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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 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 JUNE 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-11516
REMINGTON OIL AND GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-2369148
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
8201 PRESTON ROAD, SUITE 600, DALLAS, TEXAS 75225-6211
(Address of principal executive offices)
(Zip code)
(214) 210-2650
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
There were 26,777,031 outstanding shares of Common Stock, $0.01 par value,
on August 7, 2003.
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REMINGTON OIL AND GAS CORPORATION
TABLE OF CONTENTS
PART I, FINANCIAL INFORMATION............................... 2
Item 1. Financial Statements.............................. 2
Condensed Consolidated Balance Sheets............. 2
Condensed Consolidated Statements of Income....... 3
Condensed Consolidated Statements of Cash Flows... 4
Notes to Condensed Consolidated Financial
Statements........................................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk............................................ 11
Item 4. Controls and Procedures........................... 11
PART II, OTHER INFORMATION.................................. 12
Item 1. Legal Proceedings................................. 12
Item 2. Changes in Securities and Use of Proceeds......... 12
Item 3. Defaults upon Senior Securities................... 12
Item 4. Submission of Matters to a Vote of Security
Holders................................................ 12
Item 5. Other Information................................. 12
Item 6. Exhibits and Reports on Form 8-K.................. 12
1
PART I, FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2003 2002
------------ -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE
DATA)
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 14,829 $ 14,929
Accounts receivable....................................... 38,773 32,555
Prepaid expenses and other current assets................. 7,644 4,978
--------- ---------
TOTAL CURRENT ASSETS................................... 61,246 52,462
--------- ---------
PROPERTIES
Oil and natural gas properties (successful-efforts
method)................................................ 571,918 510,921
Other properties.......................................... 3,253 3,182
Accumulated depreciation, depletion and amortization...... (299,339) (279,722)
--------- ---------
TOTAL PROPERTIES....................................... 275,832 234,381
--------- ---------
OTHER ASSETS................................................ 2,405 2,150
--------- ---------
TOTAL ASSETS...................................... $ 339,483 $ 288,993
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................. $ 46,250 $ 47,523
Short-term notes payable and current portion of other
long-term payables..................................... 2,332 1,715
--------- ---------
TOTAL CURRENT LIABILITIES.............................. 48,582 49,238
--------- ---------
LONG-TERM LIABILITIES
Notes payable............................................. 37,400 37,400
Other long-term payables.................................. 765 1,503
Asset retirement obligation............................... 13,127 --
Deferred income tax liability............................. 18,992 7,192
--------- ---------
TOTAL LONG-TERM LIABILITIES............................ 70,284 46,095
--------- ---------
TOTAL LIABILITIES...................................... 118,866 95,333
--------- ---------
Commitments and contingencies (Note 6)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 25,000,000 shares
authorized, no shares outstanding...................... -- --
Common stock, $.01 par value, 100,000,000 shares
authorized, 26,868,417 shares issued and 26,742,672
shares outstanding in 2003, 26,327,195 shares issued
and 26,236,459 shares outstanding in 2002.............. 268 263
Additional paid-in capital................................ 120,576 115,827
Restricted common stock................................... 3,505 5,468
Unearned compensation..................................... (2,323) (3,192)
Retained earnings......................................... 100,222 76,271
Treasury stock............................................ (1,631) (977)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY............................. 220,617 193,660
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $ 339,483 $ 288,993
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
2
REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- -------------------
2003 2002 2003 2002
--------- --------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES
Oil sales............................................ $12,584 $11,356 $26,237 $18,423
Gas sales............................................ 33,196 16,050 61,847 28,357
Gain on sale of assets............................... -- 4,087 -- 4,087
Other income......................................... 223 207 256 250
------- ------- ------- -------
TOTAL REVENUES......................................... 46,003 31,700 88,340 51,117
------- ------- ------- -------
COSTS AND EXPENSES
Operating............................................ 5,277 4,465 9,669 7,720
Exploration.......................................... 6,366 4,958 13,464 8,622
Depreciation, depletion and amortization............. 12,792 10,250 23,549 19,818
