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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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)
December 20, 1996
AMERICAN EXPLORATION COMPANY
(Exact Name of Registrant as Specified in Its Charter)
0-11871
(Commission File Number)
DELAWARE 74-2086890
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1331 LAMAR, SUITE 900
HOUSTON, TEXAS 77010
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 756-6000
N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OF ASSETS
On December 20, 1996, American Exploration Company (the "Company")
acquired from New York Life Insurance Company ("New York Life") and
certain of its affiliates (collectively, the "Limited Partners") the
Limited Partners' aggregate 80% interest in the net assets of Ancon
Partnership Ltd. ("Ancon") for a purchase price of approximately $12.9
million. The acquisition was funded through borrowings under the
Company's bank credit facility.
The net assets acquired by the Company included interests in proved oil
and gas reserves totaling an estimated 2.3 million BOE as of October 1,
1996, the effective date of the transaction. The interests in oil and
gas properties were valued at approximately $9 million, and the
remaining purchase price was attributable to acquired working capital.
The acquisition of the Limited Partners' interests increased the
Company's net ownership position in several of its major properties.
Ancon is a Texas limited partnership which was formed by the
Company and New York Life to acquire, explore, develop and operate oil
and gas properties. The Company served as the general partner of
Ancon, and the New York Life entities were the only limited partners.
The Company expects to dissolve the partnership as soon as practicable
after the completion of the acquisition.
As of December 31, 1996, New York Life was the beneficial owner of
approximately 4.5% of the Company's outstanding common stock. Also, a
subsidiary of the Company and a separate subsidiary of New York Life
serve as managing general partners of a series of publicly-registered
limited partnerships that are currently in the process of liquidation.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Set forth on pages 2 through 18 are the audited financial
statements related to the oil and gas property interests acquired
from the Limited Partners of Ancon.
(b) Pro Forma Financial Information
Set forth on pages 19 through 24 are the unaudited pro forma
financial statements of the Company which give effect to certain
transactions described therein, including the acquisition of oil
and gas property interests from the Limited Partners of Ancon.
(c) Exhibits
10(a)* Purchase and Sale Agreement, dated December 16, 1996,
by and among American Exploration Company, NYLIFE
Resources Inc., New York Life Insurance Company and
New York Life Insurance and Annuity Corporation.
99(a)* American Exploration Company News Release, dated
December 30, 1996.
* Previously filed with Form 8-K dated December 20, 1996.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Exploration Company, as General Partner of Ancon Partnership, Ltd.:
We have audited the accompanying combined balance sheets of the Ancon
Properties identified in Note 1 as of December 31, 1995 and 1994, and the
related statements of operations and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the management of American Exploration Company, as general
partner of Ancon Partnership, Ltd. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Ancon Properties
as of December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 28, 1997
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ANCON PROPERTIES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------
1996 1995 1994
------------------ -------------------- -----------------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 750 $ 1,301 $ 661
Accounts receivable and other 1,107 1,038 2,319
Receivable from general partner 584 144 --
Assets held for sale 2,766 -- --
------- ------- -------
Total current assets 5,207 2,483 2,980
------- ------- -------
Oil and gas properties,
using successful efforts method 16,540 21,778 52,643
Less: Accumulated depreciation, depletion
and amortization 6,047 4,055 1,502
------- ------- -------
Oil and gas properties, net 10,493 17,723 51,141
------- ------- -------
Other assets 26 -- 15
------- ------- -------
$15,726 $20,206 $54,136
======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accrued liabilities $ 564 $ 609 $ 1,415
Payable to general partner -- -- 1,625
------- ------- -------
Total current liabilities 564 609 3,040
------- ------- -------
Gas balancing obligations 592 643 654
------- ------- -------
Long-term portion of deferred revenue -- -- 239
------- ------- -------
Partners' capital 14,570 18,954 50,203
------- ------- -------
$15,726 $20,206 $54,136
======= ======= =======
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
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ANCON PROPERTIES
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 5,794 $ 9,399
Gain (loss) on sales of oil
and gas properties 124 (7,424)
Gas settlement income (expense) (15) 414
Other income, net 118 53
------- -------
Total revenues 6,021 2,442
