FORM 8K/A-1
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET NORTHWEST
WASHINGTON, DC 02549
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13, or 15 (d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 31, 1998
ASPEN EXPLORATION CORPORATION
-------------------------------------------------
(Exact name of Registrant as specified in charter)
AMENDMENT NO. 1
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K as set
forth in the pages attached hereto.
ITEM 7.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASPEN EXPLORATION CORPORATION
(Registrant)
By /s/ R. V. Bailey
-----------------------------
R. V. Bailey, President
Date: September 28, 1998
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GORDON, HUGHES & BANKS, LLP
6851 South Holly Circle, Suite 125
Englewood, Colorado 80112
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Aspen Exploration Corporation and Subsidiaries
Denver, Colorado
We have audited the accompanying statement of revenue and direct expenses
of the assets acquired from D. E. Craggs, Inc. for the year ended June 30, 1998.
This financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit 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 statement is 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.
In our opinion, the financial statement referred to above present fairly,
in all material respects, the results of operations for the assets acquired from
D. E. Craggs, Inc. for the year ended June 30, 1998, in conformity with
generally accepted accounting principles.
GORDON, HUGHES & BANKS, LLP
Englewood, Colorado
August 31, 1998
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ASPEN EXPLORATION CORPORATION
STATEMENT OF REVENUE AND DIRECT EXPENSE
OF THE ASSETS ACQUIRED FROM D. E. CRAGGS, INC.
FOR THE YEAR ENDED JUNE 30, 1998
Oil & Gas Revenue $44,690
-------
Lease Operating Expense 11,811
-------
11,811
-------
Excess of Revenue over
direct Expenses $32,879
=======
See Notes to Financial Statements
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ASPEN EXPLORATION CORPORATION
NOTES TO STATEMENT OF REVENUE AND DIRECT EXPENSES
OF THE ASSETS ACQUIRED FROM D. E. CRAGGS, INC.
Note 1 - Summary of significant accounting policies
------------------------------------------
On July 16, 1998, Aspen Exploration Corporation acquired a net 21% working
interest (16.17% net revenue interest) in two natural gas units, the Johnson and
Gay Units, in addition to a 5.00% royalty interest in the Gay Unit, located in
Tehama and Glenn Counties, California. Aspen acquired a 100% working interest in
the two properties from D. E. Craggs, Inc., an unaffiliated third party for
$275,000 in cash and 275,000 shares of Aspen's restricted common stock valued at
$1.00 per share. Simultaneously with the acquisition Aspen sold a 79% working
interest in the two prospects to certain unaffiliated and three affiliated
purchasers for a total price of $477,950 ($6,050 per one percent working
interest, as compared to Aspen's purchase price of $5,500 per one percent
working interest). The affiliated purchasers are Aspen's president, R.V. Bailey,
vice president, Robert Cohan, and consulting accountant, Ray Davis, who acquired
working interests of 3%, 2%, and 5%, respectively.
The effective date of the acquisition and disposition was June 30, 1998.
Pursuant to the agreement with Craggs, Aspen paid Craggs 25% of the cash and
stock at the closing ($68,750 and 68,750 shares) and is obligated to pay an
additional 25% (plus interest on the cash from the date of closing at the daily
rate of 0.015%) in January 1999, 2000, and 2001. The affiliates who purchased
the working interests from Aspen paid their entire purchase price prior to the
closing.
The Johnson Unit in Tehama County, California, consists of 660 acres
including 3 wells producing natural gas from the Tehama, Kione, and Forbes
formations at the rate of 250 thousand cubic feet per day (Mcf/D). Based on an
engineering estimate prepared by Cecil Engineering, Inc., the net reserves
attributable to Aspen's remaining 21% interest in the Johnson Unit are 161,425
Mcf as of June 30, 1998.
The Gay Unit in Glenn County, California, consists of 615 acres including 3
wells producing natural gas from the Kione and Forbes formations at the rate of
70 Mcf/D. Based on an engineering estimate prepared by Cecil Engineering, Inc.,
the net reserves attributable to Aspen's remaining 21% interest in the Gay Unit
are 58,827 Mcf as of June 30, 1998.
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ASPEN EXPLORATION CORPORATION
NOTES TO STATEMENT OF REVENUE AND DIRECT EXPENSES
OF THE ASSETS ACQUIRED FROM D. E. CRAGGS, INC.
(CONTINUED)
Prior to the closing, Aspen structured the terms of the acquisition with
the other working interest participants. At the closing, Aspen delivered an
aggregate 79% working interest (60.83% net revenue interest) to the other
working interest participants and retained a 21% working interest (16.17% net
revenue interest in the Johnson and Gay Units, in addition to a 5.00% royalty
interest in the Gay Unit) itself. Prior to the reassignment by Aspen to the
other working interest owners, Aspen assigned a royalty interest to the Aspen
employees pursuant to the terms of Aspen's Amended Royalty and Working Interest
Plan.
