<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K/A
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 17, 1999
EEX CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
TEXAS 1-12905 75-2421863
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
</TABLE>
2500 CITYWEST BOULEVARD, SUITE 1400, HOUSTON, TEXAS 77042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including Area Code: (713) 243-3100
================================================================================
<PAGE>
EEX CORPORATION
FORM 8-K/A
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.................... 1
(a) Financial Statements of the Acquisition.......... 1
Report of Independent Auditors................... 1
Statements of Revenues and Direct Operating Expenses
of Certain Oil and Gas Properties and Pipeline
Assets Acquired from Tesoro Petroleum Corporation
and Subsidiaries............................... 2
Notes to the Statements of Revenues and Direct
Operating Expenses of Certain Oil and Gas
Properties and Pipeline Assets Acquired from
Tesoro Petroleum Corporation and Subsidiaries... 3
(b) Pro Forma Financial Information................... 10
Unaudited Pro Forma Consolidated
Financial Statements............................ 10
Pro Forma Consolidated Balance Sheet - Unaudited
September 30, 1999 and December 31, 1998........ 11,12
Pro Forma Consolidated Statement of Operations -
Unaudited Nine Month Period Ended September 30,
1999 and Twelve Month Period Ended
December 31, 1998............................... 13,14
Notes to Unaudited Pro Forma Consolidated Financial
Statements...................................... 15
(c) Exhibits.......................................... 17
SIGNATURES..................................................... 18
</TABLE>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the Acquisition
REPORT OF INDEPENDENT AUDITORS
Board of Directors
EEX Corporation
We have audited the accompanying statements of revenues and direct
operating expenses of certain oil and gas properties and pipeline assets
acquired from Tesoro Petroleum Corporation and certain of its subsidiaries (the
"Acquired Business") by EEX Corporation and its subsidiaries (the "Company") for
the years ended December 31, 1998, 1997, and 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the 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 presentation of
the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying financial statements were prepared as described in Note
1 for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission and are not intended to be a complete presentation of
the revenues and direct operating expenses of the Acquired Business.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the revenues and direct operating expenses of
the Acquired Business for the years ended December 31, 1998, 1997 and 1996 in
conformity with accounting principles generally accepted in the United States.
Ernst & Young LLP
Houston, Texas
February 14, 2000
1
<PAGE>
EEX CORPORATION
Statements of Revenues and Direct Operating Expenses of Certain Oil and Gas
Properties and Pipeline Assets Acquired from Tesoro Petroleum Corporation and
Subsidiaries
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
(In thousands)
Revenues:
Natural gas, oil and condensate $68,152 $68,843 $88,358
Gas transportation 3,332 4,765 5,356
------------------------------------------
Total revenues 71,484 73,608 93,714
Direct operating expenses 10,039 7,675 6,125
------------------------------------------
Revenues in excess of direct operating
expenses $61,445 $65,933 $87,589
==========================================
</TABLE>
See the accompanying notes to these statements.
2
<PAGE>
EEX CORPORATION
Notes to the Statements of Revenues and Direct Operating Expenses of Certain Oil
and Gas Properties and Pipeline Assets Acquired from Tesoro Petroleum
Corporation and Subsidiaries
1. Basis of Presentation
On December 17, 1999, subsidiaries of EEX Corporation (the "Company") closed a
purchase of certain oil and gas properties and pipeline assets of Tesoro
Petroleum Corporation and subsidiaries. A Stock Purchase Agreement dated as of
October 8, 1999, between EEX Operating LLC ("EEX Operating") and Tesoro
Petroleum Corporation and Tesoro Gas Resources Company, Inc. was amended on
December 16, 1999, and three corollary purchase agreements were entered into on
December 17, 1999. Collectively, the purchase agreements provided for the
purchase of (i) all of the member interests in four limited liability companies
which, together, own all of the partnership interests of Tesoro E&P Company,
L.P. (whose name was changed after closing to EEX E&P Company, L.P., "E&P
L.P."), owner of the oil and gas assets ("Oil and Gas Interests"), and (ii) all
of the issued and outstanding stock of Tesoro Natural Gas Company (whose name
was changed after closing to EEX Natural Gas Company) and Tesoro Gathering
Company (whose name was changed after closing to EEX Gathering Company), which,
together, own all of the partnership interests in Tesoro Pipeline Company, L.P.
