<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
Commission file number 0-9378
ENEX RESOURCES CORPORATION
(Name of small business issuer in its charter)
DELAWARE 93-0747806
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
TWO SHELL PLAZA, SUITE 2400
777 WALKER STREET
HOUSTON, TEXAS 77002
(Address of principal executive offices)(Zip Code)
ISSUER'S TELEPHONE NUMBER: (713) 821-7100
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.05 PAR VALUE
(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
---
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.[x]
Revenues of the issuer for its most recent fiscal year are $2,220,446
The aggregate market value of the voting stock held by non-affiliates
based upon the closing price of the stock on March 23, 2000 of $2.25 was
$279,434.
As of March 13, 2000, the issuer had 1,342,672 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
NONE
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TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1999
ENEX RESOURCES CORPORATION
ITEM NO. PART I PAGE
------
1 Description of Business................................ 1
2 Description of Property................................ 3
3 Legal Proceedings...................................... 6
4 Submission of Matters to a Vote of Security Holders.... 7
PART II
-------
5 Market for Common Equity and
Related Stockholder Matters............................ 8
6 Management's Discussion and Analysis
and Results of Operations.............................. 8
7 Financial Statements and Supplementary Data............ 14
8 Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure................. 15
PART III
--------
9 Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act................................... 15
10 Executive Compensation................................ 15
11 Security Ownership of Certain
Beneficial Owners and Management...................... 15
12 Certain Relationships and Related Transactions........ 15
13 Exhibits and Reports on Form 8-K...................... 15
Signatures............................................ 18
<PAGE>
PART I
Item 1. DESCRIPTION OF BUSINESS
-----------------------
GENERAL
Enex Resources Corporation ("Enex" or the "Company") was incorporated on
August 17, 1979 in Colorado. On June 30, 1992, the Company reincorporated in
Delaware. The Company is engaged in the business of acquiring interests in
producing oil and gas properties. The Company's operations are concentrated in
a single industry segment.
The Company's principal executive office is maintained at Two Shell Plaza,
Suite 2400, 777 Walker Street, Houston, Texas 77002. The telephone number at
this office is (713) 821-7100. The Company has no regional offices.
As of December 31, 1999, the Company had no employees.
Since 1982, the Company has financed most of its oil and gas activities
through the public sale of interests in limited partnerships formed to purchase
and hold working interests and other operating and non operating interests in
producing oil and gas properties (the "Partnerships"). From 1982 through 1994,
the Company formed 56 limited partnerships with aggregate investor subscriptions
of $224 million received from 69,139 investors, including reinvestors.
Producing property acquisitions for those partnerships totaled approximately
$201 million.
During 1995 through 1997, eleven partnerships, with aggregate investor
subscriptions totaling approximately $54 million were liquidated. Effective
June 30, 1997, the remaining thirty-four partnerships were consolidated into
Enex Consolidated Partners, L.P. (the "Consolidated Partnership"). The limited
partners in the thirty-four partnerships were issued 1,102,631 units in the
Consolidated Partnership. The Company's receivables and its general partner
capital balances from the consolidated partnerships were converted into limited
partner units in the Consolidated Partnership. These interests combined with
the Company's limited partner interests in the consolidated partnerships gave
the Company a 55.5% limited partner interest in the Consolidated Partnership,
together with a 4.1% carried revenue interest as the general partner of the
Consolidated Partnership. General and administrative savings and
simplification, risk reduction, oil and gas reserve diversification and
expansion were the primary reasons for the formation of the Consolidated
Partnership. Subsequent to the formation of the Consolidated Partnership, the
Company has acquired additional limited partner units such that its limited
partner interest at October 1, 1998 was approximately 56.2%
On February 19, 1998, 3TEC Energy Company ("3TEC"), (formerly Middle Bay
Oil Company, Inc.) began a $15 per share cash tender offer for 100% of the
outstanding common stock of the Company. 3TEC is an independent oil and gas
company, headquartered in Houston, Texas, engaged in the exploration,
development and production of oil and gas in the contiguous United States.
3TEC's common stock trades on the Nasdaq SmallCap Market. At the expiration of
the tender offer on March 27, 1998, 1,064,432 common shares (79.2%) of the
Company were tendered for an aggregate price of $15,966,480. After the close of
the tender offer, the Company's officers and directors were replaced with the
officers and directors of 3TEC and the Company's headquarters were moved to
3TEC's headquarters at 1221 Lamar Street, Suite 1020, Houston, Texas 77010. The
headquarters were subsequently moved to Two Shell Plaza, Suite 2400, 777 Walker
Street, Houston, Texas 77002.
On November 27, 1998 3TEC filed with the Securities and Exchange
Commission an offer to purchase 100% of the limited partners units of the
Consolidated Partnership (the "Exchange Offer"). The Exchange Offer involved
the issuance of 2,177,481 shares of 3TEC Series C preferred stock
(the "Series C") and payment of approximately $539,000 in cash in exchange for
all of the outstanding limited partner units of the Consolidated
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Partnership, the transfer of the Consolidated Partnership's assets and
liabilities to 3TEC effective October 1, 1998, and the dissolution of the
Consolidated Partnership. The Exchange Offer valued each Consolidated
Partnership unit at $10.43 and the unitholders had the option of exchanging
their units for the Series C (at a conversion ratio of 2.086 Series C shares for
each of the total 1,102,631 outstanding Consolidated Partnership units) or
exercising dissenters' rights and receiving a cash payment for their interests.
The Company did not exercise its dissenters' rights and was issued 1,293,522
Series C shares for its limited partner interest in the Consolidated
Partnership.
The Series C entitles the holder to cash dividends at the rate of 10% per
year (payable semi-annually on March 31 and September 30), a $5.00 per share
liquidation preference and conversion, at any time, of three Series C shares
into one share of 3TEC common stock. After January 1, 2000, 3TEC may, at its
option, redeem the Series C for the liquidation value plus accrued dividends.
3TEC has applied to list the Series C on the NASDAQ Small Cap Market. Dividends
began to accrue on December 30, 1998.
FORWARD-LOOKING STATEMENTS
This document includes "forward-looking statements" within the meaning of
various provisions of the Securities Act and Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The words "expect," "estimate," "anticipate,"
"predict," "believe," and similar expressions and variations thereof are
intended to identify forward-looking statements. All statements, other than
statements of historical facts, included in this document that address
activities, events, or developments that the Company expects or anticipates will
or may occur in the future, including such things as estimated future net
revenues from oil and natural gas reserves and the present value thereof, future
capital expenditures (including the amount and nature thereof), business
strategy and measures to implement strategy, competitive strengths, goals,
expansion, and growth of the Company's business and operations, plans,
references to future success, references to intentions as to future matters and
other such matters are forward-looking statements and include statements
regarding interest, belief or current expectations of the Company, its
directors, or its officers regarding such matters. These statements are based
on certain assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current conditions and
expected future developments as well as other factors it believes are
appropriate under the circumstances. However, whether actual results and
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, including the risk factors
discussed in this document, general economic, market or business conditions, the
opportunities (or lack thereof) that may be presented to and pursued by the
Company, competitive actions by other oil and gas companies, changes in laws or
regulations, and other factors, many of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made in this
document are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequences to or effects on the Company or its business or
operations.
COMPETITION, MARKETS AND REGULATION
Competition in the exploration and property acquisition markets is intense.
In seeking to obtain desirable leases and exploration prospects, the Company
faces competition from both major and independent oil and gas companies, as well
as from numerous individuals. Many of these competitors have substantial
financial resources available to them, which makes for increased competition.
The ability of the Company to market oil and gas from its wells will depend
upon numerous factors beyond its control, including, but not limited to, the
extent of domestic production and imports of oil and gas, the proximity of the
Company's production to existing pipelines, the availability of capacity in such
pipelines and state and federal regulation of oil and gas production. There is
no assurance that the Company will be able to market all of the oil or gas
produced by it or that favorable prices can be obtained for the oil and gas it
produces. In view of the uncertainties
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affecting the supply and demand of oil and gas, the Company is unable to
accurately predict future oil and gas prices and demand, or the overall effect
they will have on the Company.
