<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
________________________
Date of Report (Date of Earliest event reported):
December 15, 1997
_________________________
SHERIDAN ENERGY, INC.
(Exact name of registrant as specified in its charter)
__________________________
Delaware 1-10201 76-0507664
(State of Incorporation) (Commission File Number) (IRS Employee
Identification No.)
___________________________
1000 Louisiana, Suite 800
Houston, Texas 77002
(Address of principal executive offices)
Registrant's telephone number, including area code
(713) 651-7899
================================================================================
<PAGE>
SHERIDAN ENERGY, INC.
FORM 8-K/A
TABLE OF CONTENTS
PAGE
----
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the Acquisition
Independent Auditors' Report 1
Statements of Revenues and Direct Operating Expenses of
certain properties acquired from Pioneer Natural Resources
USA, Inc. for the years ended December 31, 1996 and 1995
and for the nine month periods ended September 30, 1997
and 1996 (unaudited) 2
Notes to the Statements of Revenues and Direct Operating
Expenses of certain properties acquired from Pioneer Natural
Resources USA, Inc. 3
(b) Pro Forma Financial Information
Preliminary Statement 7
Unaudited Pro Forma Condensed Consolidated Balance Sheet -
September 30, 1997 8
Unaudited Pro Forma Condensed Statement of Operations
for the nine month period ended September 30, 1997 9
Unaudited Pro Forma Condensed Statement of Operations
for the year ended December 31, 1996 10
Notes to Unaudited Pro Forma Condensed Financial Statements 11
(c) Exhibits 14
Signatures 15
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Sheridan Energy, Inc.:
We have audited the accompanying statements of revenues and direct
operating expenses of certain properties acquired from Pioneer Natural Resources
USA, Inc. (the "Pioneer Acquisition") for the years ended December 31, 1996 and
1995. These statements are the responsibility of the management of Sheridan
Energy, Inc. Our responsibility is to express an opinion on these statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of revenues and direct
operating expenses 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 statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
The accompanying statements of revenues and direct operating expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission (for inclusion in Form 8-K/A of Sheridan
Energy, Inc. as described in Note 1) and are not intended to be a complete
presentation of the Pioneer Acquisition interests' revenues and expenses.
In our opinion, the statements of revenues and direct operating expenses
referred to above present fairly, in all material respects, the revenues and
direct operating expenses of the Pioneer Acquisition for the years ended
December 31, 1996 and 1995, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Midland, Texas
February 11, 1998
1
<PAGE>
SHERIDAN ENERGY, INC.
Statements of Revenues and Direct Operating Expenses
of certain properties acquired from Pioneer Natural Resources USA, Inc.
(in thousands)
Years Ended Nine Months
December 31, Ended September 30,
----------------- -----------------
1996 1995 1997 1996
---- ---- ---- ----
(unaudited)
Revenues:
Natural gas $11,306 $ 8,264 $ 7,693 $ 7,903
Oil and condensate 3,414 3,040 1,986 2,536
------- ------- ------- -------
14,720 11,304 9,679 10,439
Direct operating expenses:
Lease operating 2,941 3,699 2,193 1,950
Workover 930 941 190 603
Production taxes 963 755 627 681
------- ------- ------- -------
4,834 5,395 3,010 3,234
------- ------- ------- -------
Revenues in excess of direct
operating expenses $ 9,886 $ 5,909 $ 6,669 $ 7,205
======= ======= ======= =======
See the accompanying notes to these statements.
2
<PAGE>
SHERIDAN ENERGY, INC.
Notes to the Statements of Revenues and Direct Operating Expenses of certain
properties acquired from Pioneer Natural Resources USA, Inc.
Note 1. Basis of Presentation
On December 15, 1997, Sheridan Energy, Inc. (the "Company") acquired from
Pioneer Natural Resources USA, Inc. ("Pioneer") certain oil and gas properties
(the "Pioneer Acquisition") for approximately $46.8 million. The accompanying
statements of revenues and direct operating expenses for the Pioneer Acquisition
do not include general and administrative expenses, interest income or expense,
a provision for depreciation, depletion and amortization, or any provision for
income taxes since historical expenses of this nature incurred by Pioneer are
not necessarily indicative of the costs to be incurred by the Company.
