UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 15, 1998
Commission file number 0-8609
Future Petroleum Corporation
(Exact name of small business issuer as specified in charter)
Utah 87-0239185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2351 West Northwest Highway, Suite 2130
Dallas, Texas 75220
(Address of principal executive offices) (Zip Code)
(214)350-7602
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
FUTURE PETROLEUM, INC.
INDEX TO FINANCIAL STATEMENTS
CROSS CREEK PROPERTIES:
Report of Independent Accountants F-2
Statement of Revenues and Direct Operating Expenses of the
Properties F-3
Notes to the Statement of Revenues and Direct Operating Expenses
of the Properties F-4
SOUTH TEXAS PROPERTIES:
Independent Auditor's Report F-8
Historical Summaries of Revenues and Direct Operating Expenses F-9
Notes to Historical Summaries and Direct Operating Expenses F-10
UNAUDITED PRO FORMA FINANCIAL INFORMATION F-13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Of Future Petroleum Corporation
We have audited the accompanying statement of revenues and direct operating
expenses of Chevron U.S.A. Inc.'s working interest in the Cross Creek Field (the
"Properties") acquired from Bargo Energy Resources, Ltd. by Future Petroleum
Corporation (the "Company") for the year ended December 31, 1997 and for the
nine months ended September 30, 1998. This statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
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 statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement 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 statement of revenues
and direct operating expenses. We believe that our audit provides a reasonable
basis for our opinion.
The accompanying statement of revenues and direct operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission (for inclusion in the Form 8-K/A of Future
Petroleum Corporation) as described in Note 1 and is not intended to be a
complete presentation of the Properties' revenues and expenses.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of the Properties described in Note 1 for the year ended
December 31, 1997 and for the nine months ended September 30, 1998, in
conformity with generally accepted accounting principles.
/S/ PricewaterhouseCooper LLP
PricewaterhouseCoopers LLP
San Francisco, California
December 11, 1998
F-2
STATEMENT OF REVENUES AND DIRECT OPERATING
EXPENSES OF THE PROPERTIES
<TABLE>
Year Ended Nine Months Ended
December 31, 1997 September 30, 1998
_________________ __________________
<S> <C> <C>
Oil, and gas revenues $ 7,243,442 $ 2,802,194
Direct operating expenses 928,933 689,357
----------------- ------------------
Revenues in excess of direct
operating expenses $ 6,314,509 $ 2,112,837
================= ==================
</TABLE>
See accompanying notes.
F-3
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING
EXPENSES OF THE PROPERTIES
1. Basis of Presentation
On October 15, 1998 Future Petroleum Inc., (the "Company") acquired a 100%
working interest in the Cross Creek Field located in Harris and Montgomery
Counties, Texas. Bargo Energy Resources, Ltd., a Texas limited partnership and a
principal shareholder of the Company, ("Bargo") agreed on August 3, 1998 to
acquire Chevron U.S.A. Inc.'s working interest in the Cross Creek Field (the
"Properties") for approximately $6.1 million. This acquisition was completed on
October 15, 1998, effective October 1, 1998. On the same date, the Company
acquired the Properties from Bargo, effective October 1, 1998.
The accompanying statement of revenues and direct operating expenses (the
"Statement") relates only to the working interest in the producing oil and gas
properties acquired and may not be representative of future operations. The
Statement includes revenues from oil and gas sales and direct operating expenses
for each of the periods presented. The Statement does not include federal and
state income taxes, interest, depletion, depreciation and amortization or
general and administrative expenses because such amounts would not
be indicative of those expenses which would be incurred by the Company.
Presentation of complete historical financial statements for the year ended
December 31, 1997 and the nine months ended September 30, 1998 is not
practicable because the Properties were not accounted for as separate entities;
therefore, such statements are not available.
Revenues in the accompanying Statement are recognized on the entitlement method.
The accompanying Statement has been prepared on the accrual basis in accordance
with generally accepted accounting principles. Preparation of the Statement in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the Statement
and accompanying notes. Actual results could differ from those estimates.
2. Commitments and Contingencies
Given the nature of the Properties acquired, the Company is subject to loss
contingencies, if any, pursuant to existing or expected environmental laws,
regulations, and leases covering the acquired Properties. There are no matters
which, in the opinion of management, will have a material adverse effect on the
revenues and direct operating expenses of the Properties. Liability for events
occurring prior to the effective date of the sale between Bargo and Chevron
U.S.A. Inc. shall be retained by Chevron U.S.A. Inc., and Chevron U.S.A. Inc.
has indemnified Bargo for any costs incurred by it in conjunction
with said retained liability.
