<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 March 31, 1998
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 333-31375*
-------------
FORMAN PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-0954774
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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 May 12, 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 MARCH 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
Page No.
<S> <C>
Item 1. Financial Information:
Balance Sheets as of March 31, 1998 and
December 31, 1997 1
Statement of Operations and Accumulated
Deficit for the Three Month Periods
Ended March 31, 1998 and 1997 2
Statement of Cash Flows for the Three Month
Periods Ended March 31, 1998 and 1997 3
Notes to Financial Statements 4-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-11
PART II
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13-14
Signatures 15
</TABLE>
ii
<PAGE>
FORMAN PETROLEUM CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 93,555 $ 457,869
Restricted cash 1,619,560 3,937,500
Accounts receivable 611,610 597,991
Oil and gas revenue receivable 2,492,865 2,407,315
Other assets 8,320 48,806
------------ ------------
Total current assets 4,825,910 7,449,481
Property and equipment:
Oil and gas properties, full cost method 80,088,743 77,029,339
Other property and equipment, at cost 1,673,964 1,650,793
------------ ------------
81,762,707 78,680,132
Less: Accumulated depreciation, depletion
and amortization (32,760,553) (30,451,675)
------------ ------------
Net property and equipment 49,002,154 48,228,457
Other assets:
Deferred financing costs (net of accumulated
amortization) 6,125,868 6,366,367
Deferred charges 177,818 170,529
Funds on deposit in escrow 466,214 515,096
------------ ------------
Total other assets 6,769,900 7,051,992
------------ ------------
TOTAL ASSETS $ 60,597,964 $ 62,729,930
============ ============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 6,657,889 $ 6,438,278
Undistributed oil and gas revenues 1,635,114 1,848,497
Current portion of notes payable 13,992 13,992
------------ ------------
Total current liabilities 8,306,995 8,300,767
Note payable (long-term portion) 68,089,170 68,013,552
Mandatorily redeemable Preferred Stock, no par value,
1,000,000 authorized shares, 200,000 shares outstanding 11,008,702 10,589,588
Stockholder's deficit:
Common stock, no par value, 1,000,000 shares authorized,
90,000 issued and outstanding 1,000 1,000
Treasury Stock (10) (10)
Accumulated deficit (26,807,893) (24,174,967)
------------ ------------
Total stockholder's deficit (26,806,903) (24,173,977)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 60,597,964 $ 62,729,930
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
FORMAN PETROLEUM CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Oil and gas sales $ 4,207,558 $3,736,526
Overhead reimbursements 20,363 14,744
Interest Income 164,693 9,179
Other Income (16,871) 17,375
----------- ----------
Total revenues 4,375,743 3,777,824
----------- ----------
Costs and expenses:
General & administrative 528,996 428,648
Lease operating expenses 904,544 556,709
Interest expense 2,448,324 1,184,243
Production taxes 156,697 129,152
Depreciation, depletion and amortization 2,550,993 1,542,561
----------- ----------
Total costs and expenses 6,589,554 3,841,313
----------- ----------
Net loss from operations (2,213,811) (63,489)
Income tax expense (benefit) 0 0
----------- ----------
Net loss $(2,213,811) $ (63,489)
Preferred stock dividend $ 408,698 $ 0
----------- ----------
Net loss attributed to common shares $(2,622,509) $ (63,489)
Net loss per common share $ (29.14) $ (0.71)
=========== ==========
Pro forma data:
Net loss from operations reported above $(2,213,811) $ (63,489)
Pro forma benefit for income taxes 0 23,491
----------- ----------
Pro forma net loss $(2,213,811) $ (39,988)
Preferred stock dividend $ 408,698 $ 0
----------- ----------
Pro forma net loss attributed to common shares $(2,622,509) $ (39,998)
=========== ==========
Pro forma net loss per share $ (29.14) $ (0.44)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
FORMAN PETROLEUM CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended
March 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,213,811) $ (63,489)
Adjustments to reconcile net loss to
Net cash provided by operating activities:
DD&A 2,550,993 1,542,561
Withdrawal from escrow account 2,449,601 0
Change in assets and liabilities:
Decrease (Increase) in accounts receivable (13,619) (58,563)
Decrease (Increase) in prepaid expenses 0 (13,846)
Decrease (Increase) in due from affiliate 0 (162,144)
Decrease (Increase) in unbilled well costs (162) (173,239)
Increase (Decrease) in accounts payable/accrued liabilities (219,611) 673,251
Increase (Decrease) in due to/from stockholder 0 0
Decrease (Increase) in oil and gas revenue receivable (85,550) 1,184,440
Increase (Decrease) in undistributed oil and gas revenue 213,383 (281,973)
----------- -----------
Net cash provided by operating activities 2,681,224 2,646,998
----------- -----------
Cash flows from investing activities:
Additions to oil and gas properties (3,059,404) (3,423,744)
Withdrawal from (deposit into) escrow account 48,882 (9,179)
Purchase of other property and equipment (23,171) 60,461
----------- -----------
Net cash used in investing activities (3,033,693) (3,372,462)
----------- -----------
Cash flows from financing activities:
Repayment of notes payable (2,941) (245,644)
Borrowings (net of escrowed interest) 0 1,533,692
Decrease (Increase) in deferred financing costs (8,904) 0
----------- -----------
Net cash provided by financing activities (11,845) 1,288,048
----------- -----------
Net increase (decrease) in cash or cash equivalents (364,314) 562,584
Cash and cash equivalents at beginning of period 457,869 130,551
----------- -----------
Cash and cash equivalents at end of period $ 93,555 $ 693,135
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
FORMAN PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
1. Interim Financial Statements
The financial statements of the Company at March 31, 1998 and for the three
month period 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 period. 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 asset at March 31, 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>
MANAGEMENT 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 periods ended March 31, 1998 and 1997. The financial statements of
the Company at March 31, 1998 and for the three-month period 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
period. 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.
