SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 12, 1999
FORTUNE NATURAL RESOURCES CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 1-12334 95-4114732
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
515 W. Greens Road, Suite 720, Houston, Texas 77067
--------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 872-1170
Registrant's telecopier number, including area code: (281) 872-1213
N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
Fortune's press release made March 12, 1999 to report year end and fourth
quarter 1998 results follows.
Financial results for full year 1998
------------------------------------
Fortune reported a net loss for 1998 of $3,275,000, or $0.27 per share, a
significant improvement (45%) compared to the 1997 net loss of $5,958,000, or
$0.49 per share. The lower 1998 loss primarily resulted from a reduction in
Fortune's non-cash impairment to oil and gas properties expense of $1 million
incurred in 1998 versus $3.7 million incurred in 1997.
Oil and gas revenues for the year ended December 31, 1998 decreased 51% to
$1,881,000, compared to $3,851,000 for 1997. Fortune sold its interest in East
Bayou Sorrel on March 31, 1998 for approximately $4.7 million. This sale,
together with the effect of decreases in product prices discussed below, were
the primary causes for the reduction in revenues between 1997 and 1998. East
Bayou Sorrel accounted for $1,241,000 of 1997 revenues and $231,000 of 1998
revenues. Notwithstanding the decrease in revenues and cash flow, management
believes that the sale of East Bayou Sorrel was very positive for Fortune. At
the time of the sale, Fortune's reserve report reflected approximately $1.9
million of discounted proved reserves value for East Bayou Sorrel. 1997 net cash
flow from the property was approximately $1.0 million. Substantially all of this
1997 cash flow was reinvested in the property to drill the Schwing #3 which was
a dry hole. The $4.7 million sales price represented 250% of the proved reserve
value and 460% of the 1997 net cash flow for the property. East Bayou Sorrel was
primarily an oil property and oil prices declined significantly in 1998 after
the sale. The cash from the sale enabled Fortune to repay substantially all of
its bank debt and to conduct an active exploration program in 1998.
As mentioned above, lower oil and gas prices in 1998 also contributed to the
lower revenues. Oil prices declined 31% while gas prices declined 18% in 1998
versus 1997. Partially offsetting the decreased oil and gas revenues were
decreases in production and operating expense of 46%; depreciation, depletion
and amortization of 38%; and general and administrative expense of 21% for 1998
versus 1997.
Fourth quarter 1998 vs. 1997
----------------------------
The Company incurred a net loss for the fourth quarter of $646,000, or $0.05
per share, compared to a net loss of $874,000, or $0.07 per share, for the
fourth quarter of 1997.
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Primarily as a result of lower oil and gas prices and the sale of East Bayou
Sorrel, oil and gas revenues for the fourth quarter of 1998 decreased 62% to
$370,000, compared to $981,000 reported for the fourth quarter of 1997. Oil
prices declined 39% while gas prices declined 32% for the fourth quarter of 1998
versus 1997. The sale of East Bayou Sorrel field was the primary contributor to
the decrease in oil production of 75% and gas production of 17%, for the fourth
quarter of 1998 versus 1997. Partially offsetting the decreased oil and gas
revenues were decreases in production and operating expense of 32%;
depreciation, depletion and amortization of 60%; and general and administrative
expense of 16% for the fourth quarter of 1998 versus 1997. The Company incurred
a small non-cash impairment to oil and gas properties in the fourth quarter of
1998 of $100,00.
President's Remarks
-------------------
Fortune's President and CEO, Tyrone J. Fairbanks, announced, "We were
fortunate to have positioned the Company, through several strategic financial
maneuvers in early 1998, so that it could continue an aggressive exploration
program and to weather the current energy industry crisis. At year end 1998, our
short-term debt was only $10,000 and our working capital was comparable to year
end 1997. Furthermore, recent reductions announced in general and administrative
expense and geologic and geophysical expense for 1999 of just under $1 million
will further reduce overhead below the already significant reductions reflected
in 1998. Finally, with the great majority of all up-front capital expenditures
for our 3D seismic and prospect generations already paid, Fortune believes it is
better positioned not just to endure the present industry environment, but to
benefit from it."
FORTUNE NATURAL RESOURCES CORPORATION is an independent oil and gas
exploration and production company with its principal properties located onshore
and offshore Louisiana and Texas. Certain statements in this news release
regarding future expectations and plans may be regarded as "forward looking
statements" within the meaning of the Securities Exchange Act of 1934. They are
subject to various risks, such as operating hazards, drilling risks, and other
uncertainties inherent in the business of exploring for, developing and
producing oil and gas which may be beyond Fortune's control. For a discussion of
the contingencies and uncertainties affecting future events and forward-looking
statements, see Fortune's latest Report on Form 10-K, as well as other filings
with the Securities and Exchange Commission. There can be no assurance that the
Company will be successful in meeting its expectations.
************
Company Contact: J. Michael Urban
Vice President and CFO
(281) 872-1170
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<TABLE>
<CAPTION>
FORTUNE NATURAL RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share figures)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Sales of oil and gas, net of royalties $ 370 $ 981 $ 1,881 $ 3,851
Other income 24 17 142 154
-------- -------- -------- --------
394 998 2,023 4,005
-------- -------- -------- --------
COSTS AND EXPENSES
Production and operating 118 154 595 1,094
Provision for depletion,
depreciation and amortization 245 610 1,365 2,219
General and administrative 406 484 1,547 1,965
Debt conversion expense - - - 316
Stock offering cost - - - 323
Interest 171 174 831 396
Impairment to oil and gas properties 100 450 960 3,650
-------- -------- -------- --------
1,040 1,872 5,298 9,963
-------- -------- -------- --------
Loss before provision for income taxes (646) (874) (3,275) (5,958)
Provision for income taxes - - - -
-------- -------- -------- --------
Net loss $ (646) $ (874) $ (3,275) $ (5,958)
======== ======== ======== ========
Weighted average number of common
shares outstanding (thousands) 12,135 12,120 12,132 12,086
-------- -------- -------- --------
Net loss per common share $ (0.05) $ (0.07) $ (0.27) $ (0.49)
======== ======== ======== ========
Net cash provided by (used in) -
Operating activities $ (292) $ 563 $ (616) $ 1,379
======== ======== ======== ========
Investing activities $ (641) $ (1,532) $ 1,039 $ (2,477)
======== ======== ======== ========
Financing activities $ - $ 1,397 $ (638) $ 591
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF BALANCE SHEETS
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Total current assets $ 1,887 $ 2,174
Property and equipment, net 6,456 9,802
Total assets 8,492 12,626
Current liabilities 563 798
Long-term debt 3,225 3,775
Total net stockholders' equity 4,704 8,053
</TABLE>
<TABLE>
<CAPTION>
PRODUCTION DATA
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Net production:
Oil (Bbl) 6,000 24,000 42,000 87,000
Gas (Mcf) 147,000 178,000 609,000 821,000
Average sale prices for period:
Oil (Bbl) $11.29 $18.61 $13.08 $19.04
Gas (Mcf) 2.07 3.05 2.19 2.66
</TABLE>
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
None.
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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 thereunto duly authorized.
FORTUNE NATURAL RESOURCES CORPORATION
By: /s/ J. Michael Urban
-----------------------------------------
J. Michael Urban
Vice President and Chief Financial Officer
Date: March 12, 1999
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