F-4
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING
EXPENSES OF THE PROPERTIES
Prior to January 1, 1997, Chevron filed applications with the state of Texas to
classify certain wells on the Properties as "High Cost Gas Wells", which would
exempt such wells from severance taxes. In 1997 and 1998, refunds of $586,357
and $16,670, respectively, were received for prior severance taxes paid from the
date of application filing to approval date by the state of Texas. Such refunds
were recorded as a reduction of direct operating expenses in the period they
were received. Of the $586,357 refunded in 1997, $393,968 related to 1995 and
1996 production. Of the $16,670 refunded in 1998, $11,492 related to production
for the year ended December 31, 1997.
3. Related Party Transactions
The Properties were not operated as separate entities for the periods presented
in the accompanying Statement, but were included in the operations of Chevron
U.S.A. Inc. During the year ended December 31, 1997 and the nine months ended
September 30, 1998, approximately 91% of revenues from production were
transferred to Dynegy, an equity affiliate (the "Affiliate") of Chevron
Corporation, the parent of Chevron U.S.A. Inc., at approximate market prices.
4. Supplemental Information on Oil and Gas Reserves (UNAUDITED)
Proved oil and gas reserves consist of those estimated quantities of crude
oil, natural gas, and natural gas liquids that 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 reserves that can be expected to be
recovered through existing wells with existing equipment and operating
methods.
The following estimates of proved reserves have been made by the independent
petroleum engineering firm of T.J. Smith & Company, Inc. The estimated net
interest in proved reserves are based upon subjective engineering judgments
and may be affected by the limitations inherent in such estimation. The
Company emphasizes that reserve estimates for proved undeveloped reserves and
for proved developed non-producing reserves are more imprecise than reserve
estimates for proved producing reserves. A significant portion
(approximately 20% of the equivalent barrels) of the following reserves are
attributable to proved undeveloped reserves and approximately 22% of the
equivalent barrels are attributable to proved developed non-producing
reserves. The process of estimating reserves is subject to continual
revision as additional information becomes available as a result of drilling,
testing, reservoir studies and production history. There can be no assurance
that such estimates will not be materially revised in subsequent periods.
F-5
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING
EXPENSES OF THE PROPERTIES
The changes in proved reserves of the properties acquired in October 1998 for
the nine months ended September 30, 1998 and the year ended December 31, 1997
are set forth below.
<TABLE>
Oil and Natural Gas
Natural Gas (Thousand
Liquids Cubic Feet)
(Barrels)
_____________ ______________
<S> <C> <C>
Reserves at January 1, 1997 248,000 16,513,000
Production (39,000) (2,351,000)
------------- --------------
Reserves at December 31, 1997 209,000 14,162,000
Production (15,000) (1,160,000)
------------- --------------
Reserves at September 30, 1998 194,000 13,002,000
------------- --------------
Proved developed reserves:
January 1, 1997 87,000 11,475,000
December 31, 1997 48,000 9,124,000
September 30, 1998 33,000 7,964,000
============= ===============
</TABLE>
The standardized measure of discounted estimated future net cash flows
related to proved oil and gas reserves at September 30, 1998 and December 31,
1997 is as follows:
<TABLE>
September December
30, 31,
1998 1997
_____________ ______________
<S> <C> <C>
Future cash inflows $ 30,462,000 $ 52,391,000
Future production and development costs (13,443,000) (16,045,000)
------------- --------------
Future net cash flows, before income taxes 17,019,000 36,346,000
Future income taxes (3,822,000) (10,007,000)
------------- --------------
Future net cash flows 13,197,000 26,339,000
10% annual discount (5,833,000) (11,642,000)
------------- --------------
Standardized measure of discounted future
net cash flows $ 7,364,000 $ 14,697,000
============= ==============
</TABLE>
F-6
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING
EXPENSES OF THE PROPERTIES
The primary changes in the standardized measure of discounted estimated
future net cash flows for the nine months ended September 30, 1998 and the
year ended December 31, 1997, were as follows:
<TABLE>
Nine Months Year
Ended Ended
September 30, December 31,
1998 1997
______________ _____________
<S> <C> <C>
Beginning of period $ 14,697,000 $ 22,535,000
Sales of oil and gas produced, net of
production costs (2,113,000) (6,315,000)
Effect of change in prices (10,672,000) (6,819,000)
Change in income taxes 3,451,000 2,505,000
Accretion of discount 1,102,000 2,253,000
Other 899,000 538,000
-------------- -------------
End of period $ 7,364,000 $ 14,697,000
</TABLE>
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING
EXPENSES OF THE PROPERTIES
Estimated future cash inflows are computed by applying period-end prices of
oil and gas to period-end quantities of proved reserves. Estimated future
production costs are determined by estimating the expenditures to be incurred
in producing the proved oil and gas reserves at the end of the period, based
on period-end costs and assuming continuation of existing economic
conditions. Estimated future income tax expense is calculated by applying
period-end statutory tax rates to estimated future pre-tax net cash flows
related to proved oil and gas reserves, less the tax basis of the properties
involved.
