|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: GRAHAM FIELD HEALTH PRODUCTS INC, 10-Q, 1999-08-13 |
Next: UNIVERSAL AMERICAN FINANCIAL CORP, 8-K, 1999-08-13 |
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------
FORM 8-KA
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 1, 1999
CASTLE ENERGY CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
0-10990 76-0035225
(Commission File Number) (I.R.S. Employer Identification No.)
One Radnor Corporate Center, Suite 250, 100 Matsonford Road, Radnor, PA 19087
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(610) 995-9400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE>
Castle Energy Corporation ("Company") submits the following information:
ITEM 2. Acquisition or Disposition of Assets
On June 1, 1999, the Company consummated the purchase of the oil
and gas properties of AmBrit Energy Corp. ("AmBrit"). The oil and gas properties
include interests in approximately 230 oil and gas wells in Alabama, Louisiana,
Mississippi, Montana, New Mexico, Oklahoma, Texas and Wyoming, as well as
undrilled acreage in several of these states. The gross purchase price was
$22,000,000. Such purchase price was decreased by net production revenue during
the period January 1, 1999, the effective date, to May 31, 1999. The Company
estimates the adjusted purchase to approximate $20,886,000 after all
transactions from January 1, 1999 to May 31, 1999 have been accounted for. A
final accounting is expected not later than September 1, 1999. The Company used
corporate cash to fund the acquisition.
ITEM 7. Financial Statements and Exhibits
a. Historical Financial Statements of Assets Acquired:
1. Consolidated Financial Statements of AmBrit Energy Corp. for
the Year Ended December 31, 1998.
2. Consolidated Financial Statements of AmBrit Energy Corp. for
the Period October 1, 1998 to March 31, 1999.
b. Proforma Financial Information
1. Explanation of Proforma Financial Statements
2. Proforma Consolidated Balance Sheet - March 31, 1999
3. Proforma Consolidated Statement of Operations For the Year
Ending September 30, 1998
4. Proforma Consolidated Statement of Operations for the Period
October 1, 1998 to March 31, 1999
5. Reconciliation Between UK and US Accounting Principles
-1-
<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.
CASTLE ENERGY CORPORATION
Date: August 11, 1999 By: /s/ RICHARD E. STAEDTLER
------------------- ------------------------
Richard E. Staedtler
Chief Financial Officer
<PAGE>
Exhibit 7.a.1
AMBRIT ENERGY CORP
REPORT AND ACCOUNTS
DECEMBER 31, 1998
<PAGE>
Report of the Auditor, KPMG Audit Pic
We have audited the financial statements on pages 2 to 9.
Respective responsibilities of AmBrit Energy Corp and KPMG Audit Plc
In accordance with the terms of our engagement letter, we have examined the
attached summarised financial statements (as defined in the engagement letter)
of AmBrit Energy Corp (the Company), as at December 31, 1998, and for the year
then ended.
You will appreciate that the summarised financial statements have been prepared
by, and are solely the responsibility of, the Company's management. As stated in
our engagement letter, our engagement is subject to English law and subject to
the exclusive jurisdiction of the courts of England and Wales. We accept no
liability to any third party in respect of the work performed and our opinion on
the summarised financial statements.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts in the summarised financial statements. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the summarised financial statements, and of
whether the accounting policies are appropriate to the Company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the summarised financial
statements are free from material misstatement, whether caused by fraud or other
irregularity or error.
Opinion
In our opinion the summarised financial statements present fairly the net assets
of the Company as at December 31, 1998 and the loss of the Company for the year
then ended, on the basis specified in the engagement letter and in conformity
with United Kingdom generally accepted accounting standards.
This report is solely for the information and use of the Directors of the
Company and is not to be quoted or referred to, in whole or in part, without our
prior written consent.
/s/KPMG Audit Plc
KPMG Audit Plc
Chartered Accountants
Registered Auditor
London, 30 April 1999
1
<PAGE>
AMBRIT ENERGY CORP
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Notes 1998 1997
----- --------- -------
<S> <C> <C> <C>
$ 000 $ 000
Turnover 1 8,999 8,933
------- -------
COST OF SALES
Production costs (3,629) (2,887)
Depletion of oil and gas interests (4,220) (2,850)
Exceptional impairment of oil and gas interests 2 (2,490) -
------- -------
(10,339) (5,737)
------- -------
GROSS (LOSS)/PROFIT (1,340) 3,196
Administrative expenses (1,262) (1,119)
Group management fees (210) (210)
Income as operator 390 317
------- -------
OPERATING (LOSS)/PROFIT (2,422) 2,184
Interest receivable and similar income 3 288 280
Interest payable and other charges 4 (1,407) (916)
------- -------
(LOSS)/PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION (3,541) 1,548
Taxation 5 - (41)
------- -------
RETAINED (LOSS)/PROFIT FOR THE
FINANCIAL YEAR 12 (3,541) 1,507
======= =======
</TABLE>
The movement in reserves are set out in Note 12.