General and administrative........................... 2,214 1,945 3,924 3,650
Interest and financing............................... 485 464 885 1,293
------- ------- ------- -------
TOTAL COSTS AND EXPENSES............................... 27,134 22,082 51,491 41,103
------- ------- ------- -------
INCOME BEFORE TAXES.................................... 18,869 9,618 36,849 10,014
------- ------- ------- -------
Income tax expense................................... 6,605 3,366 12,898 3,505
------- ------- ------- -------
NET INCOME............................................. $12,264 $ 6,252 $23,951 $ 6,509
======= ======= ======= =======
BASIC INCOME PER SHARE................................. $ 0.46 $ 0.24 $ 0.91 $ 0.27
======= ======= ======= =======
DILUTED INCOME PER SHARE............................... $ 0.44 $ 0.22 $ 0.86 $ 0.25
======= ======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING (BASIC)............ 26,533 25,953 26,436 24,424
======= ======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED).......... 27,844 27,889 27,910 26,316
======= ======= ======= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
3
REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30,
-------------------
2003 2002
-------- --------
(UNAUDITED)
(IN THOUSANDS)
CASH FLOW PROVIDED BY OPERATIONS
NET INCOME................................................ $ 23,951 $ 6,509
Adjustments to reconcile net income
Depreciation, depletion and amortization............... 23,549 19,818
Deferred income taxes.................................. 12,898 3,505
Amortization of deferred charges....................... 116 94
Dry hole and impairment costs.......................... 12,759 8,278
Cash paid for dismantlement costs...................... (614) (42)
Stock based compensation............................... 792 853
(Gain) on sale of properties........................... -- (4,087)
Changes in working capital
(Increase) in accounts receivable...................... (6,223) (10,274)
(Increase) in prepaid expenses and other current
assets................................................ (2,739) (1,314)
(Decrease) increase in accounts payable and accrued
liabilities........................................... (1,273) 6,320
-------- --------
NET CASH FLOW PROVIDED BY OPERATIONS...................... 63,216 29,660
-------- --------
CASH FROM INVESTING ACTIVITIES
Payments for capital expenditures...................... (63,460) (49,704)
Proceeds from property sales........................... -- 7,669
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES................... (63,460) (42,035)
-------- --------
CASH FROM FINANCING ACTIVITIES
Proceeds from note payable............................. -- 6,600
Loan origination costs................................. (293) --
Payments on notes payable and other long-term
payables.............................................. (679) (52,046)
Common stock issued.................................... 1,770 53,925
Treasury stock acquired................................ (654) (977)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES................. 144 7,502
-------- --------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS................. (100) (4,873)
Cash and cash equivalents at beginning of period.......... 14,929 19,377
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 14,829 $ 14,504
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
4
REMINGTON OIL AND GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Remington Oil and Gas Corporation is an independent oil and gas exploration
and production company incorporated in Delaware. Our oil and gas properties are
located in the shallow water offshore Gulf of Mexico and the onshore Gulf Coast.
We prepared these financial statements according to the instructions for
Form 10-Q. Therefore, the financial statements do not include all disclosures
required by generally accepted accounting principles. However, we have recorded
all transactions and adjustments necessary to fairly present the financial
statements included in this Form 10-Q. The adjustments made are normal and
recurring. The following notes describe only the material changes in accounting
policies, account details or financial statement notes during the first six
months of 2003. Therefore, please read these financial statements and notes to
the financial statements together with the audited financial statements and
notes to financial statements in our 2002 Form 10-K. The income statements for
the three and six months ended June 30, 2003, cannot necessarily be used to
project results for the full year. We have made certain reclassifications to
prior year financial statements in order to conform to current year
presentations.
NOTE 2. NEW ACCOUNTING POLICIES
We adopted Statement of Financial Accounting Standards No. 143, "Accounting
for Asset Retirement Obligations," effective January 1, 2003. The statement
requires that we estimate the fair value for our asset retirement obligations
(dismantlement and abandonment of oil and gas wells and offshore platforms) in
the periods the assets are first placed in service. We then adjust the current
estimated obligation for estimated inflation and market risk contingencies to
the projected settlement date of the liability. The result is then discounted to
a present value from the projected settlement date to the date the asset was
first placed in service. We record the present value of the asset retirement
obligation as an additional property cost and as an asset retirement liability.
