<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1995
[_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number 1-9933
-----------------------------
AMERAC ENERGY CORPORATION
(Exact name of Registrant as specified in its charter)
State of Delaware 75-2181442
(State of incorporation) (I.R.S. Employer
Identification No.)
700 Louisiana
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 223-1833
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No
------ -----
The number of shares of Common Stock, $.05 par value, outstanding on April 30,
1995 was 20,433,498.
<PAGE>
AMERAC ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets
------
December 31, March 31,
1994 1995
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets
Cash and equivalents $ 3,437,000 $ 3,643,000
Accounts receivable 142,000 168,000
Other 356,000 278,000
------------- -------------
Total current assets 3,935,000 4,089,000
------------- -------------
Oil and gas properties, successful efforts method 16,797,000 16,818,000
Accumulated depreciation, depletion and amortization (11,738,000) (12,004,000)
------------- -------------
Net oil and gas properties 5,059,000 4,814,000
------------- -------------
Other assets 168,000 159,000
------------- -------------
$ 9,162,000 $ 9,062,000
============= =============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities
Accounts payable $ 47,000 $ 40,000
Accrued liabilities 139,000 147,000
Current portion of long term debt 1,923,000 1,929,000
Current obligations under gas contract 757,000 720,000
------------- -------------
Total current liabilities 2,866,000 2,836,000
------------- -------------
Long term liabilities 542,000 465,000
------------- -------------
Shareholders' equity
Preferred stock 10,000,000 shares authorized
$2.25 Convertible exchangeable preferred
$1.00 par, 1,822,592 shares issued and outstanding 1,823,000 -
$4.00 Senior preferred, $1.00 par,
1,671,060 shares issued and outstanding - 1,671,000
Common stock $.05 par value;
50,000,000 shares authorized; 20,433,498 shares
issued and outstanding 794,000 1,022,000
Additional paid-in capital 142,936,000 141,690,000
Accumulated deficit (139,799,000) (138,622,000)
------------- -------------
Total shareholders' equity 5,754,000 5,761,000
------------- -------------
Contingencies (Note 6)
$ 9,162,000 $ 9,062,000
============= =============
</TABLE>
See accompanying notes to these Statements
-2-
<PAGE>
AMERAC ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended,
March 31,
---------------------------------
1994 1995
----------- ----------
<S> <C> <C>
Revenues
Oil and gas sales $ 1,115,000 $ 824,000
Other income 40,000 64,000
----------- -----------
1,155,000 888,000
----------- -----------
Expenses
Lease operating 206,000 200,000
Exploration 145,000 7,000
Depreciation, depletion and amortization 299,000 275,000
General and administrative 423,000 345,000
Interest 61,000 54,000
----------- -----------
1,134,000 881,000
----------- -----------
Income before tax 21,000 7,000
Provision for income tax - -
----------- -----------
Net income $ 21,000 $ 7,000
Preferred stock dividend (1,025,000) (194,000)
----------- -----------
Net loss applicable
to common stock $(1,004,000) $ (187,000)
=========== ===========
Net loss per common share $ (0.06) $ (0.01)
=========== ==========
Weighted average shares outstanding 15,884,000 16,390,000
=========== ==========
</TABLE>
See accompanying notes to these Statement
-3-
<PAGE>
AMERAC ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended,
March 31,
-------------------------
1994 1995
------------ -----------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 21,000 $ 7,000
Adjustments needed to reconcile to net cash flows:
Depreciation, depletion and amortization 299,000 275,000
Amortization of discount 6,000 6,000
Exploration expenses 145,000 -
Gain on sale of assets - (8,000)
Recognition of deferred revenue (93,000) (37,000)
Changes in current items relating to operations:
Accounts receivables and other 97,000 52,000
Accounts payables 44,000 (7,000)
Other liabilities (174,000) (69,000)
---------- ----------
Net cash flow provided by operations 345,000 219,000
---------- ----------
Cash flow from investing activities:
Proceeds from sale of assets - 16,000
Oil and gas expenditures (232,000) (29,000)
---------- ----------