The Company had no recognised gains or losses other than those in the profit and
loss account.
All items dealt with in arriving at the operating (loss)/profit for 1998 and
1997 relate to operations which, while continuing in 1998 and 1997 are to be
discontinued.
The result as shown in the profit and loss account is not materially different
from the result on an unmodified historic cost basis.
2
<PAGE>
AMBRIT ENERGY CORP
BALANCE SHEET AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
Notes 1998 1997
----- -------- ------
<S> <C> <C> <C>
$ 000 $ 000
FIXED ASSETS
Intangible exploration assets 6 184 309
Tangible assets 7 19,723 18,700
-------- ------
19,907 19,009
CURRENT ASSETS
Debtors 8 6,259 5,612
Cash at bank and in hand 705 550
-------- ------
6,964 6,162
-------- ------
CREDITORS - amounts falling
due within one year 9 (5,114) (1,416)
-------- --------
NET CURRENT ASSETS 1,850 4,746
-------- --------
TOTAL ASSETS LESS
CURRENT LIABILITIES 21,757 23,755
CREDITORS - amounts falling
due after more than one year 10 (13,880) (12,337)
-------- --------
NET ASSETS 7,877 11,418
======== ========
CAPITAL AND RESERVES
Called up share capital 11 - -
Share premium account 17,376 17,376
Profit and loss account 12 (9,499) (5,958)
-------- --------
SHAREHOLDER'S FUNDS - EQUITY 7,877 11,418
======== ========
</TABLE>
These financial statements were approved by the Board of Directors on 30 April
1999 and were signed on its behalf by:
/s/N J Tamblyn
N J Tamblyn
Director
30 April 1999
3
<PAGE>
AMBRIT ENERGY CORP
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER, 31 1998
1. ACCOUNTING POLICIES
Accounting convention
The financial statements are prepared under the historical cost convention
and in accordance with applicable accounting standards.
Turnover
Turnover comprises the value of sales of oil and gas produced from the
Company's directly owned producing interests, net of sales taxes, together
with other related income. All turnover by both destination and origin
arises in the United States.
Foreign currency translation
Transactions with third parties are translated into dollars at the exchange
rates prevailing at the date of each transaction. Assets and liabilities
denominated in foreign currencies are translated into dollars at the rates
of exchange ruling at the balance sheet date. An exchange gain or loss is
dealt with through the profit and loss account.
Deferred taxation
Deferred tax is provided on the liability method on all timing differences
to the extent that they are expected to crystallise in the foreseeable
future. It is calculated at the rate at which it is estimated that tax will
be payable.
Oil and gas interests
The full cost method of accounting is used to record interests in oil and
gas properties. Under this method the acquisition cost of leaseholds and
licences, legal costs in establishing title, geological and geophysical
costs, attributable overheads and other direct costs of exploration,
appraisal and development of oil and gas reserves are capitalised and
accumulated in a single full cost pool.
The costs of properties under appraisal, called intangible exploration
assets, are assessed periodically to determine whether impairment has
occurred or commerciality has been proven. When impairment has occurred, or
when commerciality is determined and a decision to develop the field has
been taken, these costs are transferred to tangible fixed assets.
All tangible fixed assets and future development costs are depleted using
the unit-of-production method, based on proved commercial reserves. Any
changes in commercial reserve estimates are adjusted over the remaining
life of the field from the start of the year. Any disposal proceeds are
deducted from the cost pool.
The net aggregate carrying value of intangible and tangible oil and gas
interests are assessed for recoverability against the anticipated
discounted future net cash flows to be derived from their estimated
remaining commercial reserves. The assessment is made on the basis of
future oil and gas prices and cost levels forecast at the balance sheet
date. A provision is made by way of accelerated depreciation, where the
aggregate carried value exceeds the discounted future net cash flows to be
derived from its estimated remaining commercial reserves.
Other tangible fixed assets
Other tangible fixed assets are stated at cost less accumulated
depreciation. Depreciation is provided on a straight line basis to write
the cost of assets over their estimated useful lives at the following rates
per annum.
Fixtures and fittings - 20 per cent Motor vehicles - 33 per cent
Abandonment
No provision is made for abandonment liabilities as the salvage values of
equipment are projected to offset the costs of plugging and abandonment.
