<PAGE> 1
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): September 8, 1999
Commission file number 0-8609
Bargo Energy Company
(Exact name of small business issuer as specified in charter)
<TABLE>
<S> <C>
Texas 87-0239185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 Louisiana, Suite 3700
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
</TABLE>
(713) 236-9792
(Issuer's telephone number, including area code)
Not Applicable
(Former name and former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
BARGO ENERGY COMPANY
(a) Financial Statements of Business Acquired
Independent Auditor's Report F-2
Historical Summaries of Revenues and Direct Operating Expenses F-3
Notes to Historical Summaries and Direct Operating Expenses F-4
(b) Pro Forma Financial Information
Unaudited Pro Forma Financial Information PF-1
Notes to Unaudited Pro Forma Financial Information PF-4
(c) Exhibits
2.1 Purchase and Sale Agreement by and Between Atlantic Richfield
Company and Future Acquisition 1995, Ltd. (Incorporated by reference from
Exhibit 2.2 to the Company's Current Report on Form 10-QSB for the period ended
September 30, 1999, filed with the Securities and Exchange Commission on
November 19, 1999)
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Bargo Energy Company
We have audited the accompanying Statement of Revenues and Direct Operating
Expenses of the East Texas Properties for the nine month period ended September
30, 1999 and for each of the years ended December 31, 1998 and 1997. This
statement is the responsibility of the management of the owners of the
properties. Our responsibility is to express an opinion on the statement based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 statement. 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. We
believe that our audits provide a reasonable basis for our opinion.
The accompanying statement as described in Notes 1 and 2 was prepared for the
purpose of complying with certain rules and regulations of the Securities and
Exchange Commission for inclusion in a Current Report on Form 8-K. It is not
intended to be a complete presentation of the financial position and result of
operations of the properties.
In our opinion the statement presents fairly, in all material respects, the
revenues and direct operating expenses of the East Texas Properties as described
in Notes 1 and 2 for the nine month period ended September 30, 1999 and for each
of the years ended December 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
PricewaterhouseCoopers LLP
Houston, Texas
November 15, 1999
F-2
<PAGE> 4
BARGO ENERGY COMPANY AND SUBSIDIARIES
EAST TEXAS PROPERTIES
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
(in thousands)
<TABLE>
<CAPTION>
Nine months Year ended
ended December 31,
September 30, --------------------------------
1999 1998 1997
<S> <C> <C> <C>
Revenues:
Oil and gas revenues $ 11,110 $ 18,549 $ 32,141
------------- ------------- -------------
Direct operating expenses:
Lease operating expenses 4,910 6,963 6,841
Severance and ad valorem taxes 880 1,559 2,750
------------- ------------- -------------
Total direct operating expenses 5,790 8,522 9,591
------------- ------------- -------------
Excess of revenues over direct
Operating expenses $ 5,320 $ 10,027 $ 22,550
------------- ------------- -------------
</TABLE>
See Notes to Historical Summaries.
F-3
<PAGE> 5
BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES OF
THE EAST TEXAS PROPERTIES
1. The Properties
The East Texas Properties represent interest in 40 leases, a
waterflood unit, over 60 royalty properties and an oil transportation
contract in East Texas.
2. Basis of Presentation
During the periods presented, the Properties were not accounted for as
a separate entity. Accordingly, full financial statements prepared in
accordance with generally accepted accounting principles do not exist
and are not practicable to obtain in these circumstances.
The Statement of Revenues and Direct Operating Expenses (the
Statement) was derived from the historical accounting records of
Atlantic Richfield Company (ARCO) and represents only the net
interests in the Properties acquired by Bargo Energy Company.
Depreciation, depletion and amortization, general and administrative
expenses and other nonoperating expenses are not included.
Accordingly, the Statement is not intended to present financial
position and results of operations in accordance with generally
accepted accounting principles.
The accompanying Statement has been prepared on the accrual basis in
accordance with the generally accepted accounting principles.