The assumptions used to compute the standardized measure are those prescribed
by the Financial Accounting Standards Board and as such, do not necessarily
reflect the Company's expectations of actual revenues to be derived from
those reserves nor their present worth. The limitations inherent in the
reserve quantity estimation process are equally applicable to the
standardized measure computations since these estimates are the basis for the
valuation process.
F-7
INDEPENDENT AUDITOR'S REPORT
December 1, 1998
Board of Directors
Future Petroleum Corporation
Dallas, Texas
We have audited the accompanying historical summaries of revenues and direct
operating expenses of certain properties acquired in October 1998 (South Texas
Properties), for the nine months ended September 30, 1998 and the year ended
December 31, 1997. The historical summaries are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
historical summaries 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 historical summaries are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the historical summaries. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall historical summary presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying historical summaries were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in the Form 8-K/A of Future Petroleum Corporation) as described in
Note 1 and are not intended to be a complete presentation of the properties'
revenues and expenses.
In our opinion, the historical summaries referred to above present fairly, in
all material respects, the revenues and direct operating expenses of the
properties acquired in October 1998, in conformity with generally accepted
accounting principles.
/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP
Dallas, Texas
F-8
FUTURE PETROLEUM CORPORATION
HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE SOUTH TEXAS PROPERTIES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND YEAR ENDED DECEMBER 31, 1997
<TABLE>
Nine Months Year
Ended Ended
September 30, December 31,
1998 1997
_______________ ______________
<S> <C> <C>
OIL AND GAS SALES $ 777,000 $ 1,270,000
DIRECT OPERATING EXPENSES 369,000 486,000
--------------- --------------
NET REVENUE $ 408,000 $ 784,000
=============== ==============
</TABLE>
See Notes to Historical Summaries.
F-9
FUTURE PETROLEUM CORPORATION
NOTES TO HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE SOUTH TEXAS PROPERTIES
1. BASIS OF PREPARATION
The accompanying historical summaries of revenues and direct operating expenses
relate to the operations of certain oil and gas properties acquired by Future
Petroleum Corporation (the "Company") in October 1998 from Bargo Energy Company
("Bargo") and TJG Investments, Inc. ("TJG"). The properties are primarily in
South Texas with minor interests in New Mexico and Mississippi. The properties
are referred to collectively as the "South Texas Properties".
Revenues are recorded when the Properties' share of oil or natural gas and
natural gas liquids are sold. Direct operating expenses are recorded when the
related liability is incurred. Direct operating expenses include lease
operating expenses, ad valorem taxes and production taxes. Depreciation and
amortization of oil and gas properties, general and administrative expenses and
income taxes have been excluded from operating expenses in the accompanying
historical summaries because the amounts would not be comparable to those
resulting from proposed future operations.
The historical summaries presented herein were prepared for the purpose of
complying with the financial statement requirements of a business acquisition to
be filed on Form 8-K/A as promulgated by Regulation S-B Item 3-10 of the
Securities Exchange Act of 1934.
2. RELATED PARTY TRANSACTION
As discussed in Note 1, the South Texas Properties were acquired from Bargo and
TJG. Bargo is affiliated via common ownership with a significant stockholder of
the company and the stockholder of TJG is a director of the Company.
3. SUPPLEMENTAL INFORMATION ON OIL AND GAS RESERVES (UNAUDITED)
Proved oil and gas reserves consist of those estimated quantities of crude oil,
natural gas, and natural gas liquids that 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 reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
The following estimates of proved reserves have been made by T.J. Simth &
Company, Inc. an independent engineering firm. The estimated net interest
in proved reserves are based upon subjective engineering judgments and may
be affected by the limitations inherent in such estimation. The Company
emphasizes that reserve estimates for proved undeveloped reserves and for proved
developed non-producing reserves are more imprecise than reserve estimates for
proved producing reserves. A significant portion (approximately 39% of the
equivalent barrels) of the following reserves are attributable to proved
undeveloped reserves and approximately 23% of the equivalent barrels are
attributable to proved developed non-producing reserves. The process of
estimating reserves is subject to continual revision as additional information
becomes available as a result of drilling, testing, reservoir studies and
production history. There can be no assurance that such estimates will not be
materially revised in subsequent periods.