(whose name was changed after closing to EEX Pipeline Company, L.P.), which owns
partnership interests in pipeline and gathering systems ("Pipeline Interests").
The adjusted purchase price for the Oil and Gas Interests was $209.1 million and
for the Pipeline Interests, $5.7 million. The Oil and Gas Interests and the
Pipeline Interests are collectively referred to as the "Acquired Business."
EEX Operating acquired the Pipeline Interests. The Oil and Gas Interests
were acquired by EEX Reserves Funding LLC ("ERF"), a limited liability company
half-owned by subsidiaries of the Company, EEX Operating (49%) and EEX Capital,
Inc. (1%), and half-owned by a third party.
The revenues and direct operating expenses associated with the Acquired
Business were derived from the Acquired Business accounting records. Revenues,
as set forth in the accompanying financial statements, include oil and gas
revenues and pipeline revenues and are reported on a net interest basis. Direct
operating expenses, as set forth in the accompanying financial statements,
include labor, services, repairs and maintenance, supplies utilized to operate
and maintain the wells, pipelines and related equipment, net processing costs,
and property taxes.
3
<PAGE>
EEX CORPORATION
Notes to the Statements of Revenues and Direct Operating Expenses of Certain Oil
and Gas Properties and Pipeline Assets Acquired from Tesoro Petroleum
Corporation and Subsidiaries--(Continued)
The accompanying statements vary from an income statement in that they do not
show certain expenses that were incurred in connection with ownership and
operation of the acquired properties including exploration expenses, general and
administrative expenses and income taxes. These costs were not separately
allocated to the properties of the Acquired Business accounting records and any
pro forma allocation would be time consuming and expensive and would not be a
reliable estimate of what these costs would actually have been had the acquired
properties been operated historically as a stand-alone entity. In addition,
these allocations, if made using historical general and administrative
structures and tax burdens, would not produce allocations that would be
indicative of the historical performance of the acquired properties had they
been assets of the Company due to the greatly differing size, structure,
operations and accounting of the two companies. The accompanying financial
statements also do not include provisions for depreciation, depletion, and
amortization, as such amounts would not be indicative of those costs which would
be incurred by the Company upon allocation of the purchase price.
For the above reasons, primarily the lack of segregated or easily obtainable
reliable data on asset values and related liabilities, a balance sheet is not
presented for the Acquired Business.
At the end of the economic life of the acquired properties, certain
restoration and abandonment costs will be incurred by the respective owners. No
accrual for these costs is included in direct operating expenses.
The sales method is used for recording revenues from gas sales. Under this
approach, revenues were based on the monthly production sold by the Acquired
Business.
4
<PAGE>
EEX CORPORATION
Notes to the Statements of Revenues and Direct Operating Expenses of Certain Oil
and Gas Properties and Pipeline Assets Acquired from Tesoro Petroleum
Corporation and Subsidiaries--(Continued)
2. INTERIM STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF CERTAIN OIL
AND GAS PROPERTIES AND PIPELINE ASSETS ACQUIRED FROM TESORO PETROLEUM
CORPORATION AND SUBSIDIARIES (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
---------------------------------------
1999 1998
---------------------------------------
<S> <C> <C>
(In thousands)
Revenues:
Natural gas, oil and condensate $41,596 $51,759
Gas transportation 1,960 2,606
---------------------------------------
Total revenues 43,556 54,365
Direct operating expenses 8,127 7,030
---------------------------------------
Revenues in excess of direct operating
expenses $35,429 $47,335
=======================================
</TABLE>
3. SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED)
Proved Reserve Estimates
The following estimates of the net proved oil and gas reserves of the
Acquired Business are based on evaluations prepared by Netherland, Sewell &
Associates, Inc., except for net reserves at December 31, 1998 and 1997 which
were prepared by in-house engineers of the Acquired Business and audited by
Netherland, Sewell & Associates, Inc. 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. Reserve estimates are inherently imprecise and
estimates of new discoveries are more imprecise than those of producing oil and
gas properties. Accordingly, reserve estimates are expected to change as
additional performance data becomes available.
