<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 8-K
ON
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
August 10, 1996
Energen Corporation
(Exact name of registrant as specified in its charter)
Alabama
(State or other jurisdiction of incorporation)
1-7810 63-0757759
(Commission File No.) (IRS Employer Identification No.)
2101 Sixth Avenue North
Birmingham, Alabama 35203
(Address of principal (Zip Code)
executive offices)
(205) 326-2700
(Registrant's telephone number including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
As previously reported in the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, of Energen Corporation (the "Company"), on July
31, 1996, with an effective date of July 1, 1996, a subsidiary of Taurus
Exploration, Inc. ("Taurus"), the oil and gas exploration and production
subsidiary of the Company, acquired a 100 percent working interest in the
Black Warrior Basin coalbed methane properties of Houston-based Burlington
Resources Inc. ("Burlington") for $61 million. The properties are part of
Burlington's recently announced accelerated divestiture program. In addition
to ownership, Taurus will operate the properties. Current production is
located on more than 19,000 gross acres adjacent to existing Taurus coalbed
methane interests in west central Alabama. The properties include more than
100 economic wells and estimated net proved reserves of 100 billion cubic feet
("Bcf"). Substantially all of the reserves are classified as proved
producing, with net annual production currently exceeding 4.5 Bcf. Through
the year 2002, production from 43 of the wells qualifies for the
Nonconventional Fuels Tax Credit, which presently is valued at approximately
$1 per thousand cubic feet of production and increases annually with
inflation. Under applicable area of mutual interest agreements, Taurus was
required to offer substantial participation in the acquired properties to two
of its coalbed methane partners, which participation was not exercised. The
majority of the participation rights expired on August 10, 1996, and the
balance of such rights expired on August 20, 1996. Accordingly, such
acquisition is being reported on this Form 8-K as a result of the expiration
of participation rights on August 10, 1996.
The Company initially used a portion of its existing short-term
credit facilities to acquire the foregoing properties. The Company expects to
refinance a portion of its current year acquisitions, including the
acquisition reported hereby, through the issuance of long-term debt during the
fourth quarter of this fiscal year. The Company expects to refinance the
balance of such acquisitions as well as additional investments which may be
made pursuant to its ongoing acquisition program through future issuances of
long-term debt and equity.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
See "Index to Financial Statements Financial Statement of the
Acquired Property" on page 4.
(b) Pro Forma Financial Information
See "Index to Financial Statements Unaudited Pro Forma
Consolidated Financial Statements" on page 4.
<PAGE>
SIGNATURE
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.
ENERGEN CORPORATION
DATE: September 3, 1996 By /s/ G. C. Ketcham
G. C. Ketcham
Executive Vice President,
Chief Financial Officer
and Treasurer
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Financial Statement of the Acquired Property:
Report of Independent Accountants 5
Statement of Revenues and Direct Operating Expenses of the Acquired
Property for the Year Ended December 31, 1995 and Unaudited for
the Six Months Ended June 30, 1996 6
Notes to the Statement of Revenues and Direct Operating Expenses 7
Supplementary Oil and Gas Disclosures for the Acquired Property
(Unaudited) 8
Unaudited Pro Forma Consolidated Financial Statements:
Explanatory Note 11
Unaudited Pro Forma Consolidated Statement of Income for the Year Ended
September 30, 1995 12
Unaudited Pro Forma Consolidated
Statement of Income for the Nine Months
Ended June 30, 1996 13
Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1996 14
Notes to Unaudited Pro Forma Consolidated Financial Statements 15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Energen Corporation
We have audited the accompanying statement of revenues and direct
operating expenses of the Acquired Property for the year ended December 31,
1995. This financial statement is the responsibility of management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit 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 statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying statement of revenues and direct operating expenses
reflects the revenues and direct operating expenses attributable to the
Acquired Property as described in Note 1 and is not intended to be a complete
presentation of the revenues and expenses of the Acquired Property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenues and direct operating expenses of the Acquired
Property as described in Note 1 for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
COOPERS &LYBRAND L.L.P.
