UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004.
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: 333-29001-01
ENERGY CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 84-1235822
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
4643 SOUTH ULSTER STREET, SUITE 1100
DENVER, COLORADO 80237
(Address of principal executive offices and zip code)
(303) 694-2667
(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 Act).
Yes ___ No _X_
The number of shares of the Registrant's common stock, par value $1.00 per
share, outstanding at May 4, 2004 was 604,126 shares.
ENERGY CORPORATION OF AMERICA
TABLE OF CONTENTS
PAGES
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets
March 31, 2004 and June 30, 2003. . . . . . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Operations
For the three and nine months ended March 31, 2004 and 2003 . . . . . . 5
Unaudited Consolidated Statements of Cash Flows
For the nine months ended March 31, 2004 and 2003 . . . . . . . . . . . 6
Unaudited Consolidated Statements of Comprehensive Income
For the three and nine months ended March 31, 2004 and 2003 . . . . . . 7
Notes to Unaudited Consolidated Financial Statements. . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk. . . . 22
Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . 24
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . 25
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . 25
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . 25
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 25
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-2-
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENERGY CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
(Unaudited - Amounts in Thousands)
- ------------------------------------------------------------------------------
March 31, June 30,
2004 2003
----------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,612 $ 4,831
Accounts receivable:
Oil and gas sales 6,067 10,380
Gas aggregation and pipeline 9,072 9,458
Other 3,797 4,616
----------- ----------
Accounts receivable 18,936 24,454
Less allowance for doubtful accounts (1,170) (1,616)
----------- ----------
Accounts receivable net of allowance 17,766 22,838
Deferred income tax asset 1,671 828
Notes receivable, related party 1,569 1,609
Prepaid and other current assets 1,735 1,410
----------- ----------
Total current assets 25,353 31,516
Property, plant and equipment, net of accumulated
depreciation and depletion of $140,519 and $125,171 249,032 253,270
OTHER ASSETS
Deferred financing costs, net of accumulated
amortization of $6,524 and $4,728 2,270 3,098
Notes receivable, related party 129 146
Other 6,053 7,804
----------- ----------
Total other assets 8,452 11,048
----------- ----------
TOTAL $ 282,837 $ 295,834
=========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
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ENERGY CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
(Unaudited - Amounts in Thousands Except Share Data)
- ------------------------------------------------------------------------------------
March 31, June 30,
2004 2003
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 9,455 $ 13,734
Current portion of long-term debt 34,142 133
Funds held for future distribution 15,172 17,217
Income taxes payable 525 1,484
Accrued taxes other than income 8,940 9,643
Derivatives 3,328 810
Other current liabilities 1,498 1,421
----------- ----------
Total current liabilities 73,060 44,442
LONG-TERM OBLIGATIONS:
Long-term debt 131,472 173,197
Gas delivery obligation and deferred revenue 2,621 2,917
Deferred income tax liability 17,675 20,376
Derivatives 795 1,319
Other 7,577 8,311
----------- ----------
Total liabilities 233,200 250,562
COMMITMENTS AND CONTINGENCIES:
Minority Interest 1,552 1,594
STOCKHOLDERS' EQUITY:
Common stock, par value $1.00; 2,000,000 shares
authorized; 730,039 shares issued 730 730
Class A stock, no par value; 100,000 shares authorized;
68,438 shares issued 8,056 5,092
Additional paid in capital 5,503 5,503
Retained earnings 49,389 45,150
Treasury stock and notes receivable arising from the
issuance of common stock (12,431) (11,824)
Unearned compensation on restricted stock (2,015) -
Accumulated other comprehensive loss (1,147) (973)
----------- ----------
Total stockholders' equity 48,085 43,678
----------- ----------
TOTAL $ 282,837 $ 295,834
=========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
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ENERGY CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Amounts in Thousands, Except per Share Data)
- ------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ ------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
REVENUES:
Oil and gas sales $ 14,735 $ 13,511 $ 43,255 $ 33,516
Gas aggregation and pipeline sales 16,126 19,259 46,202 45,384
Well operations and service revenues 1,243 1,268 3,912 4,073
Other 100 - 148 36
----------- ----------- ----------- -----------
Total revenues 32,204 34,038 93,517 83,009
----------- ----------- ----------- -----------
COST AND EXPENSES:
Field operating expenses 2,817 2,436 8,527 7,398
Gas aggregation and pipeline cost 14,645 16,971 42,641 40,694
General and administrative 3,930 3,225 11,419 10,557
Taxes, other than income 1,132 1,074 2,966 2,338
Depletion and depreciation, oil and gas related 3,269 2,911 10,186 9,001
Depreciation of pipelines and equipment 1,055 1,078 3,104 3,206
Exploration and impairment 1,021 3,015 3,642 7,863
----------- ----------- ----------- -----------
Total costs and expenses 27,869 30,710 82,485 81,057
----------- ----------- ----------- -----------