F-10
FUTURE PETROLEUM CORPORATION
NOTES TO HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE SOUTH TEXAS PROPERTIES
The changes in proved reserves of the South Texas Properties for
the nine months ended September 30, 1998 and the year ended December 31, 1997
are set forth below.
<TABLE>
Oil and Natural Gas
Natural Gas (Thousand
Liquids Cubic
(Barrels) Feet)
_____________ _____________
<S> <C> <C>
Reserves at January 1, 1997 420,000 7,045,000
Production (43,000) (307,000)
------------- -------------
Reserves at December 31, 1997 377,000 6,738,000
Production (23,000) (237,000)
------------- -------------
Reserves at September 30, 1998 354,000 6,501,000
============= =============
Proved developed reserves:
January 1, 1997 242,000 2,742,000
============= =============
December 31, 1997 199,000 2,435,000
============= =============
September 30, 1998 176,000 2,198,000
============= =============
</TABLE>
The standardized measure of discounted estimated future net cash flows related
to proved oil and gas reserves at September 30, 1998 and December 31, 1997 is as
follows:
<TABLE>
September December
30, 31,
1998 1997
_____________ _____________
<S> <C> <C>
Future cash inflows $ 17,758,000 $ 19,846,000
Future production and development costs (5,984,000) (6,474,000)
------------- -------------
Future net cash flows, before income taxes 11,774,000 13,372,000
Future income taxes (1,877,000) (2,462,000)
------------- -------------
Future net cash flows 9,897,000 10,910,000
10% annual discount (3,543,000) (3,906,000)
------------- -------------
Standardized measure of discounted future
net cash flows $ 6,354,000 $ 7,004,000
============= =============
</TABLE>
F-11
FUTURE PETROLEUM CORPORATION
NOTES TO HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE SOUTH TEXAS PROPERTIES
The primary changes in the standardized measure of discounted estimated future
net cash flows for the nine months ended September 30, 1998 and the year ended
December 31, 1997, were as follows:
<TABLE>
Nine Months Year
Ended Ended
September 30, December 31,
1998 1997
_______________ ______________
<S> <C> <C>
Beginning of period $ 7,004,000 $ 13,817,000
Sales of oil and gas produced, net of
production costs (408,000) (784,000)
Effect of change in prices (849,000) (9,929,000)
Change in income taxes 376,000 3,619,000
Accretion of discount 525,000 1,382,000
Other (294,000) (1,101,000)
--------------- --------------
End of period $ 6,354,000 $ 7,004,000
=============== ==============
</TABLE>
Estimated future cash inflows are computed by applying period-end prices of oil
and gas to period-end quantities of proved reserves. Estimated future
production costs are determined by estimating the expenditures to be incurred in
producing the proved oil and gas reserves at the end of the period, based on
period-end costs and assuming continuation of existing economic conditions.
Estimated future income tax expense is calculated by applying period-end
statutory tax rates to estimated future pre-tax net cash flows related to proved
oil and gas reserves, less the tax basis of the properties involved.
The assumptions used to compute the standardized measure are those prescribed by
the Financial Accounting Standards Board and as such, do not necessarily reflect
the Company's expectations of actual revenues to be derived from those reserves
nor their present worth. The limitations inherent in the reserve quantity
estimation process are equally applicable to the standardized measure
computations since these estimates are the basis for the valuation process.
