<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 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 333-31375*
-----------------------
FORMAN PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-0954774
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
650 Poydras Street - Suite 2200
New Orleans, Louisiana 70130-6101
(Address of principal executive offices) (Zip code)
(504) 586-8888
(Registrant's telephone number, including area code)
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 period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of November 10, 1998, there were 70,000 shares of the Registrant's Voting
Common Stock, no par value, and 20,000 shares of the Registrant's Non-voting
Common Stock, no par value, outstanding.
* The Commission file number refers to a Form S-4 Registration Statement filed
by the Company under the Securities Act of 1933, which became effective
September 26, 1997.
<PAGE>
FORMAN PETROLEUM CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
PART I
Page No.
Item 1. Financial Information:
Balance Sheets as of September 30, 1998 and
December 31, 1997 1
Statement of Operations and Accumulated
Deficit for the Three and Nine Month Periods
Ended September 30, 1998 and September 30, 1997 2
Statement of Cash Flows for the Nine Month
Periods Ended September 30, 1998 and
September 30, 1997 3
Notes to Financial Statements 4-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
PART II
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20-21
Signatures 22
ii
<PAGE>
PART I
ITEM 1. FINANCIAL INFORMATION
FORMAN PETROLEUM CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,819,642 $ 457,869
Accounts receivable 99,356 597,991
Oil and gas revenue receivable 1,877,826 2,407,315
Restricted cash - 3,937,500
Other assets 73,614 48,806
------------ ------------
Total current assets 3,870,438 7,449,481
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, full cost method 80,819,760 77,029,339
Other property and equipment 1,766,526 1,650,793
------------ ------------
82,586,286 78,680,132
Less-accumulated depreciation, depletion and amortization (49,387,660) (30,451,675)
------------ ------------
Net property and equipment 33,198,626 48,228,457
------------ ------------
OTHER ASSETS:
Deferred financing costs
(net of accumulated amortization) 5,600,709 6,366,367
Deferred charges 177,818 170,529
Funds on deposit in escrow 466,214 515,096
------------ ------------ \
TOTAL ASSETS $ 43,313,805 $ 62,729,930
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $3,150,952 $6,438,278
Interest payable 3,149,970 -
Undistributed oil and gas revenues 1,679,156 1,848,497
Current portion of note payables 13,992 13,992
------------ ------------
Total current liabilities 7,994,070 8,300,767
------------ ------------
Notes payable (long-term portion) 68,238,401 68,013,552
Mandatorily redeemable Preferred Stock, no par value,
1,000,000 authorized shares, 200,000 shares outstanding 11,893,483 10,589,588
STOCKHOLDERS' DEFICIT:
Common stock, no par value, authorized 1,000,000
shares; issued and outstanding 90,000 shares 1,000 1,000
Treasury stock (10) (10)
Accumulated deficit (44,813,139) (24,174,967)
------------ ------------
Total stockholder's deficit (44,812,149) (24,173,977)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 43,313,805 $ 62,729,930
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
FORMAN PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------------------------
1998 1997 1998 1997
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 3,749,790 $ 2,582,842 $ 12,435,924 $ 8,845,296
Interest income 6,535 212,022 200,333 266,133
Overhead reimbursements 18,192 13,094 56,103 48,259
Other income 17,509 22,870 9,652 43,132
----------- ----------- ------------ -----------
Total revenues 3,792,026 2,830,828 12,702,012 9,202,820
----------- ----------- ------------ -----------
Costs and expenses:
Production taxes 139,379 126,593 442,606 430,240
Lease operating expenses 931,339 720,831 2,737,323 1,919,510
General and administrative expenses 585,749 463,953 1,690,918 1,306,390
Interest expense 2,493,023 2,446,986 7,512,181 5,271,587
Full cost ceiling write-down - - 12,039,831 -
Depreciation, depletion and amortization 2,421,994 1,686,679 7,613,429 5,281,685
----------- ----------- ------------ -----------
Total expenses 6,571,484 5,445,042 32,036,288 14,209,412
----------- ----------- ------------ -----------
Net loss from operations (2,779,458) (2,614,214) (19,334,276) (5,006,592)
Provision for income taxes - (882,069) - 3,863,931
----------- ----------- ------------ -----------
Net loss (2,779,458) (1,732,145) (19,334,276) (8,870,523)
Preferred stock dividends (439,925) (379,688) (1,272,647) (504,688)
----------- ----------- ------------ -----------
Net loss attributable to common shares $(3,219,383) $(2,111,833) $(20,606,923) $(9,375,211)
=========== =========== ============ ===========
Net loss per share $(35.77) $(23.46) $(228.97) $(104.17)
======= ======= ======== ========
Weighted average shares outstanding 90,000 90,000 90,000 90,000
======= ======= ======== ========
UNAUDITED PRO FORMA DATA:
Net loss from operations reported above $(2,779,458) $(2,614,214) $(19,334,276) $(5,006,592)
Pro forma benefit for income taxes related to
operations as an S Corp - 967,259 - 1,852,439
Preferred stock dividends (439,925) 379,688 (1,272,647) 504,688
----------- ----------- ------------ -----------
Pro forma net loss $(3,219,383) $(2,026,643) $(20,606,923) $(3,154,153)
=========== =========== ============ ===========
Pro forma net loss per share $(35.77) $(22.52) $(228.97) $(40.65)
======= ======= ======== ========
Weighted average shares outstanding 90,000 90,000 90,000 90,000
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
FORMAN PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(19,334,276) $(5,006,592)
Adjustments to reconcile net loss to net cash provided
by operating activities-
Depreciation and amortization 19,653,260 5,281,685
Withdrawal from interest escrow account 3,978,147 3,150,000
Change in assets and liabilities-
Decrease in oil and gas revenue receivable 529,489 1,017,210
Decrease (Increase) in accounts receivable 498,635 (160,339)
(Increase) Decrease in unbilled well costs and prepaids (65,456) 22,111
Increase in interest payable 3,149,970 -
(Decrease) Increase in accounts payable (3,287,326) 1,284,728
(Decrease) in undistributed oil and gas revenues (169,341) (590,499)
Decrease in due from affiliate - 340,285
Increase in notes payable 224,849 -
---------- -----------
Net cash provided by operating activities 5,177,951 5,338,589
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (3,790,421) (23,945,213)
Reduction of escrow account 48,882 366,874
Purchase of other property and equipment (115,733) (100,887)
---------- -----------
Net cash used in investing activities (3,857,272) (23,679,226)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - 71,800,333
Repayment of notes payable - (43,589,943)
Deposit into interest escrow account - (9,450,000)
Proceeds from preferred stock - 9,666,667
Proceeds from issuance of warrants - 1,000,000
Distribution to stockholder - (1,500,000)
Deferred financing costs 41,094 (7,063,449)
---------- -----------
Net cash provided by financing activities 41,094 20,863,608
---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,361,773 2,522,971
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 457,869 130,551
---------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $1,819,642 $2,653,522
========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $4,791,488 $ 2,384,089
========== ===========
Income taxes $ - $ -
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
FORMAN PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
1. INTERIM FINANCIAL STATEMENTS
The financial statements of the Company at September 30, 1998 and for the three
and nine-month periods then ended are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The financial statements should be
read in conjunction with the financial statements and notes thereto, for the
year ended December 31, 1997 contained in the Company's Form 10-K (file number
333-31375) filed with the Commission on March 31, 1998.
2. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128 ("SFAS 128"), "Earnings Per Share", which simplifies the computation of
earnings per share ("EPS"). SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997, and requires restatement for
all prior period EPS data presented. EPS calculated under SFAS 128 is the same
as those indicated on the Statement of Operations for the respective periods.
3. ISSUANCE OF NOTES
On June 3, 1997 the Company completed the private sale to Jefferies & Company,
Inc. ("Jefferies") of 70,000 units ("Note Units") consisting of $70 million
principal amount of 13.5% Senior Secured Notes due 2004, Series A (the "Notes")
and warrants to purchase 29,067 shares of Common Stock, no par value (the
"Common Stock"), of the Company at a price of $65,667,000 in a transaction not
registered under the Securities Act (the "Act") in reliance upon Section 4(2) of
the Act and Rule 506 of Regulation D under the Act. Jefferies thereupon offered
and resold the Note Units only to qualified institutional buyers and a limited
number of institutional accredited investors at an initial price to such
purchasers of $68,467,000. Concurrently with the offering of the Note Units,
the Company completed a private sale to Jefferies of 200,000 units ("Equity
Units") consisting of 200,000 shares of Series A Cumulative Preferred Stock and
warrants to purchase 14,533 shares of Common Stock. The Equity Units were sold
to Jefferies for $9,200,000 in a transaction not registered under the Securities
Act in reliance upon Section 4 (2) of the Act and Rule 506 of Regulation D under
the Act. Jefferies thereupon offered and resold the Equity Units only to
qualified institutional buyers and a limited number of institutional accredited
investors at an initial price to such purchasers of $10,000,000. The offerings
and sale of the Note Units and the Equity Units are referred to herein as the
"Offerings".
4
<PAGE>
The net proceeds to the Company from the Offerings were approximately $74.9
million. A portion of the net proceeds (approximately $9.5 million) was
segregated into a capitalized interest account to pay interest on the Notes
through June 1, 1998. The Company used the remaining net proceeds of the
Offerings as follows: (i) approximately $35.2 million was used to repay all of
the outstanding indebtedness (including accrued interest and associated fees)
due under the Endowment Energy Partners ("EEP") and Endowment Energy Co-
Investment Partnership ("EECIP") loans; (ii) approximately $10.5 million was
used to repay all of the outstanding indebtedness (including accrued interest
and associated fees) due under the Joint Energy Development Investments Limited
Partnership loan; (iii) $2.6 million was used to purchase from EEP and EECIP a
7.5% overriding royalty interest in the Company's Lake Enfermer Field, Manila
Village Field and Boutte Field; (iv) $5.0 million was used in connection with
the Company's acquisition from Forman Petroleum Corporation II ("FPCII"), a
company whose sole stockholder is McLain J. Forman (the Company's Chairman and
principal stockholder), all of FPCII's interest in the Bayou Fer Blanc Field and
the West Gueydan Field, of which $1.5 million was paid to FPCII, $1.0 million
was used to pay bank debt and $2.5 million was used to pay trade payables to
third parties; (v) Jefferies received a fee of $1.9 million for financial
advisory services provided to the Company and also received a warrant to
purchase 4,844 shares of Common Stock at the initial exercise price of $1.00 per
share; and (vi) $0.9 million was used to pay expenses of the Offerings. The
remaining net proceeds from the Offerings of $9.4 million were used for capital
expenditures, working capital and other general corporate purposes.
4. INCOME TAXES
As discussed in Note 3, the Company issued a second class of stock on June 3,
1997, effectively terminating its S Corporation election. As a result, the
Company is subject to Federal and state income taxes for the results of
operations subsequent to June 2, 1997. In addition, due to the termination of
the Company's status as an S Corporation for federal income tax purposes, the
Company was also required to establish a net deferred tax liability calculated
at the applicable Federal and state tax rates resulting primarily from financial
reporting and income tax reporting basis differences in oil and gas properties.
Accordingly, a net deferred tax liability of $5,081,000 was accrued at June 3,
1997. The Company has a net deferred tax asset at September 30, 1998 that has
been fully reserved due to the Company's operating losses.
For purposes of the pro forma net loss presentation, income taxes have been
adjusted to reflect the actual income tax benefit that would have been recorded
by the Company had it operated as a C Corporation throughout each of the periods
presented.
5. PER SHARE AMOUNTS
Historical and pro forma net loss per share amounts are calculated by dividing
historical and pro forma net loss by the weighted average number of common
shares outstanding (90,000 for each period presented).