5
<PAGE>
EEX CORPORATION
Notes to the Statements of Revenues and Direct Operating Expenses of Certain Oil
and Gas Properties and Pipeline Assets Acquired from Tesoro Petroleum
Corporation and Subsidiaries--(Continued)
Estimated quantities of proved domestic oil and gas reserves and of changes
in quantities of proved developed and undeveloped reserves in millions of
barrels ("MMBbls") and billions of cubic feet ("Bcf") for each of the periods
indicated were as follows:
<TABLE>
<CAPTION>
OIL GAS
(MMBBLS) (BCF)
-------------------------------
<S> <C> <C>
Proved reserves at December 31, 1995 -- 106.4
Production -- (32.1)
Extensions, discoveries and others additions -- 23.0
Revisions of previous estimates -- (4.8)
Purchase of minerals in-place 0.2 24.3
-------------------------------
Proved reserves at December 31, 1996 0.2 116.8
Production -- (31.4)
Extensions and discoveries 0.1 33.6
Revisions of previous estimates -- (3.0)
Purchases of minerals in place 0.4 30.5
-------------------------------
Proved reserves at December 31, 1997 0.7 146.5
Production (0.1) (33.0)
Extensions and discoveries 0.3 40.9
Revisions of previous estimates -- (12.3)
Sales of minerals in place -- (1.5)
Purchases of minerals in place 0.9 22.3
-------------------------------
Proved reserves at December 31, 1998 1.8 162.9
===============================
Proved developed reserves at:
December 31, 1996 0.1 107.5
December 31, 1997 0.3 112.4
December 31, 1998 1.2 129.0
</TABLE>
6
<PAGE>
EEX CORPORATION
Notes to the Statements of Revenues and Direct Operating Expenses of Certain Oil
and Gas Properties and Pipeline Assets Acquired from Tesoro Petroleum
Corporation and Subsidiaries--(Continued)
Standardized Measure of Discounted Future Net Cash Flows
The following table sets forth the computation of the standardized measure
of discounted future net cash flows relating to proved reserves and the changes
in such cash flows in accordance with SFAS No. 69. The standardized measure is
the estimated excess future cash inflows from proved reserves less estimated
future production and development costs, estimated future income taxes and a
discount factor. Future cash inflows represent expected revenues from
production of year-end quantities of proved reserves based on year-end prices
and any fixed and determinable future escalation provided by contractual
arrangements in existence at year-end. Escalation based on inflation, federal
regulatory changes and supply and demand are not considered. Estimated future
production costs related to year-end reserves are based on year-end costs. Such
costs include, but are not limited to, production taxes and direct operating
costs. Inflation and other anticipatory costs are not considered until the
actual cost change takes effect. Estimated future income tax expenses are
computed using the appropriate year-end statutory tax rates. Consideration is
given for the effects of permanent differences, tax credits and allowances. A
discount rate of 10% is applied to the annual future net cash flows.
The methodology and assumptions used in calculating the standardized
measure are those required by SFAS No. 69. The standardized measure is not
intended to be representative of the fair market value of the proved reserves.
The calculations of revenues and costs do not necessarily represent the amounts
to be received or expended by the Company.
7
<PAGE>
EEX CORPORATION
Notes to the Statements of Revenues and Direct Operating Expenses of Certain Oil
and Gas Properties and Pipeline Assets Acquired from Tesoro Petroleum
Corporation and Subsidiaries--(Continued)
The standardized measure of discounted future net cash flows related to
proved oil and gas reserves at December 31 follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Future cash inflows $330.4 $347.9 $376.1
Future production costs (77.8) (81.0) (66.5)
Future development costs (24.4) (29.4) (13.2)
------------------------------------------
Future net cash flows before
income tax expense 228.2 237.5 296.4
10% annual discount factor (88.3) (70.0) (73.7)
Discounted future net cash flows
before income taxes 139.9 167.5 222.7
Discounted future income tax expense (27.9) (32.3) (70.2)
------------------------------------------
Standardized measure of discounted
future net cash flows $112.0 $135.2 $152.5
==========================================
</TABLE>
Changes in Standardized Measure (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Sales and transfers of oil and gas
produced, net of production costs $(58.5) $(61.4) $(83.0)
Changes in prices, production and
future development costs (19.2) (82.2) 33.4
Extensions, discoveries and improved
recovery, less related costs 40.9 42.2 38.9
Purchases of minerals in place 16.7 28.7 55.5
Revisions of previous quantity estimates (12.9) (3.9) (7.6)
Accretion of discount 16.8 22.3 16.9
Net change in income taxes 4.3 37.9 (24.3)
Other (11.4) (0.9) ---
--------------------------------------------
Total $(23.3) $(17.3) $ 29.8
============================================
</TABLE>
The standardized measure of discounted future net cash flows is based on
the following oil and gas prices at December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Oil (per Bbl) $9.50 $15.50 $24.25
Gas (per Mcf) $2.06 $ 2.45 $ 3.18
</TABLE>
8
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS--(CONTINUED)
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements of EEX
Corporation (the "Company") have been prepared to give effect to the Acquired
Business, the related forward sale agreement with a third party that was prepaid
upon the close of the purchase of the Acquired Business, and borrowings under
the Company's revolving credit facility with a group of banks, as if such
transactions had taken place as of January 1, 1998 and January 1, 1999 for the
Pro Forma Consolidated Statements of Operations and as of December 31, 1998 and
September 30, 1999 for the Pro Forma Consolidated Balance Sheets. This
information should be read in conjunction with the Consolidated Financial
Statements for the Company filed in Form 10-Q for the quarterly period ended
September 30, 1999, Form 10-K for the year ended December 31, 1998 and the
Statements of Revenues and Direct Operating Expenses included herein.
