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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 333-04964C
------------------------
BLUE RIDGE ENERGY FUND
1997-A LIMITED PARTNERSHIP
(Exact name of registrant as specified in its Certificate of Limited
Partnership)
<TABLE>
<S> <C>
KENTUCKY 61-1310934
(State of Organization) (I.R.S. Employer Identification No.)
</TABLE>
632 ADAMS STREET, SUITE 700, BOWLING GREEN, KY 42101
(502) 842-2421
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required), and (2) has been subject to such filing requirements for the past 90
days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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/
Registrant does not have an aggregate market value for its Limited Partnership
Interests.
DOCUMENTS INCORPORATED BY REFERENCE
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<CAPTION>
INCORPORATED AS
DOCUMENT TO
- --------------------------------------------------------------------------- -----------------
<S> <C>
Registration Statement No. 333-04964C on Form SB-2 Items 1 and 13
</TABLE>
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<PAGE>
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
FOR THE PERIOD ENDED DECEMBER 31, 1998
BLUE RIDGE ENERGY FUND 1997A LIMITED PARTNERSHIP
<TABLE>
<S> <C> <C>
PART I
Item 1. Business.................................................................... 3
Item 2. Properties.................................................................. 5
Item 3. Legal Proceedings........................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......................... 7
PART II
Item 5. Market Price of and Distributions on the Registrant's Units and Related
Limited Partner Matters................................................... 7
Item 6. Selected Financial Data..................................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 8
Item 8. Financial Statements and Supplementary Data................................. 9
Item 9. Disagreements on Accounting and Financial Disclosure........................ 9
PART III
Item 10. Directors and Executive Officers of the Registrant.......................... 10
Item 11. Executive Compensation...................................................... 10
Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 10
Item 13. Certain Relationships and Related Transactions.............................. 10
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............. 11
OTHER
Signatures
</TABLE>
2
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PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION OF PARTNERSHIP
Blue Ridge Energy Fund 1997A Limited Partnership, a Kentucky limited
partnership (the "Partnership" or the "Registrant"), is a partnership formed
under a public serial limited partnership offering denominated Blue Ridge Energy
Fund 1996/1997 (Registration Statement No. 333-04964C on Form SB-2, originally
declared effective September 24, 1996, and amended effective November 12, 1997
the ("Registration Statement")). The Partnership was formed effective January 1,
1997 under a Limited Partnership Agreement dated January 1, 1997 with its
initial Limited Partner, an affiliate of the Managing General Partner. The
initial 35 limited partners made capital contributions totaling $1,034,000,
which were accepted in early 1998 when the Partnership commenced operations.
The Partnership is principally engaged in the business of acquiring,
developing and, when appropriate, disposing of working interests in oil and gas
properties within the continental United States. Each working interest held by
the Partnership entitles the Partnership to receive, in kind or in value, a
share of the production of oil and gas from the producing property, and
obligates the Partnership to participate in the operation of the property and to
bear its proportionate share of all operating costs associated therewith. The
Partnership typically holds less than the entire working interest in its
producing properties.
At December 31, 1998, the Partnership had expended or committed to expend
100% of the limited partners' net commitments (i.e., limited partners'
commitments available to the Partnership for property acquisitions after payment
of organization fees and expenses) in the acquisition and development of
producing properties, which properties are described under Item 2, "Properties,"
below. The Partnership's revenues and profits are derived almost entirely from
the sale of oil and gas produced from its properties and from the sale of
acquired oil and gas properties, when the sale of such properties is
economically preferable to continued operation.
The Partnership's business and affairs are conducted by its Managing General
Partner, Blue Ridge Group, Inc., a Nevada corporation ("Blue Ridge"). The
partnership's oil and gas properties are operated by industry operators
designated by the owners of a majority of the working interest in each property.
The general manner in which the Partnership acquires producing properties
and otherwise conducts its business is described in detail in the Registration
Statement under "Proposed Activities," which is incorporated herein by
reference.
COMPETITION, MARKETS AND REGULATIONS
COMPETITION
The oil and gas industry is highly competitive in all its phases. The
Partnership encounters strong competition from many other oil and gas producers,
many of which possess substantial financial resources, in acquiring economically
desirable oil and gas properties.
MARKETS
The amounts of and price obtainable for oil and gas production from
Partnership properties will be affected by market factors beyond the control of
the Partnership. Such factors include the extent of domestic production, the
level of imports of foreign oil and gas, the general level of market demand on a
regional, national and worldwide basis, domestic and foreign economic conditions
that determine levels of industrial production, political events in foreign
oil-producing regions, and variations in
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governmental regulations and tax laws and the imposition of new governmental
requirements upon the oil and gas industry. There can be no assurance that oil
and gas prices will not decrease in the future, thereby decreasing net Revenues
from Partnership Properties.