5
<PAGE>
6. FORWARD-LOOKING STATEMENTS
The discussion of Liquidity and Capital Resources in Note 7 to these Financial
Statements includes "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact included in Note 7 are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, such forward-looking statements are based on numerous
assumptions (some of which may prove to be incorrect) and are subject to risks
and uncertainties which could cause the actual results to differ materially from
the Company's expectations. Such risks and uncertainties include, but are not
limited to, the timing and extent of changes in commodity process for oil and
gas, the need to develop and replace reserves, environmental risks, drilling and
operating risks, risks related to exploration and development, uncertainties
about the estimates of reserves, competition, government regulations and the
ability of the Company to meet its stated business goals, issues and problems
which may develop as the Company continues to assess its Year 2000 readiness, as
well as other risks and uncertainties discussed in the Company's filings with
the Securities and Exchange Commission (the "Cautionary Statements"). The
Company undertakes no obligation to update or revise any forward-looking
statements, whether as a result of changes in actual results, changes in
assumptions or other factors affecting such statements. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the Cautionary
Statements.
7. LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficit at September 30, 1998 of $4.1 million.
The Company's realized oil and gas prices declined another 5% and 6.5%,
respectively, from the second quarter of 1998 to the third quarter of 1998.
During the same period, due in large part to the shut-in periods for inclement
weather, oil production declined 6% and gas production declined 12%. The
combination of these further declines in both prices and production during the
third quarter of 1998 significantly reduced the Company's revenues from
production, from $4.5 million in the second quarter of 1998 to $3.75 million in
the third quarter of 1998. The Company projects that fourth quarter product
prices will likely increase while production volumes remain relatively stable.
The Company believes that its cash on hand plus the expected normal cash flow
from operations and available vendor financing will be not sufficient to fund
its working capital needs for the remainder of 1998, even with the deferral of
exploration and development projects. The Company's primary gas purchaser has
agreed in writing to give the Company the right to receive advance payment for
December, 1998 natural gas production in the Lake Enfermer Field on December 30,
1998, 30 days in advance of the scheduled payment date, for a fee not to exceed
1.5% of the payment amount. The estimated net value of this advance payment is
approximately $1.3 million. The Company presently intends to exercise the right
to receive the advance payment. With the advance payment, the Company
anticipates that it will have the resources to meet its current interest payment
obligations on the Notes on or before the expiration of the thirty-day grace
period for such payment. The Company has not yet determined, however, whether to
apply the advance payment toward the interest obligation on the Notes or for
exploration and development projects.
6
<PAGE>
The receipt of the advance payment for the December 1998 production mentioned
above likely will negatively impact the Company's ability to make the next
scheduled interest payment on the Notes due on June 1, 1999, as well as
subsequent payments. During the third quarter of 1998, the Company attempted to
raise working capital by offering to sell a working interest in the Company's
oil and gas properties to one or more industry partners. The Company deemed the
offers it received to be at unacceptably low prices.
As previously reported, the Company has now engaged CIBC Oppenheimer Corp.
("Oppenheimer") as the Company's exclusive financial advisor in connection with
the possible financial recapitalization of the Company. In its capacity as
financial advisor, Oppenheimer will investigate and evaluate such possibilities
as negotiations with the bond holders to defer interest payments, property sales
on an acceptable basis, conversion of some or all of the debt to equity, new
third party equity investments, or some combination of the foregoing, as well as
other recapitalization opportunities which may become available. There can be
no assurance that the Company will actually conclude any financial
recapitalization. In the absence of a satisfactory recapitalization, the
Company anticipates that its liquidity problems will likely continue. The
liquidity problems, if unresolved, may impact the Company's ability to make the
June 1, 1999 interest payment on the Notes.
The foregoing discussion includes many forward looking statements which are
subject to the risks and uncertainties noted above in "Forward-Looking
Statements" which could cause the actual results to differ materially from the
Company's expectations.
8. LEGAL PROCEEDINGS
As reported by the Company in the Current Report on Form 8-K filed on October
20, 1998 with the Securities and Exchange Commission, the Company filed a
Complaint on Friday, October 16, 1998 against Jefferies & Company, Inc.
("Jefferies") in the United States District Court in and for the Eastern
District of Louisiana. The Complaint asserts causes of action against Jefferies
for breach of fiduciary duty, breach of contract, detrimental reliance,
negligence, intentional misrepresentation, and negligent misrepresentation in
connection with a 1997 debt and equity offering by the Company. The Company is
seeking damages in an amount to be determined at trial. Although the Company is
confident that the Complaint is well founded in law and fact, there can be no
assurance that the Company will prevail in the lawsuit.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion is intended to assist in an understanding of the
Company's historical financial position and the results of operations for the
three-month and nine-month periods ended September 30, 1998 and 1997. The
financial statements of the Company at September 30, 1998 and for the three and
nine-month periods then ended are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The financial statements should be
read in conjunction with the financial statements and notes thereto, for the
year ended December 31, 1997 contained in the Company's Annual Report on Form
10-K (file number 333-31375) filed with the Commission on March 31, 1998. The
Company's historical financial statements and notes thereto included elsewhere
in this quarterly report contain detailed information that should be referred to
in conjunction with the following discussion.
RISK FACTORS
A detailed discussion of risks and uncertainties which could affect the
Company's future results and the forward looking statements contained in this
report can be found in the "Item 1. Business Risk Factors" section of the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Those risks and uncertainties remain applicable to the Company's operations. In
addition, the risks and uncertainties noted therein with respect to "Substantial
Leverage", "Substantial Capital Requirements", and "Technological Changes" are
supplemented by the additional risks and uncertainties with respect to liquidity
and Year 2000 readiness noted in the "Management Discussion and Analysis of
Financial Condition and Results of Operations Liquidity and Capital Resources"
section of this report.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations, including but not limited to the discussions of Liquidity and
Capital Resources and Year 2000 Disclosure, includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical fact included in the
discussions are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
such forward-looking statements are based on numerous assumptions (some of which
may prove to be incorrect) and are subject to risks and uncertainties which
could cause the actual results to differ materially from the Company's
expectations. Such risks and uncertainties include, but are not limited to, the
timing and extent of changes in commodity process for oil and gas, the need to
develop and replace reserves, environmental risks, drilling and operating risks,
risks related to exploration and development, uncertainties about the estimates
of reserves, competition, government regulations and the ability of the Company
to meet its stated business goals, issues and problems which may develop as the
8
<PAGE>
Company continues to assess its Year 2000 readiness, as well as other risks and
uncertainties discussed in this and the Company's other filings with the
Securities and Exchange Commission (the "Cautionary Statements"). The Company
undertakes no obligation to update or revise any forward-looking statements,
whether as a result of changes in actual results, changes in assumptions or
other factors affecting such statements. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.
