $38,329 $ 31,645 $125,545 $111,936 ======= ======== ======== ========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SALES QUANTITIES (MMCF): Industrial and Utility Gas Sales - 1 (1) 100 Marketed Gas Sales... 3,149 2,048 12,248 8,198 Transportation Deliveries 34,870 30,429 123,531 118,570 Energy purchased amounted to $9.4 million for the quarter ended March 31, 1996 compared with $3.3 million for the quarter ended March 31, 1995. Energy purchased for the twelve months ended March 31, 1996 was $23.5 million compared with $14.0 million for the twelve months ended March 31, 1995. The increase in energy costs for the three- and twelve month periods is due to higher prices for marketed gas and an increase in marketed gas sales. Other operating expenses were $15.7 million for the quarter ended March 31, 1996 compared with $16.8 million for the quarter ended March 31, 1995. Other operating expenses for the twelve months ended March 31, 1996 were $69.5 million compared with $65.6 million for the twelve months ended March 31, 1995. Other operating expenses for the current twelve month period include a charge of $5.2 million for impairment of assets. Other operating expenses for the current periods, excluding the charge, remained substantially the same. Operating income was $13.2 million for the quarter ended March 31, 1996 compared with $11.5 million for the quarter ended March 31, 1995. Operating income was $32.6 million for the twelve months ended March 31, 1996 compared with $32.3 million for the twelve months ended March 31, 1995. The increase in operating income for the current periods, excluding the effect of the Columbia settlement and the charge for impairment of assets, is due to higher prices for marketed gas and an increase in marketed natural gas sales. CAPITAL RESOURCES AND LIQUIDITY OPERATING ACTIVITIES Cash required for operations is impacted primarily by the seasonal nature of the Company's distribution operations. Gas purchased for storage during the nonheating season is financed with short-term loans, which are repaid as gas is withdrawn from storage and sold during the heating season. In addition, short-term loans are used to provide other working capital requirements during the nonheating season.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) INVESTING ACTIVITIES The Company's business requires major ongoing expenditures for replacements, improvements, and additions to its distribution, transmission and storage plant, and continuing development and expansion of its resource production activities. A total of $129.5 million has been authorized for the 1996 capital expenditure program, with $63.8 allocated to exploration and production, $30.7 million for natural gas marketing, $24.6 million for natural gas distribution and $10.4 million for natural gas transmission. Capital expenditures for the three months ended March 31, 1996 were $18.8 million. Short-term loans are also used as interim financing for a portion of capital expenditures. The Company expects to finance its 1996 capital expenditures with cash generated from operations and temporarily with short-term loans. CAPITAL RESOURCES AND LIQUIDITY FINANCING ACTIVITIES The Company has adequate borrowing capacity to meet its financing requirements. The Company has a revolving Credit Agreement with a group of banks providing $500 million of available credit. The agreement requires a facility fee of one-tenth of one percent. Bank loans and commercial paper, supported by available credit, are used to meet short-term financing requirements. At March 31 1996, $131.0 million of commercial paper was outstanding at an average interest rate of 5.38 percent. Adequate credit is expected to continue to be available in the future. The Company intends to file a shelf registration with the Securities and Exchange Commission in June 1996 to issue $250 million of long-term debt. The proceeds from issuance of this debt is expected to be used to retire the 8 1/4% Debentures and provide funds for the possible tender or defeasance of the 9.9% Debentures. BALANCE SHEET CHANGES The increase in accounts receivable is due to the higher sales of marketed gas. The changes in deferred purchased gas cost are due to the timing of pass-through of gas costs to ratepayers. Changes in deferred purchased gas costs generally do not affect results of operations due to regulatory procedures for purchased gas cost recovery in rates. The increase in accounts payable reflects higher gas purchased for marketing.
PART II. OTHER INFORMATION Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3 (i) Articles of Amendment to the Restated Articles of Incorporation of the Company dated May 7, 1996. 3 (ii) Company's Bylaws as amended March 21, 1996. (b) Reports on Form 8-K during the quarter ended March 31, 1996: Form 8-K dated March 21, 1996 describing the Board of Directors' adoption of a Preferred Stock Purchase Rights Plan.
Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EQUITABLE RESOURCES, INC. (Registrant) /s/ Dan C. Eaton Dan C. Eaton Vice President - Strategic & Financial Planning Date: May 14, 1996