------- -------
COSTS AND EXPENSES:
Production and operating 1,940 3,936
Depreciation, depletion and amortization 1,530 4,185
Impairment 2,963 --
General and administrative 92 203
Management fees 268 478
------- -------
Total costs and expenses 6,793 8,802
------- -------
NET LOSS $ (772) $(6,360)
======= =======
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
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ANCON PROPERTIES
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1995 1994 1993
------------------ -------------------- -----------------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 11,408 $ 14,354 $ 12,793
Gain (loss) on sales of oil
and gas properties (7,015) 45 (254)
Gas settlement income (expense) 414 30 (52)
Other income, net 165 103 110
-------- -------- --------
Total revenues 4,972 14,532 12,597
-------- -------- --------
COSTS AND EXPENSES:
Production and operating 4,601 6,181 5,071
Depreciation, depletion and amortization 4,951 7,392 5,484
Impairment -- 4,883 --
General and administrative 261 396 321
Management fees 576 742 663
-------- -------- --------
Total costs and expenses 10,389 19,594 11,539
-------- -------- --------
NET INCOME (LOSS) $ (5,417) $ (5,062) $ 1,058
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
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ANCON PROPERTIES
COMBINED STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
-------- -------- --------
Balance, beginning of year $ 50,203 $ 59,426 $ 63,069
Contributions 3,882 877 334
Distributions (29,714) (5,038) (5,035)
Net income (loss) (5,417) (5,062) 1,058
-------- -------- --------
Balance, end of year $ 18,954 $ 50,203 $ 59,426
======== ======== ========
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
---------- -----------
Balance, beginning of period $ 18,954 $ 50,203
Contributions 44 3,873
Distributions (3,656) (29,605)
Net loss (772) (6,360)
-------- --------
Balance, end of period $ 14,570 $ 18,111
======== ========
The accompanying notes are an integral
part of these combined financial statements.
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ANCON PROPERTIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (772) $ (6,360)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation, depletion and amortization 1,530 4,185
Impairment 2,963 --
(Gain) loss on sales of oil and gas properties (124) 7,424
Changes in operating working capital:
(Increase) decrease in receivables and other (487) 1,296
Decrease in payables and accrued liabilities (166) (1,498)
Other operating 55 (1,005)
-------- --------
Net cash provided by operating activities 2,999 4,042
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Development and exploration expenditures (379) (1,804)
Proceeds from sales of oil and gas properties 516 23,851
Other investing (75) --
-------- --------
Net cash provided by investing activities 62 22,047
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 44 3,873
Partner distributions (3,656) (29,605)
-------- --------
Net cash used in financing activities (3,612) (25,732)
-------- --------
Net increase (decrease) in cash and cash equivalents (551) 357
Cash and cash equivalents at beginning of period 1,301 661
-------- --------
Cash and cash equivalents at end of period $ 750 $ 1,018
======== ========
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
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ANCON PROPERTIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION> YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1995 1994 1993
------------------ -------------------- -----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (5,417) $ (5,062) $ 1,058
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 4,951 7,392 5,484
Impairment -- 4,883 --
(Gain) loss on sales of oil and gas properties 7,015 (45) 254
Changes in operating working capital:
(Increase) decrease in receivables and other 485 (176) (221)
Increase (decrease) in payables and
accrued liabilities (1,581) 1,354 96
Other operating (1,758) (299) (328)
-------- -------- --------
Net cash provided by operating activities 3,695 8,047 6,343
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Development and exploration expenditures (2,131) (4,578) (2,801)
Proceeds from sales of oil and gas properties 24,952 134 500
Other investing (44) (11) --
-------- -------- --------
Net cash provided by (used in) investing activities 22,777 (4,455) (2,301)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 3,882 877 334
Partner distributions (29,714) (5,038) (5,035)
-------- -------- --------
Net cash used in financing activities (25,832) (4,161) (4,701)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 640 (569) (659)
Cash and cash equivalents at beginning of year 661 1,230 1,889
-------- -------- --------
Cash and cash equivalents at end of year $ 1,301 $ 661 $ 1,230
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
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ANCON PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995 IS UNAUDITED)
(1) ORGANIZATION
The accompanying combined financial statements present the combined
financial position, results of operations, and cash flows of certain oil and
gas property interests owned by the limited partners of Ancon Partnership Ltd.
