UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE YEAR ENDED SEPTEMBER 30, 2001
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 |
605 RICHARD ARRINGTON JR. BOULEVARD NORTH
BIRMINGHAM, ALABAMA 35203-2707
TELEPHONE NUMBER 205/326-2700
HTTP://WWW.ENERGEN.COM
Securities Registered Pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED ------------------- ---------------------------- Energen Corporation Common Stock, $0.01 par value New York Stock Exchange Energen Corporation Preferred Stock Purchase Rights New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by a check mark whether 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 by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X)
Aggregate market value of the voting stock held by non-affiliates of the registrants as of December 3, 2001:
Energen Corporation $ 706,775,740
Indicate number of shares outstanding of each of the registrant's classes of common stock as of December 3, 2001:
Energen Corporation 31,149,433 shares
Alabama Gas Corporation 1,972,052 shares
Alabama Gas Corporation meets the conditions set forth in General Instruction I(1) (a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format pursuant to General Instruction I(2).
DOCUMENTS INCORPORATED BY REFERENCE
Energen Corporation Proxy Statement to be filed on or about December 20, 2001
(Part III, Item 10-13)
ENERGEN CORPORATION
2001 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business............................................................... 3
Item 2. Properties............................................................. 9
Item 3. Legal Proceedings...................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders.................... 9
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters... 12
Item 6. Selected Financial Data................................................ 13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 15
Item 7a. Quantitative and Qualitative Disclosures about Market Risk............. 23
Item 8. Financial Statements and Supplementary Data............................ 24
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................... 59
PART III
Item 10. Directors and Executive Officers of the Registrants.................... 60
Item 11. Executive Compensation................................................. 60
Item 12. Security Ownership of Certain Beneficial Owners and Management......... 60
Item 13. Certain Relationships and Related Transactions......................... 60
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....... 61
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This Form 10-K is filed on behalf of Energen Corporation (Energen or the Company) and Alabama Gas Corporation (Alagasco).
FORWARD-LOOKING STATEMENT AND RISK: Certain statements in this report express expectations of future plans, objectives and performance of the Company and its subsidiaries and constitute forward-looking statements made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Except as otherwise disclosed, the Company's forward-looking statements do not reflect the impact of possible or pending acquisitions, divestitures or restructurings. We undertake no obligation to correct or update any forward-looking statements whether as a result of new information, future events or otherwise. All statements based on future expectations rather than on historical facts are forward-looking statements that are dependent on certain events, risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of these include, but are not limited to, economic and competitive conditions, inflation rates, legislative and regulatory changes, financial market conditions, future business decisions, and other uncertainties, all of which are difficult to predict. There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and in projecting future rates of production and timing of development expenditures. The total amount or timing of actual future production may vary significantly from reserves and production estimates. In the event Energen Resources Corporation is unable to fully invest its planned acquisition, development and exploratory expenditures, future operating revenues, production, and proved reserves could be negatively affected. The drilling of development and exploratory wells can involve significant risks, including those related to timing, success rates and cost overruns and these risks can be affected by lease and rig availability, complex geology and other factors. Although Energen Resources makes use of futures, swaps and fixed-price contracts to mitigate risk, fluctuations in future oil and gas prices could affect materially the Company's financial position and results of operation; furthermore, such risk mitigation activities may cause the Company's financial position and results of operations to be materially different from results that would have been obtained had such risk mitigation activities not occurred. In addition, the Company cannot guarantee the absence of errors in input data, calculations and formulas used in its estimates, assumptions and forecasts.
PART I
ITEM 1. BUSINESS
GENERAL
Energen Corporation is a Birmingham-based diversified energy holding company engaged primarily in the acquisition, development, exploration and production of oil, natural gas and natural gas liquids in the continental United States and in the purchase, distribution, and sale of natural gas, principally in central and north Alabama. Its two major subsidiaries are Energen Resources Corporation and Alabama Gas Corporation (Alagasco).
Energen was incorporated in Alabama in 1978 in connection with the reorganization of its oldest subsidiary, Alagasco. Alagasco was formed in 1948 by the merger of Alabama Gas Company into Birmingham Gas Company, the predecessors of which had been in existence since the mid-1800s. Alagasco became a public company in 1953. Energen Resources was formed in 1971 as a subsidiary of Alagasco and became a subsidiary of Energen in the 1978 reorganization.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The information required by this item is provided in Note 17, Industry Segment Information, in the Notes to Financial Statements.
NARRATIVE DESCRIPTION OF BUSINESS
- OIL AND GAS OPERATIONS
GENERAL: Energen's oil and gas operations focus on increasing production and adding proved reserves through the acquisition and exploitation of oil and gas properties with varying levels of development potential. To a lesser extent, Energen Resources explores for and develops new reservoirs, primarily in areas in which it has an operating presence. Energen Resources also provides operating services in the Black Warrior Basin in Alabama for its partners and third parties. All current oil and gas operations are located in the continental United States.
At the end of fiscal year 2001, Energen Resources' inventory of proved oil and gas reserves totaled 0.9 trillion cubic feet equivalent. Approximately 96 percent of the company's 901.9 billion cubic feet equivalent (Bcfe) of reserves are located in the San Juan Basin in New Mexico, the Black Warrior Basin in Alabama, the Permian Basin in west Texas, and the north Louisiana/east Texas region. Energen Resources' reserve base is conservative in nature, with approximately 91 percent of year-end reserves classified as proved developed; in addition, the reserve base is long-lived, with a reserves-to-production ratio of 13 at fiscal year-end. Natural gas represents approximately 70 percent of Energen Resources' proved reserves, with oil and natural gas liquids comprising the balance.
GROWTH STRATEGY: Energen has completed six years under an aggressive strategy to grow its non-regulated oil and gas operations. Since the end of fiscal year 1995, Energen Resources has invested approximately $542 million in property acquisitions, $287 million in related development, and $80 million in exploration and associated development. Energen Resources' capital investment for oil and gas activities over the five-year period ending September 30, 2006, is expected to be approximately $1 billion.
Energen Resources' approach to the oil and gas business calls for the company to pursue onshore North American property acquisitions which offer significant amounts of proved undeveloped (PUD) and/or behind-pipe reserves as well as operational enhancement potential. Energen Resources prefers gas to oil properties, long-lived reserves and operated properties that offer multiple pay-zone exploitation opportunities; however, Energen Resources does not preclude possible acquisitions of properties that otherwise meet its investment requirements.
Following an acquisition, Energen Resources focuses on increasing production and reserves through exploitation of the properties' PUD and behind-pipe reserve potential. These exploitation activities include development well drilling, behind-pipe recompletions, workovers, secondary recovery and operational enhancements. Energen Resources prefers to operate its properties in order to better control the nature and pace of exploitation activities. Energen Resources' exploitation activities can result in the addition of new proved reserves as well as serve to reclassify proved undeveloped reserves to proved developed reserves.
Over the last three fiscal years the Company's exploitation efforts have added approximately 245 Bcfe of proved reserves from the drilling of approximately 395 gross development wells and the performance of some 405 well recompletions and pay-adds. In fiscal year 2001, Energen Resources' successful development wells and other exploitation activities added approximately 50 Bcfe of proved reserves. The company drilled 140 gross development wells, performed some 145 well recompletions and pay-adds, and conducted other performance-related enhancements. Energen Resources' production totaled 68.5 Bcfe in fiscal 2001 and, is estimated to total 73 Bcfe in fiscal 2002, including 4.5 Bcfe of production from anticipated acquisitions and exploration activity.
Most of Energen Resources' coalbed methane production generates nonconventional fuels tax credits through December 31, 2002, when the credits are scheduled to expire. In fiscal 2001, Energen Resources' nonconventional fuels tax credits totaled $13.6 million; and, in fiscal years 2002 and 2003, Energen Resources expects to generate approximately $13 million and $3 million, respectively, of the production credits. These credits have been instrumental in Energen Resources' successful development of large-scale coalbed methane projects in the Black Warrior Basin. As the tax credit expiration date approaches, Energen Resources plans to replace income generated by the tax credits with long-term, revenue-generating property acquisitions and related development in a manner that does not negatively affect corporate earnings in fiscal year 2003 and beyond.
RISK MANAGEMENT: Energen Resources attempts to lower the risk associated with its oil and gas business. A key component of the company's efforts to manage risk is its acquisition versus exploration orientation and its
preference for long-lived reserves. To help reduce short-term commodity price risk, Energen Resources uses market-driven pricing estimates and hedging strategies. In pursuing an acquisition, Energen Resources primarily uses in its evaluation models the then-current oil and gas futures prices, the prevailing swap curve and, for the longer-term, its own pricing assumptions. After a purchase, Energen Resources may use futures, swaps and/or fixed-price contracts to lock in commodity prices on flowing production for up to 36 months to help protect targeted returns from price volatility. On an on-going basis, Energen Resources may hedge up to 80 percent of its flowing production in any given fiscal year depending on its pricing outlook.
At September 30, 2001, Energen Resources had entered into contracts and swaps for 9.3 Bcf of its fiscal 2002 gas production at an average NYMEX price of $3.84 per Mcf and 478 MBbl of its oil production at an average NYMEX price of $27.44 per barrel. Energen Resources had basin-specific hedges in place for 3.6 Bcf of gas production at an average contract price of $4.30 per Mcf and 0.8 Bcf of gas production hedged at a NYMEX collar price of $4.25 to $6.15 per Mcf. In addition, the Company had hedged the basis difference on 6 Bcf of its gas production and 202 MBbl of its oil production.
As of September 30, 2001, Energen Resources had entered into basin-specific swaps for 1.9 Bcf of its gas production at an average contract price of $3.77 per Mcf for fiscal year 2003. For fiscal 2004 and 2005, Energen Resources had entered into swaps for 1.8 Bcf and 1.6 Bcf of its gas production at average NYMEX prices of $3.77 per Mcf and $3.75 per Mcf, respectively.
In addition to the derivatives described above, Energen Resources has three-way pricing, physical sales contracts in place for approximately 30 percent and 19 percent of its estimated gas production, excluding anticipated acquisition and exploration volumes, in fiscal years 2002 and 2003, respectively. This is more fully described in Note 7, Commitments and Contingencies, in the Notes to Financial Statements.
See Note 18, Subsequent Event, for discussion regarding Enron North America Corp.'s bankruptcy filing, which raises uncertainty as to their ability to perform under its contracts included in the derivatives described above.
The Company adopted SFAS No. 133 (subsequently amended by SFAS Nos. 137 and 138), "Accounting for Derivative Instruments and Hedging Activities," on October 1, 2000. This statement requires all derivatives to be recognized on the balance sheet and measured at fair value. If a derivative is designated as a cash flow hedge, the Company is required to measure the effectiveness of the hedge, or the degree that the gain (loss) for the hedging instrument offsets the loss (gain) on the hedged item, at each reporting period. The effective portion of the gain or loss on the derivative instrument is recognized in other comprehensive income as a component of equity and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of a derivative's change in fair value is required to be recognized in earnings immediately. Derivatives that do not qualify for hedge treatment under SFAS No. 133 must be recorded at fair value with gains or losses recognized in earnings in the period of change.
See the Forward-Looking Statement and Risk in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for further discussion with respect to price and other risk.
ENVIRONMENTAL MATTERS: Energen Resources is subject to various environmental regulations. Management believes that Energen Resources is in compliance with currently applicable standards of the environmental agencies to which it is subject and that potential environmental liabilities, if any, are minimal. Also, to the extent that Energen Resources has operating agreements with various joint venture partners, environmental costs, if any, would be shared proportionately.
OTHER: For a discussion of risks inherent in the Company's businesses, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
- NATURAL GAS DISTRIBUTION
GENERAL: Alagasco is the largest natural gas distribution utility in the state of Alabama. Alagasco purchases natural gas through interstate and intrastate marketers and suppliers and distributes the purchased gas through its distribution facilities for sale to residential, commercial and industrial customers and other end-users of natural gas. Alagasco also provides transportation services to industrial and commercial customers located on its distribution system. These transportation customers, using Alagasco as their agent or acting on their own, purchase gas directly from producers, marketers or suppliers and arrange for delivery of the gas into the Alagasco distribution system. Alagasco charges a fee to transport such customer-owned gas through its distribution system to the customers' facilities.
Alagasco's service territory is located in central and parts of north Alabama and includes approximately 188 cities and communities in 27 counties. The aggregate population of the counties served by Alagasco is estimated to be 2.3 million. Among the cities served by Alagasco are Birmingham, the center of the largest metropolitan area in Alabama, and Montgomery, the state capital. During fiscal year 2001, Alagasco served an average of 428,663 residential customers and 35,882 commercial, industrial and transportation customers. The Alagasco distribution system includes approximately 9,600 miles of main and more than 11,100 miles of service lines, odorization and regulation facilities, and customer meters.
APSC REGULATION: 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 with modifications in 1990, 1987 and 1985. On October 7, 1996, RSE was extended, without change, through January 1, 2002, and will continue after January 1, 2002, unless, after notice to the Company and a hearing, the APSC votes to either modify or discontinue its operation. RSE replaced the traditional utility rate case with quarterly reviews and adjustments designed to give Alagasco an opportunity to earn a return on average equity at year-end within a designated range, which presently is 13.15 percent to 13.65 percent.
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. 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 Alagasco's operations and maintenance (O&M) expenses. If the change in O&M per customer falls within a range of 1.25 points above or below the percentage change in the Consumer Price Index for All Urban Consumers (index range), no adjustment is required. If the change in O&M per customer exceeds the index range, three-quarters of the difference is returned to customers. To the extent the change is less than the index range, the utility benefits by one-half of the difference through future rate adjustments.
The temperature adjustment rider to Alagasco's rate tariff, approved by the APSC in 1990, was designed to mitigate the earnings impact of variances from normal temperatures. Alagasco performs this real-time temperature adjustment calculation monthly, and the adjustments to customers' bills are made in the same billing cycle in which the weather variation occurs. Substantially all the customers to whom the temperature adjustment applies are residential, small commercial and small industrial. Alagasco's rate schedules for natural gas distribution charges contain a Gas Supply Adjustment (GSA) rider that permits the pass-through to customers of changes in the cost of gas supply.
The APSC approved an Enhanced Stability Reserve (ESR) beginning fiscal year 1998 in the amount of $3.9 million, with an approved maximum funding level of $4 million, to which Alagasco may charge the full amount of: (1) extraordinary O&M expenses resulting from force majeure events such as storms, severe weather, and outages, when one or a combination of two such events results in more than $200,000 of additional O&M expense during a fiscal year; or (2) individual industrial and commercial customer revenue losses that exceed $250,000 during the fiscal year, if such losses cause Alagasco's return on equity to fall below 13.15 percent. During 2001, Alagasco charged $1.2 million against the ESR related to extraordinary bad debt expense and revenue losses from certain large industrial customers. Following a year in which a charge against the ESR is made, the APSC provides for accretions to the ESR in an amount of no more than $40,000 monthly until the maximum funding level is
achieved. At September 30, 2001 and 2000, the ESR balance of $2.7 million and $3.9 million, respectively, was included in the consolidated financial statements.
GAS SUPPLY: Alagasco's distribution system is connected to and has firm transportation contracts with two major interstate pipeline systems - Southern Natural Gas Company (Southern) and Transcontinental Gas Pipe Line Corporation (Transco). On Southern's system, Alagasco has 251,679 Mcfd (thousand cubic feet per day) of No-Notice Firm Transportation service through October 31, 2008, and 40,000 Mcfd and 92,373 Mcfd of Firm Transportation service through April 30, 2005 and October 31, 2008, respectively. The Transco Firm Transportation contract, which expires October 31, 2002, provides for up to 100,000 Mcfd. Alagasco has requested proposals for replacement of the Transco Firm Transportation contracts and expects to have a new contract in place when the existing contract expires. As a result, Alagasco has a peak day firm interstate pipeline transportation capacity of 484,052 Mcfd. Alagasco has 12,464,074 Mcf of storage capacity on Southern's system, with a maximum withdrawal rate of 251,679 Mcfd from storage and a maximum injection rate of 95,878 Mcfd to storage. Alagasco also operates two liquified natural gas (LNG) facilities used to meet peak demand. During 2001 Alagasco replaced the liquifier at one of its LNG facilities.
Alagasco purchases gas from various gas producers and marketers, including affiliates of Southern and Transco, and from certain intrastate producers and marketers. Alagasco has contracts in place to purchase up to 293,776 Mcfd of firm supply, of which 232,373 Mcfd is supported by firm transportation on the Transco and Southern systems and approximately 21,700 Mcfd is purchased at the city gate under intrastate firm supply contracts. These firm supply volumes along with Alagasco's maximum withdrawal from storage of 251,679 Mcfd and LNG peak-shaving capacity of 200,000 Mcfd, give Alagasco a peak day firm supply of 745,455 Mcfd. Alagasco also utilizes the Southern pipeline systems to access spot market gas in order to supplement its firm system supply and serve its industrial and large commercial transportation customers. Deliveries of sales and transportation gas totaled 99,107 million cubic feet in fiscal year 2001.
See Note 18, Subsequent Event, for discussion related to contracts Alagasco had in place with Enron North America Corp.
COMPETITION AND RATE FLEXIBILITY: The price of natural gas is a significant competitive factor in Alagasco's service territory, particularly among large commercial and industrial transportation customers. Propane, coal and fuel oil are readily available, and many industrial customers have the capability to switch to alternate fuels and/or alternate sources of gas. In the residential and small commercial and industrial markets, electricity is the principal competitor. With the support of the APSC, Alagasco has implemented a variety of flexible rate strategies to help it compete for the large customers' gas load in the deregulated marketplace. Rate flexibility remains critical as the utility faces competition for the large customer load. To date, the utility has been effective in utilizing its flexible rate strategies to minimize bypass and price-based switching to alternate fuels and alternate sources of gas.
In 1994 Alagasco implemented the P Rate in response to the competitive challenge of interstate pipeline capacity release. Under this tariff provision, Alagasco releases much of its excess pipeline capacity and repurchases it as agent for its transportation customers under 12 month contracts. The transportation customers benefit from lower pipeline costs. Alagasco's core market customers benefit, as well, since the utility uses the revenues received from the P Rate to decrease gas costs for its residential and small commercial and industrial customers. In fiscal year 2001, approximately 300 of Alagasco's transportation customers utilized the P Rate, and the resulting reduction in core market gas costs totaled approximately $7.2 million.
The Competitive Fuel Clause (CFC) and Transportation Tariff also have been important to Alagasco's ability to compete effectively for customer load in its service territory. The CFC allows Alagasco to adjust large customer rates on a case-by-case basis to compete with alternate fuels and alternate sources of gas. The GSA rider to Alagasco's tariff allows the Company to recover the reduction in charges allowed under the CFC because the retention of any customer, particularly large commercial and industrial transportation customers, benefits all customers by recovering a portion of the system's fixed costs. The Transportation Tariff allows Alagasco to transport gas for customers, rather than buy and resell it to them, and is based on Alagasco's sales profit margin so that operating margins are unaffected. During 2001 substantially all of Alagasco's large commercial and industrial
customer deliveries were the transportation of customer-owned gas. In addition, Alagasco served as gas purchasing agent for approximately 99 percent of its transportation customers. Alagasco also uses long-term special contracts as a vehicle for retaining large customer load. At the end of fiscal year 2001, 44 of the utility's largest commercial and industrial transportation customers were under special contracts of varying lengths.
Natural gas service available to Alagasco customers falls into two broad categories: interruptible and firm. Interruptible service contractually is subject to interruption by Alagasco for various reasons; the most common occurrence is curtailment of industrial customers during periods of peak core market heating demand. Interruptible service typically is provided to large commercial and industrial transportation customers who can reduce their gas consumption by adjusting production schedules or by switching to alternate fuels for the duration of the service interruption. More expensive firm service, on the other hand, generally is not subject to interruption and is provided to residential and small commercial and industrial customers; these core market customers depend on natural gas primarily for space heating.
GROWTH: Customer growth presents a major challenge for Alagasco, given its mature, slow-growth service area. In fiscal year 2001, Alagasco's average number of customers remained relatively flat while penetrating 92 percent of the new single-family housing market in its service area and 16 percent of the new multi-family housing market. For fiscal year 2002, Alagasco will continue its efforts to increase gas usage by focusing on conversion prospects and by promoting, in addition to gas furnaces and water heaters, other energy-efficient natural gas products such as fireplace logs, outdoor gaslights, grills, ovens and cooktops. In addition, Alagasco will continue to pursue opportunities to invest in revenue-generating or cost-saving projects.
A vehicle for supplementing Alagasco's normal growth continues to be Alagasco's municipal acquisition program. Since 1985, Alagasco has acquired 23 municipally owned systems adding more than 43,000 customers through initial system purchases and subsequent customer additions. In September 2001, Alagasco acquired a municipal gas system located in central Alabama, adding approximately 1,000 customers in its service territory. Approximately 75 municipal systems remain in Alabama. Alagasco will continue to pursue the purchase of municipal gas systems, and company management believes that such acquisitions offer future growth opportunities.
SEASONALITY: Alagasco's gas distribution business is highly seasonal since a material portion of the utility's total sales and delivery volumes is to space heating customers. Alagasco's rate tariff includes a temperature adjustment rider primarily for residential, small commercial and small industrial customers which substantially mitigates the effect of departures from normal temperature on Alagasco's earnings. The calculation is performed monthly, and adjustments are made to customers' bills in the actual month the weather variation occurs.
ENVIRONMENTAL MATTERS: Alagasco is in the chain of title of eight former manufactured gas plant sites and five manufactured gas distribution sites. It still owns four of the plant sites and one of the distribution sites. An investigation of the sites does not indicate the present need for remediation activities. Management expects that, should remediation of any such sites be required in the future, Alagasco's share of any associated costs will not materially affect the results of its operations or financial condition.
OTHER: For a discussion of risks inherent in the Company's businesses, see Management's Discussion and Analysis of Financial Condition and Results of Operations as set forth in Item 7 of Part II of this Form 10-K.
EMPLOYEES
The Company has 1,485 employees; Alagasco employs 1,266; Energen Resources employs 206; and Energen's other subsidiaries employ 13. The Company believes that its relations with its employees are good.
ITEM 2. PROPERTIES
The corporate headquarters of Energen, Alagasco and Energen Resources are located in leased office space in Birmingham, Alabama. In addition to its corporate headquarters in Birmingham, Energen Resources maintains leased offices in Houston and Midland, Texas, in Farmington, New Mexico and in Arcadia, Louisiana.
For a description of Energen Resources' oil and gas properties, see the discussion under Item 1-Business. Information concerning Energen Resources' production, reserves and development is included in Note 16, Oil and Gas Operations (unaudited), in the Notes to Financial Statements which is included in this Form 10-K. The proved reserve estimates are consistent with comparable reserve estimates filed by Energen Resources with any federal authority or agency.
The properties of Alagasco consist primarily of its gas distribution system, which includes more than 9,600 miles of main, more than 11,100 miles of service lines, odorization and regulation facilities, and customer meters. Alagasco also has two liquified natural gas facilities, seven division offices, six payment centers, five district offices, nine service centers, and other related property and equipment, some of which are leased by Alagasco. For a further description of Alagasco's properties, see discussion under Item 1-Business.
ITEM 3. LEGAL PROCEEDINGS
Energen and its affiliates are, from time to time, parties to various pending or threatened legal proceedings. Certain of these lawsuits include claims for punitive damages in addition to other specific relief. Based upon information presently available and in light of available legal and other defenses, contingent liabilities arising from threatened and pending litigation are not considered material in relation to the respective financial positions of Energen and its affiliates. It should be noted, however, that Energen and its affiliates conduct business in Alabama and other jurisdictions in which the magnitude and frequency of punitive damage awards may bear little or no relation to culpability or actual damages thus making it difficult to predict litigation results.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2001.
EXECUTIVE OFFICERS OF THE REGISTRANTS
ENERGEN CORPORATION
Name Age Position (1)
---- --- ------------
Wm. Michael Warren, Jr. 54 Chairman of the Board
President and Chief Executive Officer (2)
Geoffrey C. Ketcham 50 Executive Vice President, Chief Financial Officer
and Treasurer (3)
Gary C. Youngblood 58 President and Chief Operating Officer of Alagasco
(4)
James T. McManus 43 President and Chief Operating Officer of Energen
Resources (5)
Dudley C. Reynolds 48 General Counsel and Secretary (6)
J. David Woodruff, Jr. 45 Vice President-Legal and Assistant Secretary and
Vice President-Corporate Development (7)
Grace B. Carr 46 Vice President and Controller (8)
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NOTES: (1) All executive officers of Energen except for Ms. Carr have been employed by Energen or a subsidiary for the past five years. Officers serve at the pleasure of its Board of Directors.
(2) Mr. Warren has been employed by the Company in various capacities since 1983. In January 1992 he was elected President and Chief Operating Officer of Energen and all of its subsidiaries, in October 1995 he was elected Chief Executive Officer of Alagasco and Energen Resources, in February 1997 he was elected Chief Executive Officer of Energen, and effective January 1, 1998, he was elected Chairman of the Board of Energen and each of its subsidiaries. Mr. Warren serves as a Director of Energen and each of its subsidiaries. He is a director of Associated Electric and Gas Insurance Services Limited, a mutual insurance company serving the United States public utility industries, and a director of Protective Life Corporation. He is also a city director of AmSouth Bank of Alabama and a member of the Board of Trustees of Birmingham-Southern College.
(3) Mr. Ketcham has been employed by the Company in various capacities since 1981. He has served as Executive Vice President, Chief Financial Officer and Treasurer of Energen and each of its subsidiaries since April 1991.
(4) Mr. Youngblood has been employed by the Company in various capacities since 1969. He was elected Executive Vice President of Alagasco in October 1993, Chief Operating Officer of Alagasco in October 1995, and President of Alagasco in April 1997.
(5) Mr. McManus has been employed by the Company in various capacities since 1986. He was elected Vice President-Finance and Corporate Development of Energen and Vice President-Finance and Planning of Alagasco in April 1991. He was elected Executive Vice President and Chief Operating Officer of Energen Resources in October 1995 and President of Energen Resources in April 1997.
(6) Mr. Reynolds has been employed by the Company in various capacities since 1980. He has served as General Counsel and Secretary of Energen and each of its subsidiaries since April 1991.
(7) Mr. Woodruff has been employed by the Company in various capacities since 1986. He has served as Vice President-Legal and Assistant Secretary of Energen and each of its subsidiaries since April 1991 and as Vice President-Corporate Development of Energen since October 1995.
(8) Ms. Carr was employed by the Company in various capacities from January 1985 to April 1989. She was not employed from April 1989 through December 1997. She was elected Controller of Energen in January 1998 and elected Vice President and Controller of Energen in October 2001.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
QUARTERLY MARKET PRICES AND DIVIDENDS PAID PER SHARE
------------------------------------------------------------------------------- Quarter ended (in dollars) HIGH LOW CLOSE DIVIDENDS PAID ------------------------------------------------------------------------------- December 31, 1998 19.50 17.44 19.50 .160 March 31, 1999 19.75 13.13 14.94 .160 June 30, 1999 19.94 14.50 18.63 .160 September 30, 1999 20.38 17.50 20.25 .165 ------------------------------------------------------------------------------- December 31, 1999 21.25 15.75 18.06 .165 March 31, 2000 18.94 14.69 15.94 .165 June 30, 2000 23.69 16.00 21.81 .165 September 30, 2000 30.38 21.00 29.75 .170 ------------------------------------------------------------------------------- December 31, 2000 33.56 26.06 32.19 .170 March 31, 2001 35.30 27.50 35.30 .170 June 30, 2001 40.25 26.75 27.60 .170 September 30, 2001 28.21 21.50 22.50 .175 ------------------------------------------------------------------------------- |
Energen's common stock is listed on the New York Stock Exchange under the symbol EGN. On December 3, 2001, there were approximately 8,400 holders of record of Energen's common stock. For restrictions on Energen's present and future ability to pay dividends, see Note 3 to the Financial Statements which is included in Part II, Item 8, herein.
At the date of this filing, Energen Corporation owns all the issued and outstanding common stock of Alabama Gas Corporation.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data as set forth below should be read in conjunction with the Consolidated Financial Statements and the Notes to Financial Statements included in this Form 10-K.