RESULTS OF OPERATIONS
The following table sets forth certain operating information with respect to
the oil and gas operations of the Company for the three-month and nine-month
periods ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- -----------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales:
Oil (Bbls) 96,776 77,888 300,330 231,200
Gas (Mcf) 1,200,635 469,536 3,755,543 1,464,945
Oil and Gas (BOE) 296,882 156,144 926,254 475,358
Sales Revenue:
Total Oil Sales $1,129,818 $1,403,310 $ 3,802,198 $4,522,382
Total Gas Sales 2,619,972 1,179,532 8,633,726 4,133,663
--------- --------- ---------- ---------
Total Sales $3,749,790 $2,582,842 $12,435,924 $8,656,045
Average Sales Prices:
Oil (per Bbl) $11.67 $18.02 $12.66 $19.56
Gas (per Mcf) $2.18 $2.51 $2.30 $2.82
Per BOE $12.63 $16.54 $13.43 $18.21
Average Costs (per BOE):
Severance Taxes $0.47 $0.81 $0.48 $0.91
Lease operating expenses $3.14 $4.62 $2.96 $4.04
General and Administrative Exp. $1.97 $2.97 $1.83 $2.75
Depreciation, depletion and amort. $8.16 $10.80 $21.22 $18.61
</TABLE>
REVENUES - The following table reflects an analysis of differences in the
Company's oil and gas revenues (expressed in thousands of dollars) between the
three and nine-month periods ended September 30, 1998 and the comparable periods
in 1997:
9
<PAGE>
<TABLE>
<CAPTION>
Third Quarter First Nine Months 1998
1998 Compared to Compared to First
Third Quarter 1997 Nine Months 1997
------------------ ---------------------
<S> <C> <C>
Increase (decrease) in oil and gas
Revenues resulting from differences in:
Crude oil and condensate -
Prices $ (613,798) $(2,072,400)
Production 340,306 1,352,216
---------- -----------
(273,492) (720,184)
Natural gas -
Prices (396,170) (1,963,361)
Production 1,836,610 6,463,424
---------- -----------
1,440,440 4,500,063
Increase (decrease) in oil and gas
Revenues $1,166,948 $ 3,779,879
========== ===========
</TABLE>
The Company's oil and gas revenues increased approximately $3.8
million, or 44% to $12.4 million for the nine months ended September 30, 1998
from $8.7 million for the comparable period in 1997. Production levels for the
nine months ended September 30, 1998 increased 95% to 926 thousand barrels of
oil equivalent ("MBOE") from 475 MBOE for the comparable period in 1997. During
the first nine months of 1998, gas production volumes increased 157%, while oil
volumes increased 30% over the comparable 1997 period. The Company's average
sales prices (including hedging activities) for oil and natural gas for the nine
months ended September 30, 1998 were $12.66 per Bbl and $2.30 per Mcf versus
$19.56 per Bbl and $2.82 per Mcf in the comparable 1997 period. During the
first nine months of 1998 revenues increased $7.8 million due to the
aforementioned production increases, and decreased by $4.0 million as a result
of sharply lower oil and gas prices compared to the comparable 1997 period.
For the quarter ended September 30, 1998, total oil and gas revenues
increased $1.2 million over revenues for the third quarter of 1997. Oil
production for the quarter ended September 30, 1998 was up 24% from the
comparable quarter in 1997, and gas production between comparable periods was up
156%. Oil prices for the quarter ended September 30, 1998 declined 35%, to
$11.67 per Bbl from $18.02 per Bbl from the third quarter of 1997. Gas prices
also declined during the quarter ended September 30, 1998 to $2.18 per Mcf from
$2.51 per Mcf for the third quarter of 1997.
LEASE OPERATING EXPENSES - On a BOE basis, lease operating expenses
experienced a 32% decrease, to $3.14 per BOE for the three months ended
September 30, 1998 from $4.62 per BOE in the comparable 1997 period. For the
first nine months of 1998, lease operating expenses per BOE were down 27%, from
$4.04 per BOE in 1997 to $2.96 in the comparable 1998 period. For the quarter
ended September 30, 1998, lease operating expenses were 29% higher than the
comparable quarter in 1997. The increases for the quarter ended September 30,
1998 and for the first nine months of 1998 resulted primarily from the nine
producing wells that were added
10
<PAGE>
between the third quarter of 1997 and the third quarter of 1998. Two new wells
were drilled and four non-producing wells were successfully worked over and put
into production between the two periods.
SEVERANCE TAXES - The effective severance tax rate as a percentage of oil
and gas revenues decreased to 3.6% for the nine months ended September 30, 1998
from 5.0% for the comparable period in 1997. For the quarter ended September 30,
1998 the effective tax rate decreased to 3.7% from 4.9% for the comparable
quarter in 1997. This relatively low effective rate is attributable to the
increased production from wells that have a state severance tax exemption under
Louisiana's severance tax abatement program, combined with the fact that, on a
value basis, the Company's production is approximately two-thirds natural gas,
which is taxed at a lower effective rate than oil.
GENERAL AND ADMINISTRATIVE EXPENSES - For the nine months ended September
30, 1998 general and administrative ("G&A") expenses were $1.83 per BOE, a 33%
decrease from the $2.75 per BOE for the first nine months of 1997. For the first
nine months of 1998, G&A increased 29%, from $1,306,000 in 1997 to $1,691,000 in
1998. For the quarter ended September 30, 1998 G&A increased 26%, from $464,000
in 1997 to $ 586,000 in 1998, although the G&A per BOE during the same periods
decreased 34%. The third quarter and first nine months decreases in G&A per BOE
in 1998 were due to increases in production during the periods as compared to
the comparable periods for 1997. The increases in actual G&A expenses in the
third quarter and nine month periods ended September 30, 1998 were primarily the
result of salary adjustments made during the first nine months of 1998,
including the addition of a Chief Financial Officer, plus increased insurance
costs directly attributable to a Directors and Officers insurance policy
approved by the Board which became effective in December, 1997.