4
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
2. EXCEPTIONAL ITEM
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
$ 000 $ 000
----- -----
Impairment of oil and gas interests 2,490
======== ======
An impairment review was performed as at 31 December 1998 in accordance
with the Company's policy. The introduction of FRS 11 during the year
has required us to change the basis on which the test is performed. The
key differences are the use of escalated oil and gas prices and costs
levels in determining future net revenues and the requirement to
discount the cash flows. Had the revised approach been followed in
determining the 1997 results, no adjustment would have been necessary
for impairment that year.
The impairment write down of the Company's oil and gas assets reflects
the impact of weak oil and gas pricing on their realisable value, net of
the costs of realising the assets.
3. INTEREST RECEIVABLE AND SIMILAR INCOME
1998 1997
$ 000 $ 000
-------- ------
Inter-company interest receivable 280 280
Exchange gains 8 -
-------- ------
288 280
======== ======
4. INTEREST PAYABLE AND OTHER CHARGES
1998 1997
$ 000 $ 1000
-------- ------
Interest payable on bank overdrafts
and loans wholly repayable within five years 1,201 646
Inter-company interest payable 206 246
Exchange losses - 24
-------- ------
1,407 916
======== ======
5. TAXATION
1998 1997
$ 000 $ 000
-------- ------
Adjustment relating to an earlier year - 41
======== ======
</TABLE>
Due to the availability of taxation losses, the Company has no liability to
deferred tax at December 31, 1998 (1997: Nil)
5
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
6. INTANGIBLE EXPLORATION ASSETS
$ 000
Cost:
<S> <C>
As at January 1, 1998 309
Additions 2,235
Transfer to tangible fixed assets (2,360)
------
As at December 31, 1998 184
======
</TABLE>
<TABLE>
<CAPTION>
7. TANGIBLE FIXED ASSETS
Fixtures, Oil & gas
fittings & interests Total
motor vehicles
$ 000 $ 000 $ 000
----- ----- -----
<S> <C> <C> <C>
Cost:
As at January 1, 1998 282 32,766 33,048
Additions 21 5,480 5,501
Transfer from intangible exploration assets - 2,360 2,360
Disposals (13) (64) (77)
------ ------- -------
As at December 31, 1998 290 40,542 40,832
====== ======= =======
Depletion & Depreciation:
As at January 1, 1998 150 14,198 14,348
Charge for the year 64 4,220 4,284
Exceptional impairment charge - 2,490 2,490
Disposals (13) - (13)
------ ------- -------
As at December 31, 1998 201 20,908 21,109
====== ======= =======
Net book value:
As at December 31, 1998 89 19,634 19,723
====== ======= =======
As at January 1, 1998 132 18,568 18,700
====== ======= =======
</TABLE>
6
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
8. DEBTORS
1998 1997
$ 000 $ 000
----- ------
<S> <C> <C>
Amounts falling due within one year:
Trade debtors 2,218 1,672
Prepayments and accrued income 121 135
Amounts due from ultimate holding company 1,057 202
------ ------
3,396 2,009
------ ------
Amounts falling due after more than one year:
Amounts due from intermediate holding company 2,863 3,093
Amounts due from ultimate holding company - 510
------ ------
2,863 3,603
------ ------
Total Debtors 6,259 5,612
====== ======
9. CREDITORS - amounts falling due within one year
1998 1997
$ 000 $ 000
------ ------
Bank loan (secured) (Note 10) 2,800 -
Trade creditors 987 1,005
Amount owed to ultimate holding company 760 -
Accruals 567 411
------ ------
5,114 1,416
====== ======
10. CREDITORS - amounts falling due after more than one year
1998 1997
$ 000 $ 000
------ ------
Bank loan (secured) 11,910 9,320
Amount owed to ultimate holding company 1,970 3,017
------ ------
13,880 12,337
====== ======
</TABLE>
7
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
10. CREDITORS - amounts falling due after more than one year (continued)
Borrowings at December 31, 1998 were repayable as follows:
<TABLE>
<CAPTION>
1998 1997
$ 000 $ 000
------ ------
<S> <C> <C>
Less than one year 2,800 -
Between one and two years - 3,017
Between two and five years 11,910 9,320
------ ------
14,710 12,337
====== ======
</TABLE>
At 31 December 1998 the bank loans represented drawings against a $15.3
million facility of which a total of $14.7 million had been drawn at 31
December 1998. Interest was payable at a rate of 1/2% above US Prime
Rate. The loan is secured on the Company's producing oil and gas assets
and is repayable by 31 December 2002.
