<PAGE>1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___ Commission IRS Employer File State of Identification Number Registrant Incorporation Number 1-7810 Energen Corporation Alabama 63-0757759 2-38960 Alabama Gas Corporation Alabama 63-0022000 2101 Sixth Avenue North Birmingham, Alabama 35203 Telephone Number 205/326-2700 Alabama Gas Corporation, a wholly owned subsidiary of Energen Corporation, meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with reduced disclosure format pursuant to General Instruction H(2). Indicate by a check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. YES X NO ____ Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of May 5, 1995: Energen Corporation, $0.01 par value 10,913,501 shares Alabama Gas Corporation, $0.01 par value 1,972,052 shares 1
<PAGE>2 ENERGEN CORPORATION AND ALABAMA GAS CORPORATION FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 TABLE OF CONTENTS Page
PART I: FINANCIAL INFORMATION (Unaudited)
Item 1. Financial Statements (a) Consolidated Statements of Income of Energen Corporation 4 (b) Consolidated Balance Sheets of Energen Corporation 5 (c) Consolidated Statements of Cash Flows of Energen Corporation 7 (d) Statements of Income of Alabama Gas Corporation 8 (e) Balance Sheets of Alabama Gas Corporation 9 (f) Statements of Cash Flows of Alabama Gas Corporation 11 (g) Notes to Unaudited Financial Statements 12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Selected Business Segment Data of Energen Corporation 18
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURES 20
<PAGE> 3 (This page intentionally left blank.)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME Energen Corporation and Subsidiaries (Unaudited) <CAPTION> Three months ended Six months ended March 31, March 31, (in thousands, except share data) 1995 1994 1995 1994 <S> <C> <C> <C> <C> Operating Revenues Natural gas distribution $ 134,141 $158,268 $201,367 $ 237,261 Oil and gas production activities 6,311 6,170 12,242 12,371 Other 2,142 5,561 4,558 10,809 Intercompany eliminations (1,774) (1,912) (3,863) (4,435) Total operating revenues 140,820 168,087 214,304 256,006 Operating Expenses Cost of gas 67,966 93,912 99,016 137,286 Operations 23,462 23,697 45,589 46,840 Maintenance 2,642 2,438 4,906 4,689 Depreciation, depletion, and amortization 7,194 6,796 14,160 13,507 Taxes, other than income taxes 9,254 10,874 14,895 17,601 Total operating expenses 110,518 137,717 178,566 219,923 Operating Income 30,302 30,370 35,738 36,083 Other Income (Expense) Interest expense, net of amounts capitalized (2,670) (2,823) (5,445) (5,745) Other, net 536 648 1,260 844 Total other income (expense) (2,134) (2,175) (4,185) (4,901) Income Before Income Taxes 28,168 28,195 31,553 31,182 Income taxes 6,454 6,003 7,103 6,690 Net Income $ 21,714 $22,192 $24,450 $24,492 Earnings Per Average Common Share $ 1.99 $ 2.03 $ 2.24 $ 2.28 Dividends Per Common Share $ 0.28 $ 0.27 $ 0.56 $ 0.54 Average Common Shares Outstanding 10,908 10,917 10,914 10,750 The accompanying Notes are an integral part of these statements. </TABLE>
<TABLE> CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited) <CAPTION> March 31, September 30, (in thousands) 1995 1994 <S> <C> <C> <C> <C> ASSETS Property, Plant and Equipment Utility plant $ 480,615 $ 464,593 Less accumulated depreciation 239,632 231,327 Utility plant, net 240,983 233,266 Oil and gas properties, successful efforts method 101,693 92,355 Less accumulated depreciation, depletion and amortization 46,983 43,052 Oil and gas properties, net 54,710 49,303 Other property, net 4,155 4,613 Total property, plant and equipment, net 299,848 287,182 Current Assets Cash and cash equivalents 28,340 27,526 Accounts receivable, net of allowance for doubtful accounts of $2,015 at March 31, 1995 and $2,037 at September 30, 1994 43,643 34,145 Inventories, at average cost Storage gas 14,467 24,363 Materials and supplies 8,101 7,589 Liquified natural gas in storage 3,421 3,349 Deferred gas costs 3,962 1,460 Regulatory asset 7,200 - Deferred income taxes 12,223 7,542 Prepayments and other 1,452 3,117 Total current assets 122,809 109,091 Other Assets Notes receivable 3,491 3,911 Deferred charges and other 10,973 11,130 Total other assets 14,464 15,041 TOTAL ASSETS $ 437,121 $ 411,314 The accompanying Notes are an integral part of these statements. </TABLE>
