<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 18, 1998
------------------------------------
VISTA ENERGY RESOURCES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 001-14575 75-2766114
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification Number)
550 WEST TEXAS AVENUE
SUITE 700 79701
MIDLAND, TEXAS (Zip code)
(Address of principal
executive offices)
</TABLE>
Registrant's telephone number, including area code: (915) 570-5045
NOT APPLICABLE
(former address if changed since last report)
================================================================================
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The following information is included in this Report beginning as
page F-1.
- Report of Independent Public Accountants
- Statements of Revenues and Direct Operating Expenses
- Notes to Statements of Revenues and Direct Operating
Expenses
(b) PRO FORMA FINANCIAL INFORMATION
The following information is included in this Report beginning as
page F-5.
- Unaudited Pro Forma Combined Balance Sheet as of
September 30, 1998
- Unaudited Pro Forma Combined Income Statement as of
September 30, 1998
- Unaudited Pro Forma Combined Income Statement for the
Year Ended December 31, 1997
- Notes to Pro Forma Consolidated Financial Statements
2
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Vista Energy Resources, Inc.:
We have audited the accompanying statements of revenue and direct operating
expenses of the I.P. Acquisition (see Note 1) for the nine months ended
September 30, 1998, and the years ended December 31, 1997 and 1996. These
financial statements are the responsibility of the management of Vista Energy
Resources, Inc. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimated made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such statements present fairly, in all material respects, the
revenues and direct operating expenses of the I.P. Acquisition described in Note
1 for the nine months ended September 30, 1998, and the years ended December 31,
1997 and 1996, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Dallas, Texas,
February 25, 1999
F-1
<PAGE> 4
I.P. ACQUISITION
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998,
AND THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Nine Months Year Year
Ended Ended Ended
September 30, December 31, December 31,
1998 1997 1996
------------- ------------- --------------
<S> <C> <C> <C>
REVENUES:
Oil and gas $4,244,847 $8,897,264 $7,782,319
---------- ---------- ----------
Total revenues 4,244,847 8,897,264 7,782,319
---------- ---------- ----------
DIRECT OPERATING EXPENSES:
Lease operating and production taxes 950,695 1,762,352 1,411,343
---------- ---------- ----------
Total direct operating expenses 950,695 1,762,352 1,411,343
---------- ---------- ----------
EXCESS OF REVENUES OVER DIRECT
OPERATING EXPENSES $3,294,152 $7,134,912 $6,370,976
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-2
<PAGE> 5
I.P. ACQUISITION
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSE
1. BASIS OF PRESENTATION:
The accompanying statements of revenues and direct operating expenses do not
include general and administrative expense, interest income or expense, a
provision for depreciation, depletion, and amortization, or any provision for
income taxes because the property interest acquired represent only a portion of
the business, and the costs incurred by International Paper are not necessarily
indicative of the costs to be incurred by Vista.
Historical financial information reflecting the financial position, results of
operations, and cash flows of the I.P. Acquisition are not presented because the
entire acquisition cost was assigned to the oil and gas property interests.
Accordingly, the historical statement of revenues and direct operating expenses
has been presented in lieu of the financial statements required under Rule 3-05
of Securities Exchange Commission Regulation S-X.
2. SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED):
Reserve information presented below has been estimated by Vista's internal
engineers using September 30, 1998, prices and costs which were utilized in
Vista's reserve estimates as of September 30, 1998. Proved reserves are
estimated quantities of crude oil and natural gas which, based on geologic and
engineering data, are estimated to be reasonably recoverable in future years
from known reservoirs under existing economic and operating conditions. Proved
developed reserves are those which are expected to be recovered through existing
wells with existing equipment and operating methods. Because of inherent
uncertainties and the limited nature of reservoir data, such estimates are
subject to change as additional information becomes available.
Proved Oil and Gas Reserves at September 30, 1998
<TABLE>
<CAPTION>
Oil (Bbls) Gas (Mcf)
---------- -----------
(in thousands)
<S> <C> <C>
Proved reserves 3,740 10,538
Proved developed reserves 1,247 5,044
</TABLE>
Standardized Measure of Discounted Net Cash Flows Relating to Proved oil and Gas
Reserves
The standardized measure of discounted future net cash flows ("Standardized
Measure") is prepared using assumptions required by the Financial Accounting
Standards Board. Such assumptions include the use of year-end prices for oil and
gas and year-end costs for estimated future development and production
expenditures to produce year-end estimated proved reserves. Discounted future
net cash flows are calculated using a 10% rate.
