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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 SEPTEMBER 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 incorporation (IRS employer identification no.)
or organization)
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 26,882,758 outstanding shares of Common Stock, $0.01 par value,
on November 5, 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
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- ------------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT SHARE DATA)
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 14,573 $ 14,929
Accounts receivable....................................... 44,042 32,555
Prepaid expenses and other current assets................. 5,045 4,978
--------- ---------
TOTAL CURRENT ASSETS................................. 63,660 52,462
--------- ---------
PROPERTIES
Oil and natural gas properties (successful-efforts
method)................................................ 589,956 510,921
Other properties.......................................... 3,341 3,182
Accumulated depreciation, depletion and amortization...... (313,896) (279,722)
--------- ---------
TOTAL PROPERTIES..................................... 279,401 234,381
--------- ---------
OTHER ASSETS......................................... 2,361 2,150
--------- ---------
TOTAL ASSETS......................................... $ 345,422 $ 288,993
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities............... $ 35,784 $ 47,523
Short-term notes payable and current portion of other
long-term payables.................................... 1,811 1,715
--------- ---------
TOTAL CURRENT LIABILITIES............................ 37,595 49,238
--------- ---------
LONG-TERM LIABILITIES
Notes payable............................................. 37,400 37,400
Other long-term payables.................................. 168 1,503
Asset retirement obligation............................... 14,631 --
Deferred income tax liability............................. 24,085 7,192
--------- ---------
TOTAL LONG-TERM LIABILITIES.......................... 76,284 46,095
--------- ---------
TOTAL LIABILITIES.................................... 113,879 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, 26,880,758 shares issued and 26,846,399
shares outstanding in 2003, 26,327,195 shares issued
and 26,236,459 shares outstanding in 2002.............. 270 263
Additional paid-in capital................................ 119,822 115,827
Restricted common stock................................... 3,156 5,468
Unearned compensation..................................... (1,996) (3,192)
Retained earnings......................................... 110,291 76,271
Treasury stock............................................ -- (977)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY........................... 231,543 193,660
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $ 345,422 $ 288,993
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
2
REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
2003 2002 2003 2002
-------- -------- -------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES
Oil sales................................... $12,287 $12,802 $ 38,524 $31,227
Gas sales................................... 34,580 13,135 96,428 41,491
Gain on sale of assets...................... -- -- -- 4,095
Other income................................ 98 113 354 355
------- ------- -------- -------
TOTAL REVENUES................................ 46,965 26,050 135,306 77,168
------- ------- -------- -------
COSTS AND EXPENSES
Operating................................... 5,322 4,477 14,991 12,199
Exploration................................. 8,961 3,976 22,425 12,598
Depreciation, depletion and amortization.... 15,050 9,384 38,599 29,201
General and administrative.................. 1,710 1,697 5,634 5,347
Interest and financing...................... 433 413 1,318 1,706
------- ------- -------- -------
TOTAL COSTS AND EXPENSES...................... 31,476 19,947 82,967 61,051
------- ------- -------- -------
INCOME BEFORE TAXES........................... 15,489 6,103 52,339 16,117
------- ------- -------- -------
Income tax expense.......................... 5,421 2,136 18,319 5,641
------- ------- -------- -------
NET INCOME............................... $10,068 $ 3,967 $ 34,020 $10,476
======= ======= ======== =======
BASIC INCOME PER SHARE........................ $ 0.38 $ 0.15 $ 1.28 $ 0.42
======= ======= ======== =======
DILUTED INCOME PER SHARE...................... $ 0.36 $ 0.14 $ 1.22 $ 0.39
======= ======= ======== =======
WEIGHTED AVERAGE SHARES OUTSTANDING (BASIC)... 26,771 26,140 26,548 24,990
======= ======= ======== =======
WEIGHTED AVERAGE SHARES OUTSTANDING
(DILUTED)................................... 28,046 27,775 27,953 26,887
======= ======= ======== =======
See accompanying Notes to Condensed Consolidated Financial Statements.
