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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 5, 1995
HARKEN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 0-9207 95-2841597
(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
5605 N. MACARTHUR BLVD., SUITE 400 75038
IRVING, TEXAS 75038 (ZIP Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (214) 753-6900
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INDEX
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<S> <C>
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
ITEM 7.(a.) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
YELLOWHOUSE PROPERTIES--AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Revenues and Direct Operating Expenses--Years Ended
December 31, 1992, 1993, and 1994, and for the Nine Months Ended
September 30, 1994 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 7.(b.) PRO FORMA FINANCIAL INFORMATION
HARKEN ENERGY CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Combined Condensed Financial Statements . . . . . . . . . . . . . . . . . . 7
Notes to Unaudited Pro Forma Combined Condensed Financial Statements . . . . . . . . . . . . . 11
Item 7.(c.) Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Harken Energy Corporation:
We have audited the accompanying statements of revenues and direct operating
expenses of Yellowhouse Properties for the years ended December 31, 1992, 1993,
and 1994. These statements of revenues and direct operating expenses are the
responsibility of Harken Energy Corporation's management. Our responsibility
is to express an opinion on these statements of revenues and direct operating
expenses 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 statements of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of revenues and direct operating expenses. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
statements of revenues and direct operating expenses. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the statements of revenues and direct operating expenses
referred to above present fairly, in all material respects, the revenues and
direct operating expenses of Yellowhouse Properties as of December 31, 1992,
1993 and 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
November 6, 1995
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YELLOWHOUSE PROPERTIES
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993, AND 1994,
AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1994 AND 1995
(In thousands)
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<CAPTION>
Nine Months
Year Ended December 31, Ended September 30,
------------------------------ ---------------------
1992 1993 1994 1994 1995
------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil $ 2,748 $ 2,533 $ 1,980 $ 1,474 $ 1,461
Gas 74 96 85 65 49
------- ------- ------- ------- -------
2,822 2,629 2,065 1,539 1,510
------- ------- ------- ------- -------
DIRECT OPERATING EXPENSES:
Production and other expenses 841 877 836 620 616
Taxes on production 86 86 67 50 49
Operator administrative overhead 172 170 166 125 123
------- ------- ------- ------- -------
Total 1,099 1,133 1,069 795 788
------- ------- ------- ------- -------
EXCESS OF REVENUES OVER DIRECT
OPERATING EXPENSES $ 1,723 $ 1,496 $ 996 $ 744 $ 722
======= ======= ======= ======= =======
</TABLE>
See notes to statements of revenues and direct operating expenses.
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YELLOWHOUSE PROPERTIES
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
1. BASIS OF PRESENTATION:
On October 5, 1995, Harken Energy West Texas, Inc., a subsidiary of Harken
Energy Corporation (the "Company"), entered into an agreement, effective April
1, 1995, with Yellowhouse Project Co. to acquire certain oil and gas producing
properties ("Yellowhouse Properties") in exchange for, among other
consideration, three million shares of the Company's restricted common stock.
The purchase price was allocated to producing properties. The Yellowhouse
Properties consist of producing interests in approximately 70 wells which are
primarily nonoperated interests in the panhandle region of Texas.
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 interests acquired represent only a portion
of a business and the costs incurred by Yellowhouse Project Co. are not
necessarily indicative of the costs to be incurred by the Company.
Historical financial information reflecting financial position, results of
operations, and cash flows of the Yellowhouse Properties is not presented
because the total acquisition cost was assigned to the oil and gas property
interests. Accordingly, the historical statements of revenues and direct
operating expenses have been presented in lieu of the financial statements
required under Rule 3-05 of Securities and Exchange Commission Regulation S-X.
2. SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (unaudited):
Estimated Quantities of Proved Oil and Gas Reserves
Reserve information presented below has been estimated using September 30,
1995, prices and costs. 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.
The proved oil and gas reserves at September 30, 1995, are as follows:
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Oil (Mbbls) Gas (Mmcf)
----------- ----------
<S> <C> <C>
Proved reserves 1,291 520
===== ===
Proved developed reserves 1,291 520
===== ===
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Standardized Measure of Discounted Future 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 period-end prices for oil
and gas and period-end costs for estimated future development and production
expenditures to produce period-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. Furthermore,
period-end prices, used to determine the Standardized Measure, are influenced
by seasonal demand and other factors and may not be the most representative in
estimating future revenues or reserve data.