Numerous federal and state laws and regulations affect the Company's
operations. In particular, oil and gas production operations are affected by
tax and other laws relating to the petroleum industry and any changes in such
laws and regulations. Some of the rules and regulations carry substantial
penalties for failing to comply. The regulatory burden on the oil and gas
industry increases the Company's cost of doing business. The Company's
activities are also subject to numerous federal, state and local environmental
laws and regulations governing the discharge of materials. In most cases, the
applicable regulatory requirements relate to water and air pollution control or
solid waste management measures. The Company believes the recent trend toward
stricter standards in environmental legislation, regulation and enforcement will
continue. To date, these laws have not had a significant impact on the Company
but no assurance can be given as to the effect of these laws on the Company in
the future.
ITEM 2. DESCRIPTION OF PROPERTY
-----------------------
OIL AND GAS PROPERTIES
Until 1986, the Company had acquired most of its interests in producing
oil and gas properties through purchases made by the Partnerships. Prior to
1995, the Partnerships acquired approximately $201 million of producing oil and
gas properties. Effective June 30, 1997, thirty-four limited partnerships
consolidated to form the Consolidated Partnership in which the Company, as
general partner, owned a 4.1% interest in net revenues and gains generated by
properties owned by the Consolidated Partnership in addition to a 56.2% limited
partner interest. Effective October 1, 1998, the Company exchanged its general
and limited partner interest in the Consolidated Partnership for 3TEC Series C
preferred stock. Due to this exchange, the Company no longer has an indirect
ownership in the oil and gas reserves attributable to the Consolidated
Partnership.
Effective October 1, 1998, all of the oil and gas reserves owned by the
Consolidated Partnership were transferred to 3TEC. At December 31, 1998, the
reserves attributable to the Company are those reserves owned directly by the
Company.
The producing oil and gas properties in which the Company owns interests
are all located within the United States. The Company's interests in these
properties at December 31, 1999 are summarized below:
Developed Acres Undeveloped Acres
--------------- -----------------
Gross Net Gross Net
------ ----- ----- ---
Working Interests 14,852 6,652 -- --
Royalty Interests 3,310 174 -- --
"Developed acres" are acres spaced or assigned to productive wells.
"Undeveloped acres" are those leased acres on which wells have not been
drilled or completed to a point that permits the production of commercial
quantities of oil and gas, regardless of whether such acreage contains proved
reserves.
A "gross acre" is an acre in which an interest is owned. The number of gross
acres is the total number of acres in which such interest is owned.
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A "net working interest acre" is deemed to exist when the sum of fractional
working interests owned in gross acres equals one. The number of net working
interest acres is the sum of fractional working interests owned in gross acres
expressed as a whole number.
A "net royalty acre" is deemed to exist when the sum of fractional royalty
interests owned in gross acres equals one. The number of net royalty acres is
the sum of fractional royalty interests owned in gross acres expressed as a
whole number.
PROPERTY ACQUISITIONS
No significant oil and gas acquisitions were made by the Company over the
three year period 1997 through 1999.
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NET OIL AND GAS PRODUCTION
The following table shows for the years ended December 31, 1999, 1998 and
1997, the approximate production attributable to the Company's oil and gas
interests including interest derived from the Company's interests in the
Partnerships. The production for the year ended December 31, 1999 includes only
production from the reserves owned directly by the Company. The production for
the years ended December 31, 1997 and 1998 include production from the reserves
owned directly by the Company and from reserves owned indirectly by the Company
through its general and limited partner interests in the Partnerships. The
production for the year ended December 31, 1998 includes production from the
reserves owned directly by the Company and from reserves owned indirectly by the
Company through its general and limited partner interests in the Partnerships
for the nine months ended September 30, 1998 and, for the three months ended
December 31, 1998, includes only production from the reserves owned directly by
the Company. All production occurred in the United States.
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Crude oil and condensate (Bbls) 19,158 227,976 277,229
Natural gas - leasehold or royalty (Mcf) 339,152 1,461,306 1,735,704
Natural gas liquids (Bbls)(1) -- -- 33,019
Natural gas - gas plant sales (Mcf)(1) -- 4,992 220,193
</TABLE>
The following table sets forth the Company's average sales price per barrel
of oil, per Mcf of gas, per barrel of natural gas liquids ("NGL") and per Mcf of
gas plant gas sales for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Average sales price per Bbl of crude oil and
condensate $16.23 $11.92 $17.20
Average sales price per Mcf of natural gas 2.40 2.15 2.49
Average sales price per Bbl of NGL(1) - - 12.16
Average sales price per Mcf of gas plant gas(1) - - 2.73
</TABLE>
(1) Natural gas liquids production and gas plant gas sales were obtained
through gas processing plant ownership rather than through leasehold
ownership.
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The following table shows, as of December 31, 1999, the approximate number
of gross and net producing oil and gas wells in which the Company owns a direct
interest.
Productive Oil Wells Productive Gas Wells
-------------------- --------------------
Net Working Net Working
Gross Interest Gross Interest
Wells Wells Wells Wells
------- ------------ ------- -----------
78 8.5 45 34.2
"Productive wells" are producing wells and wells capable of production,
including shut-in wells.
A "gross well" is a well in which a working interest is held. The number of
gross wells is the total number of wells in which a working interest is owned.
A "net working interest ("W.I.") well" is deemed to exist when the sum of
fractional interests owned in gross W.I. wells equals one. The number of net
W.I. wells is the sum of the fractional interests owned in gross W.I. wells,
expressed as whole numbers and fractions thereof.
OIL AND GAS RESERVES
As of December 31, 1999, the proved oil and gas reserves reported herein for
the Company are based primarily on engineering studies performed by the
petroleum engineering consulting firm of Ryder Scott Company. As of December 31,
1998 the proved oil and gas reserves reported herein for the Company are based
primarily on engineering studies performed by the petroleum engineering
consulting firm of H. J. Gruy and Associates, Inc. and Lee Keeling and
Associates. As of December 31, 1998, proved oil and gas reserves reported herein
for the Partnerships and for the Company's share of such Partnership reserves
are based primarily on engineering studies performed by the petroleum
engineering consulting firm of H. J. Gruy and Associates, Inc. The reserves
included in this report are estimates only and should not be construed as exact
quantities. Future conditions may affect recovery of estimated reserves and
revenues, and all reserves may be subject to revision as more performance data
becomes available. The proved reserves used in this report conform to the
applicable definitions promulgated by the Securities and Exchange Commission.
DRILLING ACTIVITIES
In 1999 and 1998, the Company and the Consolidated Partnership did not
participate in any significant developmental or exploratory drilling.
ITEM 3. LEGAL PROCEEDINGS
-----------------
There are no material pending legal proceedings to which the Company or its
subsidiary are a party or to which any of their properties are subject.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
7
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PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION Due to the failure to meet the NASDAQ listing
requirement after the completion of the tender offer, the common
shares of the Company were delisted from the NASDAQ National
Market. The stock is currently quoted on the OTC Bulletin Board.
The quotations represent prices in the over-the-counter market
between dealers in securities and do not include retail markup,
markdown or commissions and do not necessarily represent actual
transactions.
1999 1998
---- ----
High Low High Low
---- --- ---- ---
First Quarter $6.00 $3.50 $15.00 $10.50
Second Quarter 3.50 2.50 14.81 14.31
Third Quarter 3.50 2.00 14.31 8.00
Fourth Quarter 2.25 2.13 11.00 5.00
On March 23, 2000 the closing price of the common stock was $2.25
bid.
(b) HOLDERS As of March 1, 2000 the Company had approximately 520
holders of record of its common stock, which does not include
an unknown number of additional holders whose stock is held
in "street name"
(c) DIVIDEND POLICY The Company paid no dividends in 1999 and
1998. Any future determination as to the payment of dividends will
be made at the discretion of the Board of Directors and will
depend on a number of factors, including the future earnings,
capital requirements, financial condition and future prospects of
the Company, and any other factors as the Board of Directors may
deem relevant.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
financial statements and notes thereto set forth in Item 7.