and certain oil and gas property interests owned by New York Life Insurance
Company ("NYL") and New York Life Insurance and Annuity Corporation ("NYLIAC")
as limited partners in certain other partnerships (the "APPL Programs"). These
property interests are collectively referred to as the "Ancon Properties".
Ancon Partnership Ltd. (the "Partnership"), a Texas limited partnership,
was formed pursuant to an agreement of limited partnership ("Partnership
Agreement") on December 10, 1993, with American Exploration Company
("American") as general partner and NYLIFE Resources, Inc. ("NYLIFE") as
limited partner, to acquire, explore, develop and operate oil and gas
properties. The Partnership Agreement was subsequently amended as of April 1,
1995, to admit NYL and NYLIAC to the Partnership as limited partners. The APPL
Programs were a series of oil and gas investment programs that consisted
generally of eight limited partnerships of which American served as general
partner. NYL and certain affiliates held limited partner interests in each of
the limited partnerships formed under the APPL Programs. On April 1, 1995, NYL
and NYLIAC contributed their interests from certain APPL Programs (the "APPL
Interests") to the Partnership. Specifically, the APPL Interests were
comprised of interests owned by NYL and NYLIAC in the following APPL Programs:
American Production Partnership - V, Ltd., American Production Partnership -
VII, Ltd. and American Production Partnership - VIII, Ltd. During late 1994
and early 1995, American acquired substantially all of the other interests in
the APPL Programs, and the APPL Programs were subsequently dissolved.
At December 31, 1995, the Partnership owned various working and royalty
interests in 150 oil and gas fields in Alabama, Arkansas, Colorado, Kansas,
Louisiana, Michigan, Mississippi, Montana, New Mexico, North Dakota, Oklahoma,
Texas, Utah and Wyoming.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Ancon Properties have been presented on
a combined basis representing the limited partners' interests in the
Partnership and, for the periods prior to April 1, 1995, the APPL Interests.
The combined financial position and combined results of operations, which are
presented without adjustment to historical amounts, are not necessarily
indicative of the financial position and results of operations that would have
occurred had the Partnership and the APPL Interests been combined prior to
April 1, 1995 and operated as a single entity during the periods presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions which affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.
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ANCON PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995 IS UNAUDITED)
OIL AND GAS PROPERTIES
The Ancon Properties' oil and gas acquisition, exploration, development
and production activities are accounted for under the successful efforts
method. Under this method, both tangible and intangible costs of productive
wells, development dry holes and productive acreage are capitalized when
incurred. Depletion of proved properties is computed on the unit-of-production
method. The Ancon Properties also accrue for platform abandonment costs
related to their offshore platform facilities on the unit-of-production method.
The Ancon Properties anticipate total abandonment costs to be approximately
$249,000. As of December 31, 1995, the Ancon Properties had accrued $237,000,
which is included in accumulated depreciation, depletion and amortization.
