SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report
May 24, 1996
Rio Grande, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-8287 74-1973357
(Commission File Number) (I.R.S. Employer Identification Number)
10101 Reunion Place, Suite 210
San Antonio, Texas 78216-4156
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(210) 308-8000
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Item 2. Acquisition or Disposition of Assets
On March 11, 1996, Rio Grande Drilling Company ("Drilling"), a wholly
owned subsidiary of Rio Grande, Inc. (the "Company"), acquired a 3.125% working
interest in an existing producing federal oil and gas lease in South Timbalier
Area, Block 76, OCS-G-4460 ("Block 76") offshore Louisiana for an acquisition
price of $900,000.
This information was previously filed on Form 8-K dated March 26, 1996.
Item 7. Financial Statements and Exhibits
The following information was not included in the previously filed Form
8-K dated March 26, 1996.
(a) Financial Statements
Statements of Revenues and Direct Operating Expenses for the
Fortune Properties.
(b) Pro Forma Financial Information
Pro Forma Condensed Combined Statements of Operations
(c) Exhibits - None
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIO GRANDE, INC.
By: /s/
Guy Bob Buschman, President
Dated: May 24, 1996
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and shareholders
Rio Grande, Inc.:
We have audited the accompanying statements of revenues and direct operating
expenses of the oil and gas property interests acquired from Fortune Petroleum
Corporation and Pendragon Resources, L.L.C. (collectively, the "Fortune
Properties") for each of the years in the two-year period ended December 31,
1995. These statements of revenues and direct operating expenses are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these statements of revenues and direct operating expenses based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of revenues and direct operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statements of
revenues and direct operating expenses. We believe that our audits of the
statements of revenues and direct operating expenses provide a reasonable basis
for our opinion.
The accompanying statements were prepared as described in Note I for the purpose
of complying with certain rules and regulations of the Securities and Exchange
Commission ("SEC") for inclusion in certain SEC regulatory reports and filings
and are not intended to be a complete financial presentation.
In our opinion, the accompanying statements of revenues and direct operating
expenses present fairly the revenues and direct operating expenses of the
Fortune Properties for each of the years in the two-year period ended December
31, 1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
May 15, 1996
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THE FORTUNE PROPERTIES
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
Year Ended December 31,
--------------------------
1995 1994
-------- --------
Revenues $510,769 $399,854
Direct operating expenses 38,226 175,008
-------- --------
Revenues in excess of
direct operating expenses $472,543 $224,846
======== ========
See accompanying notes to the Statements of Revenues and Direct Operating
Expenses.
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THE FORTUNE PROPERTIES
NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying statements present the revenues and direct operating
expenses of the working interests in certain oil and gas properties
(the Fortune Properties) purchased by Rio Grande Drilling Company, a
wholly-owned subsidiary of Rio Grande, Inc. (the Company) from Fortune
Petroleum Corporation and Pendragon Resources, L.L.C. (collectively,
"Fortune") during March 1996 for $900,000. Fortune acquired its
property interests from Petrofina S.A. (Fina) during December 1995. The
Fortune Properties are located in federal waters in the Gulf of Mexico.
The accompanying statements of revenues and direct operating expenses
were derived from the historical accounting records of the Fortune
Properties. Direct operating expenses include payroll, lease and well
repairs, maintenance and other direct operating expenses.
Omitted Historical Financial Information
Full historical financial statements, including exploration expense,
general and administrative expenses, interest expense and income tax
expense, have not been presented because they have not historically
been allocated at this level. Historical depletion expense has not been
included in such statements as the Company will adjust the basis in its
purchase price allocation and the historical depletion will no longer
be relevant.
Accrual Basis Statements
Memorandum adjustments have been made to the financial information
derived from the predecessor owner in order to present the accompanying
statements of revenues and direct operating expenses in accordance with
generally accepted accounting principles.
Use of Estimates
Management of the Company 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.
Related Party Transactions
All of the production from the Fortune Properties was sold to a
subsidiary of Fina during 1994 and 1995. Gas production was sold for
average prices of $1.69 and $2. 1 0 per Mcf during 1995 and 1994,
respectively. Oil production was sold for average prices of $15.23 and
$14.15 during 1995 and 1994, respectively.
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2. Gas Balancing Positions
The Fortune Properties have an immaterial imbalance position as of
December 31, 1995. The entitlements method is used; therefore,
production imbalances are recorded at the sales price in effect at the
time of production. Substantially all of the imbalance position is
anticipated to be settled with production in future periods.
3. Supplemental Oil and Gas Reserve Information (Unaudited)
Total proved and proved developed oil and gas reserves of the Fortune
Properties at December 31, 1995 have been estimated based on reserve
estimates prepared by Huddleston & Co., Inc. as of January 1, 1996. No
comparable estimates were available for prior periods. Therefore,
reserves for 1995 and 1994 have been calculated by adjusting the
January 1, 1996 amounts for prior period producing activities and,
consequently, no revisions of previous estimates have been reflected.