Subsequent to the year end, the bank have reviewed the terms of the
facility and reduced the facility to $14.7 million. At this time, had
the bank determined the facility in accordance with their normal
procedures used by the bank, the facility would have been $12.5
million. In light of the over advance the bank is due to perform a
further redetermination of the facility at 1 July 1999, by which time
they expect the over advance to be rectified. Additionally, until such
time as the over advance is rectified, the interest rate will increase
from 1/2% above US Prime Rate to 1 1/2% above US Prime Rate and the
bank will require a monthly commitment reduction, effective 1 April
1999 of $200,000. The over advance and monthly commitment reductions
due by 1 July 1999 are shown as due within one year.
The amount owed to the ultimate holding company is repayable in three
equal annual instalments commencing 8 July 1999. Interest is payable at
a rate of 0.5% above US Prime Rate.
<TABLE>
<CAPTION>
<S>
11. CALLED UP SHARE CAPITAL <C> <C>
1998 1997
$ 000 $ 000
----- -----
Authorised
1,000 (1997 : 1,000) shares of $1.00 each 1 1
======= =======
Allotted, called-up and fully paid
65 (1997 : 65) shares of $1.00 each - -
======= =======
12. PROFIT AND LOSS ACCOUNT
1998 1997
$ 000 $ 000
------- -------
As at January 1, 1998 (5,958) (7,465)
(Loss)/profit for the financial year (3,541) 1,507
------- -------
As at December 31, 1998 (9,499) (5,958)
======= =======
</TABLE>
8
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
13. OBLIGATIONS UNDER LEASES
<TABLE>
<CAPTION>
The Company's annual commitments under non-cancellable operating leases,
which are in respect of office space, are as follows:
<S> <C> <C>
1998 1997
$ 000 $ 000
----- ----
Expiring 1999-2000 75 47
===== =====
</TABLE>
14. POST BALANCE SHEET EVENTS
On 1 April 1999, the Company entered into a conditional agreement to sell
all its oil and gas interests to Castle Energy Corporation for a cash
consideration of US$22 million with an effective date of I January 1999.
Amongst other matters, the agreement is subject to approval by the
ultimate Parent Company's shareholders and a Circular is being sent to
shareholders in this respect.
No material tax charge will result from the above transaction.
15. ULTIMATE PARENT COMPANY AND PARENT UNDERTAKING OF LARGER GROUP, OF WHICH
THE COMPANY IS A MEMBER
The Company is an indirect subsidiary undertaking of United Energy plc, a
company incorporated in Great Britain and registered in England and
Wales.
The largest group in which the results of the Company are consolidated is
that headed by United Energy Plc. These consolidated financial statements
may be obtained from 51 The Promenade, Cheltenham, Glos., GL50 1PJ, UK.
9
<PAGE>
viia(2)
AmBrit Energy Corp
Financial Statements
October 1, 1998 - March 31, 1999
(Unaudited)
<PAGE>
AmBrit Energy Corp
Consolidated Balance Sheet
March 31, 1999
("000's" Omitted)
Unaudited
Assets
---------
Assets
Current Assets:
Cash $ 543
Receivables - affiliated companies 1,188
Marketable securities
Accounts receivable 2,194
Advance to joint venture
Accounts receivable - other 134
--------
4,059
Fixed Assets:
Oil and gas 19,203
Furniture, fixtures and vehicles 84
--------
$ 23,346
========
Liabilities and Equity
Current Liabilities:
Accounts payable $ 853
Accrued expenses 623
--------
1,476
Long Term Liability:
Bank loans 14,510
--------
15,986
--------
Shareholders Equity:
Common stock
Paid in capital 17,374
Retained earnings (10,014)
--------
7,360
--------
$ 23,346
========
<PAGE>
AmBrit Energy Corp.