Net cash flow used for investing activities (232,000) (13,000)
---------- ----------
Cash flow from financing activities:
Debt repayments (591,000) -
Other 14,000 -
---------- ----------
Net cash flow used for financing activities (577,000) -
---------- ----------
Net increase (decrease) in cash and equivalents (464,000) 206,000
Cash and equivalents at beginning of period 5,345,000 3,437,000
---------- ----------
Cash and equivalents, end of period $4,881,000 $3,643,000
========== ==========
Supplemental disclosure:
Cash for interest paid during the period $ 186,000 $ 55,000
========== ==========
</TABLE>
See accompanying notes to these Statements
-4-
<PAGE>
AMERAC ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
$2.25 Convertible Additional
Exchangeable $4.00 Senior Common Stock Paid-in Accumulated
Preferred Shares Preferred ($.05 par value) Capital Deficit Total
---------------------- --------------------- ---------------------- ------------ ------------- ----------
Shares Amount Shares Amount Shares Amount
--------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance-
December 31, 1994 1,822,592 $ 1,823,000 _ $ _ 15,883,772 $ 794,000 $142,936,000 $(139,799,000) $5,754,000
Exchange offer (1,822,592) (1,823,000) 1,634,305 1,634,000 4,549,726 228,000 (1,403,000) 1,364,000 _
Net income 7,000 7,000
$4.00 senior
preferred stock
dividend - - 36,755 37,000 - - 157,000 (194,000) -
--------- ----------- --------- ---------- ---------- ---------- ------------ ------------- ----------
Balance-
March 31, 1995 _ $ _ 1,671,060 $1,671,000 20,433,498 $1,022,000 $141,690,000 $(138,622,000) $5,761,000
========= =========== ========= ========== ========== ========== ============ ============= ==========
</TABLE>
See accompanying notes to these Statements.
-5-
<PAGE>
AMERAC ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1994 and 1995
1. ORGANIZATION AND NATURE OF BUSINESS
Amerac Energy Corporation, formerly Wolverine Exploration Company ("Amerac"
or the "Company") was formed in 1969 and is headquartered in Houston, Texas. The
Company is an oil and gas company focused on the acquisition and development of
oil and gas properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The results of operations for the interim periods shown in this report are
not necessarily indicative of results to be expected for the year. In the
opinion of management, the accompanying unaudited financial statements contain
all adjustments necessary to present fairly the financial position as of March
31, 1995, and the results of operations for the three months ended March 31,
1994 and 1995, and cash flow for the three months ended March 31, 1994 and 1995.
These financial statements and the notes thereto should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
December 31, 1994.
Net income (loss) per common share is computed by dividing the net income or
loss attributable to common shareholders by the weighted average number of
shares of Common Stock outstanding. In computing loss per share, the $4.00
Senior Preferred Stock ("Senior Preferred") dividends, declared for the period,
and after considering accretion of the discount on the $4.00 Senior Preferred
Stock, (see Note 4) decreases the income or increases the loss attributable to
common shareholders. The stock options and convertible debt are anti-dilutive
and were not included in the average shares outstanding during the periods
presented.
3. INDEBTEDNESS
At March 31, 1995, the Company had a $5 million revolver with a bank,
secured by virtually all producing properties and cash on hand. Effective May
12, 1995, the Company entered into a new $15 million revolving line of credit
the "Revolver", which replaced the $5 million revolver. The Revolver is a two
year revolving credit facility with interest due monthly and principal due at
May 31, 1997. The Revolver is secured by all of the Company's properties, and
contains various restrictive covenants which may, if not met, cause the Company
to be in default or reduce its access to additional borrowing. The borrowing
base, which will be determined semi-annually, has initially been set at $4.0
million. The Company entered into a $1.0 million bridge loan on April 28, 1995
to finance the Myrtle B acquisition (See Note 5). The bridge loan was
extinguished with the Revolver.
