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
October 15, 1998
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.)
605 21st Street North
Birmingham, Alabama 35203
(Address of principal (Zip Code)
executive offices)
(205) 326-2700
(Registrant's telephone number including area code)
Item 2. Acquisition or Disposition of Assets
On October 15, 1998, Energen Resources Corporation (Energen Resources), the oil
and gas exploration and production subsidiary of Energen Corporation (the
Company), purchased the stock of TOTAL Minatome Corporation (TOTAL), a Houston-
based unit of TOTAL American Holding Inc. Immediately upon closing the
transaction, Energen Resources sold a 31 percent undivided interest in TOTAL's
assets to Westport Oil and Gas Company Inc. (Westport), a private Denver-based
exploration, acquisition and development company. Energen Resources' net
investment totaled approximately $134.6 million, including the assumption of
certain legal and financial obligations.
Energen Resources gained an estimated 200 billion cubic feet equivalent of
proved domestic oil and natural gas reserves. Approximately half of the proved
reserves are concentrated in north Louisiana. Other reserve locations include
the San Juan Basin in New Mexico, the Permian Basin in West Texas, offshore Gulf
of Mexico, southern Louisiana, and the Rockies. Approximately 75 percent of the
reserves are natural gas, and approximately 60 percent are proved developed
producing. Energen Resources plans to spend an estimated $70 million over the
next several years to fully exploit the approximately 40 percent of behind pipe
and proved undeveloped reserves.
The Company used a portion of its existing short-term credit facilities to
acquire the foregoing properties and expects to refinance a portion of this
acquisition 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 Statements of the
Acquired Company" 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: December 28, 1998 By /s/ Grace B. Carr
Grace B. Carr
Controller of Energen Corporation
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Financial Statements of the Acquired Company:
Report of Independent Public Accountants 5
Consolidated Balance Sheets as of December 31, 1997
and 1996 6
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 8
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1997, 1996 and 1995 9
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 10
Notes to Consolidated Financial Statements 11
Supplementary Oil and Gas Disclosures for the
acquired Company (Unaudited) 15
Unaudited Consolidated Statements of Operations for
the nine months ended September 30, 1998 and 1997 19
Unaudited Consolidated Balance Sheets as of
September 30, 1998 and December 31, 1997 20
Notes to Unaudited Consolidated Financial Statements 21
Unaudited Pro Forma Consolidated Financial Statements:
Explanatory Note 22
Unaudited Pro Forma Consolidated Statement of
income for the Year Ended September 30, 1998 23
Unaudited Pro Forma Consolidated Balance Sheet
as of September 30, 1998 24
Notes to Unaudited Pro Forma Consolidated
Financial Statements 25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
TOTAL MINATOME CORPORATION and subsidiary:
We have audited the accompanying consolidated balance sheets of TOTAL MINATOME
CORPORATION (a Delaware corporation and ultimately a wholly-owned subsidiary of
TOTAL America, Inc.) and subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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 estimates 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, the financial statements referred to above present fairly, in
all material respects, the financial position of TOTAL MINATOME CORPORATION and
subsidiary as of December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31,1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 30, 1998
TOTAL MINATOME CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 1996
1997 1996
ASSETS (Thousands of Dollars)
CURRENT ASSETS:
Cash $ 139 $ 193
Advances to affiliates 94,295 85,829
Accounts receivable, net of allowance
for doubtful accounts of $518,000
and $543,000 in 1997 and 1996, 25,586 26,870
Respectively
Assets held for sale - 143
Inventories, at lower of cost or market 202 301
Prepaid expenses and other 480 1,163
--------- ---------
Total current assets 120,702 114,499
--------- ---------
PROPERTY AND EQUIPMENT:
Oil and gas properties, successful-
efforts method of accounting -
Proved properties 592,235 612,485
Unproved properties 14,109 4,896
Other property and equipment 14,534 12,178
--------- ---------
620,878 629,559
Accumulated depreciation, depletion and (457,715) (492,614)
amortization
--------- ---------
Net property and equipment 163,163 136,945
--------- ---------