F-3
<PAGE> 6
The standardized measure does not represent Vista's estimate of future net cash
flows or the value of proved oil and gas reserves acquired from I.P. Probable
and possible reserves, which may become proved in the future, are excluded from
the calculations. Furthermore year-end prices, used to determine standardized
measure of discounted cash flows, are influenced by seasonable demand and other
factors and may not be the most representative in estimating future revenues or
reserve data. Prices utilized for the standardized measure at September 30,
1998, were $13.38/Bbl for oil and $2.17/Mcf for gas.
Standardized Measure of Discounted Future Net Cash Flows at September 30, 1998
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Future cash inflows $ 67,444
Future costs:
Production 20,628
Development 5,948
---------
Future net cash inflows 40,868
10% annual discount 14,802
---------
Standardized measure of discounted future
net cash flows before income taxes $ 26,066
=========
</TABLE>
F-4
<PAGE> 7
VISTA ENERGY RESOURCES, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The accompanying Pro Forma Combined Financial Statements have been prepared by
recording pro forma adjustments to the historical Combined Financial Statements
of Vista Energy Resources, Inc. (the "Company"). The accompanying Pro Forma
Combined Balance Sheet at September 30, 1998, has been prepared assuming the
Company consummated the I.P. Acquisition and the Midland Resources, Inc. merger
(the "Midland Merger") on September 30, 1998. The accompanying Pro Forma
Combined Income Statement for the nine months ended September 30, 1998, has been
prepared assuming the Company consummated the I.P. Acquisition and the Midland
Merger on January 1, 1998. The accompanying Pro Forma Combined Income Statement
for the period ended December 31, 1997, has been prepared assuming that the
Company consummated the I.P. Acquisition and the Midland Merger on January 1,
1997.
The Pro Forma Combined Financial Statements are not necessarily indicative of
the financial position or results of operations that would have occurred had the
transactions been effected on the assumed dates. Additionally, future results
may vary significantly from the results reflected in the Pro Forma Combined
Income Statement due to normal production declines, changes in prices, future
transactions, and other factors. These statements should be read in conjunction
with the Company's audited Combined Financial Statements and the related notes
for the period ended December 31, 1997, included in the Company's Form S-4/A
filed September 18, 1998, the Company's unaudited consolidated financial
statements and the related notes for the nine months ended September 30, 1998,
included in the Company's Form 10-Q for the quarter ended September 30, 1998,
and the statements of revenues and direct operating expenses of the IP
Acquisition for the period ended September 30, 1998.
F-5
<PAGE> 8
VISTA ENERGY RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET--SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Total
Vista Vista Total
Midland Midland I.P. Pro Forma
ASSETS Vista Midland Adjustments Combined Acquisition Vista
------------- ------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 83,091 $ 37,404 $ -- $ 120,495 $ -- $ 120,495
Accounts receivable 996,746 998,656 -- 1,995,402 -- 1,995,402
Property held for sale -- -- -- -- -- --
Deferred tax asset -- 37,000 (37,000)(b) -- -- --
Other 457,116 42,014 (42,014)(a) 457,116 -- 457,116
------------ ------------ ------------- ------------ ----------- ------------
Total current assets 1,536,953 1,115,074 (79,014) 2,573,013 -- 2,573,013
------------ ------------ ------------- ------------ ----------- ------------
PROPERTY AND EQUIPMENT:
Oil and gas properties,
successful efforts accounting 29,240,909 29,392,208 7,646,769 (a) 66,279,886 19,100,000(a) 85,379,886
Other 428,213 557,713 (409,582)(a) 576,344 -- 576,344
------------ ------------ ------------- ------------ ----------- ------------
29,669,122 29,949,921 7,237,187 66,856,230 19,100,000 85,956,230
Less- Accumulated depreciation,
depletion and amortization (4,440,863) (16,950,287) 16,950,287 (a) (4,440,863) -- (4,440,863)
------------ ------------ ------------- ------------ ----------- ------------