F-12
FUTURE PETROLEUM CORPORATION
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On October 14, 1998, Future Petroleum Corporation (the Company) acquired
interests in certain oil and gas properties in Texas, New Mexico and Mississippi
in exchange for approximately $11,100,000 in cash, 280,000 shares of the
Company's common stock, and promissory notes in the aggregate principal amount
of $4,000,000 (prior to $589,000 of discount) payable to Bargo Energy Company
and TJG Investments, Inc. The cash portion of the purchase price was financed
by increasing the borrowing base under the Company's credit agreement with Bank
of America. Approximately 86% of the purchase price related to the Cross Creek
Properties and the South Texas Properties. The separate statement of revenues
and direct operating expenses for Cross Creek Properties as well as the
historical summaries of revenues and operating expenses of the South Texas
Properties are included herein. The remaining 14% of the purchase price applied
to certain smaller properties that are not included in these pro forma financial
statements. The properties which are not included in the pro forma financial
statements were acquired for approximately $2,000,000 in cash and 280,000 shares
of common stock. The following unaudited pro forma combined financial
statements have been prepared to demonstrate the effect on the Company's
financial position and results of operations as if the Cross Creek and South
Texas Properties had been acquired on September 30, 1998 (with respect to the
pro forma balance sheet) and at the beginning of the periods (with respect to
the pro forma statements of operations). The pro forma statements of operations
also include adjustments to reflect the operations of properties acquired by the
Company on August 15, 1998 and November 1, 1997 as if those properties had been
acquired at the beginning of the respective periods. The pro forma financial
statements should be read in conjunction with the separate statement of revenues
and direct operating expenses for Cross Creek Properties as well as the
historical summaries of revenues and direct operating expenses for the South
Texas Properties included herein, with the Form 8-K/A filed for the August 15,
1998 property acquisition, with the Form 8K/A filed for the November 1, 1997
property acquisition, and with the financial statements of the Company as filed
in their Forms 10-KSB and 10-QSB. The pro forma financial statements should not
be construed as a reflection of the financial position or results of operations
that actually would have occurred if the acquisitions would have occurred on the
above dates.
F-13
FUTURE PETROLEUM CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
ASSETS
<TABLE>
Historical Pro Forma
Amount Adjustments Pro Forma
____________ ____________ ____________
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 426,000 $ - $ 426,000
Trade accounts receivable 796,000 - 796,000
Current portion of notes receivable 93,000 - 93,000
------------ ------------ ------------
Total current assets 1,315,000 - 1,315,000
PROVED OIL AND GAS PROPERTIES 18,693,000 12,511,000(1) 31,204,000
OTHER ASSETS 169,000 - 169,000
------------ ------------- -----------
Total assets $ 20,177,000 $ 12,511,000 $32,688,000
============ ============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 26,000 $ - $ 26,000
Accounts payable and accrued expenses 855,000 - 855,000
----------- ------------- -----------
Total current liabilities 881,000 - 881,000
DEFERRED GAIN ON SALE 40,000 - 40,000
DEFERRED TAX LIABILITY 1,201,000 - 1,201,000
LONG-TERM DEBT 8,106,000 9,100,000(1) 17,206,000
SUBORDINATED DEBT 4,672,000 3,411,000(1) 8,083,000
STOCKHOLDERS' EQUITY 5,277,000 - 5,277,000
----------- ------------- ----------
Total liabilities and
stockholders' equity $20,177,000 $12,511,000 $32,688,000
=========== ============= ===========
</TABLE>
See accompanying notes to pro forma financial statements.
F-14
FUTURE PETROLEUM CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
Future Cross Creek South Texas
Petroleum Properties Properties
____________ _____________ ____________
<S> <C> <C> <C>
OIL AND GAS SALES $ 1,903,000 $ 2,802,000 $ 777,000
COSTS AND EXPENSES:
Production expense 1,131,000 689,000 369,000
Depletion and depreciation 369,000 - -
Interest 407,000 - -
General and administrative 291,000 - -
------------ ------------- ------------
Total costs and expenses 2,198,000 689,000 369,000
OTHER INCOME 16,000 - -
------------ ------------- ------------
INCOME (LOSS) BEFORE TAX (279,000) 2,113,000 408,000
Deferred tax benefit 98,000 - -
------------ ------------- ------------
NET AND COMPREHENSIVE
INCOME (LOSS) $ (181,000) $ 2,113,000 $ 408,000
============ ============= ============
BASIC AND DILUTED
LOSS PER SHARE $ (0.03)
============
WEIGHTED AVERAGE SHARES
OUTSTANDING 7,053,000
============
</TABLE>
See accompanying notes to pro forma financial statements.
F-15
FUTURE PETROLEUM CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
Pro Forma
Adjustments Pro Forma
______________ _____________
<S> <C> <C>
OIL AND GAS SALES $ 2,095,000(4) $ 7,577,000
COSTS AND EXPENSES:
Production expense 1,206,000(4) 3,395,000
Depletion and depreciation 1,837,000(5) 2,206,000
Interest 1,490,000(6) 1,897,000
General and administrative 75,000(7) 366,000
--------------- -------------
Total costs and expenses 4,608,000 7 864,000
OTHER INCOME - 16,000
--------------- -------------
INCOME (LOSS) BEFORE TAX (2,513,000) (271,000)
Deferred tax benefit (3,000)(8) 95,000
--------------- ------------
NET AND COMPREHENSIVE
INCOME (LOSS) $ (2,516,000) $ (176,000)
=============== ============
BASIC AND DILUTED
LOSS PER SHARE $ (0.01)
============
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,560,000
============
</TABLE>
See accompanying notes to pro forma financial statements.