SELECTED FINANCIAL AND COMMON STOCK DATA
ENERGEN CORPORATION
--------------------------------------------------------------------------------------------------------------------------------- Years ended September 30, (dollars in thousands, except per share 2001 2000 1999 1998 1997 1996 amounts) --------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT Operating revenues $ 784,973 $ 555,595 $ 497,517 $502,627 $448,230 $399,442 Net income $ 67,896 $ 53,018 $ 41,410 $ 36,249 $ 28,997 $ 21,541 Diluted earnings per average common share $ 2.18 $ 1.75 $ 1.38 $ 1.23 $ 1.14 $ 0.97 Basic earnings per average common share $ 2.21 $ 1.76 $ 1.40 $ 1.25 $ 1.15 $ 0.98 --------------------------------------------------------------------------------------------------------------------------------- BALANCE SHEET Capitalization at year-end: Common shareholders' equity $ 480,767 $ 400,860 $ 361,504 $329,249 $301,143 $188,405 Preferred stock -- -- -- -- -- -- Long-term debt 544,110 353,932 371,824 372,782 279,602 195,545 --------------------------------------------------------------------------------------------------------------------------------- Total capitalization $1,024,877 $ 754,792 $ 733,328 $702,031 $580,745 $383,950 --------------------------------------------------------------------------------------------------------------------------------- Total assets $1,223,879 $1,203,041 $1,184,895 $993,455 $919,797 $569,410 --------------------------------------------------------------------------------------------------------------------------------- Property, plant and equipment, net $ 998,334 $ 907,829 $ 861,107 $756,344 $667,003 $444,916 --------------------------------------------------------------------------------------------------------------------------------- COMMON STOCK DATA Annual dividend rate at year-end $ 0.70 $ 0.68 $ 0.66 $ 0.64 $ 0.62 $ 0.60 Cash dividends paid per common share $ 0.685 $ 0.665 $ 0.645 $ 0.625 $ 0.605 $ 0.585 Book value per common share $ 15.45 $ 13.21 $ 12.09 $ 11.23 $ 10.46 $ 8.44 Market-to-book ratio at year end (%) 145 225 167 169 170 142 Yield at year-end (%) 3.1 2.3 3.3 3.4 3.5 5.0 Return on average common equity (%) 15.3 13.7 11.7 11.1 11.9 11.6 Price-to-earnings (diluted) ratio at year-end 10.3 17.0 14.7 15.4 15.6 12.4 Shares outstanding at year-end (000) 31,125 30,351 29,904 29,327 28,796 22,325 Price Range: High $ 40.25 $ 30.38 $ 20.38 $ 22.50 $ 18.88 $ 12.69 Low $ 21.50 $ 14.69 $ 13.13 $ 15.13 $ 11.88 $ 10.69 Close $ 22.50 $ 29.75 $ 20.25 $ 19.00 $ 17.78 $ 12.00 --------------------------------------------------------------------------------------------------------------------------------- |
Note: All information has been adjusted to reflect the 2-for-1 stock split effective March 2, 1998
SELECTED BUSINESS SEGMENT DATA
ENERGEN CORPORATION
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Years ended September 30,
(dollars in thousands) 2001 2000 1999 1998 1997 1996
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OIL AND GAS OPERATIONS
Operating revenues
Natural Gas $144,491 $119,680 $119,021 $ 97,123 $ 60,228 $ 24,262
Oil 52,525 41,745 37,227 21,452 13,981 10,313
Natural gas liquids 26,115 22,914 7,296 7,061 5,772 --
Other 7,980 5,095 8,419 7,051 5,265 7,615
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Total $231,111 $189,434 $171,963 $132,687 $ 85,246 $ 42,190
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Production Volumes
Natural gas (MMcf) 46,463 48,084 53,855 43,853 29,318 12,308
Oil (MBbl) 2,187 2,304 3,122 1,433 775 635
Natural gas liquids (MBbl) 1,482 1,429 762 817 502 --
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Proved reserves
Natural gas (MMcf) 627,051 777,456 740,001 542,039 544,283 212,977
Oil (MBbl) 20,878 24,518 24,719 19,845 9,128 6,315
Natural gas liquids (MBbl) 24,931 26,007 21,937 17,292 12,378 --
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Other data
Depreciation and amortization $ 56,042 $ 58,365 $ 61,885 $ 55,846 $ 36,202 $ 19,849
Capital expenditures $136,886 $ 67,090 $198,577 $120,991 $239,718 $126,317
Operating income $ 75,399 $ 48,358 $ 31,015 $ 20,992 $ 14,723 $ 4,779
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NATURAL GAS DISTRIBUTION
Operating revenues
Residential $367,109 $233,839 $209,263 $241,964 $237,022 $236,583
Commercial and industrial-small 147,636 88,521 77,254 89,361 87,477 87,912
Transportation 33,972 35,312 34,541 35,246 33,080 30,408
Other 5,145 8,489 4,496 3,369 5,405 2,349
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Total $553,862 $366,161 $325,554 $369,940 $362,984 $357,252
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Gas delivery volumes (MMcf)
Residential 31,064 26,069 24,751 31,079 28,357 34,963
Commercial and industrial-small 14,054 12,092 11,662 13,705 12,554 15,002
Transportation 53,989 70,534 66,356 70,563 65,622 61,458
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Total 99,107 108,695 102,769 115,347 106,533 111,423
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Average number of customers
Residential 428,663 429,368 425,937 423,602 422,878 418,486
Commercial, industrial and transportation 35,882 35,526 35,111 34,782 34,485 34,082
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Total 464,545 464,894 461,048 458,384 457,363 452,568
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Other data
Depreciation and amortization $ 30,933 $ 28,708 $ 26,730 $ 25,153 $ 23,486 $ 21,269
Capital expenditures $ 56,090 $ 67,073 $ 46,029 $ 54,168 $ 43,277 $ 43,175
Operating income $ 50,288 $ 49,063 $ 46,565 $ 41,663 $ 38,792 $ 35,270
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
CONSOLIDATED NET INCOME
Energen Corporation's net income for the fiscal year 2001 totaled $67.9 million, or $2.18 per diluted share. This reflects a 24.6 percent increase in earnings per diluted share (EPS) over prior-year net income of $53 million, or $1.75 per diluted share. A significant increase in the 2001 financial performance of Energen Resources Corporation, Energen's oil and gas subsidiary, more than offset a slight decline at Alabama Gas Corporation (Alagasco), Energen's utility subsidiary. In fiscal year 1999, Energen reported earnings of $41.4 million, or $1.38 per diluted share.
2001 VS 2000: Energen Resources' net income in fiscal 2001 rose 55.2 percent to $42.6 million, primarily due to a 24.4 percent increase in realized sales prices for natural gas, oil and natural gas liquids. The significantly higher realized commodity prices more than compensated for the negative impact of increased lease operating expense and a 2 billion cubic feet equivalent (Bcfe) production decrease. Earnings in fiscal year 2000 were negatively affected by a one-time $2.2 million (7 cents per diluted share) after-tax writedown under Statement of Financial Accounting Standards (SFAS) No. 121 of certain oil and gas properties resulting from a downward reserve revision.
Alagasco's earnings declined 1.2 percent from $26.3 million last year to $26 million in fiscal year 2001. This slight decrease in income was primarily a result of increased bad debt expense from significantly colder weather and higher natural gas prices during the past winter as well as industrial load loss due to an economic slow-down. Alagasco achieved a return on average equity (ROE) of 12.3 percent in 2001 as compared to 13.4 percent in 2000.
2000 VS 1999: Energen Resources' net income increased 58.5 percent to $27.4 million in fiscal 2000, primarily due to significantly higher realized commodity prices. The higher realized natural gas, oil and natural gas liquids prices more than compensated for reduced production levels primarily resulting from prior-year property sales and the after-tax writedown under SFAS No. 121 discussed above. Fiscal year 1999 results included a $2.1 million after-tax gain on the June 1999 sale of certain offshore Gulf of Mexico properties. Alagasco's 2000 net income of $26.3 million increased 13 percent over 1999 earnings of $23.3 million, reflecting the utility's ability to earn within its allowed range of return on an increased level of equity.
OPERATING INCOME
Consolidated operating income in 2001, 2000 and 1999 totaled $124 million, $95.8 million and $77.4 million, respectively. This significant growth in operating income was influenced by continued improvement in financial performance from Energen Resources under Energen's diversified growth strategy, implemented in fiscal 1996. Alagasco also contributed to this growth in operating income consistent with the increase in the level of equity upon which it has been able to earn a return. In the current year, the growth in operating income at Alagasco was partially offset by increased bad debt expense and industrial load loss.
OIL AND GAS OPERATIONS: Revenues from oil and gas operations continued to increase in the current fiscal year largely as a result of significantly higher commodity prices. Realized gas prices rose 24.9 percent to $3.11 per Mcf, while realized oil prices increased 32.6 percent to $24.02 per barrel. Natural gas liquids prices increased 9.9 percent to an average price of $17.62 per barrel. During 2001, total production declined slightly to 68.5 Bcfe. Natural gas production decreased 3.4 percent to 46.5 Bcf and oil volumes declined 5.1 percent to 2,187 MBbl. Production of natural gas liquids increased 3.7 percent to 1,482 MBbl. For the current year, the 2 Bcfe decrease in production largely was due to normal production declines in Energen Resources' coalbed methane and south Louisiana properties. Drilling in the San Juan and Permian basins and in the north Louisiana/east Texas area served to replace aggregate production in these areas.
In fiscal 2000, realized gas prices rose 12.7 percent to $2.49 per Mcf, realized oil prices increased 51.9 percent to $18.11 per barrel and natural gas liquids prices increased 67.4 percent to an average price of $16.04 per barrel. Total
production volumes in 2000 decreased 8.7 percent to 70.5 Bcfe primarily due to the offshore property sales occurring in the latter half of fiscal 1999. Natural gas production decreased 10.7 percent to 48.1 Bcf and oil volumes declined 26.2 percent to 2,304 MBbl. Production of natural gas liquids increased 87.5 percent to 1,429 MBbl as a result of higher liquids prices, which led to substantially all natural gas liquids being removed from the gas stream during processing.
During 1999, revenues from oil and gas production grew mainly as a result of the TOTAL Minatome Corporation (TOTAL) property acquisition and prior-year property acquisitions. Energen Resources gained an estimated 200 Bcfe of proved domestic oil and natural gas reserves as a result of the TOTAL acquisition.
Coalbed methane operating fees are calculated as a percentage of net proceeds on certain properties, as defined by the related operating agreements, and vary with changes in natural gas prices, production volumes and operating expenses. Revenues from operating fees were $7.6 million, $4.3 million and $3.9 million in 2001, 2000 and 1999, respectively.
Energen Resources may, in the ordinary course of business, be involved in the sale of developed and undeveloped properties. With respect to developed properties, sales may occur as a result of, but not limited to, disposing of non-strategic or marginal assets and accepting offers where the buyer gives greater value to a property than does Energen Resources. In 2001, Energen Resources recorded in operating revenues a net pre-tax gain from the sale of properties and adjustments to the fair value of properties held for sale of $0.8 million. Pre-tax gains from the sale of properties of $1.1 million and $4.2 million were recorded in operating revenues in 2000 and 1999, respectively.
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Years ended September 30, (in thousands, except sales price data) 2001 2000 1999
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Revenues
Natural gas production $144,491 $119,680 $119,021
Oil production 52,525 41,745 37,227
Natural gas liquids production 26,115 22,914 7,296
Operating fees 7,618 4,262 3,932
Other 362 833 4,487
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Total Revenues $231,111 $189,434 $171,963
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Production volumes
Natural gas (MMcf) 46,463 48,084 53,855
Oil (MBbl) 2,187 2,304 3,122
Natural gas liquids (MBbl) 1,482 1,429 762
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Average Sales Price
Natural gas (per Mcf) $ 3.11 $ 2.49 $ 2.21
Oil (per barrel) $ 24.02 $ 18.11 $ 11.92
Natural gas liquids (per barrel) $ 17.62 $ 16.04 $ 9.58
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Operations expense increased $11 million in 2001 and decreased $3.4 million in 2000. In 2001, lease operating expense increased by $12 million largely due to significantly higher operational costs driven by market conditions resulting from increased commodity costs. Lease operating expense decreased by $3.8 million in 2000 primarily due to the sale of offshore properties in 1999. In the current fiscal year, administrative expense decreased $0.5 million and increased $1 million in 2000. Exploration expense decreased $0.7 million in 2001 and $0.1 million in 2000, primarily due to decreased exploratory efforts.
Depreciation, depletion and amortization (DD&A) expense decreased $2.3 million in 2001 primarily due to lower production volumes and additional pre-tax DD&A expense of $3.5 million recorded in 2000 under SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and For Long-Lived Assets to Be Disposed Of" (see Note 10). DD&A expense decreased $3.5 million in 2000 largely due to lower production volumes partially offset by the additional pre-tax DD&A expense recorded under SFAS No. 121. The average depletion rate (excluding the effect of the prior-year writedown) was $0.80 per Mcf in 2001 as compared to $0.76 per Mcf in the prior year.
Energen Resources' expense for taxes other than income primarily reflected production-related taxes. Energen Resources recorded severance taxes for 2001 and 2000 of $24.3 million and $17.6 million, respectively, as a result of increased commodity prices. In 1999, severance taxes were $11.3 million.
NATURAL GAS DISTRIBUTION: As discussed more fully in Note 2 in the Notes to Financial Statements, Alagasco is subject to regulation by the Alabama Public Service Commission (APSC). On October 7, 1996, the APSC issued an order to extend Alagasco's rate-setting mechanism, Rate Stabilization and Equalization (RSE), through January 1, 2002. Under terms of the extension, RSE will continue after January 1, 2002, unless, after notice to the company and a hearing, the APSC votes to either modify or discontinue its operation.
Alagasco generates revenues through the sale and transportation of natural gas. The transportation rate does not contain an amount representing the cost of gas, and Alagasco's rate structure allows similar margins on transportation and sales gas. Weather can cause variations in space heating revenues, but operating margins essentially remain unaffected due to a real-time temperature adjustment mechanism that allows Alagasco to adjust customer bills monthly to reflect changes in usage due to departures from normal temperatures. Substantially all the customers to whom the temperature adjustment applies are residential, small commercial and small industrial.
Alagasco's natural gas and transportation sales revenues totaled $553.9 million, $366.2 million and $325.6 million in fiscal years 2001, 2000 and 1999, respectively. Significantly higher commodity gas costs and weather that was 29.9 percent colder than in the prior year contributed to the increase in sales revenue in the current fiscal year. Sales revenue in 2000 rose due to weather that was 12.8 percent colder than in fiscal 1999 as well as to higher commodity gas costs.
In the current fiscal year, significantly colder weather in Alagasco's service territory caused a 19.2 percent increase in residential sales volumes and a 16.2 percent increase in small commercial and industrial sales volumes. Transportation volumes decreased 23.5 percent, primarily due to the prior-year closing of a steel manufacturing plant and reduced consumption resulting from an economic downturn during the year. In fiscal 2000, residential sales volumes increased 5.3 percent primarily due to the impact of colder weather. Small commercial and industrial volumes, also sensitive to weather, increased 3.7 percent. Transportation volumes rose 6.3 percent, primarily due to increased volumes to a power generation facility and a large cogeneration customer.
Higher commodity cost of gas, including record high prices in fiscal year 2001, along with increased purchased volumes resulting from colder weather generated a 111.5 percent and a 23.4 percent increase in cost of gas for fiscal years 2001 and 2000, respectively.
Operations and maintenance (O&M) expense at the utility increased 1.5 percent in fiscal 2001 primarily as a result of increased bad debt expense and higher insurance costs largely offset by reduced marketing and labor-related costs. In the prior year, O&M expense increased 3.7 percent primarily due to higher labor and related costs partially offset by reduced bad debt and general liability insurance expense. In 2001 and 2000, the increase in O&M expense on a per-customer basis fell within the inflation-based Cost Control Measurement (CCM) established by the APSC as part of the utility's rate-setting mechanism. In 1999, the increase in O&M expense per customer fell below the CCM resulting in the utility benefiting by $0.7 million pre-tax, or one-half the difference, in future rate adjustments (see Note 2).
Consistent with growth in the utility's depreciable base, depreciation expense rose 7.8 percent in 2001 and 7.4 percent in 2000. Alagasco's expense for taxes other than income primarily reflects various state and local business taxes as well as payroll-related taxes. State and local business taxes generally are based on gross receipts and fluctuate accordingly.
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Years ended September 30, (in thousands) 2001 2000 1999
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Natural gas transportation and sales revenues $ 553,862 $ 366,161 $ 325,554
Cost of natural gas (329,572) (155,841) (126,264)
Revenue taxes (28,766) (19,749) (17,714)
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Natural gas transportation and sales margin $ 195,524 $ 190,571 $ 181,576
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Natural gas sales volumes (MMcf)
Residential 31,064 26,069 24,751
Commercial and industrial-small 14,054 12,092 11,662
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Total natural gas sales volumes 45,118 38,161 36,413
Natural gas transportation volumes (MMcf) 53,989 70,534 66,356
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Total deliveries (MMcf) 99,107 108,695 102,769
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NON-OPERATING ITEMS
CONSOLIDATED: Fiscal 2001 interest expense increased $4.3 million primarily due to $150 million of medium term notes (MTNs) issued by Energen in December 2000 and, in part, from the issuance by Alagasco of $40 million of 6.25% Notes and $35 million of 6.75% Notes in August 2001. The proceeds from the MTNs and the Notes were used to repay borrowings under Energen and Alagasco's short-term credit facilities incurred as a result of the growth at Energen Resources and general corporate purposes at Alagasco. The average daily outstanding balance under short-term credit facilities was $80.7 million in 2001. Interest expense remained relatively stable in fiscal year 2000 compared to fiscal 1999. The average daily outstanding balance under short-term credit facilities was $146.8 million in 2000 as compared to $155 million in fiscal year 1999.
The Company's effective tax rates in 2001, 2000 and 1999 were lower than
statutory federal tax rates primarily due to the recognition of nonconventional
fuels tax credits and the amortization of investment tax credits.
Nonconventional fuels tax credits are generated annually on qualified production
through December 31, 2002. They are expected to be recognized fully in the
financial statements, and effective tax rates are expected to continue to remain
lower than statutory federal rates in the near future. Income tax expense
increased in 2001 and 2000 primarily due to higher pre-tax income. The Company
recognized $13.6 million, $14.4 million and $14.8 million in nonconventional
fuels tax credits in 2001, 2000 and 1999, respectively. As of September 30,
2001, the amount of minimum tax credit that has been previously recognized and
can be carried forward indefinitely to reduce future regular tax liability is
$56 million.
FINANCIAL POSITION AND LIQUIDITY
The Company's net cash from operating activities totaled $156.5 million, $105 million and $130.6 million in 2001, 2000 and 1999, respectively. Operating cash flow in the current year and in 2000 benefited from significantly higher realized oil, gas and natural gas liquids prices at Energen Resources. Working capital needs at Alagasco were affected by increased gas costs and colder-than-normal weather resulting in higher storage inventory balances. In fiscal 1999, operating cash flow benefited from significantly higher production volumes related to Energen Resources' property acquisitions. Other working capital items, which primarily are the result of changes in throughput and the timing of payments, combined to create the remaining increases for all years.
During fiscal 2001, the Company made net investments of $174.4 million. Energen Resources invested $34.3 million for property acquisitions, $103.6 million for development of proved properties and $1.2 million for exploration. Energen Resources drilled 140 gross development wells, during the current year adding approximately 50 Bcfe of reserves. Energen Resources sold or traded certain properties during the current year, resulting in cash proceeds of $17.3 million. Utility expenditures for the year totaled $56.1 million and primarily represented support facilities and normal system distribution expansion along with $3 million for a municipal acquisition. Cash used in investing activities totaled $131.7 million in 2000. Energen Resources invested $2.4 million for property acquisitions, $66.7 million for development and $1.2 million for exploration. Energen Resources' successful development wells and other exploitation activities added approximately 76 Bcfe of reserves in fiscal year 2000. Utility expenditures in 2000 totaled $67.1 million. During fiscal 1999, the Company made net investments of $188.1 million largely due to the acquisition of oil and gas properties. Energen Resources invested $144 million for property acquisitions, including
$137.5 million for TOTAL, $55.5 million for development and $1.7 million for exploration. Energen Resources' acquisitions in 1999 added approximately 200 Bcfe of proved reserves while its 88 successful development wells and other exploitation activities added approximately 120 Bcfe of reserves. Utility expenditures in 1999 totaled $46 million. The Company had cash proceeds of $56.9 million resulting from the sale-leaseback of the headquarters building and the sale of certain offshore and onshore properties during 1999.
Net cash provided by financing activities totaled $19.4 million in 2001. In December 2000, Energen issued $150 million of long-term debt redeemable December 15, 2010, and in August 2001 Alagasco issued 6.25% Notes for $40 million, redeemable September 1, 2016, and 6.75% Notes for $35 million, redeemable September 1, 2031. The $223.8 million in net proceeds were used to repay short-term borrowings incurred to finance Energen Resources' growth activities and to repay additional borrowings by the utility as a result of higher capital expenditures primarily related to replacement of liquifaction equipment and for general corporate purposes. The proceeds also were used to reduce long-term debt by $36.3 million, including the retirement of the 8% Debentures for $18.3 million. Net cash used in financing activities totaled $114.9 million in 2000 resulting primarily from fluctuations in the amount and timing of short-term debt at year-end. Financing activities provided a net source of cash totaling $99.6 million in 1999. Due to a change in tax law during fiscal 2000, the Company had no borrowings at September 30, 2001 or 2000, to purchase short-term federal obligations for tax planning purposes as in previous years. The Company borrowed $140.9 million at September 30, 1999 to invest in short-term federal obligations for tax planning purposes that were sold in early October with the proceeds used to repay the related debt. In 1999, the Company utilized $74.7 million in short-term credit facilities to finance Energen Resources' acquisition strategy and reduced long-term debt by $6.2 million. For each of the years, net cash used in financing activities also reflected dividends paid to common stockholders and the issuance of common stock through the dividend reinvestment and direct stock purchase plan and the employee savings plans.
CAPITAL EXPENDITURES
OIL AND GAS OPERATIONS: Energen Resources spent $415.5 million for capital projects over the last three fiscal years, $12.9 million of which was charged to income as exploration expense. Property acquisition expenditures totaled $181 million, $225.8 million was spent in development activities and exploratory expenditures totaled $4 million.
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Years ended September 30, (in thousands) 2001 2000 1999
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Capital and exploration expenditures for:
Property acquisitions $ 34,316 $ 2,436 $143,959
Development 103,574 66,717 55,487
Exploration 1,190 1,150 1,697
Other 1,477 1,343 2,150
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Total 140,557 71,646 203,293
Less exploration expenditures charged to income 3,671 4,556 4,716
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Net capital expenditures $136,886 $67,090 $198,577
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NATURAL GAS DISTRIBUTION: During the last three fiscal years, Alagasco invested $169.2 million for capital projects: $98.2 million for normal expansion, replacements and support of its distribution system, $68 million for support facilities, including the replacement of liquifaction equipment and the development and implementation of information systems, and $3 million to purchase a municipal gas system.
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Years ended September 30, (in thousands) 2001 2000 1999
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Capital and expenditures for:
Renewals, replacements, system expansion and other $36,340 $35,774 $26,095
Support facilities 16,733 31,299 19,934
Municipal gas system acquisition 3,017 -- --
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Total $56,090 $67,073 $46,029
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FUTURE CAPITAL RESOURCES AND LIQUIDITY
The Company plans to continue to implement its diversified growth strategy that focuses on expanding Energen Resources' oil and gas operations through the acquisition and exploitation of producing properties with development potential while building on the strength of the Company's utility foundation. Since the inception of this strategy, implemented beginning with fiscal year 1996, Energen's goal has been to generate EPS growth of at least 10 percent a year, on average, over each rolling five-year period. Over the last five fiscal years under this strategy, Energen's EPS grew at an average compound rate of 17.6 percent a year.
To finance Energen Resources' investment program, the Company will continue to utilize its short-term credit facilities to supplement internally generated cash flow, with long-term debt and equity providing permanent financing. Energen has available short-term credit facilities of $220 million to help accommodate its growth plans. Energen's management plans to utilize increases in cash flows to help finance Energen Resources' acquisition and exploitation strategy and to help reduce Energen's debt-to-total capitalization ratio to near 50 percent over the next five years.
In fiscal year 2002, Energen Resources plans to invest approximately $261 million, including $175 million in property acquisitions and $74 million in exploitation activities. Energen Resources' exploratory exposure in fiscal 2002 is estimated to be $5 million, along with an additional $5 million in associated development. Capital investment at Energen Resources in fiscal year 2003 is expected to approximate $150 million for acquisitions, $39 million for exploitation and $10 million for exploration and related development. Energen Resources' capital investment for oil and gas activities over the five-year period ending September 30, 2006, is estimated to be approximately $1 billion. During this period, the Company expects to issue approximately $100 million in long-term debt to replace short-term obligations and to provide permanent financing for its acquisition strategy. Energen Resources' continued ability to invest in property acquisitions will be influenced significantly by industry trends, as the producing property acquisition market historically has been cyclical. From time to time, Energen Resources also may be engaged in negotiations to sell, trade or otherwise dispose of properties.
During fiscal year 2002, Alagasco plans to invest approximately $65 million in utility capital expenditures for normal distribution and support systems, including approximately $15 million for revenue-producing main projects and $10 million for information technology application projects. Alagasco maintains an investment in storage gas that is expected to average approximately $46 million in 2002. Alagasco plans to invest approximately $56 million in utility capital expenditures during fiscal year 2003. The utility anticipates funding these capital requirements through internally generated capital and the utilization of short-term credit facilities. Over the Company's five-year planning period ending September 30, 2006, Alagasco anticipates capital investments of approximately $275 million.
OUTLOOK
OIL AND GAS OPERATIONS: Energen Resources plans to continue to implement its acquisition and exploitation program with capital spending in fiscal years 2002 and 2003 as outlined above. Production in fiscal 2002 is expected to be approximately 73 Bcfe. This estimate includes 4.5 Bcfe of production from anticipated acquisitions and exploration activity. In fiscal year 2003, production is expected to increase to approximately 88 Bcfe, including 19.4 Bcfe of production from anticipated acquisitions and exploration activity in that fiscal year, as well as production from planned property acquisitions in fiscal year 2002 and associated exploitation.
Energen Resources expects to generate approximately $13.2 million and $3.1 million of nonconventional fuels tax credits during fiscal years 2002 and 2003, respectively. Nonconventional fuels tax credits are generated annually on qualified production through December 31, 2002. As the tax credit expiration date approaches, Energen Resources plans to replace the tax credits with revenue-generating property acquisitions and related development in a manner that does not negatively affect corporate earnings in fiscal year 2003 and beyond.
In the event Energen Resources is unable to fully invest its planned acquisition, development and exploratory expenditures, future operating revenues, production and proved reserves could be negatively affected. Energen Resources' major market risk exposure is in the pricing applicable to its oil and gas production. Historically, prices received for oil and gas production have been volatile because of seasonal weather patterns, national supply and demand factors and general economic conditions. Crude oil prices also are affected by quality differentials, by worldwide political developments and by actions of the Organization of Petroleum Exporting Countries. Basis
differentials, like the underlying commodity prices, can be volatile because of regional supply and demand factors, including seasonal variations and the availability and price of transportation to consuming areas.
Energen Resources periodically enters into derivative commodity instruments to hedge its exposure to oil and gas price fluctuations. Such instruments include regulated natural gas and crude oil futures contracts traded on the New York Mercantile Exchange (NYMEX) and over-the-counter swaps, collars and basis hedges with major energy derivative product specialists. All hedge transactions are subject to the Company's risk management policy, approved by the Board of Directors, which does not permit speculative positions.
As of September 30, 2001, 31 percent of Energen Resources' estimated 2002 gas production, excluding anticipated acquisition and exploration volumes, was hedged or under contract; 9.3 Bcf of its gas production at an average NYMEX price of $3.84 per Mcf, 3.6 Bcf of basin-specific hedges at an average contract price of $4.30 and 0.8 Bcf of gas production hedged with a NYMEX collar price of $4.25 to $6.15 per Mcf. The Company also had hedges in place for 20 percent of its estimated 2002 oil production, excluding anticipated acquisition and exploration volumes, at an average NYMEX price of $27.44 per barrel. In addition, the Company had hedged the basis difference on 6 Bcf of its fiscal 2002 gas production and 202 MBbl of its oil production.