From time to time, there may exist a surplus of natural gas or oil supplies,
the effect of which may be to reduce the amount of hydrocarbons that the
Partnerships may produce and sell while such oversupply exists. In recent years,
initial steps have been taken to provide additional gas transportation lines
from Canada to the United States. If additional Canadian gas is brought to the
United States market, it could create downward pressure on United States gas
prices.
REGULATIONS
ENVIRONMENTAL REGULATION
The federal government and various state and local governments have adopted
laws and regulations regarding the control of contamination of the environment.
These laws and regulations may require the acquisition of a permit by Operators
before drilling commences, prohibit drilling activities on certain lands lying
within wilderness areas or where pollution arises and impose substantial
liabilities for pollution resulting from operations, particularly operations
near or in onshore and offshore waters or on submerged lands. These laws and
regulations may also increase the costs of routine drilling and operation of
wells. Because these laws and regulations change frequently, the costs to the
Partnership of compliance with existing and future environmental regulations
cannot be predicted. However, the Managing Partner does not believe that the
Partnership is affected in a significantly different manner by these regulations
than are its competitors in the oil and gas industry.
FEDERAL REGULATION OF NATURAL GAS
The transportation and sale of natural gas in interstate commerce is heavily
regulated by agencies of the federal government. The following discussion is
intended only as a summary of the principal statutes, regulations and orders
that may affect the production and sale of natural gas from Partnership
Properties. This summary should not be relied upon as a complete review of
applicable natural gas regulatory provisions.
FERC ORDERS
Several major regulatory changes have been implemented by the Federal Energy
Regulatory Commission ("FERC") from 1985 to the present that affect the
economics of natural gas production, transportation and sales. In addition, the
FERC continues to promulgate revisions to various aspects of the rules and
regulations affecting those segments of the natural gas industry that remain
subject to the FERC's jurisdiction. In April 1992, the FERC issued Order No. 636
pertaining to pipeline restructuring. This rule requires interstate pipelines to
unbundle transportation and sales services by separately stating the price of
each service and by providing customers only the particular service desired,
without regard to the source for purchase of the gas. The rule also requires
pipelines to (i) provide nondiscriminatory "no-notice" service allowing firm
commitment shippers to receive delivery of gas on demand up to certain limits
without penalties, (ii) establish a basis for release and reallocation of firm
upstream pipeline capacity and (iii) provide non-discriminatory access to
capacity by firm transportation shippers on a downstream pipeline. The rule
requires interstate pipelines to use a straight fixed variable rate design. The
rule imposes these same requirements upon storage facilities.
FERC Order No. 500 affects the transportation and marketability of natural
gas. Traditionally, natural gas has been sold by producers to pipeline
companies, which then resold the gas to end-users. FERC Order No. 500 alters
this market structure by requiring interstate pipelines that transport gas for
others to provide transportation service to producers, distributors and all
other shippers of natural gas on a nondiscriminatory, "first-come, first-served"
basis ("open access transportation"), so that
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producers and other shippers can sell natural gas directly to end-users. FERC
Order No. 500 contains additional provisions intended to promote greater
competition in natural gas markets.
It is not anticipated that the marketability of and price obtainable for
natural gas production from Partnership Properties will be significantly
affected by FERC Order No. 500. Gas produced from Partnership Properties
normally will be sold to intermediaries who have entered into transportation
arrangements with pipeline companies. These intermediaries will accumulate gas
purchased from a number of producers and sell the gas to end-users through open
access pipeline transportation.
STATE REGULATIONS
Production of any oil and gas from Partnership Properties will be affected
to some degree by state regulations. Many states in which the Partnership will
operate have statutory provisions regulating the production and sale of oil and
gas, including provisions regarding deliverability. Such statutes, and the
regulations promulgated in connection therewith, are generally intended to
prevent waste of oil and gas and to protect correlative rights to produce oil
and gas between owners of a common reservoir. Certain state regulatory
authorities also regulate the amount of oil and gas produced by assigning
allowable rates of production to each well or proration unit.
FEDERAL LEASES
Some of the Partnership's properties are located on federal oil and gas
leases administered by various federal agencies, including the Bureau of Land
Management. Various regulations and orders affect the terms of leases,
exploration and development plans, methods of operation and related matters.
EMPLOYEES
The Partnership has no employees. Blue Ridge, however, has a staff of
geologists, petroleum engineers, drilling and accounting personnel who
administer the operations of Blue Ridge and the Partnership. As of December 31,
1998, Blue Ridge had 63 employees. Blue Ridge's administrative and overhead
expenses attributable to the Partnership's operations are borne by the
Partnership.
ITEM 2. PROPERTIES
As of December 31, 1998, the Partnership has acquired interests in producing
oil and gas properties which are generally described below.
PRINCIPAL OIL AND GAS PRODUCING PROPERTIES
The most valuable wells in the Partnership, based upon year-end engineering
estimates of discounted future net revenues using constant pricing and costs,
are described below.
