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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q/A
AMENDMENT NO. 1
(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, 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 26,459,991 outstanding shares of Common Stock, $0.01 par value,
on May 1, 2003.
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REMINGTON OIL AND GAS CORPORATION
INDEX
PART I -- FINANCIAL INFORMATION
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.................... 9
Item 3. Quantitative and Qualitative Disclosures about
Market Risk............................................ 11
Item 4. Controls and Procedures........................... 12
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings................................. 13
Item 2. Changes in Securities and Use of Proceeds......... 13
Item 3. Defaults upon Senior Securities................... 13
Item 4. Submission of Matters to a Vote of Security
Holders................................................ 13
Item 5. Other Information................................. 13
Item 6. Exhibits and Reports on Form 8-K.................. 13
SIGNATURES................................................ 15
1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2003 2002
-------------- ---------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............................. $ 14,814 $ 14,929
Accounts receivable.................................... 47,288 32,555
Prepaid drilling costs................................. 5,775 3,115
Prepaid expenses and other current assets.............. 1,688 1,863
--------- ---------
TOTAL CURRENT ASSETS...................................... 69,565 52,462
--------- ---------
PROPERTIES
Oil and gas properties (successful-efforts method)..... 537,974 510,921
Other properties....................................... 3,247 3,182
Accumulated depreciation, depletion and amortization... (287,027) (279,722)
--------- ---------
TOTAL PROPERTIES.......................................... 254,194 234,381
--------- ---------
OTHER ASSETS.............................................. 2,150 2,150
--------- ---------
TOTAL ASSETS................................................ $ 325,909 $ 288,993
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities............... $ 54,140 $ 47,523
Short-term notes payable and current portion of other
long-term payables.................................... 2,285 1,715
--------- ---------
TOTAL CURRENT LIABILITIES................................. 56,425 49,238
--------- ---------
LONG-TERM LIABILITIES
Notes payable.......................................... 37,400 37,400
Other long-term payables............................... 1,224 1,503
Asset retirement obligation............................ 11,847 --
Deferred income taxes.................................. 13,261 7,192
--------- ---------
TOTAL LONG-TERM LIABILITIES............................... 63,732 46,095
--------- ---------
TOTAL LIABILITIES...................................... 120,157 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, 26,495,553 shares issued and 26,388,801
shares outstanding in 2003, 26,327,195 shares issued
and 26,236,459 shares outstanding in 2002............. 265 263
Additional paid-in capital............................. 117,144 115,827
Restricted common stock................................ 4,508 5,468
Unearned compensation.................................. (2,845) (3,192)
Treasury stock (72,393 shares in 2003 and 56,377 shares
in 2002).............................................. (1,278) (977)
Retained earnings...................................... 87,958 76,271
--------- ---------
TOTAL STOCKHOLDERS' EQUITY................................ 205,752 193,660
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $ 325,909 $ 288,993
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
2
REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31,
----------------------
2003 2002
--------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
REVENUES
Oil sales................................................. $13,653 $ 7,068
Gas sales................................................. 28,651 12,307
Other income.............................................. 33 43
------- -------
TOTAL REVENUES.............................................. 42,337 19,418
------- -------
COSTS AND EXPENSES
Operating................................................. 4,392 3,257
Exploration............................................... 7,098 3,664
Depreciation, depletion and amortization.................. 10,757 9,568
General and administrative................................ 1,710 1,703
Interest and financing.................................... 400 829
------- -------
TOTAL COSTS AND EXPENSES.................................... 24,357 19,021
------- -------
INCOME BEFORE INCOME TAXES.................................. 17,980 397
Income tax expense........................................ 6,293 139
------- -------
NET INCOME.................................................. $11,687 $ 258
======= =======
Basic income per share...................................... $ 0.44 $ 0.01
======= =======
Diluted income per share.................................... $ 0.42 $ 0.01
======= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
3
REMINGTON OIL AND GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
-------------------
2003 2002
-------- --------
(UNAUDITED)
(IN THOUSANDS)
CASH FLOW PROVIDED BY OPERATIONS
NET INCOME................................................ $ 11,687 $ 258
Adjustments to reconcile net income
Depreciation, depletion and amortization............... 10,757 9,568
Deferred income taxes.................................. 6,293 139
Amortization of deferred charges....................... 64 47
Dry hole and impairment costs.......................... 6,745 3,492
Cash paid for dismantlement............................ (296) (4)
Stock based compensation............................... 419 457
CHANGES IN WORKING CAPITAL
(Increase) in accounts receivable...................... (14,733) (1,932)
(Increase) in prepaid expenses and other current
assets................................................ (2,549) (1,714)
Increase (decrease) in accounts payable and accrued
expenses.............................................. 6,617 (7,314)
-------- --------
NET CASH FLOW PROVIDED BY OPERATIONS...................... 25,004 2,997
-------- --------
CASH FROM INVESTING ACTIVITIES
Capital expenditures................................... (24,614) (20,387)
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES................... (24,614) (20,387)
-------- --------
CASH FROM FINANCING ACTIVITIES
Payments on notes payable and other long-term
payables.............................................. (267) (44,652)
Common stock issued.................................... 63 53,313
Purchase of treasury stock............................. (301) (255)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES....... (505) 8,406
-------- --------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS................. (115) (8,984)
Cash and cash equivalents at beginning of period....... 14,929 19,377
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 14,814 $ 10,393
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
4
REMINGTON OIL AND GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 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/A. 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 three
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/A. The income statements for
the three months ended March 31, 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 AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE
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.