At September 30, 2001, Energen Resources had entered into basin-specific swaps for 1.9 Bcf of its gas production at an average contract price of $3.77 per Mcf for fiscal year 2003. For fiscal 2004 and 2005, Energen Resources had entered into swaps for 1.8 Bcf and 1.6 Bcf of its gas production at average NYMEX prices of $3.77 per Mcf and $3.75 per Mcf, respectively. As acquisitions are made, Energen Resources may use futures, swaps and/or fixed-price contracts to lock in commodity prices for up to 36 months in order to protect targeted returns. Energen Resources may hedge up to 80 percent of its estimated annual production as approved by the Company's Board of Directors.
In addition to the derivatives described above, the Company has three-way pricing, physical sales contracts in place for approximately 30 percent of its estimated gas production, excluding anticipated acquisition and exploration volumes, in fiscal year 2002. These contracts provide for Energen Resources to receive a basin-specific weighted average price between $2.82 and $3.94 per Mcf. If the market price falls between $2.40 and $2.82 per Mcf, Energen Resources will receive $2.82 per Mcf. If the market price falls below $2.40 per Mcf, Energen Resources will receive the market price plus a premium of $0.33-$0.45, depending on the contracts. For fiscal year 2003, the Company has three-way pricing, physical sales contracts in place for approximately 19 percent of its estimated gas production. These contracts provide for Energen Resources to receive a basin-specific weighted average price between $2.72 and $3.94 per Mcf. If the market price falls between $2.40 and $2.72 per Mcf, Energen Resources will receive $2.72 per Mcf. If the market price falls below $2.40 per Mcf, Energen Resources will receive the market price plus a premium of $0.23-$0.35, depending on the contracts.
The Company has prepared a sensitivity analysis to evaluate the hypothetical effect that changes in the market value of crude oil and natural gas may have on the fair value of its derivative instruments. This analysis measured the impact on the commodity derivative instruments and, thereby, did not consider the underlying exposure related to the commodity. At September 30, 2001 and 2000, the Company estimated that a 10 percent change in the underlying commodities prices would have resulted in a $6.9 million and a $23.6 million change, respectively, in the fair value of open derivative contracts; however, gains and losses on derivative contracts are expected to be similarly offset by sales at the spot market price. Due to the short duration of the contracts, the time value of money was ignored. The hypothetical change in fair value was calculated by multiplying the difference between the hypothetical price and the contractual price by the contractual volumes and did not include the variance in basis difference or the impact of related taxes on actual cash prices.
See Note 18, Subsequent Event, for discussion regarding Enron North America Corp.'s bankruptcy filing, which raises uncertainty as to their ability to perform under its contracts.
NATURAL GAS DISTRIBUTION: The five-year extension of RSE in October 1996 provides Alagasco the opportunity to continue earning an allowed ROE between 13.15 percent and 13.65 percent through January 1, 2002. Under the terms
of that extension, RSE will continue after January 1, 2002, unless, after notice to the Company and a hearing, the Commission votes to either modify or discontinue its operation. Over this period, Alagasco has the potential for net income growth as the investment in additional utility plant affects the level of equity required in the business. Alagasco's 13-month average equity is estimated to be $219 million and $235 million at the end of fiscal years 2002 and 2003, respectively. The utility continues to rely on rate flexibility to effectively prevent bypass of its distribution system. Even though the utility enjoys a market saturation rate higher than the national average, customer growth in the service territory is limited. In the year 2002, Alagasco will continue to focus on enhancing customer growth by aggressively pursuing conversion opportunities and municipal acquisitions.
On December 4, 2000, the APSC authorized Alagasco to engage in energy risk management activities to manage the utility's cost of gas supply. As of September 30, 2001, Alagasco had recorded a $117,000 liability representing the fair value of derivatives. As required by SFAS No. 133, Alagasco recognizes all derivatives as either assets or liabilities on the balance sheet. Any gains or losses, including gains or losses resulting from fair value measurement of derivatives, are passed through to customers using the mechanisms of the GSA in accordance with Alagasco's APSC-approved tariff.
FORWARD-LOOKING STATEMENT AND RISK: Certain statements in this report express expectations of future plans, objectives and performance of the Company and its subsidiaries and constitute forward-looking statements made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Except as otherwise disclosed, the Company's forward-looking statements do not reflect the impact of possible or pending acquisitions, divestitures or restructurings. We undertake no obligation to correct or update any forward-looking statements whether as a result of new information, future events or otherwise. All statements based on future expectations rather than on historical facts are forward-looking statements that are dependent on certain events, risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of these include, but are not limited to, economic and competitive conditions, inflation rates, legislative and regulatory changes, financial market conditions, future business decisions, and other uncertainties, all of which are difficult to predict. There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and in projecting future rates of production and timing of development expenditures. The total amount or timing of actual future production may vary significantly from reserves and production estimates. In the event Energen Resources is unable to fully invest its planned acquisition, development and exploratory expenditures, future operating revenues, production, and proved reserves could be negatively affected. The drilling of development and exploratory wells can involve significant risks, including those related to timing, success rates and cost overruns and these risks can be affected by lease and rig availability, complex geology and other factors. Although Energen Resources makes use of futures, swaps and fixed-price contracts to mitigate risk, fluctuations in future oil and gas prices could affect materially the Company's financial position and results of operation; furthermore, such risk mitigation activities may cause the Company's financial position and results of operations to be materially different from results that would have been obtained had such risk mitigation activities not occurred. In addition, the Company cannot guarantee the absence of errors in input data, calculations and formulas used in its estimates, assumptions and forecasts.
RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
In June 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business combinations to be accounted for using the purchase method. SFAS No. 142 requires that goodwill and certain other intangible assets no longer be amortized and be tested for impairment annually. The consolidated financial statements do not include existing goodwill or other intangible assets.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses accounting and reporting standards for long-lived assets. The Company is required to adopt these statements in fiscal year 2003. The impact of these pronouncements on the Company currently is being evaluated and is not expected to be material.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item in respect to market risk is set forth in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "Outlook" and in Note 9, Financial Instruments and Risk Management, in the Notes to Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ENERGEN CORPORATION
ALABAMA GAS CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Page
----
1. Financial Statements
ENERGEN CORPORATION
Report of Independent Accountants ........................................... 26
Consolidated Statements of Income for the years ended September 30,
2001, 2000 and 1999 ....................................................... 27
Consolidated Balance Sheets as of September 30, 2001 and 2000 ............... 28
Consolidated Statements of Shareholders' Equity for the years ended
September 30, 2001, 2000 and 1999 .......................................... 30
Consolidated Statements of Cash Flows for the years ended September 30,
2001, 2000 and 1999 ....................................................... 31
Notes to Financial Statements ............................................... 37
ALABAMA GAS CORPORATION
Report of Independent Accountants ........................................... 26
Statements of Income for the years ended September 30,
2001, 2000 and 1999 ......................................................... 32
Balance Sheets as of September 30, 2001 and 2000 ............................ 33
Statements of Shareholder's Equity for the years ended September 30,
2001, 2000 and 1999 ......................................................... 35
Statements of Cash Flows for the years ended September 30,
2001, 2000 and 1999 ......................................................... 36
Notes to Financial Statements ............................................... 37
2. Financial Statement Schedules
ENERGEN CORPORATION
Schedule II - Valuation and Qualifying Accounts ............................. 59
ALABAMA GAS CORPORATION
Schedule II - Valuation and Qualifying Accounts ............................. 59
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Schedules other than those listed above are omitted because they are not required or not applicable, or the required information is shown in the financial statements or notes thereto.
REPORT OF MANAGEMENT
The accompanying consolidated financial statements and related notes of Energen Corporation and subsidiaries and the financial statements and related notes of Alabama Gas Corporation (collectively, "the financial statements") were prepared by management, which has the primary responsibility for the integrity of the financial information therein. These financial statements were prepared in conformity with accounting principles generally accepted in the United States of America appropriate in the circumstances and include amounts which are based necessarily on management's best estimates and judgments. Financial information presented elsewhere in this report is consistent with the information in the financial statements.
Management maintains a comprehensive system of internal accounting controls and relies on the system to discharge its responsibility for the integrity of the financial statements. This system provides reasonable assurance that corporate assets are safeguarded and that transactions are recorded in such a manner as to permit the preparation of materially reliable financial information. Reasonable assurance recognizes that the cost of a system of internal accounting controls should not exceed the related benefits. This system of internal accounting controls is augmented by written policies and procedures, internal auditing, and the careful selection and training of qualified personnel. As of September 30, 2001, management was aware of no material weaknesses in Energen or Alabama Gas Corporation's systems of internal accounting controls.
The financial statements have been audited by the Company's independent accountants, whose opinions are expressed elsewhere in this Form 10-K. Their audits were conducted in accordance with generally accepted auditing standards; and, in connection therewith, they obtained an understanding of the Company's systems of internal accounting controls and conducted such tests and related procedures as they deemed necessary to arrive at an opinion on the fairness of presentation of the financial statements.
The functioning of the accounting system and related internal accounting controls is under the general oversight of the Audit Committee of the Board of Directors, which is comprised of five outside Directors. The Audit Committee meets regularly with the independent accountants and representatives of management to discuss matters regarding internal accounting controls, auditing and financial reporting.
Geoffrey C. Ketcham
Executive Vice President,
Chief Financial Officer and Treasurer
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS OF ENERGEN CORPORATION:
In our opinion, the consolidated financial statements of Energen Corporation listed in the accompanying index present fairly, in all material respects, the financial position of Energen Corporation and subsidiaries at September 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 of the Notes to Financial Statements, effective October 1, 2000, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities."
PricewaterhouseCoopers LLP
Birmingham, Alabama
October 23, 2001, except for Note 18, as to which the date is December 5, 2001
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF ALABAMA GAS CORPORATION:
In our opinion, the financial statements of Alabama Gas Corporation listed in the accompanying index present fairly, in all material respects, the financial position of Alabama Gas Corporation at September 30, 2001 and 2000, and the results of its operations and cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Birmingham, Alabama
October 23, 2001, except for Note 18, as to which the date is December 5, 2001
CONSOLIDATED STATEMENTS OF INCOME
ENERGEN CORPORATION
------------------------------------------------------------------------------------------------------------------ Years ended September 30, (in thousands, except share data) 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------ OPERATING REVENUES Natural gas distribution $ 553,862 $ 366,161 $ 325,554 Oil and gas operations 231,111 189,434 171,963 ------------------------------------------------------------------------------------------------------------------ Total operating revenues 784,973 555,595 497,517 ------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Cost of gas 327,531 154,201 124,379 Operations and maintenance 184,250 171,636 169,874 Depreciation, depletion and amortization 86,975 87,073 88,615 Taxes, other than income taxes 62,208 46,884 37,266 ------------------------------------------------------------------------------------------------------------------ Total operating expenses 660,964 459,794 420,134 ------------------------------------------------------------------------------------------------------------------ OPERATING INCOME 124,009 95,801 77,383 ------------------------------------------------------------------------------------------------------------------ OTHER INCOME (EXPENSE) Interest expense (42,070) (37,769) (37,173) Other, net 1,933 1,775 1,335 ------------------------------------------------------------------------------------------------------------------ Total other expense (40,137) (35,994) (35,838) ------------------------------------------------------------------------------------------------------------------ INCOME BEFORE INCOME TAXES 83,872 59,807 41,545 Income tax expense 15,976 6,789 135 ------------------------------------------------------------------------------------------------------------------ NET INCOME $ 67,896 $ 53,018 $ 41,410 ------------------------------------------------------------------------------------------------------------------ DILUTED EARNINGS PER AVERAGE COMMON SHARE $ 2.18 $ 1.75 $ 1.38 ------------------------------------------------------------------------------------------------------------------ BASIC EARNINGS PER AVERAGE COMMON SHARE $ 2.21 $ 1.76 $ 1.40 ------------------------------------------------------------------------------------------------------------------ DILUTED AVERAGE COMMON SHARES OUTSTANDING 31,083,784 30,359,417 29,920,681 ------------------------------------------------------------------------------------------------------------------ BASIC AVERAGE COMMON SHARES OUTSTANDING 30,725,919 30,108,149 29,643,610 ------------------------------------------------------------------------------------------------------------------ |
The accompanying Notes to Financial Statements are an integral part of these statements.
CONSOLIDATED BALANCE SHEETS
ENERGEN CORPORATION
----------------------------------------------------------------------------------------------
As of September 30, (in thousands) 2001 2000
----------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,333 $ 3,823
Accounts receivable, net of allowance for doubtful accounts
of $10,031 in 2001 and $6,681 in 2000 74,078 93,362
Inventories, at average cost
Storage gas inventory 56,761 36,437
Materials and supplies 10,225 8,535
Liquified natural gas in storage 3,271 3,267
Deferred income taxes 12,425 17,830
Prepayments and other 30,451 92,182
----------------------------------------------------------------------------------------------
Total current assets 192,544 255,436
----------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Oil and gas properties, successful efforts method 822,956 713,766
Less accumulated depreciation, depletion and amortization 209,451 165,447
----------------------------------------------------------------------------------------------
Oil and gas properties, net 613,505 548,319
----------------------------------------------------------------------------------------------
Utility plant 758,374 709,004
Less accumulated depreciation 378,218 353,997
----------------------------------------------------------------------------------------------
Utility plant, net 380,156 355,007
----------------------------------------------------------------------------------------------
Other property, net 4,673 4,503
----------------------------------------------------------------------------------------------
Total property, plant and equipment, net 998,334 907,829
----------------------------------------------------------------------------------------------
OTHER ASSETS
Deferred income taxes 12,039 22,782
Deferred charges and other 20,962 16,994
----------------------------------------------------------------------------------------------
Total other assets 33,001 39,776
----------------------------------------------------------------------------------------------
TOTAL ASSETS $1,223,879 $1,203,041
----------------------------------------------------------------------------------------------
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The accompanying Notes to Financial Statements are an integral part of these statements.
CONSOLIDATED BALANCE SHEETS
ENERGEN CORPORATION
-------------------------------------------------------------------------------------------------------
As of September 30, (in thousands, except share data) 2001 2000
-------------------------------------------------------------------------------------------------------
CAPITAL AND LIABILITIES
CURRENT LIABILITIES
Long-term debt due within one year $ 16,072 $ 18,648
Notes payable to banks 7,000 168,000
Accounts payable 65,412 133,005
Accrued taxes 30,014 25,312
Customers' deposits 15,195 15,512
Amounts due customers 3,792 14,914
Accrued wages and benefits 25,821 24,256
Other 32,217 37,702
-------------------------------------------------------------------------------------------------------
Total current liabilities 195,523 437,349
-------------------------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Other 3,479 10,900
-------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 3,479 10,900
-------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 7)
-------------------------------------------------------------------------------------------------------
CAPITALIZATION
Preferred stock, cumulative, $0.01 par value, 5,000,000 shares
authorized -- --
Common shareholders' equity
Common stock, $0.01 par value; 75,000,000 shares authorized,
31,124,761 shares outstanding at September 30, 2001, and
30,350,802 shares outstanding at September 30, 2000 311 304
Premium on capital stock 233,471 213,582
Capital surplus 2,802 2,802
Retained earnings 232,354 185,561
Accumulated other comprehensive income, net of tax 15,531 --
Deferred compensation on restricted stock (1,186) --
Deferred compensation plan 5,259 4,965
Treasury stock, at cost; 325,355 shares and 239,305 shares at
September 30, 2001 and 2000, respectively (7,775) (6,354)
-------------------------------------------------------------------------------------------------------
Total common shareholders' equity 480,767 400,860
Long-term debt 544,110 353,932
-------------------------------------------------------------------------------------------------------
Total capitalization 1,024,877 754,792
-------------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND LIABILITIES $ 1,223,879 $ 1,203,041
-------------------------------------------------------------------------------------------------------
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The accompanying Notes to Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ENERGEN CORPORATION
-----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
-----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK ACCUMULATED
-------------------- OTHER
NUMBER OF PAR PREMIUM ON CAPITAL RETAINED COMPREHENSIVE
SHARES VALUE CAPITAL STOCK SURPLUS EARNINGS INCOME
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 1998 29,326,597 $ 293 $ 195,874 $ 2,802 $ 130,280 $ --
Net Income 41,410
Purchase of treasury shares
Shares issued for:
Dividend reinvestment plan 187,738 2 3,319
Employee benefit plans 389,629 4 6,638
Deferred compensation obligation
Cash dividends - $0.645 per share (19,118)
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 1999 29,903,964 299 205,831 2,802 152,572 --
Net Income 53,018
Purchase of treasury shares
Shares issued for:
Dividend reinvestment plan 57,920 1 1,438
Employee benefit plans 388,918 4 6,313
Deferred compensation obligation
Cash dividends - $0.665 per share (20,029)
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2000 30,350,802 304 213,582 2,802 185,561 --
Net Income 67,896
Other comprehensive income:
Transition adjustment on cash
flow hedging activities, net of (55,416)
tax of ($35,430)
Current period change in fair value
of derivative instruments, net of
tax of $11,740 18,363
Reclassification adjustment, net of
tax of $33,619 52,584
Comprehensive income
Purchase of treasury shares
Shares issued for:
Dividend reinvestment plan 75,480 1 2,366
Employee benefit plans 698,479 6 17,523
Deferred compensation obligation
Issuance of restricted stock
Amortization of restricted stock
Cash dividends - $0.685 per share (21,103)
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2001 31,124,761 $ 311 $ 233,471 $ 2,802 $ 232,354 $ 15,531
-----------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
DEFERRED
COMPENSATION DEFERRED
RESTRICTED COMPENSATION TREASURY SHAREHOLDERS'
STOCK PLAN STOCK EQUITY
---------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 1998 $ - $ 873 $ (873) $ 329,249
Net Income 41,410
Purchase of treasury shares (442) (442)
Shares issued for:
Dividend reinvestment plan 442 3,763
Employee benefit plans 6,642
Deferred compensation obligation 1,181 (1,181)
Cash dividends - $0.645 per share (19,118)
---------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 1999 - 2,054 (2,054) 361,504
Net Income 53,018
Purchase of treasury shares (4,934) (4,934)
Shares issued for:
Dividend reinvestment plan 1,395 2,834
Employee benefit plans 2,150 8,467
Deferred compensation obligation 2,911 (2,911)
Cash dividends - $0.665 per share (20,029)
---------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2000 - 4,965 (6,354) 400,860
Net Income 67,896
Other comprehensive income:
Transition adjustment on cash
flow hedging activities, net of (55,416)
tax of ($35,430)
Current period change in fair value
of derivative instruments, net of
tax of $11,740 18,363
Reclassification adjustment, net of
tax of $33,619 52,584
------
Comprehensive income 83,427
------
Purchase of treasury shares (2,516) (2,516)
Shares issued for :
Dividend reinvestment plan 331 2,698
Employee benefit plans 1,058 18,587
Deferred compensation obligation 294 (294)
Issuance of restricted stock (1,662) (1,662)
Amortization of restricted stock 476 476
Cash dividends - $0.685 per share (21,103)
---------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2001 $ (1,186) $ 5,259 $ (7,775) $ 480,767
---------------------------------------------------------------------------------------------------------------------
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The accompanying Notes to Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
ENERGEN CORPORATION
---------------------------------------------------------------------------------------------------------
Years ended September 30, (in thousands) 2001 2000 1999
---------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 67,896 $ 53,018 $ 41,410
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation, depletion and amortization 86,975 87,073 88,615
Deferred income taxes, net 5,349 (5,400) (12,774)
Deferred investment tax credits, net (448) (448) (448)
Gain on sale of assets (4,716) (1,107) (4,180)
Loss on properties held for sale 3,821 -- --
Net change in:
Accounts receivable 19,284 (18,857) (10,960)
Inventories (22,018) (11,912) (3,039)
Accounts payable 15,665 4,569 11,368
Amounts due customers (11,655) (3,662) 6,506
Other current assets and liabilities 1,705 7,119 14,938
Other, net (5,362) (5,350) (816)
---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 156,496 105,043 130,620
---------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (190,695) (133,061) (120,204)
Acquisition, net of cash acquired -- -- (123,816)
Proceeds from sale of assets 17,326 2,647 56,884
Other, net (1,038) (1,329) (951)
---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (174,407) (131,743) (188,087)
---------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Payment of dividends on common stock (21,103) (20,029) (19,118)
Issuance of common stock 21,285 11,301 10,405
Purchase of treasury stock (2,516) (4,934) (442)
Reduction of long-term debt (36,267) (1,205) (6,219)
Proceeds from issuance of long-term debt 223,799 -- --
Debt issuance costs (4,777) -- --
Net change in short-term debt issued to purchase
U.S. Treasury securities -- (140,917) 40,346
Net change in short-term debt (161,000) 40,917 74,654
---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 19,421 (114,867) 99,626
---------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 1,510 (141,567) 42,159
Cash and cash equivalents at beginning of period 3,823 145,390 103,231
---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,333 $ 3,823 $ 145,390
---------------------------------------------------------------------------------------------------------
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The accompanying Notes to Financial Statements are an integral part of these statements.
STATEMENTS OF INCOME
ALABAMA GAS CORPORATION
--------------------------------------------------------------------------------------------------------- Years ended September 30, (in thousands) 2001 2000 1999 --------------------------------------------------------------------------------------------------------- OPERATING REVENUES $ 553,862 $ 366,161 $ 325,554 --------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Cost of gas 329,572 155,841 126,264 Operations and maintenance 105,812 104,206 100,478 Depreciation 30,933 28,708 26,730 Income taxes Current 16,995 16,711 15,748 Deferred, net (3,099) (1,939) (2,137) Deferred investment tax credits, net (448) (448) (448) Taxes, other than income taxes 37,257 28,343 25,517 --------------------------------------------------------------------------------------------------------- Total operating expenses 517,022 331,422 292,152 --------------------------------------------------------------------------------------------------------- OPERATING INCOME 36,840 34,739 33,402 --------------------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE) Allowance for funds used during construction 2,098 1,172 374 Other, net (607) 281 (113) --------------------------------------------------------------------------------------------------------- Total other income 1,491 1,453 261 --------------------------------------------------------------------------------------------------------- INTEREST CHARGES Interest on long-term debt 8,803 8,542 8,614 Other interest charges 3,513 1,328 1,752 --------------------------------------------------------------------------------------------------------- Total interest charges 12,316 9,870 10,366 --------------------------------------------------------------------------------------------------------- NET INCOME $ 26,015 $ 26,322 $ 23,297 --------------------------------------------------------------------------------------------------------- |
The accompanying Notes to Financial Statements are an integral part of these statements.
BALANCE SHEETS
ALABAMA GAS CORPORATION
---------------------------------------------------------------------------------------------
As of September 30, (in thousands) 2001 2000
---------------------------------------------------------------------------------------------
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility plant $ 758,374 $ 709,004
Less accumulated depreciation 378,218 353,997
---------------------------------------------------------------------------------------------
Utility plant, net 380,156 355,007
---------------------------------------------------------------------------------------------
Other property, net 333 241
---------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash 1,555 866
Accounts receivable
Gas 47,024 48,300
Merchandise 1,417 2,192
Other 1,448 1,472
Affiliated companies 937 --
Allowance for doubtful accounts (9,500) (5,800)
Inventories, at average cost
Storage gas inventory 56,761 36,437
Materials and supplies 5,423 5,400
Liquified natural gas in storage 3,271 3,267
Deferred gas costs 3,275 3,556
Deferred income taxes 14,477 12,360
Prepayments and other 2,616 3,438
---------------------------------------------------------------------------------------------
Total current assets 128,704 111,488
---------------------------------------------------------------------------------------------
DEFERRED CHARGES AND OTHER ASSETS 8,546 4,546
---------------------------------------------------------------------------------------------
TOTAL ASSETS $ 517,739 $ 471,282
---------------------------------------------------------------------------------------------
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The accompanying Notes to Financial Statements are an integral part of these statements.
BALANCE SHEETS
ALABAMA GAS CORPORATION
------------------------------------------------------------------------------------------------
As of September 30, (in thousands, except share data) 2001 2000
------------------------------------------------------------------------------------------------
CAPITAL AND LIABILITIES
CAPITALIZATION
Preferred stock, cumulative, $0.01 par value, 120,000
shares authorized $ -- $ --
Common shareholder's equity
Common stock, $0.01 par value; 3,000,000 shares
authorized, 1,972,052 shares outstanding at
September 30, 2001 and 2000, respectively 20 20
Premium on capital stock 31,682 31,682
Capital surplus 2,802 2,802
Retained earnings 174,885 164,767
------------------------------------------------------------------------------------------------
Total common shareholder's equity 209,389 199,271
Long-term debt 185,000 115,000
------------------------------------------------------------------------------------------------
Total capitalization 394,389 314,271
------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Long-term debt due within one year 5,000 4,650
Notes payable to banks 1,000 20,500
Accounts payable
Trade 32,078 39,376
Affiliated companies -- 1,156
Accrued taxes 26,963 21,621
Customers' deposits 15,195 15,512
Amounts due customers 3,792 14,914
Accrued wages and benefits 11,616 9,221
Other 9,416 10,230
------------------------------------------------------------------------------------------------
Total current liabilities 105,060 137,180
------------------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 15,825 15,938
Accumulated deferred investment tax credits 1,317 1,765
Regulatory liability 242 1,352
Customer advances for construction and other 906 776
------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 18,290 19,831
------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND LIABILITIES $517,739 $471,282
================================================================================================
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The accompanying Notes to Financial Statements are an integral part of these statements.
STATEMENTS OF SHAREHOLDER'S EQUITY
ALABAMA GAS CORPORATION
------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
--------------------- TOTAL
NUMBER OF PAR PREMIUM ON CAPITAL RETAINED SHAREHOLDER'S
SHARES VALUE CAPITAL STOCK SURPLUS EARNINGS EQUITY
------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 1998 1,972,052 $20 $31,682 $2,802 $120,205 $154,709
Net Income 23,297
------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 1999 1,972,052 20 31,682 2,802 143,502 $178,006
Net Income 26,322
Cash dividends (5,057)
------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2000 1,972,052 20 31,682 2,802 164,767 $199,271
Net Income 26,015
Cash dividends (15,897)
------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2001 1,972,052 $20 $31,682 $2,802 $174,885 $209,389
========================================================================================================================
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The accompanying Notes to Financial Statements are an integral part of these statements.
STATEMENTS OF CASH FLOWS
ALABAMA GAS CORPORATION
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Years ended September 30, (in thousands) 2001 2000 1999
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OPERATING ACTIVITIES
Net income $ 26,015 $ 26,322 $ 23,297
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 30,933 28,708 26,730
Deferred income taxes, net (3,099) (1,939) (2,137)
Deferred investment tax credits (448) (448) (448)
Net change in:
Accounts receivable 5,775 (9,290) (4,182)
Inventories (20,351) (12,040) (2,913)
Deferred gas costs 281 (1,251) (531)
Accounts payable - gas purchases (8,497) 2,559 14,115
Accounts payable - trade 1,199 (168) (347)
Amounts due customers (11,655) (3,662) 6,695
Other current assets and liabilities 7,692 1,617 1,198
Other, net (2,231) (1,663) (583)
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Net cash provided by operating activities 25,614 28,745 60,894
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INVESTING ACTIVITIES
Additions to property, plant and equipment (53,749) (65,684) (45,390)
Net advances from (to) parent company (2,093) 21,811 (23,392)
Proceeds from sale of assets -- -- 27,000
Other, net (327) 18 549
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Net cash used in investing activities (56,169) (43,855) (41,233)
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FINANCING ACTIVITIES
Payment of dividends on common stock (15,897) (5,057) --
Reduction of long-term debt -- -- (5,350)
Proceeds from issuance of long-term debt 75,000 -- --
Debt issuance costs (3,709) -- --
Net change in short-term debt (24,150) 20,500 (15,000)
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Net cash provided by (used in) financing activities 31,244 15,443 (20,350)
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Net change in cash and cash equivalents 689 333 (689)
Cash and cash equivalents at beginning of period 866 533 1,222
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Cash and cash equivalents at end of period $ 1,555 $ 866 $ 533
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The accompanying Notes to Financial Statements are an integral part of these statements.
NOTES TO FINANCIAL STATEMENTS
Energen Corporation (Energen or the Company) is a diversified energy holding company engaged primarily in the acquisition, development, exploration and production of oil and gas in the continental United States (oil and gas operations) and in the purchase, distribution, and sale of natural gas principally in central and north Alabama (natural gas distribution). The following is a description of the Company's significant accounting policies and practices.
A. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, principally Energen Resources Corporation and Alabama Gas Corporation (Alagasco), after elimination of all significant intercompany transactions in consolidation. Certain reclassifications have been made to conform the prior years' financial statements to the current-year presentation.