1. Approximately 84% of total value is from the Knobles-Respondek #1 in
Dewitt County Texas. The Knobles-Respondek #1 produces from the Wilcox formation
2. The Gonzales #2 is in Starr, County, Texas and produces from the Frio
and Vicksburg formations, accounting for 16% of the value.
There are no other wells in the Partnership contributing to the total
Partnership value.
TITLE TO PROPERTIES
Title to substantially all significant producing properties of the
Partnership has been examined. The properties are subject to royalty, overriding
royalty and other interests customary in the industry. The Managing General
Partner does not believe any of these burdens materially detract from the value
of
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the properties or will materially detract from the value of the properties or
materially interfere with their use in the operation of the business of the
Partnership.
PRODUCTION AND SALES PRICE
The following table summarizes the sales volumes of the Partnership's net
oil and gas production expressed in MCFs. Equivalent MCFs are obtained by
converting oil to gas on the basis of their relative energy content; one barrel
equals 6,000 cubic feet of gas.
<TABLE>
<CAPTION>
NET PRODUCTION
--------------
FOR THE YEAR
ENDED
DECEMBER 31,
1998
--------------
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Net Volumes (Equivalent Mcfs)............................... 40,545
Average Sales Price per Equivalent Mcf...................... $1.35
Average Production Cost per Equivalent Mcf (includes
production taxes)......................................... $0.51
</TABLE>
NET PROVED OIL AND GAS RESERVES
Presented below are the estimates of the Partnership's proved reserves as of
December 31, 1998. All of the Partnership's proved reserves are located in the
United States.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------
OIL NATURAL GAS
(BBLS) (MMCF)
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<S> <C> <C>
Proved developed reserves at end of year............................... 31,297 1,011,910
--------- -----------
Proved reserves
Balance at beginning of year......................................... -- --
Extensions, discoveries and other additions.......................... 31,804 1,049,412
Revisions of previous estimates...................................... -- --
Sales of minerals in place........................................... -- --
Production........................................................... (507) (37,502)
--------- -----------
Balance at end of year............................................... 31,297 1,011,910
--------- -----------
--------- -----------
</TABLE>
The following table summarizes by acquisition the Registrant's reserves and
gross and net interests in producing oil and gas wells as of December 31, 1998:
<TABLE>
<CAPTION>
RESERVES
DECEMBER 31, 1998
----------------- NATURAL WELLS
OIL GAS ------------
ACQUISITION STATE(S) (BBLS) (MMCF) GROSS NET
- ------------------------------ -------- ------ --------- ----- ----
<S> <C> <C> <C> <C> <C>
Knobles-Respondek #1.......... Tx 27,577 787,913 1.0 0.70
Gonzales #2................... Tx 3,720 223,997 1.0 0.25
------ --------- ----- ----
31,297 1,011,910 2.0 0.95
------ --------- ----- ----
------ --------- ----- ----
</TABLE>
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting the future rates of production, timing and plan of
development. Oil and gas reserve engineering must be recognized as a subjective
process of estimating underground accumulations of oil and gas that cannot be
measured in an exact way, and estimates of other engineers might differ from
those above. The accuracy of any reserve estimate is a function of the quality
of available data and of engineering and geological interpretation and judgment.
Results of drilling, testing and production subsequent to the date of the
estimate may justify revision of such estimate, and, as a general rule,
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reserve estimates based upon volumetric analysis are inherently less reliable
than those based on lengthy production history. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are ultimately
recovered.
In estimating the oil and natural gas reserves, the Registrant, in
accordance with criteria prescribed by the Securities and Exchange Commission,
has used prices received as of December 31, 1998 without escalation, except in
those instances where fixed and determinable gas price escalations are covered
by contracts, limited to the price the Partnership reasonably expects to
receive. The Registrant does not believe that any favorable or adverse event
causing a significant change in the estimated quantity of proved reserves has
occurred between December 31, 1998 and the date of this report.
Future prices received for the sale of the Partnership's product may be
higher or lower than the prices used in the evaluation described above; the
operating costs relating to such production may also increase or decrease from
existing levels. The estimates presented above are in accordance with rules
adopted by the Securities and Exchange Commission.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not aware of any material pending legal proceedings to
which it is a party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of limited partners during the fiscal
year covered by this report.
PART II
ITEM 5. MARKET PRICE OF AND DISTRIBUTIONS ON THE REGISTRANT'S UNITS AND RELATED
LIMITED PARTNER MATTERS
MARKET INFORMATION
Units in the Partnership were initially sold at a price of $1,000 per Unit.
Units are not traded on any exchange and there is no established public trading
market for the Units.
HOLDERS
As of December 31, 1998, there were 35 Limited Partners holding Units in the
Partnership.
DISTRIBUTIONS
The Partnership generally makes distributions to Limited Partners on a
monthly basis, subject to the restrictions set forth in the Limited Partnership
Agreement. In the fiscal year ending December 31, 1998, the Partnership
distributed a total of $17,390 to holders of its Units. Cash distributions
constitute net proceeds from sale of oil and gas production after payment of
lease operating expenses and other partnership expenses. Some or all of such
amounts or any proceeds from the sale of partnership properties could be deemed
to constitute a return of investors' capital.
