LOMAK PETROLEUM INC
8-K, 1997-02-26
CRUDE PETROLEUM & NATURAL GAS
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<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION


                             Washington, D.C. 20549


                                    FORM 8-K


                                 CURRENT REPORT


                     PURSUANT TO SECTION 13 OR 15(D) OF THE


                      SECURITIES AND EXCHANGE ACT OF 1934


              Date of Report (date of earliest event reported) February 26, 1997



                             LOMAK PETROLEUM, INC.
              (Exact name of registrant as specified in its charter)
                         COMMISSION FILE NUMBER 0-9592




<TABLE>
<S>                                                                                   <C>
                DELAWARE                                                                    34-1312571
      (State or other jurisdiction                                                        (IRS Employer
    of incorporation or organization)                                                 Identification Number)


        500 THROCKMORTON STREET                                                                76102
           FORT WORTH, TEXAS                                                                 (Zip Code)
(Address of principal executive offices)


</TABLE>

             Registrant's telephone number, including area code:  (817) 870-2601
             
             
                                       1
             
<PAGE>   2
ITEM 5.          ACQUISITION OR DISPOSITION OF ASSETS.

         The Company acquired oil and gas properties and equipment located in
West Texas, South Texas and the Gulf of Mexico (the "Cometra Properties") from
Cometra Energy, L.P., Cometra Production Company, L.P. and Rockland, L.P.
(collectively "Cometra") for a purchase price of $385 million (the "Cometra
Acquisition").  The Cometra Acquisition increased the Company's proved reserves
at December 31, 1996 by 68% to 644 Bcfe and increased its Present Value by 98%
to $974 million. The Cometra Properties, located primarily in the Company's
core operating areas, include 515 producing wells, 401 proven development
projects and substantial additional development and exploration potential on
approximately 150,000 gross acres (90,000 net acres).  In addition, the Cometra
Properties include 265 miles of gas pipelines, a 25,000 Mcf/d gas processing
plant and an above-market gas contract with a major Texas gas utility covering
approximately 30% of the December 1996 production from the Cometra Properties.

         The purchase price for the Cometra Acquisition was approximately $385
million, consisting of $355 million in cash and 1,410,106 shares of the
Company's Common Stock.  The Company financed the cash portion of the purchase
price with $221 million of borrowings under a recently expanded bank credit
facility (the "Credit Agreement") and the issuance to Cometra of a $134 million
non-interest bearing promissory note due March 31, 1997, which is secured by a
bank letter of credit.  The promissory note will be repaid at maturity through
borrowings under the Credit Agreement.  The Credit Agreement permits the
Company to obtain revolving credit loans and issue letters of credit from time
to time in an aggregate amount not to exceed $400 million initially.
Availability under the credit agreement will be reduced to $325 million on
August 13, 1997, unless otherwise agreed to by the lenders.

         The foregoing description of the above described transaction is
qualified in its entirety by reference to the Purchase and Sale Agreements,
which are being filed herewith as Exhibits 1and 2 and are fully incorporated by
reference herein.

ITEM 7.          FINANCIAL STATEMENTS AND EXHIBITS.

         (a)     Financial Statements of Assets Acquired

                 Report of Independent Public Accountants
                 Statements of revenues and direct operating expenses for the
                 years ended December 31, 1994, 1995 and 1996 Notes to
                 statements of revenues and direct operating expenses

         (b)     Pro Forma Financial Information

                 Pro forma combined statement of income for the year ended
                 December 31, 1996 Pro forma combined balance sheet at December
                 31, 1996 Notes to pro forma combined financial statements

         (c)     Exhibits

                *1. Purchase and Sale Agreement between Cometra Energy, L.P.
                    and Cometra Production Company, L.P., as seller, and Lomak
                    Petroleum, Inc., as buyer, dated as of December 31, 1996,
                    including First Amendment to Purchase and Sale Agreement,
                    dated January 10, 1997.
                *2. Purchase and Sale Agreement between Rockland L.P., as
                    seller, and Lomak Petroleum, Inc., as buyer, dated as of
                    December 31 1996.
                 *  Previously filed as exhibit in Form S-3, Registration 
                    No. 333-20257, dated January 23, 1997.





                                       2
<PAGE>   3
                                   SIGNATURE


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                          LOMAK PETROLEUM, INC.