Preparation of the Statement in conformity with generally accepted
accounting principles and estimation of oil and gas reserves require
management to make estimates and assumptions that affect the amounts
reported in the Statement and accompanying notes. Actual results could
differ from those estimates.
3. Related Party Transactions
Production for all periods presented has been sold to affiliated ARCO
subsidiaries at prices determined by ARCO. Lease operating costs
included allocation of costs from ARCO of $451,000, $805,000 and
$751,000 for the 1999, 1998 and 1997 periods, respectively.
4. Commitment and Contingencies
In the course of their operations, the properties are subject to
possible contingencies arising from federal, state and local
environmental, health and safety laws and regulations. There are no
such matters which, in the opinion of Bargo management, will have a
material adverse impact on the revenues and direct operating expenses
in the Statement.
F-4
<PAGE> 6
BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES OF
THE EAST TEXAS PROPERTIES
5. Supplemental Oil and Gas Information (Unaudited)
Oil and Gas Reserve Information
Proved oil and gas reserve quantities are based on estimates at
September 30, 1999 prepared by the Company's engineers in accordance
with guidelines established by the Securities and Exchange Commission
(SEC). There are numerous uncertainties inherent in estimating
quantities of proved reserves and projecting future rates of
production and timing of development expenditures. The following
reserve data represent estimates only and should not be construed as
being exact.
<TABLE>
<CAPTION>
Crude oil,
Condensate
and
natural Natural gas
gas liquids (thousands of
(barrels) cubic feet)
<S> <C> <C>
Total proved reserves:
Balance January 1, 1997 7,075,554 5,275,912
Production (1,433,695) (1,097,254)
---------- ----------
Balance December 31, 1997 5,641,859 4,178,658
Production (1,151,593) (1,075,392)
---------- ----------
December 31, 1998 4,490,266 3,103,266
Production (668,766) (622,466)
---------- ----------
Balance September 30, 1999 3,821,500 2,480,800
---------- ----------
Proved developed reserves:
December 31, 1997 4,497,759 3,835,358
December 31, 1998 3,346,166 2,759,966
September 30, 1999 2,677,400 2,137,500
</TABLE>
Future Net Cash Flows
Future net cash inflows are based on period-end prices related to the
intercompany pricing policies of ARCO. Operating costs, production and
ad valorem taxes and future development costs are based on current
costs with no escalation.
F-5
<PAGE> 7
BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES OF
THE EAST TEXAS PROPERTIES
The following table sets forth unaudited information concerning future
net cash flows for oil and gas reserves. The information does not
purport to present fair market value of the Company's oil and gas
assets, but does present a standardized disclosure concerning possible
future net cash flows that would result under the assumptions used.
<TABLE>
<CAPTION>
(unaudited) (in thousands) Total
<S> <C>
September 30, 1999:
Cash inflows $ 92,894
Production and development costs (40,388)
--------
Net cash flows 52,506
10 percent annual discount rate (14,707)
--------
Discounted future net cash flows $ 37,799
--------
December 31, 1998:
Cash inflows $ 59,231
Production and development costs (46,178)
--------
Net cash flows 13,053
10 percent annual discount rate (3,916)
--------
Discounted future net cash flows $ 9,137
--------
December 31, 1997:
Cash inflows $ 95,595
Production and development costs (54,700)
--------
Net cash flows 40,895
10 percent annual discount rate (13,506)
--------
Discounted future net cash flows $ 27,389
--------
</TABLE>
F-6
<PAGE> 8
BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES OF
THE EAST TEXAS PROPERTIES
The following table sets forth the principal sources of change in the
discounted future net cash flows:
(in thousands)
<TABLE>
<CAPTION>
Nine months Year ended
ended December 31,
September 30, -----------------------------
1999 1998 1997
<S> <C> <C> <C>
Sales, net of production costs $ (5,320) $(10,027) $(22,550)
Change in prices and production costs 33,068 (10,964) (26,994)
Accretion of discount 914 2,739 6,994
-------- -------- --------
Net change 28,662 (18,252) (42,550)
Balance, beginning of period 9,137 27,389 69,939
-------- -------- --------
Balance, end of period $ 37,799 $ 9,137 $ 27,389
-------- -------- --------
</TABLE>
F-7
<PAGE> 9
BARGO ENERGY COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
The following unaudited pro forma combined statements of operations for the
nine months ended September 30, 1999 and the year ended December 31, 1998
reflect the acquisition of the East Texas Properties by Bargo Energy Company
that occurred in September 1999 as if the acquisition occurred at the beginning
of the respective periods. The pro forma statements of operations combine the
operating results of Bargo for the nine months ended September 30, 1999 and the
year ended December 31, 1998 with the historical summaries of revenues and
direct operating expenses of the East Texas Properties for the same periods.