Oil and gas investments involve a high risk of loss, and no assurance can be
given that any particular level of distributions to holders of Units can be
achieved or maintained. Although it is anticipated that monthly distributions
will continue to be made through 1999, the Partnership's ability to make
distributions could be diminished by any event adversely affecting the oil and
gas properties in which the Partnership owns interests or the amount of revenues
received by the Partnership therefrom.
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The Partnership's Limited Partnership Agreement contains various provisions
which might serve to delay, defer or prevent a change in control of the
Partnership, such as the requirement of a vote of Limited Partners in order to
sell all or substantially all of the Partnership's properties or the requirement
of consent by the Managing General Partner to transfers of limited partnership
interests.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data, prepared in accordance with generally
accepted accounting principles as of December 31, 1998, should be read in
conjunction with the financial statements included in Item 8.
<TABLE>
<CAPTION>
1998
------------
<S> <C>
Revenues........................................................................ $ 59,156
Income (Loss)................................................................... $ 17,972
Total Assets.................................................................... $ 1,045,953
Cash Distributions.............................................................. $ 17,390
Long Term Obligations........................................................... $ --
Limited Partners' Net Income (Loss) Per Unit.................................... $ 17.38
Limited Partners' Cash Distributions Per Unit................................... $ 16.82
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Oil and gas reserves are depleting assets and therefore often experience
significant production declines each year from the date of acquisition through
the end of the life of the property. The primary source of liquidity to the
Partnership comes almost entirely from the income generated from the sale of oil
and gas produced from ownership interests in oil and gas properties. Net cash
provided by operating activities totaled $22,238. This source of liquidity and
the related results of operations, and in turn cash distributions, will decline
in future periods as the oil and gas produced from the properties also declines
while production and general and administrative costs remain relatively stable
making it unlikely that the Partnership will hold the properties until they are
fully depleted, but will likely liquidate when a substantial majority of the
reserves have been produced. The Partnership has expended all of the partner's
net commitments available for property acquisitions and development by
developing oil and gas properties. The partnership invests primarily in
development properties. Significant purchases of additional reserves or
extensive drilling activity are not anticipated. Capital expenditures totaled
$930,600, in 1998. Cash distributions totaled $17,390 in 1998.
The Managing General Partner ("MGP") anticipates that the Partnership will
have adequate liquidity from income from continuing operations to satisfy any
future capital expenditure requirements, so long as 1999 market conditions
remain comparable to those in 1998.
RESULTS OF OPERATIONS
The Partnership began operations in 1998, therefore the results from
operations cannot be compared with such results from any prior periods. Revenues
were primarily generated by oil and gas sales from the Partnership's two wells,
the Gonzales #2 and the Knobles-Respondek #1 totaling $54,671. The Gonzales #2
began production in May of 1998 and the Knobles-Respondek #1 began production in
September of 1998. Expenses associated with the oil and gas sales were lease
operating expenses of $16,893, or 31% of sales. And production taxes of $3,824,
or 7% of sales. Interest income of $4,485 brought total revenues for 1998 to
$59,156. Other expenses incurred during the year were
8
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depreciation of $12,916 and general and administrative costs totaling $7,551.
The Partnership distributed $17,390 to its partners as a result of these
operations.
YEAR 2000
The Year 2000 issue results from computer programs and embedded computer
chips with date fields that cannot distinguish between the years 1900 and 2000.
The Managing General Partner is currently implementing the steps necessary to
make its operations and the related operations of the Partnership capable of
addressing the Year 2000. These steps include upgrading and certifying its
computer systems and field operation services and obtaining Year 2000 compliance
certification from all important business suppliers. The Managing General
Partner anticipates that all of its the mission critical systems will be capable
of Year 2000 operations.
The Managing General Partner's business systems are almost entirely
comprised of off-the-shelf software. Most of the necessary changes in computer
instructional code can be made by upgrading this software. The Managing General
Partner is currently in the process of either upgrading the off-the-shelf
software or receiving certification as to Year 2000 compliance from vendors or
third party consultants.
The Managing General Partner does not believe that costs incurred to address
the Year 2000 issue with respect to its business systems will have a material
effect on the Partnership's results of operations, or its liquidity and
financial condition. The estimated total cost to the Managing General Partner to
address Year 2000 issues is projected to be less than $10,000 and the
Partnership's share of this cost is expected to be insignificant.
The failure to correct a material Year 2000 problem could result in an
interruption, or failure of certain normal business activities or operations.