(a) Results of Operations
The factors that most significantly affect the Company's results of
operations are (i) the sales price of crude oil and natural gas, (ii) the level
of production volumes, (iii) the level of lease operating expenses, (iv) the
dividends accrued on the Series C preferred stock and (v) the interest accrued
on the receivable from 3TEC Energy Corporation.
Sales of production is significantly impacted by the Company's ability to
maintain or increase its production from existing oil and gas properties or
through its exploration and development activities. Sales prices received by
the Company for oil and gas have fluctuated significantly from period to period.
The fluctuations in oil prices during these periods reflect market uncertainty
regarding the inability of OPEC to control the production of its member
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countries, production from Iraq, as well as concerns related to the global
supply and demand for crude oil. Gas prices received by the Company fluctuate
generally with changes in the spot market price for gas. Relatively modest
changes in either oil or gas prices significantly impact the Company's results
of operations and cash flow.
The continued accrual of income from the Company's investment in preferred stock
of 3TEC Energy Corporation and the note receivable from 3TEC Energy Corporation
depends solely upon the creditworthiness of the Company's 80% owner, 3TEC Energy
Corporation. Should 3TEC Energy Corporation experience problems that adversely
affect its financial condition, the financial condition and results of
operations of the Company will be adversely affected.
(b) Fiscal 1999
In 1999, the Company recorded net income of $691,931 or $0.52 per share.
This compares to a net loss of $619,157 or $.46 per share in 1998. The increase
in net income from 1998 to 1999 was primarily the result of the decrease in
general and administrative expenses and the dividend income from the preferred
stock of 3TEC.
Oil, natural gas and gas plant sales were $1,124,903 in 1999 versus
$5,877,445 in 1998. This represents a decrease of $4,752,542 or 81%. Oil sales
were $310,999 and $2,717,991 in 1999 and 1998 respectively. This represents a
decrease of $2,406,992 or 89%. A 92% decrease in oil production, partially
offset by a 36% increase in oil prices, resulted in lower oil revenues in 1999.
Gas sales were $813,904 in 1999 versus $3,141,721 in 1998. This represents a
decrease of $2,327,817 or 74%. A 77% decrease in gas production, partially
offset by a 12% increase in gas prices, resulted in lower gas revenues. The
decrease in oil and gas production was primarily the result of the sale of
several properties effective September 1, 1998, sale of the Consolidated
Partnership effective October 1, 1998 and normal production decline. The
increase in the average oil and gas prices corresponds with higher market prices
for oil and gas. There were no gas plant sales in 1999 versus $17,733 in 1998.
The decrease was due to the sale of the Dover Hennessey Gas Plant by the
Consolidated Partnership effective January 1, 1998.
The gain on the sale of assets in 1999 and 1998 was $40,040 and $1,199,272,
respectively. The 1998 gain included the sale of the gas plant, the sale of
several oil and gas properties in September 1998 and the sale of the Company's
interest in the Consolidated Partnership.
Other income was $10,003 in 1999 versus $22,494 in 1998. The decrease was
due primarily to the sale of miscellaneous office furniture in 1998.
General and administrative expenses were $552,104 in 1999 versus $2,216,352
in 1998. This decrease was primarily the result of the sale of the Consolidated
Partnership October 1, 1998, and the $826,250 expense in 1998 related to the
buyout of the outstanding stock options in conjunction with the successful
tender offer by 3TEC.
Lease operating expenses and production taxes were $671,903 in 1999 versus
$3,361,006 in 1998. The decrease was primarily due to the sale of several
properties effective September 1, 1998, and the sale of the Consolidated
Partnership effective October 1, 1998.
There were no gas purchases and plant operating expenses in 1999 versus
$58,832 in 1998. The decrease was due to the sale of the Dover Hennessey Gas
Plant by the Consolidated Partnership effective January 1, 1998.
The impairment expense in 1999 was $3,530 versus $189,211 in 1998. The
decrease in impairment expense was primarily due to the sale of uneconomical
properties in 1998 and the increase in average sale prices of oil and gas in
1999.
There was no minority interest income/expense in 1999 versus a $414,888
expense in 1998. The minority interest was eliminated when the Company sold the
Consolidated Partnership effective October 1, 1998.
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(c) Fiscal 1998
In 1998, the Company recorded a net loss of $619,157 or $0.46 per share.
This compares to net income of $1,965,675 or $1.45 per share in 1997. The
decrease in net income from 1997 to 1998 was primarily the result of lower oil
and gas revenues and lower gas plant revenues offset partially by a lower
minority interest deduction. Revenues and expenses for the nine months ended
September 30, 1998 include the Company and the Consolidated Partnership on a
fully consolidated basis. Revenues and expenses subsequent to September 30,
1998 include only those attributable to the Company and excludes the revenues
and expenses of the Consolidated Partnership because it was sold to 3TEC,
effective October 1, 1998.
Oil, natural gas and gas plant sales were $5,877,445 in 1998 versus
$10,095,642 in 1997. This represents a decrease of $4,218,197 or 42%. Oil
sales were $2,717,991 and $4,771,413 in 1998 and 1997 respectively. This
represents a decrease of $2,053,422 or 43%. An 18% decrease in oil production
and a 31% decline in oil prices resulted in lower oil revenues in 1998. Gas
sales were $3,141,721 in 1998 versus $4,321,903 in 1997. This represents a
decrease of $1,180,182 or 27%. A 16% decrease in gas production and a 14%
decline in gas prices resulted in lower gas revenues. The decrease in oil and
gas production was primarily the result of sales of several properties effective
September 1, 1998, sale of the Consolidated Partnership effective October 1,
1998 and normal production decline. The decrease in the average oil and gas
prices corresponds with lower market prices for oil and gas. Gas plant sales
were $17,733 in 1998 versus $1,002,326 in 1997. The decease was due to the
sale of the Dover Hennessey Gas Plant by the Consolidated Partnership effective
January 1, 1998.
The gain on the sale of assets in 1998 of $1,199,272 included the gain on
the sale of the gas plant, the sale of several oil and gas properties in
September 1998 and the sale of the Company's interest in the Consolidated
Partnership.
Other income was $22,494 versus $226,658 in 1997. The decrease was due
primarily to no rig rental revenues in 1998 due to the sale of the rig in 1997,
the gain of $50,000 on the rig sale in 1997 and the lawsuit settlement of
$20,000 on the gas plant in 1997.
General and administrative expenses were $2,216,352 in 1998 versus
$2,061,090 in 1997. This increase was primarily the result of the $826,250
expense related to the buyout of the outstanding stock options in conjunction
with the successful tender offer by 3TEC in March 1998. Excluding the
option buyout expense, general and administrative expenses decreased $670,988.
The decrease in general and administrative expenses, excluding the stock buyout
expense, was due primarily to the consolidation of the Company's operations with
3TEC and the associated reduction in the workforce.
Lease operating expenses and production taxes were $3,361,006 in 1998 versus
$3,983,129 in 1997. The decrease was primarily due to the sale of several
properties effective September 1, 1998, the sale of the Consolidated Partnership
effective October 1, 1998 and lower oil and gas production.
Gas purchases and plant operating expenses were $58,832 in 1998 versus
$791,403 in 1997. The decrease was due to the sale of the Dover Hennessey Gas
Plant by the Consolidated Partnership effective January 1, 1998.
The impairment expense in 1998 of $189,211 was due to the decline in the
value of an oil field due to the decline in oil prices. The impairment expense
was computed applying the guidelines of SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
The minority interest deduction of $414,888 in 1998 declined $597,561 from
$1,012,449 in 1997. The primary reason for the decline was the sale of the
Consolidated Partnership effective October 1, 1998 and the lower level of oil
and gas revenue attributable to the Consolidated Partnership before its sale.
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(d) Effects of Oil and Gas Price Fluctuations
Fluctuations in the price of crude oil and natural gas significantly affect
the Company's operations and the value of its assets. As a result of the
instability and volatility of crude oil and natural gas prices, financial
institutions have become more selective in the energy lending area and have
reduced the percentage of existing reserves that may qualify for the borrowing
base to support energy loans.