The pro forma statements of operations also reflect the following transactions:
(1) the acquisitions of the South Coles Levee Unit (SCLU) in August 1998; (2)
the acquisition of several properties in October 1998 (the 10/15/98
Acquisition); and (3) the acquisition of the Cody Properties (Cody) in November
and December 1998. These items are reflected in the pro forma statements of
operations as if they had occurred at the beginning of the respective periods.
These unaudited pro forma financial statements should be read in conjunction
with the historical summaries of revenues and operating expenses of the East
Texas properties included herein and with the historical financial statements
of Bargo as filed in its periodic reports with the Securities and Exchange
Commission. These unaudited pro forma financial statements should not be
construed to be indicative of future results or results that actually would
have occurred if the transactions had occurred at the dates presented.
PF-1
<PAGE> 10
BARGO ENERGY COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(amounts in thousands, except per share amount)
<TABLE>
<CAPTION>
PROFORMA ADJUSTMENTS(1)
BARGO
ACTUAL EAST TEXAS PROFORMA
9/30/99 PROPERTIES OTHER 9/30/99
-------- ---------- -------- --------
<S> <C> <C> <C> <C>
Income:
Oil and gas sales $ 9,651 $ 11,110 $ -- $ 20,761
Hedge gain/loss $ (131) $ -- $ -- $ (131)
Other $ -- $ -- $ -- $ --
-------- -------- -------- --------
$ 9,520 $ 11,110 $ -- $ 20,630
-------- -------- -------- --------
Expenses:
Lease operating expenses and production taxes $ 4,187 $ 5,790 $ -- $ 9,977
Depreciation, depletion and amortization(3) $ 2,559 $ -- $ 2,549 $ 5,108
General and administrative(2) $ 2,377 $ -- $ 112 $ 2,489
-------- -------- -------- --------
$ 9,123 $ 5,790 $ 2,661 $ 17,574
-------- -------- -------- --------
Operating income/(loss) $ 397 $ 5,320 $ (2,661) $ 3,056
-------- -------- -------- --------
Other (income) and expense:
Interest expense(4) $ 1,631 $ -- $ 960 $ 2,591
Other income $ (7) $ -- $ -- $ (7)
-------- -------- -------- --------
$ 1,624 $ -- $ 960 $ 2,584
-------- -------- -------- --------
Income (loss) before income taxes $ (1,227) $ 5,320 $ (3,621) $ 472
Deferred Income Tax Benefit/(Expense)(5) $ 417 $ -- $ (587) $ (170)
-------- -------- -------- --------
Net Income (loss) before redeemable preferred
stock dividends $ (810) $ 5,320 $ (4,208) $ 302
Redeemable preferred stock dividends $ 1,935 $ -- $ -- $ 1,935
-------- -------- -------- --------
Net income/(loss) allocable to common shareholders $ (2,745) $ 5,320 $ (4,208) $ (1,633)
======== ======== ======== ========
Net income (loss) per common share - basic and diluted $ (0.04) $ (0.02)
Weighted average common shares outstanding 70,622 70,622
</TABLE>
PF-2
<PAGE> 11
BARGO ENERGY COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(amounts in thousands, except per share amount)
<TABLE>
<CAPTION>
PROFORMA ADJUSTMENTS(1)
BARGO
ACTUAL E. TEXAS 10/15/1998 PROFORMA
12/31/98 PROPERTIES ACQUISITION CODY SCLU OTHER 12/31/98
--------- ---------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Oil and gas sales $ 3,663 $ 18,549 $ 4,105 $ 2,681 $ 1,645 $ -- $ 30,643