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE - For the nine months
ended September 30, 1998 depreciation, depletion and amortization ("DD&A")
expense, before the write-down of the full cost pool during the second quarter
of 1998 (see "FULL COST POOL WRITE-DOWN"), increased 44% over the comparable
1997 period. Including the write-down of the full cost pool, DD&A increased 272%
between the first nine months of 1997 and the first nine months of 1998. For the
quarter ended September 30, 1998, DD&A expense increased 44% over the comparable
third quarter of 1997. Excluding the full cost pool write-down which occurred
during the second quarter of 1998, the DD&A increases for both the third quarter
and the first nine months of 1998 are attributable to the Company's increased
production and related future capital costs between the comparable periods for
1997 and 1998.
On a BOE basis, which reflects the increases in production, the DD&A rate
(before the write-down of the full cost pool) for the first nine months of 1998
was $8.22 per BOE compared to $11.11 per BOE for the same period in 1997, a
decrease of 26%. For the third quarter of 1998, DD&A per BOE was $8.16 compared
to $10.80 for the comparable period in 1997, for a decrease of 25%. Including
the full cost pool write-down, the DD&A rate was $21.22 per BOE for the first
nine months of 1998.
INTEREST EXPENSE - For the nine months ended September 30, 1998 interest
expense increased to $7.5 million from $5.3 million for the comparable 1997
period. This increase of $2.2 million in interest expense is due primarily to
additional interest in 1998 relating to the issuance of the Notes on June 3,
1997 (see LIQUIDITY AND CAPITAL RESOURCES). For the quarter
11
<PAGE>
ended September 30, 1998, interest expense increased $46,000 over the comparable
third quarter of 1997. This increase was also the result of the additional
interest due on the Notes as previously discussed.
NET LOSS FROM OPERATIONS - Due to the factors described above, net loss
from operations for the nine months ended September 30, 1998 was $19.3 million,
an increase of $14.3 million over the net loss of $5.0 million reported for the
first nine months of 1997. The net loss for the quarter ended September 30, 1998
increased $165,000, from $2.61 million in the third quarter of 1997 to $2.78
million during the third quarter of 1998. For nine-month period ended September
30, 1998, $12 million of the net loss from operations was due to the full cost
ceiling write-down discussed above.
INCOME TAX EXPENSE - The Company issued a second class of stock on June 3,
1997, effectively terminating its S Corporation election. As a result, the
Company is subject to Federal and state income taxes for the results of
operations subsequent to June 2, 1997. In addition, due to the termination of
the Company's status as an S Corporation for federal income tax purposes, the
Company was also required to establish a net deferred tax liability calculated
at the applicable Federal and state tax rates resulting primarily from financial
reporting and income tax reporting basis differences in oil and gas properties.
Accordingly, a net deferred tax liability of $5,081,000 was accrued at June 3,
1997. The Company has a net deferred tax asset at September 30, 1998 that has
been fully reserved due to the Company's operating losses.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL AND CASH FLOW - The Company had a working capital deficit
at September 30, 1998 of $4.1 million. The Company's realized oil and gas prices
declined another 5% and 6.5%, respectively, from the second quarter of 1998 to
the third quarter of 1998. During the same period, due in large part to the
shut-in periods for inclement weather, oil production declined 6% and gas
production declined 12%. The combination of these further declines in both
prices and production during the third quarter of 1998 significantly reduced
the Company's revenues from production, from $4.5 million in the second
quarter of 1998 to $3.75 million in the third quarter of 1998. The Company
projects that fourth quarter product prices will likely increase while
production volumes remain relatively stable.
The Company believes that its cash on hand plus the expected normal cash
flow from operations and available vendor financing will be not sufficient to
fund its working capital needs for the remainder of 1998, even with the deferral
of exploration and development projects. The Company's primary gas purchaser has
agreed in writing to give the Company the right to receive advance payment for
December, 1998 natural gas production in the Lake Enfermer Field on December 30,
1998, 30 days in advance of the scheduled payment date, for a fee not to exceed
1.5% of the payment amount. The estimated net value of this advance payment is
approximately $1.3 million. The Company presently intends to exercise the right
to receive the advance payment. With the advance payment, the Company
anticipates that it will have the resources to meet its current interest payment
obligations on the Notes on or before the expiration of the thirty-day grace
period for such payment. The Company not yet determined, however, whether to
apply the advance payment toward the interest obligation on the Notes or for
exploration and development projects.
12
<PAGE>
The receipt of the advance payment for the December 1998 production
mentioned above likely will negatively impact the Company's ability to make the
next scheduled interest payment on the Notes due on June 1, 1999, as well as
subsequent payments. During the third quarter of 1998, the Company attempted to
raise working capital by offering to sell a working interest in the Company's
oil and gas properties to one or more industry partners. The Company deemed the
offers it received to be at unacceptably low prices.
As previously reported, the Company has now engaged CIBC Oppenheimer
Corp. ("Oppenheimer") as the Company's exclusive financial advisor in connection
with the possible financial recapitalization of the Company. In its capacity as
financial advisor, Oppenheimer will investigate and evaluate such possibilities
as negotiations with the bond holders to defer interest payments, property sales
on an acceptable basis, conversion of some or all of the debt to equity, new
third party equity investments, or some combination of the foregoing, as well as
other recapitalization opportunities which may become available. There can be
no assurance that the Company will actually conclude any financial
recapitalization. In the absence of a satisfactory recapitalization, the
Company anticipates that its liquidity problems will likely continue. The
liquidity problems, if unresolved, may impact the Company's ability to make the
June 1, 1999 interest payment on the Notes.
The foregoing discussion includes many forward looking statements
which are subject to the risks and uncertainties noted above in "Forward-Looking
Statements" which could cause the actual results to differ materially from the
Company's expectations.
The following summary table reflects comparative cash flows for the Company
for the nine-month periods ended September 30, 1998 and 1997:
Nine Months Ended
September 30,
------------------
1998 1997
------- ------
Net cash provided by operating activities $ 5,178 $ 5,339
Net cash (used) by investing activities (3,857) (23,679)
Net cash provided by financing activities 41 20,864
For the nine months ended September 30, 1998 net cash provided by operating
activities decreased to $5.2 million from $5.3 million during the comparable
period in 1997.