<TABLE> CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited) March 31, September 30, (in thousands, except share data) 1995 1994 <S> <C> <C> CAPITAL AND LIABILITIES Capitalization Preferred stock, cumulative $0.01 par value, 5,000,000 shares authorized $ - $ - Common shareholders' equity Common stock, $0.01 par value; 30,000,000 shares authorized, 10,903,977 shares outstanding at March 31, 1995 and 10,917,904 shares outstanding at September 30, 1994 109 109 Premium on capital stock 81,161 81,073 Capital surplus 2,802 2,802 Retained earnings 101,381 83,042 Treasury stock at cost, 16,600 shares (361) - Total common shareholders' equity 185,092 167,026 Long-term debt 114,660 118,302 Total capitalization 299,752 285,328 Current Liabilities Long-term debt due within one year 4,629 10,123 Notes payable to banks - 6,000 Accounts payable 34,867 27,480 Accrued taxes 18,032 13,083 Customers' deposits 18,561 17,462 Amounts due customers 18,852 11,734 Accrued wages and benefits 11,716 9,662 Other 15,558 15,129 Total current liabilities 122,215 110,673 Deferred Credits and Other Liabilities Deferred income taxes 1,960 1,706 Accumulated deferred investment tax credits 4,347 4,590 Other 8,847 9,017 Total deferred credits and other liabilities 15,154 15,313 Commitments and Contingencies - - TOTAL CAPITAL AND LIABILITIES $ 437,121 $ 411,314 The accompanying Notes are an integral part of these statements. </TABLE>
<TABLE> CONSOLIDATED STATEMENTS OF CASH FLOW Energen Corporation and Subsidiaries (Unaudited) Six months ended March 31, (in thousands) 1995 1994 <S> <C><C> <C> <C> Operating Activities Net Income $ 24,450 $ 24,492 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 14,160 13,507 Deferred income taxes, net (4,770) (5,643) Deferred investment tax credits, net (243) (243) Gain on sale of equity securities - (1,375) Net change in: Accounts receivable (9,498) (16,455) Inventories 9,312 (17,257) Accounts payable 7,387 14,789 Other current assets and liabilities 7,612 13,475 Other, net (158) 149 Net cash provided by operating activities 48,252 25,439 Investing Activities Additions to property, plant and equipment (26,469) (16,090) Proceeds from sale of equity securities - 3,305 Payments on notes receivable 420 1,073 Other, net 131 1,588 Net cash used in investing activities (25,918) (10,124) Financing Activities Payment of dividends on common stock (6,113) (5,745) Issuance of common stock 90 14,692 Purchase of treasury stock (361) - Reduction of long-term debt and preferred stock of subsidiary (9,136) (10,460) Proceeds from issuance of medium-term notes - 49,670 Net change in short-term debt (6,000) (40,000) Net cash provided by (used in) financing activities (21,520) 8,157 Net change in cash and cash equivalents 814 23,472 Cash and cash equivalents at beginning of period 27,526 15,008 Cash and Cash Equivalents at End of Period $28,340 $38,480 The accompanying Notes are an integral part of these statements. </TABLE>
<TABLE> STATEMENTS OF INCOME Alabama Gas Corporation (Unaudited) <CAPTION> Three months ended Six months ended March 31, March 31, (in thousands) 1995 1994 1995 1994 <S> <C> <C> <C> <C> Operating Revenues $134,141 $158,268 $201,367 $237,261 Operating Expenses Cost of gas 68,835 94,930 100,829 139,540 Operations 19,852 18,282 38,209 36,530 Maintenance 2,607 2,342 4,835 4,495 Depreciation 4,784 4,441 9,521 8,868 Income taxes Current 14,568 15,119 15,630 15,480 Deferred, net (4,657) (5,787) (4,775) (5,819) Deferred investment tax credits, net (121) (121) (243) (243) Taxes, other than income taxes 8,997 10,577 14,389 16,980 Total operating expenses 114,865 139,783 178,395 215,831 Operating Income 19,276 18,485 22,972 21,430 Other Income Allowance for funds used during construction 223 111 409 187 Other, net 85 189 243 (19) Total other income 308 300 652 168 Interest Charges Interest on long-term debt 1,680 1,659 3,437 3,078 Other interest expense 637 438 1,169 1,136 Total interest charges 2,317 2,097 4,606 4,214 Net Income Available for Common $ 17,267 $16,688 $19,018 $17,384 The accompanying Notes are an integral part of these statements. </TABLE>
<TABLE> BALANCE SHEETS Alabama Gas Corporation (Unaudited) <CAPTION> March 31, September 30, (in thousands) 1995 1994 <S> <C> <C> ASSETS Property, Plant and Equipment Utility plant $ 480,615 $ 464,593 Less accumulated depreciation 239,632 231,327 Utility plant, net 240,983 233,266 Other property, net 180 183 Current Assets Cash and cash equivalents 13,786 156 Accounts receivable Gas 34,293 22,209 Merchandise 994 1,326 Other 1,814 1,512 Allowance for doubtful accounts (2,000) (2,000) Inventories, at average cost Storage gas 14,467 24,363 Materials and supplies 5,632 5,688 Liquified natural gas in storage 3,421 3,349 Deferred gas costs 3,962 1,460 Regulatory asset 7,200 - Deferred income taxes 10,381 5,724 Prepayments and other 1,096 2,595 Total current assets 95,046 66,382 Deferred Charges and Other Assets 9,007 9,074 TOTAL ASSETS $ 345,216 $ 308,905 The accompanying Notes are an integral part of these statements. </TABLE>