The Company's principal source of cash flow is the production and sale of
its crude oil and natural gas reserves which are depleting assets. Cash flow
from oil and gas production sales depends upon the quantity of production and
the price obtained for that production. An increase in prices permits the
Company to finance its operations to a greater extent with internally-generated
funds, allows the Company to obtain equity financing more easily and lessens the
difficulty of attracting financing alternatives available to the Company from
industry partners and nonindustry investors. However, price increases heighten
the competition for leases and prospects, increase the costs of exploration and
development activities and increase the risks associated with the purchase of
Producing Properties.
A decline in oil and gas prices (i) reduces the cash flow internally
generated by the Company, which in turn reduces the funds available for
exploring for and replacing oil and gas reserves, (ii) increases the difficulty
of obtaining equity financing, (iii) reduces the number of leases and prospects
available to the Company on reasonable economic terms and (iv) increases the
difficulty of attracting financing alternatives available to the Company from
industry partners and nonindustry investors. However, price declines reduce the
competition for leases and prospects and correspondingly reduce the prices paid
for leases and prospects. Furthermore, exploration and production costs
generally decline, although the decline may not be at the same rate of decline
of oil and gas prices.
Since December 1998, the price of oil has increased dramatically. The
posted price of WTI crude oil has increased from a low of approximately $8.00
per barrel in December 1998 to highs in December 1999 of approximately $23.00
per barrel.
(e) Seasonality
The results of operations of the Company are somewhat seasonal due to
seasonal fluctuations in the price for natural gas. Generally, natural gas
prices are higher in the first and fourth quarter of the year due to colder
winter weather and resulting higher demand for natural gas during these months.
Due to these seasonal fluctuations, results of operations for individual
quarterly periods may not be indicative of results on an annual basis.
(f) Inflation and Changing Prices
Inflation principally affects the costs required to drill, complete
and operate oil and gas wells. In recent years, inflation has had a minimal
effect on the operations of the Company. Costs have generally declined recently
due to the decrease in drilling activity in the United States. Unless
increasing oil and gas prices spur large increases in industry activities,
management believes costs will remain relatively stable over the next year.
11
<PAGE>
(g) Capital Resources and Liquidity -- Fiscal 1999 and Fiscal 1998
Adequate capital is generally provided by cash flows from the Company's oil
and gas properties. The Company does not anticipate any significant capital
expenditures in the future.
Investment in Series C Preferred Stock of 3TEC
In connection with the divestiture of the Consolidated Partnership the
Company received 1,293,522 shares of Series C.
As a holder of Series C the Company is entitled to receive cumulative cash
dividends in an amount per share of $0.50 per year (10% annual rate), payable
semi-annually on March 31 and September 30 of each year. These dividends are
payable in preference to and prior to the payment of any dividend or
distribution to any holder of 3TEC common stock or other junior security. The
Series C dividends began to accrue on December 30, 1998. 3TEC's primary bank
has granted 3TEC a waiver allowing it to pay the dividends on the Series C as
long as no default or event of default exists or would exist as a result of any
Series C dividend payment.
If 3TEC pays the dividends on the Series C as scheduled, the Company will
receive approximately $647,000 every year until redemption by 3TEC or conversion
by the Company. 3TEC is not obligated to pay the cash dividends as scheduled
and has the right to suspend payment and accrue the dividends. The payment of
the Series C dividends is also dependent on the agreements between 3TEC and its
principal creditors and 3TEC's compliance with the terms of its credit
agreements. 3TEC had approximately $88 million in long-term debt outstanding on
December 31, 1999. There can be no assurance that 3TEC will pay the Series C
dividends as scheduled.
The Series C has a liquidation preference of $5.00 per share plus an amount
equal to all accumulated, accrued and unpaid dividends. The liquidation
preference of Series C ranks on parity with 3TEC's Series B Preferred Stock
outstanding. As of December 31, 1999, 3TEC had no other preferred stock
outstanding.
Currently, no trading market exists for the Series C. 3TEC has applied for
listing the Series C for trading on the NASDAQ Small Cap Stock Market. The
listing has not yet been approved. There can be no assurance that the Series C
will be approved for trading on the NASDAQ Small Cap Stock Market
Note Receivable from 3TEC
The Company has a note receivable from 3TEC, an owner of 80% of the
outstanding common stock of the Company, as of December 31, 1999 of $6,311,000.
The principal balance of the note accrues interest at the prime rate and is due
on demand. The note consists of advances to 3TEC for general corporate purposes
and is unsecured. Interest of $626,000 was accrued on the note as of December
31, 1999. There can be no assurance that 3TEC will pay the note if payment is
demanded or that 3TEC will have the financial capability to pay the note at any
time in the future.
Creditors Hold Security Interests in Certain Oil and Gas Assets of the Company
3TEC financed its tender offer with cash provided under a credit facility by
Compass Bank and Bank of Oklahoma. In November, 1999 3TEC secured a new credit
facility from Bank One,Texas, N.A. ("the Bank") and repaid the credit facility
provided by Compass Bank and Bank of Oklahoma. The debt proceeds used to finance
the tender offer, approximately $15.9 million, was shown on the balance sheet of
3TEC. Pursuant to the terms of the credit agreement between 3TEC, the Company
and the Bank, the Bank holds a security interest in certain oil and gas
12
<PAGE>
properties of the Company. If certain properties are sold by the Company an
amount determined by the Banks would have to be paid on the outstanding
principal balance of the debt. The debt payment could be made by 3TEC or the
Company. Amounts paid to the Banks by the Company would reduce the amount of
sales proceeds that the Company would retain. Amounts paid to the Bank by 3TEC
would reduce the amount of cash available to be paid to the Company. The
principal balance of debt outstanding on 3TEC's financial statements at December
31, 1999 was approximately $88 million.
Dependence on 3TEC
A substantial portion of the Company's assets are directly related to
3TEC. Approximately $12.8 million of the Company's $13.8 million in total assets
are obligations of 3TEC. The payment of the note receivable and the value of the
Series C are directly related to the success of 3TEC. 3TEC's operations are
subject to all of the risks inherent in the oil and gas exploration and
production industry. There can be no assurance that 3TEC will be a successful
participant in the oil and gas exploration and production industry.
Year 2000 Compliance
The Company had undertaken various initiatives to ensure that its
hardware, software and equipment functioned properly with the rollover of the
date to January 1, 2000. The Company experienced no problems as a result of
rollover of the dates to January 1, 2000, and the costs incurred for Year 2000
compliance were immaterial to its financial position and results of operations.
Although the Company can provide no assurance, the Company anticipates any
future costs associated with Year 2000 compliance to be immaterial to its
financial position and results of operations.
FUTURE CAPITAL REQUIREMENTS
The Company does not anticipate making substantial capital expenditures
for acquisition, development or exploration of oil and natural gas reserves in
the future. The Company expects to make expenditures to develop its current
proved undeveloped reserves and to maintain its proved developed reserves. The
Company expects to incur a maximum of $150,000 in capital expenditures over the
next twelve months. The Company expects that cash flows from operations and
proceeds from sales of certain oil and gas properties will be sufficient to fund
the planned capital expenditures through 2000.
Because future cash flows are subject to a number of variables, such as,
the level of production and prices received for oil and gas and the prices
received on property sales, there can be no assurance that the Company's capital
resources will be sufficient to maintain planned levels of capital expenditures
and accordingly, oil and gas revenues and operating results may be adversely
affected.
Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 standardizes the accounting
for and disclosures of derivative instruments, including certain derivative
instruments embedded in other contracts. The statement is effective for
financial statements for periods beginning after June 15, 2000. As the Company
historically has not entered into derivative instruments for non-trading
(hedging) purposes or for trading purposes, the Company does not expect this
statement to have a material impact on its financial condition or results of
operations upon implementation.
13
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements for the years ended December 31, 1999
and 1998 and the independent auditors' reports thereon are included in this
Item 7.