Birmingham, Alabama
August 30, 1996<PAGE>
THE ACQUIRED PROPERTY
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
(in thousands of dollars)
Six Months
Year Ended Ended
December 31, June 30, 1996
1995 (Unaudited)
Revenues $7,812 $6,360
Lease and other direct operating
expenses 5,018 2,577
Excess of revenues over direct
operating expenses $2,794 $3,783
The accompanying notes are an integral part of this financial statement.
<PAGE>
THE ACQUIRED PROPERTY
NOTES TO THE STATEMENT OF
REVENUES AND DIRECT OPERATING EXPENSES
1. Basis of Presentation
The accompanying financial statement represents the revenues and direct
operating expenses relating to Black Warrior Basin coalbed methane properties
located in west central Alabama ("the Acquired Property") acquired by a
subsidiary of Taurus Exploration, Inc. ("Taurus"). Taurus acquired a 100%
working interest in the Acquired Property on July 31, 1996 for $61 million
with an effective date of July 1, 1996. Under applicable area of mutual
interest agreements, Taurus was required to offer substantial participation to
two of its coalbed methane partners, which participation was not exercised.
The majority of the participation rights expired on August 10, 1996, and the
balance of such rights expired on August 20, 1996.
The financial statement is derived from the operator's historical
financial records as well as certain public information. This financial
statement may not be representative of future operations.
The historical financial statements reflecting financial position,
results of operations and cash flows required by generally accepted accounting
principles are not presented, as such information is neither readily available
on an individual property basis nor meaningful for the Acquired Property.
During the period presented, the Acquired Property was not accounted for as a
separate entity. This statement does not include depreciation, depletion and
amortization, general and administrative, interest, federal income tax
expenses, or federal income tax credits allowed under Section 29 of the
Internal Revenue Code. Accordingly, the accompanying financial statement is
not intended to represent the financial position or results of operations of
the Acquired Property in conformity with generally accepted accounting
principles.
2. Interim Financial Information
The accompanying financial information for the six month period ended
June 30, 1996, is unaudited but reflects, in the opinion of Management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the revenues and direct operating expenses of the Acquired
Property for such period. The revenues and direct operating expenses for such
interim period is not necessarily indicative of results to be expected for the
full year.
3. Related Party Transactions
During the time periods presented, the majority of production from the
Acquired Property was sold to a related entity.<PAGE>
THE ACQUIRED PROPERTY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES UNAUDITED
The following gas reserve information was prepared by the Company based
on studies performed by its petroleum engineering staff using information
supplied by the former operator and other available information. The
following table presents the estimated remaining net proved gas reserves
attributable to the Acquired Property at December 31, 1995, along with a
summary of changes in the quantities of net remaining proved reserves during
such period.
The Acquired Property produces pipeline-quality natural gas from coal
(coalbed methane). Production of coalbed methane from wells drilled prior to
January 1, 1993, qualifies through December 31, 2002, for federal income tax
credits under Section 29 of the Internal Revenue Code of 1986, as amended.
The tax credit currently approximates $1 per Mcf of qualifying production.
Approximately 19 Bcf of the reserves of the Acquired Property qualifies for
tax credit.
Proved reserves are estimated quantities of natural gas that geological
and engineering data demonstrate with reasonable certainty to be recoverable
in future years from known reservoirs under existing economic and operating
conditions. Proved developed reserves are proved reserves that can be
expected to be recovered through existing wells with existing equipment and
operating methods.
Estimated Net Quantities of Gas Reserves Attributed to the Acquired Property
Natural Gas
(Mmcf)
Proved Reserves at January 1, 1995 (a) 115,224
Production 5,237
Proved Reserves at December 31, 1995 109,987
(a) All proved reserves are developed
<PAGE>
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil & Gas Reserves
The following information has been developed utilizing procedures
prescribed by Statement of Financial Accounting Standards No. 69, Disclosures
about Oil and Gas Producing Activities (SFAS No. 69) and is based on natural
gas reserve and production volumes estimated by the Company's engineering
staff. The standardized measure of discounted future net cash flows is not
intended, nor should it be interpreted, to present the fair market value of
the Company's natural gas reserves. An estimate of fair market value would
take into consideration factors such as, but not limited to, the recovery of
reserves not presently classified as proved reserves, anticipated future
changes in prices and costs, and a discount factor more representative of the
time value of money and the risks inherent in reserve estimates.