All reserve estimates are based on economic and operating conditions
existing at January 1, 1996. The future net cash flows from production
of these proved reserve quantities were computed by applying current
prices of oil and gas (with consideration of price changes only to the
extent provided by contractual arrangements) as of January 1, 1996 to
estimated future production of proved oil and gas reserves less the
estimated future expenditures (based on current costs) as of January 1,
1996, to be incurred in developing and producing the proved reserves.
Income taxes were calculated at statutory rates without consideration
of any remaining historical tax basis of the Fortune Properties. The
Fortune Properties are located in federal waters in the Gulf of Mexico.
Exploration and development costs incurred during 1994 and 1995 are not
available.
Estimated Quantities of Oil and Gas Reserves:
Year Ended December 31,
----------------------------------------
1995 1994
------------------- ----------------
Oil Gas Oil Gas
(Mbbl) (Mmcf) (Mbbl) (Mmcf)
-------- ------- ------ ------
Proved reserves:
Beginning of year 54 897 63 1,030
Production (12) (194) (9) (133)
------ ------ ------ ------
End of year 42 703 54 897
====== ====== ====== ======
Proved developed reserves:
Beginning of year
End of year 54 897 63 1,030
------ ------ ------ ------
42 703 54 897
====== ====== ====== ======
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Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil
and Gas Reserves (in 000s):
As of December 31,
-------------------
1995 1994
------- --------
Future cash inflow $ 2,335 $ 2,846
Future production costs (366) (404)
Future development costs (50) (50)
------- -------
Future net inflows before income taxes 1,919 2,392
Income taxes (672) (837)
------- -------
Future net cash flows 1,247 1,555
10% discount factor (377) (469)
------- -------
Standardized measure of discounted future net cash
flows $ 870 $ 1,086
======= =======
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves (in 000s):
As of December 31,
----------------------
1995 1994
------- -------
Standardized measure, beginning of year $ 1,086 $ 1,187
Sales, net of production costs (473) (225)
Net change in income taxes 115 55
Changes in timing and other 34 (50)
Accretion of discount 108 119
------- -------
Standardized measure, end of year $ 870 $ 1,086
======= =======
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RIO GRANDE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
The following pro forma combined condensed statements of operations
for the year ended January 31, 1996 give effect to the acquisition of oil and
gas properties purchased from Fortune Petroleum Corporation in March 1996. The
pro forma information for revenues and direct operating expenses is based on
historical information of the oil and gas properties acquired as if such
acquisitions had occurred at the beginning of the respective periods. These pro
forma financial statements may not be indicative of the results that actually
would have occurred had the transactions taken place on the dates indicated.
Fiscal Year Ended January 31, 1996
Historical
-------------------
Pro Forma Pro Forma
Rio Grande Fortune Adjustments Balances
Revenues
Oil and gas sales $ 3,632,171 510,769 -- 4,142,940
--------- ------- -------- ----------
Costs and Expenses:
Operating expenses 2,278,276 38,226 -- 2,316,502
Depreciation, depletion and
amortization 1,171,042 -- 250,680(a) 1,421,722
Provision for abandonment
expense 180,000 -- -- 180,000
General and administrative 1,336,309 -- -- 1,336,309
--------- ------- -------- ---------
Total costs and expenses 4,965,627 38,226 250,680 5,254,533
--------- ------- -------- ----------
Earnings (loss) from operations (1,333,456) 472,543 250,680) (1,111,593)
--------- ------- -------- ----------
Other income (expense):
Interest expense (318,222) -- (83,250)(b) (401,472)
Interest income 59,629 -- -- 59,629
Gain on sale of assets 1,258,688 -- -- 1,258,688
Minority interest of limited
partners (128,794) -- -- (128,794)
--------- ------- ------- ----------
Total other income (expense) 871,301 -- (83,250) 788,051
--------- ------- -------- ----------
Earnings (loss) before income
taxes (462,155) 472,543 (333,930) (323,542)
Income taxes 2,924 -- -- 2,924
--------- ------- -------- ----------
Net earnings (loss) $ (465,079) 472,543 (333,930) (326,466)
============ ======== ======== ==========
Net earnings (loss) per common
and common equivalent share ($ 0.09) ($ 0.06)
Weighted average common and
common equivalent shares
outstanding 5,231,177 5,231,177
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NOTES TO THE PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(a) To provide for depreciation, depletion and amortization of the oil and
gas properties and other assets acquired based on their production
during the respective periods after giving effect to the purchase
price.
(b) To provide for the additional interest expense for the $900,000 bank
debt incurred in the acquisition.
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