A combination of the amortization of the additional property cost (using the
unit of production method) and the accretion of the discounted liability is
recorded as a periodic expense in our income statement.
Prior to this adoption, we accrued an estimated dismantlement, restoration
and abandonment liability using the unit of production method over the life of a
property and included the accrued amount in depreciation, depletion and
amortization expense. The total accrued liability ($5.5 million) was reflected
as additional accumulated depreciation, depletion and amortization of oil and
gas properties on our balance sheet.
In conformity with the new statement we recorded the cumulative effect of
this accounting change as of January 1, 2003 as if we had used this method in
the prior years. At January 1, 2003, we increased our oil and gas properties by
$9.0 million, recorded $11.8 million as an Asset Retirement Obligation liability
and reduced our accumulated depreciation by $2.8 million ($5.5 million accrued
dismantlement in prior years less accumulated depreciation, depletion and
amortization of $2.7 million on the increased property costs). The
5
REMINGTON OIL AND GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adoption of the new standard had no material effect on our net income. The
following table reflects the reconciliation of the asset retirement obligations
during the first six months of 2003.
CAPITALIZED ACCUMULATED ASSET
ASSET DEPRECIATION RETIREMENT
RETIREMENT DEPLETION AND OBLIGATION
COST AMORTIZATION LIABILITY
----------- ------------- ----------
(IN THOUSANDS)
Balance January 1, 2003............................ $ 8,985 $2,692 $11,807
Property additions................................. 2,073 -- 2,073
Settlement of liabilities.......................... -- -- (614)
Asset retirement expense........................... -- 644 419
------- ------ -------
Balance June 30, 2003.............................. $11,058 $3,336 $13,685
======= ====== =======
Of the total asset retirement obligation, $558,000 is classified as current
due to the anticipated dismantlement and abandonment of East Cameron block 305
during 2003.
On our balance sheets we have included the costs of contract-based drilling
rights and mineral rights as part of oil and gas properties. We believe that all
domestic oil and gas producing companies treat such costs as part of oil and gas
properties. We have been advised that the Financial Accounting Standards Board
and the staff of the Securities and Exchange Commission are engaged in a
discussion on the issue of whether Statement of Financial Accounting Standards
No. 141, "Business Combinations" and Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangibles," which were effective June 30, 2001,
would require that such costs be classified as intangible assets. Once this
issue is resolved, we may be required to reclassify to intangible assets the
rights mentioned in paragraph A14(d)7 of SFAS 141.
NOTE 3. NET INCOME PER SHARE
The following table presents our calculation of basic and diluted income
per share.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- -------------------
2003 2002 2003 2002
--------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net income available for basic income per
share........................................ $12,264 $ 6,252 $23,951 $ 6,509
Basic income per share......................... $ 0.46 $ 0.24 $ 0.91 $ 0.27
======= ======= ======= =======
Diluted income per share....................... $ 0.44 $ 0.22 $ 0.86 $ 0.25
======= ======= ======= =======
Weighted average common stock
Total common shares for basic income per
share..................................... 26,536 25,953 26,436 24,424
Dilutive stock options outstanding (treasury
stock method)............................. 1,019 1,486 1,144 1,442
Restricted common stock grant................ 289 450 330 450
------- ------- ------- -------
Total common shares for diluted income per
share........................................ 27,844 27,889 27,910 26,316
======= ======= ======= =======
6
REMINGTON OIL AND GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. STOCK BASED COMPENSATION
The following table summarizes relevant information as to the reported
results under our intrinsic value method of accounting for stock awards, with
supplemental information as if the fair value recognition provision of SFAS No.