9
<PAGE>
EEX CORPORATION
Pro Forma Consolidated Balance Sheet - Unaudited
September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
ACQUIRED BUSINESS PRO FORMA
PRO FORMA EEX CORPORATION
EEX CORPORATION ADJUSTMENTS AND SUBSIDIARIES
-------------------- ----------------- ----------------
ASSETS
Current Assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 97,583 $(88,986) $ 8,597
Accounts receivable - trade (net of allowance
of $1,189) 25,872 - 25,872
Other 14,489 - 14,489
---------- -------- ----------
Total Current Assets 137,944 (88,986) 48,958
---------- -------- ----------
Property, Plant and Equipment (at cost):
Oil and gas properties (successful efforts
method) 1,062,384 214,826 (a) 1,277,210
Other 8,004 - 8,004
---------- -------- ----------
Total 1,070,388 214,826 1,285,214
Less accumulated depletion, depreciation and
amortization 597,970 - 597,970
---------- -------- ----------
Net property, plant and equipment 472,418 214,826 687,244
---------- -------- ----------
Deferred Income Tax Assets 26,442 - 26,442
Other Assets 4,604 2,160 (b) 6,764
---------- -------- ----------
Total Assets $ 641,408 $128,000 $ 769,408
========== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 42,850 $ - $ 42,850
Current portion of capital lease obligations 17,248 - 17,248
Other 2,498 - 2,498
---------- -------- ----------
Total current liabilities 62,596 - 62,596
---------- -------- ----------
Bank Revolving Credit Agreement - 20,000 (c) 20,000
Capital Lease Obligations 205,634 - 205,634
Other Liabilities 34,675 - 34,675
Gas Sales Obligation - 105,000 (d) 105,000
Minority Interest - 3,000 (e) 3,000
Shareholders' Equity:
Preferred stock (10,000 shares authorized;
1,589 issued; liquidation preference of
$158,938) 16 - 16
Common stock ($0.01 par value; 150,000 shares
authorized; 42,476 shares issued) 425 - 425
Paid in capital 726,749 - 726,749
Retained Earnings (Deficit) (387,894) - (387,894)
Unamortized restricted stock compensation (482) - (482)
Treasury stock at cost (14 shares) (311) - (311)
---------- -------- ----------
Total shareholders' equity 338,503 - 338,503
---------- -------- ----------
Total Liabilities and Shareholders'
Equity $ 641,408 $128,000 $ 769,408
========== ======== ==========
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated Financial
Statements.