The Standardized Measure at September 30, 1995, is as follows (in thousands):
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Future cash inflows $ 21,844
Future costs-
Production (12,798)
Development -
--------
Future net cash flows 9,046
10% annual discount (4,200)
--------
Standardized Measure before income taxes $ 4,846
========
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ITEM 7.(B.) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements give
effect to the October 5, 1995, acquisition by Harken Energy West Texas, Inc., a
subsidiary of Harken Energy Corporation ("Harken"), of certain oil and gas
producing properties ("Yellowhouse Properties") in exchange for, among other
consideration, 3,000,000 shares of restricted Harken common stock. In
addition, the unaudited pro forma combined condensed financial statements also
reflect the May 12, 1995, issuance of European 8% Senior Convertible Notes in
the amount of $15,000,000, as well as the May 22, 1995, merger with Search
Exploration, Inc. ("Search") and the October 1994 acquisition of an additional
20.35625% interest in the CHAP Joint Venture (the "Prior Transactions").
The pro forma combined condensed balance sheet gives effect to the acquisition
of the Yellowhouse Properties as if it had been consummated as of September 30,
1995. The pro forma combined condensed statements of operations for the year
ended December 31, 1994, and for the nine months ended September 30, 1995, give
effect to all transactions as if all had been consummated at the beginning of
each period.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the financial position or operating results that
would have occurred had the transactions been consummated at the dates
indicated, nor are they indicative of future financial position or operating
results.
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HARKEN ENERGY CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET-- SEPTEMBER 30, 1995
(Unaudited)
(In thousands of dollars)
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<CAPTION>
Pro Forma
Adjustments-
Harken Yellowhouse
ASSETS Actual Properties (1) Pro Forma
------ -------- -------------- ---------
<S> <C> <C> <C>
CURRENT ASSETS $ 9,059 $ 345 $ 9,404
PROPERTY AND EQUIPMENT, net 27,363 4,426 31,789
RESTRICTED CASH IN EUROPEAN
SEGREGATED ACCOUNT 9,674 - 9,674
INVESTMENTS IN FORMER SUBSIDIARIES 1,219 - 1,219
NOTES RECEIVABLE FROM RELATED
PARTIES, including interest 232 - 232
OTHER ASSETS, net 1,846 - 1,846
------- ------ -------
Total assets $49,393 $4,771 $54,164
======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES $ 4,556 $ 580 $ 5,136
LONG-TERM DEBT 13,300 - 13,300
REDEEMABLE PREFERRED STOCK 1,868 - 1,868
STOCKHOLDERS' EQUITY 29,669 4,191 33,860
------- ------ -------
Total liabilities and stockholders' equity $49,393 $4,771 $54,164
======= ====== =======
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HARKEN ENERGY CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
(In thousands of dollars)
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<CAPTION>
Pro Forma Pro Forma
Adjustments- Adjustments-
Harken Search Prior Yellowhouse
Actual Actual Transactions Properties Pro Forma
---------- -------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
OIL AND GAS REVENUES $ 4,189 $ 188 $ - $1,510(1) $ 5,887
OTHER REVENUES 992 - 248(5) - 1,240
---------- ------- ------- ------ ----------
Total revenues 5,181 188 248 1,510 7,127
OIL AND GAS OPERATING
EXPENSE 1,343 79 - 788(1) 2,210
GENERAL AND
ADMINISTRATIVE EXPENSE 2,285 236 - - 2,521
DEPRECIATION AND
AMORTIZATION 1,810 18 95(6) 454(3) 2,377
INTEREST EXPENSE AND
OTHER 322 19 382(5) 6(2) 729
---------- ------- ------- ------ ----------
Total expenses 5,760 352 477 1,248 7,837
---------- ------- ------- ------ ----------
INCOME/(LOSS) FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES (579) (164) (229) 262 (710)
INCOME TAX EXPENSE - - - - -
---------- ------- ------- ------ ----------
INCOME/(LOSS) FROM
CONTINUING OPERATIONS $ (579) $ (164) $ (229) $ 262 $ (710)
========== ======= ======= ====== ==========
Net loss per share from
continuing operations
attributable to common
stock $ (0.01) $ (0.01)
========== ==========
Weighted average shares
outstanding 63,052,443 67,424,089
========== ==========
</TABLE>
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HARKEN ENERGY CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(Unaudited)
(In thousands of dollars)
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<CAPTION>
Pro Forma Pro Forma
Acquired Adjustments- Adjustments-
Harken Interest in Search Prior Yellowhouse
Actual CHAP-Actual Actual Transactions Properties Pro Forma
---------- ----------- -------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
OIL AND GAS REVENUES $ 4,156 $1,035 $ 495 $ 89(4) $ 2,065(1) $ 7,840
OTHER REVENUES 739 39 221 660(5) - 1,659
---------- ------ ------- ------- --------- ---------
Total revenues 4,895 1,074 716 749 2,065 9,499
OIL AND GAS OPERATING EXPENSE 1,535 337 274 37(4) 1,069(1) 3,252
GENERAL AND ADMINISTRATIVE