3
REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
2003 2002
-------- --------
(UNAUDITED)
(IN THOUSANDS)
CASH FLOW PROVIDED BY OPERATIONS
NET INCOME................................................ $ 34,020 $ 10,476
Adjustments to reconcile net income
Depreciation, depletion and amortization............... 38,599 29,201
Deferred income taxes.................................. 18,244 5,641
Amortization of deferred charges....................... 161 164
Dry hole and impairment costs.......................... 21,443 11,993
Cash paid for dismantlement costs...................... (1,284) (86)
Stock based compensation............................... 1,171 1,246
(Gain) on sale of properties........................... -- (4,095)
Changes in working capital
(Increase) in accounts receivable...................... (11,494) (3,674)
(Increase) in prepaid expenses and other current
assets............................................... (139) (4,436)
(Decrease) increase in accounts payable and accrued
liabilities.......................................... (11,739) 6,414
-------- --------
NET CASH FLOW PROVIDED BY OPERATIONS...................... 88,982 52,844
-------- --------
CASH FROM INVESTING ACTIVITIES
Payments for capital expenditures...................... (89,147) (76,650)
Proceeds from property sales........................... -- 7,738
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES................... (89,147) (68,912)
-------- --------
CASH FROM FINANCING ACTIVITIES
Proceeds from note payable............................. -- 6,600
Loan origination costs................................. (293) --
Payments on notes payable and other long-term
payables............................................. (1,239) (53,997)
Common stock issued.................................... 2,150 54,379
Treasury stock acquired................................ (809) (977)
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES....... (191) 6,005
-------- --------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS................. (356) (10,063)
Cash and cash equivalents at beginning of period.......... 14,929 19,377
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 14,573 $ 9,314
======== ========
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 nine
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 nine months ended September 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 recorded 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 nine 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................................. 3,458 -- 3,458
Settlement of liabilities.......................... -- -- (1,284)
Asset retirement expense........................... -- 1,132 650
------- ------ -------
Balance September 30, 2003......................... $12,443 $3,824 $14,631
======= ====== =======
On our balance sheets we have included the costs of contract-based drilling
rights and mineral rights as part of oil and gas properties. Depending on how
accounting and disclosures interpretations relating to Statement of Financial
Accounting Standards No. 141, "Business Combinations" and Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangibles" are clarified,
these costs may be classified separately as intangible assets on our balance
sheet. At September 30, 2003, we had such costs in the net amount of $37.2
million on our balance sheet.
NOTE 3. NET INCOME PER SHARE
The following table presents our calculation of basic and diluted income
per share.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2003 2002 2003 2002
--------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net income available for basic income per
share......................................... $10,068 $3,967 $34,020 $10,476
Basic income per share.......................... $ 0.38 $ 0.15 $ 1.28 $ 0.42
======= ====== ======= =======
Diluted income per share........................ $ 0.36 $ 0.14 $ 1.22 $ 0.39
======= ====== ======= =======
Weighted average common stock
Total common shares for basic income per
share...................................... 26,771 26,140 26,548 24,990
Dilutive stock options outstanding (treasury
stock method).............................. 1,015 1,185 1,145 1,447
Restricted common stock grant................. 260 450 260 450
------- ------ ------- -------
Total common shares for diluted income per
share......................................... 28,046 27,775 27,953 26,887
======= ====== ======= =======
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 provisions of SFAS No.
123 had been applied:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2003 2002 2003 2002
--------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
As reported:
Net income.................................... $10,068 $3,967 $34,020 $10,476
Basic income per share........................ $ 0.38 $ 0.15 $ 1.28 $ 0.42
Diluted income per share...................... $ 0.36 $ 0.14 $ 1.22 $ 0.39
Stock based compensation (net of tax at
statutory rate of 35%) included in net income
as reported................................... $ 246 $ 256 $ 761 $ 810
Stock based compensation (net of tax at
statutory rate of 35%) if using the fair value
method applied to all awards.................. $ 733 $ 626 $ 2,203 $ 1,897
Proforma (if using the fair value method applied
to all awards):
Net income.................................... $ 9,581 $3,597 $32,578 $ 9,389
Basic income per share........................ $ 0.36 $ 0.14 $ 1.23 $ 0.38
Diluted income per share...................... $ 0.34 $ 0.13 $ 1.17 $ 0.35
Weighted average shares used in computation
Basic......................................... 26,771 26,140 26,548 24,990
Diluted....................................... 28,046 27,775 27,953 26,887
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 September 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 July 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
------ ------ -----
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. 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 the information below 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 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 September 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........................... 1,934 1,766 168 -- --
Office lease............................. 2,137 441 958 738 --
------- ------ ------- ---- --
Total................................. $41,471 $2,207 $38,526 $738 $--
======= ====== ======= ==== ==
On September 30, 2003, our current assets exceeded our current liabilities
by $26.1 million. Our current ratio was 1.69 to 1.