Aspen believes several of the wells located on the Johnson and Gay Units
may have gas potential in zones behind-pipe. These zones will be perforated in
the future and may lead to increased gas production. Aspen also plans to shoot a
3-D seismic survey over the properties which could identify additional drilling
locations.
Note 2 - Major customers
----------------
Gas revenues were derived from one purchaser.
Note 3 - Unaudited oil and gas reserve quantities
----------------------------------------
The following unaudited reserve estimates presented as of June 30, 1998 were
prepared by independent petroleum consultants. There are many uncertainties
inherent in estimating proved reserve quantities and in projecting future
production rates and the timing of development expenditures. In addition,
reserve estimates of new discoveries that have little production history are
more imprecise than those of properties with more production history.
Accordingly, these estimates are expected to change as future information
becomes available.
Proved oil and gas reserves are the estimated quantities of crude oil,
condensate, natural gas and natural gas liquids which geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions.
Proved developed oil and gas reserves are those reserves expected to be
recovered through existing wells with existing equipment and operating methods.
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ASPEN EXPLORATION CORPORATION
NOTES TO STATEMENT OF REVENUE AND DIRECT EXPENSES
OF THE ASSETS ACQUIRED FROM D. E. CRAGGS, INC.
(CONTINUED)
Unaudited net quantities of proved and proved developed reserves of crude oil
(including condensate) and natural gas (all located within the United States)
are as follows:
Changes in proved reserves (MCF)
-------------------------- -----------
(in thousands)
Estimated quantity, June 30, 1997 239
Revisions of previous estimates
Acquisitions
Production (19)
----
Estimated quantity, June 30, 1998 220
====
Proved reserves Developed Undeveloped Total
at year end --------- ----------- -----
- --------------- (in thousands)
Gas (MCF)
June 30, 1997 187 52 239
June 30, 1998 168 52 220
Unaudited standardized measure
- ------------------------------
The following table presents a standardized measure of the discounted future net
cash flows attributable to the Company's proved oil and gas reserves. Future
cash inflows were computed by applying year-end prices of oil and gas to the
estimated future production of proved oil and gas reserves. The future
production and development costs represent the estimated future expenditures
(based on current costs) to be incurred in developing and producing the proved
reserves, assuming continuation of existing economic conditions. Future income
tax expenses were computed by applying statutory income tax rates to the
difference between pre-tax net cash flows relating to the Company's proved oil
and gas reserves and the tax basis of proved oil and gas properties and
available net operating loss carryforwards. Discounting the future net cash
inflows at 10% is a method to measure the impact of the time value of money.
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ASPEN EXPLORATION CORPORATION
NOTES TO STATEMENT OF REVENUE AND DIRECT EXPENSES
OF THE ASSETS ACQUIRED FROM D. E. CRAGGS, INC.
(CONTINUED)
Year Ended
June 30, 1998
-------------
(in thousands)
Future cash inflows $454
Future production and
development costs (174)
Future income tax
expense (1) --
Future net
cash flows 280
10% annual discount
for estimated timing
of cash flows (103)
----
Standardized measure
of discounted future
net cash flows $177
====
(1) Net operating loss carryforward exceeds future net cash flows.
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ASPEN EXPLORATION CORPORATION
NOTES TO STATEMENT OF REVENUE AND DIRECT EXPENSES
OF THE ASSETS ACQUIRED FROM D. E. CRAGGS, INC.
(CONTINUED)
The following presents the principal sources of the changes in the standardized
measure of discounted future net cash flows:
Year Ended
June 30, 1998
(in thousands)
Standardized measure of
discounted future net
cash flows, beginning
of year $ 202
------
Sales and transfers of
oil and gas produced,
net of production
costs (33)
Net changes in prices
and production costs
and other (10)
Other -
Accretion of discount 18
------
(25)
------
Standardized measure
of discounted future
cash flows, end of
year $ 177
======
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Condensed Pro Forma Combined
----------------------------
Statement of Operations
-----------------------
The following unaudited condensed pro forma combined balance sheet and condensed
pro forma combined statement of operations for the year ended June 30, 1998 is
presented to show the effects of the acquisition of certain oil and gas
producing properties (the "Properties") by Aspen Exploration Company ("Aspen")
as if the acquisition had taken place on July 1, 1997. The acquisition, which
occurred on July 16, 1998, is accounted for as a purchase. The financial
information for Aspen for the year ended June 30, 1998 is derived from its Form
10-KSB as filed for that period and should be read in conjunction with this
statement. Additionally, Form 8-K, filed by the Company of July 31, 1998 and
which describes the acquisition of the properties in detail, should also be read
in conjunction with this statement.