Income from operations 4,335 3,328 11,032 1,952
OTHER (INCOME) EXPENSE:
Interest expense 3,766 3,793 11,354 12,603
(Gain) loss on sale of assets (175) (50) (283) 195
Interest income and other (24) (5,713) (1,099) (26,478)
----------- ----------- ----------- -----------
Income before income taxes and minority interest 768 5,298 1,060 15,632
Income tax expense (benefit) (3,850) 2,014 (3,692) 5,702
----------- ----------- ----------- -----------
Income before minority interest 4,618 3,284 4,752 9,930
Minority interest 13 64 118 175
----------- ----------- ----------- -----------
NET INCOME $ 4,631 $ 3,348 $ 4,870 $ 10,105
=========== =========== =========== ===========
Basic and diluted earnings per common share:
Basic $ 6.98 $ 5.15 $ 7.45 $ 15.49
=========== =========== =========== ===========
Diluted (see Note 4) $ 6.83 $ 5.04 $ 7.29 $ 15.16
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
-5-
ENERGY CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Amounts in Thousands)
- -------------------------------------------------------------------------------
Nine Months Ended
March 31,
------------------------
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,870 $ 10,105
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depletion, depreciation and amortization 13,290 12,207
Gain or loss on sale of assets (283) 195
Gain on purchase of senior bonds (513) (23,609)
Deferred income taxes (4,161) -
Exploration and impairment 3,590 7,705
Other, net 637 2,095
Changes in assets and liabilities:
Accounts receivable 5,072 (8,170)
Income taxes 525 6,686
Prepaid and other assets (324) (301)
Accounts payable (4,657) 1,081
Funds held for future distribution (2,044) 6,517
Other 282 753
----------- -----------
Net cash provided by operating activities 16,284 15,264
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (11,051) (25,183)
Proceeds from sale of assets 990 3,134
Notes receivable and other 34 1,334
----------- -----------
Net cash used by investing activities (10,027) (20,715)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 36,380 52,818
Principal payments on long-term debt (43,528) (58,369)
Purchase of treasury stock (657) (1,113)
Proceeds from issuance of stock 257 -
Dividends paid (928) (785)
----------- -----------
Net cash used by financing activities (8,476) (7,449)
----------- -----------
Net decrease in cash and cash equivalents (2,219) (12,900)
Cash and cash equivalents, beginning of period 4,831 17,775
----------- -----------
Cash and cash equivalents, end of period $ 2,612 $ 4,875
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
-6-
ENERGY CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited - Amounts in Thousands)
- --------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
March 31, March 31
------------------------ -----------------------
2004 2003 2004 2003
----------- ----------- ---------- -----------
Net income (loss) $ 4,631 $ 3,348 $ 4,870 $ 10,105
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment:
Current period change 63 249 956 426
Marketable securities:
Current period change - - - (5)
Reclassification to earnings - - - (25)
Oil and gas derivatives:
Current period transactions (927) (588) (1,250) (1,401)
Reclassification to earnings (50) 405 121 574
----------- ----------- ---------- -----------
Other comprehensive income (loss), net of tax (914) 66 (173) (431)
----------- ----------- ---------- -----------
Comprehensive income $ 3,717 $ 3,414 $ 4,697 $ 9,674
=========== =========== ========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
-7-
ENERGY CORPORATION OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
1. Nature of Organization
Energy Corporation of America (the "Company") is a privately held energy
company engaged in the exploration, development, production, gathering and
marketing of natural gas and oil, primarily in the Appalachian Basin and
Gulf Coast region. The Company conducts business primarily through its
principal wholly owned subsidiaries, Eastern American Energy Corporation
("Eastern"), Westech Energy Corporation ("Westech"), and Westech Energy New
Zealand ("WENZ"). Eastern is one of the largest oil and gas operators in
the Appalachian Basin, including exploration, development and production,
and is engaged in the gathering and marketing of natural gas. Westech is
involved in oil and gas exploration and development in the California and
Gulf Coast regions of the United States. WENZ is involved in oil and gas
exploration and development in New Zealand. As used herein the "Company"
refers to the Company alone or together with one or more of its
subsidiaries.
2. Accounting Policies
Reference is hereby made to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 2003, which contains a summary of major
accounting policies followed in preparation of its consolidated financial
statements. These policies were also followed in preparing the quarterly
financial statements included herein.
Management of the Company believes that all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the results
of such interim periods have been made. The results of operations for the
periods ended March 31, 2004 are not necessarily indicative of the results
to be expected for the full year.
Certain amounts in the financial statements of prior periods have been
reclassified to conform to the current period presentation.
3. Note Repurchases
The Company purchased $6.04 million of its 9 1/2% Senior Subordinated Notes
("Notes") during the nine months ended March 31, 2004, $2.04 in privately
negotiated transactions and $4.0 million pursuant to an Asset Sale Offer as
defined in the Indenture for the Notes.