Based on activities to date, the Managing General Partner believes that it will
be able to resolve any Year 2000 problems concerning its financial and
administrative systems. It is undeterminable how all the aspects of the Year
2000 will impact the Partnership. The most reasonably likely worst case scenario
would involve a prolonged disruption of external power sources upon which core
equipment relies, resulting in a substantial decrease in the Partnership's oil
and gas production activities. In addition, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as other
customers and suppliers, could be prone to Year 2000 problems that could not be
assessed or detected by the Managing General Partner. The Managing General
Partner is contacting its major purchasers, customers, suppliers, financial
institutions and others with whom it conducts business to determine whether they
will be able to resolve in a timely manner any Year 2000 problems directly
affecting the Managing General Partner or Partnership and to inform them of the
Managing General Partner's internal assessment of its Year 2000 review. There
can be no assurance that such third parties will not fail to appropriately
address their Year 2000 issues or will not themselves suffer a Year 2000
disruption that could have a material adverse effect on the Partnership's
activities, financial condition or operating results. Based upon these responses
and any problems that arise during the testing phase, contingency plans or
back-up systems would be determined and addressed.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 14(a) for index to financial statements.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
9
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As a limited partnership, the Registrant has no directors or executive
officers. The business and affairs of the Registrant are managed by Blue Ridge
as Managing General Partner. Set forth below is certain information as of March
12, 1999 regarding the directors and executive officers of Blue Ridge.
DIRECTORS AND EXECUTIVE OFFICERS
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<CAPTION>
POSITION(S) WITH
NAME AGE BLUE RIDGE AND OTHER COMPANIES
- ----------------------------------- --- -----------------------------------------------------------------------
<S> <C> <C>
Robert D. Burr..................... 53 Chairman of the Board of Blue Ridge, President and Chief Executive
Officer
J. Thomas Cook, Jr................. 46 Director of Blue Ridge, Senior Vice President--Finance and Chief
Financial Officer
Gregory B. Shea.................... 36 Director of Blue Ridge; Senior Vice President--Operations
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
As noted in Item 10, "Directors and Executive Officers of the Registrant,"
above, the Partnership has no executive officers. The executive officers of Blue
Ridge are not compensated by the Partnership.
Certain fees and allowances contemplated by the Limited Partnership
Agreement have been paid by the Partnership to Blue Ridge. See Item 13 for
further discussion.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Blue Ridge Group, Inc., located at 632 Adams Street, Suite 700, Bowling
Green, KY 42101, is the Managing General Partner and also owns 100 Limited
Partnership Units, which is 9.67 percent of all outstanding Limited Partnership
Units. All Limited Partnership Units owned by Blue Ridge were acquired as part
of the initial funding. As the Managing General Partner, Blue Ridge is not
permitted generally, under the Limited Partnership Agreement, to vote its
Limited Partnership Units.
Blue Ridge is not aware of any arrangement, the operation of which may at a
subsequent date result in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As noted in Item 10, "Directors and Executive Officers of the Registrant,"
above, the Partnership has no executive officers or directors, and thus has not
engaged in any transactions in which any such person had an interest. The
Partnership is permitted to engage in certain transactions with Blue Ridge as
Managing General Partner, subject to extensive guidelines and restrictions as
described in the "Conflicts of Interest" section of the Amended Prospectus
contained in the Registration Statement, which is incorporated herein by
reference.
Summarized below are the principal transactions that have occurred between
the Partnership and Blue Ridge and its affiliates.
1. The Partnership acquired its interests in the wells described above in
Item 2, "Properties" from Texas Independent Exploration, Inc. ("TIE") for
$900,000 pursuant to an agreement between the Partnership and TIE (the
"Participation Agreement"). Under the terms of the Participation Agreement, the
Partnership also pays to TIE a monthly fee in exchange for TIE's operation of
those wells. TIE entered into a turnkey drilling contract with the Managing
General Partner in the amount of $441,000 to drill the wells and use the
drilling equipment supplied by the Managing General Partner. TIE may
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be deemed to be an affiliate of Island Resources, Inc., the beneficial owner of
500 Units, as the sole shareholder of Island Resources, Inc. is a shareholder
and executive officer of TIE. The Managing General Partner believes that the
transactions described above were at competitive industry rates.
2. As contemplated in the Amended Prospectus, the interests in the wells
acquired by the Partnership, as described in Item 2, "Properties" above, were
acquired initially by Blue Ridge from TIE and subsequently transferred to the
Partnership. Such transfers were made by Blue Ridge at its Property Acquisition
Costs (as defined in the Limited Partnership Agreement).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Independent Auditors Report
Balance Sheet
Statement of Income
Statement of Changes in Partner's Capital
Statement of Cash Flows
Notes to Financial Statements
(a)(2) Financial Statement Schedules
Not Applicable or included in Financial Statements and Notes thereto.