OTHER LONG-TERM ASSETS 5,951 5,292
--------- ---------
$ 289,816 $ 256,736
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
TOTAL MINATOME CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 1996
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY (Thousands of Dollars)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 39,151 $ 32,968
LONG-TERM DEBT TO AFFILIATES (Note 3) 115,000 115,000
OTHER LONG-TERM LIABILITIES 13,570 15,194
--------- ---------
Total liabilities 167,721 163,162
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, $100 par value, 500,000
shares authorized, 470,000 shares
issued and outstanding (Note 4) 47,000 47,000
Common stock, $10 par value, 1,000
shares authorized, issued and
outstanding 10 10
Additional paid-in capital 551,970 551,655
Accumulated deficit
(476,885) (505,091)
--------- ---------
Total stockholders' equity 122,095 93,574
---------- ---------
$ 289,816 $ 256,736
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
TOTAL MINATOME CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 and 1995
1997 1996 1995
(Thousands of Dollars)
REVENUES AND OTHER INCOME:
Crude oil and condensate $ 28,296 $38,653 $35,949
Natural gas and natural gas 85,114 84,009 54,018
liquids
Other income 18,482 12,303 14,393
--------- --------- ---------
131,892 134,965 104,360
COSTS AND EXPENSES:
Lease operating expense 24,527 23,117 23,226
Production and other taxes 4,318 4,157 3,629
Impairment of oil and gas
properties
Unproved 1,000 1,214 856
Proved - - 27,538
Oil and gas exploration
expenses 10,417 5,707 7,454
Depreciation, depletion and
amotization 40,219 43,031 44,769
General and administrative 10,645 10,414 11,068
Interest expense (Note 6) 10,418 10,263 13,084
Other expense 2,142 2,052 1,351
------- ------- -------
103,686 99,955 132,975
------- -------- --------
NET INCOME (LOSS) $ 28,206 $ 35,010 $(28,615)
======== ======== ========
The accompanying notes are an integral part of these statements.
<PAGE>
TOTAL MINATOME CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Additional
Preferred Common Paid-In Accumulated
Stock Stock Capital Deficit Total
(Thousands of Dollars)
BALANCE, DECEMBER 31, 1994 $47,000 $10 $521,655 $(511,486) $ 57,179
Capitalization of loans
from parent - - 30,000 - 30,000
Net loss - - - (28,615) (28,615)
------ ---- ------ ------- -------
BALANCE, DECEMBER 31, 1995 47,000 10 551,655 (540,101) 58,564
Net income - - - 35,010 35,010
----- ---- ----- ------ ------
BALANCE, DECEMBER 31,
1996 47,000 10 551,655 (505,091) 93,574
Capital contribution
by parent - - 315 - 315
Net income - - - 28,206 28,206
----- ---- ------ --------- ---------
BALANCE, DECEMBER 31,
1997 $47,000 $10 $551,970 $(476,885) $122,095
======= === ======= ======= =======
The accompanying notes are an integral part of these statements.
<PAGE>
TOTAL MINATOME CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 and 1995
1997 1996 1995
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 28,206 $ 35,010 $(28,615)
--------- --------- ---------
Adjustments to reconcile net income
(loss) to
Net cash provided by operating
activities -
Depreciation, depletion and 40,219 43,031 44,769
amortization
Gain on sale of assets (7,617) (2,486) (34)
Impairment of oil and gas 1,000 1,214 28,394
properties
Oil and gas exploration expenses 10,417 5,707 7,454
Compensation expense related to
employee stock purchases 315 - -
Changes in working capital -
(Increase) decrease in accounts 1,284 (4,717) 1,044
receivable
(Increase) decrease in prepaid 1,958 (923) (478)
expenses and other
(Increase) decrease in other long- (729) (1,002) 1,349
term assets
Increase (decrease) in accounts
payable and accrued liabilities 1,132 146 (1,977)
Increase (decrease) in other long- (1,218) 1,611 (3,113)
term liabilities
--------- --------- ---------
Total adjustments 46,761 42,581 77,408
--------- --------- ---------
Net cash provided by operating 74,967 77,591 48,793
activities
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets 13,329 4,132 -
Oil and gas exploration, development
and acquisition costs (79,867) (45,047) (48,555)
--------- --------- ---------
Net cash used in investing activities (66,538) (40,915) (48,555)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances (to) from affiliate (8,466) (37,063) 110
Other (17) (20) (28)
--------- --------- ---------
Net cash provided by (used in) (8,483) (37,083) 82
financing activities
NET INCREASE (DECREASE) IN CASH (54) (407) 320
--------- --------- ---------
CASH AT BEGINNING OF YEAR 193 600 280
--------- --------- ---------
CASH AT END OF YEAR $ 139 $ 193 $ 600
======= ======= ========
SUPPLEMENTAL INFORMATION:
Interest paid $ 10,418 $ 10,368 $ 13,084
======== ========= ========
The accompanying notes are an integral part of these statements.