B. OIL AND GAS OPERATIONS
PROPERTY AND RELATED DEPLETION: Energen Resources follows the successful efforts method of accounting for costs incurred in the exploration and development of oil and gas reserves. Lease acquisition costs are capitalized initially, and unproved properties are reviewed periodically to determine if there has been impairment of the carrying value, with any such impairment charged to exploration expense currently. Exploratory drilling costs are capitalized pending determination of proved reserves. If proved reserves are not discovered, the exploratory drilling costs are expensed. Other exploration costs, including geological and geophysical costs, are expensed as incurred. All development costs are capitalized. Depreciation, depletion and amortization expense is determined on a field-by-field basis using the unit-of-production method based on proved reserves. A provision for anticipated abandonment and restoration costs at the end of a property's useful life is made through depreciation expense.
OPERATING REVENUE: Energen Resources utilizes the sales method of accounting to recognize oil and gas production revenue. Under the sales method, revenue is recognized for the Company's total takes of oil and gas production, and over-production liabilities are established only when it is estimated that a property's over-produced volumes exceed the net share of remaining reserves for such property. Energen Resources had no material production imbalances at September 30, 2001. Gains and losses on the sale of property in the ordinary course of business are classified as operating revenue.
DERIVATIVE COMMODITY INSTRUMENTS: The Company adopted Statement of
Financial Accounting Standard (SFAS) No. 133 (subsequently amended by
SFAS Nos. 137 and 138), "Accounting for Derivative Instruments and
Hedging Activities," on October 1, 2000. This statement requires all
derivatives to be recognized on the balance sheet and measured at fair
value. If a derivative is designated as a cash flow hedge, the Company
is required to measure the effectiveness of the hedge, or the degree
that the gain (loss) for the hedging instrument offsets the loss
(gain) on the hedged item, at each reporting period. The effective
portion of the gain or loss on the derivative instrument is recognized
in other comprehensive income as a component of equity and
subsequently reclassified into earnings when the forecasted
transaction affects earnings. The ineffective portion of a
derivative's change in fair value is required to be recognized in
earnings immediately. Derivatives that do not qualify for hedge
treatment under SFAS No. 133 must be recorded at fair value with gains
or losses recognized in earnings in the period of change.
Energen Resources periodically enters into derivative commodity instruments to hedge its exposure to price fluctuations on oil and gas production. Such instruments include regulated natural gas and crude oil futures contracts traded on the New York Mercantile Exchange (NYMEX) and over-the-counter swaps, collars and basis hedges with major energy derivative product specialists.
All hedge transactions are subject to the Company's risk management policy, approved by the Board of Directors, which does not permit speculative positions. The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge. This process includes specific identification of the hedging instrument and the hedge transaction, the nature of the risk being hedged and how the hedging instrument's effectiveness in hedging the exposure to the hedged transaction's variability in cash flows attributable to the hedged risk will be assessed. Both at the inception of the hedge and on an ongoing basis, the Company assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. The Company discontinues hedge accounting if a derivative is not determined to be highly effective as a hedge or has ceased to be a highly effective hedge.
C. NATURAL GAS DISTRIBUTION
UTILITY PLANT AND DEPRECIATION: Property, plant and equipment is stated at cost. The cost of utility plant includes an allowance for funds used during construction. Maintenance is charged for the cost of normal repairs and the renewal or replacement of an item of property which is less than a retirement unit. When property which represents a retirement unit is replaced or removed, the cost of such property is credited to utility plant and, together with the cost of removal less salvage, is charged to the accumulated reserve for depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of utility property at rates established by the Alabama Public Service Commission (APSC). Approved depreciation rates averaged approximately 4.5 percent in 2001, 2000 and 1999.
INVENTORIES: Inventories, which consist primarily of gas stored underground, are stated at average cost.
OPERATING REVENUE AND GAS COSTS: In accordance with industry practice, Alagasco records natural gas distribution revenues on a monthly- and cycle-billing basis. The commodity cost of purchased gas applicable to gas delivered to customers but not yet billed under the cycle-billing method is deferred as a current asset.
REGULATORY ACCOUNTING: Alagasco is subject to the provisions of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation." In general, SFAS No. 71 requires utilities to capitalize or defer certain costs or revenues, based upon approvals received from regulatory authorities, to be recovered from or refunded to customers in future periods.
D. INCOME TAXES
The Company uses the liability method of accounting for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Under this method, a deferred tax asset or liability is recognized for the estimated future tax effects attributable to temporary differences as well as tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period of the change. Alagasco files a consolidated federal income tax return with its parent. Consolidated federal income taxes are allocated to appropriate subsidiaries using the separate return method.
E. CASH EQUIVALENTS
The Company includes highly liquid marketable securities and debt instruments purchased with a maturity of three months or less in cash equivalents.
F. EARNINGS PER SHARE
The Company's basic earnings per share amounts have been computed based on the weighted-average number of common shares outstanding. Diluted earnings per share amounts reflect the assumed issuance of common shares for all potentially dilutive securities (see Note 13).
G. ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates with regard to these financial statements include the estimate of proved oil and gas reserves and the related present value of estimated future net revenues therefrom (see Note 16).
As an Alabama utility, Alagasco is subject to regulation by the APSC which, in 1983, established the Rate Stabilization and Equalization (RSE) rate-setting process. RSE was extended with modifications in 1990, 1987 and 1985. On October 7, 1996, RSE was extended, without change, for a five-year period through January 1, 2002. Under the terms of that extension, RSE will continue after January 1, 2002, unless, after notice to the Company and a hearing, the Commission votes to either modify or discontinue its operation. 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 average equity at the end of 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 Alagasco's operations and maintenance (O&M) expense. Under the inflation-based cost control measurement established by the APSC, if the percentage change in O&M expense per customer falls within a range of 1.25 points above or below the percentage change in the Consumer Price Index For All Urban Consumers (index range), no adjustment is required. If the change in O&M expense per customer exceeds the index range, three-quarters of the difference is returned to customers. To the extent the change is less than the index range, the utility benefits by one-half of the difference through future rate adjustments. In fiscal 1999, the increase in O&M expense per customer was below the index range; as a result, the utility benefited by $0.7 million. Under RSE as extended, a $9.1 million, $4.5 million and a $6.6 million annual increase in revenues became effective December 1, 2000, 1999 and 1998, respectively.
Alagasco calculates a temperature adjustment to customers' monthly bills to substantially remove the effect of departures from normal temperatures on Alagasco's earnings. The calculation is performed monthly, and the adjustments to customers' bills are made in the same billing cycle in which the weather variation occurs. Substantially all the customers to whom the temperature adjustment applies are residential, small commercial and small industrial. Alagasco's rate schedules for natural gas distribution charges contain a Gas Supply Adjustment (GSA) rider, established in 1993, which permits the pass-through to customers of changes in the cost of gas supply.
The APSC approved an Enhanced Stability Reserve (ESR), beginning fiscal year 1998 in the amount of $3.9 million with an approved maximum funding level of $4 million, to which Alagasco may charge the full amount of: (1) extraordinary O&M expenses resulting from force majeure events such as storms, severe weather, and outages, when one or a combination of two such events results in more than $200,000 of additional O&M expense during a fiscal year; or (2) individual industrial and commercial customer revenue losses that exceed $250,000 during the fiscal year, if such losses cause Alagasco's return on average equity to fall below 13.15 percent. During 2001, Alagasco charged $1.2 million against the ESR related to extraordinary bad debt expense and revenue losses from certain large industrial customers. Following a year in which a charge against the ESR is made, the APSC provides for accretions to the ESR of no more than $40,000 monthly until the maximum funding level is achieved. At September 30, 2001 and 2000, the ESR balance of $2.7 million and $3.9 million, respectively, was included in the consolidated financial statements.
The excess of total acquisition costs over book value of net assets of acquired municipal gas distribution systems is included in utility plant and is being amortized through Alagasco's rate-setting mechanism on a straight-line basis over approximately 23 years. At September 30, 2001 and 2000, the net acquisition adjustment was $12.4 million and $13.4 million, respectively.
Long-term debt consisted of the following:
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As of September 30, (in thousands) 2001 2000
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Energen Corporation:
Medium-term Notes, interest ranging from 6.60% to 8.09%, for
notes redeemable July 15, 2002, to February 15, 2028 $363,000 $225,000
8% Debentures -- 18,588
Series 1993 Notes, interest ranging from 6.40% to 7.25%, due annually
in payments ranging from $1,072,000 to $1,545,000 from March 1, 2002,
to March 1, 2008 8,881 9,910
Alabama Gas Corporation:
Medium-term Notes, interest ranging from 6.25% to 7.97%, for notes
redeemable August 1, 2002, to September 23, 2026 115,000 119,650
6.25% Notes, redeemable September 1, 2016 40,000 --
6.75% Notes, redeemable September 1, 2031 35,000 --
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Total 561,881 373,148
Less amounts due within one year 16,072 18,648
Less unamortized debt discount 1,699 568
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Total $544,110 $353,932
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The aggregate maturities of Energen's long-term debt for the next five years are as follows:
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Years ending September 30, (in thousands)
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2002 2003 2004 2005 2006
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$ 16,072 $ 14,119 $ 21,145 $ 11,250 $ 21,340
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The aggregate maturities of Alagasco's long-term debt for the next five years are as follows:
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Years ending September 30, (in thousands)
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2002 2003 2004 2005 2006
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$ 5,000 $ 5,000 $ 10,000 $ 10,000 $ 10,000
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The Company is subject to various restrictions on the payment of dividends. Under its Series 1993 Notes, the most restrictive provision states that dividends or other distributions with respect to common stock may not be made unless the Company maintains a minimum consolidated tangible net worth of $80 million; at September 30, 2001, Energen had a tangible net worth of $481 million.
Energen and Alagasco had short-term credit lines and other credit facilities of $220 million available as of September 30, 2001, for working capital needs; Alagasco has been authorized to borrow up to $70 million of the available credit lines by the APSC. At September 30, 1999, the Company had $140.9 million of borrowings to purchase U.S. Treasury securities for tax planning. These securities matured in early October 1999, and the proceeds were used to repay such borrowings. The following is a summary of information relating to notes payable to banks:
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As of September 30, (in thousands) 2001 2000 1999
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Energen outstanding $ 6,000 $147,500 $268,000
Alagasco outstanding 1,000 20,500 --
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Notes payable to banks 7,000 168,000 268,000
Available for borrowings 213,000 81,000 11,000
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Total $220,000 $249,000 $279,000
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Maximum amount outstanding at any month-end $177,000 $168,000 $268,000
Average daily amount outstanding $ 80,681 $146,761 $154,427
Weighted average interest rates based on:
Average daily amount outstanding 6.05% 6.45% 5.40%
Amount outstanding at year-end 2.97% 6.95% 5.70%
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Alagasco maximum amount outstanding at any month-end $ 62,000 $ 20,500 $ 35,000
Alagasco average daily amount outstanding $ 40,066 $ 1,169 $ 9,140
Alagasco weighted average interest rates based on:
Average daily amount outstanding 5.31% 6.93% 5.48%
Amount outstanding at year-end 2.97% 6.98% --
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Total interest expense for Energen in 2001, 2000 and 1999 was $42,070,000, $37,769,000 and $37,173,000, respectively. In 2001, 2000 and 1999, total interest expense for Alagasco was $12,316,000, $9,870,000 and $10,366,000, respectively.
The components of Energen's income taxes consisted of the following:
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For the years ended September 30, (in thousands) 2001 2000 1999
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Taxes estimated to be payable currently:
Federal $ 9,642 $ 10,689 $ 11,639
State 1,433 1,948 1,718
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Total current 11,075 12,637 13,357
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Taxes deferred:
Federal 3,073 (6,027) (13,062)
State 1,828 179 (160)
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Total deferred 4,901 (5,848) (13,222)
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Total income tax expense $15,976 $ 6,789 $ 135
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The components of Alagasco's income taxes consisted of the following:
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For the years ended September 30, (in thousands) 2001 2000 1999
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Taxes estimated to be payable currently:
Federal $ 15,456 $ 15,225 $ 14,331
State 1,539 1,486 1,417
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Total current 16,995 16,711 15,748
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Taxes deferred:
Federal (3,193) (2,215) (2,395)
State (354) (172) (190)
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Total deferred (3,547) (2,387) (2,585)
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Total income tax expense $ 13,448 $ 14,324 $ 13,163
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Temporary differences and carryforwards which gave rise to a significant portion of Energen's and Alagasco's deferred tax assets and liabilities for 2001 and 2000 were as follows:
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Energen Corporation
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As of September 30, (in thousands) 2001 2000
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CURRENT NONCURRENT Current Noncurrent
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Deferred tax assets:
Minimum tax credit $ -- $56,043 $ -- $48,298
Pension and other costs 6,574 -- 3,980 --
Other, net 14,952 1,420 14,229 1,507
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Total deferred tax assets 21,526 57,463 18,209 49,805
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Deferred tax liabilities:
Depreciation and basis differences -- 44,165 -- 27,023
Other comprehensive income 8,676 1,254 -- --
Other, net 425 5 379 --
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Total deferred tax liabilities 9,101 45,424 379 27,023
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Net deferred tax assets $12,425 $12,039 $17,830 $22,782
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Alabama Gas Corporation
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As of September 30, (in thousands) 2001 2000
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CURRENT NONCURRENT Current Noncurrent
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Deferred tax assets:
Enhanced stability reserve $ 1,016 $ -- $ 1,478 $ --
Unbilled revenue 1,942 -- 1,849 --
Insurance and accruals 2,817 -- 3,170 --
Inventories 1,061 -- 1,303 --
Allowance for doubtful accounts 3,592 -- 2,193 --
Pension and other costs 2,239 -- 1,147 --
Other, net 2,058 526 1,418 1,101
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Total deferred tax assets 14,725 526 12,558 1,101
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Deferred tax liabilities:
Depreciation and basis differences -- 16,351 -- 17,039
Other, net 248 -- 198 --
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Total deferred tax liabilities 248 16,351 198 17,039
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Net deferred tax assets (liabilities) $14,477 $(15,825) $12,360 $(15,938)
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Total income tax expense for the Company differed from the amount which would have been provided by applying the statutory federal income tax rate of 35% to earnings before taxes as illustrated below:
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For the years ended September 30, (in thousands) 2001 2000 1999
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Income tax expense at statutory federal income tax rate $ 29,355 $ 20,932 $ 14,541
Increase (decrease) resulting from:
Nonconventional fuels tax credits (13,588) (14,405) (14,839)
Enhanced oil recovery tax credits (25) (457) (185)
Deferred investment tax credits (448) (448) (448)
State income taxes, net of federal income tax benefit 1,878 1,452 1,087
Other, net (1,196) (285) (21)
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Total income tax expense $ 15,976 $ 6,789 $ 135
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Effective income tax rate (%) 19.05 11.35 0.32
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Total income tax expense for Alagasco differed from the amount which would have been provided by applying the statutory federal income tax rate of 35% to earnings before taxes as illustrated below:
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For the years ended September 30, (in thousands) 2001 2000 1999
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Income tax expense at statutory federal income tax rate $ 13,812 $ 14,226 $ 12,761
Increase (decrease) resulting from:
Deferred investment tax credits (448) (448) (448)
State income taxes, net of federal income tax benefit 799 874 784
Other, net (715) (328) 66
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Total income tax expense $ 13,448 $ 14,324 $ 13,163
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Effective income tax rate (%) 34.08 35.24 36.10
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The Company files a consolidated federal income tax return with all of its subsidiaries. As of September 30, 2001, the amount of minimum tax credit which can be carried forward indefinitely to reduce future regular tax liability is $56 million. No valuation allowance with respect to deferred taxes is deemed necessary, as the Company anticipates generating adequate future taxable income to realize the benefits of all deferred tax assets on the consolidated balance sheets.
The Company has two defined benefit non-contributory pension plans: Plan A covers a majority of the employees and Plan B covers employees under certain labor union agreements. Benefits are based on years of service and final earnings. The Company's policy is to use the projected unit credit actuarial method for funding and financial reporting purposes.
The status of the plans was as follows:
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As of June 30, (in thousands) PLAN A PLAN B
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2001 2000 2001 2000
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Projected benefit obligation:
Balance at beginning of year $ 71,694 $ 73,841 $ 17,002 $ 18,227
Service cost 2,219 1,988 255 265
Interest cost 5,458 5,573 1,267 1,361
Actuarial loss (gain) 16,478 (2,642) 1,345 (487)
Benefits paid (5,236) (7,066) (1,920) (2,364)
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Balance at end of year 90,613 71,694 17,949 17,002
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Plan assets:
Fair value of plan assets at beginning of year 87,169 83,844 23,561 24,043
Actual return on plan assets (7,447) 10,391 (975) 1,882
Benefits paid (5,236) (7,066) (1,920) (2,364)
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Fair value of plan assets at end of year 74,486 87,169 20,666 23,561
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Amounts recognized in the consolidated balance sheets:
Funded status of plan (16,127) 15,475 2,717 6,559
Unrecognized actuarial loss (gain) 6,001 (22,926) (2,729) (6,458)
Unrecognized prior service cost 2,321 2,555 928 1,163
Unrecognized net transition obligation (asset) (261) (1,069) 57 114
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Accrued pension asset (liability) $ (8,066) $ (5,965) $ 973 $ 1,378
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The components of net pension expense were:
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For the years ended September 30, (in thousands) PLAN A PLAN B
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2001 2000 1999 2001 2000 1999
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Components of net periodic benefit cost:
Service cost $ 2,219 $ 1,988 $ 2,653 $ 255 $ 265 $ 299
Interest cost 5,458 5,573 6,193 1,267 1,361 1,338
Expected return on assets (5,778) (5,566) (5,938) (1,466) (1,577) (1,510)
Prior service cost amortization 235 235 235 235 235 235
Actuarial loss (gain) 422 -- -- (28) -- --
Transition amortization (808) (808) (808) 57 57 57
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Net periodic expense $ 1,748 $ 1,422 $ 2,335 $ 320 $ 341 $ 419
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In 2001, 2000 and 1999, net pension expense for Alagasco was $1,812,000, $1,466,000 and $2,458,000, respectively.
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As of September 30, PLAN A PLAN B
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2001 2000 1999 2001 2000 1999
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Weighted average rate assumptions in
pension actuarial calculations:
Discount rate 7.50% 8.00% 7.75% 7.50% 8.00% 7.75%
Expected return on plan assets 9.00% 8.25% 8.25% 9.00% 8.25% 8.25%
Rate of compensation increase 4.50% 5.50% 5.25% -- -- --
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The Company has supplemental retirement plans with certain key executives providing payments on retirement, termination, death or disability. Expense under these agreements for 2001, 2000 and 1999 was $381,000, $372,000 and $(75,000), respectively. At June 30, 2001 and 2000, the accumulated post-retirement benefit obligation related to these agreements was $5,465,000 and $3,204,000, respectively, and the projected benefit obligation was $10,750,000 and $10,356,000, respectively. An accrued post-retirement benefit liability of $2,408,000 was recorded at June 30, 2001. A prepaid post-retirement benefit asset of $566,000 was recorded at June 30, 2000.
In addition to providing pension benefits, the Company provides certain post-retirement health care and life insurance benefits. Substantially all of the Company's employees may become eligible for certain benefits if they reach normal retirement age while working for the Company. The projected unit credit actuarial method was used to determine the normal cost and actuarial liability.
The status of the post-retirement benefit programs was as follows:
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As of June 30, (in thousands) SALARIED EMPLOYEES UNION EMPLOYEES
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2001 2000 2001 2000
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Projected post-retirement benefit obligation:
Balance at beginning of year $ 29,811 $ 29,144 $ 39,291 $ 37,423
Service cost 1,095 1,092 733 1,876
Interest cost 2,327 2,203 3,095 2,852
Actuarial loss (gain) 4,964 (1,146) 124 (1,635)
Benefits paid (1,679) (1,482) (2,257) (1,225)
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Balance at end of year 36,518 29,811 40,986 39,291
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Plan assets:
Fair value of plan assets at beginning of year 41,004 35,494 35,410 26,702
Actual return on plan assets (4,520) 4,186 (5,749) 3,928
Company contribution 1,337 2,806 4,513 6,005
Benefits paid (1,679) (1,482) (2,257) (1,225)
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Fair value of plan assets at end of year 36,142 41,004 31,917 35,410
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Amounts recognized in the consolidated balance sheets:
Funded status of plan (376) 11,193 (9,069) (3,881)
Unrecognized actuarial loss (gain) (8,667) (19,435) (7,269) (11,274)
Unrecognized net transition obligation (asset) 8,672 9,395 15,417 16,702
Company contribution 369 -- 1,069 --
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Accrued pension asset (liability) $ (2) $ 1,153 $ 148 $ 1,547
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Net periodic post-retirement benefit expense included the following:
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For the years ended September 30, (in thousands) SALARIED EMPLOYEES UNION EMPLOYEES
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2001 2000 1999 2001 2000 1999
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Components of net periodic benefit cost:
Service cost $ 1,095 $ 1,092 $ 1,464 $ 733 $ 1,876 $ 2,039
Interest cost 2,327 2,203 2,013 3,095 2,852 2,599
Expected return on assets (1,994) (1,721) (1,448) (1,723) (1,292) (1,156)
Actuarial loss (gain) (1,098) (1,029) (590) (336) (271) (129)
Transition amortization 723 723 723 1,285 1,285 1,285
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Net periodic expense $ 1,053 $ 1,268 $ 2,162 $ 3,054 $ 4,450 $ 4,638
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In 2001, 2000 and 1999, net periodic post-retirement benefit expense for Alagasco was $3,959,000, $5,449,000 and $6,644,000, respectively.
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As of September 30, SALARIED EMPLOYEES UNION EMPLOYEES
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2001 2000 1999 2001 2000 1999
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Weighted average rate assumptions in
pension actuarial calculations:
Discount rate 7.50% 8.00% 7.75% 7.50% 8.00% 7.75%
Expected return on plan assets 9.00% 8.25% 8.25% 9.00% 8.25% 8.25%
Rate of compensation increase 4.50% 5.50% 5.25% -- -- --
Health care cost trend rate 7.50% 7.50% 7.50% 7.50% 7.50% 7.50%
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The weighted average health care cost trend rate used in determining the accumulated post-retirement benefit obligation has a significant effect on the amounts reported. For example, with respect to salaried employees, increasing the weighted average health care cost trend rate by 1 percentage point would increase the accumulated post-retirement benefit obligation by $993,000 and the net periodic post-retirement benefit cost by $32,000. For union employees, increasing the weighted average health care cost trend rate by 1 percentage point would increase the accumulated post-retirement benefit obligation by $3,004,000 and the net periodic post-retirement benefit cost by $257,000.
For both defined benefit plans and other post-retirement plans, certain financial assumptions are used in determining the Company's projected benefit obligation. These assumptions are examined periodically by the Company, and any required changes are reflected in the subsequent determination of projected benefit obligations.
The Company has a long-term disability plan covering most salaried employees. The Company had no expense for this plan in the years ended September 30, 2001 and 2000. Expense for the year ended September 30, 1999 was $177,000.
A majority of Company employees are eligible to participate in the Energen Employee Savings Plan (ESP) by investing a portion of their compensation in the ESP, with the Company matching a part of the employee investment
by contributing Company common stock (new issue or treasury shares) or funds for the purchase of Company common stock. The ESP also contains employee stock ownership plan provisions. At September 30, 2001, a total of 419,453 common shares were reserved for issuance under the ESP. Expense associated with Company contributions to the ESP was $3,597,000, $3,381,000 and $3,421,000 for 2001, 2000 and 1999, respectively.
In 1992 the Company adopted the Energen Corporation 1992 Long-Range Performance Plan which provides for the award of up to 1,000,000 performance units, with each unit equal to the market value of one share of common stock, to eligible employees based on predetermined performance criteria at the end of a four-year award period. Under the Plan, a portion of the performance units is payable with Company common stock; accordingly, 700,000 shares have been reserved for issuance. Under the Plan, 76,120, 102,860, and 100,100 performance units were awarded in 2001, 2000 and 1999, respectively. According to the provisions of the Plan, no additional performance units can be awarded after September 30, 2001. In October 2001, the Company added provisions for the award of future performance units, comparable to the 1992 Long-Range Performance Plan, under the 1997 Stock Incentive Plan. The Company recorded expense of $2,311,000, $4,448,000 and $1,530,000 for 2001, 2000 and 1999, respectively, under the Plan.
On November 27, 1997, the Company adopted the Energen Corporation 1997 Stock Incentive Plan. The 1997 Stock Incentive Plan, along with the Energen Corporation 1988 Stock Option Plan, provides for the grant of incentive stock options, non-qualified stock options, or a combination thereof to officers and key employees. Options granted under the Plans provide for purchase of Company common stock at not less than the fair market value on the date the option is granted. In addition, the 1997 Stock Incentive Plan provides for the grant of restricted stock with 57,190, 12,500 and 5,500 shares awarded in 2001, 2000 and 1999, respectively. The sale or transfer of the shares is limited during the restricted period. The Company recorded expense of $583,000, $97,000 and $31,000 in 2001, 2000 and 1999, respectively, related to the restricted stock. Under the 1988 Stock Option Plan, 540,000 shares of Company common stock reserved for issuance have been granted. Under the 1997 Stock Incentive Plan, 1,300,000 shares of Company common stock have been reserved for issuance. All outstanding options are incentive or non-qualified, vest within three years from date of grant, and expire 10 years from the grant date. Transactions under the Plans are summarized as follows:
-------------------------------------------------------------------------------------------------------------------
1997 STOCK INCENTIVE PLAN 1988 STOCK OPTION PLAN
-------------------------------------------------------------------------------------------------------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
-------------------------------------------------------------------------------------------------------------------
Outstanding at September 30, 1998 256,320 $ 18.25 497,792 $ 11.83
Granted 78,950 18.25 -- --
Exercised -- -- (73,716) 9.05
Forfeited -- -- (2,000) 18.25
-------------------------------------------------------------------------------------------------------------------
Outstanding at September 30, 1999 335,270 18.25 422,076 12.29
Granted 108,500 18.8125 -- --
Exercised (40,262) 18.25 (157,660) 9.65
-------------------------------------------------------------------------------------------------------------------
Outstanding at September 30, 2000 403,508 18.40 264,416 13.86
Granted 137,200 27.44 -- --
Exercised (152,786) 18.30 (105,302) 13.90
-------------------------------------------------------------------------------------------------------------------
Outstanding at September 30, 2001 387,922 $ 21.64 159,114 $ 13.84
-------------------------------------------------------------------------------------------------------------------
Exercisable at September 30, 1999 85,430 $ 18.25 320,280 $ 10.90
Exercisable at September 30, 2000 158,488 $ 18.25 237,836 $ 13.37
Exercisable at September 30, 2001 138,068 $ 18.34 159,114 $ 13.84
-------------------------------------------------------------------------------------------------------------------
Remaining reserved for issuance at
September 30, 2001 643,840 -- -- --
-------------------------------------------------------------------------------------------------------------------
|
The following table summarizes information about options outstanding as of September 30, 2001:
---------------------------------------------------------------------------------------------------------------------
1997 STOCK INCENTIVE PLAN 1988 STOCK OPTION PLAN
Weighted Average Weighted Average
Range of Exercise Remaining Contractual Range of Remaining Contractual
Prices Shares Life Exercise Prices Shares Life
---------------------------------------------------------------------------------------------------------------------
$18.25-$18.81 250,722 7.06 years $9.19-$11.06 63,600 2.77 years
$27.44 137,200 9.08 years $15.00-$18.25 95,514 5.82 years
---------------------------------------------------------------------------------------------------------------------
$18.25-$27.44 387,922 7.78 years $9.19-$18.25 159,114 4.60 years
---------------------------------------------------------------------------------------------------------------------
|
The weighted-average grant-date fair value of options granted in 2001, 2000 and 1999 was $9.27, $5.91, and $5.42, respectively. The fair value of each option grant was estimated using the Black-Scholes option-pricing model. The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation expense has been recognized for its stock options. Had compensation cost for these options been determined in accordance with SFAS No. 123, the Company's net income and diluted earnings per share would have been $67.4 million, or $2.17 per share, in 2001, $52.5 million, or $1.73 per share, in 2000, and $40.9 million, or $1.37 per share, in 1999.
In 1992 the Company adopted the Energen Corporation 1992 Directors Stock Plan to pay part of the compensation of its non-employee directors in shares of Company common stock. Under the Plan, 2,400, 3,254 and 4,914 shares were issued in 2001, 2000 and 1999, respectively, leaving 147,039 shares reserved for issuance as of September 30, 2001.