Historical financial information reflecting financial position, results of
operations, and cash flows of the Pioneer Acquisition, are not presented because
the purchase price was assigned to the oil and gas property interests acquired.
Other assets acquired and liabilities assumed were not material. Accordingly,
the historical statements of revenues and direct operating expenses of the
Pioneer Acquisition are presented in lieu of the financial statements required
under Item 3-10(b) of Securities and Exchange Commission Regulation S-B.
Revenues in the accompanying statements of revenues and direct operating
expenses are recognized on the sales method. Under this method, revenues are
recognized based on actual volumes of oil and gas sold to purchasers. Direct
operating expenses are recognized on the accrual method.
Interim Statements of Revenues and Direct Operating Expenses
The interim financial information for the nine months ended September 30,
1997 and 1996, is unaudited. However, in the opinion of management, the interim
statements of revenues and direct expenses include all the necessary adjustments
to fairly present the results of the interim period and all such adjustments are
of a normal recurring nature. The interim statements of revenues and direct
operating expenses should be read in conjunction with the audited statements of
revenues and direct operating expenses for the years ended December 31, 1996 and
1995.
Note 2. Supplementary Information for Oil and Gas Producing Activities
(Unaudited)
Estimated Quantities of Proved Oil and Gas Reserves
The following schedule presents estimates of proved oil and natural gas
reserves attributable to the Pioneer Acquisition, all of which are located in
the United States. Proved reserves are estimated quantities of oil and natural
gas which geological and engineering data demonstrate with reasonable certainty
to be recoverable in future years from known reservoirs under existing economic
and operating conditions. Proved developed reserves are those which are expected
to be recovered through existing wells with existing equipment and operating
methods. Reserves are stated in thousands of barrels ("Mbbl") of oil and
condensate and millions of cubic feet ("Mmcf") of natural gas.
(Continued)
3
<PAGE>
SHERIDAN ENERGY, INC.
Notes to the Statements of Revenues and Direct Operating Expenses of certain
properties acquired from Pioneer Natural Resources USA, Inc.
1996 1995
------------ ------------
Oil Gas Oil Gas
--- --- --- ---
Proved reserves:
Beginning of year 1,343 51,228 1,529 56,611
Revisions of previous estimates 1 - (1) 125
Production (168) (5,100) (185) (5,508)
----- ------ ----- ------
End of year 1,176 46,128 1,343 51,228
===== ====== ===== ======
Proved-developed reserves 1,051 42,592 1,212 45,476
===== ====== ===== ======
Estimating economically recoverable crude oil and natural gas reserves and
the future net revenues therefrom is not an exact science and is based upon a
number of variable factors, such as historical production of the subject
properties as compared with similar producing properties, and assumptions such
as the effects of regulation by governmental agencies, future taxes, and
development and other costs, all of which may vary considerably from actual
results. All such estimates are to some degree speculative, and classifications
of reserves are only attempts to define the degree of speculation involved. For
these reasons, estimates of economically recoverable reserves of crude oil and
natural gas attributable to any particular group of properties, the
classification and risk of recovering such reserves, and estimates of the future
net revenues expected therefrom, prepared by different engineers or by the same
engineers at different times, may vary substantially.
Proved oil and natural gas reserves are the estimated quantities of crude oil
and natural gas which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Estimates with respect to
proved undeveloped and proved developed non-producing reserves that may be
developed and produced in the future are based upon volumetric calculations or
upon analogy to similar types of reservoirs. Later studies of the same
reservoirs based upon production history may result in variations, which may be
substantial. The actual production, revenues, severance and excise taxes,
development costs, and operating expenditures with respect to the Pioneer
Acquisition's reserves as reflected herein may vary from estimates, and such
variances may be material.