<PAGE>
TOTAL MINATOME CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and summary of
significant accounting policies-
Organization and operations-
TOTAL MINATOME CORPORATION (TMC) is ultimately a wholly-owned subsidiary of
TOTAL America, Inc. (TAI). TAI is a wholly-owned subsidiary of TOTAL, a major
international energy company organized in France. TMC and its wholly-owned
subsidiary, Horse Creek Trading and Compression Company (HCT&CC), are engaged in
the acquisition, exploration and development of oil and gas properties in the
United States.
Oil and gas properties-
TMC uses the successful-efforts method of accounting for its oil and gas
activities. Under the successful-efforts method, costs of productive wells,
development dry holes and productive leases are capitalized and amortized on a
units-of-production basis over the life of the estimated proved reserves. Cost
centers for amortization purposes are determined on a field-by-field basis. The
estimated future costs of offshore facilities abandonment are amortized as part
of depreciation, depletion and amortization expense.
Proved properties are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of properties may not be
realizable. The carrying values of the properties on a field-by-field basis are
compared to their estimated future cash flows based on TMC's internal economic
assumptions. If the carrying value of the field exceeds its estimated future
cash flows, the field is impaired to its fair value. Fair value is determined
by discounting the estimated future cash flows.
Oil and gas leasehold costs are capitalized when incurred. Individually
significant unproved properties are assessed periodically and any impairments in
value are charged to expense. The acquisition costs of all unproved properties
that are not individually significant are aggregated and amortized based on the
average holding period of the properties.
Geological and geophysical costs and lease rentals are expensed as incurred.
Exploratory drilling costs, including stratigraphic test wells, are initially
capitalized but are expensed if the well is determined to be unsuccessful.
The costs of evaluating potential acquisitions of proved oil and gas properties
are capitalized when incurred. If a property acquisition is consummated, these
evaluation costs are capitalized as part of the total cost of the acquisition.
Evaluation costs of acquisitions not completed are expensed.
Other property and equipment-
Other property and equipment consists primarily of office furniture and
equipment. The assets are depreciated using the straight-line method based on
the estimated useful lives of the related assets. Maintenance and repairs are
expensed as incurred. Renewals and betterments which extend the useful lives of
assets are capitalized.
Financial instruments-
TMC enters into hedging instruments to minimize the impact of oil and natural
gas price fluctuations. Gains and losses on these activities are recognized in
oil and gas revenues when the hedged production occurs.
TMC accounts for all other transactions which do not qualify as hedges under the
marked-to-market method of accounting. Under this methodology, forward
contracts, swaps, options and futures contracts are reflected at market value
and the resulting unrealized gains and losses are recognized currently in the
consolidated statements of income. The net gains and losses are determined on a
counterparty-by-counterparty basis, netted when a contractual right of offset
exists, and are reflected as either an asset or liability on the consolidated
balance sheets.
Gas imbalances-
TMC follows the entitlement method of accounting for gas imbalances.
Receivables for gas undertakes of $5.7 million and $5.0 million as of
December 31, 1997 and 1996, respectively, are included in Other Long-Term
Assets. Payables and deferred revenues for gas overtakes of $7.2 million and
$8.7 million as of December 31, 1997 and 1996, respectively, are included in
Other Long-Term Liabilities.
Use of estimates-
The preparation of these financial statements required the use of certain
estimates by management in determining TMC's assets, liabilities, revenues, and
expenses. A significant uncertainty exists in estimating proved reserve
quantities and in projecting the future rate of production and timing of
development expenditures. Reservoir engineering is a subjective process of
estimating underground accumulations of hydrocarbons and cannot be measured in
an exact way. Proved reserves are estimated quantities that geological and
engineering data demonstrate with reasonable certainty to be recoverable in the
future from known reservoirs under existing operating conditions.