Consolidated Statement of Operations
October 1, 1998 to March 31, 1999
("000's" Omitted)
(Unaudited)
Revenues:
Oil and gas sales $ 4,455
Operating fees 183
-------
4,638
-------
Costs and Expenses:
Lease operating costs 1,887
Depletion 2,280
Asset impairment 2,490
General and administrative 780
-------
7,437
-------
Net Income Before Tax Provision (2,799)
Tax Provision
-------
Net Income ($2,799)
=======
<PAGE>
AmBrit Energy Corp
Consolidated Statement of Cash Flows
October 1, 1998 to March 31, 1999
("000's" Omitted)
Unaudited
Net cash flow provided by operating activities $ 414
-----
Cash flows from investing activities:
Purchase of oil and gas properties (95)
-----
(95)
Cash flows from financing activities:
Bank repayments (200)
-----
(200)
Net increase (decrease) in cash and cash equivalents 119
Cash and cash equivalents - beginning of period 424
-----
Cash and cash equivalents - end of period $ 543
=====
<PAGE>
viib(1)
EXPLANATION OF PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
The following proforma consolidated balance sheet and statements of
operations of the Company reflect the proforma effects of the purchase of the
oil and gas properties of AmBrit Energy Corp. ("Purchase") as if the Purchase
had occurred on (i) March 31, 1999 for balance sheet purposes, (ii) October 1,
1997 for purposes of the statement of operations for the year ended September
30, 1998 and (iii) October 1, 1998 for purposes of the statement of operations
for the six months ended March 31, 1999 under the purchase method of accounting.
The proforma consolidated financial statements assume that the final adjusted
purchase price will be $20,886,000. The Company financed the acquisition using
working capital.
The Proforma Consolidated Statements of the Company do not purport to
represent what the Company's financial position or results of operations would
actually have been if the purchase in fact had occurred on such dates or to
project the Company's financial condition or results of operations as of any
future date or for any future period. The proforma adjustments are based upon
available information and upon certain assumptions that the Company believes are
reasonable under the circumstances. The proforma consolidated financial
statements and accompanying notes should be read in conjunction with the
historical consolidated financial statements of the Company and notes thereto
and the other financial information regarding the Company included in filings
with the Securities and Exchange Commission made by the Company.
<PAGE>
viib(2)
Castle Energy Corporation and Subsidiaries
Proforma Consolidated Balance Sheet
March 31, 1999
("000's" Omitted Except Share Amounts)
<TABLE>
<CAPTION>
Proforma
Adjustment:
Historical Asset
(Unaudited) Purchase (a) Proforma
----------- ----------- -----------
ASSETS
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 43,845 ($ 20,886) $ 22,959
Restricted cash 924 924
Accounts receivable 7,964 7,964
Marketable securities 575 575
Prepaid transportation, net 171 171
Prepaid expenses and other current assets 204 204
Prepaid gas purchases 0
Deferred income taxes 0
Note receivable - Penn Octane Corporation 100 100
Estimated realizable value of discontinued net refining assets 3,495 3,495
----------- ----------- -----------
Total current assets 57,278 (20,886) 36,392
Property, plant and equipment, net:
Natural gas transmission 75 75
Furniture, fixtures and equipment 265 265
Oil and gas properties, net (full cost method) 4,752 20,886 25,638
Gas contracts, net 1,480 1,480
Investment in preferred stock - Penn Octane 477 477
Other assets 17 17
----------- ----------- -----------
Total assets $ 64,344 -- $ 64,344
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Dividends payable $ 401 $ 401
Accounts payable 6,051 6,051
Accrued expenses 825 825
Net refining liabilities retained 5,900 5,900
----------- -----------
Total current liabilities 13,177 13,177
Other long-term liabilities 1 1
----------- -----------
Total liabilities 13,178 13,178
----------- -----------
Commitments and contingencies
Stockholders' equity:
Series B participating preferred stock; par value -
$1.00; 10,000,000 shares authorized; no shares issued
Common stock; par value - $0.50; 25,000,000 shares authorized;
6,803,646 3,402 3,402
Additional paid-in capital 67,122 67,122
Retained earnings 40,001 40,001
----------- -----------
110,525 110,525
Treasury stock at cost - 4,202,617 shares at March 31, 1999 (59,359) (59,359)
----------- -----------
Total stockholders' equity 51,166 51,166
----------- -----------
Total liabilities and stockholders' equity $ 64,344 $ 64,344
=========== ===========
</TABLE>
<PAGE>
viib(2)
2 of 2
Castle Energy Corporation
Notes to the Proforma Consolidated Balance Sheet
March 31, 1999
Unaudited
("000's" Omitted)
General
Gives effect to the Purchase as though it occurred March 31, 1999.
(a) Reflects estimated adjusted purchase price paid for oil and gas
properties of AmBrit Energy Corp. as follows:
Gross purchase price on effective date, 1/1/99 $22,000
Anticipated purchase price adjustment, 1/1/99-5/31/99 (1,114)
---------
$20,886
=========
Estimated adjusted purchase price $20,886
=========
A final accounting for the purchase price adjustment, taking into
account revenues and expenses applicable to the period January 1, 1999 to May
31, 1999 that have still not yet been received or paid, will be made prior to
September 1, 1999.