Cash used in investing activities decreased by $19.8 million, from $23.7
million during the first nine months of 1997 to $3.9 million during the
comparable period in 1998. This decrease was a result of decreased capital
spending during the first nine months of 1998 as compared to the same period in
1997.
During the nine months ended September 30, 1998 financing activities
provided cash flow of $41,000 as compared to $20.9 million of cash flow
generated from financing activities during the comparable period in 1997. The
decrease in cash provided by financing activities during 1998 was the result of
no new borrowings by the Company during the first nine months of 1998.
13
<PAGE>
LONG-TERM FINANCING - On June 3, 1997 the Company completed the private
sale to Jefferies & Company, Inc. ("Jefferies") of 70,000 units ("Note Units")
consisting of $70 million principal amount of the Series A Notes and warrants to
purchase 29,067 shares of Common Stock, no par value (the "Common Stock"), of
the Company at a price of $65,667,000 in a transaction not registered under the
Securities Act (the "Act") in reliance upon Section 4(2) of the Act and Rule 506
of Regulation D under the Act. Jefferies thereupon offered and resold the Note
Units only to qualified institutional buyers and a limited number of
institutional accredited investors at an initial price to such purchasers of
$68,467,000. Concurrently with the offering of the Note Units, the Company
completed a private sale to Jefferies of 200,000 units ("Equity Units")
consisting of 200,000 shares of Series A Cumulative Preferred Stock and warrants
to purchase 14,533 shares of Common Stock. The Equity Units were sold to
Jefferies for $9,200,000 in a transaction not registered under the Securities
Act in reliance upon Section 4 (2) of the Act and Rule 506 of Regulation D under
the Act. Jefferies thereupon offered and resold the Equity Units only to
qualified institutional buyers and a limited number of institutional accredited
investors at an initial price to such purchasers of $10,000,000.The offerings
and sale of the Note Units and the Equity Units are referred to herein as the
"Offerings". On November 5, 1997 the Company completed an exchange offer of its
13.5% Senior Secured Notes due 2004, Series B (the "Series B Notes") that were
registered under the Securities Act of 1933, for the Series A Notes. The Series
A Notes and the Series B Notes are collectively referred to as the "Notes".
The net proceeds to the Company from these Offerings were approximately
$74.9 million. A portion of the net proceeds (approximately $9.5 million) was
segregated into a capitalized interest account to pay interest on the Notes
through June 1, 1998. The Company used the remaining net proceeds of the
Offerings as follows: (i) approximately $35.2 million was used to repay all of
the outstanding indebtedness (including accrued interest and associated fees)
due under the EEP and EECIP loans; (ii) approximately $10.5 million was used to
repay all of the outstanding indebtedness (including accrued interest and
associated fees) due under the JEDI loan; (iii) $2.6 million was used to
purchase from EEP and EECIP a 7.5% overriding royalty interest in the Company's
Lake Enfermer Field, Manila Village Field and Boutte Field; (iv) $5.0 million
was used in connection with the Company's acquisition from Forman Petroleum
Corporation II ("FPCII"), a company whose sole stockholder is McLain J. Forman
(the Company's Chairman and principal stockholder), all of FPCII's interest in
the Bayou Fer Blanc Field and the West Gueydan Field, of which $1.5 million was
paid to FPCII, $1.0 million was used to pay bank debt and $2.5 million was used
to pay trade payables to third parties; (v) Jefferies received a fee of $1.9
million for financial advisory services provided to the Company and also
received a warrant to purchase 4,844 shares of Common Stock at the initial
exercise price of $1.00 per share; and (vi) $0.9 million was used to pay
expenses of the Offerings. The remaining net proceeds from the Offerings of
$9.4 million were used for capital expenditures, working capital and other
general corporate purposes.
FULL COST POOL WRITE-DOWN - The Company uses the full cost method of
accounting for its investment in oil and natural gas properties. Under the full
cost method of accounting, all costs of acquisition, exploration and development
of oil and natural gas reserves are capitalized into a "full cost pool" as
incurred, and properties in the pool are depleted and charged to operations
using the future gross revenue method based on the ratio of current gross
revenue to total proved future gross revenues, computed based on current prices.
To the extent that such
14
<PAGE>
capitalized costs (net of accumulated depreciation, depletion and amortization)
less deferred taxes exceed the present value (using a 10% discount rate) of
estimated future net cash flow from proved oil and natural gas reserves, and the
lower of cost and fair value of unproved properties after income tax effects,
excess costs are charged to operations. Once incurred, a write-down of oil and
natural gas properties is not reversible at a later date even if oil or natural
gas prices increase. The Company was required to write down its asset base at
the end of the second quarter of 1998 due primarily to significant declines in
oil and natural gas prices during 1998.
HEDGING ACTIVITIES - With the objective of achieving more predictable
revenues and cash flows and reducing the exposure to fluctuations in oil and
natural gas prices, the Company has entered into hedging transactions of various
kinds with respect to both oil and natural gas. While the use of these hedging
arrangements limits the downside risk of reverse price movements, it may also
limit future revenues from favorable price movements. In January 1997, the
Company entered into forward sales arrangements with respect to approximately
40% of its estimated net natural gas production in the Lake Enfermer Field
through April 1997, at a weighted average price of approximately $3.18 per Mcf.
At the same time, the Company hedged approximately 30% of its estimated net oil
production through June 1997 at a weighted average price of $23.75 per Bbl. In
October 1997, the Company entered into forward sales arrangements with respect
to approximately 25% of its estimated net natural gas production in the Lake
Enfermer Field through March 1998, at a weighted average price of approximately
$3.19 per Mcf. Starting in March, 1998 the Company entered into forward sales
arrangements for the months, volumes and prices as indicated in the following
table:
PERCENT OF PRICE PER
MONTH YEAR PRODUCTION MCF
- ---------------------------------------------------------
April 1998 33.3% $2.34
May 1998 48.4% $2.45
June 1998 50.0% $2.45
July 1998 66.1% $2.39
August 1998 48.4% $2.37
September 1998 55.0% $2.23
October 1998 53.2% $2.24
November 1998 64.5% $2.36
December 1998 48.4% $2.69
January 1999 24.2% $2.75
February 1999 26.8% $2.64
March 1999 24.2% $2.48
The Company continuously reevaluates its hedging program in light of market
conditions, commodity price forecasts, capital spending and debt service
requirements. The Company may hedge additional volumes through the remainder of
1998 and into 1999 or it may determine from time to time to terminate its then
existing hedging positions.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 1998 the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative
15
<PAGE>
Instruments and Hedging Activities. The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998).