Under the Standardized Measure, future cash inflows were estimated by
applying period-end oil and gas prices adjusted for fixed and determinable
escalations to the estimated future production of period-end proved reserves.
Future cash inflows were reduced by estimated future development, abandonment
and production costs based on period-end costs in order to arrive at net cash
flow. Future income tax estimates are included. Use of a 10% discount rate
is required by SFAS No. 69.
Management does not rely upon the following information in making
investment and operating decisions. Such decisions are based upon a wide
range of factors, including varying estimates of price, cost, and tax credit
assumptions considered more representative of a range of possible economic
conditions that may be anticipated.
<PAGE>
The Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Gas Reserves attributed to the Acquired Property is as follows:
As of December 31, 1995
(In thousands)
Future gross revenues $ 249,254
Less related future production, development
and abandonment costs 119,621
Future net cash flows before income taxes 129,633
Future income tax expense including tax credits 6,538
Future net cash flows after income taxes 123,095
Discount at 10% per annum 50,712
Standardized measure of discounted future net
cash flows relating to proved gas reserves $ 72,383
A summary of the changes in standardized measure of discounted future net
cash flows relating to proved gas reserves attributed to the Acquired Property
is as follows:
1995
(In thousands)
January 1 $ 66,610
Changes in prices and costs 18,089
Accretion of discount 6,661
Sales of gas, net of production costs (5,158)
Net changes in income taxes (13,819)
Net increase 5,773
December 31 $ 72,383<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated statements of income
for the year ended September 30, 1995 and the nine month period ended June 30,
1996 include pro forma acquisition adjustments that give effect to the
acquisition of the Acquired Property as if such acquisition had been completed
October 1, 1994 and October 1, 1995, respectively. The accompanying unaudited
pro forma consolidated balance sheet as of June 30, 1996 includes the
acquisition of the Acquired Property as if such acquisition had occurred on
June 30, 1996.
The unaudited pro forma consolidated financial statements are based on
the assumptions set forth in the notes to such statements. Such pro forma
information should be read in conjunction with the Company's financial
statements and related notes thereto and is not necessarily indicative of the
results that actually would have occurred had the transactions been in effect
on the dates or for the periods indicated, or of results that may occur in the
future.
<PAGE>
ENERGEN CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Year Ended September 30, 1995
Pro Forma Adjustments
Acquired Other
Historical Property Adjustments Pro Forma
Operating Revenues
Natural gas distribution $295,967 $295,967
Oil and gas production 23,655 $7,812 (A) 31,467
Other 9,001 9,001
Intercompany eliminations (7,419) (7,419)
Total operating revenues 321,204 7,812 329,016
Operating Expenses
Cost of gas 130,220 130,220
Operations 95,509 5,018 (A) 100,527
Maintenance 9,849 9,849
DD&A 29,577 3,142 (B) 32,719
Taxes, other than income taxes 23,640 23,640
Total operating expenses 288,795 8,160 296,955
Operating Income 32,409 (348) 32,061
Other Income (Expense)
Interest expense (11,818) (3,593)(C) (15,411)
Other, net 2,398 2,398
Other income (expense) (9,420) (13,013)
Income Before Income Taxes 22,989 19,048
Income tax expense (benefit) 3,681 (4,678)(D) (997)
Net Income $19,308 $20,045
Earnings Per Share $1.77 $1.84
Average Shares Outstanding 10,906 10,906
See accompanying notes to the unaudited pro forma combined financial statements.
<PAGE>
ENERGEN CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Nine Months Ended June 30, 1996
Pro Forma Adjustments
Acquired Other
Historical Property Adjustments Pro Forma
Operating Revenues
Natural gas distribution $312,553 $312,553
Oil and gas production 24,678 $8,767 (E) 33,445
Other 1,677 1,677
Intercompany eliminations (1,968) (1,968)
Total operating revenues 336,940 8,767 345,707
Operating Expenses
Cost of gas 161,645 161,645
Operations 72,760 3,680 (E) 76,440
Maintenance 8,451 8,451
DD&A 27,567 2,338 (F) 29,905
Taxes, other than income taxes 24,090 24,090
Total operating expenses 294,513 6,018 300,531
Operating Income 42,427 2,749 45,176
Other Income (Expense)
Interest expense (9,926) (2,519)(G) (12,445)
Other, net 1,966 1,966
Other income (expense) (7,960) (10,479)
Income Before Income Taxes 34,467 34,697
Income tax expense (benefit) 7,688 (2,374)(D) 5,314
Net Income $26,779 $29,383
Earnings Per Share $2.44 $2.67
Average Shares Outstanding 10,991 10,991
See accompanying notes to the unaudited pro forma combined financial statements.