Property and equipment, net 25,228,259 12,999,634 24,187,474 62,415,367 19,100,000 81,515,367
------------ ------------ ------------- ------------ ----------- ------------
OTHER ASSETS:
Deferred tax asset -- 1,441,271 (1,441,271)(b) -- -- --
Goodwill, net -- 700,588 (700,588)(a) -- -- --
Contracts and leases, net -- 183,075 (183,075)(a) -- -- --
Note receivable -- -- -- -- -- --
Other 706,287 87,858 (87,858)(a) 706,287 -- 706,287
------------ ------------ ------------- ------------ ----------- ------------
Total assets $ 27,471,499 $ 16,527,500 $ 21,695,668 $ 65,694,667 $19,100,000 $ 84,794,667
============ ============ ============= ============ =========== ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
expenses 1,456,326 $ 666,219 $ 1,040,000 (c) $ 3,162,545 -- 3,162,545
Current maturities of long-term
debt -- 900,000 (900,000)(d) -- -- --
------------ ------------ ------------- ------------ ----------- ------------
Total current liabilities 1,456,326 1,566,219 140,000 3,162,545 -- 3,162,545
------------ ------------ ------------- ------------ ----------- ------------
LONG-TERM DEBT 18,900,000 8,770,974 900,000 (d) 28,570,974 19,100,000(b) 47,670,974
DEFERRED TAX LIABILITY -- -- 6,999,814 (b) 7,566,462 -- 7,566,462
566,648 (e)
OTHER -- 205,116 960,000 (c) 1,165,116 -- 1,165,116
STOCKHOLDERS' EQUITY:
Common stock -- 4,470 157,992 (a) 162,462 -- 162,462
Additional paid-in capital -- 8,505,716 17,400,509 (a) 25,906,225 -- 25,906,225
(566,648)(e) (566,648) (566,648)
Unearned compensation -- (81,420) 81,420 (a) -- --
Retained earnings (deficit) -- (2,443,575) 2,443,575 (a) -- -- --
Owner's equity 7,115,173 -- (7,387,642)(a) (272,469) -- (272,469)
------------ ------------ ------------- ------------ ----------- ------------
7,115,173 5,985,191 12,129,206 25,229,570 -- 25,229,570
------------ ------------ ------------- ------------ ----------- ------------
Total liabilities and
stockholders' equity $ 27,471,499 $ 16,527,500 $ 21,695,668 $ 65,694,667 $19,100,000 $ 84,794,667
============ ============ ============= ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 9
VISTA ENERGY RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Total
Vista Vista Total
Midland Midland I.P. I.P. Pro Forma
Vista Midland Adjustments Combined Acquisition Adjustments Vista
----------- ------------- -------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 5,984,676 $ 3,119,835 $ -- $ 9,104,511 $4,244,847 $ -- $ 13,349,358
----------- ------------ ---------- ------------ ---------- ----------- ------------
Total revenues 5,984,676 3,119,835 -- 9,104,511 4,244,847 -- 13,349,358
----------- ------------ ---------- ------------ ---------- ----------- ------------
COSTS AND EXPENSES:
Lease operating 2,812,435 1,988,305 (347,473)(f) 4,453,267 950,695 -- 5,403,962
Exploration costs 25,458 44,517 -- 69,975 -- -- 69,975
Depreciation, depletion, and
amortization 1,229,601 1,027,447 866,308 (g) 3,123,356 -- 1,090,451 (c) 4,213,807
General and administrative,
net 1,150,083 752,647 347,473 (f) 2,250,203 -- -- 2,250,203
Amortization of unit option
awards 214,303 -- -- 214,303 -- -- 214,303
Impairment of oil and gas
properties -- -- -- -- -- -- --
----------- ------------ ---------- ------------ ---------- ----------- ------------
Total costs
and expenses 5,431,880 3,812,916 866,308 10,111,104 950,695 1,090,451 12,152,250
----------- ------------ ---------- ------------ ---------- ----------- ------------
TOTAL OPERATING INCOME
(LOSS) 552,796 (693,081) (866,308) (1,006,593) 3,294,152 (1,090,451) 1,197,108
----------- ------------ ---------- ------------ ---------- ----------- ------------
OTHER:
Interest and other income 60,907 117,214 -- 178,121 -- -- 178,121
Interest expense (1,070,123) (640,113) 97,698 (h) (1,612,538) -- (1,084,274)(d) (2,696,812)
Sale of assets gain (loss) (339,362) (48,953) -- (388,315) -- -- (388,315)
----------- ------------ ---------- ------------ ---------- ----------- ------------
Total other (1,348,578) (571,852) 97,698 (1,822,732) -- (1,084,274) (2,907,006)
----------- ------------ ---------- ------------ ---------- ----------- ------------
NET INCOME (LOSS) BEFORE
TAXES (795,782) (1,264,933) (768,610) (2,829,325) 3,294,152 (2,174,725) (1,709,898)
BENEFIT (PROVISION) FOR
TAXES 278,524 430,078 281,662 (e) 990,264 -- (391,800)(e) 598,464