-8-
4. Earnings per Share
A reconciliation of the components of basic and diluted net income per
common share is as follows for the net income available to common
stockholders:
Net Income
(in Thousands) Shares Per Share
-------------- -------- ----------
Three months ended March 31, 2004
Basic $ 4,631 663,875 $ 6.98
Diluted $ 4,631 678,141 $ 6.83
Nine months ended March 31, 2004
Basic $ 4,870 653,530 $ 7.45
Diluted $ 4,870 667,796 $ 7.29
Three months ended March 31, 2003
Basic $ 3,348 649,921 $ 5.15
Diluted $ 3,348 664,187 $ 5.04
Nine months ended March 31, 2003
Basic $ 10,105 652,471 $ 15.49
Diluted $ 10,105 666,737 $ 15.16
-9-
5. Industry Segments
The Company's reportable business segments have been identified based on
the differences in products and service provided. Revenues for the
exploration and production segment are derived from the production and sale
of natural gas and crude oil. Revenues for the gas aggregation and pipeline
segment arise from the marketing of both Company and third party produced
natural gas volumes and revenues derived from gathering and pipeline
services (functions) provided for Company and third party natural gas. The
Company utilizes earnings before interest, taxes, depreciation, depletion,
amortization and exploration and impairment costs ("EBITDAX") to evaluate
the operations of each segment. Reconciliation of non-GAAP financial
measure is as follows (in thousands):
Nine Months Ended
March 31, March 31,
2004 2003
----------- ----------
Net income $ 4,870 $ 10,105
Add:
Interest expense 11,354 12,603
Depletion, depreciation, amortization-o&g 10,186 9,001
Depletion, depreciation, amortization-other 3,104 3,206
Impairment & exploratory costs 3,642 7,863
Income tax expense (benefit) (3,692) 5,702
----------- ----------
EBITDAX $ 29,464 $ 48,480
=========== ==========
-10-
Summarized financial information for the Company's reportable segments for
operations is as follows (in thousands):
Exploration & Gas Aggregation
Production & Pipeline Other Consolidated
-------------- ----------------- -------- -------------
For the nine months ended March 31, 2004
- ----------------------------------------
Revenue from unaffiliated customers $ 47,167 $ 46,202 $ 148 $ 93,517
Depreciation, depletion, amortization 11,214 475 1,601 13,290
Exploration and impairment costs 3,626 16 - 3,642
Income (loss) from operations 10,362 1,645 (975) 11,032
Interest expense, net 16,676 (5,494) (29) 11,153
EBITDAX 27,047 2,027 390 29,464
Total assets 174,437 94,970 13,430 282,837
Capital expenditures 10,919 38 94 11,051
- ----------------------------------------------------------------------------------------------------
For the nine months ended March 31, 2003
- ----------------------------------------
Revenue from unaffiliated customers $ 37,589 $ 45,384 $ 36 $ 83,009
Depreciation, depletion, amortization 9,905 608 1,694 12,207
Exploration and impairment costs 7,863 - - 7,863
Income (loss) from operations 656 2,558 (1,262) 1,952
Interest expense, net 16,300 (4,681) 566 12,185
EBITDAX 20,269 3,116 25,095 48,480
Total assets 186,376 90,041 20,939 297,356
Capital expenditures 24,300 231 652 25,183
- ----------------------------------------------------------------------------------------------------
Income (loss) from operations represents revenues less costs which are
directly associated with such operations. Revenues are priced and accounted
for consistently for both unaffiliated and intersegment sales. The 'Other'
column includes corporate-related items, including corporate debt and
non-reportable segments. Included in the total assets of the exploration
and production segment are net long-lived assets located in New Zealand of
$6.9 million and $5.3 million as of March 31, 2004 and 2003.
6. Derivative Instruments
The Company periodically hedges a portion of its gas production through
futures and swap agreements. The purpose of the hedges is to provide a
measure of stability in the volatile environment of oil and gas prices and
to manage its exposure to commodity price risk under existing sales
commitments. All of the Company's price swap agreements in place are
designated as cash flow hedges. At March 31, 2004, the Company had recorded
a $2.5 million other comprehensive loss, $1.6 million short-term deferred
tax asset, $0.02 million short-term derivative asset, $3.3 million
short-term derivative liability, $0.8 million long-term derivative
liability, and $0.02 million in recognized expense due to ineffectiveness.
The estimated net amount of the existing losses within other comprehensive
income that are expected to be reclassified into earnings within the next
twelve months is approximately $2.0 million. The Company has partially
hedged its exposure to the variability in future cash flows through June
2005.
-11-
7. Income Tax Expense
An income tax benefit of approximately $4.2 million was recorded during the
quarter ended March 31, 2004, due to the resolution of certain tax
contingencies.
8. Contingencies
As previously reported, the Company has been in litigation with certain
Holders of its $200,000,000 9 1/2% Senior Subordinated Notes due 2007 (the
"Noteholders") (the "Notes). The dispute involved the calculation of Net
Proceeds of an Asset Sale as defined in the Indenture dated May 23, 1997
between the Company and The Bank of New York. The Company and the
Noteholders have settled the dispute, as memorialized in the Settlement
Agreement executed as of February 24, 2004, and attached to the Form 8-K
filed by the Company on February 25, 2004 as Exhibit 99.11 (the "Settlement
Agreement"). In settlement of the dispute the Company has agreed to
repurchase $38 million in Notes. The repurchase will be effected by the
Company making three Asset Sale Offers (as defined in the Indenture)
totaling $38 million. The Company commenced an Asset Sale Offer of $4
million on February 26, 2004. The Company will consummate another Asset
Sale Offer of $17 million no later than 180 days from execution of the
Settlement Agreement and a third Asset Sale Offer no later than 360 days
from the execution of the Settlement Agreement. The Company finalized the
first Asset Sale Offer of $4 million on March 24, 2004. The United States
District Court for the Southern District of West Virginia has entered a
Dismissal Order dismissing the litigation with prejudice.
Pursuant to an Agreement dated December 28, 1998, the Company is required
to purchase all shares owned by Kenneth W. Brill upon notice by Mr. Brill's
estate or promptly after the passage of two years from Mr. Brill's death if
the estate does not sooner tender the shares. The Company entered into a
repurchase agreement on January 21, 2004 with the KWB Trust to define the
purchase price and establish the conditions for the repurchase of stock
owned by Kenneth W. Brill. The agreement outlines the repurchase of 49,110
shares of stock at an anticipated value of approximately $3.7 million over
the next five years, and provides for payments in twenty quarterly
installments on the majority of the shares to be repurchased. The
repurchase of shares is subject to certain restrictions in the Company's
credit agreements.
The Company is involved in various other legal actions and claims arising
in the ordinary course of business. While the outcome of the lawsuits
against the Company cannot be predicted with certainty, management does not
expect these matters to have a material adverse effect on the Company's
operations or financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
- ----------------------------------------------------------------------
AND FINANCIAL CONDITION
-----------------------
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
- --------------------------------------------------------------------------------
This discussion and analysis of financial condition and results of
operations, and other sections of this Form 10-Q, contain forward-looking
statements that are based on management's beliefs, assumptions,
-12-
current expectations, estimates, intentions and projections about the oil and
gas industry, the economy and about the Company itself. Words such as
"anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is
likely," "plans," "predicts," "projects," variations of such words and similar
expressions are intended to identify such forward-looking statements under the
Private Securities Litigation Reform Act of 1995. The Company cautions that
these statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions that are difficult to predict with regard
to timing, extent, likelihood and degree of occurrence. Therefore, actual
results and outcomes may materially differ from what may be expressed or
forecasted in such forward-looking statements. Furthermore, the Company
undertakes no obligation to update, amend or clarify forward-looking statements,
whether as a result of new information, future events or otherwise.