<TABLE> BALANCE SHEETS Alabama Gas Corporation (Unaudited) <CAPTION> March 31, September 30, (in thousands, except share data) 1995 1994 <S> <C> <C> CAPITAL AND LIABILITIES Capitalization Common shareholder's equity Common stock, $0.01 par value; 3,000,000 shares authorized, 1,972,052 shares outstanding at March 31, 1995 and September 30, 1994 $ 20 $ 20 Premium on capital stock 31,682 31,682 Capital surplus 2,802 2,802 Retained earnings 93,990 81,087 Total common shareholder's equity 128,494 115,591 Cumulative preferred stock, $0.01 par value, 120,000 shares authorized, issuable in series-$4.70 Series - - Long-term debt 82,750 84,391 Total capitalization 211,244 199,982 Current Liabilities Long-term debt due within one year 2,854 2,823 Notes payable to banks - 4,000 Accounts payable Other 28,846 19,002 Affiliated companies 4,711 132 Accrued taxes 19,015 14,241 Customers' deposits 18,561 17,462 Supplier refunds due customers 3,205 832 Other amounts due customers 15,647 10,902 Accrued wages and benefits 6,671 5,659 Other 8,602 7,605 Total current liabilities 108,112 82,658 Deferred Credits and Other Liabilities Deferred income taxes 13,929 13,704 Accumulated deferred investment tax credits 4,347 4,590 Regulatory liability 6,522 6,960 Customer advances for construction and other 1,062 1,011 Total deferred credits and other liabilities 25,860 26,265 Commitments and Contingencies - - TOTAL CAPITAL AND LIABILITIES $ 345,216 $ 308,905 The accompanying Notes are an integral part of these statements. </TABLE>
<TABLE> STATEMENTS OF CASH FLOW Alabama Gas Corporation (Unaudited) <CAPTION> Six months ended March 31, (in thousands) 1995 1994 <S> <C> <C> Operating Activities Net Income $ 19,018 $ 17,384 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,521 8,868 Deferred income taxes, net (4,775) (5,819) Deferred investment tax credits (243) (243) Net change in: Accounts receivable (12,054) (16,783) Inventories 9,880 (17,512) Accounts payable 9,911 18,017 Other current assets and liabilities 6,797 15,189 Other, net (345) 684 Net cash provided by operating activities 37,710 19,785 Investing Activities Additions to property, plant and equipment (16,729) (13,745) Net advances to holding company - 87 Other, net (138) (118) Net cash used in investing activities (16,867) (13,776) Financing Activities Payment of dividends on common stock (6,115) (5,745) Reduction of long-term debt (1,610) (9,860) Proceeds from issuance of medium-term notes - 49,670 Proceeds from equity infusion from parent - 10,000 Net advances from affiliates 4,512 5,490 Net change in short-term debt (4,000) (29,000) Net cash provided by (used in) financing activities (7,213) 20,555 Net change in cash and cash equivalents 13,630 26,564 Cash and cash equivalents at beginning of period 156 480 Cash and Cash Equivalents at End of Period $ 13,786 $ 27,044 The accompanying Notes are an integral part of these statements. </TABLE>
<PAGE> 12 NOTES TO UNAUDITED FINANCIAL STATEMENTS Energen Corporation and Alabama Gas Corporation 1. BASIS OF PRESENTATION All adjustments to the unaudited financial statements which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim periods have been recorded. Such adjustments consisted only of normal recurring items. The consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended September 30, 1994, 1993, and 1992 included in the 1994 Annual Report of Energen Corporation (the Company) on Form 10- K. Certain reclassifications were made to conform prior years' financial statements to the current quarter presentation. The Company's primary business is seasonal in character and influenced by weather conditions. Results of operations for the interim periods are not necessarily indicative of the results which may be expected for the fiscal year. 2. REGULATORY As an Alabama utility, Alagasco is subject to regulation by the Alabama Public Service Commission (APSC) which, in 1983, established the Rate Stabilization and Equalization (RSE) rate- setting process. RSE was extended for the third time on December 3, 1990, for a three-year period. Under the terms of that extension, RSE shall continue after November 30, 1993, unless, after notice to the Company, the Commission votes to either modify or discontinue its operation. On October 4, 1993, the Commission unanimously voted to extend RSE until such time as certain hearings mandated by the Energy Policy Act of 1992 (Energy Act) in connection with integrated resource planning and demand side management programs are completed. The Energy Act proceedings are expected to conclude during fiscal 1995 at which time it is expected that the Commission will begin reviewing Alagasco's RSE. No time table for review has yet been established. Under RSE as extended, the APSC conducts quarterly reviews to determine, based on Alagasco's projections and fiscal year-to-date performance, whether Alagasco's return on equity for the fiscal year will be within the allowed range of 13.15 percent to 13.65 percent. Reductions in rates can be made quarterly to bring the projected return within the allowed range; increases, however, are allowed only once each fiscal year, effective December 1, and cannot exceed 4 percent of prior-year revenues. RSE limits the utility's equity upon which a return is permitted to 60 percent of total capitalization and provides for certain cost control measures designed to monitor