New accounting pronouncements-
In June 1997, the Financial Accounting Standards Board (FASB) issued a new
standard (SFAS No. 130 "Reporting Comprehensive Income") on reporting
comprehensive income. TMC is required to adopt the new standard no later than
its fiscal year ending December 31, 1998, although earlier implementation is
permitted. Adoption of the new standard requires reclassification of financial
statements for prior periods provided for comparative purposes. TMC expects to
adopt the new standard effective January 1, 1998. TMC does not expect the
adoption of this standard to have a material effect on TMC's financial position
or its results of operations.
(2) Hedging activities-
TMC utilizes crude oil and natural gas swap agreements to manage the impact of
changes in crude oil and natural gas prices. In the swaps, TMC receives the
difference between a fixed price and a price based upon a third-party index if
the index price is lower. If the index price is higher, TMC pays the
difference. The swaps are to be settled at the time the index is published.
The swaps expose TMC to off-balance-sheet risks arising from increases in
prices, basis risk associated with differences between various indices, and from
the unlikely event of non-performance by the counterparty. TMC has
substantially eliminated the basis risk by using an index which represents the
actual sales price for the majority of the hedged production. TMC has hedged
approximately 24% of its estimated 1998 natural gas production at average prices
per MMBTU of $2.41. While these transactions have no carrying value, the fair
value, represented by the estimated amount that would be required to terminate
the contracts was, at December 31, 1997, a net gain of $1.7 million.
(3) Long-term debt-
Long-term debt to affiliates at December 31, 1997 and 1996 consisted of the
following:
1997 1996
(Thousands of Dollars)
Amount due to Total Energy Capital, Inc.
(TECI):
Note payable; interest at the prime rate,
8.5%
at December 31, 1997; secured by TOTAL
guaranty
and due on demand. $ 65,000 $ 65,000
Amount due to Total Energy Resources Finance, Inc.
(TERFIN):
Note payable; interest at the prime rate,
8.5% at
December 31, 1997; secured by TOTAL
guaranty
and due on demand. 50,000 50,000
-------- --------
$ 115,000 $ 115,000
========= =========
The notes are classified as long-term because TMC has the ability to refinance
the amounts outstanding using a $150 million long-term credit agreement with
TAI. Since these notes provide for market sensitive rates of interest,
management believes that the recorded value approximates fair value.
(4) Preferred stock-
In April 1987, TMC issued 270,000 shares of preferred stock to TERFIN for $27
million with an annual dividend rate of 8%. In December 1989, TMC issued
200,000 additional shares of preferred stock to TERFIN for $20 million with an
annual dividend rate of 7%. Dividends are payable if and when declared by TMC's
board of directors, are cumulative and have a preference over all payments with
respect to common stock. The preferred stock is nonvoting and is redeemable at
the option of TMC at a liquidation preference of $100 per share plus an amount
equal to unpaid cumulative dividends. Cumulative undeclared dividends related
to the preferred stock at December 31, 1997 are $34.3 million.
(5) Income taxes-
TMC is included in TAI's consolidated federal income tax return. TMC has
entered into a tax sharing agreement with TAI which requires TMC to calculate
its federal income tax liability on a separate company basis. At December 31,
1997, TMC had net operating loss (NOL) carryforwards of approximately $370.1
million which are available to reduce future income tax liabilities and which
are subject to review by the Internal Revenue Service. Approximately $23.5
million of the carryforwards expire from 2000 through 2002; the remainder expire
during the years 2003 through 2010. The difference between tax NOL
carryforwards and the accumulated deficit at December 31, 1997, relates
primarily to differences in the treatment of oil and gas acquisition,
exploration and development expenditures and mineral property expenditures for
tax and financial reporting purposes.
TMC accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
statement requires that deferred income taxes reflect the tax consequences on
future years of differences between the tax basis of assets and liabilities and
their bases for financial reporting purposes. In addition, SFAS 109 requires
the recognition of future tax benefits, such as net operating loss carryforwards
(NOLs), to the extent that realization of such benefits are more likely than
not. As of December 31, 1997, TMC had a deferred tax asset of $166.6 million
attributable to tax NOL carryforwards and a tax basis in excess of book basis.
Due to the uncertainty that any of the deferred tax asset will be realized, a
valuation allowance of the entire amount has been recorded.
(6) Related-party transactions-
Cash in excess of operating requirements is advanced to TAI under an interest-
bearing central cash management program. Interest on funds advanced to TAI is
paid by TAI monthly at prime rate. TMC earned $8.3 million, $5.9 million and
$3.9 million in 1997, 1996 and 1995, respectively, in interest on funds advanced
to TAI.