                                          By   /s/ Thomas W. Stoelk      
                                               ---------------------
                                                   Thomas W. Stoelk
                                                   Chief Financial Officer






February 26, 1997





                                       3
<PAGE>   4
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


THE BOARD OF DIRECTORS AND STOCKHOLDERS
LOMAK PETROLEUM, INC.:


We have audited the accompanying statements of revenues and direct operating
expenses of the American Cometra Interests, as described in Note 1, for the
years ended December 31, 1994, 1995 and 1996.  These financial statements are
the responsibility of management.  Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audit provides a reasonable basis
for our opinion.

The accompanying statements of revenues and direct operating expenses reflect
the revenues and direct operating expenses attributable to the American Cometra
Interests, as described in Note 1, and are not intended to be a complete
presentation of the revenues and expenses of the American Cometra Interests.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the revenues and direct operating expenses of the
American Cometra Interests, as described in Note 1, for the years ended
December 31, 1994, 1995 and 1996, in conformity with generally accepted
accounting principles.





COOPERS & LYBRAND L.L.P.


Fort Worth, Texas
February 7, 1997





                                       4
<PAGE>   5
                         THE AMERICAN COMETRA INTERESTS

              STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES



<TABLE>
<CAPTION>
                                                                     YEAR ENDED          YEAR ENDED          YEAR ENDED
                                                                    DECEMBER 31,        DECEMBER 31,        DECEMBER 31,
                                                                       1994                1995                1996
                                                                    -----------         -----------         -----------
        <S>                                                         <C>                 <C>                 <C>
        Revenues:
             Oil and gas production                                 $46,808,830         $43,513,982         $60,751,200
             Marketing and gas plant operating activities (net)       3,370,500           5,276,900           7,273,100
                                                                    -----------         -----------         -----------
                 Total Revenues                                      50,179,330          48,790,882          68,024,300
        Direct operating expenses                                   (14,447,533)        (12,727,532)        (14,375,900)
                                                                    -----------         -----------         -----------
                 Excess of revenues over operating expenses         $35,731,797         $36,063,350         $53,648,400
                                                                    ===========         ===========         ===========     





</TABLE>
      The accompanying notes are an integral part of these financial statements.





                                       5
<PAGE>   6
                         THE AMERICAN COMETRA INTERESTS
                        NOTES TO STATEMENTS OF REVENUES
                         AND DIRECT OPERATING EXPENSES
(1)      GENERAL:
Organization

         The accompanying statements present the revenues and direct operating
expenses of certain working and other interests in oil and gas properties and
the Sterling gas plant and related pipeline owned by American Cometra, Inc.
(the "American Cometra Interests") which were purchased by Lomak Petroleum,
Inc. ("Lomak").  Such financial statements were derived from the historical
records of the predecessor owner and represent Lomak's interest.

Basis of Presentation

         The historical financial statements reflecting financial position,
results of operations and cash flows required by generally accepted accounting
principles are not presented, as such information is neither readily available
on an individual property basis nor meaningful for the American Cometra
Interests.  During the periods presented, the American Cometra Interests were
not accounted for as a separate entity.  These statements do not include
depreciation, depletion and amortization, general and administrative, interest,
federal income tax expenses, or federal income tax credits allowed under
Section 29 of the Internal Revenue Code.  Accordingly, the accompanying
financial statements are not intended to be a complete presentation of the
results of operations of American Cometra Interests in conformity with
generally accepted accounting principles.

Revenue Recognition

         Revenues are recognized when oil and gas production is sold.  Direct
operating expenses are accrued when services are provided.  Netted against
marketing and gas plant operating activities is $9,758,300, $7,700,000 and
$11,478,400 for the years ended December 31, 1994, 1995 and 1996, respectively,
relating to costs associated with those activities.

Use of Estimates

         Management has made a number of estimates and assumptions relating to
the reporting of revenues and direct operating expenses to prepare these
financial statements in conformity with generally accepted accounting
principles.  Actual results could differ from those estimates.

(2)      SALES TO MAJOR CUSTOMERS:

         For the year ended December 31, 1994, 1995 and 1996 four purchasers
accounted for 33%, 54% and 74% of total revenues, respectively.

(3)      OIL AND GAS RESERVES INFORMATION (UNAUDITED):

         The estimates of the American Cometra Interests in proved oil and gas
reserves, which are located entirely in the United States, are based on
evaluations by an independent petroleum engineer, Netherland, Sewell &
Associates as of December 31, 1996.  These reserves were estimated in
accordance with guidelines established by the Securities and Exchange
Commission which require that reserve reports be prepared under existing
economic and operating conditions with no provision for price escalations
except by contractual arrangements.  Reserves as of December 31, 1994 and 1995
were derived from the December 31, 1996 reserve estimates after considering
historical production and drilling activities.