5
REMINGTON OIL AND GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
quarter 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................................. 694 -- 694
Settlement of liabilities.......................... -- -- (296)
Asset retirement expense........................... -- 250 200
------ ------ -------
Balance March 31, 2003............................. $9,679 $2,942 $12,405
====== ====== =======
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.
SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and
Intangible Assets" became effective for us on July 1, 2001, and January 1, 2002,
respectively. SFAS No. 141 requires all business combinations initiated after
June 30, 2001, to be accounted for using the purchase method. Additionally, SFAS
No. 141 requires companies to disaggregate and report separately from goodwill
certain intangible assets. SFAS No. 142 establishes new guidelines for
accounting for goodwill and other intangible assets. Under SFAS No. 142,
goodwill and certain other intangible assets are not amortized, but rather are
reviewed annually for impairment. The appropriate application of SFAS Nos. 141
and 142 to oil and gas mineral rights held under lease and other contractual
arrangements representing the right to extract such reserves is unclear.
Depending on how the accounting and disclosure literature is clarified, these
oil and gas mineral rights held under lease and other contractual arrangements
representing the right to extract such reserves for both undeveloped and
developed leaseholds may be classified separately from oil and gas properties,
as intangible assets on our balance sheets. Additional disclosures required by
SFAS Nos. 141 and 142 would be included in the notes to financial statements.
Historically, we, like many other oil and gas companies, have included these oil
and gas mineral rights held under lease and other contractual arrangements
representing the right to extract such reserves as part of the oil and gas
properties, even after SFAS Nos. 141 and 142 and became effective.
This interpretation of SFAS Nos. 141 and 142 would affect only our balance
sheet classification of oil and gas leaseholds. Our results of operations and
cash flows would not be affected, since those oil and gas mineral rights held
under lease and other contractual arrangements representing the right to extract
such reserves would continue to be amortized in accordance with accounting rules
for oil and gas companies provided in SFAS No. 19, "Financial Accounting and
Reporting by Oil and Gas Producing Companies."
At March 31, 2003, we had net leaseholds cost of approximately $34.7
million. If we applied the interpretation currently being deliberated, this
classification would require us to make the disclosures set forth under SFAS No.
142 related to these interests. We will continue to classify our oil and gas
leaseholds as oil and gas properties until further guidance is provided.
6
REMINGTON OIL AND GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. NET INCOME PER SHARE
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
2003 2002
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Net income.................................................. $11,687 $ 258
======= =======
Basic income per share...................................... $ 0.44 $ 0.01
======= =======
Diluted income per share.................................... $ 0.42 $ 0.01
======= =======
Weighted average common stock............................... 26,340 22,878
Dilutive stock options outstanding (treasury stock
method)................................................... 1,259 1,535
Restricted common stock grant............................... 371 584
------- -------
Total weighted average common shares for diluted income per
share..................................................... 27,970 24,997
======= =======
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:
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
2003 2002
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
As reported:
Net income................................................ $11,687 $ 258
Basic income per share.................................... $ 0.44 $ 0.01
Diluted income per share.................................. $ 0.42 $ 0.01
Stock based compensation (net of tax at statutory rate of
35%) included in net income as reported................... $ 272 $ 297
Stock based compensation (net of tax at statutory rate of
35%) if using the fair value method as applied to all
awards.................................................... $ 746 $ 654
Proforma (if using the fair value method applied to all
awards):
Net income................................................ $11,213 $ (99)
Basic income per share.................................... $ 0.43 $ 0.00
Diluted income per share.................................. $ 0.40 $ 0.00
Weighted average shares used in computation
Basic..................................................... 26,340 22,878
Diluted................................................... 27,970 24,997
NOTE 5. NOTES PAYABLE
As of March 31, 2003, our credit facility of $150.0 million had a borrowing
base of $75.0 million. Interest only is payable quarterly through May 3, 2004,
at which time the line expires and all principal becomes due, unless the line is
extended or renegotiated. On May 1, 2003, we agreed with the lenders to increase
the borrowing base to $100.0 million and to extend the term to May 3, 2006. As
of May 1, 2003, we had
7
REMINGTON OIL AND GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$37.4 million borrowed under the facility. The banks review the borrowing base
semi-annually and may increase or decrease 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. CONTINGENCIES
We have no material pending legal proceedings.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion will assist in understanding 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/A 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 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 our 2002
Form 10-K/A. We recommend that you read this discussion in conjunction with the
Form 10-K/A.