14
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report................................................ F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998................ F-3
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998................................................ F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998................................................ F-6
Consolidated Statements of Changes in Stockholder's Equity for the years
ended December 31, 1999 and 1998.......................................... F-7
Notes to Consolidated Financial Statements.................................. F-8
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Enex Resources Corporation
We have audited the accompanying consolidated balance sheets of Enex Resources
Corporation and subsidiaries as of December 31, 1999 and December 31, 1998 and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Enex Resources
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
KPMG LLP
Houston, Texas
February 25, 2000
F-2
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
- -----------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS 1999 1998
- ------ ----------- ------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ - $ 33,649
Accounts receivable:
Oil and gas sales 208,956 250,763
Joint owners 6,443 29,926
Prepaid expenses and other current assets - 20,182
------------ -----------
Total current assets 215,399 334,520
------------ -----------
PROPERTY:
Oil and gas properties (successful efforts method): 3,363,151 3,662,353
Furniture, fixtures and other (at cost) 345,919 345,919
------------ -----------
3,709,070 4,008,272
Less accumulated depreciation,
depletion and amortization 2,918,652 3,101,968
------------ -----------
Net property 790,418 906,304
------------ -----------
OTHER ASSETS:
Preferred Stock-3TEC 6,467,610 6,467,610
Note receivable-3TEC 6,310,942 5,147,548
Deferred tax asset - 199,879
----------- -----------
Total other assets 12,778,552 11,815,037
----------- -----------
TOTAL ASSETS $13,784,369 $13,055,861
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
- ------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
- ------------------------------------ ------------ -----------
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 249,091 $ 212,514
----------- -----------
Total current liabilities 249,091 212,514
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized;
none issued - -
Common stock, $.05 par value;
10,000,000 shares authorized;
1,804,912 shares issued and outstanding at
December 31, 1999 and December 31,1998 90,246 90,246
Additional paid-in capital 10,807,472 10,807,472
Retained earnings 5,882,507 5,190,576
Less Cost of treasury stock:
462,240 shares at December 31, 1999 and December 31, 1998 (3,244,947) (3,244,947)
----------- -----------
Total stockholders' equity 13,535,278 12,843,347
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,784,369 $13,055,861
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
- -----------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998
----- ----
REVENUES:
<S> <C> <C>
Oil and gas sales $ 1,124,903 $ 5,859,712
Gas plant sales - 17,733
Gain on sale of assets 40,040 1,199,272
Preferred stock dividends 646,761 -
Interest income 398,739 294,824
Other income 10,003 22,494
------------- ------------
Total revenues 2,220,446 7,394,035
------------- ------------
COSTS AND EXPENSES:
General and administrative 552,104 2,216,352
Lease operating and other 603,673 3,053,584
Gas purchases and plant operating - 58,832
Production taxes 68,230 307,422
Depreciation, depletion and amortization 99,713 1,755,183
Impairment expense 3,530 189,211
Interest expense 1,386 -
------------- ------------
Total costs and expenses 1,328,636 7,580,584
------------- ------------
Income (loss) before minority interest and income taxes 891,810 (186,549)
MINORITY INTEREST - (414,888)
------------- ------------
Income (loss) before income taxes 891,810 (601,437)
INCOME TAX EXPENSE 199,879 17,720
------------- ------------
NET INCOME (LOSS) $ 691,931 $ (619,157)
============= ============
NET INCOME (LOSS) PER SHARE
Basic Income (loss) per Share $ 0.52 $ (0.46)
============= ===========
Diluted Income (loss) per Share $ 0.52 $ (0.46)
============= ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 1,342,672 1,342,637
============= ===========
Diluted 1,342,672 1,342,637
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
- -----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 691,931 $ (619,157)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation, depletion and amortization 99,713 1,755,183
Impairment 3,530 189,211
Bad debt expense 14,156 70,000
Deferred income tax expense 199,879 17,720
Gain on sale of Consolidated Partnership - (124,918)
Gain on sale of properties (40,040) (1,074,354)
Minority interest - (862,580)
Changes in operating assets and liabilities:
Decrease in accounts receivable 51,134 928,090
Decrease (increase) in prepaid expenses and other assets 20,182 (28,370)
Decrease in accounts payable (71,985) (331,430)
----------- ------------
Net cash provided (used) by operating activities 968,500 (80,605)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable - 3TEC (1,163,394) (5,147,548)
Cash distributed in sale of Consolidated Partnership - (1,136,431)
Proceeds from sale of properties 59,798 2,469,850
Property additions (7,115) (350,418)
----------- ------------
Net cash used by investing activities (1,110,711) (4,164,547)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft 108,562 -
Purchase of treasury stock - (45,669)
Proceeds from exercise of stock options - 80,000
----------- ------------
Net cash provided by financing activities 108,562 34,331
----------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (33,649) (4,210,821)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 33,649 4,244,470
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ - $ 33,649
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
- -----------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Total
-------- --------- --------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 1,794,912 $89,746 $10,727,972 $5,809,733 $(3,199,278) $13,428,173
Exercise of stock options 10,000 500 79,500 80,000
Purchase of 4,200 shares
of treasury stock (45,669) (45,669)
Net loss (619,157) (619,157)
----------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1998 1,804,912 90,246 10,807,472 5,190,576 (3,244,947) 12,843,347
Net income 691,931 691,931
----------------------------------------------------------------------------------------
Balance December 31, 1999 1,804,912 $90,246 $10,807,472 $5,882,507 $(3,244,947) $13,535,278
========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
Enex Resources Corporation (the Company) was incorporated under the laws of
the state of Colorado on August 17, 1979. On June 30, 1992, the Company
reincorporated in Delaware. Effective March 27, 1998, 3TEC Energy Corporation
("3TEC"), (formerly Middle Bay Oil Company, Inc.) acquired 79.2% of the common
stock of the Company. Effective October 1, 1998, the Company sold all of its
partnership units in Enex Consolidated Partners, L.P. (the "Consolidated
Partnership"), a limited partnership of which the Company owned greater than a
50% interest, to 3TEC. The Company is engaged in the acquisition, development
and production of oil and natural gas in the contiguous United States. The
Company considers its business to be a single operating segment.
The Consolidated Partnership was formed from thirty-four managed limited
partnerships effective June 30, 1997 (the "Consolidation") The Company had a
4.1% carried revenue interest as general partner in addition to its proportional
interest as a limited partner of approximately 56.2%.
Significant Accounting Policies
- -------------------------------
The Company's accounting policies reflect industry standards and conform to
generally accepted accounting principles. The more significant of such policies
are described below.
Principles of Consolidation
- ---------------------------
In 1999, the financial statements included the accounts of the Company and
no subsidiaries. In 1998, the consolidated financial statements included the
accounts of the Company and its wholly owned subsidiary, Enex Securities
Corporation and until September 30, 1998, the accounts of the Consolidated
Partnership.
Cash and Cash Equivalents
- -------------------------
For purposes of the statements of cash flows, the Company classifies all
cash investments with original maturities of three months or less as cash.
F-8
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounts Receivable-Joint Owners
- --------------------------------
The Company, as operator for jointly-owned properties, bills joint owners
monthly for costs expended by the Company for the joint owners' share of
operating costs and capital expenditures.
Oil and Gas Property
- ---------------------
The Company follows the successful efforts method of accounting for oil and
gas properties, and accordingly, capitalizes all direct costs incurred in
connection with the acquisition, drilling and development of productive oil and
gas properties. Costs associated with unsuccessful exploration are charged to
expense currently. Geological and geophysical costs and costs of carrying and
retaining unevaluated properties are charged to expense. Depletion,
depreciation and amortization of capitalized costs are computed separately for
each field based on the unit of production method using only proved oil and gas
reserves. In arriving at such rates, commercially recoverable reserves have
been estimated by independent petroleum engineering firms. The Company reviews
its undeveloped properties continually and charges them to expense on a property
by property basis when it is determined that they have been condemned by dry
holes or have otherwise diminished in value. Gains and losses are recorded on
sales of interests in proved properties and on sales of entire interests in
unproved properties. For the years ended December 31, 1999 and 1998, the
Company realized gains on sales of properties of $40,040 and $1,199,272,
respectively. The Company has not capitalized any internal costs into property.
