NERCO REPORTS SECOND-QUARTER RESULTS
NERCO REPORTS SECOND-QUARTER RESULTS PORTLAND, Ore., Aug. 3 /PRNewswire/ -- NERCO Inc.
(NYSE: NER, Toronto) today reported consolidated revenues of $158.5 million for the second quarter ended June 30, 1992, a 23-percent decrease from the same period a year ago. Operating income during the current period was $16.7 million, compared with $25.1 million in the second quarter of 1991. The decrease in 1992 revenues and operating income was largely due to the sale or transfer of assets in 1991, which had contributed approximately $33.1 million of revenues and $9.8 million of operating income in the second quarter of 1991.
Net income for the quarter was $2.1 million, or 6 cents per share, compared to $6.7 million, or 17 cents per share last year. Interest expense during the second quarter declined from $17.1 million to $12.6 million. Operating cash flow -- comprised of net income plus depreciation, depletion and amortization, deferred taxes and certain non-cash charges -- increased to $75.8 million for the second quarter, compared to $61.5 million for the same period in 1991. According to NERCO Inc. President & Chief Executive Officer Lawrence E. Heiner, "During the second quarter, we continued to evaluate asset disposition options to raise cash and to lower debt. Discussions are being held with several parties interested in purchasing assets, including the entire minerals subsidiary. In addition to the sales effort, the company continues to explore other options for NERCO Minerals Co. as well. The ultimate outcome and financial effects from possible asset dispositions remain uncertain." For the first six months of 1992, consolidated revenues were $323.5 million, compared to $413.1 million for the same period a year ago. Assets sold or transferred in 1991 contributed approximately $68.9 million of revenues in the first half of 1991. Through June 30, 1992, the company reported a net loss of $176.1 million, or $4.49 per share, compared with a net income of $28.2 million, or 72 cents per share, last year. The 1992 loss is attributable primarily to the first quarter write-downs of oil and gas assets and estimated losses on planned asset dispositions. Excluding the after-tax, first-quarter charges of $178.0 million, year-to-date net income would be $1.9 million, or 5 cents per share. Operating cash flow declined from $124.2 million in the first half of 1991 to $120.2 million during the 1992 six-month period as a result of lower revenues. "While our financial results are down from last year, I am encouraged that the company has improved its operating results over first quarter 1992," Heiner said. Excluding the write-downs, the net loss in the first quarter would have been $200,000, or 1 cent per share. "The improvement in the second quarter was due, in large part, to higher natural gas prices, which have strengthened further in the early part of the third quarter. However, low prices for spot coal and precious metals persist. Because of this, we are continuing to take necessary steps to reduce costs, increase production capacity and generate cash in order to improve financial results and balance sheet flexibility this year and beyond," he said. On May 11, 1992, the company's board of directors declared a regular quarterly dividend of 16 cents per share, payable Aug. 14, 1992, to shareholders of record on July 31, 1992. The company's debt agreements contain restrictive covenants that, among other things, limit the payment of dividends. At June 30, 1992, $36.3 million was available for payment of future dividends. Additional losses from asset sales or otherwise would reduce or could eliminate the amount available for future dividends. COAL NERCO Coal Corp. reported revenues of $77.5 million in the second quarter of 1992 compared to $119.1 million in the comparable 1991 period. Coal revenues were negatively affected by lower sales volumes and effective sales prices resulting from the transfer of the Bridger and Glenrock coal operations in December 1991 -- which provided 2.0 million tons of coal during the second quarter of last year -- and continued soft market prices during the current period. Total sales volumes were 6.0 million tons during the second quarter of 1992, compared to 8.5 million tons for the comparable period in 1991. Coal sales prices averaged $12.20 per ton in the second quarter of 1992 versus $14.28 per ton in the comparable 1991 period. Operating