123 had been applied:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- -------------------
2003 2002 2003 2002
--------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
As reported:
Net income................................... $12,264 $ 6,252 $23,951 $ 6,509
Basic income per share....................... $ 0.46 $ 0.24 $ 0.91 $ 0.27
Diluted income per share..................... $ 0.44 $ 0.22 $ 0.86 $ 0.25
Stock based compensation (net of tax at 35%)
included in net income as reported........... $ 242 $ 257 $ 515 $ 554
Stock based compensation (net of tax at 35%) if
using the fair value method as applied to all
awards....................................... $ 716 $ 617 $ 1,462 $ 1,271
Proforma (if using the fair value method
applied to all awards):
Net income................................... $11,790 $ 5,892 $23,004 $ 5,792
Basic income per share....................... $ 0.44 $ 0.22 $ 0.87 $ 0.23
Diluted income per share..................... $ 0.42 $ 0.21 $ 0.82 $ 0.22
Weighted average shares used in computation
Basic........................................ 26,536 25,953 26,436 24,424
Diluted...................................... 27,844 27,889 27,910 26,316
NOTE 5. NOTES PAYABLE
Effective May 1, 2003, we agreed with our lenders to increase our borrowing
base from $75.0 million to $100.0 million and to extend the maturity date of the
loan facility from May 3, 2004, to May 3, 2006. As of June 30, 2003, we had
$37.4 million borrowed under the facility. The banks review the borrowing base
semi-annually and may decrease or propose an increase to the borrowing base
relative to a redetermined estimate of proved oil and gas reserves. Our oil and
gas properties are pledged as collateral for the line of credit. Additionally,
we have agreed not to pay dividends.
NOTE 6. COMMITMENTS AND CONTINGENCIES
For the period April 1, 2003, through December 31, 2003, we have physical
delivery contracts in place to sell 21,500 MMBtu of gas per day and 1,200
barrels of oil per day at the following prices:
PRICE PER
--------------
PERIOD BARREL MMBTU
------ ------ -----
April 1, 2003 through June 30, 2003......................... $30.92 $5.16
July 1, 2003 through September 30, 2003..................... $28.70 $4.89
October 1, 2003 through December 31, 2003................... $27.41 $4.95
We have no material pending legal proceedings.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion will assist in the understanding of our financial
position and results of operations. The information below should be read in
conjunction with the financial statements, the related notes to financial
statements, and our Form 10-K for the year ended December 31, 2002.
Our discussion contains both historical and forward-looking information. We
assess the risks and uncertainties about our business, long-term strategy, and
financial condition before we make any forward-looking statements, but we cannot
guarantee that our assessment is accurate or that our goals and projections can
or will be met. Statements concerning results of future exploration,
exploitation, development, and acquisition expenditures as well as revenue,
expense, and reserve levels are forward-looking statements. We make assumptions
about commodity prices, drilling results, production costs, administrative
expenses, and interest costs that we believe are reasonable based on currently
available information.
This discussion is primarily an update to the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the 2002
Form 10-K. We recommend that you read this discussion in conjunction with the
Form 10-K.
Our long-term strategy is to increase our oil and gas production and
reserves while keeping our operating costs and our finding and development costs
competitive with our industry peers.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes certain contractual obligations and
commercial commitments as of June 30, 2003.
PAYMENTS DUE BY PERIOD
--------------------------------------------------------
LESS THAN
TOTAL 1 YEAR 1-3 YEARS 4-5 YEARS AFTER 5 YEARS
------- ---------------- --------- --------- -------------
(IN THOUSANDS)
Contractual obligations
Bank debt.................. $37,400 $ -- $37,400 $ -- $ --
Other payables............. 2,539 1,774 765 -- --
Office lease............... 2,248 441 946 861 --
------- ------ ------- ---- -----
Total................... $42,187 $2,215 $39,111 $861 $ --
======= ====== ======= ==== =====
On June 30, 2003, our current assets exceeded our current liabilities by
$12.7 million. Our current ratio was 1.26 to 1.
Net cash flow provided by operations increased by $33.6 million, or 113%,
primarily because of higher oil and gas revenues during the first half of 2003
compared to the first half of 2002. Gas sales increased by $33.5 million, or
118% because average prices increased by 102% and production increased by 8%. In
addition, oil sales increased by $7.8 million, or 42%, because oil prices
increased by 35% and oil production increased by 6%.
During the first six months of 2003, our capital expenditures totaled $63.5
million of which $59.5 million, or 94%, was spent in the Gulf of Mexico where we
incurred costs to drill and complete wells and upgrade and complete platforms
and facilities. We have budgeted $96.1 million for capital expenditures during
2003. This capital and exploration budget includes $51.3 million for 30
exploratory wells, $25.8 million for offshore platforms and development
drilling, and $19.0 million for workovers and property and seismic acquisitions.