Prior to 1996, the Ancon Properties recognized an impairment of proved
oil and gas property costs if, on a partnership-wide basis, those costs
exceeded the undiscounted future net revenues from proved reserves. In 1994,
the Ancon Properties recorded an impairment of oil and gas properties of $4.9
million. There were no impairments during 1995 and 1993. During the first
quarter of 1996, the Ancon Properties adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of". Under the provisions of the new
statement, if the net book value of an individual proved oil or gas field is
greater than its undiscounted future net cash flow from proved reserves, then
an impairment is recognized for the difference between the net book value and
the fair value. The fair value used to calculate the impairment for an
individual field is equal to the present value of its future net cash flows.
The Ancon Properties recorded an impairment charge of $3.0 million related to
the adoption of SFAS No. 121.
Geological and geophysical costs and annual lease rentals are expensed
as incurred. Maintenance and repairs are expensed as incurred, and renewals and
betterments which extend the useful life of the properties are capitalized.
ORGANIZATION COSTS
Organization costs, which are included in other assets on the combined
balance sheets, represent fees paid to the general partner as reimbursement of
organization and start-up costs and are amortized over a five-year period. For
purposes of the combined statements of operations, amortization of such costs
is included in depreciation, depletion and amortization.
GAS BALANCING OBLIGATIONS
The Ancon Properties use the sales method to account for gas imbalances.
Under the sales method, the Ancon Properties recognize revenues based on the
amount of gas sold to purchasers, which may differ from the amount to which the
Ancon Properties are entitled based on their working interests in the
properties. Gas balancing obligations are recorded when the additional
production sold by the Ancon Properties exceeds their entitled share of
remaining reserves. Such costs are recognized as other expense in the year
that they are incurred. The Ancon Properties had recorded a liability of
$643,000 and $654,000 at December 31, 1995 and 1994, respectively, for
properties having insufficient reserves from which to recover the gas
imbalance.
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ANCON PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995 IS UNAUDITED)
GAS SETTLEMENTS
Gas settlement income (expense) is recognized by the Ancon Properties
for amounts received (incurred) related to nonrefundable gas contract
settlements.
CASH FLOW INFORMATION
For purposes of the statement of cash flows, all highly liquid
investments with a maturity of three months or less are considered to be cash
equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Ancon Properties' financial instruments consist of cash and cash
equivalents, short-term investments and short-term receivables and payables.
Due to the highly liquid nature of these short-term instruments, the carrying
amounts on the accompanying combined balance sheets approximate fair value.
INCOME TAXES
The Ancon Properties are not tax-paying entities. No provision is made
in the accounts of the Ancon Properties for federal or state income taxes,
since such taxes are liabilities of the individual limited partners, and the
amounts thereof depend upon their respective tax situations.
(3) ASSETS HELD FOR SALE
During the third quarter of 1996, American commenced the process of
selling interests in approximately 100 properties, including certain properties
owned by the Partnership, and expects to complete the sales by year-end 1996.
The Ancon Properties' interests in the properties that are expected to be sold
have been classified as assets held for sale in the accompanying balance sheet
as of September 30, 1996. Although there can be no assurance as to the amount
of proceeds to be derived from such sales, American believes that the net
proceeds from the property dispositions will exceed the current carrying value
of the properties. Accordingly, the assets held for sale are stated at net
book value. (See Note 13.)
(4) OIL AND GAS PROPERTY DISPOSITIONS
During 1995, 1994 and 1993, the Ancon Properties sold certain oil and
gas properties to third parties through individual, data room or competitive
bid sales. Net proceeds received from the sales of oil and gas properties
totaled $25.0 million, $134,000 and $500,000 in 1995, 1994 and 1993,
respectively. A loss of $7.0 million, a gain of $45,000 and a loss of $254,000
were recognized on the property sales for 1995, 1994 and 1993, respectively.
The property sales for 1995 included the sale of the Ancon Properties' interest
in the Sawyer Field for net proceeds of $24.0 million. Substantially all of the
loss on property sales for 1995 was related to the Sawyer sale.
