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): November 19,1998
Commission file number 0-8609
Bargo Energy Company
(Exact name of small business issuer as specified in charter)
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)
(713)236-9792
(Issuer's telephone number, including area code)
Future Petroleum Corporation, Inc.
2351 West Northwest Highway, Suite 2130
Dallas, Texas 75220
(Former name and former address if changed since last report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
FUTURE PETROLEUM, INC.
INDEX TO FINANCIAL STATEMENTS
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-3
UNAUDITED PRO FORMA FINANCIAL INFORMATION PF-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Future Petroleum Corporation
Houston, Texas
We have audited the accompanying historical summaries of revenues and direct
operating expenses of properties acquired in November and December 1998 ("the
Cody Properties"), for the eleven month period ended November 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 Cody
Properties, in conformity with generally accepted accounting principles.
HEIN + ASSOCIATES LLP
April 30, 1999
Dallas, Texas
<PAGE>
FUTURE PETROLEUM CORPORATION
HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE CODY PROPERTIES
<TABLE>
FOR THE ELEVEN
MONTH PERIOD FOR THE YEAR
ENDED ENDED
NOVEMBER 30, DECEMBER 31,
1998 1997
-------------- ------------
<S> <C> <C>
OIL AND GAS SALES $ 2,681,000 $ 5,127,000
DIRECT OPERATING EXPENSES 1,011,000 1,388,000
-------------- ------------
NET REVENUE $ 1,670,000 $ 3,739,000
============== ============
</TABLE>
See Notes to Historical Summaries.
<PAGE>
FUTURE PETROLEUM CORPORATION
NOTES TO HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE CODY PROPERTIES
1. BASIS OF PREPARATION
The accompanying historical summaries of revenues and direct operating
expenses relate to the operations of the oil and gas properties ("the Cody
Properties") acquired by Future Petroleum Corporation (the "Company") in
November and December 1998. The Cody Properties were acquired from Bargo
Energy Resources, Ltd., which had on the same day acquired the properties
from Cody Energy, Inc., and Cody Texas, L.P. The Properties were acquired
for $7,600,000.
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. 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 independent
engineers. 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 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.
<PAGE>
FUTURE PETROLEUM CORPORATION
NOTES TO HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES
OF THE CODY PROPERTIES
The changes in proved reserves of the Cody Properties for the period ended
November 30, 1998 and the year ended December 31, 1997 are set forth below:
<TABLE>
Oil and
Natural Gas Natural Gas
Liquids (Thousand
(Barrels) Cubic Feet
----------- ------------
<S> <C> <C>
Reserves at January 1, 1997 579,000 23,899,000
Production (102,000) (1,191,000)
----------- ------------
Reserves at December 31, 1997 477,000 22,708,000
Production (99,000) (742,000)
----------- ------------
Reserves at November 30, 1998 378,000 21,966,000
=========== ============
Proved developed reserves:
January 1, 1997 531,000 18,094,000
=========== ============
December 31, 1997 429,000 16,902,000
=========== ============
November 30, 1998 352,000 16,143,000
=========== ============
The standardized measure of discounted estimated future net cash flows
related to proved oil and gas reserves at November 30, 1998 and December 31,
1997 is as follows:
November 30, December 31,
1998 1997
----------- ------------
Future cash inflows $48,986,000 $61,967,000
Future production costs (14,095,000) (14,082,000)
----------- ------------
Future net cash flows, before income taxes 34,891,000 47,885,000
Future income taxes (9,552,000) (13,750,000)
----------- ------------
Future net cash flows 25,339,000 34,135,000
10% annual discount (13,430,000) (18,092,000)
----------- ------------
Standardized measure of discounted future
net cash flows $11,909,000 $16,043,000
=========== ============
The primary changes in the standardized measure of discounted estimated future
net cash flows for the period ended November 30, 1998 and for the year ended
December 31, 1997, were as follows:
Period Ended Year Ended
November 30, December 31,
1998 1997
------------ ------------
Beginning of year $ 16,043,000 $ 31,758,000
Sales of oil and gas produced,
net of production costs (1,670,000) (3,739,000)
Effect of change in prices (4,799,000) (22,116,000)
Change in income taxes 1,973,000 3,176,000
Accretion of discount 1,604,000 8,158,000
Other (1,242,000) (1,194,000)
------------ ------------
End of year $ 11,909,000 $ 16,043,000
</TABLE>
<PAGE>
Estimated future cash inflows are computed by applying year-end prices of
oil and gas to year-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 year,
based on year-end costs and assuming continuation of existing economic
conditions. Estimated future income tax expense is calculated
by applying year-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.
<PAGE>
FUTURE PETROLEUM CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
The following unaudited pro forma combined statements of operations for 1998
and 1997 reflect the acquisition of the Cody Properties by Future Petroleum
Corporation (FPC) that occurred in November and December 1998 as if the
acquisition occurred at the beginning of the respective periods. The
pro forma statements of operations combine the operating results of FPC for
1998 and 1997 with the historical summaries of revenues and direct
operating expenses of the Cody Properties for the eleven months ended November
30, 1998 and the year ended December 31, 1997. The operations of the Cody
Properties are included with FPC's operations beginning in December 1998.
The pro forma statements of operations also reflect the following transactions:
(1) the acquisitions of the South Coles Levee Unit (SCLU) in August 1998 and
several properties in October 1998 (the 10/15/98 acquisition); and (2) the
roll up of certain ENCAP partnerships in November 1997. Item (1) is
reflected in the pro forma statements of operations as if it had occurred
at the beginning of the respective periods. Item (2) is reflected in the 1997
pro forma statement of operations as if it had occurred at the beginning of
that year.