In 1996 the Company amended its Dividend Reinvestment and Common Stock Purchase Plan to include a direct stock purchase feature which allows purchases by non-shareholders. Accordingly, 1,500,000 shares were added to the Plan. As of September 30, 2001, 926,462 common shares were reserved under this Plan.
On April 26, 2000, the Company authorized the repurchase of up to 1,000,000 shares of the Company's common stock, in addition to the 500,000 shares authorized on May 25, 1994. In 2001, 2000 and 1999 the Company repurchased 91,600, 290,000 and 30,189 shares, respectively. As of September 30, 2001, a total of 848,111 shares remain authorized for future repurchase.
On June 24, 1998, the Company adopted a Shareholder Rights Plan (the 1998 Plan) designed to protect shareholders from coercive or unfair takeover tactics. Under certain circumstances, the 1998 Plan provides shareholders with the right to acquire the Company's Series 1998 Junior Participating Preferred Stock (or, in certain cases, securities of an acquiring person) at a significant discount. Terms and conditions are set forth in a Rights Agreement between the Company and its Rights Agent. Under the 1998 Plan, one right is associated with each outstanding share of common stock. Rights outstanding under the 1998 Plan at September 30, 2001, were convertible into 311,247 shares of Series 1998 Junior Participating Preferred Stock (1/100 share of preferred stock for each full right) subject to adjustment upon occurrence of certain take-over related events. No rights were exercised or exercisable during the period. The price at which the rights would be exercised is $70 per right, subject to adjustment upon occurrence of certain take-over related events. In general, absent certain take-over related events as described in the Plan, the rights may be redeemed prior to the July 27, 2008, expiration for $0.01 per right.
In 1997 the Company adopted the 1997 Deferred Compensation Plan to allow officers and non-employee directors to defer certain compensation. Amounts earned under the Deferred Compensation Plan and invested in Company common stock have been recorded as treasury stock, along with the related deferred compensation obligation in the Consolidated Statements of Shareholders' Equity.
CONTRACTS AND AGREEMENTS: Alagasco has various firm gas supply and firm gas transportation contracts which expire at various dates through the year 2008. These contracts typically contain minimum demand charge
obligations on the part of Alagasco. Energen Resources has three-way pricing, physical sales contracts in place for approximately 30 percent of its estimated gas production, excluding anticipated acquisition and exploration volumes, in fiscal year 2002. These contracts provide for Energen Resources to receive a basin-specific weighted average price between $2.82 and $3.94 per Mcf. If the market price falls between $2.40 and $2.82 per Mcf, Energen Resources will receive $2.82 per Mcf. If the market price falls below $2.40 per Mcf, Energen Resources will receive the market price plus a premium of $0.33-$0.45, depending on the contracts. For fiscal year 2003, the Company has three-way pricing, physical sales contracts in place for approximately 19 percent of its estimated gas production. These contracts provide for Energen Resources to receive a basin-specific weighted average price between $2.72 and $3.94 per Mcf. If the market price falls between $2.40 and $2.72 per Mcf, Energen Resources will receive $2.72 per Mcf. If the market price falls below $2.40 per Mcf, Energen Resources will receive the market price plus a premium of $0.23-$0.35, depending on the contracts. See Note 18, Subsequent Event, for discussion regarding Enron North America Corp.'s bankruptcy filing, which raises uncertainty as to their ability to perform under its contracts.
ENVIRONMENTAL MATTERS: Alagasco is in the chain of title of eight former manufactured gas plant sites, of which it still owns four, and five manufactured gas distribution sites, of which it still owns one. An investigation of the sites does not indicate the present need for remediation activities. Management expects that, should remediation of any such sites be required in the future, Alagasco's share, if any, of such costs will not materially affect the results of operations or financial condition of Alagasco.
Energen Resources is subject to various environmental regulations. Management believes that Energen Resources is in compliance with the currently applicable standards of the environmental agencies to which it is subject and that potential environmental liabilities, if any, are minimal. Also, to the extent Energen Resources has operating agreements with various joint venture partners, environmental costs, if any, would be shared proportionately.
LEGAL MATTERS: Energen and its affiliates are, from time to time, parties to various pending or threatened legal proceedings. Certain of these lawsuits include claims for punitive damages in addition to other specified relief. Based upon information presently available, and in light of available legal and other defenses, contingent liabilities arising from threatened and pending litigation are not considered material in relation to the respective financial positions of Energen and its affiliates. It should be noted, however, that Energen and its affiliates conduct business in Alabama and other jurisdictions in which the magnitude and frequency of punitive damage awards may bear little or no relation to culpability or actual damages, thus making it increasingly difficult to predict litigation results. Various legal proceedings arising in the normal course of business are in progress currently, and the Company has accrued a provision for estimated costs.
LEASE OBLIGATIONS: In January 1999 Alagasco closed on a sale-leaseback of the Company's headquarters building. The proceeds from the sale approximated the investment in the facility. The building is being leased back from the purchaser over a 25-year lease term and the related lease is accounted for as an operating lease. Energen's total lease payments related to leases included as operating lease expense, inclusive of the sale-leaseback, were $7,324,000, $6,267,000 and $5,665,000 in 2001, 2000 and 1999, respectively. Minimum future rental payments required after 2001 under leases with initial or remaining noncancelable lease terms in excess of one year are as follows:
--------------------------------------------------------------------------------------------------------------------
Years ending September 30, (in thousands)
--------------------------------------------------------------------------------------------------------------------
2002 2003 2004 2005 2006 2007 AND THEREAFTER
--------------------------------------------------------------------------------------------------------------------
$ 4,025 $ 3,956 $ 3,615 $ 2,953 $ 2,704 $ 33,955
--------------------------------------------------------------------------------------------------------------------
|
Alagasco's total payments related to leases included as operating expense, inclusive of the sale-leaseback, were $2,343,000, $2,209,000 and $2,079,000 in 2001, 2000 and 1999, respectively. Minimum future rental payments required after 2001 under leases with initial or remaining noncancelable lease terms in excess of one year are as follows:
--------------------------------------------------------------------------------------------------------------------
Years ending September 30, (in thousands)
--------------------------------------------------------------------------------------------------------------------
2002 2003 2004 2005 2006 2007 AND THEREAFTER
--------------------------------------------------------------------------------------------------------------------
$ 2,252 $ 2,178 $ 2,070 $ 1,693 $ 1,517 $ 23,762
--------------------------------------------------------------------------------------------------------------------
|
Supplemental information concerning Energen's cash flow activities is as follows:
------------------------------------------------------------------------------------------------------------------------
For the years ended September 30, (in thousands) 2001 2000 1999
------------------------------------------------------------------------------------------------------------------------
Interest paid, net of amount capitalized $42,905 $37,717 $36,646
Income taxes paid $11,636 $11,885 $12,925
Noncash investing activities:
Capitalized depreciation $ 243 $ 217 $ 265
Allowance for funds used during construction $ 2,098 $ 1,172 $ 374
------------------------------------------------------------------------------------------------------------------------
|
Supplemental information concerning Alagasco's cash flow activities is as follows:
------------------------------------------------------------------------------------------------------------------------
For the years ended September 30, (in thousands) 2001 2000 1999
------------------------------------------------------------------------------------------------------------------------
Interest paid, net of amount capitalized $12,154 $ 9,787 $10,539
Income taxes paid $18,318 $15,833 $16,342
Noncash investing activities:
Capitalized depreciation $ 243 $ 217 $ 265
Allowance for funds used during construction $ 2,098 $ 1,172 $ 374
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|
FINANCIAL INSTRUMENTS: The fair value of cash and cash equivalents, trade receivables (net of allowance), and short-term debt approximates fair value due to the short maturity of the instruments. The fair value of Energen's fixed-rate long-term debt, including the current portion, with a carrying value of $561,881,000, would be $582,635,000 at September 30, 2001. The fair value of Alagasco's fixed-rate long-term debt, including the current portion, with a carrying value of $190,000,000, would be $198,843,000 at September 30, 2001. The fair values were based on the market value of debt with similar maturities and current interest rates.
Alagasco has entered into an agreement with a financial institution whereby it can sell on an ongoing basis, with recourse, certain installment receivables related to its merchandising program up to a maximum of $20 million. During 2001, 2000 and 1999, Alagasco sold $5,444,000, $6,879,000 and $6,391,000, respectively, of installment receivables. At September 30, 2001 and 2000, the balance of these installment receivables was $13,249,000 and $15,280,000, respectively. Receivables sold under this agreement are considered financial instruments with off-balance sheet risk. Alagasco's exposure to credit loss in the event of non-performance by customers is represented by the balance of installment receivables.
PRICE RISK: The Company adopted SFAS No. 133 (subsequently amended by SFAS Nos. 137 and 138) on October 1, 2000. This statement requires all derivatives to be recognized on the balance sheet and measured at fair value. If a derivative is designated as a cash flow hedge, the Company is required to measure the effectiveness of the hedge, or the degree that the gain (loss) for the hedging instrument offsets the loss (gain) on the hedged item, at each reporting period. The effective portion of the gain or loss on the derivative instrument is recognized in other comprehensive income as a component of equity and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of a derivative's change in fair value is required to be recognized in earnings immediately. Derivatives that do not qualify for hedge treatment under SFAS No. 133 must be recorded at fair value with gains or losses recognized in earnings in the period of change.
Energen Resources periodically enters into derivative commodity instruments to hedge its exposure to price fluctuations on oil and gas production. Such instruments include regulated natural gas and crude oil futures contracts traded on the NYMEX and over-the-counter swaps, collars and basis hedges with major energy derivative product specialists. The Company has identified certain oil and gas derivatives which qualify as cash flow hedges under SFAS No. 133.
The Company had current gains on fair value of derivatives of $22.5 million included in prepayments and other and $3.2 million of non-current gains included in deferred charges and other on the consolidated balance sheet at September 30, 2001. Current deferred hedging losses of $83.5 million were included in prepayments and other, and non-current deferred hedging losses of $5.9 million were included in deferred charges and other on the consolidated balance sheet at September 30, 2000. Effective October 1, 2000, the Company reclassified the deferred hedging losses included in the consolidated balance sheet at September 30, 2000, as a cumulative effect-type adjustment to accumulated other comprehensive income as a component of equity.
As of September 30, 2001, $13.6 million, net of tax, of deferred net gains on derivative instruments recorded in accumulated other comprehensive income are expected to be reclassified to earnings during the next twelve-month period. Gains and losses on derivative instruments that are not accounted for as hedge transactions, as well as the ineffective portion of the change in fair value of derivatives accounted for as cash flow hedges, are included in operating revenues in the consolidated financial statements. The Company recorded a $1.9 million after-tax loss in 2001 for the ineffective portion of the change in fair value of derivatives accounted for as cash flow hedges. Also, Energen Resources recorded an after-tax gain of $0.5 million in 2001 on contracts which did not meet the definition of cash flow hedges under SFAS No. 133. As of September 30, 2001, all Company swaps and hedges met the definition of a cash flow hedge. The Company had $9.9 million included in deferred income taxes on the consolidated balance sheet related to other comprehensive income as of September 30, 2001.
At September 30, 2001, Energen Resources had entered into contracts and swaps for 9.3 Bcf of its fiscal year 2002 gas production at an average NYMEX price of $3.84 per Mcf and 478 MBbl of its oil production at an average NYMEX price of $27.44 per barrel. Energen Resources had basin-specific hedges in place for 3.6 Bcf of gas production at an average contract price of $4.30 per Mcf and 0.8 Bcf of gas production hedged at a NYMEX collar price of $4.25 to $6.15 per Mcf. In addition, the Company had hedged the basis difference of 6 Bcf of its gas production and 202 MBbl of its oil production.
As of September 30, 2001, Energen Resources had entered into basin-specific swaps for 1.9 Bcf of its gas production at an average contract price of $3.77 per Mcf for fiscal year 2003. For fiscal year 2004 and 2005, Energen Resources had entered into swaps for 1.8 Bcf and 1.6 Bcf of its gas production at average NYMEX prices of $3.77 per Mcf and $3.75 per Mcf, respectively.
All hedge transactions are subject to the Company's risk management policy, approved by the Board of Directors, which does not permit speculative positions. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge. This process includes specific identification of the hedging instrument and the hedge transaction, the nature of the risk being hedged and how the hedging instrument's effectiveness in hedging the exposure to the hedged transaction's variability in cash flows attributable to the hedged risk will be assessed. Both at the inception of the hedge and on an ongoing basis, the Company assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. The Company discontinues hedge accounting if a derivative is not determined to be highly effective as a hedge or has ceased to be a highly effective hedge. The maximum term over which Energen Resources is hedging exposures to the variability of cash flows is through September 30, 2005.
On December 4, 2000, the APSC authorized Alagasco to engage in energy risk-management activities to manage the utility's cost of gas supply. As of September 30, 2001, Alagasco had recorded a $117,000 liability representing the fair value of derivatives. As required by SFAS No. 133, Alagasco recognizes all derivatives as either assets or liabilities on the balance sheet. Any gains or losses are passed through to customers using the mechanisms of the GSA in accordance with Alagasco's APSC- approved tariff.
See Note 18, Subsequent Event, for discussion regarding Enron North America Corp.'s bankruptcy filing, which raises uncertainty as to their ability to perform under its contracts.
CONCENTRATION OF CREDIT RISK: Natural gas distribution operating revenues and related accounts receivable are generated from state-regulated utility natural gas sales and transportation to approximately 465,000 residential, commercial and industrial customers located in central and north Alabama. A change in economic conditions may affect the ability of customers to meet their obligations; however, the Company believes that its provision for possible losses on uncollectible accounts receivable is adequate for its credit loss exposure.
Revenues and related accounts receivable from exploration and production operations primarily are generated from the sale of produced natural gas and oil. This industry concentration has the potential to affect the Company's overall exposure to credit risk, either positively or negatively, in that the customers may be affected similarly by changes in economic, industry, or other conditions. The Company is not aware of any significant credit risks which have not been recognized in the provision for doubtful accounts.
SFAS No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", requires that an impairment loss be recognized when the carrying amount of an asset exceeds the sum of the undiscounted estimated future cash flow of the asset. The Statement also provides that all long-lived assets to be disposed of be reported at the lower of the carrying amount or fair value. Accordingly, during the third fiscal quarter of 2000, Energen Resources recorded a pre-tax writedown of $3.5 million as additional depreciation, depletion and amortization expense caused by a downward reserve revision in a small oil and gas field, adjusting the carrying amount of the properties to their fair value based upon expected future discounted cash flows. In the fourth quarter of 2001, a pre-tax loss of $3.8 million was recorded in operating revenues for certain non-strategic properties held for sale. The properties which have a carrying amount of $9.5 million are being actively marketed for sale. The results of operations from these assets held for sale were immaterial.
The Company has adopted SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business combinations to be accounted for using the purchase method. SFAS No. 142 requires that goodwill and certain other intangible assets no longer be amortized and be tested for impairment annually. The consolidated financial statements do not include existing goodwill or other intangible assets.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses accounting and reporting standards for long-lived assets. The Company is required to adopt these statements in fiscal year 2003. The impact of these pronouncements on the Company currently is being evaluated and is not expected to be material.
The following data summarizes quarterly operating results. The Company's business is seasonal in character and strongly influenced by weather conditions.
-----------------------------------------------------------------------------------------------------------------------------
2001 Fiscal Quarters
(in thousands, except per share amounts) First Second Third Fourth
-----------------------------------------------------------------------------------------------------------------------------
Operating revenues $175,897 $333,480 $161,712 $ 113,884
Operating income $ 27,716 $ 68,720 $ 23,329 $ 4,244
Net income (loss) $ 13,719 $ 46,992 $ 10,373 $ (3,188)
Diluted earnings (loss) per average common share $ 0.44 $ 1.52 $ 0.33 $ (0.10)
Basic earnings (loss) per average common share $ 0.45 $ 1.53 $ 0.34 $ (0.10)
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|
-----------------------------------------------------------------------------------------------------------------------------
2000 Fiscal Quarters
(in thousands, except per share amounts) First Second Third Fourth
-----------------------------------------------------------------------------------------------------------------------------
Operating revenues $129,009 $207,456 $116,567 $ 102,563
Operating income $ 19,394 $ 56,364 $ 13,158 $ 6,885
Net income (loss) $ 9,136 $ 41,166 $ 4,458 $ (1,742)
Diluted earnings (loss) per average common share $ 0.30 $ 1.36 $ 0.15 $ (0.06)
Basic earnings (loss) per average common share $ 0.30 $ 1.37 $ 0.15 $ (0.06)
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|
The following data summarizes quarterly operating results. Alagasco's business is seasonal in character and strongly influenced by weather conditions.
-----------------------------------------------------------------------------------------------------------------------------
2001 Fiscal Quarters
(in thousands, except per share amounts) First Second Third Fourth
-----------------------------------------------------------------------------------------------------------------------------
Operating revenues $119,126 $270,286 $103,779 $ 60,671
Operating income (loss) $ 6,498 $ 30,176 $ 3,186 $ (3,020)
Net income (loss) $ 4,040 $ 27,333 $ 578 $ (5,936)
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|
--------------------------------------------------------------------------------------------------------------------------
2000 Fiscal Quarters
(in thousands, except per share amounts) First Second Third Fourth
--------------------------------------------------------------------------------------------------------------------------
Operating revenues $85,426 $158,548 $69,111 $ 53,076
Operating income (loss) $ 6,890 $ 28,283 $ 2,935 $ (3,369)
Net income (loss) $ 4,620 $ 26,055 $ 1,116 $ (5,469)
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|
---------------------------------------------------------------------------------------------------------------------------------
Years ended September 30,
(in thousands, except per share amounts) 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE Per Share Per Share
INCOME SHARES AMOUNT Income Shares Amount Income Shares Amount
---------------------------------------------------------------------------------------------------------------------------------
Basic EPS $67,896 30,726 $ 2.21 $53,018 30,108 $ 1.76 $41,410 29,644 $ 1.40
Effect of dilutive securities
Long-range performance shares 165 126 160
Stock options 187 125 117
Restricted stock 6 --
---------------------------------------------------------------------------------------------------------------------------------
Diluted EPS $67,896 31,084 $ 2.18 $53,018 30,359 $ 1.75 $41,410 29,921 $ 1.38
---------------------------------------------------------------------------------------------------------------------------------
|
During fiscal year 1999, Energen Resources purchased the stock of the TOTAL Minatome Corporation (TOTAL), a Houston-based unit of TOTAL American Holding Inc. Immediately upon closing the transaction, Energen Resources sold a 31 percent undivided interest in TOTAL's net assets to Westport Oil and Gas Company Inc. Energen Resources' net adjusted price totaled approximately $137.5 million, including the assumption of certain legal and financial obligations. Energen Resources gained an estimated 200 Bcfe of proved domestic oil and natural gas reserves. The acquisition was accounted for as a purchase, and the results of operations since the acquisition date are included in the consolidated financial statements. A summary of net assets acquired follows:
------------------------------------------------------------------------------ (in thousands) ------------------------------------------------------------------------------ Oil and gas properties $ 137,533 Less liabilities assumed (13,288) Less cash acquired (429) ------------------------------------------------------------------------------ Acquisition cost, net of cash acquired $ 123,816 ------------------------------------------------------------------------------ |
Alagasco purchased natural gas from affiliates amounting to $5,254,000, $3,662,000 and $3,232,000, in 2001, 2000 and 1999, respectively. These amounts are included in gas purchased for resale. Alagasco had net receivables from affiliates of $937,000 at September 30, 2001, net payables to affiliates of $1,156,000 at September 30, 2000 and net receivables from affiliates of $20,654,000 at September 30, 1999.
The following schedules detail historical financial data of the Company's oil and gas operations. Certain terms appearing in the schedules are prescribed by the Securities and Exchange Commission (SEC) and are briefly described as follows:
EXPLORATION EXPENSES are costs primarily associated with drilling unsuccessful exploratory wells in undeveloped properties, exploratory geological and geophysical activities, and costs of impaired and expired leaseholds.
DEVELOPMENT COSTS include costs necessary to gain access to, prepare and equip development wells in areas of proved reserves.
PRODUCTION (LIFTING) COSTS include costs incurred to operate and maintain wells.
GROSS REVENUES are reported after deduction of royalty interest payments.
GROSS WELL OR ACRE is a well or acre in which a working interest is owned.
NET WELL OR ACRE is deemed to exist when the sum of fractional ownership working interests in gross wells or acres equals one.
DRY WELL is an exploratory or a development well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.
PRODUCTIVE WELL is an exploratory or a development well that is not a dry well.
CAPITALIZED COSTS
---------------------------------------------------------------------------------------------------------------------
As of September 30, (in thousands) 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------
Proved $818,535 $707,236 $659,522
Unproved 4,421 6,530 10,463
---------------------------------------------------------------------------------------------------------------------
Total capitalized costs 822,956 713,766 669,985
Accumulated depreciation, depletion, and amortization 209,451 165,447 129,839
---------------------------------------------------------------------------------------------------------------------
Capitalized costs, net $613,505 $548,319 $540,146
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|
COSTS INCURRED The following table sets forth costs incurred in property acquisition, exploration and development activities and includes both capitalized costs and costs charged to expense during the year:
--------------------------------------------------------------------------------------------------------------------------
Years ended September 30, (in thousands) 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------
Property acquisition:
Proved $ 33,764 $ 2,086 $143,693
Unproved 552 350 266
Exploration 1,734 1,472 1,919
Development 103,574 66,717 55,487
--------------------------------------------------------------------------------------------------------------------------
Total costs incurred $139,624 $70,625 $201,365
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|
RESULTS OF OPERATIONS The following table sets forth results of the Company's oil and gas operations:
---------------------------------------------------------------------------------------------------------------------------- Years ended September 30, (in thousands) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------- Gross revenues $230,749 $188,601 $ 167,476 Production (lifting costs) 91,536 72,820 70,230 Exploration expense* 4,215 4,878 4,938 Depreciation, depletion and amortization** 54,698 57,253 60,891 Income tax expense (benefit) 15,433 5,121 (3,045) ---------------------------------------------------------------------------------------------------------------------------- Results of operation from producing activities $ 64,867 $ 48,529 $ 34,462 ---------------------------------------------------------------------------------------------------------------------------- |
* Includes a $2.7 million, $3.8 million, and $3.3 million pre-tax writedown of a portion of an unproved leasehold in 2001, 2000, and 1999, respectively
** Includes a pre-tax writedown of $3.5 million in 2000 under SFAS No.
121 (see Note 10)
AVERAGE SALES PRICE, PRODUCTION COST AND DEPRECIATION RATE
---------------------------------------------------------------------------------------------------------------------
Years ended September 30, 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------
Average sales price:
Gas (Mcf) $ 3.11 $ 2.49 $ 2.21
Oil (per barrel) $24.02 $18.11 $11.92
Natural gas liquids (per barrel) $17.62 $16.04 $ 9.58
Average production (lifting) cost (per Mcfe) $ 1.34 $ 1.03 $ 0.91
Average depreciation rate (per Mcfe) $ 0.80 $ 0.76 $ 0.79
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DRILLING ACTIVITY The following table sets forth the total number of net productive and dry exploratory and development wells drilled:
---------------------------------------------------------------------------------------------------------------
Years ended September 30, 2001 2000 1999
---------------------------------------------------------------------------------------------------------------
Exploratory:
Productive 0.1 0.3 0.9
Dry 1.3 -- 1.3
---------------------------------------------------------------------------------------------------------------
Total 1.4 0.3 2.2
---------------------------------------------------------------------------------------------------------------
Development:
Productive 90.7 70.6 62.4
Dry -- 1.5 2.3
---------------------------------------------------------------------------------------------------------------
Total 90.7 72.1 64.7
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As of September 30, 2001, the Company was participating in the drilling of 10 gross development wells, with the Company's interest equivalent to 6.48 wells.
PRODUCTIVE WELLS AND ACREAGE The following table sets forth the total gross and net productive gas and oil wells as of September 30, 2001, and developed and undeveloped acreage as of the latest practicable date prior to year-end:
-----------------------------------------------------------------------------------------------------
Gross Net
-----------------------------------------------------------------------------------------------------
Gas Wells 3,392 1,613
Oil Wells 2,490 626
-----------------------------------------------------------------------------------------------------
Developed Acreage 948,819 514,544
Undeveloped Acreage 173,797 32,782
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|
There were 46 wells with multiple completions in 2001. All wells and acreage are located onshore in the United States, with the majority of the net undeveloped acreage located in the Permian Basin.
OIL AND GAS OPERATIONS The calculation of proved reserves is made pursuant to rules prescribed by the SEC. Such rules, in part, require that only proved categories of reserves be disclosed and that reserves and associated values be calculated using year-end prices and current costs. Changes to prices and costs could have a significant effect on the disclosed amount of reserves and their associated values. In addition, the estimation of reserves inherently requires the use of geologic and engineering estimates which are subject to revision as reservoirs are produced and developed and as additional information is available. Accordingly, the amount of actual future production may vary significantly from the amount of reserves disclosed. The proved reserves are located onshore in the United States.
--------------------------------------------------------------------------------------------------------------------------- Year ended September 30, 2001 Gas MMcf Oil MBbl NGL MBbl --------------------------------------------------------------------------------------------------------------------------- Proved reserves at beginning of year 777,456 24,518 26,007 Revisions of previous estimates (134,543) (2,407) (2,006) Purchases 9,334 1,100 836 Discoveries and other additions 26,145 1,995 1,672 Production (46,463) (2,187) (1,482) Sales (4,878) (2,141) (96) --------------------------------------------------------------------------------------------------------------------------- Proved reserves at end of year 627,051 20,878 24,931 --------------------------------------------------------------------------------------------------------------------------- Proved developed reserves at end of year 579,991 17,467 22,867 --------------------------------------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------------------------------------- Year ended September 30, 2000 Gas MMcf Oil MBbl NGL MBbl --------------------------------------------------------------------------------------------------------------------------- Proved reserves at beginning of year 740,001 24,719 21,937 Revisions of previous estimates 37,028 (2,601) 3,250 Purchases 1,819 1,997 308 Discoveries and other additions 47,146 2,890 1,942 Production (48,084) (2,304) (1,429) Sales (454) (183) (1) --------------------------------------------------------------------------------------------------------------------------- Proved reserves at end of year 777,456 24,518 26,007 --------------------------------------------------------------------------------------------------------------------------- Proved developed reserves at end of year 691,287 18,714 22,906 --------------------------------------------------------------------------------------------------------------------------- |
--------------------------------------------------------------------------------------------------------------------------- Year ended September 30, 1999 Gas MMcf Oil MBbl NGL MBbl --------------------------------------------------------------------------------------------------------------------------- Proved reserves at beginning of year 542,039 19,845 17,292 Revisions of previous estimates 66,522 2,575 2,546 Purchases 149,158 8,870 -- Discoveries and other additions 57,452 1,851 2,869 Production (53,855) (3,122) (762) Sales (21,315) (5,300) (8) --------------------------------------------------------------------------------------------------------------------------- Proved reserves at end of year 740,001 24,719 21,937 --------------------------------------------------------------------------------------------------------------------------- Proved developed reserves at end of year 644,702 20,332 18,696 --------------------------------------------------------------------------------------------------------------------------- |
During fiscal 2001, Energen Resources invested approximately $33.8 million in proved property acquisitions. Energen Resources sold approximately 18 Bcfe of proved reserves, recording net pre-tax gains of $4.6 million.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES The standardized measure of discounted future net cash flows is not intended, nor should it be interpreted, to present the fair market value of the Company's crude oil and natural gas reserves. An estimate of fair market value would take into consideration factors such as, but not limited to, the recovery of reserves not presently classified as proved reserves, anticipated future changes in prices and costs, and a discount factor more representative of the time value of money and the risks inherent in reserve estimates. At September 30, 2001, 2000 and 1999, the Company had a deferred hedging gain of $25.7 million and deferred hedging losses of $89.4 million and $16.5 million, respectively, which are excluded from the calculation of standardized measure of future net cash flows.