(Continued)
4
<PAGE>
SHERIDAN ENERGY, INC.
Notes to the Statements of Revenues and Direct Operating Expenses of certain
properties acquired from Pioneer Natural Resources USA, Inc.
Standardized Measure of Discounted Future Net Cash Flows of Proved Oil and
Gas Reserves
The following schedules present the standardized measure of estimated
discounted future net cash flows and changes therein attributable to the
Pioneer Acquisition's proved oil and gas reserves ("Standardized Measure"), in
accordance with the standards established by the Financial Accounting Standards
Board through its Statement No. 69. The estimates of future cash flows and
future production and development costs are based on year end sales prices for
oil and gas, estimated future production of proved reserves, and estimated
future production and development costs of proved reserves, based on current
costs and economic conditions. The estimated future net cash flows are then
discounted at a rate of 10%.
(Continued)
5
<PAGE>
SHERIDAN ENERGY, INC.
Notes to the Statements of Revenues and Direct Operating Expenses of certain
properties acquired from Pioneer Natural Resources USA, Inc.
Since the Standardized Measure was prepared using the prevailing economic
conditions existing at each applicable year end, it is emphasized that such
conditions continually change, as evidenced by the fluctuations in oil and
natural gas prices during recent years. Weighted average year end oil and
natural gas prices utilized in computing the Standardized Measure for 1996 were
$22.88 and $3.49, respectively, and for 1995 were $16.93 and $2.06,
respectively. Accordingly, such information should not serve as a basis in
making any judgment on the potential value of the Pioneer Acquisition's
recoverable reserves, or in estimating future results of operations.
<TABLE>
<CAPTION>
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Future net cash flows:
Future revenues $187,889 $128,274
-------- --------
Future production costs (47,835) (44,912)
Future development costs (6,269) (7,083)
-------- --------
Future pre-tax cash flows 133,785 76,279
10% discount factor (59,810) (32,959)
-------- --------
Standardized Measure, discounted at 10%, of future net cash
flows $ 73,975 $ 43,320
======== ========
Changes in Standardized Measure:
Standardized Measure, beginning of year $ 43,320 $ 42,762
-------- --------
Revisions of previous quantity estimates - 99
Net changes in prices and production costs 36,813 3,033
Sales of oil and natural gas produced, net of production
costs (9,886) (5,909)
Accretion of discount 4,332 4,276
Changes in production rates and other, net (604) (941)
-------- --------
Net increase 30,655 558
-------- --------
Standardized Measure, end of year $ 73,975 $ 43,320
======== ========
</TABLE>
6
<PAGE>
ITEM 7(b) PRO FORMA FINANCIAL INFORMATION
- -------------------------------------------
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma condensed financial statements of Sheridan Energy,
Inc. (the "Company") have been prepared to give effect to the acquisition of
certain properties of Pioneer Natural Resources USA, Inc. (the "Pioneer
Acquisition") and related financing transactions of new issuances of the
Company's redeemable senior preferred stock and shares of the Company's common
stock to Enron Capital & Trade Resources Corp. ("Enron"), and the entering into
a First Amended and Restated Credit Agreement with Bank One, Texas N.A., as if
such transactions had taken place as of January 1, 1996 for the Statement of
Operations or as of September 30, 1997 for the Condensed Balance Sheet. This
information should be read in conjunction with the Consolidated Financial
Statements of Sheridan Energy, Inc. Form 10-QSB for the quarterly period ended
September 30, 1997 and TGX Corporation's Annual Report on Form 10-KSB for the
year ended December 31, 1996 and the Statements of Revenues and Direct Operating
Expenses included herein with respect to the properties acquired in the Pioneer
Acquisition.
7
<PAGE>
SHERIDAN ENERGY, INC.
Pro Forma Condensed Balance Sheet - Unaudited
September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Sheridan Pro Forma Sheridan
Energy, Inc. Adjustments Energy, Inc.