These unaudited pro forma financial statements should be read in conjunction
with the historical summaries of revenues and operating expenses of the Cody
Properties included herein and with the historical financial statements
of FPC 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.
<PAGE>
FUTURE PETROLEUM CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(amounts in thousands, except per share amount)
<TABLE>
PRO FORMA ADJUSTMENTS
10/15/98 CODY SCLU
FPC ACQUISITION ACQUISITION ACQUISITION
------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE: (1) (1) (1)
Oil and gas sales $ 3,663 $ 4,105 $ 2,681 $ 1,645
Other income 16
-------- ----------- ----------- -----------
Total revenue 3,679 4,105 2,681 1,645
COSTS AND EXPENSES:
Production expenses 1,826 1,366 1,011 1,002
General and administrative 783
Depletion and depreciation 1,316
Interest 1,238
-------- ----------- ----------- -----------
Total costs and expenses 5,163 1,366 1,011 1,002
OTHER INCOME 19
-------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
TAXES (1,465) 2,739 1,670 643
INCOME TAX PROVISION 287
-------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (1,178) 2,739 1,670 643
EXTRAORDINARY GAIN ON
CONVERSION OF DEBT 2,586
-------- ----------- ----------- -----------
NET INCOME (LOSS) $ 1,408 $ 2,739 $ 1,670 $ 643
======== =========== =========== ===========
BASIC AND DILUTED
EARNINGS PER SHARE $ 0.14
========
WEIGHTED AVERAGE
SHARES OUTSTANDING 9,924
========
</TABLE>
<TABLE>
OTHER PRO FORMA
--------- -----------
<S> <C> <C>
REVENUE:
Oil and gas sales $ $ 12,094
Other income 16
--------- -----------
Total revenue 12,110
COSTS AND EXPENSES:
Production expenses 5,205
General and administrative 100(2) 883
Depletion and depreciation 2,503(3) 3,819
Interest 2,176(4) 3,414
---------- -----------
Total costs and expenses 4,779 13,321
OTHER INCOME 19
----------- -----------
INCOME (LOSS) BEFORE
TAXES (4,779) (1,192)
INCOME TAX PROVISION 130(7) 417
----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (4,649) (775)
EXTRAORDINARY GAIN ON
CONVERSION OF DEBT 2,586
------------ -----------
NET INCOME (LOSS) $ (4,649) $ 1,811
============ ===========
BASIC AND DILUTED
EARNINGS PER SHARE $ (0.01)(8) $ 0.13
============ ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 3,924(8) 13,848
============ ===========
</TABLE>
<PAGE>
FUTURE PETROLEUM CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(amounts in thousands, except per share amount)
<TABLE>
1998 PROPERTY ACQUISITIONS
8/14/98 10/15/98 CODY
FPC ACQUISITION ACQUISITION ACQUISTION
----- ----------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUE: (1) (1) (1)
Oil and gas sales $ 596 $ 5,261 $ 8,513 $ 5,127
Well operation fees 176
----- ----------- ----------- ----------
Total revenue 772 5,261 8,513 5,127
COSTS AND EXPENSES:
Production expense 419 2,936 1,415 1,388
General and administrative 154
Depletion and depreciation 191
Interest 69
----- ---------- ----------- ----------
Total costs and expenses 833 2,936 1,415 1,388
OTHER INCOME 42
INCOME BEFORE TAXES (19) 2,325 7,098 3,739
INCOME TAX PROVISION 7
----- ---------- ----------- ----------
NET (INCOME) LOSS (12) 2,325 7,098 3,739
===== ========== =========== ==========
BASIC AND DILUTED EARNINGS
PER SHARE $ -
=====
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,280
=====
</TABLE>
<PAGE>
<TABLE>
OTHER
ACQUISITION OTHER PRO FORMA
----------- ----------- ----------
<S> <C> <C> <C>
REVENUE:
Oil and gas sales $ 7,581(5) $ 27,078
Well operation fees (162)(6) 14
----------- ----------- ----------
Total revenue 7,419 27,092
COSTS AND EXPENSES:
Production expense 3,898(5) 9,894
(162)(6)
General and administrative 130(2) 284
Depletion and depreciation 4,570(3) 4,761
Interest 3,344(4) 3,413
---------- ----------- ----------
Total costs and expenses 3,736 8,044 18,352
OTHER INCOME 42
---------- ----------- ----------
INCOME BEFORE TAXES 3,683 (8,044) 8,782
INCOME TAX PROVISION (3,080)(7) (3,073)
---------- ----------- ----------
NET (INCOME) LOSS 3,683 (11,124) 5,709
========== =========== ==========
BASIC AND DILUTED EARNINGS
PER SHARE $ 0.42(8) $ 0.42
=========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 9,312 13,592
=========== ==========
</TABLE>
<PAGE>
FUTURE PETROLEUM CORPORATION
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) Record (a) activity for original ENCAP partnerships rolled up in
November 1997 for ten month period before inclusion in FPC's
operations ($2,318,000 of oil and gas sales and $1,132,000 of
production expense); and (b) 1997 activity for South Cole Levee
Unit acquired in August 1998 ($5,263,000 of oil and gas sales and
$2,928,000 of production expenses).
(6) Eliminate well operational fees included as revenue for FPC and
production expense for the original ENCAP partnerships of $162,000.
(7) Adjustment to record income tax effect as if the transactions had all
occurred at the beginning of the respective periods.
(8) Adjustment to record effect on earnings per share as if the
transactions had all occurred at the beginning of the respective
periods.
<PAGE>