EXPENSE 3,132 96 698 - - 3,926
DEPRECIATION AND AMORTIZATION 1,993 416 499 (203)(6) 624(3) 3,329
PROVISION FOR ASSET IMPAIRMENTS 6,361 - 2,667 (2,667)(6) - 6,361
INTEREST EXPENSE AND OTHER 85 - 5 1,149(5) 6(2) 1,245
---------- ------ ------- ------- --------- ---------
Total expenses 13,106 849 4,143 (1,684) 1,699 18,113
---------- ------ ------- ------- --------- ---------
INCOME/(LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (8,211) 225 (3,427) 2,433 366 (8,614)
INCOME TAX EXPENSE/(BENEFIT) - - (227) 227(7) - -
---------- ------ ------- ------- --------- ---------
INCOME/(LOSS) FROM CONTINUING
OPERATIONS $ (8,211) $ 225 $(3,200) $ 2,206 $ 366 $ (8,614)
========== ====== ======= ======= ========= ==========
Net loss per share from continuing
operations attributable to common
stock $ (0.14) $ (0.13)
========== ==========
Weighted average shares
outstanding 59,722,853 65,845,609
========== ==========
</TABLE>
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HARKEN ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
PRO FORMA ADJUSTMENTS - PRO FORMA COMBINED CONDENSED BALANCE SHEET:
(1) Pro forma entry to record the acquisition of Yellowhouse Properties at
September 30, 1995, in exchange for 3,000,000 shares of restricted Harken
common stock previously held as treasury stock. Harken also issued 1,000,000
warrants to purchase additional shares of restricted Harken common stock at $2
per share, and also issued 82,759 shares of restricted Harken common stock
previously held as treasury stock to a financial advisor in connection with the
acquisition. The purchase price was calculated using the market value,
discounted by 25%, of the shares issued in the acquisition. In addition,
Harken assumed certain short-term notes payable with a remaining balance of
$333,000. The purchase price was allocated entirely to the Yellowhouse
Properties proved reserves and includes $100,000 of estimated transaction
costs. In addition, certain closing adjustments have been reflected in the pro
forma balance sheet.
PRO FORMA ADJUSTMENTS - PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS:
(1) Pro forma entry to reflect the actual revenues and direct operating
expenses of the Yellowhouse Properties.
(2) Pro forma entry to record interest expense related to the short-term
notes payable assumed by Harken as part of the acquisition of Yellowhouse
Properties.
(3) Pro forma entry to reflect depreciation and depletion expense on oil and
gas properties for the Yellowhouse Properties calculated on a
consolidated basis.
(4) Pro forma entry to reflect the additional revenues and expenses of the
interests in Search's managed limited partnerships which were rolled up
into Search as a part of the Search acquisition.
(5) Pro forma entry to reflect interest income earned on European segregated
cash as well as interest expense incurred primarily on the European 8%
Senior Convertible Notes.
(6) Pro forma entry to adjust actual depreciation and depletion expense and
valuation provision on oil and gas properties for Search and the acquired
interest in CHAP Joint Venture calculated on a consolidated basis.
(7) Pro forma entry to eliminate income tax benefit of Search.
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EXHIBITS
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<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
*2.1 Agreement of Sale and Purchase dated October 5, 1995, by and between Yellowhouse
Project Co. and Harken Energy West Texas, Inc.
*99.1 Restructuring and Sale Agreement ("Harken") dated as of October 5, 1995, by and among
Harken Energy Corporation, Harken Energy West Texas, Inc., Internationale Nederlanden
(U.S.) Capital Corporation, New England Mutual Life Insurance Company and EnCap 1989-I
Limited Partnership.
*99.2 Promissory Note of Harken Energy West Texas, Inc. dated October 5, 1995, in the
principal amount of $375,000 issued to Internationale Nederlanden (U.S.) Capital
Corporation (together with a schedule identifying substantially identical documents
and material details in which those documents differ from the foregoing document).
*99.3 Stock Purchase Warrant dated October 5, 1995, of Harken Energy Corporation issued to
Internationale Nederlanden (U.S.) Capital Corporation (together with a schedule
identifying substantially identical documents and material details in which those
documents differ from the foregoing document).
*99.4 Registration Rights Agreement, dated as of October 5, 1995, by and among Harken Energy
Corporation, Internationale Nederlanden (U.S.) Capital Corporation, New England Mutual
Life Insurance Company and EnCap 1989-I Limited Partnership.
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__________
* Previously filed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
HARKEN ENERGY CORPORATION
-------------------------
(Registrant)
By: /s/Bruce N. Huff
------------------------------------
Bruce N. Huff
Senior Vice President and
Chief Financial Officer
Date: December 1, 1995
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