TMC was charged $10.3 million, $9.7 million and $13.0 million in 1997, 1996 and
1995, respectively for interest on notes payable to affiliates (see Note 3).
TMC was charged $1.6 million, $1.3 million and $1.7 million in 1997, 1996 and
1995, respectively, by TOTAL and other affiliates for various services and
costs.
TMC charged $5.1 million, $3.6 million and $2.9 million in 1997, 1996 and 1995,
respectively, to TOTAL and other affiliates for various services and costs.
TMC had crude oil sales of $0.9 million in 1995, with no similar sales in 1997
or 1996, to an affiliate of TOTAL.
(7) Employee benefits-
TMC participated in a nonqualified stock-based compensation plan whereby its
employees could purchase shares of TOTAL at prices less than quoted market
prices. The discounted price was established in conjunction with TOTAL's
worldwide employee stock purchase program. The cumulative discount on 30,750
American Depository Shares issued was $0.3 million which was recorded as
compensation expense and recognized as a capital contribution from its parent.
TMC has a defined contribution plan covering substantially all employees under
which an amount equal to 6% of each employee's compensation is contributed by
TMC to the plan each year. TMC has another defined contribution plan covering
substantially all employees under which participating employees may make tax-
deferred contributions which are matched by TMC up to 4% of the employee's
compensation. TMC contributed $1.0 million in both 1997, 1996 and $1.1 million
in 1995 to these plans.
TMC sponsors a health and life insurance plan that covers a fixed group of
retirees. The plan is noncontributory and unfunded. In December, 1990, the
FASB issued a statement which required a change in the method of accounting for
postretirement benefits other than pensions from a pay-as-you-go basis to an
accrual basis. In adopting the statement effective January 1, 1993, TMC
immediately recognized its transition obligation. The accumulated
postretirement benefit obligation (APBO) of $0.7 million at December 31, 1997
and $0.8 million at December 31, 1996 are included in Other Long-Term
Liabilities. The net periodic postretirement benefit costs were $0.1 million
for 1997, 1996 and 1995 consisting of interest costs. The unrecognized loss
from past experience and changes in assumptions is $0.1 million resulting in an
accrued postretirement benefit cost of $0.6 million at December 31, 1997.
In calculating the APBO, medical inflation is expected to continue to be higher
than the general inflation rate. For 1998, the health care cost trend is
expected to be 7%, but gradually reducing to 5.5% by the year 2000. A one
percentage-point increase in this trend would have a negligible effect on the
APBO as of December 31, 1997 and December 31, 1996, and the net periodic
postretirement benefit cost for each year. The discount rate used to measure
the APBO was 7% for 1997 and 1996. The objective of the discount rate is to
determine the single amount that, if invested in a portfolio of high-quality
debt instruments, would yield the necessary cash flows to pay the APBO when due.
(8) Commitments and contingencies-
TMC is a party to litigation arising in the ordinary course of business.
Management believes that the outcome of any pending litigation will not have a
material adverse effect on TMC's financial condition.
TMC's operating lease rental expense (exclusive of oil and gas lease rentals)
was $0.7 million for 1997, 1996 and 1995. Future minimum rental payments under
noncancelable operating leases are $0.2 million for the year 1998, and $0.2
million for the year 1999.