income from the coal segment totaled $23.9 million in the quarter versus $26.5 million last year. Operations transferred last year contributed $7.4 million of operating income during the second quarter of 1991. Coal segment operating cash flow -- comprised of operating income plus depreciation, depletion and amortization -- totaled $29.0 million in the period versus $35.4 million last year. Capital expenditures for the period were $6.4 million compared to $7.7 million last year. OIL & GAS NERCO Oil & Gas Inc. revenues declined 13 percent from $66.7 million in the second quarter of 1991 to $58.0 million during the second quarter of 1992. The decline was primarily due to lower gas and oil sales volumes and the loss of revenues from a natural gas supply contract sold in December 1991, partially offset by higher prices. Total sales volumes of natural gas declined 17 percent during the period from 33.5 billion cubic feet (BCF) to 27.8 BCF, while oil sales volumes declined 9 percent from 483,000 barrels to 439,000 barrels. These declines reflect construction, field performance and market related curtailments. Natural gas liquid sales volumes increased 16 percent from 404,000 barrels to 470,000 barrels during the period as a result of successful workovers and higher yields. The oil and gas segment reported an operating loss for the quarter of $1.9 million, compared to a loss of $900,000 in the second quarter of 1991. The current period loss includes a $4.3 million charge for a property abandonment. Adjusting for the gas contract disposition in 1991 and the property abandonment in the current period, oil and gas operating income was $5.7 million higher than in the prior year primarily due to higher prices and lower depletion expense. The first quarter asset write-down reduced the average oil and gas depletion, depreciation and amortization (DD&A) rate from $1.28 per thousand cubic feet of natural gas equivalents (MCFE) in the first quarter to 99 cents per MCFE in the second quarter of 1992. The average DD&A rate per MCFE in the second quarter of 1991 was $1.14. Oil and gas operating cash flow was $29.1 million for the quarter, compared to $41.1 million in the second quarter of 1991. Capital expenditures for the period were $38.6 million compared to $532.1 million in 1991, when the company purchased certain offshore U.S. Gulf Coast oil and gas assets for $500 million. The average effective sales price for natural gas was $1.51 per thousand cubic feet (MCF) in the current period versus $1.39 in the second quarter of 1991. Average oil and natural gas liquid prices of $20.43 and $13.53 per barrel were also higher compared to the same period last year. Due to market improvements, average effective sales prices for all of NERCO Oil & Gas Inc.'s products are higher in the second quarter compared to the first quarter of 1992. The company has hedged approximately 14 BCF of natural gas production through December 1992 at an average price of $1.75 per MCF and 675,000 barrels of oil at $21.75 per barrel. Subsequent to the end of the quarter, two projects were completed that added to the company's daily production capacity. NERCO Oil & Gas reestablished production from its 100-percent owned Eugene Island Block 371 platform which had been shut-in to allow construction of oil facilities. By mid-July, the platform was producing 35 million cubic feet (MMCF) of gas and 2,200 barrels of oil per day. A major workover program was also completed at the company's 70-percent owned Black Lake Field, which increased daily production capacity by approximately 37 MMCF of gas and 1,200 barrels of gas liquids per day. At the end of July, NERCO's average net daily production rates were 300 MMCF of gas, 6,900 barrels of oil and 5,000 barrels of gas liquids. MINERALS NERCO Minerals Co. had revenues of $23.0 million during the second quarter of 1992, compared with $21.3 million in the comparable 1991 period. The increase in revenues reflected increased gold sales volumes partially offset by lower gold sales prices in 1992. The minerals segment sold 49,000 ounces of gold at an average effective sales price of $410 per ounce in the current period. Total silver sales were 700,000 ounces at $4.17 per ounce. The minerals segment reported an operating loss of $1.8 million during the quarter, compared to operating income of $2.5 million in the comparable 1991 period, which included a $1.0 million gain from the disposition of