------------- ----------- ------------
<S> <C> <C> <C>
ASSETS
- ------
Current assets $ 2,108 - $ 2,108
Property and equipment, net 13,581 $46,803(a) 60,384
Other assets 936 724(b) 1,660
------- ---------- -------
Total assets $16,625 $47,527 $64,152
======= ========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities $ 2,902 $ 361(b) $ 3,263
Long-term debt 2,200 28,013(c) 30,213
New Preferred Stock - 10,000(d) 10,000
Common stock 42 16(d) 58
Additional paid-in-capital 15,780 9,137(d) 24,917
Accumulated deficit (4,299) - (4,299)
------- --------- -------
Total liabilities and
stockholders' equity $16,625 $47,527 $64,152
======= ========= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
8
<PAGE>
SHERIDAN ENERGY, INC.
Pro Forma Condensed Statement of Operations - Unaudited
Nine Months Ended September 30, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Sheridan Pioneer Pro Forma Sheridan
Energy, Inc. Acquisition Adjustments Energy, Inc.
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 5,448 $ 9,679 $ - $ 15,127
-------- ------- -------- --------
Costs and expenses:
Oil and gas production 1,694 3,010 - 4,704
Depreciation, depletion & amortization 1,291 - 3,817(e) 5,108
General and administrative 1,496 - 900(f) 2,396
Exploration costs 85 - - 85
Interest 128 - 1,884(g) 2,012
-------- ------- -------- --------
4,694 3,010 6,601 14,305
-------- ------- -------- --------
Net income (loss) before federal
income taxes and extraordinary gain 754 6,669 (6,601) 822
-------- ------- -------- --------
Provision for federal income taxes:
Current 15 - 1(h) 16
Deferred 250 - - 250
-------- ------- -------- --------
265 - 1 266
-------- ------- -------- --------
Net income (loss) 489 6,669 (6,602) 556
Preferred stock dividends (5,841) - - (5,841)
New Preferred Stock dividends - - (954)(i) (954)
Accretion of senior preferred
redemption value (3,205) - - (3,205)
-------- ------- -------- --------
Net income (loss)
applicable to common stock ($8,557) $ 6,669 ($7,556) ($9,444)
======== ======= ======== ========
Basic loss per share of common stock ($2.00) ($1.61)
======== ========
Weighted average shares outstanding 4,281 1,600 (d) 5,881
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
9
<PAGE>
SHERIDAN ENERGY, INC.
Pro Forma Condensed Statement of Operations - Unaudited
Year Ended December 31, 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Sheridan Pioneer Pro Forma Sheridan
Energy, Inc. Acquisition Adjustments Energy, Inc.
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues (See Note 1) $ 13,800 $14,720 $ - $ 28,520
-------- ------- -------- --------
Costs and expenses:
Oil and gas production 2,211 4,834 - 7,045
Depreciation, depletion &
amortization 964 - 5,864(e) 6,828
General and administrative 2,437 - 1,200(f) 3,637
Exploration costs 164 - - 164
Interest 207 - 2,512(g) 2,719
-------- ------- -------- --------
5,983 4,834 9,576 20,393
-------- ------- -------- --------
Income (loss) before federal
income taxes and extraordinary gain 7,817 9,886 (9,576) 8,127
Provision for federal income taxes:
Current 143 - 19 (h) 162
Deferred (930) - - (930)
-------- ------- -------- --------
(787) - 19 (768)
-------- ------- -------- --------
Net income (loss) before
extraordinary gain 8,604 9,886 (9,595) 8,895
Extraordinary gain, net of income
taxes of $37 1,831 - - 1,831
-------- ------- -------- --------
Net income (loss) 10,435 9,886 (9,595) 10,726
Senior preferred stock dividends (13,143) - - (13,143)
New Preferred Stock dividends - - (1,273)(i) (1,273)
Accretion of senior preferred
redemption value (6,104) - - (6,104)
-------- ------- -------- --------
Net income (loss) applicable to
common stock ($8,812) $ 9,886 ($10,868) ($9,794)
======== ======= ======== ========
Basic income (loss) per share of common
stock:
Before extraordinary gain ($2.42) ($1.94)
Extraordinary gain 0.42 0.31
-------- -------
Basic income (loss) per share ($2.00) ($1.63)
======== =======
Weighted average shares outstanding 4,406 1,600 (d) 6,006
======== ===== =======
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
10
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The following unaudited pro forma condensed financial statements
are presented to reflect the estimated impact on the historical consolidated