(9) Supplemental oil and gas producing activities (unaudited)-
Costs incurred in oil and gas producing activities
Costs incurred in oil and gas producing activities are set forth below for the
years indicated:
1997 1996 1995
Property acquisition costs: (Thousands of Dollars)
Proved $ 1,014 $ 90 $2,730
Unproved 12,840 1,122 612
Exploration 9,523 8,184 9,514
Development 57,804 39,046 34,046
------- ------- -------
Total costs $81,181 $48,442 $46,902
======= ======= =======
Capitalized costs
Capitalized costs relating to oil and gas producing activities at December 31
are set forth below for the years indicated:
1997 1996 1995
(Thousands of Dollars)
Proved properties $592,235 $612,485 $588,796
Unproved properties 14,109 4,896 4,646
--------- --------- ---------
Total capitalized costs 606,344 617,381 593,442
Accumulated depreciation, depletion, (446,340) (482,145) (456,048)
and amortization
--------- --------- ---------
Net capitalized costs $ 160,004 $ 135,236 $ 137,394
========= ========= =========
Results of operations for oil and gas producing activities
Results of operations for oil and gas producing activities are set forth below
for the years indicated:
1997 1996 1995
(Thousands of Dollars)
Revenues $113,410 $122,662 $ 89,967
Production costs (28,845) (27,274) (26,855)
Exploration expenses and impairment (11,417) (6,921) (8,310)
Depreciation, depletion and
amortization and valuation
allowances (39,313) (42,275) (71,307)
------- ------- -------
Results of oil and gas
producing activities $33,835 $46,192 $(16,505)
======= ======= =======
Proved oil and gas reserves
Reserve estimates presented herein were prepared by TMC. TMC cautions that
there are many uncertainties inherent in estimating proved reserve quantities,
and in projecting future production rates and the timing of development
expenditures. In addition, estimates of new discoveries are more imprecise than
those of properties with a production history. Accordingly, these estimates are
subject to change as additional information becomes available.
Proved oil and gas reserves are the estimated quantities of crude oil,
condensate, natural gas and natural gas liquids 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 oil and gas reserves are those reserves expected to be recovered
through existing wells with existing equipment and operating methods.
Net quantities of proved reserves and proved developed reserves of crude oil
(including condensate and natural gas liquids) and natural gas (all of which are
located within the United States), as well as the changes in proved reserves
during the periods indicated, are set forth in the following tables:
Oil Gas
(Bbls) (MCF)
Proved reserves: (Thousands)
Balance, December 31, 1994 10,729 137,360
Revisions of previous estimates 1,079 8,982
Extensions, discoveries and other additions 571 16,721
Improved recovery 1,584 -
Purchase of reserves in-place 428 1
Production (2,431) (32,005)
--------- ---------
Balance, December 31, 1995 11,960 131,059
Revisions of previous estimates 1,317 8,355
Extensions, discoveries and other additions 426 35,041
Improved recovery 1,500 -
Sales of reserves in-place (78) (2,607)
Production (2,182) (34,025)
--------- ---------
Balance, December 31, 1996 12,943 137,823
Revisions of previous estimates (339) (4,029)
Extensions, discoveries and other additions 1,253 55,847
Improved recovery 1,540 -
Purchase of reserves in-place 110 552
Sales of reserves in-place (566) (3,675)
Production (1,675) (34,940)
--------- ---------
Balance, December 31, 1997 13,266 151,578
====== =======
Proved developed reserves:
Balance, December 31, 1994 10,605 132,278
====== ======
Balance, December 31, 1995 11,955 128,904
====== ======
Balance, December 31, 1996 12,932 135,702
====== ======
Balance, December 31, 1997 13,006 148,047
====== ======
Standardized measure of discounted future net cash flows
This information is presented specifically in accordance with Statement of
Financial Accounting Standards No. 69 and does not necessarily yield the best
estimate of fair market value of TMC's oil and gas properties nor should it be
viewed as a forecast of future economic conditions, revenues or profits.
The following table sets forth in thousands of dollars the standardized measure
of the discounted future net cash flows attributable to TMC's proved oil and gas
reserves. Future cash inflows were computed by applying year-end prices of oil
and gas to the estimated future production of proved oil and gas reserves.
Future prices actually received may differ from the estimates in the
standardized measure.
Future production and development costs represent the estimated future
expenditures (based on current costs) to be incurred in developing and producing
the proved reserves, assuming continuation of existing economic conditions.
There are no future income taxes because TMC's NOL carryforwards and tax basis
exceeds future net cash flows. The resulting annual net cash inflows are then
discounted using a 10% annual rate.
1997 1996 1995
(Thousands of Dollars)
Future cash inflows $ 596,600 $ 802,300 $ 482,300
Future production costs (236,900) (224,600) (175,900)
Future development costs (42,700) (46,900) (50,200)
-------- -------- --------
Total future costs (279,600) (271,500) (226,100)
Future net cash inflows
before future income taxes 317,000 530,800 256,200
Discount at 10% per annum (91,500) (167,300) (72,400)
--------- --------- ---------
Discounted future net cash inflows
before future income taxes 225,500 363,500 183,800
Discounted future income taxes - - -
------- ------- -------
Standardized measure of discounted
future net cash flows $225,500 $ 363,500 $ 183,800
======== ========= =========
The following are the principal sources of change in the standardized
measure of discounted future net cash flows.