We expect that our cash, estimated future cash flow from operations, and
available bank line of credit will be adequate to fund these expenditures for
the remainder of 2003.
If our exploratory drilling results in significant new discoveries, we will
have to expend additional capital for the completion, development, and potential
additional opportunities generated by our success. We believe that, because of
the additional reserves resulting from the exploratory success and our record of
reserve growth
8
in recent years, we will be able to acquire sufficient additional capital
through additional bank financing and /or offerings of debt or equity
securities.
Effective May 1, 2003, we agreed with our lenders to increase our borrowing
base from $75.0 million to $100.0 million and to extend the maturity date of the
loan facility from May 3, 2004, to May 3, 2006. As of June 30, 2003, we had
$37.4 million borrowed under the facility. The banks review the borrowing base
semi-annually and may decrease or propose an increase to the borrowing base
relative to a redetermined estimate of proved oil and gas reserves. Our oil and
gas properties are pledged as collateral for the line of credit. Additionally,
we have agreed not to pay dividends.
On June 19, 2003, we filed a shelf registration statement to issue up to
$200 million of common stock, debt securities, preferred stock, and/or warrants.
We expect the registration statement to become effective during the third
quarter of this year.
RESULTS OF OPERATIONS
We recorded net income for the three months ended June 30, 2003, of $12.3
million or $0.46 basic income per share and $0.44 diluted income per share
compared to $6.3 million or $0.24 basic income per share and $0.22 diluted
income per share for the three months ended June 30, 2002. For the first six
months of 2003 we recorded net income of $24.0 million or $0.91 basic income per
share and $0.86 diluted income per share compared to $6.5 million or $0.27 basic
income per share and $0.25 diluted income per share for the first six months of
2002. Net income for the three and six months ended June 30, 2003, was higher
than in the prior year primarily because of increased oil and gas revenues,
partially offset by higher exploration expenses in 2003 and a $4.1 million gain
from the sale of certain South Texas properties in 2002. The following table
reflects the increase or decrease in oil and gas sales revenue due to the
changes in prices and volumes.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
2003 2002 2003 2002
-------- -------- ------- -------
(IN THOUSANDS, EXCEPT PRICES)
Oil production volume (Bbls)................... 447 457 872 825
Oil sales revenue.............................. $12,584 $11,356 $26,237 $18,423
Price per barrel............................... $ 28.15 $ 24.85 $ 30.09 $ 22.33
Increase (decrease) in oil sales revenue due
to:
Change in prices............................. $ 1,508 $ 6,402
Change in production volume.................. (280) 1,412
------- -------
Total increase (decrease) in oil sales
revenue...................................... $ 1,228 $ 7,814
======= =======
Gas production volume (Mcf).................... 5,855 4,832 10,360 9,587
Gas sales revenue.............................. $33,196 $16,050 $61,847 $28,357
Price per Mcf.................................. $ 5.67 $ 3.32 $ 5.97 $ 2.96
Increase in gas sales revenue due to:
Change in prices............................. $11,355 $28,857
Change in production volume.................. 5,791 4,633
------- -------
Total increase in gas sales revenue............ $17,146 $33,490
======= =======
Total production Mcfe.......................... 8,537 7,574 15,592 14,537
Price per Mcfe................................. $ 5.36 $ 3.62 $ 5.65 $ 3.22
Oil sales revenue for the second quarter of 2003 compared to the same
period in 2002 increased by $1.2 million, or 11%, primarily because oil prices
increased by $3.30 per barrel, or 13%. Oil production from offshore Gulf of
Mexico decreased by 25,000 barrels, or 7%, because of natural depletion from
several older properties partially offset by production from new properties in
the Gulf of Mexico. Oil production from the onshore gulf coast increased by
10,000 barrels primarily due to production from new discoveries, partially
9
offset by natural depletion from several older properties. Average prices
increased from $24.85 during the second quarter of 2002 to $28.15 during the
second quarter of 2003.