----------- ------------ ---------- ------------ ---------- ----------- ------------
NET INCOME (LOSS) $ (517,258) $ (834,855) $ (486,948) $ (1,839,061) $3,294,152 $(2,566,525) $ (1,111,434)
=========== ============ ========== ============ ========== =========== ============
BASIC NET LOSS PER SHARE (0.11) (0.07)
============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 16,312,337 16,312,337
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 10
VISTA ENERGY RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997 1997 Pro
Assets Assets Forma
Vista Midland Acquired (k) Sold (l) Adjustments
------------ -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 8,874,961 $ 6,396,249 $ 1,390,778 $ (193,041) $ --
------------ ------------ ------------ ------------ ------------
Total revenues 8,874,961 6,396,249 1,390,778 (193,041) --
------------ ------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Lease operating 3,688,695 3,088,886 521,382 (117,369) (553,554)(f)
Exploration costs 97,211 849,534 -- -- --
Depreciation, depletion, and
amortization 2,169,098 1,964,658 162,856 (34,016) 592,835 (g)
General and administrative, net 987,020 1,332,392 -- (30,718) 553,554 (f)
Amortization of unit option
awards 315,518 -- -- -- --
Impairment of oil and gas
properties -- 1,371,102 -- -- (1,371,102)(i)
------------ ------------ ------------ ------------ ------------
Total costs
and expenses 7,257,542 8,606,572 684,238 (182,103) (778,267)
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING INCOME (LOSS) 1,617,419 (2,210,323) 706,540 (10,938) 778,267
------------ ------------ ------------ ------------ ------------
OTHER:
Interest and other income 115,949 117,563 -- -- --
Interest expense (1,048,009) (970,430) -- -- 314,405 (h)
Sale of assets gain (loss) (87,678) 462,571 -- -- (462,571)(j)
------------ ------------ ------------ ------------ ------------
Total other (1,019,738) (390,296) -- -- (148,166)
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE TAXES 597,681 (2,600,619) 706,540 (10,938) 630,101
BENEFIT (PROVISION) FOR TAXES (211,720) 717,237 -- -- (268,485)(e)
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 385,961 $ (1,883,382) $ 706,540 $ (10,938) $ 361,616
============ ============ ============ ============ ============
BASIC NET INCOME (LOSS) PER SHARE
FULLY DILUTED EARNINGS PER SHARE
WEIGHTED AVERAGE SHARES
OUTSTANDING
FULLY DILUTED SHARES OUTSTANDING
</TABLE>
<TABLE>
<CAPTION>
Vista Total
Midland I.P. I.P. Pro Forma
Combined Acquisition Adjustments Vista
------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 16,468,947 $ 8,897,264 $ -- $ 25,366,211
------------ ------------ ------------ ------------
Total revenues 16,468,947 8,897,264 -- 25,366,211
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Lease operating 6,628,040 1,762,352 -- 8,390,392
Exploration costs 946,745 -- -- 946,745
Depreciation, depletion, and
amortization 4,855,431 -- 1,090,451(c) 5,945,882
General and administrative, net 2,842,248 -- -- 2,842,248
Amortization of unit option
awards 315,518 -- -- 315,518
Impairment of oil and gas
properties -- -- -- --
------------ ------------ ------------ ------------
Total costs
and expenses 15,587,982 1,762,352 1,090,451 18,440,785
------------ ------------ ------------ ------------
TOTAL OPERATING INCOME (LOSS) 880,965 7,134,912 (1,090,451) 6,925,426
------------ ------------ ------------ ------------
OTHER:
Interest and other income 233,512 -- -- 233,512
Interest expense (1,704,034) -- (1,445,698)(d) (3,149,732)
Sale of assets gain (loss) (87,678) -- -- (87,678)
------------ ------------ ------------ ------------
Total other (1,558,200) -- (1,445,698) (3,003,898)
------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE TAXES (677,235) 7,134,912 (2,536,149) 3,921,528
BENEFIT (PROVISION) FOR TAXES 237,032 -- (1,609,567)(e) (1,372,535)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (440,203) $ 7,134,912 $ (4,145,716) $ 2,548,993
============ ============ ============ ============
BASIC NET INCOME (LOSS) PER SHARE (0.03) 0.16
------------ ------------
FULLY DILUTED EARNINGS PER SHARE .09
------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 16,312,337 16,312,337
============ ============
FULLY DILUTED SHARES OUTSTANDING 28,393,410
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 11
VISTA ENERGY RESOURCES, INC.