--------------------------------------------------------------------------------------------------------------------- Years ended September 30, (in thousands) 2001 2000 1999 --------------------------------------------------------------------------------------------------------------------- Future gross revenues $1,672,436 $4,824,681 $2,272,586 Future production 693,817 1,379,913 801,640 Future development costs 83,781 110,660 102,651 --------------------------------------------------------------------------------------------------------------------- Future net cash flows before income taxes 894,838 3,334,108 1,368,295 Future income tax expense including tax credits 124,803 1,073,051 288,227 --------------------------------------------------------------------------------------------------------------------- Future net cash flows after income taxes 770,035 2,261,057 1,080,068 Discount at 10% per annum 272,493 1,155,792 466,214 --------------------------------------------------------------------------------------------------------------------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves $ 497,542 $1,105,265 $ 613,854 --------------------------------------------------------------------------------------------------------------------- |
Reserves and associated values were calculated using year-end prices and current costs. The following are the principal sources of changes in the standardized measure of discounted future net cash flows:
------------------------------------------------------------------------------------------------------------------------
Years ended September 30, (in thousands) 2001 2000 1999
------------------------------------------------------------------------------------------------------------------------
Balance at beginning of year $ 1,105,265 $ 613,854 $ 357,258
------------------------------------------------------------------------------------------------------------------------
Revisions to reserves proved in prior years:
Net changes in prices, production costs and
future development costs (1,015,900) 715,746 165,092
Net changes due to revisions in quantity estimates (81,076) 37,049 55,993
Development costs incurred, previously estimated 50,768 39,589 24,529
Accretion of discount 144,266 61,385 35,725
Other 95,165 6,850 (12,976)
------------------------------------------------------------------------------------------------------------------------
Total revisions (806,777) 860,619 268,363
New field discoveries and extensions, net of
future production and development costs 33,685 110,727 40,105
Sales of oil and gas produced, net of production costs (220,220) (157,533) (93,314)
Purchases 32,811 17,657 157,437
Sales (26,256) (1,110) (18,843)
Net change in income taxes 379,034 (338,949) (97,152)
------------------------------------------------------------------------------------------------------------------------
Net change in standardized measure of discounted future
net cash flows (607,723) 491,411 256,596
------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 497,542 $ 1,105,265 $ 613,854
------------------------------------------------------------------------------------------------------------------------
|
COALBED METHANE ACTIVITIES Energen Resources is actively engaged in the production of pipeline-quality natural gas from coal seams (coalbed methane). The results of coalbed methane activities have been included in the oil and gas disclosures shown previously. Because of the significance of coalbed methane to Energen Resources, certain data are separately disclosed below:
---------------------------------------------------------------------------------------------------------------------------------- Years ended September 30, (in thousands) 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- Proved reserves at beginning of year (MMcf) 268,435 262,840 222,481 Revisions of previous estimates (61,017) 20,076 55,120 Production (13,270) (14,481) (14,761) ---------------------------------------------------------------------------------------------------------------------------------- Proved reserves at end of year 194,148 268,435 262,840 ---------------------------------------------------------------------------------------------------------------------------------- Estimated proved reserves qualifying for tax credits (MMcf) 13,518 24,777 35,602 ---------------------------------------------------------------------------------------------------------------------------------- Net capitalized costs (in thousands) $ 123,977 $ 128,809 $ 133,773 ---------------------------------------------------------------------------------------------------------------------------------- Gross wells in which the company has working and/or revenue interests 839 850 871 ---------------------------------------------------------------------------------------------------------------------------------- Net productive wells 508.3 516.4 534.6 ---------------------------------------------------------------------------------------------------------------------------------- |
Section 29 of the Internal Revenue Code of 1986, as amended, provides an income tax credit against federal regular income tax liability for sales of certain fuels produced from nonconventional sources (including natural gas from coal seams). Fuels qualifying for these credits must be produced from wells drilled after December 31, 1979, and before January 1, 1993, and must be sold before January 1, 2003. The credit for natural gas from coal seams is adjusted for inflation, and the Company estimates this credit will approximate $1.08 per Mcf of qualifying production in calendar year 2001. Accordingly, a significant portion of the value of proved coalbed methane reserves is associated with this tax credit.
The Company is principally engaged in two business segments: the acquisition, development, exploration and production of oil and gas in the continental United States (oil and gas operations) and the purchase, distribution and sale of natural gas in central and north Alabama (natural gas distribution). The accounting policies of the segments are the same as those described in Note 1. Certain reclassifications have been made to conform the prior years' financial statements to the current year presentation.
----------------------------------------------------------------------------------------------------------------------------------
As of September 30, (in thousands) 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
Operating revenues
Oil and gas operations $ 231,111 $ 189,434 $ 171,963
Natural gas distribution 553,862 366,161 325,554
----------------------------------------------------------------------------------------------------------------------------------
Total $ 784,973 $ 555,595 $ 497,517
----------------------------------------------------------------------------------------------------------------------------------
Operating income (loss)
Oil and gas operations $ 75,399 $ 48,358 $ 31,015
Natural gas distribution 50,288 49,063 46,565
Eliminations and corporate expenses (1,678) (1,620) (197)
----------------------------------------------------------------------------------------------------------------------------------
Total $ 124,009 $ 95,801 $ 77,383
----------------------------------------------------------------------------------------------------------------------------------
Depreciation, depletion and amortization expense
Oil and gas operations $ 56,042 $ 58,365 $ 61,885
Natural gas distribution 30,933 28,708 26,730
----------------------------------------------------------------------------------------------------------------------------------
Total $ 86,975 $ 87,073 $ 88,615
----------------------------------------------------------------------------------------------------------------------------------
Interest expense
Oil and gas operations $ 30,244 $ 28,441 $ 27,758
Natural gas distribution 12,316 9,871 10,366
Eliminations and other (490) (543) (951)
----------------------------------------------------------------------------------------------------------------------------------
Total $ 42,070 $ 37,769 $ 37,173
----------------------------------------------------------------------------------------------------------------------------------
Income tax expense (benefit)
Oil and gas operations $ 2,893 $ (7,245) $ (13,472)
Natural gas distribution 13,448 14,324 13,163
Other (365) (290) 444
----------------------------------------------------------------------------------------------------------------------------------
Total $ 15,976 $ 6,789 $ 135
----------------------------------------------------------------------------------------------------------------------------------
Capital expenditures
Oil and gas operations $ 136,886 $ 67,090 $ 198,577
Natural gas distribution 56,090 67,073 46,029
Other 60 287 53
----------------------------------------------------------------------------------------------------------------------------------
Total $ 193,036 $ 134,450 $ 244,659
----------------------------------------------------------------------------------------------------------------------------------
Identifiable assets
Oil and gas operations $ 716,043 $ 737,814 $ 643,925
Natural gas distribution 516,802 471,282 410,001
Eliminations and other (8,966) (6,055) 130,969
----------------------------------------------------------------------------------------------------------------------------------
Total $ 1,223,879 $ 1,203,041 $ 1,184,895
----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net
Oil and gas operations $ 617,592 $ 552,287 $ 543,888
Natural gas distribution 380,489 355,248 317,119
Other 253 294 100
----------------------------------------------------------------------------------------------------------------------------------
Total $ 998,334 $ 907,829 $ 861,107
----------------------------------------------------------------------------------------------------------------------------------
|
Certain of the physical sale contracts and swaps mentioned previously in Note 7 and Note 9 have Enron North America Corp. (Enron) as the counterparty. Enron filed for protection from creditors under Chapter 11 of the United States Bankruptcy Code on December 2, 2001. At November 30, 2001, Energen Resources had open swap positions with Enron for 8.98 Bcf of gas and 34,000 barrels of oil to be produced through the remainder of fiscal 2002 and open swap contracts for gas and oil basis differentials on its fiscal 2002 production, which constituted a net in-the-money position whereby Enron owes Energen Resources approximately $11.2 million. In addition, Energen Resources estimates it is due approximately $2.2 million for the value of its November 2001 swap positions. Energen Resources had also delivered approximately 1.5 Bcf of gas under a physical sales contract for which it was owed approximately $4.5 million by Enron at November 30, 2001. All of the previously mentioned three-way pricing, physical sales contracts were with Enron.
Alagasco had contracts in place with Enron with respect to its system supply. At November 30, 2001 Alagasco had received gas supply from Enron, for which it owed approximately $7.3 million.
In the days leading up to the bankruptcy filing, various events occurred which caused Enron to be in default under all of its agreements with Energen Resources and most of its agreements with Alagasco. These agreements provided Energen Resources and Alagasco with various remedies including, termination and liquidation rights in the event of such defaults. Energen Resources and Alagasco have and will continue to take the steps that they deem appropriate to avail themselves of the default remedies.
The Company has previously treated the swap agreements as qualifying for cash flow hedge accounting under SFAS No. 133. The Company is currently evaluating the implications of the present situation to its financial statements. It is possible that future earnings will be less than previously estimated due to collectibility issues with respect to the Energen Resources advantageous swap position. Energen Resources should be able to remarket physical volumes not taken by Enron, but these volumes as well as volumes covered by Enron hedges will be at current prices, provided the Company does not enter into new hedges. Alagasco expects to be able to replace any volumes not delivered by Enron without impact to the operation of its distribution system or reliability of supply. The ultimate resolution of the arrangements between Energen Resources and Enron as well as Alagasco and Enron cannot be determined at this time.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ENERGEN CORPORATION
--------------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
BALANCE AT BEGINNING OF YEAR $ 6,681 $ 5,598 $ 3,547
--------------------------------------------------------------------------------------------------------------------------
Additions:
Charged to income 7,953 4,287 6,121
Recoveries and adjustments (901) (276) (244)
--------------------------------------------------------------------------------------------------------------------------
Net additions 7,052 4,011 5,877
--------------------------------------------------------------------------------------------------------------------------
Less uncollectible accounts written off (3,702) (2,928) (3,826)
--------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 10,031 $ 6,681 $ 5,598
--------------------------------------------------------------------------------------------------------------------------
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ALABAMA GAS CORPORATION
--------------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
BALANCE AT BEGINNING OF YEAR $ 5,800 $ 4,532 $ 3,482
--------------------------------------------------------------------------------------------------------------------------
Additions:
Charged to income 7,799 4,275 5,105
Recoveries and adjustments (452) (276) (244)
--------------------------------------------------------------------------------------------------------------------------
Net additions 7,347 3,999 4,861
--------------------------------------------------------------------------------------------------------------------------
Less uncollectible accounts written off (3,647) (2,731) (3,811)
--------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 9,500 $ 5,800 $ 4,532
--------------------------------------------------------------------------------------------------------------------------
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Information regarding the executive officers of Energen is included in Part I. The other information required by Item 10 is incorporated herein by reference from Energen's definitive proxy statement for the Annual Meeting of Shareholders to be held January 30, 2002. The proxy statement will be filed on or about December 20, 2001.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding executive compensation is incorporated herein by reference from Energen's definitive proxy statement for the Annual Meeting of Shareholders to be held January 30, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The information regarding the security ownership of the beneficial owners of more than five percent of Energen's common stock is incorporated herein by reference from Energen's definitive proxy statement for the Annual Meeting of Shareholders to be held January 30, 2002.
B. SECURITY OWNERSHIP OF MANAGEMENT
The information regarding the security ownership of management is incorporated herein by reference from Energen's definitive proxy statement for the Annual Meeting of Shareholders to be held January 30, 2002.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information regarding certain relationships and related transactions is incorporated herein by reference from Energen's definitive proxy statement for the Annual Meeting of Shareholders to be held January 30, 2002.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. DOCUMENTS FILED AS PART OF THIS REPORT
(1) FINANCIAL STATEMENTS The consolidated financial statements of Energen and the financial statements of Alagasco are included in Item 8 of this Form 10-K.
(2) FINANCIAL STATEMENT SCHEDULES The financial statement schedules are included in Item 8 of this Form 10-K.
(3) EXHIBITS The exhibits listed on the accompanying Index to Exhibits are filed as part of this Form 10-K.
B. REPORTS ON FORM 8-K
Form 8-K dated December 13, 2000, reporting Energen's Consolidated Ratios of Earnings to Fixed Charges for the years ended September 30, 2000, 1999, 1998, 1997 and 1996.
Form 8-K dated August 30, 2001, reporting two series of notes offered by Alagasco. The aggregate principal amount of notes offered was $75 million; $40 million of 6.25% Notes due September 1, 2016 and $35 million of 6.75% Notes due September 1, 2031.
ENERGEN CORPORATION
ALABAMA GAS CORPORATION
INDEX TO EXHIBITS
ITEM 14(A)(3)
Exhibit
Number Description
------- -----------
*3(a) Restated Certificate of Incorporation of Energen Corporation (composite, as amended February 2, 1998) which was
filed as Exhibit 3(a) to Energen's Annual Report on Form 10-K for the year ended September 30, 1998
(File No. 1-7810)
*3(b) Articles of Amendment to Restated Certificate of Incorporation of Energen, designating Series 1998 Junior
Participating Preferred Stock (July 27, 1998) which was filed as Exhibit 4(b) to Energen's Post Effective
Amendment No. 1 to Registration Statement on Form S-3 (Registration No. 333-00395)
*3(c) Bylaws of Energen Corporation (as amended through July 22, 1998) which was filed as Exhibit 3(c) to
Energen's Annual Report on Form 10-K for the year ended September 30, 1998 (File No. 1-7810)
*3(d) Articles of Amendment and Restatement of the Articles of Incorporation of Alabama Gas Corporation,
dated September 27, 1995, which was filed as Exhibit 3(i) to the Registrant's Annual Report on Form 10-K
for the year ended September 30, 1995 (file No. 1-7810)
*3(e) Bylaws of Alabama Gas Corporation (as amended through July 22, 1998) which was filed as Exhibit 3(e) to
Energen's Annual Report on Form 10-K for the year ended September 30, 1998 (File No. 1-7810)
*4(a) Rights Agreement, dated as of July 27, 1998, between Energen Corporation and First Chicago Trust Company of
New York, Rights Agent, which was filed as Exhibit 1 to Energen's Registration Statement on Form 8-A,
dated July 10, 1998 (File No. 1-7810)
*4(b) Indenture, dated as of March 1, 1993, between Energen Corporation and Boatmen's Trust Company, Trustee,
which was filed as Exhibit 4 to Energen's Registration Statement on Form S-3 (Registration No. 33-58572)
*4(c) First Supplemental Indenture, dated as of September 5, 1997, between Energen Corporation and The Bank
of New York, Trustee, to Indenture dated as of March 1, 1993, which was filed as Exhibit 4(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997 (File No. 1-7810)
*4(d) Form of Indenture between Energen Corporation and The Bank of New York, as Trustee, which was dated as
of September 1, 1996 (the "Energen 1996 Indenture"), and which was filed as Exhibit 4(i) to the
Registrant's Registration Statement on Form S-3 (Registration No. 333-11239)
4(d)(i) Officers' Certificate, dated September 13, 1996, pursuant to Section 301 of the Energen 1996 Indenture
setting forth the terms of the Series A Notes
4(d)(ii) Officers' Certificate, dated July 8, 1997, pursuant to Section 301 of the Energen 1996 Indenture
amending the terms of the Series A Notes
4(d)(iii) Amended and Restated Officers' Certificate, dated February 27, 1998, setting forth the terms of the
Series B Notes
|
*4(e) Indenture dated as of November 1, 1993, between Alabama Gas Corporation and NationsBank of Georgia, National
Association, Trustee, ("Alagasco 1993 Indenture"), which was filed as Exhibit 4(k) to Alabama Gas'
Registration Statement on Form S-3 (Registration No. 33-70466)
*4(e)(i) Officers' Certificate, dated August 30, 2001, pursuant to Section 301 of the Alagasco 1993 Indenture setting
forth the terms of the 6.25 percent Notes due September 1, 2016, which was filed as Exhibit 4.01 to
Alabama Gas' Current Report on Form 8-K filed September 27, 2001
*4(e)(ii) Officers' Certificate, dated August 30, 2001, pursuant to Section 301 of the Alagasco 1993 Indenture
setting forth the terms of the 6.75 percent Notes due September 1, 2031, which was filed as Exhibit 4.02
to Alabama Gas' Current Report on Form 8-K filed September 27, 2001
*10(a) Form of Service Agreement Under Rate Schedule CSS (No. S10710), between Southern Natural Gas
Company and Alabama Gas Corporation which was filed as Exhibit 10(a) to Energen's Annual Report on
Form 10-K for the year ended September 30, 1993 (File No. 1-7810)
*10(b) Form of Service Agreement Under Rate Schedule FT-NN (No. 866941), between Southern Natural Gas
Company and Alabama Gas Corporation which was filed as Exhibit 10(c) to Energen's Annual Report on
Form 10-K for the year ended September 30, 1993 (File No. 1-7810)
*10(c) Form of Executive Retirement Supplement Agreement between Energen Corporation and it's executive
officers (as revised October 2000) which was filed as Exhibit 10(c) to Energen's Annual Report
on Form 10-K for the year ended September 30, 2000 (File No. 1-7810)
*10(d) Form of Addendum to Executive Retirement Supplement Agreement between Energen Corporation and it's
executive officers which was filed as Exhibit 10(d) to Energen's Annual Report on Form 10-K for the year
ended September 30, 2000 (File No. 1-7810)
*10(e) Form of Severance Compensation Agreement between Energen Corporation and it's executive officers which
was filed as Exhibit 10(d) to Energen's Annual Report on Form 10-K for the year ended September 30,
1999 (File No. 1-7810)
*10(f) Energen Corporation 1988 Stock Option Plan (as amended November 25, 1997) which was filed as Exhibit 10(e) to
Energen's Annual Report on Form 10-K for the year ended September 30, 1998 (File No. 1-7810)
*10(g) Energen Corporation 1992 Long-Range Performance Share Plan (as amended effective October 1, 1999) which
was filed as Exhibit 10(f) to Energen's Annual Report on Form 10-K for the year ended September 30,
1999 (File No. 1-7810)
10(h) Energen Corporation 1997 Stock Incentive Plan (as amended effective October 1, 2001)
*10(i) Energen Corporation 1997 Deferred Compensation Plan (as amended effective October 1, 1999) which was
filed as Exhibit 10(h) to Energen's Annual Report on Form 10-K for the year ended September 30, 1999
(File No. 1-7810)
*10(j) Energen Corporation 1992 Directors Stock Plan (as amended April 25, 1997) which was filed as Exhibit 10(i)
to Energen's Annual Report on Form 10-K for the year ended September 30, 1998 (File No. 1-7810)
10(k) Energen Corporation Annual Incentive Compensation Plan, as amended effective October 1, 2001
|
*10(l) Energen Corporation Officer Split Dollar Life Insurance Plan, effective October 1, 1999 which was filed
as Exhibit 10(l) to Energen's Annual Report on Form 10-K for the year ended September 30, 2000
(File No. 1-7810)
*10(m) Form of Split Dollar Life Insurance Plan Agreement under Energen Corporation Officer Split Dollar Life
Insurance Plan which was filed as Exhibit 10(m) to Energen's Annual Report on Form 10-K for the year
ended September 30, 2000 (File No. 1-7810)
*10(n) Officer Split Dollar Tax Matters Agreement which was filed as Exhibit 10(n) to Energen's Annual Report on
Form 10-K for the year ended September 30, 2000 (File No. 1-7810)
21 Subsidiaries of Energen Corporation
23 Consent of Independent Accountants (Energen Corporation)
|
* Incorporated by reference
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
ENERGEN CORPORATION
(Registrant)
ALABAMA GAS CORPORATION
(Registrant)
December 5, 2001 By /s/ Wm. Michael Warren, Jr.
-------------------------- -------------------------------
Wm. Michael Warren, Jr.
Chairman, President and Chief
Executive Officer of Energen,
Chairman and Chief Executive
Officer of Alabama Gas Corporation
|
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrants and in the capacities and on the dates indicated:
December 5, 2001 By /s/ Wm. Michael Warren, Jr.
--------------------- ----------------------------------
Wm. Michael Warren, Jr.
Chairman, President and Chief
Executive Officer of Energen,
Chairman and Chief Executive
Officer of Alabama Gas Corporation
December 5, 2001 By /s/ Geoffrey C. Ketcham
--------------------- ----------------------------------
Geoffrey C. Ketcham
Executive Vice President, Chief
Financial Officer and Treasurer of
Energen and Alabama Gas Corporation
December 5, 2001 By /s/ Grace B. Carr
--------------------- ----------------------------------
Grace B. Carr
Vice President and
Controller of Energen
December 5, 2001 By /s/ Paula H. Rushing
--------------------- ----------------------------------
Paula H. Rushing
Vice President-Finance of Alabama
Gas Corporation
December 5, 2001 By /s/ J. Mason Davis, Jr.
--------------------- ----------------------------------
J. Mason Davis, Jr.
Director
December 5, 2001 By /s/ Julian W. Banton
--------------------- ----------------------------------
Julian W. Banton
Director
December 5, 2001 By /s/ James S. M. French
--------------------- ----------------------------------
James S. M. French
Director
December 5, 2001 By /s/ T. Michael Goodrich
--------------------- ----------------------------------
T. Michael Goodrich
Director
December 5, 2001 By /s/ Drayton Nabers, Jr.
--------------------- ----------------------------------
Drayton Nabers, Jr.
Director
|
EXHIBIT 4(d)(i)
OFFICERS' CERTIFICATE
PURSUANT TO SECTION 301 OF THE INDENTURE
We, the undersigned Wm. M. Warren, Jr. and G. C. Ketcham, President and Executive Vice President, Chief Financial Officer and Treasurer, respectively, of Energen Corporation (the "Company"), in accordance with Section 301 of the Indenture, dated as of September 1, 1996 (the "Indenture"), of the Company to The Bank of New York, as trustee (the "Trustee"), and pursuant to the Board Resolution adopted by the Company's Board of Directors (capitalized terms used herein and not defined herein have the meaning specified in the Indenture) as of August 20, 1996, do hereby establish a series of debt securities with the following terms and characteristics (the lettered clauses set forth below corresponding to the lettered subsections of Section 301 of the Indenture):
(a) the title of the securities of such series shall be "Medium-Term Notes, Series A" (the "Notes");
(b) the aggregate principal amount of Notes which may currently be authenticated and delivered under the Indenture shall be limited to $40,000,000 (unless increased by further Board Resolution up to an aggregate of $125,000,000), except as contemplated in Section 303 of the Indenture;
(c) interest on the Notes shall be payable to the Person or Persons in whose names the Notes are registered at the close of business on the Regular Record Date (as hereinafter defined) for such interest, except as otherwise expressly provided in the forms, attached hereto as Exhibit A and hereby authorized and approved, of Fixed Rate Note (as hereinafter defined) and Floating Rate Note (as hereinafter defined);
(d) the date or dates on which the principal of the Notes shall be payable shall be determined at the time of sale of the Notes, or any Tranche thereof, by the proper officers of the Company and communicated to the Trustee by Company Order, or by the proper officers of the Company pursuant to the Administrative Procedures (the "Administrative Procedures") attached as Exhibit A to the Selling Agency Agreement dated September 13, 1996 among the Company, Salomon Brothers Inc, Smith Barney Inc. and A.G. Edwards & Sons, Inc., as Agents; provided, however, that in no event shall any Note have a term less than nine months;
(e) the Notes, or any Tranche thereof, may bear interest, at a fixed rate (any such Note being hereinafter called a "Fixed Rate Note") or at a floating rate (any such Note being hereinafter called a "Floating Rate Note"), or they may bear no interest, all as determined by the proper officers of the Company as follows: there shall be determined by the proper officers of the Company and communicated to the Trustee by Company Order, or by the proper officers of the Company pursuant to the Administrative Procedures, at the time of sale of the Notes or any Tranche thereof, (1) in the case of Fixed Rate Notes, the interest rate or rates (including the interest rate on overdue principal, premium or interest, if any) applicable to such Fixed Rate Notes, or Tranche thereof, and (2) in the case of Floating Rate Notes, the Initial Interest Rate, the
Base Rate (which shall be the Commercial Paper Rate, LIBOR, the Treasury Rate or any other Base Rate determined at the time of sale of the Notes or Tranche thereof), the Maximum Interest Rate, if any, the Minimum Interest Rate, if any, the Interest Payment Period, the Interest Reset Period, the Interest Reset Dates, the Rate Determination Dates, the Index Maturity, the Spread, if any, the Spread Multiplier, if any (each of such terms being referred to in the form of Floating Rate Note attached hereto), and the interest rate on overdue principal, premium or interest, if any, applicable, to such Floating Rate Notes or Tranche thereof; interest shall accrue on any Note from the original Issue Date specified in such Note or the most recent date to which interest has been paid or duly provided for, or, if the authentication date of the Note is after any Regular Record Date but before the next succeeding Interest Payment Date, from the next succeeding Interest Payment Date; the Interest Payment Dates for the Fixed Rate Notes shall be April 1 and October 1, and the Regular Record Dates with respect to such Interest Payment Dates shall be March 15 and September 15, respectively (whether or not a Business Day); the Interest Payment Dates on Floating Rate Notes shall be determined at the time of sale of the Notes or Tranche thereof by the proper officers of the Company and communicated to the Trustee by Company Order, or determined by the proper officers of the Company pursuant to the Administrative Procedures, and the Regular Record Date with respect to each such Interest Payment Date shall be the date 15 calendar days immediately preceding such Interest Payment Date (whether or not a Business Day); and interest on Floating Rate Notes which employ the Treasury Rate as the Base Rate shall be computed on the basis of the actual number of days in the year;
(f) the corporate trust office of The Bank of New York in the City of New York, State of New York shall be the office or agency of the Company at which the principal of and premium, if any, and interest, if any, on the Notes shall be payable, at which Notes may be surrendered for registration of transfer and exchange and at which notices and demands to or upon the Company with respect of the Notes and the Indenture may be served;
(g) the Notes, or any Tranche thereof, shall be redeemable in whole or in part, at the option of the Company as and to the extent determined at the time of sale of the Notes or any Tranche thereof by the proper officers of the Company and communicated to the Trustee by Company Order, or determined by the proper officers of the Company pursuant to the Administrative Procedures;
(h) the obligation, if any, of the Company to redeem or purchase the Notes or any Tranche thereof pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which, and the terms and conditions upon which, such Notes or Tranche thereof shall be redeemed or purchased, in whole or in part, pursuant to such obligation shall be determined at the time of sale of the Notes or Tranche thereof by the proper officers of the Company and communicated to the Trustee by Company Order, or determined by the proper officers of the Company pursuant to the Administrative Procedures;
(i) Notes issued shall be issued in denominations of $1,000 or any amount in excess thereof that is an integral multiple of $1,000; provided, however, that Notes issued in global form shall not be issued in principal amounts in excess of $125,000,000;
(j) the Notes may be issued in whole or in part in global
form and the depositary for Notes issued in global form shall be The Depository
Trust Company; interests in Notes issued in global form may not be exchanged, in
whole or in part, for the individual securities represented thereby, except that
(l) if the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed, the Company will issue
individual certificated notes in exchange for global notes and (2) the Company
may at any time and in its sole discretion determine not to have any particular
Tranche of Notes represented by one or more global notes and, in such event,
will issue individual certificated notes in exchange for the corresponding
tranche of global notes;
(k) not applicable;
(l) not applicable;
(m) not applicable;
(n) see clause (e) with respect to the interest rate or rates on Floating Rate Notes;
(o) the extent to which the Notes, or any Tranche thereof, shall be specified on the face thereof to be Original Issue Discount Securities shall be determined at the time of sale of such Notes or Tranche thereof by the proper officers of the Company and communicated to the Trustee by Company Order, or determined by the proper officers of the Company pursuant to the Administrative Procedures, and the portion of the principal amount of any such Note issued as an Original Issue Discount Security which shall be payable upon a declaration or acceleration of Maturity thereof pursuant to section 802 of the Indenture shall be the Amortized Face Amount (as defined in the forms of Notes attached hereto) of such Note as of the date of such acceleration;
(p) not applicable; provided, however, that the Company reserves the right to make, by one or more Officers' Certificates supplemental to this Officers' Certificate any additional covenants of the Company for the benefit of the Holders of the Notes or any Tranche thereof, or any additional Events of Default with respect to all or any series of securities Outstanding;
(q) not applicable;
(r) not applicable;
(s) no service charge shall be made for the registration of transfer or exchange of Securities; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the exchange or transfer;
(t) in the case of any Fixed Rate Note, if any Interest Payment Date, any Redemption Date or the Stated Maturity Date (as specified in such Fixed Rate Note) shall not be a Business Day (as defined in the form of Fixed Rate Note attached hereto), payment of amounts due thereon on such date may be made on the next succeeding Business Day (as defined in the
form of Fixed Rate Note attached hereto), and if such payment is made or duly provided for on such Business Day, no interest shall accrue on such amounts for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to such Business Day; in the case of any Floating Rate Note, if any Interest Payment Date (as specified in such Floating Rate Note) would otherwise be a day that shall not be a Business Day (as defined in the form of Floating Rate Note attached hereto) each Interest Payment Date will be postponed until the next succeeding Business Day (as defined in the form of Floating Rate Note attached hereto), except that, if the Base Rate specified in such Floating Rate Note is LIBOR and such next succeeding Business Day is in the next succeeding calendar month, such Interest Payment Date shall be the immediately preceding Business Day (as defined in the form of Floating Rate Note attached hereto). If the Stated Maturity or Redemption Date of a Floating Rate Note is not a Business Day, payments of principal and interest due on such Floating Rate Note may be made on the next succeeding Business Day, and no interest shall accrue on such amounts for the period from and after such Stated Maturity Date or Redemption Date, as the case may be, to such next succeeding Business Day; and
(u) the Notes shall be substantially in the forms of Fixed Rate Note and Floating Rate Note attached hereto and hereby authorized and approved and shall have such further terms as set forth in such forms.
