Harbinger Group Inc.
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DEF 14A
HRG GROUP, INC. filed this Form DEF 14A on 11/15/1995
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  During fiscal 1994, the Company recorded a $29.2 million pretax writedown of
its oil and gas properties in the Gulf of Mexico. The writedown was the result
of several factors: lower natural gas prices, additional capitalized costs
incurred recently in connection with several workover wells at the Company's
Wisdom gas field and an increase in estimated future costs.
 
  Significant Property. At September 30, 1994, the Company owned interests in
six separate domestic producing properties, all of which were located in
federal waters in the Gulf of Mexico offshore Texas and Louisiana. The Company
owns 100% of the working interest in a single property, the Wisdom gas field,
consisting of two blocks on the Outer Continental Shelf, East Breaks 109 and
110, located approximately 100 miles south of Galveston, Texas. This property
includes a production platform from which nine development wells have been
drilled. The development was completed during fiscal 1988. During fiscal 1994,
the Wisdom gas field provided approximately 47% of the Company's U.S. gas
production and as of September 30, 1994, the Wisdom field represented
approximately 87% of the Company's remaining U.S. proved gas reserves. None of
the five other properties individually accounted for more than 10% of the
Company's total proved reserves as of September 30, 1994.
 
  In April 1993, one of the wells in the Wisdom gas field was shut-in when it
started producing sand. Prior to the failure, this well was capable of
producing 6.5 MMcf per day. After some minor repairs, the well was returned to
production at a significantly reduced level. Efforts to restore production from
this well have been deferred.
 
  In early September 1993, an additional well in the Wisdom gas field ceased
production as a result of an influx of sand and water. Immediately prior to the
time the well ceased producing, this well was capable of producing
approximately 5.5 MMcf per day. After some minor repairs, the well was returned
to production at a significantly reduced level. Efforts to restore production
commenced in February 1994 and the workover/recompletion of this well and one
additional well successfully restored production of these two wells to
acceptable levels. The Company undertook the recompletion of a third well in
the Wisdom gas field which was abandoned after a series of mechanical failures.
The Wisdom gas field was producing 10.8 MMcf per day in August 1994 before
curtailing production in September due to low gas prices.
 
  Bolivian Joint Venture. In 1987, the Company wrote off its remaining
investment in its oil and gas properties in Bolivia (held by a joint venture in
which the Company has a 25% interest), and all cash proceeds received by the
Company thereafter have been recognized as revenues. The write-off resulted
from the failure of the Bolivian state-owned petroleum company to honor its
commitment to pay the joint venture for gas deliveries on a timely basis and to
remit past-due payments on an agreed schedule. The Bolivian properties continue
to be operated by the joint venture, which began receiving payments with
respect to current and past-due invoices on June 30, 1991. The Company received
cash payments with respect to its 25% interest in the joint venture of $10.1
million during fiscal 1992 and $3.2 million during fiscal 1993. These amounts,
which were recorded as revenues in fiscal 1992 and 1993, respectively, include
the collection of past-due amounts and may not be indicative of future cash
flows from the Company's Bolivian interest. Based on the Bolivian oil and gas
company's performance under renegotiated contracts and improved operating
conditions, Zapata returned to the accrual method of accounting for its
Bolivian oil and gas operations beginning in October 1993; outstanding
receivables related to production from prior months will continue to be
recognized as revenue when received. The Company recorded revenues of $4.1
million in fiscal 1994 from its Bolivian interest.
 
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