<PAGE>
viib(3)
1 of 2
Castle Energy Corporation and Subsidiaries
Proforma Consolidated Statement of Operations
Year Ended September 30, 1998
(Unaudited)
("000's" Omitted Except Share Amounts)
<TABLE>
<CAPTION>
Proforma Adjustments
--------------------------------------
Oil & Gas
Depletion
and Full
Cost Interest
Historical Operations(1) Write-Offs(2) Income (3)
--------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Natural gas marketing and transmission:
Gas sales $70,001
---------
Exploration and production:
Oil and gas sales 2,373 $8,999
Well operations 230 390
--------- -----------
2,603 9,389
--------- -----------
72,604 9,389
--------- -----------
Expenses:
Natural gas marketing and transmission:
Gas purchases 43,254
Operating costs (16)
General and administrative 62
Depreciation and amortization 9,462
Transportation 1,539
---------
54,301
---------
Exploration and production:
Oil and gas production 775 3,629
General and administrative 992
Impairment of oil and gas properties 1,716 ($1,716)
Depreciation, depletion and amortization 423 4,414 (1,330)
--------- ----------- ----------
2,190 9,759 (3,046)
--------- ----------- ----------
Corporate general and administrative expenses 3,081 1,472
--------- ----------- ----------
59,572 11,231 (3,046)
--------- ----------- ----------
Operating income (loss) 13,032 (1,842) (3,046)
--------- ----------- ----------
Other income (expense):
Interest income 2,271 ($1,044)
Other income (expense) (41)
Interest expense (2)
--------- ----------- ---------- ----------
2,228 (1,044)
--------- ----------- ---------- ----------
Net income (loss) before provision for (benefit of) income taxes 15,260 (1,842) (3,046) (1,044)
--------- ----------- ---------- ----------
Provision for income taxes:
State 40
Federal 1,164
---------
1,204
--------- ----------- ---------- ----------
Net income (loss) $14,056 ($1,842 ($3,046) ($1,044)
========= =========== ========== ==========
Net income (loss) per share:
Basic $3.71 ($0.49) $0.80 ($0.28)
========= =========== ========== ==========
Diluted $3.66 ($0.48) $0.79 ($0.27)
========= =========== ========== ==========
Weighted average number of common and common
equivalent shares outstanding:
Basic 3,790,100 3,790,100 3,790,100 3,790,100
========= =========== ========== ==========
Diluted 3,837,903 3,837,903 3,837,903 3,837,903
========= =========== ========== ==========
</TABLE>
<PAGE>
viib(3)
continued
Castle Energy Corporation and Subsidiaries
Proforma Consolidated Statement of Operations
Year Ended September 30, 1998
(Unaudited)
("000's" Omitted Except Share Amounts)
<TABLE>
<CAPTION>
Tax
Effects (4) Proforma
---------- ---------
<S> <C> <C>
Revenues:
Natural gas marketing and transmission:
Gas sales $70,001
---------
Exploration and production:
Oil and gas sales 11,372
Well operations 620
---------
11,992
---------
81,993
---------
Expenses:
Natural gas marketing and transmission:
Gas purchases 43,254
Operating costs (16)
General and administrative 62
Depreciation and amortization 9,462
Transportation 1,539
---------
54,301
---------
Exploration and production:
Oil and gas production 4,404
General and administrative 992
Impairment of oil and gas properties
Depreciation, depletion and amortization 3,507
---------
8,903
---------
Corporate general and administrative expenses 4,553
---------
67,757
---------
Operating income (loss) 14,236
---------
Other income (expense):
Interest income 1,227
Other income (expense) (41)
Interest expense (2)
---------
1,184
---------
Net income (loss) before provision for (benefit of) income taxes 15,420
---------
Provision for income taxes:
State 40
Federal $8 1,172
---------- ---------
8 1,212
---------- ---------
Net income (loss) ($8) $14,208
========== =========
Net income (loss) per share:
Basic ($0.00) $3.75
========== =========
Diluted ($0.00) $3.70
========== =========
Weighted average number of common and common
equivalent shares outstanding:
Basic 3,790,100 3,790,100
========== =========
Diluted 3,837,903 3,837,903
========== =========
</TABLE>
<PAGE>
viib(3)
2 of 2
Castle Energy Corporation
Notes to the Proforma Consolidated Statements of Operations
Year Ended September 30, 1998
Unaudited
("000's" Omitted)
General
Gives effect to the Purchase as though it occurred October 1, 1997.
1. Reflects the operating results of AmBrit converted to U.S. generally
accepted accounting principles. The Company purchased all of AmBrit's oil
and gas properties.