the Company's operations and maintenance (O&M) expense. If O&M expense per customer falls within 1.25 percentage points above or below the Consumer Price Index For All Urban Customers (index range), no adjustment is required. If, however, O&M expense per customer exceeds the index range, three-quarters of the difference will be returned to the customers. To the extent O&M expense per customer is less than the index range, the utility will benefit by one-half of the difference through future rate adjustments. Effective December 15, 1990, the APSC approved a temperature adjustment to customers' monthly bills to remove the effect of departures from normal temperature on Alagasco's earnings. The calculation is performed monthly, and the adjustment to customers' bills is made in the same month the weather variation occurs. Under RSE as extended, a $1.1 million decrease in revenue became effective October 1, 1994, and a $5.2 million annual increase in revenue became effective December 1, 1994. The Company's rate schedules for natural gas distribution charges contained a Gas Supply Adjustment rider which permits the pass- through of changes in gas costs to customers and gas supply realignment surcharges imposed by the Company's suppliers resulting from changes in gas supply purchases related to the implementation of FERC Order 636. In accordance with APSC-directed regulatory accounting procedures, Alagasco in 1989 began returning excess utility deferred taxes which resulted from a reduction in the federal statutory tax rate from 46 percent to 34 percent using the average
<PAGE> 13 rate assumption method. This method provides for the return to ratepayers of excess deferred taxes over the lives of the related assets. In 1993 those excess taxes were reduced as a result of a federal tax rate increase from 34 percent to 35 percent. Approximately $3.1 million of remaining excess utility deferred taxes is being returned to ratepayers over approximately 16 years. FERC Regulation On March 15, 1995 Southern Natural Gas Company (Southern) filed a comprehensive settlement with the Federal Energy Regulatory Commission (FERC) in the form of a Stipulation and Agreement (the Settlement) to resolve all issues in Southern's six pending rate cases, as well as to resolve all gas supply realignment and transition cost issues resulting from the implementation of FERC Order 636. The Settlement is supported by parties representing over 90% of the firm transportation demand on Southern's system, including local distribution companies (including Alagasco), municipal distribution systems, major gas producers, large industrial end users, marketers, and state commissions (including the APSC). The Settlement is subject to FERC approval which has not yet occurred as of the date of this filing. Specifically, the Settlement provides for the following: (1) the resolution of all cost of service and rate design issues in Southern's six pending rate cases and the establishment of reduced rates for the purpose of calculating rate case refunds; (2) the implementation of reduced settlement rates on an interim basis for supporting parties commencing March 1, 1995 (by order dated April 4, 1995 FERC approved these interim rates pending its final review of the merits of the Settlement); (3) the resolution of all Gas Supply Realignment (GSR) and other transition cost issues resulting from FERC Order 636; (4) lower GSR cost recovery through the reduction and earlier payout of GSR costs; (5) a three-year moratorium on general rate increases; and (6) the resolution and disposition of all rate case and GSR refunds for supporting parties. With respect to this last point, the Settlement provides that all rate case refunds will be used to offset a portion of Southern's remaining GSR liability. In the Settlement filing with FERC, Southern has represented that the Settlement will allow Southern and the supporting parties to resolve all issues relating to GSR and other transition costs, the majority of which costs will be collected by the end of 1995. Alagasco estimates that it has a remaining GSR liability of approximately $6.0 million to be paid through December 1995 and approximately $1.2 million in other transition costs to be paid through March 1998, and has recorded such amounts in the financial statements. Because these costs will be recovered in full from Alagasco's customers in a timely manner through the GSA rider of Alagasco's Tariff (approved by APSC order dated October 4, 1993 in docket U-3497), the Company has recorded a corresponding regulatory asset in the accompanying financial statements. In addition, as a result of the recalculated GSR surcharges for the period January 1, 1994 to February 28, 1995, Southern will refund over-collected GSR costs. Neither the total amount of this refund nor Alagasco's share has yet been determined, therefore, no amounts have been recorded in the financial statements.