The Company reviews long-lived assets for impairment when events or changes
in circumstances indicate that the carrying value of such an asset may not be
recoverable. This review consists of a comparison of the carrying value of the
asset to the asset's expected future undiscounted cash flows without interest
costs. Estimates of expected future cash flows represent management's best
estimate based on reasonable and supportable assumptions and projections. If
the expected future cash flows, assuming escalated prices, are less than the
carrying value of the asset, an impairment exists and is measured as the excess
of the carrying value over the estimated fair value of the asset. The Company
estimates discounted future net cash flows to determine fair value. Any
impairment provisions recognized are permanent and may not be restored in the
future.
The Company's proved properties were assessed for impairment on an
individual field basis and the Company recorded an impairment provision of
approximately $3,500 in 1999 and $189,000 in 1998.
F-9
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Managed Limited Partnership
- ---------------------------
For the nine months ended September 30, 1998, the Company served as general
partner of the Consolidated Partnership and also participated as a limited
partner.
As general partner of the Consolidated Partnership, the Company was
entitled to 4.1% of the Consolidated Partnership's oil and gas revenues less
4.1% of the expenses, other than the costs of acquiring oil and gas properties.
The Company recognized its share of these net revenues as production was sold to
third parties.
In addition to the above, the Company was reimbursed for direct
expenditures made on behalf of the partnership operations.
Other Property and Equipment
- ----------------------------
Other property and equipment are stated at cost and depreciation is
computed on the straight-line method over appropriate lives not to exceed five
years. Additions and betterments which provide benefits to several periods are
capitalized.
Environmental Liabilities
- -------------------------
Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations are expensed. Liabilities are recorded when
environmental assessments and/or clean-ups are probable, and the costs can be
reasonably estimated. Generally, the timing of these accruals coincides with the
Company's commitment to a formal plan of action.
Revenue
- -------
Oil and gas revenues are recorded using the sales method, whereby the
Company recognizes revenues based on the amount of oil and gas sold to
purchasers on its behalf. The revenue imbalance for 1999 and 1998 was
immaterial.
F-10
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
- ------------
The Company uses the asset and liability method of accounting for income taxes
under which deferred tax assets and liabilities are determined by applying
enacted statutory tax rates applicable to future years to the difference between
the financial statement and tax basis of assets and liabilities. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized as
part of the provision for income taxes in the period that includes the enactment
date.
Stock Based Compensation
- ------------------------
The Company accounts for stock-based compensation under the intrinsic value
method. Under this method, the Company records no compensation expense for the
expense for stock options granted when the exercise price of options granted is
equal to or greater than the fair market value of the Company's common stock on
the date granted.
Earnings Per Share
- ------------------
Basic earnings per share is based on the weighted average shares outstanding
without any dilutive effects considered. Diluted earnings per share reflects
dilution from all potential common shares, including options, warrants and
convertible preferred stock.
Concentrations of Market Risk
- -----------------------------
The future results of the Company will be affected by the market prices of
oil and natural gas. The availability of a ready market for natural gas and oil
in the future will depend on numerous factors beyond the control of the Company,
including weather, production of other natural gas and crude oil, imports,
marketing of competitive fuels, proximity and capacity of oil and gas pipelines
and other transportation facilities, any oversupply or undersupply of gas and
oil, the regulatory environment, and other regional and political events, none
of which can be predicted with certainty.
F-11
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
- -----------------------------
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of accounts receivable. Risk with respect to
receivables is concentrated primarily in the current production revenue
receivable from multiple oil and gas producers, both major and independent, and
is typical in the industry. Two purchasers accounted for approximately 56% and
17% of the total oil and gas sales, respectively, for the year ended December
31, 1999. No single customer accounted for greater than 10% of the Company's
total oil and gas sales for the year ended December 31, 1998.
Accounting Pronouncements
- -------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 standardizes the accounting
for and disclosures of derivative instruments, including certain derivative
instruments embedded in other contracts. The statement is effective for
financial statements for periods beginning after June 15, 2000. As the Company
historically has not entered into derivative instruments for non-trading
(hedging) purposes or for trading purposes, the Company does not expect this
statement to have a material impact on its financial condition or results of
operations upon implementation.
Use of Estimates
- ----------------
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities to prepare the financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Reclassifications
- -----------------
Certain reclassifications of prior period amounts have been made to conform
to the current presentation.
F-12
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(2) CONSOLIDATED PARTNERSHIP DIVESTITURE AND RECEIPT OF PREFERRED STOCK OF
3TEC
On December 30, 1998, the Company sold all of its units of the Consolidated
Partnership to 3TEC. The sale consisted of an exchange offer (the "Exchange
Offer") whereby the Company exchanged each Consolidated Partnership unit for
2.086 shares of 3TEC Series C Preferred Stock ("3TEC Preferred Stock"). In
connection with the Exchange Offer, a proposal was submitted to the limited
partners in the Consolidated Partnership to amend the partnership agreement to
provide for the transfer of all of the assets and liabilities of the
Consolidated Partnership to 3TEC as of October 1, 1998 and dissolve the
Consolidated Partnership. The Exchange Offer was approved on December 30, 1998
and 2,177,481 shares of 3TEC Preferred Stock were issued for 100% of the
outstanding limited partner units. The Company was issued 1,293,522 shares of
3TEC Preferred Stock for its limited partner ownership in the Consolidated
Partnership.
As a holder of Series C the Company is entitled to receive cumulative cash
dividends in an amount per share of $0.50 per year (10% annual rate), payable
semi-annually on March 31 and September 30 of each year. These dividends are
payable in preference to and prior to the payment of any dividend or
distribution to any holder of 3TEC common stock or other junior security. The
Series C dividends began to accrue on December 30, 1998. 3TEC's primary bank
has granted 3TEC a waiver allowing it to pay the dividends on the Series C as
long as no default or event of default exists or would exist as a result of any
Series C dividend payment. The Series C has a liquidation preference of $5.00
per share plus an amount equal to all accumulated, accrued and unpaid dividends.
The liquidation preference of Series C ranks on parity with 3TEC's Series B
Preferred Stock outstanding. As of December 31, 1999, 3TEC had no other
preferred stock outstanding.
Each share of Series C is convertible into 1/3 share of 3TEC common stock.
On or after January 1, 2000, 3TEC may redeem all or a portion of the Series C,
at its option, at a purchase price of $5.00 per share, plus an amount equal to
all accumulated, accrued and unpaid dividends.
The Series C is generally nonvoting; however, holders of Series C are
entitled to vote on any amendment, alteration or appeal of any provision of
3TEC's Articles of Incorporation which would adversely affect any holder's
rights and preferences.
F-13
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(2) CONSOLIDATED PARTNERSHIP DIVESTITURE AND RECEIPT OF PREFERRED STOCK OF
3TEC (continued)
The following pro forma data presents the results of the Company for the
twelve months ended December 31, 1998, as if the divestiture of the Consolidated
Partnership had occurred on January 1, 1998. The pro forma results are
presented for comparative purposes only and are not necessarily indicative of
the results which would have been obtained had the divestiture been consummated
as presented. Dollars are presented in thousands, except for per share amounts.
ProForma
(Unaudited)
1998
----
Total revenues excluding dividend income $1,738
Preferred dividend income 647
Net loss available to stockholders (604)
Net loss per share available to stockholders (0.45)
(3) 3TEC TENDER OFFER
On March 27, 1998, 3TEC purchased 1,064,432 of the outstanding common
shares of the Company for $15,966,480. 3TEC purchased the common shares through
a cash tender offer that commenced February 19, 1998. Over the three-week period
ended December 23, 1998, 3TEC acquired an additional 9,747 shares (approximately
0.80%) of the outstanding common shares of the Company.
(4) RELATED PARTY TRANSACTIONS
The Company has a note receivable from 3TEC, an owner of 80% of the
outstanding common stock of the Company, as of December 31, 1999 of $6,310,942.