         Lomak's management emphasizes that reserve estimates are inherently
imprecise.  Accordingly, the estimates are expected to change as future
information becomes available.





                                       6
<PAGE>   7
                         THE AMERICAN COMETRA INTERESTS

                        NOTES TO STATEMENTS OF REVENUES

                  AND DIRECT OPERATING EXPENSES -- (CONTINUED)

(3)      OIL AND GAS RESERVES INFORMATION (UNAUDITED), CONTINUED:



         The following unaudited table sets forth the estimated proved oil and
gas reserve quantities of the American Cometra Interests at December 31, 1994,
1995 and 1996:



<TABLE>
<CAPTION>
                                                                        CRUDE OIL            NATURAL GAS
                                                                          (BBLS)                (MCFS)
                                                                        --------             ------------
                                                                                  (in thousands)
                                                                                 
                       <S>                                                <C>                   <C>
                       PROVED RESERVES:
                       Balance, December 31, 1993                       10,107                194,508
                          Production                                      (404)               (14,372)
                          Purchases                                       --                    1,294
                          Extensions, discoveries, renewals                505                 12,683
                          Sales                                           --                    --
                                                                         ------               -------
                       Balance, December 31, 1994                       10,208                194,113
                          Production                                      (626)               (15,212)
                          Purchases                                         93                  1,502
                          Extensions, discoveries, renewals                 24                  9,210
                          Sales                                            (14)                  --
                                                                         ------               -------
                       Balance, December 31, 1995                        9,685                189,613
                          Production                                      (803)               (16,124)
                          Extensions, discoveries, renewals                848                 28,516
                                                                         ------               -------
                       Balance, December 31, 1996                        9,730                202,005
                                                                         ======               =======
                       PROVED DEVELOPED RESERVES:
                          Balance, December 31, 1994                      5,062                 97,269
                                                                         ======                =======
                          Balance, December 31, 1995                      4,550                 93,398
                                                                         ======                =======
                          Balance, December 31, 1996                      4,595                103,749
                                                                         ======                =======
</TABLE>

         The "Standardized Measure of Discounted Future Net Cash Flows Relating
to Proved Oil and Gas Reserves" (Standardized Measure) is a disclosure
requirement under Statement of Financial Accounting Standards No. 69.  The
Standardized Measure does not purport to present the fair market value of
proved oil and gas reserves.  This would require consideration of expected
future economic and operating conditions, which are not taken into account in
calculating the Standardized Measure.



         Future net cash flows for the period presented were derived from the
December 31, 1996 reserve estimate after considering historical production and
drilling activities.  December 31, 1996 prices in the reserve estimates were
adjusted for fixed and determinable escalations to the estimated future
production less estimated future production costs based on period-end costs and
future development costs.  Future net cash inflows were discounted using a 10%
annual discount rate to arrive at the Standardized Measure.  Future income tax
estimates are not included, as the historical tax basis of the properties is
not relevant.





                                       7
<PAGE>   8
                         THE AMERICAN COMETRA INTERESTS

                        NOTES TO STATEMENTS OF REVENUES

                   AND DIRECT OPERATING EXPENSES--(CONTINUED)



(3)      OIL AND GAS RESERVES INFORMATION (UNAUDITED), CONTINUED:

         The standardized measure of discounted future net cash flows relating
to proved oil and gas properties is as follows:


<TABLE>
<CAPTION>
                                                                 AS OF              AS OF               AS OF

                                                              DECEMBER 31,        DECEMBER 31,         DECEMBER 31,
                                                                  1994               1995                 1996 
                                                               ----------          ----------          ----------  
                                                                 
                                                                                (in thousands)

                  <S>                                          <C>                 <C>                 <C>
                   Future cash inflows                         $1,207,887          $1,179,424          $1,156,858

                   Future costs:
                        Production                               (243,413)           (232,040)           (219,098)
                        Development                               (99,353)            (92,534)            (88,350)
                                                               ----------          ----------          ----------  
                   Undiscounted future net cash flows             865,121             854,850             849,410

                   10% discount factor                           (444,749)           (408,382)           (367,919)
                                                               ----------          ----------          ----------  
                   Standardized measure                        $  420,372          $  446,468          $  481,491
                                                               ==========          ==========          ==========     
</TABLE>

