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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 18, 1997
HARCOR ENERGY, INC.
(Exact name of registrant as specified in its Charter)
Delaware
(State or other jurisdiction of incorporation)
0-9300 33-0234380
(Commission File Number) (IRS Employer I.D. No.)
Five Post Oak Park, Suite 2220
4400 Post Oak Park
Houston, TX 77027-3416
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 961-1804
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Item 2. Disposition of Assets
On December 18, 1997 HarCor Energy, Inc. (the "Registrant" and the
"Company") announced that it had reached a definitive agreement for the sale of
all of its oil and gas assets located outside of California (the
"Non-California Assets") to an undisclosed buyer for $13.2 million in cash.
This sale is being made pursuant to the bifurcation of the Company's sales
process and in conjunction with ongoing efforts to effect the sale of the whole
Company as previously announced. Closing is subject to customary title and
environmental due diligence and is anticipated to occur by January 15, 1998.
The Company anticipates recording an estimated gain of approximately $2.9
million upon closing of the sale. No capital gains taxes are anticipated to be
incurred due to the Company's current net operating loss carry-forwards.
The Non-California Assets consist of (i) all of the Company's proved
developed producing, proved undeveloped, probable and possible reserves in New
Mexico, Texas, Alabama and Louisiana; (ii) all of the Company's leasehold
interests, working interests in wells currently drilling, seismic data and the
associated resale rights, and participation rights in those exploration
agreements in its 3-D and 2-D exploration activities in the Hostetter area of
South Texas, Reeves County in the West Texas-Permian Basin, the Lapeyrouse area
of Louisiana, Polaris Joint Venture and the Gulf Coast Frio AVO Program; and
(iii) certain miscellaneous royalty and net-profits interests in various states
previously referred to by the Company as the Fund I Royalty Interests.
Based on a recent engineering reserve study performed by the Company's
independent petroleum engineers, the oil and gas reserves being sold pursuant
to this transaction consist of 1,634,000 barrels of oil and 8,553 MMcf of gas
with a current 10% present value of $14,836,000. This value is based on flat
projected pricing of the recent average 12 month forward pricing of $19.15 per
barrel and $2.50 per MMBtu, with adjustments for quality and location.
Included in this value is proved undeveloped oil and gas reserves consisting of
1,390,000 barrels of oil and 3,778 MMcf of gas with a 10% present value of
$8,774,000. Average daily production relating to these properties during the
third quarter of 1997 was 213 BOPD and 4,897 Mcfd as reported.
Pursuant to the terms of its 14-7/8% Senior Secured Notes ("Senior
Notes") indenture and an intercreditor agreement, the Company is required to
use the cash proceeds received upon closing of the sale of assets to
immediately repay, to the extent required by its lenders, its indebtedness
outstanding under its revolving credit facility. To the extent there are
excess cash proceeds remaining after fulfillment of this obligation, or if the
Company's lender waives this obligation, excess cash proceeds or total cash
proceeds (as the case may be) from a sale of assets must be used to make an
offer to redeem a like amount of Senior Notes from the
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holders thereof at a cost equal to the face value of the Senior Notes.
The Company has received initial indications from its lender that it
will not require the Company to repay indebtedness outstanding under its
revolving credit facility and has requested a waiver of this obligation.
Accordingly, upon closing of the sale the Company will immediately commence an
offer to redeem $13.2 million of its outstanding Senior Notes from the holders
thereof at a cost equal to the face value of the Senior Notes. The holders of
the Senior Notes are not required to accept said offer and there can be no
assurances that they will do so.
Item 7. Financial Statements and Exhibits
(b) Pro Forma financial information.
(1) The following Pro Forma financial information is
included herein as Exhibit 7(b)(1):
(i) Unaudited Pro Forma Condensed Consolidated
Balance Sheet of HarCor at September 30, 1997
assuming that the disposition of assets
described herein had occurred at that date;
and
(ii) Unaudited Proforma Statements of Operations
for the nine-months ended September 30, 1997
and the Year Ended December 31, 1996 assuming
that the disposition of assets described
herein had occurred at the beginning of such
periods.