10
<PAGE>
EEX CORPORATION
Pro Forma Consolidated Balance Sheet - Unaudited
December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
ACQUIRED BUSINESS PRO FORMA
PRO FORMA EEX CORPORATION
EEX CORPORATION ADJUSTMENTS AND SUBSIDIARIES
---------------- ----------------- ----------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 15,588 $(13,986) $ 1,602
Accounts receivable - trade (net of allowance
of $2,504) 42,530 - 42,530
Other 14,240 - 14,240
---------- -------- ----------
Total Current Assets 72,358 (13,986) 58,372
---------- -------- ----------
Property, Plant and Equipment (at cost):
Oil and gas properties (successful efforts
method) 1,106,274 214,826 (a) 1,321,100
Other 19,998 - 19,998
---------- -------- ----------
Total 1,126,272 214,826 1,341,098
Less accumulated depletion, depreciation and
amortization 674,887 - 674,887
---------- -------- ----------
Net property, plant and equipment 451,385 214,826 666,211
---------- -------- ----------
Deferred Income Tax Assets 28,826 - 28,826
Other Assets 12,501 2,160 (b) 14,661
---------- -------- ----------
Total Assets $ 565,070 $203,000 $ 768,070
========== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 45,528 $ - $ 45,528
Current portion of capital lease obligations 10,874 - 10,874
Other 5,190 - 5,190
---------- -------- ----------
Total current liabilities 61,592 - 61,592
---------- -------- ----------
Bank Revolving Credit Agreement - 95,000 (c) 95,000
Capital Lease Obligations 222,444 - 222,444
Other Liabilities 46,734 - 46,734
Gas Sales Obligation - 105,000 (d) 105,000
Minority Interest - 3,000 (e) 3,000
Shareholders' Equity:
Common stock ($0.01 par value; 150,000 shares
authorized; 42,387 shares issued) 424 - 424
Paid in capital 569,268 - 569,268
Retained Earnings (Deficit) (334,698) - (334,698)
Unamortized restricted stock compensation (206) - (206)
Treasury stock at cost (22 shares) (488) - (488)
---------- -------- ----------
Total shareholders' equity 234,300 - 234,300
---------- -------- ----------
Total Liabilities and Shareholders'
Equity $ 565,070 $203,000 $ 768,070
========== ======== ==========
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated Financial
Statements.
11
<PAGE>
EEX CORPORATION
Pro Forma Consolidated Statement of Operations - Unaudited
Nine Month Period Ended September 30, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
EEX ACQUIRED PRO FORMA PRO FORMA EEX
CORPORATION BUSINESS ADJUSTMENTS CORPORATION
----------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues:
Natural gas $ 69,637 $39,201 $ -- $108,838
Oil, condensate, and natural gas
liquids 57,949 2,395 -- 60,344
Cogeneration operations 6,486 -- -- 6,486
Other (447) 1,960 -- 1,513
-------- ------- -------- --------
Total 133,625 43,556 -- 177,181
-------- ------- -------- --------
Costs and Expenses:
Production and operating 28,809 8,127 -- 36,936
Exploration 55,022 -- 3,000 (f) 58,022
Depletion, depreciation, and
amortization 54,719 -- 26,360 (g) 81,079
(Gain) Loss on sales of
property, plant, and equipment (1,258) -- -- (1,258)
Cogeneration operations 6,105 -- -- 6,105
General, administrative, and
other 20,398 -- 1,500 (h) 21,898
Taxes, other than income 3,399 -- -- 3,399
-------- ------- -------- --------
Total 167,194 8,127 30,860 206,181
-------- ------- -------- --------
Operating Income (Loss) (33,569) 35,429 (30,860) (29,000)
Other Income - Net 57 -- -- 57
Interest Income 4,384 -- -- 4,384
Interest and Other Financing Costs (12,707) -- (8,930) (i)(j)(k) (21,637)
-------- ------- -------- --------
Income (Loss) Before Income Taxes (41,835) 35,429 (39,790) (46,196)
-------- ------- -------- --------
Income Taxes (Benefit) 2,287 -- -- 2,287
Minority Interest -- -- 2,019 (l) 2,019
-------- ------- -------- --------
Net Income (Loss) (44,122) 35,429 (37,771) (46,464)
Preferred Stock Dividends 8,938 -- -- 8,938
-------- ------- -------- --------
Net Income (Loss) Applicable to
Common Shareholders $(53,060) $35,429 $(37,771) $(55,402)
======== ======= ======== ========
Basic and Diluted Net Income (Loss)
Per Share $ (1.26) $ 0.84 $ (0.90) $ (1.31)
Weighted Average Shares
Outstanding 42,200 42,200 42,200 42,200
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
12
<PAGE>
EEX CORPORATION