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 periods ended
March 31, 1998 and 1997:
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1998 1997
---------- ---------
<S> <C> <C>
Sales Volumes:
Oil (Bbls) 100,593 78,235
Gas (Mcf) 1,180,613 556,247
Oil and gas (BOE) 297,362 170,043
Sales Revenue:
Total oil sales $1,409,071 $1,727,263
Total gas sales $2,798,487 $1,938,075
Average Sales Prices:
Oil (per Bbl) $ 14.01 $ 22.08
Gas (per Mcf) $ 2.37 $ 3.48
Per BOE $ 14.15 $ 21.44
Average Costs (per BOE):
Severance Tax $ 0.53 $ 0.76
Lease Operating Expenses $ 3.04 $ 3.26
General & Administrative $ 1.78 $ 2.51
Depreciation, Depletion & Amortization $ 8.58 $ 9.02
</TABLE>
6
<PAGE>
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-month period ended March 31, 1998 and the comparable period in 1997:
<TABLE>
<CAPTION>
First Quarter
1998 Compared
to First Quarter
1997
----------------
<S> <C>
Increase (decrease) in oil and gas revenues
resulting from differences in:
Crude oil and condensate-
Prices $ (811,809)
Production 493,617
-----------
(318,192)
Natural gas-
Prices (1,315,003)
Production 2,175,415
-----------
860,412
Hedging and other, net (71,188)
-----------
Increase (decrease) in oil and gas revenues $ 471,032
===========
</TABLE>
The Company's oil and gas revenues increased approximately $471,000, or 13%
to $4.2 million for the three months ended March 31, 1998, from $3.7 million for
the comparable period in 1997. Production levels for the three months ended
March 31, 1998, increased 74% to 297 thousand barrels of oil equivalent ("MBOE")
from 171 MBOE for the comparable period in 1997. Gas production volumes
increased 112%, while oil volumes increased 29%. The Company's average sales
prices (including hedging activities) for oil and natural gas for the three
months ended March 31, 1998 were $14.01 per Bbl and $2.37 per Mcf versus $22.08
per Bbl and $3.48 per Mcf in the 1997 period. Revenues increased $2.7 million
due to the aforementioned production increases, and decreased by $2.1 million as
a result of sharply lower oil and gas prices.
Lease operating expenses - On a BOE basis, lease operating expenses
experienced a 6% decrease, to $3.04 per BOE for the three months ended March 31,
1998 from $3.26 per BOE in the comparable 1997 period. For the first three
months of 1998, lease operating expenses were up 63%, from $557,000 in 1997 to
$905,000 in the comparable 1998 period. This increase resulted primarily from
the six producing wells, which were added between the first quarter of 1997 and
the first quarter of 1998. Two new wells were drilled and four non-producing
wells were successfully worked over and put into production between the two
quarterly periods.
7
<PAGE>
Severance taxes - The effective severance tax rate as a percentage of oil
and gas revenues increased to 3.7% for the three months ended March 31, 1998,
from 3.5% for the comparable period 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 two-
thirds gas, which is taxed at a lower effective rate than oil.
General and administrative expenses - For the quarter ended March 31, 1998,
general and administrative ("G&A") expenses were $1.78 per BOE, a 29% decrease
from the $2.51 per BOE for the first quarter of 1997. For the first three months
of 1998, G&A increased 23%, from $429,000 in 1997 to $529,000 in 1998. The first
quarter decrease in G&A per BOE in 1998 was due to increases in production
during the period as compared to the comparable periods for 1997. The increases
in actual G&A expenses in the first quarter ended March 31, 1998 were primarily
the result of salary adjustments made during the second half of 1997, 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 three months
ended March 31, 1998, depreciation, depletion and amortization ("DD&A") expense
increased 65% over the comparable 1997 period. 9.89 The increase for the first
quarter of 1998 is attributable to the Company's increased production and
related future capital costs during the first three months of 1998. On a BOE
basis, which reflects the increases in production, the DD&A rate for the first
three months of 1998 was $8.58 per BOE compared to $9.02 per BOE for the same
period in 1997, a decrease of 5%.