         Changes in standardized measure of discounted future net cash flows
from proved reserve quantities are as follows:





<TABLE>
<CAPTION>
                                                               YEAR  ENDED            YEAR ENDED          YEAR ENDED
                                                               DECEMBER 31,           DECEMBER 31,        DECEMBER 31,
                                                                  1994                  1995                  1996
                                                               ----------             ----------           ----------  
                                                                                (in thousands)

                 <S>                                          <C>                       <C>                 <C>
                 Standardized measure, beginning of           $395,914                  $420,372            $446,468
                 year
                 Purchases                                         627                     1,228                --
                 Extensions, discoveries, additions             17,730                    15,051              38,185
                 Production                                    (33,490)                  (32,141)            (47,809)
                 Sales                                            --                         (79)                --
                 Accretion of discount                          39,591                    42,037              44,647
                                                              --------                  --------            --------
                 Standardized measure, end of year            $420,372                  $446,468            $481,491
                                                              ========                  ========            ======== 


</TABLE>


                                       8
<PAGE>   9
               UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

         The accompanying unaudited pro forma combined financial statements
give effect to:(i) the purchase by the Company of certain oil and gas
properties from Bannon Energy Incorporated (the "Bannon Acquisition") in April
1996 for $37 million, (ii) the Cometra Acquisition, (iii) the private
placements of 600,000 shares of Common Stock and $55 million of 6% Convertible
Subordinated Debentures (collectively referred to as "Private Placements"), and
(iv) the application of the estimated net proceeds from the Private Placements.
The unaudited pro forma combined statement of income for the year ended
December 31, 1996 was prepared as if the Bannon Acquisition , the Cometra
Acquisition, and the Private Placements (collectively, the Transactions") had
occurred on January 1, 1996.  The accompanying unaudited pro forma combined
balance sheet of the Company as of December 31, 1996 has been prepared as if
the Transactions had occurred as of that date.  The historical information
provided in the statement of income for the year ended December 31, 1996
includes results for the properties acquired in the Bannon Acquisition for the
period January 1, 1996 until its purchase on March 31, 1996.

         This information is not necessarily indicative of future consolidated
results of operations and it should be read in conjunction with the separate
historical statements and related notes of the respective entities appearing
elsewhere in this Registration Statement or incorporated by reference herein.





                                       9
<PAGE>   10
                     LOMAK PETROLEUM, INC. AND SUBSIDIARIES
                     PRO FORMA COMBINED STATEMENT OF INCOME
                          YEAR ENDED DECEMBER 31, 1996
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                   Bannon         Cometra       Pro Forma           Pro Forma
                                    Lomak        Acquisition    Acquisition    Adjustments            Lomak
                                   -------       -----------    -----------    -----------          ---------
<S>                               <C>              <C>           <C>         <C>                    <C>
Revenues
  Oil and gas sales               $ 68,054         $ 1,703        $60,751    $                      $130,508
  Field services                    14,223             -              -              240    (a)       14,463
  Gas transportation and                               -              -
    marketing                        5,575             -            7,273         11,478    (a)       24,326
  Interest and other                 3,386             -              -                                3,386
                                   -------          ------        -------                            -------
                                    91,238           1,703         68,024                            172,683
                                   -------          ------        -------                            -------
Expenses
  Direct operating                  24,456             562         14,376                             39,394
  Field services                    10,443             -              -                               10,443
  Gas transportation and                               -              -
marketing
                                     1,674                                        11,478    (a)       13,152
  Exploration                        1,460             -              -                                1,460
  General and administrative         3,966             -              -            1,650    (a)        5,616
  Interest                           7,487             -              -           23,991    (b)       31,478
  Depletion, depreciation and

    amortization                    22,303             -              -           22,086    (c)       44,389
                                   -------          ------        -------                            -------
                                    71,789             562         14,376                            145,932
                                   -------          ------        -------                            -------
Income before income taxes          19,449           1,141         53,648                             26,751

Income taxes
  Current                             (729)            -              -              (74)   (d)         (803)
  Deferred                          (6,105)            -              -           (2,455)   (d)       (8,560)
                                   -------          ------        -------                            -------
Net Income                         $12,615          $1,141        $53,648                            $17,388
                                   =======          ======        =======                            =======
Net income applicable to

    common shares                  $10,161                                                           $15,084
                                   =======                                                           =======
Earnings per common share          $  0.69                                                           $  0.92
                                   =======                                                           =======
Weighted average shares

    outstanding                     14,812                                         1,583              16,395
                                   =======                                                           =======
</TABLE>
              See notes to pro forma combined financial statements





                                       10
<PAGE>   11
                             LOMAK PETROLEUM, INC.