Pro Forma Consolidated Statement of Operations - Unaudited
Twelve Month Period Ended December 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
EEX ACQUIRED PRO FORMA PRO FORMA EEX
CORPORATION BUSINESS ADJUSTMENTS CORPORATION
----------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues:
Natural gas $128,061 $66,743 $ -- $194,804
Oil, condensate, and natural gas
liquids 76,328 1,409 -- 77,737
Cogeneration operations 13,794 -- -- 13,794
Other 869 3,332 -- 4,201
-------- ------- -------- --------
Total 219,052 71,484 -- 290,536
-------- ------- -------- --------
Costs and Expenses:
Production and operating 46,861 10,039 -- 56,900
Exploration 45,144 -- 4,000 (f) 49,144
Depletion, depreciation, and
amortization 101,051 -- 33,660 (g) 134,711
Impairment of producing oil and gas
properties 10,439 -- -- 10,439
(Gain) Loss on sales of
property, plant, and equipment (9,085) -- -- (9,085)
Cogeneration operations 10,564 -- -- 10,564
General, administrative, and
other 24,058 -- 2,000 (h) 26,058
Taxes, other than income 11,017 -- -- 11,017
-------- ------- -------- --------
Total 240,049 10,039 39,660 289,748
-------- ------- -------- --------
Operating Income (Loss) (20,997) 61,445 (39,660) 788
Other Income - Net 81 -- -- 81
Interest Income 512 -- -- 512
Interest and Other Financing Costs (18,987) -- (17,532) (i)(j)(k) (36,519)
-------- ------- -------- --------
Income (Loss) Before Income Taxes (39,391) 61,445 (57,192) (35,138)
-------- ------- -------- --------
Income Taxes (Benefit) (4,997) -- -- (4,997)
Minority Interest (6,532) -- (2,343) (l) (8,875)
-------- ------- -------- --------
Net Income (Loss) (40,926) 61,445 (59,535) (39,016)
Preferred Stock Dividends -- -- -- --
-------- ------- -------- --------
Net Income (Loss) Applicable to
Common Shareholders $(40,926) $61,445 $(59,535) $(39,016)
======== ======= ======== ========
Basic and Diluted Net Income (Loss)
Per Share $(0.97) $1.46 $(1.41) $(0.92)
Weighted Average Shares
Outstanding 42,208 42,208 42,208 42,208
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
13
<PAGE>
EEX CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION:
On December 17, 1999, subsidiaries of EEX Corporation (the "Company") closed a
purchase of certain oil and gas properties and pipeline assets of Tesoro
Petroleum Corporation and subsidiaries. A Stock Purchase Agreement dated as of
October 8, 1999, between EEX Operating LLC ("EEX Operating") and Tesoro
Petroleum Corporation and Tesoro Gas Resources Company, Inc. was amended on
December 16, 1999, and three corollary purchase agreements were entered into on
December 17, 1999. Collectively, the purchase agreements provided for the
purchase of (i) all of the member interests in four limited liability companies
which, together, own all of the partnership interests of Tesoro E&P Company,
L.P. (whose name was changed after closing to EEX E&P Company, L.P., "E&P
L.P."), owner of the oil and gas assets ("Oil and Gas Interests"), and (ii) all
of the issued and outstanding stock of Tesoro Natural Gas Company (whose name
was changed after closing to EEX Natural Gas Company) and Tesoro Gathering
Company (whose name was changed after closing to EEX Gathering Company), which,
together, own all of the partnership interests in Tesoro Pipeline Company, L.P.
(whose name was changed after closing to EEX Pipeline Company, L.P.), which owns
partnership interests in pipeline and gathering systems ("Pipeline Interests").
The adjusted purchase price for the Oil and Gas Interests was $209.1 million and
for the Pipeline Interests, $5.7 million. The Oil and Gas Interests and the
Pipeline Interests are collectively referred to as the "Acquired Business."
EEX Operating acquired the Pipeline Interests. The Oil and Gas Interests were
acquired by EEX Reserves Funding LLC ("ERF"), a limited liability company half-
owned by subsidiaries of the Company, EEX Operating (49%) and EEX Capital, Inc.
(1%), and half-owned by a third party.
The Company has fully consolidated ERF, the limited liability companies owning
E&P L.P. partnership interests, E&P L.P., EEX Natural Gas Company, EEX Gathering
Company and EEX Pipeline Company, L.P. The third party's 50% equity interest in
ERF is reflected in the balance sheet as a minority interest.