Oil sales revenue for the first half of 2003 compared to the first half of
2002 increased by $7.8 million, or 42%, because oil prices increased by $7.76,
or 35%, and production increased by 47,000 barrels. Oil production from offshore
Gulf of Mexico increased by 57,000 barrels, or 9%, because of production from
new properties. Oil production from onshore gulf coast properties decreased by
10,000 barrels because of natural depletion of the existing producing properties
and the sale of certain properties in South Texas in April 2002, partially
offset by production from new properties. Average prices increased from $22.33
during the first six months of 2002 to $30.09 during the first six months of
2003, which increased oil revenues by $6.4 million.
Gas sales revenue for the three months ended June 30, 2003, compared to the
same period in 2002 increased by $17.1 million, or 107% because production
increased by 1.0 Bcf, or 21%, and average prices increased by $2.35, or 71%.
Production from the Gulf of Mexico increased by 1.1 Bcf, or 26%, primarily
because of gas production from new properties, partially offset by lower
production from natural depletion of existing properties in the gulf coast area.
Average prices increased from $3.32 during the second quarter of 2002 to $5.67
during the second quarter of 2003, increasing revenues by $11.4 million.
Gas sales revenue for the first half of 2003 compared to the first half of
2002 increased by $33.5 million, or 118% because production increased by 773,000
Mcf, or 8%, and average prices increased by $3.01, or 102%. Production from the
Gulf of Mexico increased by 1.3 Bcf, or 15%, primarily because of gas production
from new properties, partially offset by lower production from natural depletion
of existing properties in the gulf coast area. Average prices increased from
$2.96 during the first six months of 2002 to $5.97 during the first six months
of 2003, which increased gas revenues by $28.9 million.
Other income decreased primarily because we realized a $4.1 million gain
from the sale of properties in South Texas in April 2002.
The following table presents certain expense items per Mcf equivalent
(Mcfe) of production. (Barrels of oil are converted to Mcfe at a ratio of one
barrel equals six Mcf.)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------- ---------------
2003 2002 2003 2002
------ ------ ------ ------
Operating costs and expenses........................... $0.62 $0.59 $0.62 $0.53
Depreciation, depletion and amortization............... $1.50 $1.35 $1.51 $1.36
General and administrative expense*.................... $0.26 $0.26 $0.25 $0.25
Interest and financing expense......................... $0.06 $0.06 $0.06 $0.09
---------------
* Stock based compensation included in general and
administrative expense............................... $0.04 $0.05 $0.05 $0.06
Operating costs and expenses for the second quarter of 2003 compared to the
second quarter of 2002 increased by $708,000, or 16%, and for the first six
months of 2003 compared to 2002 increased by $1.8 million, or 24% primarily
because of new operated properties in the Gulf of Mexico. In addition, increases
in delay rental expense for unproved properties, insurance rates, and repairs
expense on existing properties also increased operating costs and expenses and
were the primary reason for the increase in the rate per Mcfe.
Exploration expense increased by $1.4 million during the second quarter of
2003 and by $4.8 million during the first six months of 2003 primarily because
of increased dry hole expense. Dry hole expense for 2003 includes 6 wells in the
Gulf of Mexico, one well in Mississippi and one well in South Texas for a total
cost of $12.3 million compared to $8.3 million dry hole expense in 2002.
Depreciation, depletion, and amortization expense increased by $2.5 million
during the second quarter of 2003 and by $3.7 million during the first six
months of 2003 compared to the same period in the prior year because of an
increase in the number of producing properties.
10
General and administrative expenses have increased slightly due to employee
related expense. Included in general and administrative expenses is stock based
compensation expense which includes the amortized compensation cost related to
the contingent stock grant and the directors fees paid in common stock.