certain assets. The loss in the current period included a $3.2 million write-down of the company's gold and silver work-in-process inventory carrying value in excess of current market prices caused by increased residual production costs at the Candelaria Mine in Nevada. Mining operations at the Candelaria Mine were halted in November 1990 due to low silver market prices. Adjusting for the gains on asset dispositions in 1991 and the current period write-down, minerals operating income in the second quarter of 1992 is comparable to the prior 1991 period. Minerals operating cash flow was $4.4 million for the quarter, compared to $7.6 million for the second quarter of 1991. Capital expenditures for the period were $17.7 million compared to $9.4 million last year. 1992 OUTLOOK "While second quarter earnings were lower than last year's results, I am encouraged by the operating results emerging in the company's businesses. The oil and gas segment had excellent drilling results through the first half of 1992, adding approximately 33 billion cubic feet of proved equivalent gas reserves," Heiner said. Through June year-to-date, NERCO participated in drilling 16 wells, with 12 being successful, for a success rate of 75 percent. "Our coal company continues to successfully market its low-sulfur product," Heiner noted. During the second quarter, NERCO Coal Corp. entered into three new coal supply agreements which include deliveries of approximately 600,000 tons of coal during 1992 and 2 million tons per year in 1993 and 1994. At the end of the quarter, over 90 percent of NERCO's 1992 coal production from its operated mines was committed to customers. "While we continue to face many challenges in 1992, the improvement in gas prices has improved our financial outlook. For the remainder of the year, we will continue to focus on increasing productivity, reducing costs, and generating cash to lower debt," according to Heiner. NERCO Inc. is a diversified natural resource company with interests in low-sulfur coal, oil and natural gas, and precious metals. Approximately 82 percent of NERCO's common stock is beneficially owned by PacifiCorp (NYSE: PPW). NERCO INC. FINANCIAL SUMMARY (Amounts in thousands, except per share) Three Months Six Months Ended June 30: 1992 1991 1992 1991 Revenues: Coal $77,500 $119,100 $172,400 $255,000 Oil & gas 58,000 66,700 104,800 112,300 Precious metals 23,000 21,300 46,300 45,800 Total revenues $ 158,500 $207,100 $ 323,500 $413,100 Operating income/(loss): Coal $23,900 $26,500 $ 28,500 $65,100 Oil & gas (1,900) (900) (276,600) 7,700 Precious metals (1,800) 2,500 400 3,800 Corporate expense and other (3,500) (3,000) (5,300) (6,200) Total operating income/(loss) 16,700 25,100 (253,000) 70,400 Interest expense (12,600) (17,100) (24,600) (28,400) Interest and other income/(expense) 100 700 -- 900 Minority interest 200 (1,700) -- (3,800) Income/(loss) before income taxes 4,400 7,000 (277,600) 39,100 Income tax provisions (benefit) 2,300 300 (101,500) 10,900 Net income/(loss) $ 2,100 $ 6,700 $(176,100) $28,200 Earnings/(loss) per share $0.06 $0.17 $(4.49) $0.72 Dividends paid per share $0.16 $0.16 $0.32 $0.32 Average shares outstanding 39,200 39,200 39,200 39,200 Total debt $745,300 $1,025,900 Total shareholders' equity $635,100 $613,500 NERCO INC. STATISTICAL DATA SUMMARY (Amounts in thousands, except gas volumes and sales prices) Three Months Six Months Ended June 30: 1992 1991 1992 1991 Sales Volume: Coal (tons): Operations 4,103 6,916 8,921 13,412 Purchased for resale 1,839 1,588 3,970 3,530 Total tons sold 5,942 8,504 12,891 16,942 Gas and Oil: Gas (bcf) 25.8 31.4 50.9 48.0 Gas Purchased for resale (bcf) 2.0 2.1 2.2 4.3 Oil (barrels) 439 483 936 859 Natural gas liquids (barrels) 470 404 799 660 Precious Metals (ounces): Sales: Gold 49 40 89 83 Silver 700 720 1,920 1,855 Production: Gold 49 36 86 73 Silver 717 893 1,535 1,619 Average Effective Sales Prices: Coal/ton $12.20 $14.28 $12.16 $14.30 Gas/mcf 1.51 1.39 1.43 1.50 Oil/bbl 20.43 18.96 19.07 19.55 NGL/bbl 13.53 12.36 12.02 12.91 Gold/oz. 409.87 423.96 410.07 441.98 Silver/oz. 4.17 4.18 4.31 3.89 -0- 8/3/92 /CONTACT: John C. Cummings, 503-731-6649, or Richard T. O'Brien, 503-731-6732, both of NERCO Inc./ (NER PPW) CO: NERCO Inc. ST: Oregon IN: OIL MNG SU: ERN
LM -- SE007 -- 6416 08/03/92 19:26 EDT
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|Date:||Aug 3, 1992|
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