NOTES TO (UNAUDITED) PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying Pro Forma Consolidated Balance Sheet at September 30, 1998, has
been prepared assuming Vista Energy Resources, Inc. (the "Company") consummated
the I.P. Acquisition and the Midland Merger on September 30, 1998. The pro forma
consolidated statement of operations for the nine months ended September 30,
1998, has been prepared assuming the Company consummated the I.P. Acquisition
and the Midland Merger on January 1, 1998. The accompanying pro forma
consolidated statement of operations for the period ended December 31, 1997, has
been prepared assuming that the Company consummated the I.P. Acquisition and the
Midland Merger on January 1, 1997. The pro forma consolidated statements of
operations are not necessarily indicative of the results of operations had the
above described transaction occurred on the assumed dates.
2. ACQUISITIONS:
IP Acquisition
On December 18, 1998, the Company acquired a group of producing oil and gas
properties from IP Petroleum Company, Inc. ("IP") and certain of IP's working
interest partners for a cash purchase price of $19,100,000 (the "I.P.
Acquisition").
The properties acquired consist of the sellers' War-Wink area leases located in
Ward and Winkler counties, Texas. The Company gains operatorship and working
interests ranging from 65% to 85% in 65 wells producing from the Cherry Canyon
member of the Delaware formation. Oil and gas production net to the interests
acquired by the Company was 650 barrels of oil and 2,150 thousand cubic feet
("Mcf") of natural gas per day at the time of acquisition.
The acquisition was financed through borrowings under the Company's new
$100,000,000 credit facility with BankBoston, N.A. The new facility was entered
into simultaneously with the closing of the IP Acquisition, and provides for a
three-year revolving credit facility which converts to a three-year term loan in
December 2001. The credit facility is secured by a priority first lien on
substantially all of the Company's oil and gas properties, and availability is
governed by a borrowing base originally set at $55.0 million. Outstanding debt
immediately after the closing was $49.4 million. Interest rates under the new
facility range from 125 basis points over London Interbank Offered Rate
("LIBOR") to 250 basis points over LIBOR based on borrowing base utilization.
F-9
<PAGE> 12
Midland Merger
On October 28, 1998, the Merger and Conversion among Vista Resources Partners,
L.P., Midland Resources, Inc. and Vista Energy Resources, Inc. was closed. As a
result of the Conversion, Vista Resources Partners, L.P. became a wholly-owned
subsidiary of the Company, and as a result of the merger Midland Resources also
became a wholly-owned subsidiary of the Company.
3. PRO FORMA ADJUSTMENTS:
IP Acquisition
Pro forma adjustments necessary to adjust the consolidated balance sheet and
statements of operations are as follows:
(a) To record the properties purchased in the IP Acquisition by Vista
Energy Resources, Inc.
(b) To record the increase in long-term debt utilized in the IP
Acquisition.
(c) To adjust depreciation, depletion and amortization expense for the
additional basis allocated to the oil and gas properties acquired and
accounted for using the successful efforts method of accounting.
(d) To adjust the interest expense related to the long-term debt utilized
in the IP Acquisition.
(e) To adjust the provision for income taxes for the assets acquired
based on actual results of operations prior to their acquisition.
Midland Merger
Pro forma adjustments necessary to adjust the consolidated balance sheet and
statements of operations for the Midland Merger are as follows:
(a) To adjust Midland's historical balances to reflect the fair market value of
the assets acquired, liabilities assumed, and the new capital structure
using the purchase method of accounting based on the aggregate purchase
consideration. All net working capital balances were estimated to
approximate fair market value at the time of acquisition. The historical
goodwill, contracts and leases, and other assets balances were eliminated,
as it was determined that these items did not provide any continuing value
to Vista. Unearned compensation was eliminated as it related to the
unamortized portion of Midland's stock-related compensation expense that is
not applicable to Vista.
(b) To record deferred taxes related to the differences between the historical
tax basis of assets acquired and liabilities assumed and the fair market
value allocated to the assets acquired and liabilities assumed based on the
aggregate purchase consideration.
(c) To record cash consideration for non-recurring merger expenses related to
the Warley Settlement Agreement and legal, accounting, registration, and
other costs directly related to the Midland acquisition
(d) To record all assumed debt as long-term under Vista's Amended and Restated
Credit Agreement, dated August 15, 1997.
(e) To record the deferred tax liability and related provision for income taxes
to reflect the change in Vista's tax status from a partnership to a
corporation.