(c) Exhibits
99.1 Press release dated December 18, 1997 announcing
definitive agreement for the sale of the Company's
Non-California Assets.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HarCor Energy, Inc.
---------------------
(Registrant)
Date: December 23, 1997
/s/ Gary S. Peck
---------------------------
Gary S. Peck
Vice President, Finance
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Exhibit 7(b)(1)
(b) PRO FORMA CONDENSED FINANCIAL INFORMATION
Set forth in the following pages is certain unaudited pro forma
condensed financial information with respect to the disposition of the
Company's Non-California Assets including an unaudited pro forma balance sheet
as of September 30, 1997 and unaudited pro forma statements of operations for
the nine months ended September 30, 1997 and the year ended December 31, 1996.
The balance sheet data have been prepared on the basis that the disposition of
the Company's Non-California Assets and the concurrent redemption of a portion
of its 14-7/8% Senior Secured Notes (the "Senior Notes Redemption") had
occurred on September 30, 1997. The statements of operations for the year
ended December 31, 1996 and the nine months ended September 30, 1997 have been
prepared on the basis that the disposition of the Company's Non-California
Assets and the Senior Notes Redemption had occurred on January 1, 1996 and
January 1, 1997, respectively. The unaudited pro forma financial statements
should be read in conjunction with the notes thereto and the consolidated
financial statements of HarCor Energy, Inc. The pro forma results of operations
are not necessarily indicative of future operations of HarCor Energy, Inc.
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HARCOR ENERGY, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro Forma
------------------------------
Historical Adjustments Adjusted
---------- ----------- --------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash ....................................... $ 2,485 $ -- (a,b) $ 2,485
Accounts Receivable ........................ 4,070 -- $ 4,070
Prepaids & Other ........................... 1,455 -- $ 1,455
--------- --------- ---------
8,010 -- 8,010
--------- --------- ---------
Property & Equipment, net .................... 81,130 (10,219) (a) 70,911
--------- --------- ---------
Other assets.................................. 2,896 (648) (b) 2,248
--------- --------- ---------
Total Assets ................................. $ 92,036 $ (10,867) $ 81,169
========= ========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long Term Bank Debt ..... $ 397 $ -- $ 397
Accounts Payable and Accrued Liabilities ... 5,416 -- 5,416
--------- --------- ---------
5,813 -- 5,813
--------- --------- ---------
LONG TERM BANK DEBT .......................... 4,903 -- 4,903
--------- --------- ---------
14-7/8% SENIOR SECURED NOTES ................. 52,578 (13,200) (b) 39,378
--------- --------- ---------
STOCKHOLDERS' EQUITY:
Common Stock & Additional Paid-In Capital .. 52,742 -- 52,742
Accumulated Deficit ........................ (24,000) 2,333 (a,b) (21,667)
--------- --------- ---------
Total Stockholders' Equity ................... 28,742 2,333 31,075
--------- --------- ---------
$ 92,036 $ (10,867) $ 81,169
========= ========= =========
</TABLE>
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HARCOR ENERGY, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
(Dollars in Thousands except Per Share Data)
<TABLE>
<CAPTION>
PRO FORMA
------------------------------
HISTORICAL ADJUSTMENTS ADJUSTED
----------- ------------ -----------
<S> <C> <C> <C>
REVENUES:
Oil & Gas Sales ................ $ 12,588 $ (3,978)(c) $ 8,610
Plant Revenue................... 4,134 -- $ 4,134
Interest & Other................ 121 -- $ 121
----------- ---------- -----------
Total Revenue................... 16,843 (3,978) 12,865
----------- ---------- -----------
COSTS AND EXPENSES:
Production Expense.............. 3,063 (1,337)(c) 1,726
Plant Expense................... 2,872 -- 2,872
Engineering & Geological........ 247 (82)(d) 165
DD&A............................ 4,603 (1,497)(c) 3,106
General & Administrative........ 1,884 (622)(d) 1,262
Interest........................ 6,564 (1,620)(e) 4,944
----------- ---------- -----------
Total Expenses.................. 19,233 (5,158) 14,075