(a)(3) Index to and Description of Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
3.1 Form of Limited Partnership Agreement (Appendix A to the Partnerships Registration Statement on
Form SB-2 (File No. 333-049640))
3.2 Articles of Incorporation of Blue Ridge Group, Inc. (Exhibit 3.2 to the Partnership's Registration
Statement on Form SB-2 (File No. 333-04964C))
3.3 Bylaws of Blue Ridge Group, Inc. (Exhibit 3.3 to the Partnership's Registration Statement on Form
SB-2 (File No. 333-04964C))
10.1 Form of Drilling and Operating Agreement (Exhibit 10.1 to the Partnership's Registration Statement
on Form SB-2 (File No. 333-04964C))
10.2 Form of Drilling and Completion Contract (Exhibit 10.2 to the Partnership's Registration Statement
on Form SB-2 (File No. 333-04964C))
</TABLE>
(b)(1) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter ended
December 31, 1998.
11
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BLUE RIDGE ENERGY 1997A
LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
DECEMBER 31, 1998
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
INDEPENDENT AUDITORS' REPORT........................................................................ F-1
BALANCE SHEET....................................................................................... F-2
STATEMENT OF INCOME................................................................................. F-3
STATEMENT OF CHANGES IN PARTNERS' CAPITAL........................................................... F-4
STATEMENT OF CASH FLOWS............................................................................. F-5
NOTES TO FINANCIAL STATEMENTS....................................................................... F-6 - F-10
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Blue Ridge Energy 1997-A Limited Partnership
Bowling Green, Kentucky
We have audited the accompanying balance sheet of Blue Ridge Energy 1997-A
Limited Partnership as of December 31, 1998 and the related statement of income,
changes in partners' capital and cash flows for the year ended December 31,
1998. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Blue Ridge Energy 1997-A
Limited Partnership as of December 31, 1998, and the results of its operations
and cash flows for the year then ended in conformity with generally accepted
accounting principles.
Samson, Robbins & Associates, P.L.L.C.
Dallas, Texas
March 17, 1999
F-1
<PAGE>
BLUE RIDGE ENERGY 1997-A
LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................ $ 4,848
Accounts Receivable (Note 2)................................ 20,021
----------
TOTAL CURRENT ASSETS.................................... 24,869
OIL AND GAS PROPERTIES, NET (Note 3)........................ 920,269
DEFERRED CHARGES, NET (Note 1).............................. 100,815
----------
TOTAL ASSETS................................................ $1,045,953
----------
----------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts Payable and Accrued Liabilities.................... $ 11,371
----------
TOTAL CURRENT LIABILITIES............................... 11,371
COMMITMENTS AND CONTINGENCIES (Notes 1 and 4)............... --
PARTNERS' CAPITAL (NOTE 5):
Limited Partners' Capital (226 Limited Partnership Units;
$1,000 per Unit).......................................... 226,111
General Partners' Capital (808 Limited Partnership Units;
$1,000 per Unit).......................................... 808,471
----------
TOTAL PARTNERS' CAPITAL................................. 1,034,582
----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL..................... $1,045,953
----------
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
BLUE RIDGE ENERGY 1997-A
LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
REVENUES:
Oil and Gas Sales.................................................................. $ 54,671
Interest Income.................................................................... 4,485
---------
Total Revenues................................................................. 59,156
COSTS AND EXPENSES:
Lease Operating Costs.............................................................. 16,893
Production Taxes................................................................... 3,824
Depreciation, Depletion and Amortization........................................... 12,916
General and Administrative Costs................................................... 7,551
---------
Total Costs and Expenses....................................................... 41,184
---------
NET INCOME......................................................................... $ 17,972
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
BLUE RIDGE ENERGY 1997-A
LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
MANAGING ADDITIONAL
LIMITED GENERAL GENERAL
PARTNERS PARTNER PARTNERS TOTAL
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1997...................................... $ -- $ -- $ -- $ --
Capital Contributions.......................................... 226,000 100,000 708,000 1,034,000
Income......................................................... 3,914 1,797 12,261 17,972
Cash Distributions............................................. (3,803) (1,672) (11,915) (17,390)
---------- ---------- ---------- ------------
BALANCE DECEMBER 31, 1998...................................... $ 226,111 $ 100,125 $ 708,346 $ 1,034,582
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
BLUE RIDGE ENERGY 1997-A
LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................................... $ 17,972
Adjustments to Reconcile Net Income to Net Cash Flows from Operating
Activities:
Depreciation, Depletion and Amortization.................................... 12,916
(Increase) in Accounts Receivable........................................... (20,021)
Increase in Accounts Payable................................................ 11,371
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES....................................... 22,238
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Oil and Gas Properties........................................... (930,600)
---------
NET CASH (USED) IN INVESTING ACTIVITIES......................................... (930,600)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from Partners................................................... 1,034,000
Syndication Costs............................................................. (103,400)
Cash Distributions to Partners................................................ (17,390)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES....................................... 913,210
---------
NET INCREASE IN CASH............................................................ 4,848
CASH AT BEGINNING OF PERIOD..................................................... --
---------
CASH AT END OF PERIOD........................................................... $ 4,848
---------
---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for Interest........................................................ $ --
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
BLUE RIDGE ENERGY 1997-A
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Blue Ridge Energy 1997-A Limited Partnership, a Kentucky Limited Partnership
(the "Partnership") was formed on January 1, 1998 for the purpose of purchasing
and developing interests in oil and gas properties within the continental United
States. Blue Ridge Group, Inc., a Nevada corporation, with offices at 632 Adams
Street, Suite 700, Bowling Green, KY 42101, serves as the Managing General
Partner of the Partnership and made capital contributions of $100,000 to the
Partnership. The Limited Partners and Additional General Partners made total
capital contributions of $934,000 to the Partnership bringing the Partnership's
total contributed capital to $1,034,000.