Our long-term strategy is to increase our oil and gas reserves and
production while keeping our finding and development costs and operating costs
competitive with our industry peers. We will implement this strategy through
drilling exploratory and development wells from our inventory of available
prospects that we have evaluated for geologic and mechanical risk and future
reserve or resource potential. Our drilling program will contain some high
risk/high reserve potential opportunities as well as some lower risk/lower
reserve potential opportunities, in order to achieve a balanced program of
reserve and production growth. Success of this strategy is contingent on various
risk factors, as discussed in our filings with the Securities and Exchange
Commission.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes our contractual obligations and commercial
commitments as of March 31, 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 long-term payables......... $ 2,951 $1,727 $ 1,224 $ -- $ --
Office lease..................... $ 2,358 $ 441 $ 933 $984 $ --
------- ------ ------- ---- -----
Total......................... $42,709 $2,168 $39,557 $984 $ --
======= ====== ======= ==== =====
On March 31, 2003, our current assets exceeded our current liabilities by
$13.1 million. Our current ratio was 1.23 to 1. From December 31, 2002, to March
31, 2003, our current assets increased by $17.1 million due primarily to
increased accounts receivable.
Cash flow from operations increased by $22.0 million, primarily because of
higher oil and gas revenues during the first quarter of 2003 compared to the
first quarter of 2002 and changes in our working capital accounts. Gas sales
increased by $16.4 million, or 134%, and oil sales increased by $6.5 million, or
93%. The increases in sales related primarily to higher average prices in 2003
compared to the prior year.
Significant changes in our working capital accounts during the first
quarter of 2003 include an increase in accounts receivable due to the increase
in balances due from our joint interest participants due to an increase in
operating activities and an increase in oil and gas sales during the quarter.
Prepaid expenses and other current assets increased due to an increase in
prepaid drilling costs on non-operated properties. In addition, due to the
increase in our operating activities our accounts payable increased by $6.6
million.
9
During the first quarter of 2003, our capital expenditures totaled $24.6
million of which $22.3 million was spent in the Gulf of Mexico where we incurred
costs to drill and complete wells and fabricate and install new 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
commit additional capital above our existing budget in order to finance 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 in recent years, should
such outlays exceed our operating cash flow we will be able to fund such needs
through bank financing and /or offerings of debt or equity securities.
As of March 31, 2003, our credit facility of $150.0 million had a borrowing
base of $75.0 million. Interest only is payable quarterly through May 3, 2004,
at which time the line expires and all principal becomes due, unless the line is
extended or renegotiated. On May 1, 2003, we agreed with the lenders to increase
the borrowing base to $100.0 million and to extend the term to May 3, 2006. As
of May 1, 2003, we had $37.4 million borrowed under the facility. The banks
review the borrowing base semi-annually and may increase or decrease 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.
RESULTS OF OPERATIONS
The following table reflects oil and gas revenues, production, and prices
during the first quarter of 2003 compared to the first quarter of 2002.