1997 1996 1995
(Thousands of Dollars)
Beginning balance $ 363,500 $ 183,800 $148,700
Revisions to reserves proved in prior
years:
Net changes in prices and (173,500) 137,900 41,100
production costs
Net changes due to revisions in (5,600) 30,400 17,800
quantity estimates
Net changes in estimated future 2,700 1,900 1,500
development costs
Accretion of discount 36,400 18,400 14,900
Changes in production rates
(timing) and other (15,300) (12,800) (11,500)
--------- --------- ---------
Total revisions (155,300) 175,800 63,800
New field discoveries and extensions
and improved recovery, net of future
production and development costs
and development costs 116,400 101,800 35,700
Purchase of reserves in-place 800 - 2,000
Sale of reserves in-place (12,200) (3,700) 200
Sales of oil and gas produced, net of
production costs (87,700) (95,700) (70,600)
Previously estimated development
costs incurred - 1,500 4,000
--------- --------- ---------
Net change in standardized measure of
discounted future net cash flows (138,000) 179,700 35,100
--------- --------- ---------
Ending balance $ 225,500 $ 363,500 $ 183,800
========= ========= =========
<PAGE>
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS
TOTAL Minatome Corporation and Subsidiary
Nine months ended September 30, (in 1998 1997
thousands)
Operating Revenues $ 69,417 $ 98,982
-------- -------
Operations and maintenance 30,982 30,469
Depreciation, depletion and amortization 27,356 30,273
Taxes, other than income taxes 2,723 3,116
------- -------
Total operating expenses 61,061 63,858
------- -------
Operating Income 8,356 35,124
------- --------
Other Expense
Interest expense (4,994) (7,757)
Other, net (429) (414)
------- -------
Total other expense (5,423) (8,171)
-------- --------
Net Income $ 2,933 $ 26,953
========= ========
The accompanying Notes are an integral part of these financial statements.
UNAUDITED CONSOLIDATED BALANCE SHEETS
TOTAL Minatome Corporation and Subsidiary
September December
30, 31,
(in thousands) 1998 1997
ASSETS
Current Assets $ 27,746 $ 120,702
Property, Plant and Equipment, net 165,038 163,163
Other Assets 5,095 5,951
------ -------
Total Assets $ 197,879 $ 289,816
======= =======
CAPITAL AND LIABILITIES
Current Liabilities $ 48,313 $ 39,151
Other Long-Term Liabilities 13,069 128,570
Total Stockholders' Equity 136,497 122,095
-------- --------
Total Capital and Liabilities $197,879 $ 289,816
======== =========
The accompanying Notes are an integral part of these financial statements.
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
TOTAL Minatome Corporation and Subsidiary
All adjustments to the unaudited financial statements which are, in the opinion
of management, necessary for a fair statement of the results of operations for
the interim periods have been recorded. Such adjustments consisted of normal
recurring items and immaterial adjustments. The consolidated financial
statements and notes thereto should be read in conjunction with the consolidated
financial statements and notes for the years ended December 31, 1997, 1996, and
1995, included in this Form 8-K.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated statements of income for the
year ended September 30, 1998 include pro forma acquisition adjustments that
give effect to the acquisition of the Acquired Company as if such acquisition
had been completed October 1, 1997. The accompanying unaudited pro forma
consolidated balance sheet as of September 30, 1998 includes the acquisition of
the Acquired Company as if such acquisition had occurred on September 30, 1998.