The partnership follows the accrual method of accounting for financial
reporting purposes.
USE OF 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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
WORKING INTERESTS
Revenues from working interests the Partnership owns are recognized when the
natural gas and oil are produced.
OIL AND GAS PROPERTIES
The Partnership follows the successful efforts method of accounting for oil
and gas properties, using the lease as its accumulation center for capitalized
costs. Under the successful efforts method of accounting, costs which relate
directly to the discovery of oil and gas reserves and all development costs are
capitalized.
Exploration costs which do not result directly in the discovery of oil and
gas reserves are charged to expense as incurred. The capitalized costs,
consisting of lease and well equipment, lease acquisition costs and intangible
development costs are depreciated, depleted and amortized on the
unit-of-production method, based on estimates of recoverable proved developed
oil and gas reserves of each respective lease.
The costs of acquiring undeveloped properties are capitalized as incurred
and carried until the property is capitalized as a producing oil and gas
property, or is surrendered or otherwise disposed of, at which time the full
amount is charged to operations. Maintenance and repairs are charged against
operations as incurred. Renewals and betterments which extend the life or
improve existing properties are capitalized.
Upon disposition or retirement of property and equipment other than oil and
gas properties, the cost and related accumulated depreciation are removed from
the accounts and the gain or loss thereon, if any, is credited or charged to
income. The Partnership recognizes the gain or loss on the sale of either a part
of a proved oil and gas property or of an entire proved oil and gas property
constituting a
F-6
<PAGE>
BLUE RIDGE ENERGY 1997-A
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
part of a field upon the sale or other disposition of such. The unamortized cost
of the property or group of properties, a part of which was sold or otherwise
disposed of, is apportioned to the interest sold and interest retained on the
basis of the fair value of those interests.
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership follows the provisions of SFAS 121--"Accounting for the
Impairment of Long-Lived Assets to be Disposed Of." Consequently, the
Partnership reviews its long-lived assets to be held and used, including oil and
gas properties accounted for under the successful efforts method of accounting,
whenever events or circumstances indicate the carrying value of those assets may
not be recoverable. An impairment loss is indicated if the sum of the expected
future cash flows is less than the carrying amount of the assets.
DEFERRED CHARGES
Organizational and offering costs associated with the public offering in the
amount of $103,400 have been capitalized and are being amortized utilizing the
units-of-production method. Amortization expense was $2,585 during the year
ended December 31, 1998.
INCOME TAXES
The Partnership is not a tax-paying entity. No provision is made in the
accounts of the Partnership for federal or state income taxes, since such taxes
are liabilities of the individual partners, and the amounts thereof depend upon
their respective tax situations.
CASH EQUIVALENTS
For purposes of reporting cash flows, cash includes cash on hand and cash on
deposit.
2. RELATED PARTY TRANSACTIONS
Texas Independent Exploration, Inc. is the operator of the Partnership's oil
and gas properties. Island Resources, Inc., an Additional General Partner,
purchased 500 Units in the Partnership and is owned by a principal shareholder
and executive officer of Texas Independent Exploration, Inc. In addition, Texas
Independent Exploration, Inc. utilized a drilling rig owned by the Blue Ridge
Rig 7 Joint Venture, a joint venture managed by the Managing General Partner, at
standard industry rates under a turnkey drilling contract with the Managing
General Partner.
3. OIL AND GAS PROPERTIES
Oil and Gas Properties, stated at cost, consisted of the following at
December 31, 1998:
<TABLE>
<S> <C>
Oil and Gas Properties............................................ $ 930,600
Less Accumulated Depletion, Depreciation & Amortization........... 10,331
---------
$ 920,269
---------
---------
</TABLE>
F-7
<PAGE>
BLUE RIDGE ENERGY 1997-A
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. OIL AND GAS PROPERTIES (CONTINUED)
Depreciation, depletion and amortization expense was $10,331 during the year
ended December 31, 1998.
4. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Partnership had no outstanding commitments as of December 31, 1998.
CONTINGENCIES
The Partnership's drilling and oil and gas exploration and production
operations are subject to inherent risks, including blowouts, fire and
explosions which could result in personal injury or death, suspended drilling
operations, damage to or destruction of equipment, damage to producing
formations and pollution or other environmental hazards. As a protection against
these hazards, the Managing General Partner maintains general liability
insurance coverage of approximately $2 million limited to $1 million per
occurrence. The Managing General Partner believes it is adequately insured for
public liability and property damage to others with respect to its operations.