F-10
<PAGE> 13
(f) To reclassify certain COPAS overhead charges to conform with the financial
statement presentation of Vista.
(g) To adjust depreciation, depletion and amortization expense for the
additional basis allocated to the oil and gas properties acquired and
accounted for using the successful efforts methods of accounting.
(h) To adjust interest expense to be reflective of the weighted average
interest rate received under Vista's Amended and Restated Credit Agreement
dated August 15, 1997. The applicable interest rate under Vista's Amended
and Restated Credit Agreement, dated August 15, 1997, for both periods was
7.6%.
(i) To adjust impairment of oil and gas properties to reflect there statement
of the Midland properties in purchase accounting as if the Merger had
occurred on January 1, 1997. Midland's historical impairment charges were
required under SFAS No. 121, which requires a review for impairment on a
property by property basis. Although the fair value of Midland's oil and
gas properties may have exceeded its cost in total, Midland recorded an
impairment because of the property by property nature of the impairment
test required by SFAS No. 121. In accordance with APB No. 16, the purchase
consideration in the Merger has been allocated to the assets and
liabilities acquired based on estimated fair values as detailed in Note 2.
This allocation results in approximately $36.9 million recorded to oil and
gas properties on a pro forma basis after the fair value of other assets
and liabilities acquired was determined. The purchase price attributed to
oil and gas properties was allocated to groups of properties based on
relative fair values. Based on estimated future cash flow, management does
not believe any impairment charge under SFAS No. 121 is required on a pro
form a basis for the Midland properties. Vista could be required to
recognize an impairment charge in the future depending on future expected
prices and costs and production estimates. Due to the significance of the
write-up of Midland's oil and gas properties, such an impairment charge
could be significant, if required.
(j) To remove gain on 1997 assets sold as described in footnote (1).
(k) To record revenue and direct operating expenses for the 1997 Assets
Acquired based on the actual results of operations prior to their
acquisition.
(l) To reduce revenue and direct operating expenses for the 1997 Assets Sold
based on the actual results of operations prior to their sale.
4. PRO FORMA SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED):
Estimated Quantities of Pro Forma Proved Oil and Gas Reserves
December 31, 1997 reserve estimates for the I.P. Acquisition were determined by
adjusting the September 30, 1998 reserve estimates for 1998 production and
applying December 31, 1997 prices and costs.
Proved reserves are estimated quantities of crude oil, natural gas, and natural
gas liquids which, based on geologic and engineering data, are estimated to be
reasonably recoverable in future years from known reservoirs under existing
economic and operating conditions. Proved developed reserves are those which are
expected to be recovered through existing wells with existing equipment and
operating methods. Because of inherent uncertainties and the limited nature of
reservoir data, such estimates are subject to change as additional information
becomes available.
F-11
<PAGE> 14
Pro Forma Proved Oil and Gas Reserves at December 31, 1997
<TABLE>
<CAPTION>
Oil (Bbls) Gas (Mcf)
---------- ---------
(in thousands)
<S> <C> <C>
Proved reserves 13,832 36,368
Proved developed reserves 6,760 22,343
</TABLE>
Standardized Measure of Discounted Future Net Cash
Flows Relating to Pro Forma Proved Oil and Gas Reserves
The standardized measure of discounted future net cash flows ("Standardized
Measure") is prepared using assumptions required by the Financial Accounting
Standards Board. Such assumptions include the use of year-end prices for oil and
gas and year-end costs for estimated future development and production
expenditures to produce year-end estimated proved reserves. Discounted future
net cash flows are calculated using a 10% rate.
The Standardized Measure does not represent the Company's estimate of future net
cash flows or the value of proved oil and gas reserves. Probable and possible
reserves, which may become proved in the future, are excluded from the
calculations. Furthermore, year-end prices, used to determine the standardized
measure of discounted cash flows, are influenced by seasonal demand and other
factors and may not be the most representative in estimating future revenues or
reserve data.
Pro Forma Standardized Measure of Discounted Future Net Cash Flows at December
31, 1997
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Future cash inflows $ 267,662
Future costs:
Production 112,341
Development 30,331
Future net cash inflows before income tax 124,990
10% annual discount 49,503
---------
Standardized measure of discounted future
net cash flows before income taxes $ 75,487
=========
</TABLE>
F-12
<PAGE> 15
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.
VISTA ENERGY RESOURCES, INC.
By: /s/ C. Randall Hill
-----------------------------------
Name: C. Randall Hill
Title: Chairman and Chief Executive
Officer
Date: March 1, 1999
3