E&P L.P. entered into a $105 million forward sale agreement with a third party
for approximately 50 billion cubic feet equivalent of production from E&P L.P.
through December 2004 that was prepaid upon the close of the purchase
transaction. The third party receives an adjusted index price monthly for the
committed volume. In the event production is not delivered, the obligation may
be settled with a cash payment from E&P L.P. The third party also has a lien on
the E&P L.P. oil and gas properties as security in the event the committed
volumes are not delivered or cash payment is not made. The forward sale
agreement also enables E&P L.P. to act as the third party's marketing agent to
market the committed production. E&P L.P., at its discretion, may terminate the
prepayment obligation by paying the third party a predetermined amount. The
prepayment has been recorded as a gas sales obligation on the balance sheet.
Payments under this obligation will be amortized on the interest method through
final pay out.
14
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EEX CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PRO FORMA ADJUSTMENTS:
(a) Represents the purchase price of the Acquired Business. The purchase price
has been adjusted for the estimated activity between the effective time,
July 1, 1999 and the closing date, December 17, 1999. Such adjustments
primarily include capital expenditures and revenues in excess of operating
expenses for this period.
(b) Represents fees associated with the forward sale agreement. These fees
will be amortized over the life of the agreement.
(c) Represents borrowings under the revolving credit facility to complete the
purchase of the Acquired Business.
(d) Represents the gas sales obligation to a third party for approximately 50
billion cubic feet equivalent of production through December 2004 that was
prepaid upon the close of the purchase of the Acquired Business. The
Company has assumed revenue during the periods presented is equal to
amounts actually realized in the period, rather than the amounts that would
have been realized in the first year from amortization of the gas sales
obligation. The gas sales obligation is based on current prices and not
prices indicative of the periods presented.
(e) Represents the equity contribution from a third party for a 50% equity
interest in EEX Reserves Funding LLC ("ERF"). The third party's 50% equity
interest in ERF is reflected on the balance sheet as minority interest.
(f) Represents estimated salaries and related expenses associated with
exploration personnel.
(g) Represents adjustment to depletion, depreciation and amortization based
upon historical production, reserves and the acquisition cost basis.
(h) Represents estimated general and administrative expenses as a result of the
purchase of the Acquired Business.
(i) Represents estimated interest expense related to the gas sales obligation
(assumes annual interest rate of 9.5%).
(j) Represents estimated interest expense related to borrowings under the
revolving credit facility (assumes interest rate of 7.5%).
(k) Represents amortization of fees associated with the forward sale agreement.
(l) Represents third party's 50% equity ownership in ERF.
15
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS--(CONTINUED)
(c) Exhibits
23.1 Consent of Ernst & Young LLP
23.2 Consent of Netherland, Sewell & Associates, Inc.
16
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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.
EEX CORPORATION
Date: February 24, 2000 By: /s/ R. S. LANGDON
-----------------------------------
R. S. Langdon
Executive Vice President,
Finance and Administration,
and Chief Financial Officer
17
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-24595 registering 6,313,432 shares of common stock pursuant to
the Employee Stock Purchase and Savings Plan, Employee Stock Option Plan,
Revised and Amended 1996 Stock Incentive Plan, Non-Qualified Stock Option
Agreement and Restricted Stock Agreement, Form S-8 No. 333-41979 registering
1,500,000 shares of common stock pursuant to the 1997 Non-Officer Stock Option
Plan, and Form S-3 No. 333-64427 for the registration of EEX Corporation debt
securities, preferred stock, warrants, and common stock) of EEX Corporation of
our report dated February 14, 2000, with respect to the statements of revenues
and direct operating expenses of certain oil and gas properties and pipeline
assets acquired from Tesoro Petroleum Corporation and Subsidiaries included in
this Report (Form 8-K) for the years ended December 31, 1998, 1997, and 1996.
ERNST & YOUNG LLP
Houston, Texas
February 24, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT
PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to the filing of the Current Report on Form 8-K/A with
the report date of December 17, 1999, for EEX Corporation in accordance with the
requirements of the Securities Exchange Act of 1934. We consent to the
inclusion in such Current Report of our reserve report incorporated therein,
references to our name in the form and context in which they appear, and the
incorporation by reference thereof into the company's Registration Statements on
Form S-8 (Nos. 333-24595 and 333-41979) and Form S-3 (No. 333-64427).
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ Frederic D. Sewell
---------------------------------------
Frederic D. Sewell
President
Dallas, Texas
February 23, 2000