Other $ 16 $ -- $ -- $ -- $ -- $ -- $ 16
--------- --------- --------- --------- --------- --------- ---------
$ 3,679 $ 18,549 $ 4,105 $ 2,681 $ 1,645 $ -- $ 30,659
--------- --------- --------- --------- --------- --------- ---------
Expenses:
Lease operating expenses and
production taxes $ 1,826 $ 8,522 $ 1,366 $ 1,011 $ 1,002 $ -- $ 13,727
Depreciation, depletion and
amortization(3) $ 1,316 $ -- $ -- $ -- $ -- $ 6,895 $ 8,211
General and administrative(2) $ 783 $ -- $ -- $ -- $ -- $ 250 $ 1,033
--------- --------- --------- --------- --------- --------- ---------
$ 3,925 $ 8,522 $ 1,366 $ 1,011 $ 1,002 $ 7,145 $ 22,971
--------- --------- --------- --------- --------- --------- ---------
Operating income/(loss) $ (246) $ 10,027 $ 2,739 $ 1,670 $ 643 $ (7,145) $ 7,688
--------- --------- --------- --------- --------- --------- ---------
Other (income) and expense:
Interest expense(4) $ 1,238 $ -- $ -- $ -- $ -- $ 3,456 $ 4,694
Other income $ (19) $ -- $ -- $ -- $ -- $ -- $ (19)
--------- --------- --------- --------- --------- --------- ---------
$ 1,219 $ -- $ -- $ -- $ -- $ 3,456 $ 4,675
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item $ (1,465) $ 10,027 $ 2,739 $ 1,670 $ 643 $ (10,601) $ 3,013
Deferred Income Tax Benefit/(Expense)(5) $ 287 $ -- $ -- $ -- $ -- $ (1,372) $ (1,085)
--------- --------- --------- --------- --------- --------- ---------
Income/(loss) before extraordinary item $ (1,178) $ 10,027 $ 2,739 $ 1,670 $ 643 $ (11,973) $ 1,928
Extraordinary gain on conversion of
debt $ 2,586 $ -- $ -- $ -- $ -- $ -- $ 2,586
--------- --------- --------- --------- --------- --------- ---------
Net income/(loss) $ 1,408 $ 10,027 $ 2,739 $ 1,670 $ 643 $ (11,973) $ 4,514
========= ========= ========= ========= ========= ========= =========
Net income (loss) per common share -
basic and diluted $ 0.14 $ 0.45
Weighted average common shares
outstanding 9,924 9,924
</TABLE>
PF-3
<PAGE> 12
BARGO ENERGY COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Pro Forma Statements of Operations
(1) The pro forma adjustments reflect the oil and gas sales and production
expenses of the acquired properties prior to acquisition as if the
acquisitions had all occurred at the beginning of the respective
periods.
(2) Adjustment to record estimated additional general and administrative
expense associated with the acquired properties as if they had all
been acquired at the beginning of the respective periods.
(3) Adjustment to record additional depletion and depreciation as if the
properties had all been acquired at the beginning of the respective
periods.
(4) Adjustment to record additional interest expense that would have been
incurred if the properties had all been acquired at the beginning of
the respective periods.
(5) Adjustment to record income tax effect as if the transactions had all
occurred at the beginning of the respective periods.
PF-4
<PAGE> 13
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 hereunto duly authorized.
Bargo Energy Company
(Registrant)
Dated: November 19, 1999 /s/ KIMBERLY G. SEEKELY
------------------------------------
By: Kimberly G. Seekely
Vice President - Treasurer