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ANCON PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995 IS UNAUDITED)
(5) DEFERRED REVENUE
Pursuant to a 1992 settlement agreement, KN Energy, Inc. ("KN") made a
prepayment to one of the APPL Programs for gas to be produced from the Bowdoin
Field. The Ancon Properties' share of this prepayment was $1.2 million, which
was recorded as a deferred revenue liability. This prepayment is being
recouped without interest by KN at a rate of $1.00 per mmbtu out of ongoing gas
purchases from the Bowdoin Field. At December 31, 1995 and 1994, the Ancon
Properties had a remaining deferred revenue liability of $210,000 and $502,000,
respectively. The 1995 liability and $264,000 of the 1994 liability are
included in accrued liabilities as such amounts represented the portion of the
prepayment expected to be recouped over the next twelve-month period.
(6) ALLOCATION OF REVENUES AND COSTS
The Partnership Agreement provides for the allocation of revenues and
costs between the limited partners and general partner in accordance with the
sharing ratio for the designated accounting unit to which such revenues and
costs are attributable. Pursuant to the Partnership Agreement, a separate
accounting unit is established to account for sharing ratios among the partners
which may differ with respect to the future placement of oil and gas properties
within the Partnership. The Partnership only had one accounting unit as of
September 30, 1996, since all properties placed within the Partnership as of
the end of the current period have the same sharing ratio, which is 20% to the
general partner and 80% to the limited partners.
The APPL Programs' agreements provided for the allocation of revenues
and costs between the limited partners and the general partner. The limited
partners generally received 87% of net oil and gas revenues until payout was
reached. Payout was defined as the return of the limited partners' initial
capital plus, in most cases, a compounded rate of return which ranged,
depending on the program, from approximately 12% to 14%. After payout, the
limited partners' interest in each of these programs' net oil and gas revenues
decreased to approximately 65%. Payout was not reached prior to the
dissolution of the APPL Programs in which the APPL Interests were held.
(7) INCOME TAXES
The Partnership's and APPL Programs' tax returns and the amount of the
Partnership's and APPL Programs' distributable income or loss are subject to
examination by federal and state taxing authorities. In the event of such
examinations, the tax liability of the partners could be changed if an
adjustment to partnership income or loss is ultimately sustained by the taxing
authorities.
(8) LIMITED PARTNERS' CAPITAL AND FUNDING OF COSTS
As of December 31, 1995, the limited partners had contributed $66.2
million of net assets to the Partnership. The net assets contributed to the
Partnership included oil and gas properties with a net book value of $66.0
million. American contributed cash equal to 1% of the value of these net
assets, as required by the Partnership Agreement, and purchased 19% of the
limited partnership interest in these net assets directly from the limited
partners. Initial capital contributions to the APPL Programs were completed by
the end of 1991.
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ANCON PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995 IS UNAUDITED)
In accordance with the Partnership Agreement, both the general partner
and the limited partners shall make additional capital contributions in order
to pay their share of costs and expenses of the Partnership, which are agreed
upon annually by the partners. Also, the Partnership Agreement and the APPL
Programs' agreements provide that the general partner may request additional
capital contributions from the partners for acquisition costs, exploration
costs, development costs and enhanced recovery costs which are in excess of the
amounts agreed upon annually. In the event a limited partner declines to make
additional capital contributions, the limited partner choosing not to
participate may be subject to certain penalties with respect to its
non-consenting interest, pursuant to the Partnership's and APPL Programs'
agreements. As of December 31, 1995, additional capital contributions made by
the limited partners to the Partnership and the APPL Programs totaled $1.1
million and $2.7 million, respectively.
Subject to certain limitations, the general partner could arrange for
the APPL Programs to borrow, from the general partner or external sources,
funds needed for the development of the APPL Programs' properties. Any such
borrowings were repaid from funds available for distribution to the partners.
NYL's and NYLIAC's aggregate share of funds withheld from distributions related
to the APPL Interests to repay American for advances made for capital
expenditures was $411,000 for the first quarter of 1995 and $2.2 million for
each of the years ended December 31, 1994 and 1993.