               PRO FORMA COMBINED BALANCE SHEET DECEMBER 31, 1996

                             (DOLLARS IN THOUSANDS)

                                  (UNAUDITED)



<TABLE>
<CAPTION>
                                                                       PRO FORMA         PRO FORMA
                                                        LOMAK         ADJUSTMENTS         LOMAK
                                                       --------       -----------       ----------
<S>                                                    <C>             <C>             <C>
ASSETS
Current Assets
  Cash and equivalents                                 $  8,625        $                 $  8,625
  Accounts receivable                                    18,121                            18,121
  Marketable securities                                   7,658                             7,658
  Inventory and other                                       799                               799
                                                       --------                          --------
         Total current assets                            35,203                            35,203
                                                       --------                          --------
Oil and gas properties                                  282,519         325,000 (e)       607,519
         Accumulated depletion and amortization         (53,102)                          (53,102)
                                                       --------                          --------
                                                        229,417                           554,417
                                                       --------                          --------
Gas transportation and field service assets              21,139          60,000 (e)        81,139
         Accumulated depreciation                        (4,997)                           (4,997)
                                                       --------                          --------
                                                         16,142                            76,142
                                                       --------                          --------
Other assets                                              1,785                             1,785
                                                       --------                          --------
                                                       $282,547                          $667,547
                                                       ========                          ========
LIABILITIES AND STOCKHOLDERS'
  EQUITY
Current liabilities
  Accounts payable                                     $ 14,433        $                 $ 14,433
  Accrued liabilities                                     4,603                             4,603
  Accrued payroll and benefit costs                       3,245                             3,245
  Current portion of debt                                    26                                26
                                                       --------                          --------
         Total current liabilities                       22,307                            22,307
                                                       --------                          --------
                                                                                            
Revolving credit facility                                61,355          355,000 (e)      416,355
6% Convertible subordinated debentures                   55,000                            55,000
Other long-term debt                                        425                               425
                                                       --------                          --------
                                                        116,780                           471,780
                                                       --------                          --------
Deferred income taxes                                    25,931                            25,931

Stockholders' equity
  $2.03 Preferred Stock, $1 par value                     1,150                             1,150
  Common Stock, $.01 par value                              148              14 (e)           162
  Capital in excess of par value                        110,248          29,986 (e)       140,234
  Retained earnings                                       5,291                             5,291
  Unrealized gain on marketable securities                  692                               692
                                                       --------                          --------
         Total stockholders' equity                     117,529                           147,529
                                                       --------                          --------
                                                       $282,547                          $667,547
                                                       ========                          ========      
</TABLE>

              See notes to pro forma combined financial statements





                                       11
<PAGE>   12
                             LOMAK PETROLEUM, INC.
                NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE (1)  PRO FORMA ADJUSTMENTS FOR THE TRANSACTIONS FOR THE YEAR ENDED
          DECEMBER 31, 1996

    The accompanying unaudited pro forma consolidated statement of income for
the year ended December 31, 1996 has been prepared as if the Transactions had
occurred on January 1, 1996 and reflects the following adjustments:

(a)  To adjust historical field services revenues for income increases and cost
reclassifications and general and administrative expenses for cost increases
due to integration of the Bannon Acquisition and the Cometra Acquisition.

(b)  To adjust interest expense for the estimated amount that would have been
incurred on the incremental borrowings for the Bannon Acquisition and the
Cometra Acquisition and net proceeds received from the Private Placements.

(c)  To record depletion expense for the Bannon Acquisition and the Cometra
Acquisition at a rate of $0.87 per Mcfe, and to record depreciation expense on
the gas processing plant purchased in the Cometra Acquisition.

(d)  To adjust the provision for income taxes for the change in taxable income
resulting from the Bannon Acquisition, the Cometra Acquisition and the Private
Placements and the effect on deferred taxes recorded at January 1, 1996 as if
such transactions had taken place at that time.

NOTE (2)  PRO FORMA ADJUSTMENTS FOR THE COMETRA ACQUISITION, AS OF DECEMBER 31,
          1996

(e) To record the Cometra Acquisition.





                                       12


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