Important factors that could cause actual results to differ materially from
the forward-looking statements include, but are not limited to, weather
conditions, changes in production volumes, worldwide demand and commodity prices
for petroleum natural resources, the timing and extent of the Company's success
in discovering, acquiring, developing and producing oil and natural gas
reserves, risks incident to the drilling and operation of oil and natural gas
wells, future production and development costs, foreign currency exchange rates,
the effect of existing and future laws, governmental regulations and the
political and economic climate of the United States and New Zealand, the effect
of hedging activities, and conditions in the capital markets.
The following should be read in conjunction with the Company's Financial
Statements and Notes (including the segment information) at Part I, Item 1.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
AND 2003
- ---------
The Company recorded net income of $4.6 million for the quarter ended March
31, 2004 compared to net income of $3.3 million for the quarter ended March 31,
2003. The increase in net income of $1.3 million is primarily attributable to
the net of a $1.8 million decrease in revenues, $2.8 million decrease in costs
and expenses, $5.7 million decrease in interest income and other, $0.1 million
increase in gain on sale of assets, and a $5.9 million decrease in income tax
expense.
-13-
Production, gas aggregation and pipeline volumes, revenue and average sales
prices for the quarters ended March 31 and their related variances are as
follows:
Three Months Ended
March 31 Variance
------------------ -----------------
2004 2003 Amount Percent
--------- ------- ------- --------
Natural Gas
Production (Mmcf) 2,689 2,250 439 19.5%
Average sales price received ($/Mcf) 6.02 7.37 (1.35) -18.3%
--------- ------- ------- --------
Sales ($in thousands) 16,193 16,591 (398) -2.4%
Oil
Production (Mbbl) 23 25 (2) -8.0%
Average sales price received ($/Bbl) 31.22 31.44 (0.22) -0.7%
--------- ------- ------- --------
Sales ($in thousands) 718 786 (68) -8.7%
Hedging (2,201) (3,956) 1,755 44.4%
Other 25 90 (65) -72.2%
--------- ------- ------- --------
Total oil and gas sales ($in thousands) 14,735 13,511 1,224 9.1%
========= ======= ======= ========
Aggregation Revenue
Volume (Million Mmbtu) 2,228 2,361 (133) -5.6%
Average sales price received ($/Mmbtu) 5.35 6.00 (0.66) -10.9%
--------- ------- ------- --------
Sales ($in thousands) 11,909 14,167 (2,258) -15.9%
Pipeline Revenue
Volume (Million Mmbtu) 1,362 1,399 (37) -2.6%
Average sales price received ($/Mmbtu) 3.10 3.64 (0.54) -14.9%
--------- ------- ------- --------
Sales ($in thousands) 4,217 5,092 (875) -17.2%
--------- ------- ------- --------
Total aggregation and pipeline sales ($in thousands) 16,126 19,259 (3,133) -16.3%
========= ======= ======= ========
Aggregation Gas Cost
Volume (Million Mmbtu) 2,228 2,361 (133) -5.6%
Average price paid ($/Mmbtu) 5.02 5.59 (0.57) -10.3%
--------- ------- ------- --------
Cost ($in thousands) 11,178 13,200 (2,022) -15.3%
Pipeline Gas Cost
Volume (Million Mmbtu) 1,088 1,081 7 0.6%
Average price paid ($/Mmbtu) 3.19 3.49 (0.30) -8.7%
--------- ------- ------- --------
Cost ($in thousands) 3,467 3,771 (304) -8.1%
--------- ------- ------- --------
Total aggregation and pipeline cost ($in thousands) 14,645 16,971 (2,326) -13.7%
========= ======= ======= ========
REVENUES. Total revenues decreased $1.8 million or 5.4% between the
--------
periods. The decrease was due to a $1.2 million increase in oil and gas sales
and a $3.1 million decrease in gas aggregation and pipeline sales. Well
operations and service revenues remained relatively constant.
-14-
Revenues from oil and gas sales increased a net of $1.2 million from $13.5
million for the quarter ended March 31, 2003 to $14.7 million for the quarter
ended March 31, 2004. Sales increased for the quarter ended March 31, 2004 due
to a reduction in recognized losses on hedging transactions and other revenue,
which totaled a loss of $2.2 million for the quarter ended March 31, 2004
compared to a loss of $3.9 million for the quarter ended March 31, 2003.
Natural gas sales decreased $0.4 million and oil sales decreased $0.1 million.
The net decrease in gas production revenue is attributable to the decrease in
gas prices and offset by an increase in gas production. The price decrease is a
result of the decrease in related natural gas indexes and the increase in
production is primarily due to wells drilled in the Gulf Coast region.
Revenues from gas aggregation and pipeline sales decreased $3.1 million
from $19.3 million during the period ended March 31, 2003 to $16.1 million in
the period ended March 31, 2004. Gas aggregation revenue decreased $2.2 million
primarily as a result of a decrease in the average sales price that corresponds
to the decrease in the related natural gas price indexes for this period
compared to the prior period. Also decreasing gas aggregation revenue was a
decrease in gas volumes sold. Pipeline revenue, which has a sales and gathering
component, decreased $0.9 million primarily as a result of a decrease in the
average sales price that corresponds to the decrease in the related natural gas
price indexes and a decline in production sold for this period compared to the
prior period. Pipeline volumes declined compared to the prior period primarily
due to natural production declines on the system.