F-16
FUTURE PETROLEUM CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
Future Cross Creek South Texas
Petroleum Properties Properties
____________ _____________ ____________
<S> <C> <C> <C>
OIL AND GAS SALES $ 772,000 $ 7,243,000 $ 1,270,000
COSTS AND EXPENSES:
Production expense 419,000 929,000 486,000
Depletion and depreciation 191,000 - -
Interest 69,000 - -
General and administrative 154,000 - -
------------ ------------- ------------
Total costs and expenses 833,000 929,000 486,000
OTHER INCOME 42,000 - -
------------ ------------- ------------
INCOME(LOSS) BEFORE TAX (19,000) 6,314,000 784,000
Income tax benefit (expense) 7,000 - -
------------ ------------- ------------
NET AND COMPREHENSIVE
INCOME (LOSS) $ (12,000) $ 6,314,000 $ 784,000
============ ============= ============
BASIC AND DILUTED
EARNINGS PER SHARE $ -
============
WEIGHTED AVERAGE
SHARES OUTSTANDING 4,280,000
============
</TABLE>
See accompanying notes to pro forma financial statements.
F-17
FUTURE PETROLEUM CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
Pro Forma
Adjustments Pro Forma
______________ _____________
<S> <C> <C>
OIL AND GAS SALES $ 7,419,000(2,3,4) $ 16,704,000
COSTS AND EXPENSES:
Production expense 3,898,000(2,3,4) 5,732,000
Depletion and depreciation 3,409,000(5) 3,600,000
Interest 2,411,000(6) 2,480,000
General and administrative 287,000(2,7) 441,000
------------- -------------
Total costs and expenses 10,005,000 12,253,000
OTHER INCOME - 42,000
------------ -------------
INCOME(LOSS) BEFORE TAX (2,586,000) 4,493,000
Income tax benefit (expense) (1,580,000)(8) (1,573,000)
----------- -------------
NET AND COMPREHENSIVE
INCOME (LOSS) $(4,166,000) $ 2,920,000
============ =============
BASIC AND DILUTED
EARNINGS PER SHARE $ .22
=============
WEIGHTED AVERAGE
SHARES OUTSTANDING 13,312,000
=============
</TABLE>
See accompanying notes to pro forma financial statements.
F-18
FUTURE PETROLEUM CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(1) Adjustment to reflect the acquisition of the Cross Creek and South Texas
oil and gas properties for cash of approximately $9,100,000 and $4,000,000 of
10% subordinated debt. The subordinated debt includes an imputed interest rate
of 14.2%, which resulted in a discount of $589,000. The cash portion of the
acquisition was financed by increasing the borrowing base under the Company's
credit agreement.
(2) Adjustment to reflect the oil and gas revenue, lease operating and
general and administrative expenses for the period from January 1997 to October
1997 for the partnerships acquired by the Company from Encap in November 1997.
(3) Adjustment to eliminate well operational fees of $162,000 charged by the
Company to the Encap partnerships for the period from January 1997 to October
1997.
(4) Adjustment to reflect the oil and gas revenue and lease operating
expenses for the interests in the South Coles Levee Unit acquired by the Company
in August 1998 as if it had been acquired at the beginning of the respective
periods.
(5) Adjustment to reflect additional depletion and depreciation expense as
if all the properties referred to above had been acquired at the beginning of
the respective periods.
(6) Adjustment to reflect additional interest expense at 8.25% for the
outside bank debt and 10% for the subordinated debt as if the properties had
been acquired at the beginning of the respective periods. Adjustment also
includes the effect of refinancing $1,760,000 of the Company's 10% debt with the
8.25% debt, which was done in connection with the August 15, 1998 acquisition.
(7) Adjustment to reflect estimate of additional administrative costs
associated with the acquired properties.
(8) Adjustment to record the income tax effect of the adjustments.
F-19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FUTURE PETROLEUM CORPORATION
(Registrant)
Dated: December 29, 1998 By: /s/ B. Carl Price
B. Carl Price, Vice President Corporate Development,