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>
UNADUTIED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Energen Corporation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Pro Forma Adjustments
Year Ended Acquired 31% Sold Purchase
September 30, 1998 Historical Company To Westport Adjustments Pro Forma
(in thousands, except
per share data)
Operating Revenues (A)
Natural gas
distribution $369,940 $369,940
Oil and gas production
activities 132,687 $102,328 ($31,722) 203,293
-------- -------- -------- --------- --------
Total operating
revenues 502,627 102,328 (31,722) 573,233
-------- -------- -------- --------- --------
Operating Expenses
Cost of gas 174,051 174,051
Operations and
maintenance 148,376 44,712 (13,860) 179,228
Depreciation, depletion
and amortization 80,999 38,302 (11,874) ($1,787) (B) 105,640
Taxes, other than
income taxes 37,716 3,925 (1,217) 40,424
-------- -------- -------- ------- --------
Total operating
expenses 441,142 86,939 (26,951) (1,787) 499,343
-------- -------- -------- ------- --------
Operating Income 61,485 15,389 (4,771) 1,787 73,890
-------- -------- -------- ------- --------
Other Income
(Expense)
Interest expense,
net of amounts
capitalized (30,001) (7,655) 2,373 (7,355)(C) (42,638)
Other, net 2,544 (2,157) 669 1,056
-------- -------- ------- ------ --------
Total other income
(expense) (27,457) (9,812) 3,042 (7,355) (41,582)
-------- ------- -------- ------- --------
Income Before Income
taxes 34,028 5,577 (1,729) (5,568) 32,308
Income taxes (2,221) 0 0 (688)(D) (2,909)
-------- ------- -------- -------- --------
Net Income $ 36,249 $ 5,577 ($1,729) $ (4,880) $ 35,217
======== ======== ======== ======== ========
Basic Earnings
Per Share $ 1.25 $ 1.21
======= ========
Basic Average Shares
Outstanding 29,084 29,084
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
Energen Corporation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Pro Forma Adjustments
Year Ended Acquired 31% Sold Purchase
September 30, 1998 Historical Company To Westport Adjustments Pro Forma
(in thousands)
Assets
Current Assets $218,453 $ 27,746 ($8,601) $ 237,598
Property, Plant and
Equipment
Oil and gas
properties 427,734 165,038 (51,162) $ 20,726(E) 562,336
Utility plant 324,677 324,677
Other property 3,933 3,933
-------- -------- --------- -------- ---------
Total property, plant
and equipment, net 756,344 165,038 (51,162) 20,726 890,946
Other Assets 18,658 5,095 (1,579) 22,174
-------- -------- --------- -------- ---------
Total Assets $993,455 $197,879 ($61,342) $ 20,726 $1,150,718
======== ======== ======== ======== ==========
Current Liabilities
Notes payable to
banks $153,000 $124,245(E) $ 277,245
Other current
liabilities 131,241 $ 48,313 ($14,977) (13,733)(E) 150,844
-------- -------- -------- -------- ----------
Total current
liabilities 284,241 48,313 (14,977) 110,512 428,089
Deferred Credits and
Other Liabilities 7,183 13,069 (4,051) 4,397(E) 20,598
Commitments and
Contigencies 0 0
Capitalization
Common stock 293 293
Premium on capital
stock 195,874 195,874
Retained earnings and
capital surplus 133,082 136,497 (42,314) (94,183)(E) 133,082
-------- -------- -------- -------- ----------
Total common shareholders'
equity 329,249 136,497 (42,314) (94,183) 329,249
Long-term debt 372,782 372,782
-------- -------- --------- -------- ----------
Total
capitalization 702,031 136,497 (42,314) (94,183) 702,031
-------- -------- -------- -------- ----------
Total Capital and
Liabilities $993,455 $197,879 ($61,342) $ 20,726 $1,150,718
======== ======== ======== ======== ==========
</TABLE>
The accompanying Notes are an integral part of these financial statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Energen Corporation
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 Company, on the dates
indicated, for a net investment of approximately $134.6 million, including the
assumption of certain legal and financial obligations.
The pro forma adjustments are described as follows:
(A)Represents pro forma adjustments to reflect the sale of a 31 percent
undivided interest in TOTAL's assets to Westport immediately upon closing
the transaction.
(B)Represents pro forma adjustments to reflect reduced estimated
depreciation, depletion and amortization attributable to the acquisition
as if such acquisition had occurred on October 1, 1997. The reduced
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, 1998, were
$0.87 and $0.86 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 $124.2 million acquisition cash outlay cost at an average
interest rate of 5.92% for the Acquired Company as of October 1, 1997.
(D)Represents pro forma adjustments for estimated federal and state
income tax benefit using a tax rate of 40%.
(E)Represents pro forma purchase adjustments to reflect the acquisition
of the Acquired Company for total net investment of approximately $134.6
million as if such acquisition occurred on September 30, 1998. These
adjustments include a $4.4 million accrual for severance benefits, a
$13.7 million adjustment for the payment of an intercompany liability and
a $124.2 million adjustment for the cash outlay cost of the acquisition.