THREE MONTHS ENDED MARCH 31,
------------------------------------
% INCREASE
2003 (DECREASE) 2002
--------- ------------ ---------
(DOLLARS IN THOUSANDS, EXCEPT UNIT
PRICES)
Oil production volume (MBbls).......................... 426 16% 367
Oil sales revenue...................................... $13,653 93% $ 7,068
Price per barrel....................................... $ 32.05 66% $ 19.26
Increase (decrease) in oil sales revenue due to:
Change in prices..................................... $ 4,694
Change in production volume.......................... 1,891
-------
Total (decrease) in oil sales revenue.................. $ 6,585
=======
Gas production volume (MMcf)........................... 4,505 (5)% 4,755
Gas sales revenue...................................... $28,651 133% $12,307
Price per Mcf.......................................... $ 6.36 146% $ 2.59
(Decrease) in gas sales revenue due to:
Change in prices..................................... $17,926
Change in production volume.......................... (1,582)
-------
Total (decrease) in gas sales revenue.................. $16,344
=======
Total production Mcfe.................................. 7,061 6,957
Price per Mcfe......................................... $ 5.99 116% $ 2.78
Oil sales revenue increased by $6.6 million, or 93%. An increase of 59,000
barrels (16%) in oil production, primarily from new properties in the offshore
Gulf of Mexico, provided an increase in revenue of
10
approximately $1.9 million. Offshore Gulf of Mexico production increased by
82,000 barrels, or 31%, during the first quarter of 2003 compared to 2002
primarily because of production from five new properties. Onshore Gulf coast
production decreased due to property sales and natural depletion of oil and gas
fields.
Gas Sales revenue increased by $16.3 million, or 133%, because of higher
average gas prices partially offset by lower production. Average gas prices
increased from $2.59 per Mcf in the first quarter of 2002 to $6.36 per Mcf, or
146%, for the same quarter in 2003, causing gas sales revenues to increase by
$18.0 million. Production decreased by 250,000 Mcf, or 5%, primarily because of
the sales of certain South Texas properties during the second quarter of 2002,
partially offset by increased production from new properties in the Gulf of
Mexico.
Operating expenses increased by $1.1 million during the first quarter of
2003 compared to the prior year because of addition producing properties.
Exploration expenses increased by $3.4 million due to additional dry hole
expense incurred during the first quarter of 2003 compared to 2002.
Depreciation, depletion, and amortization including the amortization and
accretion of the asset retirement obligation required by Statement of Financial
Accounting Standards No. 143, "Accounting for Asset Retirement Obligations,"
increased by $1.2 million, or 13%, primarily due to increased production and
additional producing properties. We adopted the new accounting standard
effective January 1, 2003.
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 this new standard, at
January 1, 2003, we recorded an increase in our oil and gas properties totaling
$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 adoption of
the new standard had no material effect on our net income.
General and administrative expenses, which includes stock based
compensation, did not change significantly. Stock based compensation expense
includes the amortized compensation cost related to the contingent stock grant
and the directors fees paid in common stock. Interest and financing costs
decreased due to a decrease in the average debt outstanding and lower weighted
average rates. Income tax expense increased by $6.2 million because of the
higher income before taxes in the first quarter of 2003 compared to the first
quarter of 2002.
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 March 31, 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 March 31, 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
11
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.
12
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 Contingent Stock Grant Agreement -- Directors.
10.12## Form of Contingent Stock Grant Agreement -- Employees.
10.13## Form of Amendment to Contingent Stock Grant Agreement --
Directors.
10.14## Form of Amendment to Contingent Stock Grant Agreement --
Employees.
31.1+++ Certification of James A. Watt, Chief Executive Officer, as
required pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2+++ Certification of J. Burke Asher, Principal Financial
Officer, as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1+++ Certification of James A. Watt, Chief Executive Officer,
pursuant to 18 U.S.C. Section 1350, as required pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+++ Certification of J. Burke Asher, Principal Financial
Officer, pursuant to 18 U.S.C. Section 1350, as required
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13
---------------
* 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 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 November 12, 1999.
** Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 1999, filed with the Commission on
March 29, 2000.
## 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
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 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
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
March 31, 2003.
+++ Filed herewith.
(b) We filed no reports on Form 8-K during the quarter ended March 31,
2003.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to 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: December 16, 2003
15
EXHIBIT INDEX
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 Contingent Stock Grant Agreement -- Directors.
10.12## Form of Contingent Stock Grant Agreement -- Employees.
10.13## Form of Amendment to Contingent Stock Grant Agreement --
Directors.
10.14## Form of Amendment to Contingent Stock Grant Agreement --
Employees.
31.1+++ Certification of James A. Watt, Chief Executive Officer, as
required pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2+++ Certification of J. Burke Asher, Principal Financial
Officer, as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1+++ Certification of James A. Watt, Chief Executive Officer,
pursuant to 18 U.S.C. Section 1350, as required pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+++ Certification of J. Burke Asher, Principal Financial
Officer, pursuant to 18 U.S.C. Section 1350, as required
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
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 November 12, 1999.
** Incorporated by reference to the Company's Form 10-K (file number 1-11516)
for the fiscal year ended December 31, 1999, filed with the Commission on
March 29, 2000.
## 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
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 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
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
March 31, 2003.
+++ Filed herewith.
16