COSTS AND EXPENSES. The Company's costs and expenses decreased $2.8
--------------------
million between the periods primarily as a net result of a $0.4 increase in
field operating expenses, $2.3 million decrease in gas aggregation and pipeline
costs, $0.7 increase in general and administrative expenses, $0.3 million
increase in depreciation, depletion, and amortization costs, $2.0 million
decrease in exploration and impairment costs, and a $0.1 million increase in
taxes other than income.
Gas aggregation and pipeline costs decreased $2.3 million. Gas aggregation
costs decreased $2.0 million and pipeline costs increased $0.3 million. The
decrease in costs is primarily attributable to the decrease in average price of
gas that corresponds to the decrease in the related natural gas indexes and a
decrease in volumes purchased for this period compared to the prior period.
General and administrative expenses increased $0.7 million primarily as a
result of an increase in payroll and costs associated with the Company's
restricted stock plan and outside professional services.
Depletion, depreciation, and amortization expenses increased $0.3 million
primarily due to an increase in production for this period compared to the prior
period.
Exploration and impairment costs decreased $2.0 million primarily due to a
decrease in dry hole expense related to exploratory wells drilled in the current
period as compared to the related exploratory dry hole expenses in the prior
period.
Field and lease operating expenses increased $0.4 million primarily as a
result of increased expenses for compressor and road repairs, and an increase in
the number of producing wells in the Gulf Coast region.
INTEREST INCOME AND OTHER. Interest income and other income decreased $5.7
-------------------------
million when comparing the periods. This decrease between the periods is mainly
attributable to a decrease in recognized gains on the purchase of senior bonds.
-15-
INCOME TAX EXPENSE. Income tax expense decreased $5.9 million when
---------------------
comparing the periods primarily due to the resolution of certain tax
contingencies and the change in income before tax.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2004 AND
- --------------------------------------------------------------------------------
2003
- ----
The Company recorded net income of $4.9 million for the nine months ended
March 31, 2004 compared to net income of $10.1 million for the nine months ended
March 31, 2003. The decrease in net income of $5.2 million is primarily
attributable to the net of a $10.5 million increase in revenues, $1.4 million
increase in costs and expenses, $1.2 million decrease in interest expense, $25.4
million decrease in interest income and other, $0.5 million increase in gain on
sale of assets, and a $9.4 million decrease in income tax expense.
-16-
Production, gas aggregation and pipeline volumes, revenue and average sales
prices for the nine months ended March 31 and their related variances are as
follows:
Nine Months Ended
March 31 Variance
------------------ -----------------
2004 2003 Amount Percent
--------- ------- ------- --------
Natural Gas
Production (Mmcf) 8,239 7,236 1,003 13.9%
Average sales price received ($/Mcf) 5.26 4.89 0.37 7.6%
--------- ------- ------- --------
Sales ($in thousands) 43,332 35,354 7,978 22.6%
Oil
Production (Mbbl) 86 77 9 11.7%
Average sales price received ($/Bbl) 28.70 26.32 2.37 9.0%
--------- ------- ------- --------
Sales ($in thousands) 2,468 2,027 441 21.8%
Hedging (2,755) (4,149) 1,394 33.6%
Other 210 284 (74) -26.1%
--------- ------- ------- --------
Total oil and gas sales ($in thousands) 43,255 33,516 9,739 29.1%
--------- ------- ------- --------
Aggregation Revenue
Volume (Million Mmbtu) 6,722 7,275 (553) -7.6%
Average sales price received ($/Mmbtu) 5.16 4.70 0.46 9.7%
--------- ------- ------- --------
Sales ($in thousands) 34,678 34,212 466 1.4%
Pipeline Revenue
Volume (Million Mmbtu) 4,176 4,337 (161) -3.7%
Average sales price received ($/Mmbtu) 2.76 2.58 0.18 7.1%
--------- ------- ------- --------
Sales ($in thousands) 11,524 11,172 352 3.2%
--------- ------- ------- --------
Total aggregation and pipeline sales ($in thousands) 46,202 45,384 818 1.8%
========= ======= ======= ========
Aggregation Gas Cost
Volume (Million Mmbtu) 6,722 7,275 (553) -7.6%
Average price paid ($/Mmbtu) 4.96 4.40 0.56 12.6%
--------- ------- ------- --------
Cost ($in thousands) 33,353 32,046 1,307 4.1%
Pipeline Gas Cost
Volume (Million Mmbtu) 3,369 3,446 (77) -2.2%
Average price paid ($/Mmbtu) 2.76 2.51 0.25 9.9%
--------- ------- ------- --------
Cost ($in thousands) 9,288 8,648 640 7.4%
--------- ------- ------- --------
Total aggregation and pipeline cost ($in thousands) 42,641 40,694 1,947 4.8%
========= ======= ======= ========
-17-
REVENUES. Total revenues increased $10.5 million or 12.7% between the
--------
periods. The increase was due primarily to a $9.7 million increase in oil and
gas sales and a $0.8 million increase in gas aggregation and pipeline sales.
Well operations and service revenues remained relatively constant.
Revenues from oil and gas sales increased a net of $9.7 million from $33.5
million for the nine months ended March 31, 2003 to $43.2 million for the nine
months ended March 31, 2004. Natural gas sales increased $8.0 million and oil
sales increased $0.4 million. The net increase in gas production revenue is
attributable to the increase in gas prices and an increase in gas production.
The price increase is a result of the rise in the related natural gas indexes
and the increase in production is primarily due to wells drilled in the Gulf
Coast region. Also contributing to the increase in sales was a decrease in
recognized losses on related hedging transactions and other revenue, which
totaled a loss of $2.5 million for the nine months ended March 31, 2004 compared
to a loss of $3.9 million for the nine months ended March 31, 2003.