The Company has not yet quantified the impact of adopting Statement 133 on
its financial statements and has not determined the timing of or method of
adoption of Statement 133. However, the Statement is unlikely to significantly
increase volatility in earnings and other comprehensive income, since the
Company does not currently have any derivative instruments as defined by
Statement 133 and does not anticipate entering into material amounts of such
investments in the future.
DISTRICT COURT COMPLAINT - The Company filed a Complaint on Friday, October
16, 1998 against Jefferies & Company, Inc. ("Jefferies") in the United States
District Court in and for the Eastern District of Louisiana. The Complaint
asserts causes of action against Jefferies for breach of fiduciary duty, breach
of contract, detrimental reliance, negligence, intentional misrepresentation,
and negligent misrepresentation in connection with a 1997 debt and equity
offering by the Company. The Company is seeking damages in an amount to be
determined at trial. Although the Company is confident that the Complaint is
well founded in law and fact, there can be no assurance that the Company will
prevail in the lawsuit.
YEAR 2000 DISCLOSURE - In August, 1998, the Securities and Exchange
commission issued a release that included guidance for Year 2000 ("Y2K")
disclosure in the MD&A portion of periodic filings under the securities Exchange
Act of 1934, as amended. In accordance with this release, the following
information is provided relating to the Company's Y2K issues:
1. Readiness - The Company has reviewed the status of all of its
information technology ("IT") systems and has either received
certification from third-party vendors and/or certified to its
satisfaction that these IT systems are Y2K compatible. Concerning the
Company's non-IT systems, the Company is currently assessing the extent
to which any such non-IT systems may exist within the Company's
operations and whether such systems are Y2K compatible. Completion of
this assessment is scheduled to be completed by year-end 1998. Following
completion of this assessment, the Company will determine the most cost-
effective method of bringing all such non-IT systems into compliance.
This process is scheduled to be completed by the end of the first
quarter, 1999.
16
<PAGE>
The Company has, to date, identified only one third party issue that
would have a direct material effect and must, therefore, be clarified.
This issue involves the oil and natural gas pipeline companies where they
are the sole pipeline within a producing field for delivery of the
Company's oil or natural gas. The Company is preparing an appropriate
questionnaire for these third parties and will assess each third party's
respective readiness based on the responses to these questionnaires. The
Company can provide no assurance that the Company's key suppliers and
customers have, or will have, technology systems, information technology
systems, and products that are Y2K compliant. Any Y2K compliance
problems facing such key suppliers and customers could have a material
adverse effect on the Company's business, financial condition, and
results of operations.
2. Cost to Address Company's Y2K Issues - The Company has not incurred any
material costs to date related to Y2K issues, and at this time it does
not anticipate any material costs will be incurred to fix as yet
unidentified Y2K issues. The costs of these projects and the dates on
which the Company plans to complete modifications and replacements are
based on management's' best estimates, the estimates of any third-party
specialists who assist the Company, the modification plans of third
parties and other factors. However, these estimates of future Y2K-related
costs may change when the assessments of non-IT systems and third party
issues are completed, and actual results could differ materially from
those estimates.
3. Risks - The Company's most reasonably likely worst case Y2K scenario at
this time would be that one or more of the oil or natural gas pipelines
serving the Company's producing properties would be unable to continue to
take delivery of oil or natural gas produced by the Company due to a Y2K
problem within a third party's pipeline system. The third party
questionnaire described in Item 1 above is intended to determine the
extent of this risk and the alternatives available to reduce or eliminate
this risk. While the Company believes the likelihood of the above
occurring to be low, there can be no assurance that the Company will not
be materially adversely affected by Y2K problems.
4. Contingency Plans - The Company presently does not have a contingency
plan. The development of a contingency plan to handle the most reasonably
likely worst case Y2K scenario is dependent upon the completion of the
assessments of the non-IT systems and the third party questionnaires. The
Company currently expects to have such a contingency plan in place by the
end of the second quarter of 1999. When completed, it is intended that
the Company's written Y2K contingency plan will include identified "point
persons" to contact in the event of a Y2K problem, as well as the
availability of back-up systems. Due to the nature of the open issues at
this time, which involve only non-IT systems and third party issues, the
Company does not currently anticipate the need for any third party
consultants for remediation efforts.
The foregoing discussion includes many forward looking statements which are
subject to the risks and uncertainties noted above in "Forward-Looking
Statements" which could cause the actual results to differ materially from the
Company's expectations.
17
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
18
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Reference is made to "PART I - FINANCIAL INFORMATION, Item 1. Financial
Statements, Note 8, Legal Proceedings", which is incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
UNANIMOUS WRITTEN CONSENT OF SOLE STOCKHOLDER - The following actions were
taken by unanimous written consent of the sole stockholder on October 9, 1998:
Revision of the Company's Bylaws - The Company's Bylaws were revised
to delete the requirement that Directors of the Company must be
stockholders and to add a provision permitting the election of Directors by
written consent of the stockholders as an additional exception to the
provision in the Bylaws that Directors shall be elected at the annual
meeting of the stockholders.
Ratification of Actions of Board - All actions taken by the Board of
Directors of the Company during periods when individuals who were not
stockholders served on the Board of Directors were ratified.
Election of a New Board of Directors - The following individuals were
elected as Directors of the Company, to serve until the next annual meeting
of the stockholders or until their successors are duly elected and have
qualified:
McLain J. Forman (Re-elected)
Randolph R. Birkman (Re-elected)
Marvin J. Gay (Re-elected)
Harold C. Block (Re-elected)
Michael A. Habetz (Re-elected)
Michael H. Price (Elected)
ITEM 5. OTHER INFORMATION
PREFERRED STOCK DIVIDEND - The Company declared a dividend payable on
September 1, 1998 to the holders of record of the Series A Cumulative Preferred
Stock payable at the rate of .0375 shares of Series A Cumulative Preferred Stock
per share of Series A Cumulative Preferred Stock of the Company, or a total of
8,799 dividend shares.