4. SHAREHOLDERS EQUITY
On February 3, 1995, the Company offered to exchange one share of its $4.00
Senior Preferred, with a stated value of $4.00 per share, par value $1.00 per
share and an initial dividend rate of $.36 per share, and 2.5 shares of Common
Stock for each outstanding share of $2.25 Convertible Exchangeable Preferred
Stock ("Old Preferred"), which carried a stated value of $25.00 per share and a
dividend rate of $2.25 per share. The exchange offer was approved by the holders
of a majority of the Common Stock and by approximately 90% of the Old Preferred
shareholders. As a result, 1,634,305 shares of Old Preferred were exchanged for
1,634,305 shares of $4.00 Senior Preferred Stock and 4,085,763 shares of Common
Stock. Holders of Old Preferred that did not exchange received 2.5 shares of
Common Stock for each share of Old Preferred not exchanged, resulting in the
issuance of 470,677 shares of Common Stock. This exchange offer had the effect
of eliminating all Old Preferred Stock and related dividend arrearages.
-6-
<PAGE>
AMERAC ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
March 31, 1994 and 1995
At the date of the exchange offer, the Company discounted the $4.00 Senior
Preferred Stock at an amount which would yield its perpetual dividend rate of
15% during the initial years when the actual dividend rate is less than the
perpetual dividend rate. Accordingly, the Company credited retained earnings and
debited additional paid in capital $1,364,000 representing the discount amount.
The $4.00 Senior Preferred Stock provides, among other things, that the
Company has the option to pay the quarterly dividends, which commenced January
1, 1995, for the first two years in either cash or additional shares of $4.00
Senior Preferred Stock. Thereafter, the Company has, under certain conditions,
the option to pay the dividends in cash or Common Stock. At this time, the
Company plans to pay the dividends in shares of $4.00 Senior Preferred Stock
during the first two years. The annual dividend rate increases from $.36 per
share to $.60 at January 1, 2000. The Company made its first dividend payment
on the $4.00 Senior Preferred Stock to holders of record as of March 31, 1995,
of $.09 per share in shares of $4.00 Senior Preferred Stock (36,755 shares).
The Company has the option of redeeming the $4.00 Senior Preferred Stock at face
value anytime. If the Company fails to pay its dividends on the $4.00 Senior
Preferred Stock, then the holders of the $4.00 Senior Preferred Stock have the
right to elect 80% of the Board of Directors.
5. ACQUISITION OF ASSETS
In April, 1995, the Company acquired a 68% working interest in the Cosden
Field in Bee County, Texas for approximately $2.9 million from working capital.
The field is currently producing from three wells. The Company estimates the
net proved reserves at 5.2 BCFE with an estimated life of 29 years.
In May, 1995, the Company completed the acquisition of the Myrtle "B" field
located in Loving County, Texas for $725,000. This acquisition includes four
producing wells and four proved undeveloped locations with total net estimated
proved reserves of 359,600 BOE. The Company acquired 100% working interest and
a 75% net revenue interest in these wells.
These acquisitions will be accounted for under the purchase method and
results of operations related to these properties will be consolidated beginning
on the date the acquisition was effected.
6. CONTINGENCIES
In February 1995, Geodyne Resources, Inc. ("Geodyne") filed an Original
Third-Party Petition naming the Company as third-party defendant. The Claim
arose out of the settlement of a 1986 accident by UPRC, operator of a property
in Summit County, Utah. UPRC subsequently sued Geodyne for a proportionate share
of the lawsuit involving the 1986 well accident. Geodyne purchased the property
from the Company in 1988 and is claiming that the Company is liable under the
indemnity provisions of the 1988 Purchase and Sale Agreement between the Company
and Geodyne. The amount of the claim against the Company is approximately
$176,000. The Company has filed a general denial and is reviewing this matter
with its insurance carriers and counsel. The Company has been indemnified for
any shortfall in the insurer's payment on the claim.