<PAGE> 14 3. SUPPLEMENTAL CASH FLOW INFORMATION Energen Corporation Six months ended March 31, (in thousands) 1995 1994 Interest paid, net of amounts capitalized $ 6,675 $ 5,919 Income taxes paid $ 2,615 $ 3,984 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 487 $ 269 Noncash financing activities (debt issuance costs) $ - $ 330 Alabama Gas Corporation Six months ended March 31, (in thousands) 1995 1994 Interest paid $ 5,531 $ 4,420 Income taxes paid $ 6,647 $ 4,612 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 487 $ 269 Noncash financing activities (debt issuance costs) $ - $ 330
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated net income for the second quarter was $21,714,000 ($1.99 per share), a slight decline from the prior year's $22,192,000 ($2.03 per share). Decreased earnings from Taurus Exploration (Taurus) and the absence of contribution from W & J Propane, which was sold in the third quarter of the prior year, were largely offset by increased earnings from Alagasco as it continued to earn its allowed return on a higher level of equity. Taurus's contribution to consolidated earnings declined 9 percent primarily due to lower natural gas prices and the timing of recognition of nonconventional fuel tax credits on an interim basis. Partially offsetting the impact of these items was a one time gain of $0.5 million associated with the buyout of a sales contract. Consolidated net income for the six months was $24,450,000 ($2.24 per share), compared to $24,492,000 ($2.28 per share) in the prior year. The factors primarily influencing earnings were the same as for the quarter. Two factors created the majority of the 15 percent decrease in utility natural gas revenues for the quarter and year to date. The benefit of lower commodity cost of gas was passed through to customers in reduced rates. Additionally, warmer than normal weather resulted in a significant reduction in gas sales volumes to residential customers for both periods; partially offsetting that impact on revenues was the recovery of margins associated with departures from normal weather allowed by Alagasco's temperature adjustment provision. A significant decrease in natural gas prices heavily influenced operating fees and natural gas production revenues at Taurus. Operating fees on certain coalbed methane properties are impacted by a variety of factors as defined by the operating agreements, including production volume, operating expenses and the price of natural gas. The decrease in the current quarter's operating fees is attributable almost exclusively to a 34 percent decrease in the average index price of natural gas. With respect to gas production revenues, after giving effect to hedged volumes, the average sales price per Mcf was $1.76 compared to $1.95 in the prior year. Similar to the quarter, the decrease in the six month's operating fees is largely due to a 31 percent decrease in the average index price of natural gas. Likewise, gas production revenues were impacted by a lower average sales price, which, after giving effect to hedged volumes, was $1.78 per Mcf compared to $1.98 per Mcf in the prior year. Offsetting the effect of pricing in both the quarter and year to date was the buyout of the five remaining years of a long-term sales contract ($0.8 million) which covered a portion of the Company's coalbed methane production. A new contract has been executed which should provide a market for all of the Company's production for five years at prices tied to spot market indices. To hedge its exposure to energy price fluctuations on oil and gas production over the remainder of this fiscal year, Taurus has entered into contracts for the sale of 3 Bcf of its gas production at an average contract price of $1.94 per Mcf, and for the sale of 54 MBbl of its oil production at an average contract price of $18.42 per Bbl. Based on current estimates for fiscal 1995 production (excluding additional producing property acquisitions), approximately 65 percent of gas production and 55 percent of oil production are hedged. At March 31, 1995, the Company's deferred gains related to its futures contracts totalled $0.4 million. Current year earnings are expected to decrease compared to 1994 due to the price risk associated with both unhedged production volumes and operating fees. The program has been extended into fiscal 1996 for the sale of 3.9 Bcf of gas production with an average contract price of $1.78 per Mcf. Other revenues for the quarter and year to date were significantly lower than in the prior year primarily due to the absence of revenues from W & J Propane. Excluding the effect of propane revenues, other revenues would have decreased slightly in both periods as a result of lower merchandise sales. As with natural gas revenues, decreased commodity cost coupled with decreased sales volumes associated with warmer weather created a majority of the 28 percent decrease in cost of gas in both periods.