Interest expense - For the three months ended March 31, 1998, interest
expense increased to $2.4 million from $1.2 million for the comparable 1997
period. This increase of $1.2 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).
Net loss from operations - Due to the factors described above, net loss
from operations for the quarter ended March 31, 1998 was $2.2 million, an
increase of $2.1 million over the net loss reported for the first quarter of
1997 of $63,000.
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 March 31, 1998 that has been
fully reserved due to the Company's operating losses.
8
<PAGE>
Liquidity and Capital Resources
Working Capital and Cash Flow - The Company had a working capital deficit
at March 31, 1998 of $3.5 million. The Company believes that its cash on hand
plus the expected cash flow from operations and available vendor financing will
be sufficient to fund its working capital needs for 1998, although certain
exploration and development projects have been deferred.
The Company will require additional financing to complete its planned
capital expenditures in 1999 and to service its outstanding debt. Management is
reviewing alternative sources of financing, including an initial public
offering, to satisfy these requirements. The Company has postponed any initial
public offering of equity until market conditions improve. There can be no
assurance that the Company will be able to obtain this additional financing. The
following summary table reflects comparative cash flows for the Company for the
three-month periods ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1998 1997
--------- ---------
(in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 2,681 $ 2,647
Net cash used by investing activities (3,034) (3,372)
Net cash provided by financing activities (12) 1,288
</TABLE>
For the three months ended March 31, 1998, net cash provided by operating
activities increased to $2.7 million from $2.6 million during the comparable
period in 1997. This increase was primarily due to the Company's funding of
interest expense on the Notes from funds escrowed for the first quarter of 1998
interest payment.
Cash used in investing activities decreased by $340,000, from $3.4 million
during the first three months of 1997 to $3.0 million during the comparable
period in 1998. This decrease was a result of decreased capital spending during
the first quarter of 1998 as compared to the same period in 1997.
During the quarter ended March 31, 1998, financing activities required cash
flow of $12,000, as compared to $1.3 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 quarter of 1998.
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
9
<PAGE>
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.
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. The Company
10
<PAGE>
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.
Forward-Looking Statements - The foregoing discussion of Liquidity and
Capital Resources includes forwarding looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Company believes that its expectations are
based on reasonable assumptions, it can give no assurance that its goals will be
achieved. Important factors that could cause actual results to differ materially
from those in the forward looking statements herein include the timing and
extent of changes in commodity prices 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.
11
<PAGE>
PART II
Item 5. Other Information
Operational Activities - In the Boutte Field, the Company completed the
recompletion of the Simoneaux #7 Well, which is currently producing
approximately 250 Bbl of oil per day. The Company attempted to workover the
Simoneaux #20 well to restore it to production, but was unable to complete the
workover due to mechanical problems and was forced to temporarily abandon the
well.
The first well to be drilled in the Company's Bayou Fer Blanc Field, the
Allan Land Company #1 Well, was plugged and abandoned during the first quarter
of 1998.
The Company has completed the integration and interpretation of the 3-D
seismic survey on the West Gueydan Field and is now in the process of showing
this prospect to industry participants in an effort to sell an interest in the
prospect prior to drilling the initial well.
Preferred Stock Dividend - The Company declared a dividend payable on March
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 8,073
dividend shares.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
The following instruments and documents are included as Exhibits to this
Form 10-Q. Exhibits incorporated by reference are so indicated by parenthetical
information.
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
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)).
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
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
</TABLE>
14
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Forman Petroleum Corporation
Date: May 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
15
<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> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 DEC-31-1997
<CASH> 1,713,115 4,395,369
<SECURITIES> 0 0
<RECEIVABLES> 611,610 597,991
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,825,910 7,449,481
<PP&E> 0 0
<DEPRECIATION> 32,760,553 30,451,675
<TOTAL-ASSETS> 60,597,964 62,729,930
<CURRENT-LIABILITIES> 8,306,995 8,300,767
<BONDS> 0 0
11,008,702 10,589,588
0 0
<COMMON> 1,000 1,000
<OTHER-SE> (26,807,893) (24,174,967)
<TOTAL-LIABILITY-AND-EQUITY> 60,579,964 62,729,930
<SALES> 4,207,558 14,235,272
<TOTAL-REVENUES> 4,375,743 14,708,857
<CGS> 1,061,241 3,408,208
<TOTAL-COSTS> 6,589,554 32,538,454
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,448,324 7,723,717
<INCOME-PRETAX> (2,213,811) (17,829,597)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,213,811) (17,829,597)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,213,811) (17,829,597)
<EPS-PRIMARY> (29.14) (140.52)
<EPS-DILUTED> (29.14) (140.52)
</TABLE>