The Company is subject to various contingencies which arise primarily from
interpretation of federal and state laws and regulations affecting the oil and
gas industry. Such contingencies include differing interpretations as to the
prices at which oil and gas sales may be made, the prices at which royalty
owners may be paid for production from their leases and other matters. Although
management believes it has complied with the various laws and regulations,
administrative rulings and interpretations thereof, adjustment could be required
as new interpretations and regulations are issued. In addition, production
rates, marketing and environmental matters are subject to regulation by various
federal and state agencies.
-7-
<PAGE>
AMERAC ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company has improved its financial condition the last three years and
has improved the equity section of the balance sheet to position itself in such
a manner to grow. In early 1994, the Board of Directors re-evaluated the
Company's strategic plan. Based on the Company's limited capital availability,
its declining reserve base, and considering the size of the Company and the risk
associated with exploration, the Board concluded that the best strategy going
forward was the acquisition and exploitation of smaller producing properties.
Mr. Jeffrey B. Robinson was retained as President and Chief Executive Officer to
effect the new strategy. Mr. Robinson has considerable experience in
acquisitions, mostly recently as Vice President of Engineering and Operations of
Amax Oil and Gas Inc.
The Company has also improved the life of the property mix through its
property acquisitions in the last half of 1994 and the first half of 1995. At
January 1, 1994, the Company's properties had an expected life assuming current
production rates approximated four years, today, as a result of acquisitions, it
has been extended to approximately eight years. One of the immediate goals
of the Company was to build a base of properties with longer lives so that the
Company has a base and time with which to continue its acquisition strategies.
The Company will continue its efforts to increase the overall life of the
property mix as its primary property, South Timbailer, continues to decline.
The associated revenue decline would also severely restrict the ability of the
Company to continue to develop the properties it currently holds, which would
limit its ability to recognize the full potential of its properties.
The Company restructured its capital structure in an effort to enhance its
ability to attract the financing required for future acquisitions. Given the
$46 million liquidation rights and dividend arrearage of the Old Preferred, it
was difficult to access additional capital. In addition, the Company was
striving to preserve the $200 million net operating tax loss carryforward
("NOL"). In order to do so, the Company could not have an ownership change as
defined by the federal income tax laws, which limited the amount of common stock
the Company could issue. The recently completed exchange offer eliminated the
dividend in arrearage, the Old Preferred and maintained the NOL.
Future Strategy
The Company believes it is now in a better position to raise capital to
support its acquisition strategy. The Company plans to concentrate initially on
acquisitions where most of the value is in proved developed producing reserves.
Management is relatively indifferent as gas versus oil and, if possible, prefers
operatorship.
Along with the acquisition of properties, the Company will look for ways to
exploit existing and acquired reserves by increasing production rates,
accelerating recoveries and improving and extending the economic viability of
the properties. Exploitation activities may include workovers, recompletions,
development drilling, horizontal drilling, pressure maintenance projects, and
other methods of enhanced recovery.
While the Company is actively pursuing these avenues, there can be no
assurance that they will have successful results in an acquisition and
exploitation program. There is a tremendous amount of competition in the
industry and the prices paid for in-place reserves make it difficult to achieve
attractive rates of return. In addition, although the Company's projected cash
flow from its existing properties will cover overhead for a few years, without
successful results the Company's ability to replace its reserves and cash flow
therefrom will be limited.