The pro forma results of operations are not necessarily indicative of the
results of operations that would actually have occurred if the transaction had
been effective as of July 1, 1998.
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<TABLE>
<CAPTION>
ASPEN EXPLORATION CORPORATION
CONDENSED PRO FORMA COMBINED BALANCE SHEET
YEAR ENDED JUNE 30, 1998
(UNAUDITED)
HISTORICAL ADJUSTMENTS PRO FORMA
ASPEN DEBIT CREDIT COMBINED
----- ----- ------ --------
ASSETS
- ------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS $ 568,035 (2) $ 477,950 (1) $ 68,750 $ 977,235
INVESTMENT IN OIL AND GAS
PROPERTIES AT COST, NET OF
DEPLETION AND VALUATION
ALLOWANCE 675,619 (1) 550,000 (2) 477,950 747,669
PROPERTY AND EQUIPMENT, AT
COST, NET OF DEPRECIATION 50,578 50,578
UNDEVELOPED MINING PROPERTIES 27,826 27,826
OTHER ASSETS 262,714 262,714
----------- ----------- ----------- -----------
$ 1,584,772 $ 2,066,022
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES 618,769 618,769
LONG TERM NOTES PAYABLE 280,360 (1) 206,250 486,610
STOCKHOLDERS' EQUITY 24,581 (1) 1,375 25,956
CAPITAL IN EXCESS OF PAR VALUE 5,677,977 (1) 273,625 5,951,602
ACCUMULATED DEFICIT (5,016,915) (5,016,915)
----------- ----------- ----------- -----------
$ 1,584,772 $ 1,027,950 $ 1,027,950 $ 2,066,022
=========== =========== =========== ===========
SEE NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
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</TABLE>
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<TABLE>
<CAPTION>
ASPEN EXPLORATION CORPORATION
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1998
(UNAUDITED)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
ASPEN PROPERTIES DEBIT CREDIT COMBINED
----- ---------- ----- ------ --------
REVENUES
<S> <C> <C> <C> <C> <C>
OIL & GAS $ 739,426 $ 44,690 $ 784,116
FEES AND EQUIPMENT RENTAL 124,162 124,162
INTEREST 19,523 19,523
OTHER INCOME 27,713 27,713
--------- --------- ---------
910,824 44,690 955,514
--------- --------- ---------
COSTS & EXPENSES
OIL & GAS PRODUCTION 75,775 11,811 87,586
DEPRECIATION, DEPLETION & AMORTIZATION 119,653 (3) 5,640 125,293
SELLING, GENERAL & ADMINISTRATIVE 575,955 (4) 2,000 577,955
INTEREST EXPENSE 28,903 28,903
--------- --------- -------- ------- ---------
800,286 11,811 7,640 0 819,737
--------- --------- -------- ------- ---------
NET INCOME $ 110,538 $ 32,879 $(7,640) $ 0 $135,777
========= ========= ======== ======= ========
BASIC EARNINGS PER COMMON SHARE $ .02 N/A $ .03
========= ========= =========
DILUTED EARNINGS PER COMMON SHARE $ .02 N/A $ .03
========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,687,342 4,687,342
========= =========
SEE NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
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</TABLE>
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NOTES TO CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(A) Pro forma adjustments:
(1) To record the purchase of the Johnson and Gay gas units from D.
E. Craggs, Inc. on July 16, 1998 for $275,000 in cash and 275,000
shares of the Company's common stock.
(2) To record the sale of 79% of the Johnson and Gay units third
parties for $477,950 in cash.
(3) To record depletion and amortization on the properties acquired,
using the full cost method. Depletion and amortization of the
properties valued at $72,050 is computed using a
unit-of-production method based on proved reserves as determined
by independent engineers.
(4) Estimated accounting and legal costs associated with SEC filings
regarding the acquisition.
(B) Pro forma income per share:
The basic earnings per common share is based on the weighted average number
of common shares outstanding for the period presented.
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Item 7. Financial Statements
(i) Financial statements for assets acquired are provided herein by this
Form 8K\A-1 Amendment to Form 8-K Current Report dated and filed on July 31,
1998, as allowed by Item 7(a) (4).
(ii) Exhibits
(1) Incorporated by reference on Form 10-K dated June 30, 1998 (filed
on September 28, 1998).
(2) Incorporated by reference to Acquisition Agreement relating to
the D. E. Craggs, Inc. properties dated June 30, 1998 (filed on
July 31, 1998).
(3) Incorporated by reference on Form 8-K dated and filed on July 31,
1998.
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