----------- ---------- -----------
Net Operating Loss before
Provision for Income Taxes...... (2,390) 1,180 (1,210)
Provision for Income Taxes........ -- -- (f) --
----------- ---------- -----------
Net Loss.......................... (2,390) 1,180 (1,210)
Preferred Dividends............... (60) -- (60)
----------- ---------- -----------
NET LOSS TO COMMON STOCKHOLDERS... $ (2,450) $ 1,180 $ (1,270)
=========== ========== ===========
NET LOSS TO COMMON
STOCKHOLDERS PER SHARE.......... $ (0.16) $ (0.08)
=========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING.............. 15,796 15,796
=========== ===========
PRODUCTION DATA:
Barrels of Oil.................... 259,841 (58,771) 201,070
Mcf of Gas........................ 3,569,515 (1,466,555) 2,102,960
Bbls of NGLs...................... 139,767 -- 139,767
</TABLE>
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HARCOR ENERGY, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Dollars in Thousands except Per Share Data)
<TABLE>
<CAPTION>
Pro Forma
-----------------------
Historical Adjustments Adjusted
---------- ----------- --------
<S> <C> <C> <C>
REVENUES:
Oil and Gas Sales..................... $ 21,716 $ (6,714)(c) $ 15,002
Plant Revenue......................... 6,635 -- $ 6,635
Interest and Other.................... 3,271 -- $ 3,271
-------- -------- --------
Total Revenues........................ 31,622 (6,714) 24,908
-------- -------- --------
COSTS AND EXPENSES:
Production Expense.................... 5,134 (2,316)(c) 2,818
Plant Expense......................... 4,017 -- 4,017
Engineering and Geological............ 368 (121)(d) 247
DD&A.................................. 8,172 (1,985)(c) 6,187
General and Administrative............ 3,159 (1,042)(d) 2,117
Interest.............................. 10,067 (2,161)(e) 7,906
Other................................. 368 -- 368
-------- -------- --------
Total Expenses........................ 31,285 (7,625) 23,660
-------- -------- --------
Net Income (Loss) before
Provisions for Income Taxes
and Extraordinary Item................ 337 912 1,249
Provision for Income Taxes.............. -- -- --
-------- -------- --------
Net Loss before Extraordinary Item...... 337 912 1,249
Extraordinary Item(i)................. (2,135) -- (2,135)
-------- -------- --------
Net Loss................................ (1,798) 912 (886)
Preferred Dividends..................... (461) -- (461)
-------- -------- --------
NET LOSS TO COMMON STOCKHOLDERS......... $ (2,259) $ 912 $ (1,347)
======== ======== ========
NET LOSS TO COMMON STOCKHOLDERS
PER SHARE BEFORE EXTRAORDINARY ITEM... $ (0.01) $ 0.07
======== ========
NET LOSS TO COMMON STOCKHOLDERS PER
SHARE AFTER EXTRAORDINARY ITEM........ $ (0.20) $ (0.12)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING..... 11,150 11,150
======== ========
PRODUCTION DATA:
Barrels of Oil.......................... 522,527 (151,941) 370,586
Mcf of Gas.............................. 5,795,247 (2,008,248) 3,786,999
Bbls of NGLs............................ 232,519 -- 232,519
</TABLE>
(i) Early extinguishment of debt
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HARCOR ENERGY, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
September 30, 1997 and December 31, 1996
1. Basis of Presentation
The accompanying unaudited pro forma condensed financial statements
have been prepared to reflect adjustments to the Company's historical financial
statements for:
(i) The sale of the Non-California Assets for $13.2 million in cash;
(ii) The use of the sales proceeds to redeem a like amount of the Company's
14-7/8% Senior Secured Notes as required pursuant to the terms of an
indenture agreement (the "Note Redemption") and assuming that a
sufficient number of the holders of the Senior Notes accept the Notes
Redemption offer by the Company equivalent to $13.2 million;
(iii) The reduction of historical revenues and expenses directly related to the
Non-California Assets as previously reported for the periods
presented;
(iv) The reduction of historical interest expense and associated
amortization of deferred financing costs and note accretion directly
related to the Note Redemption as described in item (ii) of $13.2
million of the Senior Notes;
(v) The estimated reduction of other direct expenses resulting from the
sale of the Non-California Assets.