Interest and financing expenses increased slightly during the second
quarter of 2003 compared to the second quarter of 2002 because of higher bank
debt during the quarter partially offset by lower rates. During the first six
months of 2003 interest and financing expenses decreased by 32% because of lower
average bank debt and lower interest rates as compared to the six month period
of 2002. In March 2002, we issued 3.0 million shares of common stock at $18.50
per share. We used $44.0 million of the net proceeds to reduce outstanding bank
debt from $71.0 million to $27.0 million.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
Our revolving bank line of credit is sensitive to changes in interest
rates. At June 30, 2003, the unpaid principal balance under the line was $37.4
million which approximates its fair value. The interest rate on this debt is
based on a premium of 150 to 225 basis points over the London Interbank Offered
Rate ("Libor"). The rate is reset periodically, usually every three months. If
on June 30, 2003, Libor changed by one full percentage point (100 basis points)
the fair value of our revolving debt would change by approximately $93,000. We
have not entered into any interest rate hedging contracts.
COMMODITY PRICE RISK
A vast majority of our production is sold on the spot markets. Accordingly,
we are at risk for the volatility in the commodity prices inherent in the oil
and gas industry.
Occasionally we sell forward portions of our production under physical
delivery contracts that by their terms cannot be settled in cash or other
financial instruments. Such contracts are not subject to the provisions of
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Accordingly, we do not provide sensitivity
analysis for such contracts. For the period January 1, 2003, through March 31,
2003, we did not have any forward sales contracts in place. For the period April
1, 2003, through December 31, 2003, we have physical delivery contracts in place
to sell 21,500 MMBtu of gas per day and 1,200 barrels of oil per day at the
following prices:
PRICE PER
--------------
PERIOD BARREL MMBTU
------ ------ -----
April 1, 2003 through June 30, 2003......................... $30.92 $5.16
July 1, 2003 through September 30, 2003..................... $28.70 $4.89
October 1, 2003 through December 31, 2003................... $27.41 $4.95
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, our management,
including our Chief Executive Officer and our Principal Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures as defined
in Exchange Act Rule 13a-15(e). Based on that evaluation, our management,
including the Chief Executive Officer and the Principal Financial Officer,
concluded that our disclosure controls and procedures were effective as of the
end of the period covered by this report. Further, during the period covered by
this report, there was no significant change in internal controls over financial
reporting that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
11
PART II, OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We have no material pending legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 27, 2003, we held our annual stockholders meeting to elect members
to the company's board of directors. The stockholders voted as follows:
FOR WITHHELD
---------- --------
Election of Directors
John E. Goble, Jr. ....................................... 21,458,809 128,483
William E. Greenwood...................................... 21,458,679 128,613
Robert P. Murphy.......................................... 21,458,809 128,483
David E. Preng............................................ 21,458,709 128,583
Thomas W. Rollins......................................... 21,458,809 128,483
Alan C. Shapiro........................................... 21,458,809 128,483
James A. Watt............................................. 21,458,679 128,613
The members of the board of directors do not serve staggered terms of
office. All directors elected at the meeting were already members of the board
at the time of election, except Robert P. Murphy. Directors Don D. Box, David H.
Hawk, and James Arthur Lyle, whose terms ended as of the annual stockholders
meeting, did not stand for re-election.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1# Certificate of Amendment of Certificate of Incorporation of
Remington Oil and Gas Corporation.
3.3 By-Laws as amended.
10.1++ Pension Plan of Remington Oil and Gas Corporation, as
Amended and Restated effective January 1, 2000.
10.2 Amendment Number One to the Pension Plan of Remington Oil
++ and Gas Corporation.
10.3*** Amendment Number Two to the Pension Plan of Remington Oil
and Gas Corporation.
10.4*** Amendment Number Three to the Pension Plan of Remington Oil
and Gas Corporation.
10.5* Box Energy Corporation Severance Plan.
10.6## Box Energy Corporation 1997 Stock Option Plan (as amended
June 17, 1999 and May 23, 2001).
10.7* Box Energy Corporation Non-Employee Director Stock Purchase
Plan.
10.8+ Form of Employment Agreement effective September 30, 1999,
by and between Remington Oil and Gas Corporation and two
executive officers.
12
10.9+ Form of Employment Agreement effective September 30, 1999, by and between Remington Oil and Gas
Corporation and an executive officer.
10.10** Employment Agreement effective January 31, 2000, by and between Remington Oil and Gas Corporation and
James A. Watt.
10.11*** Form of Employment Agreement effective April 30, 2002, by and between Remington Oil and Gas Corporation
and an executive officer.