Revenues from gas aggregation and pipeline sales increased $0.8 million
from $45.4 million for the nine months ended March 31, 2003 to $46.2 million for
the nine months ended March 31, 2004. Gas aggregation revenue increased $0.5
million primarily as a result of an increase in the average sales price that
corresponds to the rise in the related natural gas price indexes for this period
compared to the prior period. Offsetting this increase in average sales price
was a decrease in gas volumes aggregated for sale. Pipeline revenue, which has
a sales and gathering component, increased $0.3 million primarily as a result of
an increase in the average sales price that corresponds to the rise in the
related natural gas price indexes for this period compared to the prior period
offset by a decrease in volumes sold. Pipeline volumes declined compared to the
prior period primarily due to natural production declines on the system.
COSTS AND EXPENSES. The Company's costs and expenses increased $1.4
--------------------
million between the periods primarily as a net result of a $1.9 million increase
in gas aggregation and pipeline costs, $1.1 million increase in depreciation,
depletion, and amortization costs, $4.2 million decrease in exploration and
impairment costs, $0.6 million increase in taxes other than income, $0.9 million
increase in general and administrative expense, and a $1.1 million increase in
field and lease operating expense.
Gas aggregation and pipeline costs increased $1.9 million. Gas aggregation
costs increased $1.3 million and pipeline costs increased $0.6 million. The
increase in cost is primarily attributable to the increase in average price of
gas that corresponds to the rise in the related natural gas indexes offset by a
decrease in volume for this period compared to the prior period.
Depletion, depreciation, and amortization expenses increased $1.1 million
primarily due to an increase in production.
Exploration and impairment costs decreased $4.2 million primarily due to a
decrease in dry hole expense related to exploratory wells drilled in the current
period as compared to the related exploratory dry hole expenses in the prior
period.
Taxes other than income increased $0.6 million due to the increase in oil
and gas sales for the current year as compared to the same period in the prior
year. Wellhead oil and gas sales revenue, on which production taxes are based,
was higher for the current year.
General and administrative expense increased $0.9 million primarily as a
result of an increase in payroll and costs associated with the Company's
restricted stock plan, and forgiveness of notes from employees which was
partially offset by a reduction in office rent expense and equipment leasing
costs.
-18-
Field and lease operating expenses increased $1.1 million primarily as a
result of increased expenses for compressor and road repairs, insurance, costs
associated with properties acquired in the East, and an increase in the number
of producing wells in the Gulf Coast region.
INTEREST EXPENSE. Interest expense decreased $1.2 million when comparing
------------------
the periods primarily due to the purchase of a portion of the Company's senior
notes and a decrease in the average interest rate paid on outstanding debt.
GAIN ON SALE OF ASSETS. Gain on sale of assets increased $0.5 primarily
--------------------------
due to the sale of certain properties located in Wyoming during the current
year.
INTEREST INCOME AND OTHER. Other income decreased $25.4 million when
----------------------------
comparing the periods. This decrease between the periods is mainly attributable
to a decrease in recognized gains on the purchase of senior bonds.
INCOME TAX EXPENSE. Income tax expense decreased $9.4 million when
---------------------
comparing the periods primarily due to the resolution of certain tax
contingencies and the change in income before tax.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
Stockholders' equity of the Company has increased from $44.4 million at
December 31, 2003 to $48.1 million at March 31, 2004. The Company's working
capital of a negative $26.4 million at December 31, 2003 increased to a negative
$13.8 million at March 31, 2004, before inclusion of the classification of $34
million of the Company's Notes as a current liability as a result of the
Settlement Agreement with Noteholders discussed below. The Company's cash
decreased from $3.7 million at December 31, 2003 to $2.6 million at March 31,
2004. The Company's cash at May 4, 2004 was $0.8 million. The change in cash
during the quarter of approximately $1.1 million resulted from various
operating, investing and financing activities of the Company. The activities
were primarily comprised of: the reduction of approximately $4.5 million under
the Company's $50 million revolving Credit Agreement (the "Agreement"); payments
of approximately $4.0 million for the purchase of a portion of the Company's
outstanding Notes; the investment of approximately $3.3 million in property,
plant and equipment; payments of approximately $0.5 million for the acquisition
of treasury stock and dividends; receipt of approximately $0.4 million of cash
proceeds from the sale of assets; and approximately $10.8 million of cash
provided by operations during the quarter.
At March 31, 2004, the Company's principal source of liquidity consisted of
$2.6 million of cash, $0.9 million available under an unsecured credit facility
currently in place, plus amounts available under the $50 million Foothill
Capital Corporation Agreement. Foothill Capital Corporation is now known as
Wells Fargo Foothill, Inc. ("Foothill"). At March 31, 2004, $1.1 million was
outstanding or committed under the short-term credit facility and $37.7 million
was outstanding under the Agreement.
On July 10, 2002, the Company entered into the Agreement with Foothill.
Depending on its level of borrowing under the Agreement, the applicable interest
rates are based on Wells Fargo's prime rate plus 0.50% to 2.50%. The Agreement
currently expires on July 10, 2005. The Agreement is secured by certain of the
existing proved producing oil and gas assets of the Company. The Agreement,
among other things, restricts the ability of the Company and its subsidiaries to
incur new debt, grant additional security interests in its collateral, engage in
certain merger or reorganization activities, or dispose of certain assets. Upon
the occurrence of an event of default, the lenders may terminate the Agreement
and declare all obligations thereunder immediately due and payable (see
discussion of an event of default notice below). As of May 4, 2004, there are
$34.8 million in outstanding borrowings under the Agreement. Under the
-19-
Indenture for the Company's Notes, the Company is restricted from incurring
additional debt in excess of the $50 million available under the Agreement
unless the Company's fixed charge coverage ratio, as defined in the Indenture,
is at least 2.5 to 1 and the Company is not in default under the Indenture.