<PAGE> 16 For the quarter and year to date, consolidated operations and maintenance (O&M) expense was relatively constant as the impact of the sale of propane operations in the prior year was offset by increases at Alagasco and Taurus. Excluding the effect of propane operations, O&M expense would have increased 9 percent for the quarter primarily due to labor and related expenses at Alagasco. For the six month period O&M expense would have increased 6 percent due to labor and related expenses at Alagasco and increased exploration expense at Taurus. Depreciation expense for the quarter and year to date increased 5 percent and 4 percent, respectively, as the effects of normal plant growth at Alagasco and an increased DD &A rate at Taurus were offset in part by the absence of depreciation on propane assets in the current year. The Company's expense for taxes other than income taxes primarily reflects various state and local business taxes paid by Alagasco as well as various payroll-related taxes. State and local business taxes generally are based on gross receipts of Alagasco and fluctuate accordingly. A significant reduction in average short-term debt outstanding and the early repayment of certain long-term notes more than offset the effect of medium-term notes issued in December and January of the prior fiscal year; the resulting decrease in interest expense for both the quarter and year to date was 5 percent. Other income did not vary significantly for the quarter; for the six-month period increased AFUDC and the inclusion of redemption fees in the prior year related to the Company's refinancing of a significant portion of its long-term debt created the increase. The variance in income tax expense for the quarter and year to date was due largely to the timing of recognition of nonconventional fuel tax credits on an interim basis as pretax income did not vary significantly. Nonconventional fuel tax credits are available on production from qualifying wells through the year 2002; therefore, the Company anticipates effective tax rates to remain lower than statutory rates through that period as it expects to recognize all tax credits generated for financial statement purposes. As previously discussed, the Company's business is seasonal in character and influenced by weather conditions. Results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year. As more fully discussed in Note 2, Alagasco is subject to regulation by the APSC, which is expected to consider renewal of the utility's rate-setting mechanism following the completion of its review of certain mandates under the Energy Policy Act of 1992. Changes, if any, to the utility's present rate-setting assumptions or provisions could have an impact on its net income. Liquidity and Capital Resources The item primarily responsible for the significant change in cash provided by operations was the prior year initial investment in underground storage working gas that represented a use of cash totaling $18 million at March 31, 1994. In the current year, while the total volumes maintained in storage have not materially changed, a 20 percent decrease in the average cost per Mcf of storage gas resulted in a $9.9 million source of cash at March 31, 1995. Fluctuations in receivables and payables are generally the result of timing of payments. Net cash used in investing activities primarily was influenced by two factors. Capital expenditures exceeded those of the prior year due to Alagasco's acquisition of the 2,200-customer Alabaster gas system and Taurus's investment in proved properties of $6.0 million adding 9 Bcf of oil and gas reserves. Additionally, the inclusion in the prior year of proceeds related to the sale of equity securities served to reduce that quarter's cash used in investing activities. The change in net cash provided by (used in) financing activities is attributable to several occurrences in the prior year. The issuance of 550,000 shares of Energen common stock in November 1993 generated $13.5 million, and Alagasco issued $49.6 million in medium-term notes in the prior year. These proceeds were used to fund the investment in underground working storage gas, redeem its 8.75 percent debentures, reduce short-term debt outstanding, and fund additional capital needs. During the current year, the Company has acquired 16,600 shares of common stock through its stock repurchase program. Future Capital Expenditures and Liquidity: Capital and exploration expenditures could approximate $66 million in fiscal 1995, excluding municipal gas system acquisitions, and primarily represent additions for normal distribution system expansion, the development of a new customer information system at Alagasco, and oil and gas development activities. With respect to oil and gas activities, the Company is attempting to invest a significant portion of its capital expenditures in proven property acquisitions. However, the market for acquisitions has been limited and the economics of current pricing has delayed exploration opportunities; therefore, capital expenditures may not reach targeted levels. In addition, Alagasco will maintain an investment in storage working gas which is anticipated to average $19 million for the fiscal year. The Company anticipates funding these capital requirements through internally generated capital and the utilization of short-term credit facilities. Energen has short-term credit facilities totaling $110 million available for working capital needs, with no amounts outstanding at March 31, 1995 or 1994.