IN WITNESS WHEREOF, we have hereunto signed our names this 13th day of September, 1996.
President
EXHIBIT 4(d)(ii)
OFFICERS' CERTIFICATE
PURSUANT TO SECTION 301 OF THE INDENTURE
We, the undersigned Wm. M. Warren, Jr. and G. C. Ketcham,
President and Executive Vice President, Chief Financial Officer and Treasurer,
respectively, of Energen Corporation (the "Company"), in accordance with Section
301 of the Indenture, dated as of September 1, 1996 (the "Indenture"), of the
Company to The Bank of New York, as trustee (the "Trustee"), and pursuant to the
Board Resolution adopted by the Company's Board of Directors (capitalized terms
used herein and not defined herein have the meaning specified in the Indenture)
as of August 20, 1996, do hereby amend the terms and characteristics of the
Medium-Term Notes, Series A established pursuant to our Officers' Certificate
dated September 13, 1996 (the "Certificate"), to increase the aggregate
principal amount of the Notes which may currently be authenticated and delivered
under the indenture as set forth in clause (b) of the Certificate from the
$40,000,000 previously authorized to $125,000,000, except as contemplated in
Section 303 of the Indenture.
Except as modified and amended herein, the Certificate remains in full force and effect.
IN WITNESS WHEREOF, we have hereunto signed our names this 8th day of July, 1997.
President
G. C. Ketcham Executive Vice President, Chief Financial Officer and Treasurer
EXHIBIT 4(d)(iii)
AMENDED AND RESTATED
OFFICERS' CERTIFICATE
PURSUANT TO SECTION 301 OF THE INDENTURE
We, the undersigned Wm. M. Warren, Jr. and G. C. Ketcham,
Chairman of the Board, President and Chief Executive Officer and Executive Vice
President, Chief Financial Officer and Treasurer, respectively, of Energen
Corporation (the "Company"), in accordance with Section 301 of the Indenture,
dated as of September 1, 1996 (the "Indenture"), of the Company to The Bank of
New York, as trustee (the "Trustee"), and pursuant to the Board Resolution
adopted by the Company's Board of Directors (capitalized terms used herein and
not defined herein have the meaning specified in the Indenture) as of November
25, 1997, do hereby establish a series of debt securities with the following
terms and characteristics and, by delivering this certificate pursuant to
Section 301 of the Indenture, do hereby amend and restate in entirety, and
supersede, that certain certificate delivered by the Company to the Trustee on
January 29, 1998 pursuant to Section 301 of the Indenture (the lettered clauses
set forth below corresponding to the lettered subsections of Section 301 of the
Indenture):
(a) the title of the securities of such series shall be "Medium-Term Notes, Series B" (the "Notes");
(b) the aggregate principal amount of Notes which may currently be authenticated and delivered under the Indenture shall be limited to $250,000,000, except as contemplated in Section 303 of the Indenture;
(c) interest on the Notes shall be payable to the Person or Persons in whose names the Notes are registered at the close of business on the Regular Record Date (as hereinafter defined) for such interest, except as otherwise expressly provided in the forms attached hereto as Exhibit A-1, Exhibit A-2, and Exhibit A-3, respectively, and hereby authorized and approved, of Selling Agency Fixed Rate Note (as hereinafter defined), Underwritten Fixed Rate Note (as hereinafter defined) and Floating Rate Note (as hereinafter defined);
(d) the date or dates on which the principal of the Notes shall be payable shall be determined at the time of sale of the Notes, or any Tranche thereof, by the proper officers of the Company and communicated to the Trustee by Company Order, or by the proper officers of the Company pursuant to the Administrative Procedures (the "Administrative Procedures") attached as Exhibit A to the Selling Agency Agreement dated January 29, 1998 (the "Selling Agency Agreement") among the Company, Salomon Brothers Inc, Morgan Stanley & Co. Incorporated, A.G. Edwards & Sons, Inc., and Morgan Keegan & Company, Inc. as Agents; provided, however, that in no event shall any Note have a term less than nine months;
(e) the Notes, or any Tranche thereof, may bear interest, at a fixed rate (any such Note being hereinafter called a "Fixed Rate Note" and such Fixed Rate Notes may be offered pursuant to Paragraph 2(a) of the Selling Agency Agreement (the "Selling Agency Fixed
Rate Notes") or pursuant to Paragraph 2(b) of the Selling Agency Agreement (the
"Underwritten Fixed Rate Notes")) or at a floating rate (any such Note being
hereinafter called a "Floating Rate Note"), or they may bear no interest, all as
determined by the proper officers of the Company as follows: there shall be
determined by the proper officers of the Company and communicated to the Trustee
by Company Order, or by the proper officers of the Company pursuant to the
Administrative Procedures, at the time of sale of the Notes or any Tranche
thereof, (1) in the case of Fixed Rate Notes, the interest rate or rates
(including the interest rate on overdue principal, premium or interest, if any)
applicable to such Fixed Rate Notes, or Tranche thereof, and (2) in the case of
Floating Rate Notes, the Initial Interest Rate, the Base Rate (which shall be
the Commercial Paper Rate, LIBOR, the Treasury Rate or any other Base Rate
determined at the time of sale of the Notes or Tranche thereof), the Maximum
Interest Rate, if any, the Minimum Interest Rate, if any, the Interest Payment
Period, the Interest Reset Period, the Interest Reset Dates, the Rate
Determination Dates, the Index Maturity, the Spread, if any, the Spread
Multiplier, if any (each of such terms being referred to in the form of Floating
Rate Note attached hereto), and the interest rate on overdue principal, premium
or interest, if any, applicable, to such Floating Rate Notes or Tranche thereof;
interest shall accrue on any Note from the original Issue Date specified in such
Note or the most recent date to which interest has been paid or duly provided
for, or, if the authentication date of the Note is after any Regular Record Date
but before the next succeeding Interest Payment Date, from the next succeeding
Interest Payment Date; the Interest Payment Dates for the Fixed Rate Notes shall
be February 1 and August 1, unless otherwise specified by the proper officers of
the Company and communicated to the Trustee by Company Order, and the Regular
Record Dates with respect to such Interest Payment Dates shall be January 15 and
July 15, respectively (whether or not a Business Day), unless otherwise
specified by the proper officers of the Company and communicated to the Trustee
by Company Order; the Interest Payment Dates on Floating Rate Notes shall be
determined at the time of sale of the Notes or Tranche thereof by the proper
officers of the Company and communicated to the Trustee by Company Order, or
determined by the proper officers of the Company pursuant to the Administrative
Procedures, and the Regular Record Date with respect to each such Interest
Payment Date shall be the date 15 calendar days immediately preceding such
Interest Payment Date (whether or not a Business Day); and interest on Floating
Rate Notes which employ the Treasury Rate as the Base Rate shall be computed on
the basis of the actual number of days in the year;
(f) the corporate trust office of The Bank of New York in the City of New York, State of New York shall be the office or agency of the Company at which the principal of and premium, if any, and interest, if any, on the Notes shall be payable, at which Notes may be surrendered for registration of transfer and exchange and at which notices and demands to or upon the Company with respect of the Notes and the Indenture may be served;
(g) the Notes, or any Tranche thereof, shall be redeemable in whole or in part, at the option of the Company as and to the extent determined at the time of sale of the Notes or any Tranche thereof by the proper officers of the Company and communicated to the Trustee by Company Order, or determined by the proper officers of the Company pursuant to the Administrative Procedures;
(h) the obligation, if any, of the Company to redeem or purchase the Notes or any Tranche thereof pursuant to any sinking fund or analogous provisions or at the option of a
Holder thereof and the period or periods within which, the price or prices at which, and the terms and conditions upon which, such Notes or Tranche thereof shall be redeemed or purchased, in whole or in part, pursuant to such obligation shall be determined at the time of sale of the Notes or Tranche thereof by the proper officers of the Company and communicated to the Trustee by Company Order, or determined by the proper officers of the Company pursuant to the Administrative Procedures;
(i) Notes issued shall be issued in denominations of $1,000 or any amount in excess thereof that is an integral multiple of $1,000; provided, however, that Notes issued in global form shall not be issued in principal amounts in excess of $250,000,000;
(j) the Notes may be issued in whole or in part in global
form and the depositary for Notes issued in global form shall be The Depository
Trust Company; interests in Notes issued in global form may not be exchanged, in
whole or in part, for the individual securities represented thereby, except that
(l) if the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed, the Company will issue
individual certificated notes in exchange for global notes and (2) the Company
may at any time and in its sole discretion determine not to have any particular
Tranche of Notes represented by one or more global notes and, in such event,
will issue individual certificated notes in exchange for the corresponding
tranche of global notes;
(k) not applicable;
(l) not applicable;
(m) not applicable;
(n) see clause (e) with respect to the interest rate or rates on Floating Rate Notes;
(o) the extent to which the Notes, or any Tranche thereof, shall be specified on the face thereof to be Original Issue Discount Securities shall be determined at the time of sale of such Notes or Tranche thereof by the proper officers of the Company and communicated to the Trustee by Company Order, or determined by the proper officers of the Company pursuant to the Administrative Procedures, and the portion of the principal amount of any such Note issued as an Original Issue Discount Security which shall be payable upon a declaration or acceleration of Maturity thereof pursuant to section 802 of the Indenture shall be the Amortized Face Amount (as defined in the forms of Notes attached hereto) of such Note as of the date of such acceleration;
(p) not applicable; provided, however, that the Company reserves the right to make, by one or more Officers' Certificates supplemental to this Officers' Certificate any additional covenants of the Company for the benefit of the Holders of the Notes or any Tranche thereof, or any additional Events of Default with respect to all or any series of securities Outstanding;
(q) not applicable;
(r) not applicable;
(s) no service charge shall be made for the registration of transfer or exchange of Securities; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the exchange or transfer;
(t) in the case of any Fixed Rate Note, if any Interest Payment Date, any Redemption Date or the Stated Maturity Date (as specified in such Fixed Rate Note) shall not be a Business Day (as defined in the forms of Selling Agency Fixed Rate Note and Underwritten Fixed Rate Note attached hereto), payment of amounts due thereon on such date may be made on the next succeeding Business Day (as defined in the forms of Selling Agency Fixed Rate Note and Underwritten Fixed Rate Note attached hereto), and if such payment is made or duly provided for on such Business Day, no interest shall accrue on such amounts for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to such Business Day; in the case of any Floating Rate Note, if any Interest Payment Date (as specified in such Floating Rate Note) would otherwise be a day that shall not be a Business Day (as defined in the form of Floating Rate Note attached hereto) each Interest Payment Date will be postponed until the next succeeding Business Day (as defined in the form of Floating Rate Note attached hereto), except that, if the Base Rate specified in such Floating Rate Note is LIBOR and such next succeeding Business Day is in the next succeeding calendar month, such Interest Payment Date shall be the immediately preceding Business Day (as defined in the form of Floating Rate Note attached hereto). If the Stated Maturity or Redemption Date of a Floating Rate Note is not a Business Day, payments of principal and interest due on such Floating Rate Note may be made on the next succeeding Business Day, and no interest shall accrue on such amounts for the period from and after such Stated Maturity Date or Redemption Date, as the case may be, to such next succeeding Business Day; and
(u) the Notes shall be substantially in the forms of Selling Agency Fixed Rate Note, Underwritten Fixed Rate Note and Floating Rate Note attached hereto and hereby authorized and approved and shall have such further terms as set forth in such forms.
IN WITNESS WHEREOF, we have hereunto signed our names this 27th day of February, 1998.
Chairman of the Board,
President and Chief Executive Officer
EXHIBIT 10(h)
ENERGEN CORPORATION
1997 STOCK INCENTIVE PLAN
(As Amended Effective October 1, 2001)
The purpose of this Plan is to provide a means whereby Energen Corporation may, through the use of stock and stock related compensation, attract and retain persons of ability as employees and motivate such employees to exert their best efforts on behalf of Energen Corporation and its subsidiaries.
1. DEFINITIONS. As used in the Plan, the following terms have meanings indicated:
"Award" means any grant or award under the Plan of Incentive Stock Options, Nonqualified Stock Options, Restricted Stock and/or Performance Shares granted under the Plan.
"Award Period" means the 4-year period (Energen fiscal years) commencing with the first day of the fiscal year in which the applicable Performance Share Award is granted, except as otherwise determined by the Committee at the time of grant and subject to the other provisions of this Plan.
"Board" means the Board of Directors of Energen.
"Cause" means any of the following:
(1) The willful and continued failure by a Participant to substantially perform such Participant's duties with Energen or a Subsidiary (other than any such failure resulting from such Participant's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Participant specifically identifying the manner in which such Participant has not substantially performed such Participant's duties.
(2) The engaging by a Participant in willful, reckless or grossly negligent misconduct which is demonstrably injurious to Energen or a Subsidiary monetarily or otherwise; or
(3) The conviction of a Participant of a felony.
"Change in Control" means: the occurrence of any one or more of the following:
(1) The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule
13(d)-3 promulgated under the Exchange Act) of 25% or more of either (i) the
then outstanding shares of common stock of Energen (the "Outstanding Common
Stock") or (ii) the combined voting power of the then outstanding voting
securities of Energen entitled to vote generally in the election of directors
(the "Outstanding Voting Securities"); provided, however, that for purposes of
this subsection (1) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by Energen or any corporation controlled by
Energen shall not constitute a Change in Control;
(2) Individuals who, as of October 1, 1999, constitute the Board of Directors of Energen (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of Energen (the "Board of Directors"); provided, however that any individual becoming a director subsequent to such date whose election, or nomination for election by Energen's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors;
(3) Consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets, of Energen (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Energen or all or substantially all of Energen's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Energen or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination;
(4) Any transaction or series of transactions which is expressly designated by resolution of the Board of Directors to constitute a Change in Control for purposes of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Committee" means the Officers Review Committee of the Board or such other Committee of two or more directors as may be determined by the Board.
"Energen" means Energen Corporation and any successor corporation by merger or other reorganization.
"Employee" means any employee of one or more of Energen and the Subsidiaries.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exercise Date" means the date on which a notice of option exercise is delivered to Energen pursuant to Section 6.2(c) or a notice of option cancellation is delivered to Energen pursuant to Section 6.2(i).
"Expiration Date" means the last day on which an option issued under the Plan may be exercised, as such date may be extended pursuant to Section 6.2(a).
"Fair Market Value" means, with respect to a share of Stock, the closing price of the Stock on the New York Stock Exchange (or such other exchange or system on which the Stock then trades or is quoted) or, if there is no trading of the Stock on the relevant date, then the closing price on the most recent trading date preceding the relevant date. With respect to other consideration, the term Fair Market Value means fair market value as may be reasonably determined by the Committee.
"Incentive Stock Options" means options granted under the Plan to purchase Stock which at the time of grant qualify as "incentive stock options" within the meaning of Section 422 of the Code.
"Independent Auditor" means the firm of certified public accountants which at the time of the Change in Control had been most recently engaged by Energen to render an opinion on Energen's consolidated financial statements, or any other firm of certified public accountants mutually agreeable to Energen and at least eighty percent of the Participants holding Awards outstanding as of the date of the Change in Control.
"Interim Period" means a 1, 2 or 3 year period within a Performance Share Award Period for which the Committee determines that there shall be Interim Periods.
"Measurement Value" means the average of the daily closing prices for a share of Stock for the 20 trading days ending on the fifth business day prior to the date of payment of Performance Shares for an Award Period or an Interim Period, as the case may be, on the Composite Tape for the New York Stock Exchange -- Listed Stocks, or, if the stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on which the stock is listed, or, if the stock is not listed on any such Exchange, the average of the daily closing bid quotations with respect to a share of the stock for such 20 trading days on the National Association of Securities Dealers, Inc., Automated Quotations System or any system then in use, or, if no such quotations are available, the fair market value of a share of Stock as determined by a majority of the Board of Directors; provided, however that if a Change in Control shall have occurred, then if no such quotations are available, such determination shall be made by a majority of the Incumbent Board (as defined in the Change in Control definition above).
"Nonqualified Stock Options" means options granted under the Plan to purchase Stock which are not Incentive Stock Options.
"Participant" means an Employee who is selected by the Committee to receive an Award.
"Performance Measures" has the meaning set forth in Section 10.
"Performance Share" means the value equivalent of one share of Stock.
"Plan" means this Energen Corporation 1997 Stock Incentive Plan.
"Restricted Stock" means Stock granted to a Participant under Section 7 of the Plan with respect to which the applicable Restrictions have not lapsed or been removed.
"Restrictions" means the transfer and other restrictions set forth in
Section 7.2(a).
"Stock" means the common stock, par value $.01 per share, of Energen as such stock may be reclassified, converted or exchanged by reorganization, merger or otherwise.
"Subsidiary" means any corporation, the majority of the outstanding voting stock of which is owned, directly or indirectly by Energen Corporation.
"Ten Percent Stockholder" means an individual who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of Energen.
2. SHARE LIMITATIONS.
2.1 SHARES SUBJECT TO THE PLAN. Subject to adjustment in accordance with Section 3, an aggregate of 1,300,000 shares of Stock are available for issuance (including shares transferred from treasury) under the Plan (reflects the original 650,000-share authorization adjusted for the 1998 stock split). Shares of Stock allocable to an Award or portion of an Award that is canceled by forfeiture, expiration or for any other reason (excepting pursuant to a stock appreciation right election under Section 6.2(i)) shall again be available for additional Awards. If any option granted under the Plan shall be canceled as to any shares of Stock pursuant to Section 6.2(i) (stock appreciation rights), then such shares of Stock shall not be available for the grant of another Award.
2.2 INDIVIDUAL LIMITATION. Subject to adjustment in accordance with Section 3, the maximum aggregate number of shares of Stock represented by all Awards of options and Performance Shares granted under the Plan to any one Participant shall not exceed 300,000 (reflects the original 150,000-share limitation adjusted for the 1998 stock split).
3. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK. In the event of any change in the Stock by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or rights offering to purchase Stock at a price substantially below fair market value, or of any similar change affecting the Stock, the number and kind of shares which thereafter may be available for issuance under the Plan, the terms of outstanding Awards shall be appropriately adjusted consistent with such change in such manner as the Committee may deem equitable to prevent dilution or enlargement of the rights granted to, or available for, Participants in the Plan. If the adjustment would result in fractional shares with respect to an Award, then the Committee may make such further adjustment (including, without limitation, the use of consideration other than Stock or rounding to the nearest whole number of shares) as the Committee shall deem appropriate to avoid the issuance of fractional shares.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Committee. No member of the Committee shall be eligible to participate in the Plan while serving as a member of the Committee. Subject to the provisions of the Plan, the Committee shall have the exclusive authority to select the Employees who are to be Participants in the Plan, to determine the Award to be made to each Participant, and to determine the conditions subject to which Awards will become payable under the Plan. The Committee shall have full power to administer and interpret the Plan and to adopt such rules and regulations consistent with the terms of the Plan as the Committee deems necessary or advisable in order to carry out the provisions of the Plan. The Committee's interpretation and construction of the Plan and of any conditions applicable to Awards shall be conclusive and binding on all persons, including Energen and all Participants. Any action which can be taken, or authority which can be exercised, by the Committee with respect to the Plan, may also be taken or authorized by the Board.
5. PARTICIPATION. Participants in the Plan shall be selected by the Committee from those Employees who, in the judgment of the Committee, have significantly contributed or can be expected to significantly contribute to Energen's success.
6. OPTIONS
6.1 GRANT OF OPTIONS. Subject to the provisions of the Plan, the Committee may (a) determine and designate from time to time those Participants to whom options are to be granted and the number of shares of Stock to be optioned to each employee; (b) authorize the granting of Incentive Stock Options, Nonqualified Stock Options, or combination of Incentive Stock Options and Nonqualified Stock Options; (c) determine the number of shares subject to each option; (d) determine the time or times when each Option shall become exercisable and the duration of the exercise period; and (e) determine whether and, if applicable, the manner in which each option shall contain stock appreciation rights and/or dividend equivalents; provided, however, that (i) no Incentive Stock Option shall be granted after the expiration of ten years from the effective date of the Plan specified in Section 15 and (ii) the aggregate Fair Market Value (determined as of the date the option is granted) of the Stock with respect to which Incentive Stock Options are exercisable for the first time by any employee during any calendar year (under all plans of Energen and its Subsidiaries) shall not exceed $100,000.
6.2 TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Plan shall be evidenced by a written agreement. Such agreement shall be subject to the following express terms and conditions and to such other terms and conditions as the Committee may deem appropriate:
(a) Option Period. Each option agreement shall specify the period for which the option thereunder is granted and shall provide that the option shall expire at the end of such period. The Committee may extend such period provided that, in the case of an Incentive Stock Option, such extensions shall not in any way disqualify the option as an Incentive Stock Option. In no case shall such period for an Incentive Stock Option, including any such extensions, exceed ten years from the date of grant, provided, however that, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, such period, including extensions, shall not exceed five years from the date of grant.
(b) Option Price. The option price per share shall be determined by the Committee at the time any option is granted, and shall be not less than (i) the Fair Market Value, or (ii) in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110 percent of the Fair Market Value, (but in no event less than the par value) of one share of Stock on the date the option is granted, as determined by the Committee.
(c) Exercise of Option. No part of any option may be exercised until the optionee shall have remained in the employ of Energen or of a Subsidiary for such period, if any, as the Committee may specify in the option agreement, and the option agreement may provide for exercisability in installments. The Committee shall have full authority to accelerate for any reason it deems appropriate the vesting schedule of all or any part of any option issued under the Plan. Each option shall be exercisable in whole or part on such date or dates and during such period and for such number of shares as shall be set forth in the applicable option agreement. An optionee electing to exercise an option shall give written notice to Energen of such election and of the number of shares the optionee has elected to purchase and shall at the time of exercise tender the full purchase price of the shares the optionee has elected to purchase plus any required withholding taxes in accordance with Sections 6.2(d) and 9.
(d) Payment of Purchase Price upon Exercise. The purchase price of the shares as to which an option shall be exercised shall be paid to Energen at the time of exercise (i) in cash, (ii) in Stock already owned by the optionee having a total Fair Market Value equal to the purchase price and not subject to any lien, encumbrance or restriction on transfer other than pursuant to federal or state securities laws, (iii) by election to have Energen withhold (from the Stock to be delivered to the optionee upon such exercise) shares of Stock having a Fair Market Value equal to the purchase price or (iv) by any combination of such consideration having a total Fair Market Value equal to the purchase price; provided that the use of consideration described in clauses (ii), (iii) and (iv) shall be subject to approval by the Committee. In addition the Committee in its discretion may accept such other consideration or combination of consideration as the Committee shall deem to be appropriate and to have a total Fair Market Value equal to the purchase price. In each case, Fair Market Value shall be determined as of the Exercise Date.
(e) Exercise in the Event of Death or Termination of
Employment. If an optionee's employment by Energen and all Subsidiaries
shall terminate for Cause, then all options held by the terminated
Employee shall immediately expire. If an optionee's employment by
Energen and all Subsidiaries shall terminate because of the optionee's
(i) death or (ii) disability or retirement in accordance with the terms
of Energen's applicable tax-qualified disability or retirement plans,
then all options held by the optionee shall be immediately and fully
vested and may be exercised on or prior to the applicable Expiration
Dates. If an optionee's employment by Energen and all Subsidiaries
shall terminate for any reason other than those set forth in the
preceding sentences, then all of the optionee's unvested options shall
expire as of the termination date and all of the optionee's vested
options shall expire ninety days following the date of termination of
employment, provided that the Committee shall have the authority to
extend such option expiration date up to the original Expiration Date.
Without limiting the generality of Section 5(c), the Committee shall
have full authority to accelerate the vesting schedule of all or any
part of any option issued under the Plan and held by an employee who
has terminated or plans to terminate his or her employment, such that a
terminated employee, his heirs or personal representatives may exercise (at such time or times on or prior to the applicable Expiration Dates as may be specified by the Committee) any part or all of any unvested option under the Plan held by such employee at the date of his or her termination of employment. The foregoing notwithstanding, the Committee may at the time of grant provide for different or supplemental terms and conditions with respect to termination of employment and any such terms and conditions expressly provided in the written option agreement shall be controlling with respect to that option.
(f) Nontransferability. Except as may otherwise be provided in this Section 5(f), no option granted under the Plan shall be transferable other than by will or by the laws of descent and distribution and, during the lifetime of the optionee, an option shall be exercisable only by the optionee. The foregoing notwithstanding, the optionee may transfer Nonqualified Stock Options to (i) the optionee's spouse or natural, adopted or step-children or grandchildren (including the optionee, "Immediate Family Members"), (ii) a trust for the benefit of one or more of the Immediate Family Members, (iii) a family charitable trust established by one or more of the Immediate Family Members, or (iv) a partnership in which the only partners are (and, except as may be otherwise agreed by the Committee, will remain during the option period) one or more of the Immediate Family Members. Any options so transferred shall not be further transferable except in accordance with the terms of this Plan, shall remain subject to all terms and conditions of the Plan and the applicable option agreement, and may be exercised by the transferee only to the extent that the optionee would have been entitled to exercise the option had the option not been transferred.
(g) Investment Representation. To the extent reasonably necessary to assure compliance with all applicable securities laws, upon demand by the Committee for such a representation, the optionee shall deliver to the Committee at the time of any exercise of an option or portion thereof or settlement of stock appreciation rights or dividend equivalents a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of an option and prior to the expiration of the option period shall be a condition precedent to the right of the optionee or such other person to purchase any shares.
(h) Incentive Stock Options. Each option agreement which provides for the grant of an Incentive Stock Option to a participant shall contain such terms and provisions as the Committee may determine to be necessary or desirable in order to qualify such option as an "incentive stock option" within the meaning of Section 422 of the Code, or any amendment thereof or substitute therefor. Energen, in its discretion, may retain possession of any certificates for Stock delivered in connection with the exercise of an Incentive Stock Option or appropriately legend such certificates during the period that a disposition of such Stock would disqualify the exercised option from treatment as an incentive stock option under Section 422 of the Code (a "422 Option"). Subject to the other provisions of the Plan, Energen shall cooperate with the optionee should the optionee desire to make a disqualifying disposition. Any Incentive Stock Option which is disqualified from treatment as a 422 Option for whatever reason, shall automatically become a Nonqualified Stock Option. No party has any obligation or responsibility to maintain an Incentive Stock Option's status as a 422 Option. The optionee shall, however, immediately notify Energen of any disposition of Stock which would cause an Incentive Stock Option to be disqualified as a 422 Option.
(i) Stock Appreciation Right. Each option agreement may provide that the optionee may from time to time elect, by written notice to Energen, to cancel all or any portion of the option then subject to exercise, in which event Energen's obligation in respect of such option shall be discharged by payment to the optionee of an amount in cash equal to the excess, if any, of the Fair Market Value as of the Exercise Date of the shares subject to the option or the portion thereof so canceled over the aggregate purchase price for such shares as set forth in the option agreement or, if mutually agreed by the Committee and the optionee, (i) the issuance or transfer to the optionee of shares of Stock with a Fair Market Value as of the Exercise Date equal to any such excess, or (ii) a combination of cash and shares of Stock with a combined value as of the Exercise Date equal to any such excess.
(j) Dividend Equivalents. Each option agreement may provide that upon (i) exercise of all or part of an option, (ii) cancellation of all or part of such option pursuant to paragraph 5(i), or (iii) the occurrence of an Expiration Date, for no additional consideration, the optionee shall be paid an additional amount equal to the aggregate amount of cash dividends which would have been paid on the shares of Stock purchased upon such exercise or with respect to which such cancellation or expiration occurs, if such shares had been issued and outstanding during the period commencing with the option grant date and ending on the date of option exercise, cancellation or expiration, plus an amount equal to the interest that such dividends would have earned from the respective dividend payment dates if deposited in an account bearing interest, compounded quarterly on each April 1, July 1, October 1 and January 1, at a rate calculated as follows. For purposes of the preceding sentence, the assumed interest rate in effect for a calendar quarter shall be the announced prime rate of AmSouth Bank of Alabama (or such comparable rate of a comparable institution as the Committee may from time to time determine) in effect on the first day of such calendar quarter. Such additional amount shall be paid by cash, or if mutually agreed by the Committee and the optionee, by the issuance of Stock or a combination of cash and shares of Stock having an aggregate Fair Market Value as of the applicable Expiration or Exercise Date, equal to any such excess.