However, such insurance may not be sufficient to protect the Partnership against
liability for all consequences of well disasters, extensive fire damage, or
damage to the environment. The Managing General Partner has never been fined or
incurred liability for pollution or other environmental damage in connection
with its operations.
The Partnership's revenues are primarily the result of its oil and natural
gas production. Market prices of oil and natural gas may fluctuate and adversely
affect operating results.
All of the Partnership's operating funds are maintained in one local bank
insured by the FDIC.
5. PARTNERS' CAPITAL
Under the terms of the first amended and restated limited partnership
agreement dated January 1, 1998, net income (loss) from operations and tax
credits are apportioned as follows: 10% to the Managing General Partner, 68% to
the Additional General Partners, and 22% to the Limited Partners based on Units
owned. Net cash receipts (as defined) can be distributed at the discretion of
the Managing General Partner in the same percentages as above.
6. SUPPLEMENTAL INFORMATION ABOUT OIL AND GAS PRODUCING PROPERTIES (UNAUDITED)
Costs incurred in oil and gas acquisition, exploration and development
activities:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Beginning Balance.......................................................... $ --
Acquisition of proved properties........................................... --
Acquisition of unproved properties......................................... --
Development Costs.......................................................... 930,600
--------
$ 930,600
--------
--------
</TABLE>
F-8
<PAGE>
BLUE RIDGE ENERGY 1997-A
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. SUPPLEMENTAL INFORMATION ABOUT OIL AND GAS PRODUCING PROPERTIES (UNAUDITED)
(CONTINUED)
RESERVE QUANTITIES
The following tables present estimates of the Partnership's proved oil and
gas reserves. The Partnership emphasizes that reserve estimates are inherently
imprecise and that estimates of new discoveries are more imprecise than those of
producing oil and gas properties. Accordingly, the estimates are expected to
change as future information becomes available.
<TABLE>
<CAPTION>
OIL (BBLS) GAS (MCF)
----------- ----------
<S> <C> <C>
Reserves--January 1, 1998............................................. -- --
Purchases of minerals in place........................................ -- --
Extensions............................................................ 31,804 1,049,412
Production............................................................ (507) (37,502)
----------- ----------
Reserves--December 31, 1998........................................... 31,297 1,011,910
----------- ----------
----------- ----------
Proved Developed Reserves
January 1, 1998..................................................... -- --
----------- ----------
----------- ----------
December 31, 1998................................................... 31,297 1,011,910
----------- ----------
----------- ----------
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The following table presents the standardized measure of discounted future
net cash flows relating to proved oil and gas reserves in accordance with SFAS
69:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1998
------------
<S> <C>
Future cash inflows............................................................. $2,206,929
Future production costs......................................................... (229,940)
Future severance taxes.......................................................... (154,672)
------------
Future net cash flows........................................................... 1,822,317
10% annual discount for estimated timing of cash flow........................... (671,674)
Standardized measure of discounted future net cash flows........................ $1,150,643
------------
------------
</TABLE>
F-9
<PAGE>
BLUE RIDGE ENERGY 1997-A
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. SUPPLEMENTAL INFORMATION ABOUT OIL AND GAS PRODUCING PROPERTIES (UNAUDITED)
(CONTINUED)
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Standardized measure of discounted future net cash flows (beginning)............ $ --
Sales of oil and gas, net of production costs................................... (33,954)
Net changes in price and production costs....................................... --
Net changes in reserve quantities............................................... --
Change in future income taxes................................................... --
Accretion of discount........................................................... --
Purchases and extensions of reserves in place................................... 1,184,597
------------
Standardized measure of discounted future net cash flows (ending)............... $1,150,643
------------
------------
</TABLE>
The estimates of cash flows and reserve quantities shown above are base on
year-end oil and gas prices for the period. In accordance with SEC guidelines,
the Partnership's estimates of future net revenues from the Partnership's proved
reserves and the PV-10 Value are made using oil and gas sale prices in effect as
of the date of such estimates and are held constant throughout the life of the
properties. The standardized measure of discounted future net cash flows is not
intended to present the fair market value of the Partnership's oil and gas
reserves. An estimate of fair value would also take into account, among other
things, the recovery of reserves in excess of proved reserves, anticipated
future changes in prices and costs, an allowance for return on investment and
the risks inherent in reserve estimates.
F-10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Blue Ridge Energy Fund 1997A
Limited Partnership
(Registrant)
By: BLUE RIDGE GROUP, INC.
Managing General Partner
Date: August 19, 1999 By: s/b Robert D. Burr
Robert D Burr,
Chairman of the Board, President and Chief
Executive Officer
Date: August 19, 1999 By: s/b J. Thomas Cook, Jr.
J. Thomas Cook, Jr.
Director, Senior Vice President--Finance
and Chief Financial Officer
Date: August 19, 1999 By: s/b Gregory B. Shea
Gregory B. Shea
Director, Senior Vice
President--Operations
</TABLE>