(9) RELATED-PARTY TRANSACTIONS
In 1995, 1994 and 1993, American billed the Ancon Properties $189,000,
$316,000 and $262,000, respectively, for technical services provided by
American's employees in exploring and developing oil and gas leases for the
Ancon Properties. Pursuant to the Partnership's and APPL Programs' agreements,
technical services are charged at hourly rates which are adjusted annually.
These expenses are included in general and administrative expense.
During 1995, 1994 and 1993, American charged the Ancon Properties
$576,000, $742,000 and $663,000, respectively, as a reimbursement of overhead
costs incurred by American in managing the Ancon Properties. For the
Partnership, these overhead costs are calculated quarterly pursuant to the
Partnership Agreement as the higher of 1.67% per annum of net invested
partners' capital (capital contributions less distributions and partnership
funds available for distribution) or an amount previously agreed upon annually
by the partners. For the APPL Interests, these overhead costs were calculated
quarterly pursuant to the APPL Programs' agreements as 1.00% - 1.67% per annum,
subject to minimum floor amounts, of net invested partners' capital (capital
contributions less distributions).
Additionally, American charges the Ancon Properties for producing-well
overhead on certain properties for which American is the designated operator.
Such operating overhead costs are computed according to industry standards and
are included in production and operating costs on the combined statements of
operations.
The receivable from/payable to general partner includes net working
capital advances between the Ancon Properties and American related to
American's management of the Ancon Properties' operations. Such advances are
noninterest bearing.
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<PAGE> 15
ANCON PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995 IS UNAUDITED)
(10) CONCENTRATION OF RISKS
The Ancon Properties' revenues are derived principally from
uncollateralized sales of oil and gas production to customers in the oil and
gas industry. Market prices for oil and gas may fluctuate; accordingly,
decreases in market prices could adversely affect the Ancon Properties' net
operating revenues and cash flows from operating activities. In addition, the
concentration of credit risk in a single industry affects the Ancon Properties'
overall exposure to credit risk because customers may be similarly affected by
changes in economic and other conditions. The Ancon Properties have not
experienced significant credit losses on such receivables.
(11) LEGAL PROCEEDINGS
BOWDOIN FIELD, PHILLIPS AND VALLEY COUNTIES, MONTANA. In February
1995, two of the APPL Programs were served with a lawsuit styled KN GAS SUPPLY
SERVICES, INC. V. AMERICAN PRODUCTION PARTNERSHIP-V, LTD. AND NINIAN OIL
FINANCE CORP., filed in United States District Court in Denver, Colorado,
requesting declaratory judgment that KN Gas Supply Services, Inc. ("KNGSS") had
the right to reduce the contract price for gas produced from the Bowdoin Field
to market levels from October 1, 1993 forward. KNGSS also requested
declaratory judgment that it has a right to relief from the contract price due
to regulatory changes, which it alleges renders the contract commercially
impracticable, and that Federal Energy Regulatory Commission Order No. 636 is a
condition subsequent which excuses performance under the contract. In April
1995, American filed counterclaims against KNGSS relating to the failure of
KNGSS to take and pay for certain minimum volumes of gas, among other
contractual matters. American has dismissed all of its counterclaims, and
KNGSS has dismissed its commercially impracticable and condition subsequent
claims. KNGSS alleges that it has overpaid American's affiliates and seeks a
refund of approximately $7.7 million for the period through September 1996. A
motion for summary judgment was filed by American in July 1996 and was argued
before the court on February 14, 1997. Although American cannot predict the
outcome of this proceeding, American will vigorously defend this case and does
not expect the outcome of the case to have a material adverse impact on the
financial position or results of operations of the Ancon Properties.
(12) CASH FLOW INFORMATION
Presented below is a supplemental schedule of noncash investing and
financing activities related to contributions of net assets by the limited
partners to the Partnership (in thousands).