Currently, the Company's fixed charge coverage ratio is estimated to be greater
than 2.5 to 1. Under the terms of the Company's Settlement Agreement with the
Noteholders described below, until the Company satisfies its obligations under
the Settlement Agreement with the Noteholders, any additional borrowings beyond
that available under the Company's existing credit facilities must be applied to
repurchase the Notes.
As previously reported, the Company has been in litigation with certain
Holders (the "Noteholders") of its Notes. The dispute involved the calculation
of "Net Proceeds" of an "Asset Sale" as defined in the Indenture.
A Settlement Agreement dated February 24, 2004, was negotiated with the
Noteholders to resolve the dispute. In settlement of the dispute the Company has
agreed to repurchase $38 million in Notes. The repurchase will be effected by
the Company making three Asset Sale Offers (as defined in the Indenture)
totaling $38 million. The Company made an initial Asset Sale Offer of $4
million, which was completed on March 25, 2004. The Company will consummate
another Asset Sale Offer of $17 million within one hundred eighty (180) days of
February 24, 2004, and a third Asset Sale Offer of $17 million within three
hundred sixty (360) days of February 24, 2004. Upon consummation of the initial
Asset Sale Offer of $4 million, the Noteholders withdrew and waived the Notice
of Default issued to the Company on December 27, 2001. The United States
District Court for the Southern District of West Virginia has entered a
Dismissal Order dismissing the litigation with prejudice. If the Company fails
to consummate any of the Asset Sale Offers, the amount of Notes to be
repurchased shall be $43 million and such failure shall constitute an Event of
Default, giving the Noteholders the immediate right to accelerate all
outstanding principal and interest due under the Indenture. Also, in such event,
the December 27, 2001 Notice of Default previously issued by the Noteholders
will be reinstated.
On January 23, 2004, prior to reaching the Settlement Agreement with the
Noteholders, the Company received a Notice of Default from Foothill. Also, on
January 23, 2004, the Company and Foothill entered into a Forbearance Agreement
whereby Foothill agreed to continue to fund advances under the secured $50
million revolver until March 15, 2004, unless earlier terminated as provided
therein, subject to certain terms and conditions set forth therein. The
Forbearance Agreement was subsequently amended to provide for an extension of
the Forbearance Period to April 15, 2004. On April 2, 2004, Foothill withdrew
and waived the Notice of Default previously issued to the Company, subject to
the continuing effectiveness of the Noteholders' Settlement Agreement discussed
above.
The Company's net cash requirements will fluctuate based on timing and the
extent of the interplay of capital expenditures, cash generated by continuing
operations, cash generated by the sale of assets and interest expense. EBITDAX,
before inclusion of the gain on the purchase of the Company's Notes, for fiscal
year 2003 was $36.9 million. EBITDAX for fiscal years 2002 and 2001 was $19.7
million and $33.7 million, respectively. Management anticipates that EBITDAX
for fiscal year 2004 will approximate $38 million. The Company's ability to
achieve EBITDAX of $38 million for fiscal year 2004 is highly dependant on
product price and continued drilling success. There can be no assurance given
that the Company will be able to achieve these goals. Management believes that
cash generated from oil and gas operations, together with the liquidity provided
by existing cash balances, permitted borrowings, and new or additional lines of
credit, to the extent permitted, and the cash proceeds resulting from the sale
of certain assets, will be sufficient to satisfy commitments for capital
expenditures, debt service obligations, working capital needs and other cash
requirements for the remainder of fiscal year 2004.
-20-
In order to reduce future cash interest payments, as well as future amounts
due at maturity or upon redemption, the Company may, from time to time, purchase
its outstanding Notes in open market purchases and/or privately negotiated
transactions. The Company will evaluate any such transactions in light of then
existing market conditions, taking into account its liquidity, uses of capital
and prospects for future access to capital. The amounts involved in any such
transaction, individually or in the aggregate, may be material.
The Company believes that the resolution to the dispute with the
Noteholders, together with its existing capital resources, permitted borrowings,
and new or additional lines of credit, to the extent permitted, and its expected
fiscal year 2004 results of operations and cash flows from operating activities
will be sufficient for the Company to remain in compliance with the requirements
of its Notes. However, since future results of operations, cash flow from
operating activities, debt service capability, levels and availability of
capital resources and continuing liquidity are dependent on future weather
patterns, oil and gas commodity prices and production volume levels, future
exploration and development drilling success and successful acquisition
transactions, no assurance can be given that the Company will remain in
compliance with the requirements of its Notes.
-21-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
COMMODITY RISK
- ---------------
The Company's operations consist primarily of exploring for, producing,
aggregating and selling natural gas and oil. Contracts to deliver gas at
pre-established prices mitigate the risk to the Company of falling prices but at
the same time limit the Company's ability to benefit from the effects of rising
prices. The Company occasionally uses derivative instruments to hedge commodity
price risk. The Company hedges a portion of its projected natural gas production
through a variety of financial and physical arrangements intended to support
natural gas prices at targeted levels and to manage its exposure to price
fluctuations. The Company may use futures contracts, swaps, options and fixed
price physical contracts to hedge commodity prices. Realized gains and losses
from the Company's price risk management activities are recognized in oil and
gas sales when the associated production occurs. Unrecognized gains and losses
are included as a component of other comprehensive income. Ineffectiveness is
recorded in current earnings. The Company does not hold or issue derivative
instruments for trading purposes. The Company currently has elected to enter
into derivative hedge transactions and fixed price physical delivery contracts
on its estimated production covering approximately 67% to 77% for the fiscal
year ending June 30, 2004 and 32% to 42% for the fiscal year ending June 30,
2005.