-8-
<PAGE>
AMERAC ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- - - - - - ---------------------
Three Months Ended March 31, 1994 compared with Three Months Ended March 31,
1995
Oil and gas revenues decreased from $1.1 million in the first three months
of 1994 to $.8 million during the comparable period in 1995 as a result of a
decline in gas production and prices partially offset by increased oil
production and prices. Oil production for the three months increased from
approximately 225 barrels per day in the first three months of 1994 to
approximately 308 barrels per day for the comparable period in 1995, primarily
as a result of the acquisition of the Whiteaker properties in October, 1994;
however, gas production declined from approximately 4.1 MMcf per day for the
first three months of 1994 to approximately 2.7 MMcf per day for the comparable
period in 1995, resulting from normal depletion of reserves. The average prices
received for production increased for oil from $12.82 per Bbl during the first
three months of 1994 to $15.09 per Bbl during the comparable period in 1995 and
gas prices decreased from an average of $2.32 per Mcf for the first three months
of 1994 production to an average of $1.38 per Mcf for the first three months of
1995 production.
Lease operating expenses decreased from $206 thousand in the first three
months of 1994 to $200 thousand for the comparable period in 1995. Operating
expenses decreased with a general decline in gas production, the depletion of
certain wells and the sale of producing properties. Depreciation and
amortization expense also decreased from $299 thousand during the first three
months of 1994 to $275 thousand for the comparable period in 1995 as a result of
the decline in gas production partially offset by the increase in oil
production.
Exploration expenses decreased from $145 thousand in the first three months
of 1994 to $7 thousand for the comparable period in 1995. The 1994 expense was
a result of increased geological and geophysical activity with Lance Exploration
and increased impairment expenses as new undeveloped acreage was added to Lance
Exploration. The expense dropped sharply subsequent to the first quarter of
1994 after the disposition of Lance.
Administrative expenses declined from $423 thousand for the first three
months of 1994 to $345 thousand for the comparable period in 1995 primarily as a
result of the disposition of the Company's exploration subsidiary.
Interest expense decreased from $61 thousand in the first three months of
1994 to $54 thousand for the comparable period in 1995 as a result of the
overall repayment of debt.
Liquidity and Capital Resources
As discussed in Note 3, the Company entered into a "Revolver" in May 1995,
which provides a borrowing base based on the value of its properies. The
initial borrowing base will be reviewed and reset semi-annually and has been
initially set at $4.0 million.
While the Company funded the $2.9 million Cosden aquisition (see note 5)
with existing cash, it plans to fund future property acquisitions with the
Revolver, working capital, equity and other forms of financing. The Company has
repaid its subordinated debt due on May 15, 1995, with the proceeds drawn from
the Revolver and working capital.
Management currently intends to pay quarterly dividends on the $4.00 Senior
Preferred Stock in shares of the $4.00 Senior Preferred for the next two years.
(See Note 4)
-9-
<PAGE>
Part II. Other Information
---------------------------
Item 1. Legal Proceedings
- - - - - - --------------------------
See Note 6 - The Consolidated Financial Statements.
Item 6. Reports on Form 8-K during the First Quarter of 1995
- - - - - - -------------------------------------------------------------
None
-10-
<PAGE>
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.
AMERAC ENERGY CORPORATION
(Registrant)
By: /s/ JEFFREY L. STEVENS
-------------------------------------------------
Jeffrey L. Stevens
Senior Vice President and Chief Financial Officer
Date: May 15 , 1995
------
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q-
03/31/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,643,000
<SECURITIES> 0
<RECEIVABLES> 446,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,089,000
<PP&E> 16,977,000
<DEPRECIATION> (12,004,000)
<TOTAL-ASSETS> 9,062,000
<CURRENT-LIABILITIES> 2,836,000
<BONDS> 465,000
<COMMON> 1,022,000
0
1,671,000
<OTHER-SE> 3,068,000
<TOTAL-LIABILITY-AND-EQUITY> 9,062,000
<SALES> 824,000
<TOTAL-REVENUES> 888,000
<CGS> 482,000
<TOTAL-COSTS> 482,000
<OTHER-EXPENSES> 345,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,000
<INCOME-PRETAX> 7,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