financial statements of Sheridan Energy, Inc. (the "Company"), assuming the
acquisition of certain properties of Pioneer Natural Resources USA, Inc. (the
"Pioneer Acquisition") and related financing transactions of issuance of the
Company's redeemable senior preferred stock ("New Preferred Stock") for $10
million due December 15, 2002 which bears a cash divident rate of 12% or, at the
Company's election, paid-in-kind dividend rate of 13.5%, and issuance of
1,600,000 shares of common stock for $10,000,000, less related expenses, to
Enron Capital & Trade Resources, Corp. ("Enron"), and the addition of
$28,013,000 of debt pursuant to the First Amended and Restated Credit Agreement
with Bank One, Texas N.A. (the "Credit Agreement") as if such transactions had
taken place as of January 1, 1996 for the unaudited Pro Forma Condensed
Statement of Operations and as of September 30, 1997 for the unaudited Pro Forma
Condensed Balance Sheet.
The unaudited pro forma condensed financial statements give effect only to
the adjustments set forth in the accompanying notes to unaudited pro forma
condensed financial statements. Unaudited pro forma information is not
necessarily indicative of the results of operations or financial position which
would have occurred had the Pioneer Acquisition and related financing
transactions been consummated on the dates indicated, nor is it necessarily
indicative of the Company's future results of operations or financial position.
Merger
The Pro Forma Condensed Balance Sheet as of September 30, 1997 and Pro
Forma Condensed Statement of Operations for the nine months ended September 30,
1997 reflect, in the historic results, the impact from the merger (the
"Merger"), effective June 12, 1997 (the "Effective Date"), of the Company with
its former parent, TGX Corporation ("TGX"), and the issuance of 4,394,285 shares
of Company common stock in exchange for all of TGX's senior preferred shares
outstanding and the cancellation of TGX's previously issued preferred stock and
common stock and related dividends and accretion expense. The December 31, 1996
weighted average shares and per share data have been restated to reflect
inssuance of the Company's common stock on a retroactive basis. All preferred
stock dividends and accretion were eliminated as of the Effective Date of the
Merger; however, all pre-Effective Date dividends and accretion charges are
reflected in the historical earnings results applicable to common stocks.
Merger expenses, consisting primarily of professional fees, proxy
preparation, printing and solicitation costs and stock issuance costs, were
charged to expense as incurred during 1996 and 1997. Included in general and
administrative expenses for the nine months ended September 30, 1997 and the
year ended December 31, 1996 are Merger expenses of $181,000 and $440,000,
respectively. No adjustments to the Pro Forma Statement of Operations have been
made regarding these expenses.
The following table summarizes certain pro forma condensed consolidated
results of operations data as if the Merger had been effective as of January 1,
1996 (in thousands, except per share data):
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Total revenues $15,127 $28,520
Net income (loss) before extraordinary gain $ (398) $ 7,619
Net income (loss) applicable to common stock $ (398) $ 9,450
Basic income (loss) per share of common stock:
Before extraordinary gain $ (0.07) $ 1.27
Extraordinary gain -- $ 0.31
------- -------
$ (0.07) $ 1.58
======= =======
Average common shares outstanding 5,881 6,006
</TABLE>
11
<PAGE>
Litigation Settlement
On April 12, 1996, TGX entered into a settlement agreement with National
Fuel Gas Distribution Corporation ("NFG") and the Public Service Commission of
the State of New York. Pursuant to the Settlement Agreement, TGX received
$7,200,000 from NFG and all parties to the Settlement Agreement have dismissed
all claims and counterclaims against each other. In conjunction with the NFG
settlement, TGX recoginzed a net litigation settlement gain of $7,100,000, which
is included in revenues as shown in the Pro Forma Condensed Statement of
Operations for the year ended December 31, 1996.