The principal balance of the note accrues interest at the prime rate and is due
on demand. The note consists of advances to 3TEC for general corporate purposes
and is unsecured. Interest of approximately $626,000 and $227,000 was accrued on
the note as of December 31, 1999 and 1998, respectively, and is included in the
note receivable balance.
3TEC financed its tender offer with cash provided under a credit facility by
Compass Bank and Bank of Oklahoma. In November, 1999, 3TEC secured a new credit
facility from Bank One Texas, N.A. ("the Bank") and repaid the credit facility
provided by Compass Bank and Bank of Oklahoma. The debt proceeds used to finance
the tender offer, approximately $15.9 million, was shown on the balance sheet of
3TEC. Pursuant to the terms of the credit agreement between 3TEC, the Company
and the Bank, the Bank holds a security interest in certain oil and gas
properties of the Company. If certain properties were sold by the Company an
amount determined by the Bank would have to be paid on the outstanding principal
balance of the debt. The debt payment could be made by 3TEC or the Company.
Amounts paid to the Bank by the Company would
F-14
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(4) RELATED PARTY TRANSACTIONS (continued)
reduce the amount of sales proceeds the Company would retain. Amounts paid to
the Bank by 3TEC would reduce the amount of cash available to be paid to the
Company. The principal balance of debt outstanding under the credit facility on
3TEC's financial statements at December 31, 1999 was approximately $88 million.
All but one of the officers and directors of the Company also serve as the
officers and directors of 3TEC.
(5) INCOME TAXES
Income tax expense for the years ended December 31 consisted of the
following (in thousands):
1999 1998
------ ------
Current $ - $ -
Deferred 200 18
----- -----
Total $ 200 $ 18
===== =====
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to the provision for income taxes is as follows:
1999 1998
----- -----
Income tax (benefit) expense at statutory rate $ 303 $(204)
Change in valuation allowance 77 730
Purchase accounting adjustment - (508)
Dividends received (220) -
Increase due to other items 40 -
----- -----
Income tax expense $ 200 $ 18
===== =====
F-15
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(5) INCOME TAXES (continued)
The Company's net deferred tax asset at December 31, 1998 is shown below
(in thousands). The Company provided a valuation allowance against the entire
deferred tax asset at December 31, 1999.
1999 1998
------- --------
Deferred tax assets
Oil and gas properties (3,553) (4,688)
NOL carryforward (2,461) (1,454)
Other (173) (168)
------- -------
(6,187) (6,310)
Valuation allowance 6,187 6,110
------- --------
Net deferred tax asset $ - $ (200)
======= ========
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will not be realized. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon projections for future taxable
income over the periods which the deferred tax assets are deductible, the
Section 382 limitation discussed below, and the separate return loss year
limitation, management believes it is more likely than not that the Company will
not realize the benefits of these deductible differences. Therefore a valuation
allowance has been set up against the deferred tax asset at December 31, 1999
and 1998. The valuation allowance increased $77,000 during 1999 and $730,000
during 1998.
In March 1998, 79.2% of the Company's common stock was acquired by 3TEC, at
which time the Company had a net operating loss carryforward of approximately
$5,200,000. These net operating losses expire in varying amounts through 2018,
and their utilization is limited due to an ownership change pursuant to Section
382 triggered by 3TEC's acquisition of the Company's common stock.
As of December 31, 1999, the Company had net operating loss carryforwards
of approximately $7,200,000, which expire beginning in the year 2009 through
2019.
F-16
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(6) STOCK OPTION PLANS
At December 31, 1998, the Company had an incentive stock option plan and a
nonqualified stock option plan, which authorize the issuance of options to
purchase up to 362,000 shares of common stock to directors, officers and key
employees. The Company has also issued options not covered by a plan. The
Company applies the intrinsic value method for accounting for stock based
compensation. There were no stock options issued during 1999 and 1998.
At December 31, 1999 and 1998 there were 209,000 shares of common stock
available for grant under the stock option plans. The plans are administered by
the Compensation Committee of the Board of Directors.
Information relating to stock options is summarized below:
Average
Exercise Price
Shares Per Share
--------- --------------
Options outstanding at January 1, 1998...... 178,000 $9.25
Buyout....................................... (143,000) $9.22
Canceled..................................... (25,000) $9.88
Exercised.................................... (10,000) $8.00
--------
Options outstanding at December 31, 1999
and 1998.................................... --
========
(7) STOCKHOLDERS' EQUITY
Earnings Per Share
- ------------------
At December 31, 1999 and 1998 the Company had no common stock equivalents
outstanding.
F-17
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(8) COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various legal proceedings which are
considered routine litigation incidental to the Company's business, the
disposition of which management believes will not have a material effect on the
financial position or results of operations of the Company.
(9) SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
Capitalized Costs and Costs Incurred
- ------------------------------------
The following tables present the capitalized costs related to oil and gas
producing activities and the related depreciation, depletion, amortization and
impairment and costs incurred in oil and gas property acquisition, exploration
and development activities (in thousands):
1999 1998
-------- --------
Capitalized Costs
- -----------------
Proved properties $ 3,363 $ 3,662
Accumulated depreciation, depletion, amortization
and impairment (2,602) (2,798)
------- -------
Net capitalized costs $ 761 $ 864
======= =======
Costs Incurred
- --------------
Proved properties $ --- $ ---
Development costs 7 350
------- -------
Total $ 7 $ 350
======= =======
Depletion, depreciation, amortization
and impairment $ 95 $ 1,929
======= =======
F-18
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(9) SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) (continued)
Estimated Quantities of Reserves
- ---------------------------------
The Company has interests in oil and gas properties that are located
principally in Texas. The Company does not own or lease any oil and gas
properties outside the United States. There are no quantities of oil and gas
subject to long-term supply or similar agreements with any governmental
agencies.
The Company retains independent engineering firms to provide year-end
estimates of the Company's future net recoverable oil, gas and natural gas
liquids reserves. In 1999, such estimates were prepared by Ryder Scott
Company. In 1998, such estimates were prepared by and H.J. Gruy & Associates,
Inc. and Lee Keeling & Associates, Inc. The reserve information was prepared in
accordance with guidelines established by the Securities and Exchange
Commission.
Estimated proved net recoverable reserves as shown below include only those
quantities that can be expected to be commercially recoverable at prices and
costs in effect at the balance sheet dates under existing regulatory practices
and with conventional equipment and operating methods. Proved developed
reserves represent only those reserves expected to be recovered through existing
wells. Proved undeveloped reserves include those reserves expected to be
recovered from new wells or on undrilled acreage or from existing wells on which
a relatively major expenditure is required for recompletion.
Net quantities of proved developed and undeveloped reserves of natural gas and
crude oil, including condensate and natural gas liquids, are summarized as
follows:
<TABLE>
<CAPTION>
Years Ended
December 31
<S> <C> <C> <C> <C>
1999 1998
---- ----
Oil Gas Oil Gas
Proved Reserves (Barrels) (Mcf) (Barrels) (Mcf)
- --------------- -------- --------- --------- ----------
Beginning of year 60,225 9,262,611 1,299,556 14,915,559
Revisions of previous estimates 101,762 662,253 (258,651) 5,734,679
Sale of reserves in place (6,131) (4,712) (752,704) (9,926,321)
Production for the year (19,158) (339,152) (227,976) (1,461,306)
------- --------- --------- ----------
End of year 136,698 9,581,000 60,225 9,262,611
======= ========= ========= ==========
Proved Developed Reserves
- -------------------------
Beginning of year 60,225 6,865,911 1,299,556 14,915,559
End of year 136,698 6,631,000 60,225 6,865,911
</TABLE>
F-19
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(9) SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) (continued)
Standardized Measure of Discounted Future Net Cash Flows From Proved Reserves
- -----------------------------------------------------------------------------
The following is a summary of the standardized measure of discounted
future net cash flows related to the Company's proved oil and gas reserves. For
these calculations, estimated future cash flows from estimated future production
of proved reserves are computed using oil and gas prices as of the end of each
period presented. Future development and production costs attributable to the
proved reserves were estimated assuming that existing conditions would continue
over the economic lives of the individual leases and costs were not escalated
for the future. Estimated future income taxes were calculated by applying
statutory tax rates (based on current law adjusted for permanent differences and
tax credits) to the estimated future pre-tax net cash flows related to proved
oil and gas reserves, less the tax basis of the properties involved.