<PAGE>
ENERGEN CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(in thousands)
June 30, 1996
Pro Forma
Historical Adjustments Pro Forma
Assets
Property, Plant and Equipment
Utility plant $270,187 $270,187
Oil and gas properties 93,611 61,017 (H) 154,628
Other property 4,060 4,060
Total PP&E, net 367,858 61,017 428,875
Current Assets 105,775 105,775
Other Assets 13,956 13,956
Total Assets $487,589 $61,017 $548,606
Capital and Liabilities
Capitalization
Common stock $111 $111
Premium on capital stock 84,512 84,512
Retained earnings and capital surplus 110,034 110,034
Total Common Shareholders' Equity 194,657 194,657
Long-term debt 130,652 130,652
Total Capitalization 325,309 325,309
Current Liabilities
Notes payable to banks 19,000 60,376 (H) 79,376
Other current liabilities 130,290 641 (H) 130,931
Total Current Liabilities 149,290 61,017 210,307
Deferred Credits and Other Liabilities 12,990 12,990
Commitments and Contingencies 0 0
Total Liabilities 162,280 61,017 223,297
Total Capital and Liabilities $487,589 $61,017 $548,606
See accompanying notes to the unaudited pro forma combined financial statements.
<PAGE>
ENERGEN CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated financial statements of
the Company have been prepared to reflect adjustments to the Company's
historical financial statements for the acquisition of the Acquired Property,
on the dates indicated, for total consideration of $61 million.
The pro forma adjustments are described as follows:
(A) Represents pro forma adjustments to reflect the recognition of
revenues and direct operating expenses of the Acquired Property for
the year ended September 30, 1995.
(B) Represents pro forma adjustments to reflect additional estimated
depreciation, depletion and amortization attributable to the
acquisition as if such acquisition had occurred on October 1, 1994.
The additional depreciation, depletion and amortization amounts were
calculated on the unit-of-production method based on pro forma
capitalized costs and estimated future development, dismantlement and
abandonment costs and estimates of total pro forma proved reserves.
The Company's actual and pro forma depletion rates for the year ended
September 30, 1995, were $0.88 and $0.78 per Mcfe produced,
respectively.
(C) Represents pro forma adjustments to reflect increased interest
expense as if the Company incurred borrowings under its credit
agreement to finance the $61 million acquisition cost at an average
interest rate of 5.95% for the Acquired Property as of October 1,1994.
(D) Represents pro forma adjustments for estimated federal income tax
expense using the Company's average tax rate of 35% and pro forma
recognition of Section 29 federal income tax credits.
(E) Represents pro forma adjustments to reflect the recognition of
revenues and direct operating expenses of the Acquired Property for
the nine month period ended June 30, 1996.
(F) Represents pro forma adjustments to reflect additional estimated
depreciation, depletion and amortization attributable to the
acquisition as if such acquisition had occurred on October 1, 1995.
The additional depreciation, depletion and amortization amounts were
calculated on the unit-of-production method based on pro forma
capitalized costs and estimated future development, dismantlement and
abandonment costs and estimates of total pro forma proved reserves.
The Company's actual and pro forma depreciation, depletion and
amortization rates for the period ended June 30, 1996 were $1.06 and
$0.93 per Mcfe produced, respectively.
(G) Represents pro forma adjustments to reflect increased interest
expense as if the Company incurred borrowings under its credit
agreement to finance the $61 million aggregate acquisition cost at an
average interest rate of 5.68% for the Acquired Property on October 1,
1995.
(H) Represents pro forma adjustments to reflect the acquisition of the
Acquired Property for total consideration of $61 million as if such
acquisition occurred on June 30, 1996.