(k) No Rights as Shareholder. No optionee shall have any rights as a shareholder with respect to any shares subject to the optionee's option prior to the date of issuance to the optionee of a certificate or certificates for such shares.
(l) Delivery of Certificates. Subject to Section 6.2(h), as soon as reasonably practicable after receipt of an exercise notice and full payment, Energen shall deliver to the optionee, registered in the optionee's name, certificates for the appropriate number of shares of Stock.
7. RESTRICTED STOCK
7.1 GRANT OF RESTRICTED STOCK. The Committee may make grants of Restricted Stock to Participants. Each restricted Stock Award shall be evidenced by a written agreement setting forth the number of shares of Restricted Stock granted and the terms and conditions to which the Restricted Stock is subject. Restricted Stock may be awarded by the Committee in its discretion with or without cash consideration.
7.2 TERMS AND CONDITIONS OF RESTRICTED STOCK.
(a) Restrictions. No shares of Restricted Stock may be sold, assigned, transferred, pledged, hypothecated, or otherwise encumbered or disposed of (the "Restrictions") until the Restrictions on such shares have lapsed or been removed.
(b) Lapse. The Committee shall establish as to each Award of Restricted Stock the terms and conditions upon which the Restrictions shall lapse, which terms and conditions may include, without limitation, a required period of service, Performance Measures, or any other individual or corporate performance conditions.
(c) Termination of Employment. Exercise in the Event of Death or Termination of Employment. If a Participant's employment by Energen and all Subsidiaries shall terminate because of the Participant's (i) death or (ii) disability or retirement in accordance with the terms of Energen's applicable tax-qualified disability or retirement plans, then all restrictions on the Participant's outstanding Restricted Stock shall immediately lapse. Should a Participant's employment with Energen and all Subsidiaries terminate for any reason other than those set forth in the preceding sentence, any shares of the Participant's Stock which remain subject to Restrictions, shall be forfeited and returned to Energen. The foregoing notwithstanding, the Committee may at the time of grant provide for different or supplemental terms and conditions with respect to termination of employment and any such terms and conditions expressly provided in the written Restricted Stock agreement shall be controlling with respect to that grant of Restricted Stock.
(d) Lapse at Discretion of Committee. The Committee may at any time, in its sole discretion, accelerate the time at which any or all Restrictions on a Restricted Stock Award will lapse or remove any and all such Restrictions; provided that the Committee may not accelerate the lapse of or remove Restrictions which require the attainment of a Performance Measure except as may be permitted by the performance-based exception to Section 162(m) of the Code.
(e) Rights with respect to Restricted Stock. Upon the
acceptance by a Participant of an award of Restricted Stock, such
Participant shall, subject to the restrictions set forth in paragraph
(b) above, have all the rights of a shareholder with respect to such
shares of Restricted Stock, including, but not limited to, the right to
vote such shares of Restricted Stock and the right to receive all
dividends and other distributions paid thereon. Certificates
representing Restricted Stock may be held by Energen until the
restrictions lapse and shall bear such restrictive legends as Energen
shall deem appropriate.
(f) No Section 83(b) Election. Unless otherwise expressly agreed in writing by Energen, a Participant shall not make an election under Section 83(b) of the Code with respect to a Restricted Stock Award and upon the making of any such election, all shares of Restricted Stock subject to the election shall be forfeited and returned to Energen.
8. PERFORMANCE SHARES
8.1 GRANT OF PERFORMANCE SHARES
(a) The Committee may from time to time select employees to receive Performance Shares under the Plan. An Employee may be granted more than one Performance Share Award under the Plan. In its discretion at the time of grant, the Committee may determine that an Interim Period or Interim Periods should be established for payment with respect to Performance Share Awards. Whenever Interim Periods are established, the terms and conditions with respect to payment after the end of such Interim Period shall be those set by the Committee.
(b) A Performance Share Award shall not entitle a Participant to receive any dividends or dividend equivalents on Performance Shares; no Participant shall be entitled to exercise any voting or other rights of a stockholder with respect to any Performance Share Award under the Plan; and no Participant shall have any interest in or rights to receive any shares of Stock prior to the time when the committee determines the form of payment of Performance Shares pursuant to Section 8.2.
(c) Payment of a Performance Share Award to any Participant shall be made in accordance with Section 8.2 and shall be subject to such conditions for payment as the Committee may prescribe at the time the Performance Share Award is made. The Committee may prescribe conditions such that payment of a Performance Share Award may be made with respect to a number of shares of Stock greater than the number of Performance Shares awarded. The Committee may prescribe different conditions for different Participants.
(d) Each Performance Share Award shall be made in writing and shall set forth the terms and conditions set by the Committee for payment of such Performance Share Award.
8.2 PAYMENT OF PERFORMANCE SHARE AWARDS
Each Participant granted a Performance Share Award shall be entitled to payment on account thereof as of the close of the applicable Award Period, but only if the Committee has determined that the conditions for payment of the Award set by the Committee have been satisfied. Participants granted Awards with Interim Periods shall be entitled to partial payment on account thereof as of the close of the Interim Period, but only if the Committee has determined that the conditions for partial payment of the Award set by the Committee have been satisfied. Performance Shares paid to a Participant for an Interim Period need not be repaid to the Corporation, notwithstanding that, based on the conditions set for payment at the end of the Award Period, such Participant would not have been entitled to payment of any portion of such Award. Any Performance Shares paid to a Participant for the Interim Period during an Award Period shall be deducted from the Performance Shares to which such Participant is entitled at the end of the Award Period.
At the time it determines whether the conditions for payment have been satisfied, the Committee, in its discretion, shall determine whether the Awards will be paid all in cash, or in some combination of cash and shares of Stock, except and provided that the Committee must pay in cash an amount equal to the federal, state and other taxes which the Corporation is required to withhold, and further provided that payment in shares of Stock shall be subject to the aggregate share limitation set forth in Section 2. Payment of Awards shall be made by the Corporation as promptly as possible after the determination by the Committee that payment has been earned and upon a date fixed by the Committee to permit calculation of Measurement Value of the Common Stock. The portion of the Award paid in Stock shall be equal to the number of Performance Shares being paid in Stock, and the balance shall be an amount of cash equal to the Measurement Value of the remaining Performance Shares to be paid.
8.3 TERMINATION OF EMPLOYMENT
Except in the case of a Qualified Termination (as defined below) if, prior to the close of the Award Period with respect to a Performance Share Award, a Participant's employment with Energen and all Subsidiaries terminates, then any unpaid portion of such Participant's Performance Share Award shall be forfeited. In the case of a Qualified Termination (as defined below), the Participant shall remain entitled to payout of any outstanding Performance Share Awards (subject to the retirement reduction described below) at the end of the applicable Award Period in accordance with the terms of this Plan including without limitation applicable performance conditions.
Qualified Termination. "Qualified Termination" means termination of a Participant's employment with Energen and all subsidiaries under any one of the following circumstances:
(i) An involuntary termination by Energen and the Subsidiaries, as applicable, other than for Cause.
(ii) Expressly agreed in writing by the Participant and Energen and/or a subsidiary to constitute a Qualified Termination for purposes of this Plan.
(iii) A result of the Participant's death or disability.
(iv) A result of Participant's retirement under the Energen Corporation Retirement Income Plan, as amended from time to time.
(v) A voluntary termination by the Participant for Good Reason. The term "Good Reason" means with respect to an Award and a Participant, the occurrence subsequent to the grant of such Award of (A) a reduction in the Participant's aggregate rate of monthly base pay from Energen and the Subsidiaries, as applicable, or (B) the termination or materially adverse modification of the Energen Annual Incentive Compensation Plan without substitution of new short-term incentives providing comparable compensation opportunities for the Participant.
(vi) A voluntary termination by the Participant during the period commencing with the earliest date that a Change in Control occurs and ending on the last day of the thirty-sixth calendar month following the calendar month during which such Change in Control occurs.
Retirement. If the Participant's termination satisfies only that part of the Qualified Termination definition related to retirement (clause (v)), then this paragraph applies. If the Participant, having reached Retirement Date as defined under the Energen Corporation Retirement Income Plan, as amended from time to time, retires prior to the end of the first twelve months of an Award Period (the "Initial Fiscal Year"), the number of Performance Shares for such Award shall be reduced. The reduced Award shall equal the number of Performance Shares originally granted multiplied by a fraction the numerator of which is the number of Initial Fiscal Year months which occur prior to retirement and the denominator of which is 12. For example, if the original Award was for 1,000 Performance Shares and the Participant retired on January 1 of the Initial Fiscal Year, the size of the Award would be reduced by 75% to 250 Performance Shares, with the payment of such 250 Performance Shares remaining subject to the applicable Performance Conditions for the full Award Period and the remaining 750 Performance Shares being forfeited.
8.4 CONSULTING, NON-COMPETE AND CONFIDENTIALITY
A Participant's entitlement, if any, to payout of Performance Share Awards subsequent to termination of employment with Energen and all Subsidiaries shall continue so long as the Participant is in compliance with the following requirements. Failure to comply shall result in forfeiture of all then outstanding Performance Share Awards.
(a) Consulting Services. For a period of three years following the termination of the Participant's employment ("Date of Termination"), Participant will fully assist and cooperate with Energen, the Subsidiaries and their representatives (including outside auditors, counsel and consultants) with respect to any matters with which the Participant was involved during the course of employment, including being available upon reasonable notice for interviews, consultation, and litigation preparation. Except as otherwise agreed by Participant, Participant's obligation under this Section 8(a) shall not exceed 80 hours during the first year and 20 hours during each of the following two years. Such services shall be provided upon request of Energen and the Subsidiaries but scheduled to accommodate Participant's reasonable scheduling requirements. Participant shall receive no additional fee for such services but shall be reimbursed all reasonable out-of-pocket expenses.
(b) Non-Compete. For a period of twelve months following
the Date of Termination, the Participant shall not Compete, (as defined
below) or assist others in Competing with Energen and the Subsidiaries.
For purposes of this Agreement, "Compete" means (i) solicit in
competition with Alabama Gas Corporation ("Alagasco") any person or
entity which was a customer of Alagasco at the Date of Termination;
(ii) offer to acquire any local gas distribution system in the State of
Alabama; or (iii) offer to acquire any coalbed methane interest in the
State of Alabama. Employment by, or an investment of less than one
percent of equity capital in, a person or entity which Competes with
Energen or the Subsidiaries does not constitute Competition by
Participant so long as Participant does not directly participate in,
assist or advise with respect to such Competition.
(c) Confidentiality. Participant agrees that at all times following the Date of Termination, Participant will not, without the prior written consent of Energen, disclose to any person, firm or corporation any confidential information of Energen or the Subsidiaries which is now known to Participant or which hereafter may become known to Participant as a result of Participant's employment, unless such disclosure is required under the terms of a valid and effective subpoena or order issued by a court or governmental body; provided, however, that the foregoing shall not apply to confidential information which becomes publicly disseminated by means other than a breach of this Agreement.
8.5 NO ASSIGNMENT OF INTEREST
The interest of any person in the Plan shall not be assignable, either by voluntary assignment or by operation of law, and any assignment of such interest, whether voluntary or by operation of law, shall render the Award void. Amounts payable under the Plan shall be transferable only by will or by the laws of descent and distribution.
9. WITHHOLDING. Each Participant shall, no later than the date as of which the value of an Award first becomes includable in the gross income of the Participant for Federal income tax purposes, pay to Energen and Subsidiaries, or make arrangements satisfactory to the Committee, in its sole discretion, regarding payment of, any Federal, FICA, state, or local taxes of any kind required by law to be withheld with respect to the Award. The obligations of Energen under the Plan shall be conditional on such payment or arrangements. Energen and, where applicable, its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes owed hereunder by a Participant from any payment of any kind otherwise due to said Participant. The Committee may permit Participants to elect to satisfy their Federal, and where applicable, FICA, state and local tax withholding obligations with respect to all Awards by the reduction, in an amount necessary to pay all said withholding tax obligations, of the number of shares of Stock or amount of cash otherwise issuable or payable to said Participants in respect of an Award.
10. PERFORMANCE MEASURES. At its discretion, the Committee may make the Awards subject to the attainment of one or more Performance Measures designed to qualify for the performance-based exceptions from Section 162(m) of the Code.
Unless and until Energen's shareholders approve a change in the Performance Measures set forth in this Section 10, the Performance Measures to be used for purposes of such Awards shall be chosen from among the following alternatives, as measured with respect to Energen and/or any one or more of the Subsidiaries, with or without comparison to a peer group:
(a) return on shareholder's equity;
(b) return on assets;
(c) net income;
(d) earnings per common share;
(e) total shareholder return;
(f) oil and/or gas reserve additions;
(g) utility customer number, volume and/or revenue growth; and
(h) such other criteria as may be established by the Committee in writing and which meets the requirements of the performance-based exception to Section 162(m) of the Code.
In the event that the performance-based exception to Section 162(m) or its successor is amended such that the performance-based exception permits the employer to alter the governing performance measures without obtaining shareholder approval of such changes, the Committee shall have discretion to make such changes without obtaining shareholder approval.
11. NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan and any Award granted under the Plan shall not confer upon any Participant any right with respect to continuance of employment by Energen or any Subsidiary or any right to further Awards under the Plan, nor shall they interfere in any way with the right of Energen or any Subsidiary by which a Participant is employed to terminate the Participant's employment at any time.
12. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant and fulfillment of Awards thereunder, and the obligations of Energen to sell, issue, release and/or deliver shares of Stock shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. Energen shall not be required to issue or deliver any certificates for shares of Stock prior to (a) the listing of such shares on any stock exchange on which the Stock may then be listed and (b) the completion of any registration or qualification of such shares under any federal or state law, or any ruling or regulation of any government body which Energen shall, in its sole discretion, determine to be necessary or advisable.
13. CHANGE IN CONTROL.
13.1 OPTIONS, RESTRICTED STOCK. Except as may be otherwise expressly provided in the applicable Award agreement, upon the occurrence of a Change in Control all outstanding Incentive Stock Options and Nonqualified Stock Options shall be immediately and fully vested and exercisable and all restrictions on all outstanding Restricted Stock shall immediately lapse. Except as may be otherwise expressly provided in the applicable Award Agreement, if a Participant's employment by Energen and all subsidiaries is terminated during a Pre-Closing Period (defined below) (i) involuntarily by Energen other than for Cause, or (ii) voluntarily by the Participant for Good Reason (defined below), then all of the Participant's outstanding Incentive Stock Options and Nonqualified Stock Options shall be immediately and fully vested and exercisable and all restrictions on all of the Participant's outstanding Restricted Stock shall immediately lapse. A "Pre-Closing Period" commences upon Energen shareholder approval of a transaction which upon consummation will constitute a Change in Control and
ends upon the first to occur of (i) the closing of such transaction or
(ii) a determination by the Board that such Change in Control will not
be consummated. "Good Reason" means with respect to a Participant (i) a
reduction in Participant's aggregate rate of monthly base pay from
Energen and all subsidiaries or (ii) the termination or materially
adverse modification of the Energen Annual Incentive Compensation Plan
without substitution of new short-term incentives providing comparable
compensation for the Participant.
13.2 PERFORMANCE SHARES.
(a) Acceleration Event. For purposes of this
Section 13.2, "Acceleration Event" means the occurrence of a
Change in Control unless following such Change in Control at
least a majority of the members of the Board of Directors of
the corporation resulting from such Change in Control were
members of the Incumbent Board (as defined in the Section 1
definition of Change in Control) at the time of the execution
of the initial agreement, or of the action of the Board
providing for such Change in Control.
(b) Payment Acceleration. If an Acceleration Event occurs, all outstanding Performance Share Awards shall be valued as soon after the date of such Acceleration Event as practicable. Valuation of the Performance Share awards shall be based on satisfaction of the applicable performance conditions measured as if all Award Periods had ended at the close of Energen's last whole fiscal year prior to the date of the Acceleration Event, provided that for purposes of any performance conditions involving the price of the Common Stock or payment of dividends, stock shall be priced equal to its Measurement Value based on the twenty trading days immediately preceding the date of such Acceleration Event and the period for dividend measurement shall extend to and include the day immediately prior to the date of the Acceleration Event. As soon as practicable following the completion of such valuation, all outstanding Performance Share Awards shall be paid based on such valuation.
(c) Independent Auditor. Following an Acceleration Event, all calculations with respect to performance measurement and Award payment shall be made by the Independent Auditor at the expense of Energen. The Independent Auditor shall resolve any procedural ambiguities discovered in making such calculations using its own judgment and discretion in light of the purposes of the Plan and past practices in calculating Performance Share Award payments.
13.3 PAYMENT OF PROFESSIONAL FEES AND EXPENSES. If a Change in Control occurs, Energen shall pay promptly as incurred all legal, accounting and other professional fees and expenses (collectively, "Professional Fees") which a Participant may reasonably incur as a result of any contest (regardless of the outcome thereof) by Energen, Participant or others of the validity or enforceability of, or liability under, any provision of the Plan (including as a result of any contest by Executive about the amount of any payment pursuant to the Plan), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. In addition Energen shall promptly pay to Participant an additional amount (the "Tax Reimbursement Payment") such that the net amount retained by the Participant with respect to all payments made under this paragraph 4 after deduction of Taxes, shall be equal to the amount of the Professional Fees reimbursement plus applicable interest. For purposes of this Section 13.3 "Taxes" means all federal, state and local, employment and income taxes payable or withheld with respect to Professional Fees reimbursement
payments (excluding interest) and Tax Reimbursement payments. The Independent Auditor, at Energen's expense, shall make all calculations with respect to the Tax Reimbursement Payment and in making such calculations shall assume that Participant is subject to the highest marginal tax rates.
14. AMENDMENT AND DISCONTINUANCE. The Board of Directors of Energen may from time to time amend, suspend or discontinue the Plan. Without the written consent of a Participant, no amendment or suspension of the Plan shall alter or impair any Award previously granted to a Participant under the Plan.
15. EFFECTIVE DATE OF THE PLAN. The effective date of the Plan shall be November 25, 1997, the date of its adoption by the Board, subject to approval by shareholders of Energen holding not less than a majority of the shares present and voting at its January 1998 Annual Meeting. Awards may be granted under the Plan by the Committee as provided herein prior but subject to such subsequent shareholder approval of the Plan.
16. NAME. The Plan shall be known as the "Energen Corporation 1997 Stock Incentive Plan."
17. 1997 DEFERRED COMPENSATION PLAN. If and to the extent permitted under the Energen Corporation 1997 Deferred Compensation Plan (the "Deferred Compensation Plan"), a Participant may elect, pursuant to the Deferred Compensation Plan, to defer receipt of part or all of any shares of Stock or other consideration deliverable under an Award and upon such deferral shall have no further right with respect to such deferred Award other than as provided under the Deferred Compensation Plan. In the event of such a deferral election, certificates for such shares of Stock as would have otherwise been issued under the Plan but for the deferral election, may at the discretion of Energen be delivered to the Trustee under the Deferred Compensation Plan and registered in the name of the Trustee or such other person as the Trustee may direct. Regardless of whether such deferred shares of Stock are issued to the Trustee, they shall constitute "issued" shares for purposes of the Plan's maximum number of shares limitation set forth in Section 2.
As approved by the Energen Corporation Board of Directors on November 25, 1997, and shareholders on January 28, 1998, and amended by the Board on October 27, 1999 (effective as of October 1, 1999), October 25, 2000 and October 24, 2001 (effective as of October 1, 2001).
Assistant Secretary
EXHIBIT 10(k)
ENERGEN CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN
As amended effective October 1, 2001
Article Description Page
------- ----------- ----
I. Purpose 1
II. Policy 1
III. Scope 1
IV. Terms and Definitions 1
V. Control Responsibility 3
VI. Plan Design 4
VII. Deferral Arrangements 5
VIII. Participant Eligibility and 5
Partial Year Awards
IX. Taxes and Effect on Other Benefits 6
X. Termination and/or Amendments 6
XI. Assignments or Transfers 6
XII. Payment of Awards 7
Attachment Fiscal Year Potential Incentive
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ENERGEN CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN
I. PURPOSE: Attract, retain and motivate key management personnel for Energen and its subsidiaries while promoting a team spirit and the pay for performance concept.
II. POLICY: It is the policy of Energen and its subsidiaries to provide an incentive compensation plan which rewards superior performance that benefits:
- Stockholders (earnings plus capital appreciation)
- Customers (quality service and products)
- Management (income)
III. SCOPE: This Incentive Compensation Plan is applicable to key executive management personnel of Energen and its subsidiaries as recommended by the CEO and approved by the ORC.
IV. TERMS AND DEFINITIONS
4.01 Attachment - For each Plan Year, an attachment to this Plan setting forth for such Plan Year the Participants, the Base Incentive Factor, Potential Bonus Pool, Maximum, and such other items as may be approved by the ORC.
4.02 Base Incentive Factor - A number expressed in terms of "percent of salary" that each Participant is potentially eligible to receive based on Energen Performance (see Attachment).
4.03 Board of Directors - The Board of Directors of Energen.
4.04 CEO - The Chief Executive Officer of Energen.
4.05 Competitive - The Energen financial median performance objective.
4.06 Energen - Energen Corporation
4.07 Energen Performance - The Energen financial performance objectives approved by the ORC.
4.08 Incentive Award - The annual cash incentive payment based on Energen, subsidiary and individual performance, as applicable.
4.09 Individual Performance Factor - An adjustment to the Base Incentive Factor based on measurement of individual Participant performance.
4.10 Maximum - The maximum is controlled by the individual maximum caps (see Section 6.05 and Attachment) and Energen net income (see Incentive Pool footnote on Attachment).
4.11 ORC - The Officer Review Committee of the Board of Directors.
4.12 Participant - An executive employee of Energen and/or an Energen subsidiary recommended by the CEO and approved by the ORC to participate in the Plan (see Attachment).
4.13 The Plan - This Annual Incentive Compensation Plan as amended from time to time.
4.14 Plan Year - Fiscal year October 1 through September 30.
4.15 Potential Incentive Pool - The potential amount of money available for distribution for different levels of Energen performance results (see Attachment).
4.16 Salary - The actual salary earned by the Participant during the applicable Plan Year. Salary shall be determined without reduction for salary amounts deferred by the Participant pursuant to the Energen Corporation 1997 Deferred Compensation Plan and without increase for any amounts distributed to the Participant under said Deferred Compensation Plan.
4.17 Subsidiary Performance Factor - An adjustment to the Base Incentive Factor based on measurement of selected performance objectives (earnings and other) for a subsidiary.
4.18 Target - The Energen financial performance "stretch" objective
4.19 Threshold - The Energen financial performance objective below which no incentive awards will be made regardless of subsidiary or individual performance.
V. CONTROL RESPONSIBILITY
5.01 The Board of Directors will approve Energen Performance objectives on recommendation of the ORC on an annual basis.
5.02 The ORC will administer the Plan, which will include approval of:
a. Participants
b. Energen Performance Objectives
c. Potential Incentive Pool
d. Subsidiary Performance Factor results
e. Individual Performance Factor results and individual incentive award results for the CEO and all Participants directly reporting to the CEO
5.03 The Energen CEO will approve:
a. The establishment of Subsidiary Performance Factor objectives in conjunction with the subsidiary presidents.
b. The Individual Performance Factor objectives and the individual incentive awards for all other Participants.
VI. PLAN DESIGN
6.01 Potential Incentive Pool - The Potential Incentive Pool is expressed as a pool of dollars available for distribution based on Energen Performance as covered in Section 6.02 (see Attachment).
6.02 Energen Performance - Base Incentive Factor - Energen Performance includes financial objectives for Threshold, Competitive, Target, and Maximum award levels. Energen Performance therefore dictates the Base Incentive Factor (see Attachment) which is used in the following formula to determine the individual incentive award:
If a Subsidiary Performance Factor or Individual Performance Factor is not applicable to a Participant's individual incentive award then it shall be measured as 1.0 for purposes of the Incentive Award formula.
6.03 Subsidiary Performance - The CEO in consultation with the subsidiary presidents may establish criteria for evaluating subsidiary performance. In determining the individual incentive award for a Participant, the Base Incentive Factor is adjusted for subsidiary performance. The subsidiary Performance Factor will typically range from 0.50 to 1.50 although individual components may have tighter or broader ranges.
6.04 Individual Performance - Participants may be required to meet or exceed certain individual performance criteria prior to earning an incentive award. Participants may be required to establish with their supervisor key objectives, both strategic and operational, for the fiscal year. Incentive Awards will be adjusted based on Individual Performance Factor measurement of the achievement of these objectives.
Typically, each individual performance objective will be assigned a weight and the sum will be equal to 100. At the end of the plan year the Participant's overall performance on such objectives will be rated as follows:
a. Unacceptable - 0 b. Effective - 1.0 c. Highly Effective - 1.5 d. Outstanding - 2.0 |
The Individual Performance Factor is calculated as follows:
The Attachment may also provide for by the ORC to set an Individual Performance Factor using such objective or subjective criteria as it may select in its discretion.
6.05 Control Measure - Individual Maximum Bonus Potential - Maximum individual awards will be established for each group of Participants (see Attachment).
VII. DEFERRAL ARRANGEMENTS:
A Participant may elect to defer an award payment in accordance with the terms of the Energen Corporation 1997 Deferred Compensation Plan and upon such deferral shall have no further right to such award other than as provided under said Deferred Compensation Plan.
VIII. PARTICIPANT ELIGIBILITY AND PARTIAL YEAR AWARDS
8.01 A Participant in this Plan will be a key executive of the Company recommended by the CEO and approved by the ORC.
8.02 An individual is a Participant for a Plan Year only if he or she has been recommended by the CEO and approved by the ORC for that Plan Year.
8.03 A Participant who vacates an eligible position during the plan year due to retirement, disability or death will be included in the Plan on a pro rata basis (number of months worked during the year divided by 12). No Payments will be made to Participants who otherwise vacate an eligible position during a Plan Year except as may otherwise be determined by the ORC in its discretion.
8.04 Payments for partial year Participants under Section 8.03 will be made at the end of the Plan Year in conjunction with all other awards.
IX. TAXES AND EFFECT ON OTHER BENEFITS
9.01 Any award shall be considered as compensation for tax purposes and there shall be deducted from the payment the amount of any tax required by any governmental authority.
9.02 Incentive award payments will not be considered as wages, salaries or compensation under any of the employee fringe benefit plans of Energen or its subsidiaries, except as otherwise expressly provided in an applicable plan document.
X. TERMINATION AND/OR AMENDMENTS
10.1 The Board of Directors may terminate the Plan at any time and may from time to time amend the Plan.
XI. ASSIGNMENTS OR TRANSFER
11.1 Neither the Participant, Participant's beneficiary, nor the Participant's personal representative shall have any rights to commute, sell, assign, transfer or otherwise convey the right to receive any payments or awards under this Plan. Such payments or awards are non-assignable and non-transferable and any attempt to assign or transfer payments or awards shall be void and have no effect.
XII. PAYMENT OF AWARDS
12.1 At the end of the Plan Year the annual Incentive Awards will be paid by
payroll check as soon as practicable after all evaluations and approvals
are complete, provided that any amounts, the payment of which has been
deferred by the Participant under the Energen Corporation 1997 Deferred
Compensation Plan, shall be payable in accordance with the terms of that
plan.
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As adopted April 1986, and subsequently amended May 1990, October 1993, April 25, 1997, and October 24, 2001, effective as of October 1, 2001.
EXHIBIT 21
SUBSIDIARIES OF ENERGEN CORPORATION
Alabama Gas Corporation
Energen Resources Corporation
Energen Resources TEAM, Inc.
American Heat Tech, Inc.
Basin Pipeline Corp.
EGN Services, Inc.
Midtown NGV, Inc.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-3 (File No. 333-00395 and File No. 333-43245) and Forms S-8 (File No. 33-27869, File No. 33-46641, File No. 33-48504, File No. 33-48505, File No. 33-26111 and File No. 33-45107) of Energen Corporation of our report dated October 23, 2001, except as to the subsequent event described in Note 18 which is as of December 5, 2001, relating to the consolidated financial statements and financial statement schedule of Energen Corporation, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Birmingham, Alabama
December 5, 2001