The Company cautions against using this data to determine the value of
its oil and gas properties. To obtain the best estimate of the fair value of
the oil and gas properties, forecasts of future economic conditions, varying
discount rates, and consideration of other than proved reserves would have to be
incorporated into the calculation. In addition, there are significant
uncertainties inherent in estimating quantities of proved reserves and in
projecting rates of production that impair the usefulness of the data.
The standardized measure of discounted future net cash flows relating
to proved oil and gas reserves are summarized as follows (in thousands):
Years Ended
December 31
-----------------------
1999 1998
---------- ---------
Future cash inflows $ 25,277 $ 20,352
Future production costs and development costs (12,882) (11,884)
Future income tax expenses (1,625) (338)
--------- --------
Future net cash flows 10,770 8,130
10% discount to reflect timing of cash flows (5,835) (4,400)
--------- --------
Standardized measure of discounted
future net cash flows $ 4,935 $ 3,730
========= ========
F-20
<PAGE>
ENEX RESOURCES CORPORATION AND SUBISDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(9) SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) (continued)
Standardized Measure of Discounted Future Net Cash Flows From Proved Reserves
- -----------------------------------------------------------------------------
(continued)
The following are the principal sources of changes in the standardized
measure of discounted future net cash flows (in thousands):
Years Ended
December 31
-----------------------
1999 1998
---------- ---------
Sales of oil and gas, net of production cost $ (453) $ (2,499)
Net changes in price and production cost 1,346 (3,048)
Purchase of reserves --- ---
Sale of reserves (23) (12,080)
Revisions of previous quantity estimates 697 1,547
Net change in income taxes (571) (174)
Accretion of discount 390 2,018
Changes in production rates (timing) and other (181) (2,214)
------- --------
Change in standardized measure of
discounted future net cash flows $ 1,205 $(16,450)
======= ========
During recent years, there have been significant fluctuations in the prices
paid for crude oil in the world markets. The situation has had a destabilizing
effect on the crude oil posted prices in the United States, including the posted
prices paid by purchasers of the Company's crude oil. The year end prices of
oil and gas at December 31, 1999 and 1998, used in the above table were $23.64
and $9.50 per barrel of oil and $2.23 and $2.10 per thousand cubic feet of gas,
respectively.
F-21
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
In 1998, the Company made the decision to change its independent
accountants to the independent accountants engaged by 3TEC. Deloitte and Touche
LLP resigned as independent accountants for the Company on October 19, 1998.
The independent accountant's reports on the financial statements of the Company
for the two fiscal years ended December 31, 1996 and December 31, 1997, did not
contain an adverse opinion or a disclaimer of opinion, and the reports were not
qualified or modified as to uncertainty, audit scope or accounting principles.
Effective January 21, 1999, the Company engaged KPMG LLP as independent
accountants to audit the Company's financial statements for the fiscal year
ending December 31, 1998. Neither the Company nor any person acting on behalf of
the Company consulted KPMG LLP regarding (I) either the application of
accounting principles to a specified transaction, either complete or proposed,
or the type of opinion that might be rendered on the Company's financial
statements or (ii) any matter that was either the subject of a disagreement (as
defined in paragraph (a)(1)(iv) of Regulation S-K, Item 304 and the related
instructions) or a reportable event (as described in paragraph (a)(1)(v) of
Regulation S-K, Item 304).
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference from
the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from
the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from
the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from
the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation of the Company as currently in
effect(1)
3.2 Bylaws of the Company as currently in effect/(1)/
15
<PAGE>
4.1 Form of Rights Agreement dated as of September 4, 1990
between the Companys predecessor-in-interest, Enex Resources
Corporation, a Colorado corporation (the APredecessor@), and
American Securities Transfer, Incorporated, as Rights Agent,
which includes as exhibits thereto the Form of Rights
Certificate and the Summary of Rights to Purchase Common
Stock/(2)/
10.1 Enex Employees Stock Purchase Program/(3)/
10.2 1991 Non-Qualified Stock Option Award Program/(3)/
10.3 1990 Non-Qualified Stock Option Plan/(3)/
10.4 1984 Incentive Stock Option Plan and 1979 Employees Non-
Qualified Stock Option Plan/(4)/
10.5 Credit Agreement between the Company and Middle Bay Oil
Company, Inc., as borrower, and Compass Bank, as agent and
lender, Bank of Oklahoma, N.A., as a lender, and the other
lenders signatory thereto dated March 27, 1998/(5)/
16.1 Letter from Deloitte & Touche, LLP regarding change in
certifying public accountants dated October 26, 1998/(6)/
21.1 Subsidiaries of the Company/(7)/
27.1 Financial Data Schedule*
* Filed herewith
1. Incorporated by reference to Exhibits to Form 8-K dated June 30, 1992
2. Incorporated by reference to Exhibits to Form 8-K dated September 4, 1990
3. Incorporated by reference to Exhibits to Registration Statement on Form S-8
filed with the Securities and Exchange Commission on March 22, 1993
4. Incorporated by reference to Exhibits to Registration Statement on Form S-8
filed with the Securities and Exchange Commission on July 1, 1992
5. Incorporated by reference to Exhibits to Amendment No. 3 and Final
Amendment to Schedule 14D-1 filed by Middle Bay Oil Company, Inc. (MBOC) on
April 13, 1998
6. Incorporated by reference to Exhibits to Form 8-K filed October 29, 1998
7. Incorporated by reference to Exhibits to Annual Report on Form 10-K dated
March 16, 1992
16
<PAGE>
(b) Reports on Form 8-K
There were no Form 8-Ks filed during the fourth quarter for the period
ending December 31, 1999.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed by
the undersigned, thereunto duly authorized, as of March 30, 2000.
ENEX RESOURCES CORPORATION
(Registrant)
By: /s/ Floyd C. Wilson
-------------------------------------
Floyd C. Wilson
Chief Executive Officer,
President and Chairman
By: /s/ Stephen W. Herod
-------------------------------------
Stephen W. Herod
Executive Vice-President,
Chief Financial Officer, Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Floyd C. Wilson and Stephen W. Herod, and each of
them, his true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to sign any and all amendments (including post-
effective amendments) to this Annual Report on Form 10-KSB and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact, or their
substitute or substitutes, or any of them, shall do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
March 30, 2000 /s/ Floyd C. Wilson
- --------------------------- --------------------------------
Date Floyd C. Wilson
Chief Executive Officer,
President and Chairman
March 30, 2000 /s/ Stephen W. Herod
- --------------------------- --------------------------------
Date Stephen W. Herod
Director, Executive Vice-President,
Chief Financial Officer, Secretary
18
<PAGE>
March 30, 2000 /s/ Gary R. Christopher
- ---------------------------- ----------------------------
Date Gary R. Christopher
Director
March 30, 2000 /s/ D. Martin Phillips
- ---------------------------- ----------------------------
Date D. Martin Phillips
Director
March 30, 2000 /s/ David B. Miller
- ---------------------------- ----------------------------
Date David B. Miller
Director
March 30, 2000 /s/ David B. Dunton
- ---------------------------- ----------------------------
Date David B. Dunton
Director
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 215,399
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 215,399
<PP&E> 3,709,070
<DEPRECIATION> 2,918,652
<TOTAL-ASSETS> 13,784,369
<CURRENT-LIABILITIES> 247,091
<BONDS> 0
0
0
<COMMON> 90,246
<OTHER-SE> 13,445,032
<TOTAL-LIABILITY-AND-EQUITY> 13,784,369
<SALES> 1,124,903
<TOTAL-REVENUES> 2,220,446
<CGS> 671,903
<TOTAL-COSTS> 1,328,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,386
<INCOME-PRETAX> 891,810
<INCOME-TAX> 199,879
<INCOME-CONTINUING> 691,931
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 691,931
<EPS-BASIC> 0.515
<EPS-DILUTED> 0.515
</TABLE>