Note 2. Pro Forma Adjustments
Balance Sheet
(a) To record the net Pioneer Acquisition property costs.
(b) To record the additional loan fees incurred related to the Credit
Agreement of $361,000 and related current liability and deferred
capitalized issuance costs related to the New Preferred Stock of
$363,000.
(c) To record the additional bank debt incurred under the Credit Agreement
for the Pioneer Acquisition and related expenses.
(d) To record the issuance of $10,000,000 of New Preferred Stock and of
1,600,000 shares of common stock for $10,000,000 less related expenses
of $847,000.
Statement of Operations
(e) To record estimated incremental depreciation and amortization expense
for the properties acquired in the Pioneer Acquisition.
(f) To record estimated incremental general and administrative expenses of
$100,000 per month necessary to administer the properties acquired in
the Pioneer Acquisition.
(g) To adjust interest expense to reflect additional borrowings for the
Pioneer Acquisition based on the current borrowing rate of 8.5%. Also
included is the amortization of loan fees of $361,000 over the term of
the Credit Agreement (33 months).
Incremental interest expense includes the following components:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Additional interest on borrowings
for the Pioneer Acquisition $1,786 $2,381
Amortization of loan fees 98 131
------ ------
$1,884 $2,512
====== ======
</TABLE>
(h) To record income tax expense on the incremental income associated with
the Pioneer Acquisition at the Company's alternative minimum effective
rate of 2%. The historical results reflect the utilization of then
available net operating losses, the historical use of which would not
have been materially changed by the Pioneer Acquisition and related
financing.
(i) To record estimated New Preferred Stock dividends at the cash dividend
rate of 12%. Also included is the amortization of capitalized issuance
costs related to the New Preferred Stock of $363,000 over five years.
12
<PAGE>
Note 3. Supplemental Oil and Gas Reserve Information
The following table presents estimates of proved oil and gas reserves
prepared by the Company as of January 1, 1997, all of which are located in the
United States. Reserves were estimated in accordance with guidelines
established by the Securities and Exchange Commission and FASB which require
that reserve estimates be prepared under existing economic and operating
conditions with no provision for price and cost escalations, except by
contractual arrangements. The Company has presented the pro forma reserve
estimates utilizing an oil price of $23.58 per barrel and a gas price of $3.37
per Mcf as of January 1, 1997. The pro forma information assumes that the
Pioneer Acquisition took place on January 1, 1996. Proved reserves are
estimated quantities of oil and natural gas which geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions. Proved
developed reserves are those which are expected to be recovered through existing
wells with existing equipment and operating methods. Reserves are stated in
thousands of barrels ("MBbl") of oil and condensate and millions of cubic feet
("MMcf") of natural gas.
<TABLE>
<CAPTION>
Oil and Condensate
------------------------------------------
Pro Forma
Sheridan Pioneer Sheridan
Energy, Inc. Acquisition Energy, Inc.
------------- ------------ -------------
<S> <C> <C> <C>
Proved Reserves:
Beginning of year, January 1, 1996 944 1,343 2,287
Sales of reserves-in-place (8) - (8)
Purchase of reserves-in-place 45 - 45
Extensions and discoveries 57 - 57
Revisions of previous estimates 19 1 20
Production (76) (168) (244)
------ ------ ------
End of year, January 1, 1997 981 1,176 2,157
====== ====== ======
Proved developed reserves 525 1,051 1,576
====== ====== ======
Gas
-------------------------------------------
Pro Forma
Sheridan Pioneer Sheridan
Energy, Inc. Acquisition Energy, Inc.