<TABLE> SELECTED BUSINESS SEGMENT DATA Energen Corporation <CAPTION> Three months ended Six months ended March 31, March 31, (in thousands, except share data) 1995 1994 1995 1994 <S> <C> <C> <C> <C> Natural Gas Distribution Operating revenues (in thousands) Residential $ 92,102 $110,586 $136,452 $162,184 Commercial and industrial - small 31,887 39,523 47,432 58,635 Commercial and industrial - large 219 710 250 733 Transportation 9,267 8,248 16,833 16,056 Other 666 (799) 400 (347) Total $134,141 $158,268 $201,367 $237,261 Volumes sold and transported (thousands of Mcf) Residential 15,219 16,841 20,506 23,773 Commercial and industrial - small 5,871 6,429 8,338 9,502 Commercial and industrial - large 8 86 16 91 Transportation 15,796 13,747 30,086 26,915 Total 36,894 37,103 58,946 60,281 Other data Depreciation and amortization $ 4,784 $ 4,441 $ 9,521 $ 8,868 Capital expenditures $ 7,438 $ 8,678 $ 17,216 $ 14,014 Operating income $ 29,066 $ 27,696 $ 33,584 $ 30,848 Oil and Gas Exploration and Production Operating revenues Natural gas $ 3,564 $ 4,136 $ 7,512 $ 8,155 Oil 903 649 1,695 1,461 Other 1,844 1,385 3,035 2,755 Total $ 6,311 $ 6,170 $ 12,242 $ 12,371 Sales volume - natural gas (thousands of Mcf) 2,028 2,126 4,209 4,117 Sales volume - oil (thousands of barrels) 59 50 109 104 Average sales price - natural gas (per Mcf) $ 1.76 $ 1.95 $ 1.78 $ 1.98 Average sales price - oil (per barrel) $ 15.31 $ 12.98 $ 15.55 $ 14.05 Other data Depreciation, depletion and amortization $ 2,304 $ 2,090 $ 4,422 $ 4,045 Capital expenditures $ 6,728 $ 315 $ 9,735 $ 2,148 Exploration expenditures $ 187 $ 139 $ 616 $ 194 Operating income $ 1,465 $ 1,913 $ 2,619 $ 4,011 Other Business Operating revenues $ 2,142 $ 5,561 $ 4,558 $ 10,809 Depreciation and amortization $ 106 $ 265 $ 217 594 Capital expenditures $ 5 $ 51 $ 5 $ 197 Operating income $ 43 $ 1,071 $ 247 $ 1,845 Eliminations and Corporate Expenses Operating loss $ (272) $ (310) $ (712) $ (621) </TABLE>
ART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a. At the annual meeting of shareholders held on January 25, 1995, the Energen shareholders elected the following Director to serve for three year terms: Director Votes cast for Votes withheld Stephen D. Ban 8,801,899 354,361 George S. Shirley 8,796,850 356,410 Wm. Michael Warren, Jr. 8,729,939 426,321 b. The shareholders also approved a proposal to amend the Restated Certificate of Incorporation of the Company by the addition of a new Article XI restricting and limiting under certain circumstances the liability of directors of the Company to the Company and its shareholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 27.1 Financial data schedule of Energen Corporation (for SEC purposes only) 27.2 Financial data schedule of Alabama Gas Corporation (for SEC purposes only) b. Reports on Form 8-K No reports on Form 8-K were filed for the three months ended March 31, 1995.
<PAGE> 19 Intentionally left blank.
SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENERGEN CORPORATION ALABAMA GAS CORPORATION May 15, 1995 By/s/ Wm. Michael Warren, Jr. Wm. Michael Warren, Jr. President and Chief Operating Officer May 15, 1995 By/s/ G. C. Ketcham G. C. Ketcham Executive Vice President, Chief Financial Officer and Treasurer May 15, 1995 By/s/ J. T. McManus J. T. McManus Vice President-Finance and Corporate Development of Energen and Vice President-Finance and Planning of Alagasco