Net cash flow provided by operations increased by $36.1 million, or 68%,
primarily because of higher oil and gas revenues during the nine months of 2003
compared to 2002. Gas sales increased by $54.9 million, or 132% because
production increased by 27% and average prices increased by 83%. In addition,
oil sales increased by $7.3 million, or 23%, primarily because oil prices
increased by 24%.
During the first nine months of 2003, our capital expenditures totaled
$89.1 million of which $82.7 million, or 93%, was spent in the Gulf of Mexico
where we incurred costs to drill and complete wells and upgrade and complete
platforms and facilities. We anticipate total capital expenditures for 2003 to
be approximately $110.0 million, which is a 14% increase over the original
capital and exploration budget of $96.1 million. The increase is due to
additional development costs anticipated as a result of successful exploration
drilling. 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 and development, of the
opportunities generated by our success. We believe that, because of the
additional reserves resulting from the exploratory success and our record of
reserve growth in recent years, we will be able to acquire sufficient additional
capital through additional bank financing and/or offerings of debt or equity
securities.
8
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 September 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 fourth
quarter of this year.
RESULTS OF OPERATIONS
We recorded net income for the three months ended September 30, 2003, of
$10.1 million or $0.38 basic income per share and $0.36 diluted income per share
compared to $4.0 million or $0.15 basic income per share and $0.14 diluted
income per share for the three months ended September 30, 2002. For the first
nine months of 2003 we recorded net income of $34.0 million or $1.28 basic
income per share and $1.22 diluted income per share compared to $10.5 million or
$0.42 basic income per share and $0.39 diluted income per share for the first
nine months of 2002. Net income for the three and nine months ended September
30, 2003, was higher than in the prior year primarily because of increased oil
and gas revenues, partially offset by higher exploration expenses 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
2003 2002 2003 2002
-------- -------- ------- -------
(IN THOUSANDS, EXCEPT PRICES)
Oil production volume (Bbls)................... 436 494 1,308 1,318
Oil sales revenue.............................. $12,287 $12,802 $38,524 $31,227
Price per barrel............................... $ 28.18 $ 25.91 $ 29.45 $ 23.69
Increase (decrease) in oil sales revenue due
to:
Change in prices............................. $ 1,121 $ 7,592
Change in production volume.................. (1,636) (295)
-------- -------
Total increase (decrease) in oil sales
revenue...................................... $ (515) $ 7,297
======== =======
Gas production volume (Mcf).................... 6,918 4,030 17,278 13,630
Gas sales revenue.............................. $34,580 $13,135 $96,428 $41,491
Price per Mcf.................................. $ 5.00 $ 3.26 $ 5.58 $ 3.04
Increase in gas sales revenue due to:
Change in prices............................. $ 7,012 $34,620
Change in production volume.................. 14,433 20,317
-------- -------
Total increase in gas sales revenue............ $21,445 $54,937
======== =======
Total production Mcfe.......................... 9,534 6,994 25,126 21,538
Price per Mcfe................................. $ 4.92 $ 3.71 $ 5.37 $ 3.38
Oil sales revenue for the third quarter of 2003 compared to the same period
in 2002 decreased by $515,000, or 4%, primarily because of lower oil production
partially offset by higher average prices. Oil production from new properties
added 70,000 barrels of production during the third quarter of 2003 which was
more than offset by natural depletion from existing properties. Average prices
increased from $25.91 during the third quarter of 2002 to $28.18 during the
third quarter of 2003.