------------ ----------- ------------
Proved Reserves:
Beginning of year, January 1, 1996 12,200 51,228 63,428
Sales of reserves-in-place (100) - (100)
Purchase of reserves-in-place 4,100 - 4,100
Extensions and discoveries 600 - 600
Revisions of previous estimates 500 - 500
Production (1,500) (5,100) (6,600)
------ ------ ------
End of year, January 1, 1997 15,800 46,128 61,928
====== ====== ======
Proved developed reserves 13,400 42,592 55,992
====== ====== ======
</TABLE>
Oil and gas reserve quantity estimates are subject to numerous
uncertainties inherent in the estimation of quantities of proved reserves and in
the projection of future rates of production and the timing of development
expenditures. The accuracy of such estimates is a function of the quality of
available data and of engineering and geological interpretation and judgment.
Results of subsequent drilling, testing, and production may cause either upward
or downward revision of previous estimates. Further, the volumes considered to
be commercially recoverable fluctuate with changes in prices and operating
costs. The Company emphasizes that reserve estimates are inherently imprecise
and that estimates of new discoveries are more imprecise that those of currently
producing oil and gas properties. Accordingly, these estimates are expected to
change as additional information becomes available in the future.
13
<PAGE>
Standardized Measure of Discounted Future Net Cash Flows of Proved Oil and Gas
Reserves
The following schedules present the standardized measure of estimated
discounted future net cash flows and changes therein attributable to the
Company's proved oil and gas reserves as of January 1, 1997 ("Standardized
Measure"), in accordance with the standards established by the Financial
Accounting Standards Board through it's Statement No. 69. The estimates of
future cash flows and future production and development costs are based on year
end sales prices for oil and gas, estimated future production of proved
reserves, and estimated future production and development costs of proved
reserves, based on current costs and economic conditions, less estimated future
income tax expense. The estimated future net cash flows are then discounted at a
rate of 10%.
<TABLE>
<CAPTION>
Pro Forma
Sheridan Pioneer Sheridan
Energy, Inc Acquisition Energy, Inc.
------------ ------------ -------------
(in thousands)
<S> <C> <C> <C>
Future Net Cash Flows:
Future revenues $ 76,568 $187,889 $ 264,457
-------- -------- ---------
Future production costs (21,793) (47,835) (69,628)
Future development costs (3,830) (6,269) ( 10,099)
-------- -------- ---------
(25,623) (54,104) (79,727)
-------- -------- ---------
Future pre-tax cash flows 50,945 133,785 184,730
Future income taxes (4,444) (42,387) (46,831)
-------- -------- ---------
Future net cash flows 46,501 91,398 137,899
10% discount factor (19,257) (38,522) (57,779)
-------- -------- ---------
Standardized Measure, discounted
at 10%, of future net cash flows $ 27,244 $ 52,876 $ 80,120
======== ======== =========
Changes in Standardized Measure:
Standardized Measure, January 1, 1996 $ 11,804 $ 43,320 $ 55,124
-------- -------- ---------
Purchases of reserves in place 5,818 - 5,818
Extensions and discoveries 2,377 - 2,377
Revisions of previous quantity estimates 878 - 878
Changes in future development costs (539) - (539)
Development costs incurred during the
period that reduced future development
costs 538 - 538
Net changes in prices and production costs 10,511 36,813 47,324
Sales of oil and natural gas produced, net
of production costs (2,848) (9,886) (12,734)
Net changes in income taxes (2,012) (21,099) (23,111)
Accretion of discount 1,180 4,332 5,512
Sale of reserves-in-place (134) - (134)
Changes in production rates and other, net (329) (604) (933)
-------- -------- ---------
Net increase 15,440 9,556 24,996
-------- -------- ---------
Standardized Measure, January 1, 1997 $ 27,244 $ 52,876 $ 80,120
======== ======== =========
</TABLE>
ITEM 7(C) EXHIBITS
- --------------------
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SHERIDAN ENERGY, INC.
Date: February 27, 1998 By: /s/ Michael A. Gerlich
----------------------------
Michael A. Gerlich
Vice President
and Chief Financial Officer
15