<TABLE> <S> <C> <ARTICLE> UT <LEGEND> This schedule contains summary financial information extracted from the Form 10Q for March 31, 1995, and is qualified in its entirety by reference to such financial statements. </LEGEND> <CIK> 0000277595 <NAME> ENERGEN CORPORATION <MULTIPLIER> 1,000 <S> <C> <PERIOD-TYPE> 6-MOS <FISCAL-YEAR-END> SEP-30-1995 <PERIOD-START> OCT-01-1994 <PERIOD-END> MAR-31-1995 <BOOK-VALUE> PER-BOOK <TOTAL-NET-UTILITY-PLANT> 240,983 <OTHER-PROPERTY-AND-INVEST> 58,865 <TOTAL-CURRENT-ASSETS> 122,809 <TOTAL-DEFERRED-CHARGES> 10,973 <OTHER-ASSETS> 3,491 <TOTAL-ASSETS> 437,121 <COMMON> 109 <CAPITAL-SURPLUS-PAID-IN> 83,602 <RETAINED-EARNINGS> 101,381 <TOTAL-COMMON-STOCKHOLDERS-EQ> 185,092 <PREFERRED-MANDATORY> 0 <PREFERRED> 0 <LONG-TERM-DEBT-NET> 114,660 <SHORT-TERM-NOTES> 0 <LONG-TERM-NOTES-PAYABLE> 0 <COMMERCIAL-PAPER-OBLIGATIONS> 0 <LONG-TERM-DEBT-CURRENT-PORT> 4,629 <PREFERRED-STOCK-CURRENT> 0 <CAPITAL-LEASE-OBLIGATIONS> 0 <LEASES-CURRENT> 0 <OTHER-ITEMS-CAPITAL-AND-LIAB> 132,740 <TOT-CAPITALIZATION-AND-LIAB> 437,121 <GROSS-OPERATING-REVENUE> 214,304 <INCOME-TAX-EXPENSE> 7,103 <OTHER-OPERATING-EXPENSES> 178,566 <TOTAL-OPERATING-EXPENSES> 185,669 <OPERATING-INCOME-LOSS> 28,635 <OTHER-INCOME-NET> 1,260 <INCOME-BEFORE-INTEREST-EXPEN> 29,895 <TOTAL-INTEREST-EXPENSE> 5,445 <NET-INCOME>
24,450 <PREFERRED-STOCK-DIVIDENDS> 0 <EARNINGS-AVAILABLE-FOR-COMM> 24,450 <COMMON-STOCK-DIVIDENDS> 6,113 <TOTAL-INTEREST-ON-BONDS> 4,774 <CASH-FLOW-OPERATIONS> 48,252 <EPS-PRIMARY> 2.24 <EPS-DILUTED> 2.24 </TABLE>
<TABLE> <S> <C> <ARTICLE> UT <LEGEND> This schedule contains summary financial information extracted from the Form 10Q for March 31, 1995, and is qualified in its entirety by reference to such financial statements. </LEGEND> <CIK> 0000003146 <NAME> ALABAMA GAS CORPORATION <MULTIPLIER> 1,000 <S> <C> <PERIOD-TYPE> 6-MOS <FISCAL-YEAR-END> SEP-30-1995 <PERIOD-START> OCT-01-1994 <PERIOD-END> MAR-31-1995 <BOOK-VALUE> PER-BOOK <TOTAL-NET-UTILITY-PLANT> 240,983 <OTHER-PROPERTY-AND-INVEST> 180 <TOTAL-CURRENT-ASSETS> 95,046 <TOTAL-DEFERRED-CHARGES> 9,007 <OTHER-ASSETS> 0 <TOTAL-ASSETS> 345,216 <COMMON> 20 <CAPITAL-SURPLUS-PAID-IN> 34,484 <RETAINED-EARNINGS> 93,990 <TOTAL-COMMON-STOCKHOLDERS-EQ> 128,494 <PREFERRED-MANDATORY> 0 <PREFERRED> 0 <LONG-TERM-DEBT-NET> 82,750 <SHORT-TERM-NOTES> 0 <LONG-TERM-NOTES-PAYABLE> 0 <COMMERCIAL-PAPER-OBLIGATIONS> 0 <LONG-TERM-DEBT-CURRENT-PORT> 2,854 <PREFERRED-STOCK-CURRENT> 0 <CAPITAL-LEASE-OBLIGATIONS> 0 <LEASES-CURRENT> 0 <OTHER-ITEMS-CAPITAL-AND-LIAB> 131,118 <TOT-CAPITALIZATION-AND-LIAB> 345,216 <GROSS-OPERATING-REVENUE> 201,367 <INCOME-TAX-EXPENSE> 10,612 <OTHER-OPERATING-EXPENSES> 167,783 <TOTAL-OPERATING-EXPENSES> 178,395 <OPERATING-INCOME-LOSS> 22,972 <OTHER-INCOME-NET> 652 <INCOME-BEFORE-INTEREST-EXPEN> 23,624 <TOTAL-INTEREST-EXPENSE> 4,606 <NET-INCOME> 19,018
<PREFERRED-STOCK-DIVIDENDS> 0 <EARNINGS-AVAILABLE-FOR-COMM> 19,018 <COMMON-STOCK-DIVIDENDS> 6,115 <TOTAL-INTEREST-ON-BONDS> 3,473 <CASH-FLOW-OPERATIONS> 37,710 <EPS-PRIMARY> 0<F1> <EPS-DILUTED> 0<F1> <FN> <F1>Earnings per share is calculated for Energen Corporation (parent company of Alagasco) and is not calculated for Alagasco separately as amount would not be meaningful. </FN> </TABLE>