The unaudited pro forma balance sheet data are presented as if the
sale of the Non-California Assets and related financings occurred on September
30, 1997. The unaudited pro forma statements of operations are presented as if
the sale of Non-California Assets occurred on January 1, 1996 for the year-end
December 31, 1996 statement, and on January 1, 1997 for the first nine months
of 1997 statement.
The accompanying unaudited pro forma financial information has been
prepared based on the historical results of operations of the Non-California
Assets as previously reported in the Company's audited and unaudited financial
statements; along with pro forma adjustments, estimates and assumptions deemed
by the Company to be appropriate. This unaudited pro forma financial
information does not purport to be indicative of the financial position or
results of operations which would actually have
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occurred if the disposition of Non-California Assets had occurred as presented
in such statements or which may be obtained in the future.
2. Pro Forma Adjustments
The accompanying unaudited pro forma condensed financial statements
include the following adjustments:
(a) To record the sale of the Non-California Assets for $13,200,000 cash
and an estimated gain of $2,981,000 at September 30, 1997;
(b) To record the redemption of $13,200,000 of the Senior Notes pursuant
to the terms of an indenture agreement and to write-off an amount of deferred
financing costs pertaining thereto;
(c) To reduce historical oil and gas sales revenues, production expenses
and depletion, depreciation and amortization expense directly related to the
Non-California Assets as previously reported;
(d) To record the estimated reduction of Engineering, Geological and G & A
expenses resulting from the sale of the Non-California Assets;
(e) To reduce historical interest expense and associated amortization of
deferred financing costs and note accretion directly related to the Senior
Notes Redemption;
(f) The Company does not anticipate any capital gains taxes resulting from the
sale of the Non-California Assets due to its net operating loss carry forwards.
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EXHIBIT INDEX
99.1 Press release dated December 18, 1997 announcing
definitive agreement for the sale of the Company's
Non-California Assets.
<PAGE> 1
EXHIBIT 99.1
[HARCOR ENERGY, INC. LETTERHEAD]
NEWS RELEASE
December 18, 1997
Contact: Mark Harrington, Chairman
Francis Roth, President
Fran Reeder, Investor Relations
713-961-1804
HARCOR ENERGY, INC. ANNOUNCES
DEFINITIVE AGREEMENT
FOR SALE OF NON-CALIFORNIA ASSETS
December 18, 1997; Houston, Texas--HarCor Energy, Inc. (NASDAQ/NMS:
HARC) announced today the execution of a definitive agreement for the sale of
its non-California assets for $13.2 million to an undisclosed buyer. The
purchase price represents cash proceeds of approximately $0.81 per HarCor
share. Effective date for the transaction is 1/1/98, and closing is anticipated
to occur on 1/15/98. Closing is subject to customary title and environmental due
diligence. The Company currently anticipates booking a $3 million gain on this
transaction. No capital gains taxes are anticipated on the sale due to offset
of HarCor's existing net operating loss carry forwards.
The sale was made pursuant to the bifurcation of HarCor's sales
process. HarCor is continuing discussions with remaining suitors for its
California properties.
HarCor Energy is a Houston-based independent energy company pursuing
risk-managed oil and gas acquisitions for future exploitation.
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