Oil sales revenue for the first nine months of 2003 increased by $7.3
million, or 23%, compared to the same period in 2002 primarily because average
oil prices increased by $5.77, or 24%, partially offset by slightly
9
lower production. Total oil production decreased by a net 10,000 barrels, or 1%.
Production from new wells totaling 135,000 barrels partially offset the overall
decreased from natural depletion of existing producing properties and the sale
of certain properties in South Texas in 2002. Average prices increased from
$23.69 during the first nine months of 2002 to $29.45 during the first nine
months of 2003, which increased oil revenues by $7.6 million.
Gas sales revenue for the three months ended September 30, 2003, compared
to the same period in 2002 increased by $21.4 million, or 163% because of
increases in both total production and average prices. During the three months
ended September 30, 2003, production from new wells totaled 3.8 Bcf, partially
offset by natural depletion from producing properties and the sale of certain
South Texas properties in 2002. Average prices increased from $3.26 during the
three months ended September 30, 2002 to $5.00 during the same three months of
2003, which increased gas revenues by $7.0 million.
Gas sales revenue for the first nine of 2003 increased by $54.9 million, or
132%, compared to the first nine months of 2002 because of increases in both
total production and average prices. During 2003, production from new wells
totaled 7.2 Bcf, partially offset by natural depletion from producing properties
and the sale of certain South Texas properties in 2002. Average prices increased
from $3.04 during the first nine months of 2002 to $5.58 during the first nine
months of 2003, which increased gas revenues by $34.6 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 NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2003 2002 2003 2002
----- ----- ----- -----
Operating costs and expenses........................... $0.56 $0.64 $0.60 $0.57
Depreciation, depletion and amortization............... 1.58 1.34 1.54 1.36
General and administrative expense*.................... 0.18 0.24 0.22 0.25
Interest and financing expense......................... 0.05 0.06 0.05 0.08
----- ----- ----- -----
* Stock based compensation included in general and
administrative expense............................... 0.04 0.06 0.05 0.06
Operating costs and expenses for the third quarter of 2003 compared to the
third quarter of 2002 increased by $845,000, or 19%, and for the first nine
months of 2003 compared to 2002 increased by $2.8 million, or 23% 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. The
primary reason for the decrease in the rate per Mcfe occurred because of the 36%
increase in total Mcfe production.
Exploration expense, including dry hole costs and property impairment
costs, increased by $5.0 million during the third quarter of 2003 and by $9.8
million during the first nine months of 2003. The expense increased primarily
because of increased dry hole expense. Dry hole expense for 2003 includes 8
wells in the Gulf of Mexico, one well in Mississippi and one well in South Texas
for a total cost of $19.7 million compared to $9.8 million dry hole expense in
2002.
Depreciation, depletion, and amortization expense increased by $5.7 million
during the third quarter of 2003 and by $9.4 million during the first nine
months of 2003 compared to the same period in the prior year primarily because
of an increase in the number of producing properties.
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.
10
Interest and financing expenses increased slightly during the third quarter
of 2003 compared to the third quarter of 2002 because of higher bank debt during
the quarter partially offset by lower rates. During the first nine months of
2003 interest and financing expenses decreased by 23% because of lower average
bank debt and lower interest rates as compared to the nine 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.
Income tax expense increased for the three and nine months ended September
30, 2003 because of the increase in income before taxes.
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 September 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 September 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 July 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
------ ------ -----
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
None
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.
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-Oxley
Act of 2002.
12
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 August 1, 2003, we filed a form 8-K reporting our second
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 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
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 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
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 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 on
or about March 31, 2003.
+++ Incorporated by reference to the Company's Form 10-Q (file number 1-1156)
for the fiscal quarter ended June 30, 2003, filed with the Commission on or
about August 11, 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: November 6, 2003
By: /s/ J. BURKE ASHER
------------------------------------
J. Burke Asher
Vice President/Finance
Date: November 6, 2003
14
INDEX TO EXHIBITS
EXHIBIT
NUMBER
-------
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-Oxley
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 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
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 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
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 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 on
or about March 31, 2003.
+++ Incorporated by reference to the Company's Form 10-Q (file number 1-1156)
for the fiscal quarter ended June 30, 2003, filed with the Commission on
or about August 11, 2003.