A reconciliation of AmBrit's operating loss per United Kingdom generally
accepted accounting principles ("GAAP") to AmBrit's operating loss per
United States generally accepted accounting principles is as follows:
Operating loss - United Kingdom GAAP ($3,541)
Impairment of oil/gas properties 774
Depletion, depreciation and amortization (194)
--------
Operation loss - United States GAAP ($2,961)
========
2. Represents decreases in depletion, depreciation and amortization and in
full cost asset impairment that would result if both of these calculations
were made on a consolidated rather than a separate company basis. The
resulting decrease in depreciation, depletion and amortization results
from increases in oil and gas prices and resulting economic reserves. The
decrease in asset impairment results for the same reason and because the
excess full cost ceiling book value of the Company's other oil and gas
assets offsets the deficient full cost ceiling book value related to the
AmBrit oil and gas assets.
3. Represents the estimated loss of interest income as a result of the
payment of the $20,886 adjusted purchase price on October 1, 1997. The
weighted average interest rate was assumed to be 5%.
4. Represents the additional tax provision related to adjustments #1-#3. Due
to tax carryforwards, the Company's effective tax rate is only 2% -
representing Federal alternative minimum taxes.
<PAGE>
viib(4)
1 of 2
Castle Energy Corporation and Subsidiaries
Proforma Consolidated Statement of Operations
For the Period October 1, 1998 to March 31, 1999
(Unaudited)
("000's" Omitted Except Share Amounts)
<TABLE>
<CAPTION>
Proforma Adjustments
-------------------------------------
Oil & Gas
Depreciation
And Interest
Historical Operations (1) Depletion (2) Income (3)
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Revenues:
Natural gas marketing and transmission:
Gas sales $42,152
---------
Exploration and production:
Oil and gas sales 972 $4,455
Well operations 177 183
--------- ---------
1,149 4,638
--------- ---------
43,301 4,638
--------- ---------
Expenses:
Natural gas marketing and transmission:
Gas purchases 26,264
Operating costs 953
Depreciation and amortization 156
Transportation 4,731
---------
32,104
---------
Exploration and production:
Oil and gas production 481 1,887
General and administrative 396
Impairment of oil and gas properties 1,716 ($1,716)
Depreciation, depletion and amortization 149 2,377 (838)
--------- --------- ---------
1,026 5,980 (2,554)
--------- --------- ---------
Corporate general and administrative expenses 1,891 780
--------- --------- ---------
35,021 6,760 (2,554)
--------- --------- ---------
Operating income (loss) 8,280 (2,122) 2,554
--------- --------- ---------
Other income (expense):
Interest income 945 ($522)
Other income (expense) 34
--------- --------- --------- ----------
979 (522)
--------- --------- --------- ----------
Net income (loss) before provision for (benefit of) income taxes 9,259 (2,122) 2,554 (522)
--------- --------- --------- ----------
Provision for income taxes:
State 78
Federal 2,732
---------
2,810
--------- --------- --------- ----------
Net income (loss) $6,449 ($2,122) $2,554 ($522)
========= ========= ========= ==========
Net income (loss) per share:
Basic $2.24 ($0.73) $0.89 ($0.18)
========= ========= ========= ==========
Diluted $2.20 ($0.72) $0.87 ($0.18)
========= ========= ========= ==========
Weighted average number of common and common
equivalent shares outstanding:
Basic 2,884,921 2,884,921 2,884,921 2,884,921
========= ========= ========= ==========
Diluted 2,936,124 2,936,124 2,936,124 2,936,124
========= ========= ========= ==========
</TABLE>
<PAGE>
viib(4)
continued
Castle Energy Corporation and Subsidiaries
Proforma Consolidated Statement of Operations
For the Period October 1, 1998 to March 31, 1999
(Unaudited)
("000's" Omitted Except Share Amounts)
<TABLE>
<CAPTION>
Tax
Effects (4) Proforma
--------- ---------
<S> <C> <C>
Revenues:
Natural gas marketing and transmission:
Gas sales $42,152
---------
Exploration and production:
Oil and gas sales 5,427
Well operations 360
---------
5,787
---------
47,939
---------
Expenses:
Natural gas marketing and transmission:
Gas purchases 26,264
Operating costs 953
Depreciation and amortization 156
Transportation 4,731
---------
32,104
---------
Exploration and production:
Oil and gas production 2,368
General and administrative 396
Impairment of oil and gas properties
Depreciation, depletion and amortization 1,688
---------
4,452
---------
Corporate general and administrative expenses 2,671
---------
39,227
---------
Operating income (loss) 8,712
---------
Other income (expense):
Interest income 423
Other income (expense) 34
---------
457
---------
Net income (loss) before provision for (benefit of) income taxes 9,169
---------
Provision for income taxes:
State 78
Federal ($18) 2,714
--------- ---------
(18) 2,792
--------- ---------
Net income (loss) $18 $6,377
========= =========
Net income (loss) per share:
Basic ($0.01) $2.21
========= =========
Diluted ($0.01) $2.16
========= =========
Weighted average number of common and common
equivalent shares outstanding:
Basic 2,884,921 2,884,921
========= =========
Diluted 2,936,124 2,936,124
========= =========
</TABLE>
<PAGE>
viib(4)
2 of 2
Castle Energy Corporation
Notes to the Proforma Consolidated Statements of Operations
For The Period October 1, 1998 to March 31, 1999
Unaudited
("000's" Omitted)
General
Gives effect to the Purchase as though it occurred October 1, 1998.