-22-
As of March 31, 2004, the Company's open gas derivative instruments and
fixed price delivery contracts were as follows:
Total Average
Market Volumes Contract Unrealized
Time period Index (MMBtu) Price (Gains) Losses
- -------------------------------- ------ ---------- --------- ----------------
Derivatives
Natural Gas Swaps
April 2004 - June 2004 NYMEX 273,000 $ 4.05 $ 383,458
April 2004 - December 2004 NYMEX 29,000 5.20 (19,206)
May 2004 - February 2005 NYMEX 500,000 5.97 (66,160)
July 2004 - March 2005 NYMEX 1,080,000 5.57 242,388
July 2004 - March 2005 NYMEX 810,000 5.61 150,864
July 2004 - June 2005 NYMEX 3,240,000 4.54 3,412,507
--------- ----------------
Unrealized (Gains) Losses 5,932,000 $ 4,103,851
--------- ================
Physical Contracts
Fixed Price Delivery Contracts
March 2004 - June 2004 1,129,250 $ 4.56
July 2004 - October 2004 338,250 4.85
---------
Total Hedged Production 7,399,500
=========
Notwithstanding the above, the Company's future cash flows from gas and oil
production are exposed to significant volatility as commodity prices change.
Assuming total oil and gas production, pricing, and the percentage of gas
production hedged under physical delivery contracts and derivative instruments
remain at March 2004 levels, a 10% change in the average unhedged prices
realized would change the Company's gas and oil revenues by approximately $0.05
million on a quarterly basis.
INTEREST RATE RISK
- --------------------
Interest rate risk is attributable to the Company's debt. The Company
utilizes United States dollar denominated borrowings to fund working capital and
investment needs. There is inherent rollover risk for borrowings as they mature
and are renewed at current market rates, and there is ongoing interest rate risk
for variable rate borrowings. The extent of this risk is not predictable
because of the variability of future interest rates and the Company's future
financing needs. Assuming the variable interest debt remained at the March 31,
2004 level, a 10% change in rates would have a $0.2 million impact on interest
expense on an annual basis. The Company has not attempted to hedge the interest
rate risk associated with its debt.
-23-
FOREIGN CURRENCY EXCHANGE RISK
- ---------------------------------
Some of the Company's transactions are denominated in New Zealand dollars.
For foreign operations with the local currency as the functional currency,
assets and liabilities are translated at the period end exchange rates, and
statements of income are translated at the average exchange rates during the
period. Gains and losses resulting from foreign currency translation are
included as a component of other comprehensive income.
ITEM 4. CONTROLS AND PROCEDURES
- --------------------------------
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, the
Company has evaluated the effectiveness of the design and operation of our
disclosure controls and procedures within 90 days of the filing date of this
quarterly report and, based on their evaluation, our principal executive officer
and principal financial officer have concluded that these controls and
procedures are effective. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation. Disclosure controls and procedures
are our controls and other procedures that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Securities Exchange Act is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, the Company has been in litigation with certain
Holders of its $200,000,000 9 1/2% Senior Subordinated Notes due 2007 (the
"Noteholders") (the "Notes). The dispute involved the calculation of Net
Proceeds of an Asset Sale as defined in the Indenture dated May 23, 1997 between
the Company and The Bank of New York. The Company and the Noteholders have
settled the dispute, as memorialized in the Settlement Agreement executed as of
February 24, 2004, and attached to the Form 8-K filed by the Company on February
25, 2004 as Exhibit 99.11 (the "Settlement Agreement"). In settlement of the
dispute the Company has agreed to repurchase $38 million in Notes. The
repurchase will be effected by the Company making three Asset Sale Offers (as
defined in the Indenture) totaling $38 million. The Company commenced an Asset
Sale Offer of $4 million on February 26, 2004. The Company will consummate
another Asset Sale Offer of $17 million no later than 180 days from execution of
the Settlement Agreement and a third Asset Sale Offer no later than 360 days
from the execution of the Settlement Agreement. The Company finalized the first
Asset Sale Offer of $4 million on March 24, 2004. The United States District
Court for the Southern District of West Virginia has entered a Dismissal Order
dismissing the litigation with prejudice.
-24-
The Company is involved in various other legal actions and claims arising
in the ordinary course of business. While the outcome of these other lawsuits
against the Company cannot be predicted with certainty, management does not
expect these matters to have a material adverse effect on the Company's
operations or financial position.
ITEM 2. CHANGES IN SECURITIES
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:
31.1 Certification of Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
b) Reports on Form 8-K:
The Company filed a report on Form 8-K, Item 5, dated January 27,
2004, reporting that on January 23, 2004, the Company received a
Notice of Default from Wells Fargo Foothill, Inc. and that the Company
and Wells Fargo Foothill, Inc., entered into a Forbearance Agreement.
The Company filed a report on Form 8-K, Item 5, dated February 25,
2004, reporting that on February 24, 2004 the Company settled the
dispute with certain Holders of its $200,000,000 9 1/2% Senior
Subordinated Notes as memorialized in the Settlement Agreement.
The Company filed a report on Form 8-K, Item 5, dated February 26,
2004, announcing the commencement of an asset sale offer for the
purchase of up to $4 million aggregate principle amount of its 9 1/2%
Senior Subordinated Notes.
-25-
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 under
signed thereunto, duly authorized, in the City of Denver, State of Colorado, on
the 6th day of May 2004.
ENERGY CORPORATION OF AMERICA
By: /s/ John Mork
------------------------------
John Mork
Chief Executive Officer and Director
By: /s/ Michael S. Fletcher
------------------------------
Michael S. Fletcher
Chief Financial Officer
-26-