10.12** Form of Contingent Stock Grant Agreement -- Directors.
10.13** Form of Contingent Stock Grant Agreement -- Employees.
10.14** Form of Amendment to Contingent Stock Grant Agreement -- Directors.
10.15** Form of Amendment to Contingent Stock Grant Agreement -- Employees.
14.1 Code of Business Conduct and Ethics.
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Onley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) On May 2, 2003, we filed a Form 8-K reporting our first quarter
earnings press release under Item 12. Results of Operations and Financial
Condition.
---------------
* Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 1997, filed with the Commission and
effective on or about March 30, 1998.
# Incorporated by reference to the Company's Registration Statement on Form S-4
(file number 333-61513) filed with the Commission and effective on November
27, 1998.
+ Incorporated by reference to the Company's Form 10-Q (file number 1-11516)
for the fiscal quarter ended September 30, 1999, filed with the Commission
and effective on or about November 12, 1999.
** Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 2000, filed with the Commission and
effective on or about March 16, 2001.
## Incorporated by reference to the Company's Form 10-Q (file number 1-11516)
for the fiscal quarter ended September 30, 2001, filed with the Commission
and effective on or about November 9, 2001.
++ Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 2001, filed with the Commission and
effective on or about March 21, 2002.
*** Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 2002, filed with the Commission and
effective on or about March 31, 2003.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REMINGTON OIL AND GAS CORPORATION
By: /s/ JAMES A. WATT
------------------------------------
James A. Watt
President and Chief Executive
Officer
Date: August 8, 2003
By: /s/ J. BURKE ASHER
------------------------------------
J. Burke Asher
Vice President/Finance
Date: August 8, 2003
14
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1# Certificate of Amendment of Certificate of Incorporation of
Remington Oil and Gas Corporation.
3.3 By-Laws as amended.
10.1++ Pension Plan of Remington Oil and Gas Corporation, as
Amended and Restated effective January 1, 2000.
10.2++ Amendment Number One to the Pension Plan of Remington Oil
and Gas Corporation.
10.3*** Amendment Number Two to the Pension Plan of Remington Oil
and Gas Corporation.
10.4*** Amendment Number Three to the Pension Plan of Remington Oil
and Gas Corporation.
10.5* Box Energy Corporation Severance Plan.
10.6## Box Energy Corporation 1997 Stock Option Plan (as amended
June 17, 1999 and May 23, 2001).
10.7* Box Energy Corporation Non-Employee Director Stock Purchase
Plan.
10.8+ Form of Employment Agreement effective September 30, 1999,
by and between Remington Oil and Gas Corporation and two
executive officers.
10.9+ Form of Employment Agreement effective September 30, 1999,
by and between Remington Oil and Gas Corporation and an
executive officer.
10.10** Employment Agreement effective January 31, 2000, by and
between Remington Oil and Gas Corporation and James A. Watt.
10.11*** Form of Employment Agreement effective April 30, 2002, by
and between Remington Oil and Gas Corporation and an
executive officer.
10.12** Form of Contingent Stock Grant Agreement -- Directors.
10.13** Form of Contingent Stock Grant Agreement -- Employees.
10.14** Form of Amendment to Contingent Stock Grant
Agreement -- Directors.
10.15** Form of Amendment to Contingent Stock Grant
Agreement -- Employees.
14.1 Code of Business Conduct and Ethics.
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Onley
Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
---------------
* Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 1997, filed with the Commission and
effective on or about March 30, 1998.
# Incorporated by reference to the Company's Registration Statement on Form S-4
(file number 333-61513) filed with the Commission and effective on November
27, 1998.
+ Incorporated by reference to the Company's Form 10-Q (file number 1-11516)
for the fiscal quarter ended September 30, 1999, filed with the Commission
and effective on or about November 12, 1999.
** Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 2000, filed with the Commission and
effective on or about March 16, 2001.
## Incorporated by reference to the Company's Form 10-Q (file number 1-11516)
for the fiscal quarter ended September 30, 2001, filed with the Commission
and effective on or about November 9, 2001.
++ Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 2001, filed with the Commission and
effective on or about March 21, 2002.
*** Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 2002, filed with the Commission and
effective on or about March 31, 2003.