1. Reflects the operating results of AmBrit for the six months
ended March 31, 1999. The Company purchased all of AmBrit's oil
and gas properties.
A reconciliation of AmBrit's operating loss per United Kingdom's
generally accepted accounting principles ("GAAP") to AmBrit's
operating loss per United States generally accepted accounting
principles ("GAAP") is as follows:
Operating loss - United Kingdom GAAP ($2,799)
Impairment of oil/gas properties 774
Depletion, depreciation and amortization (97)
--------
Operation loss - United States GAAP ($2,122)
========
2. Represents decreases in depletion, depreciation and amortization
and in full cost asset impairment that would result if both of
these calculations were made on a consolidated rather than a
separate company basis. The resulting decreases in depreciation,
depletion and amortization results from increases in oil and gas
prices and resulting economic reserves. The decrease in asset
impairment results for the same reason and because the excess
full cost ceiling book value of the Company's other oil and gas
assets offsets deficient full cost ceiling book value related to
the AmBrit oil and gas assets.
3. Represents the estimated loss of interest income as a result of
the payment of the $20,886 adjusted purchase price on October 1,
1998. The weighted average interest rate was assumed to be 5%.
4. Represents the additional tax provision related to adjustments
#1-#3. Due to tax carryforwards, the Company's effective tax
rate is only 2% - representing Federal alternative minimum
taxes.
<PAGE>
viib(5)
Reconciliation Between UK and US Accounting Principles
(Unaudited)
("000's" Omitted)
The accounts of AmBrit Energy Corp. are prepared in accordance with generally
accepted accounting principles applicable in the UK (UK GAAP) which differ in
certain significant respects from those applicable in the US (US GAAP).
The following is a summary of the material adjustments to profit and
shareholders' equity which would be required had the accounts been prepared
under US rather than UK GAAP.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Effect on profit ($3,541) $1,507
(Loss) profit after taxation under UK GAAP
US GAAP adjustments:
Impairment of long-lived assets (a) 774
Unit of production adjustment (b) (194) (140)
--------- ---------
Approximate net (loss) profit under US GAAP ($2,961) $1,367
========= =========
Effect on shareholders' equity
Shareholders' equity under UK GAAP $7,877 $11,418
US GAAP adjustments:
Impairment of long-lived assets (a) 774
Unit of production adjustment (b) (202) (8)
--------- ---------
Approximate shareholders' equity as stated under US GAAP $8,449 $11,410
========= =========
</TABLE>
(a) Under UK GAAP, FRS 11 "Impairment of Fixed Assets and Goodwill" requires
the Company to perform an impairment review, comparing the carrying amount
of the fixed assets with its recoverable amount based on a discounted cash
flow model using a discount rate appropriate to the circumstances of the
business and making appropriate estimates of all the expected cash flows
which are attributable to that asset. Under US GAAP there are specific
regulations governing the performance of a "Ceiling Test" for impairment of
oil and gas assets, which require the Company to perform the cash flow
based on current pricing and a discount factor of ten percent. The
application of the two different models results in a different net book
value for the Company's oil and gas assets.
(b) Under both UK GAAP and US GAAP depletion is calculated on a unit of
production basis. However, as reported in (a) above, different pricing
assumptions are applied to the reserves recoverable in future years. As a
result, the commercially viable reserves differ under US GAAP giving rise
to a different unit of production charge for depletion.
In addition additional or different disclosure would be required under US
GAAP. In particular, disclosure, would be required of supplementary
information for oil and gas producing activities including estimated
quantities of proved oil and gas reserves, analyses of expenditures and
standardized measures of discounted future cash flows attributable to the
Company's proved oil and gas reserves.
|
|