RESIGNATION OF DIRECTOR - Pursuant to correspondence dated November 11,
1998, Mr. Randolph R. Birkman resigned as Director effectively immediately. Mr.
Birkman cited, among other things, what he perceived as a conflict of interest
in connection with the possible recapitalization of the Company.
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS - The following instruments and documents are included as Exhibits
to this Form 10-Q. Exhibits incorporated by reference are so indicated by
parenthetical information:
EXHIBIT NO. EXHIBIT
- ---------- -------
3(i) Restated Articles of Incorporation dated July 2, 1997 (filed as
Exhibit 3(i) to the Registration Statement on Form S-4 filed on
July 16, 1997 and is incorporated herein by reference (File No.
333-31375)).
3(ii) Bylaws (filed as Exhibit 3(ii) to the Registration Statement on
Form S-4 filed on July 16, 1997 and is incorporated herein by
reference (File No. 333-31375)).
4.1 Indenture dated as of June 3, 1997 by and among Forman Petroleum
Corporation, as issuer, and U.S.Trust Company of Texas, N.A. as
trustee (filed as Exhibit 4.1 to the Registration Statement on Form
S-4 filed on July 16, 1997 and is incorporated herein by reference
(File No. 333-31375)).
4.2 Act of Mortgage, Security Agreement, Assignment of Production and
Financing Statement dated November 21, 1996, by Forman Petroleum
Corporation for the benefit of Joint Energy Development Investments
Limited Partnership (filed as Exhibit 4.2) to the Registration
Statement on Form S-4 filed on July 16, 1997 and is incorporated
herein by reference (File No. 333-31375)).
4.3 Act of First Amendment to Mortgage, Security Agreement, Assignment
of Production and Financing Statement dated December 23, 1996, by
and among Forman Petroleum Corporation and Joint Energy Development
Investments Limited Partnership (filed as Exhibit 4.3 to the
Registration Statement on Form S-4 filed on July 16, 1997 and is
incorporated herein by reference (File No. 333-31375)).
4.4 Act of Second Amendment to Mortgage, Security Agreement, Assignment
of Production and Financing Statement dated June 3, 1997, by and
among Forman Petroleum Corporation and U.S. Trust Company of Texas,
N.A. (filed as Exhibit 4.4 to the Registration Statement on Form
S-4 filed on July 16, 1997 and is incorporated herein by reference
(File No. 333-31375)).
4.5 Act of Assignment of Note and Liens dated June 3, 1997, by and
among Joint Energy Development Investments Limited Partnership, as
assignor, and U.S. Trust Company of Texas, N.A., as assignee (filed
as Exhibit 4.5 to the Registration Statement on Form S-4 filed on
July 16, 1997 and is incorporated herein by reference (File No.
333-31375)).
20
<PAGE>
4.6 Act of Mortgage, Security Agreement, Assignment of Production and
Financing Statement dated July 30, 1997, by Forman Petroleum
Corporation for the benefit of U.S. Trust Company of Texas, N.A. as
Trustee under the Indenture (filed as Exhibit 4.6 to the
Registration Statement on Form S-4 filed on July 16, 1997 and is
incorporated herein by reference (File No. 333-31375)).
10.2 Registration Rights Agreement dated June 3, 1997 by and between
Forman Petroleum Corporation and Jefferies & Company, Inc.
regarding Series A Cumulative Preferred Stock and warrants to
purchase Common Stock (filed as Exhibit 10.2 to the Registration
Statement on Form S-4 filed on July 16, 1997 and is incorporated
herein by reference (File No. 333-31375)).
27 Financial Data Schedule
99.1 Press Release (regarding engagement of CIBC Oppenheimer
Corp.)(filed as Exhibit 99.1 to the Current Report on Form 8-K
filed on October 20, 1998)
99.2 Complaint against Jefferies & Company, Inc. filed on October 16,
1998 in the United States District Court in and for the Eastern
District of Louisiana (filed as Exhibit 99.2 to the Current Report
on Form 8-K filed on October 20, 1998)
99.3 Press Release (regarding lawsuit against Jefferies & Company,
Inc.)(filed as Exhibit 99.3 to the Current Report on Form 8-K filed
on October 20, 1998)
(B) REPORTS ON FORM 8-K
1. Current Report on Form 8-K dated October 20, 1998 reporting
the engagement of CIBC Oppenheimer Corp.
2. Current Report on Form 8-K dated October 20, 1998 reporting
the Complaint filed against Jefferies & Company, Inc.
21
<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.
Forman Petroleum Corporation
Date: November 14, 1998 By: /s/ McLain J. Forman
-----------------------------
McLain J. Forman
Chairman of the Board, Chief
Executive Officer and President
By: /s/ Marvin J. Gay
-----------------------------
Marvin J. Gay
Vice President and Treasurer
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORMAN
PETROLEUM FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 1,819,642 4,395,369
<SECURITIES> 0 0
<RECEIVABLES> 1,977,182 3,005,306
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,870,438 7,449,481
<PP&E> 82,586,286 78,680,132
<DEPRECIATION> 49,387,660 30,451,675
<TOTAL-ASSETS> 43,313,805 62,729,930
<CURRENT-LIABILITIES> 7,994,070 8,300,767
<BONDS> 0 0
11,893,483 10,589,588
0 0
<COMMON> 1,000 1,000
<OTHER-SE> (44,813,139) (24,174,967)
<TOTAL-LIABILITY-AND-EQUITY> 43,313,805 62,729,930
<SALES> 12,435,924 14,235,272
<TOTAL-REVENUES> 12,702,012 14,708,857
<CGS> 3,179,929 3,408,208
<TOTAL-COSTS> 32,036,288 32,538,454
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,512,181 7,723,717
<INCOME-PRETAX> (19,334,276) (17,829,597)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (19,334,276) (17,829,597)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (19,334,276) (17,829,597)
<EPS-PRIMARY> (228.97) (140.52)
<EPS-DILUTED> (228.97) (140.52)
</TABLE>