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ------------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Acquisition of oil and gas properties
by the Partnership $ - $ 55,326 $ 56,392 $ - $ 9,559
Other assets acquired - 1,376 1,376 - -
Liabilities assumed - (2,002) (2,002) - -
Capital contribution - (54,700) (55,766) - (9,559)
</TABLE>
- 14 -
<PAGE> 16
ANCON PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995 IS UNAUDITED)
(13) SUBSEQUENT EVENTS
During the fourth quarter of 1996, American sold the Ancon Properties'
interests in the properties which had been classified as assets held for sale
at September 30, 1996. The Ancon Properties received net proceeds of
approximately $3 million.
In late December 1996, American acquired the Ancon Properties' interest
in the Partnership directly from the limited partners for a total purchase
price of $12.9 million.
- 15 -
<PAGE> 17
ANCON PROPERTIES
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
CAPITALIZED COSTS
(In thousands) 1995 1994
-------------- --------------
<S> <C> <C>
As of December 31,
- ------------------
Proved properties $ 21,778 $ 52,643
Less: Accumulated depreciation,
depletion and amortization 4,055 1,502
------------- --------------
Net capitalized costs $ 17,723 $ 51,141
============= ==============
</TABLE>
<TABLE>
<CAPTION>
COSTS INCURRED IN OIL AND GAS ACQUISITION,
EXPLORATION AND DEVELOPMENT ACTIVITIES
(In thousands) 1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Year Ended December 31,
- -----------------------
Proved property acquisition costs $ 852 $ - $ 7,648
Development costs 1,497 4,971 2,802
Exploration costs - 175 -
-------------- -------------- --------------
Total costs incurred $ 2,349 $ 5,146 $ 10,450
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS FOR
OIL AND GAS PRODUCING ACTIVITIES
(In thousands) 1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Year Ended December 31,
- -----------------------
Revenues $ 11,408 $ 14,354 $ 12,793
Production and operating costs 4,601 6,181 5,071
Depreciation, depletion and amortization 4,948 7,350 5,413
Impairment expense - 4,883 -
-------------- -------------- --------------
Results of operations for producing activities $ 1,859 $ (4,060) $ 2,309
============== ============== ==============
</TABLE>
OIL AND GAS RESERVE INFORMATION - (UNAUDITED)
The following information summarizes the policies used in preparing the
accompanying oil and gas reserve disclosures, standardized measure of
discounted future net cash flows relating to proved oil and gas reserves and
the reconciliation of such standardized measure from period to period.
Proved reserves are estimated quantities of crude oil and natural gas
which 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 reserves are proved reserves that
can reasonably be expected to be recovered through existing wells with existing
equipment and operating methods.
- 16 -
<PAGE> 18
ANCON PROPERTIES
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - (CONTINUED)
OIL AND GAS RESERVE INFORMATION - (UNAUDITED) - (CONTINUED)
The standardized measure of discounted future net cash flows from
production of proved reserves was developed by first estimating the quantities
of proved reserves and the future periods during which they are expected to be
produced based on year-end economic conditions. The estimated future cash
flows from proved reserves were then determined based on year-end prices,
except in those instances where fixed and determinable price escalations are
included in existing contracts. Finally, future cash flows were reduced by
estimated production costs, costs to develop and produce the proved reserves,
and certain abandonment costs, all based on year-end economic conditions. The
future cash flows are not reduced for the estimated effect of future income
taxes since the Ancon Properties are not tax-paying entities.
The standardized measure of discounted future net cash flows does not
purport to present, nor should it be interpreted to present, the fair value of
the Ancon Properties' oil and gas reserves. An estimate of fair value
would also take into account, among other things, the recovery of reserves not
presently classified as proved, anticipated future changes in prices and costs
and a discount factor more representative of the time value of money and the
risks inherent in reserve estimates.
<TABLE>
<CAPTION>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS RELATING TO PROVED OIL AND
GAS RESERVES - (UNAUDITED)
(In thousands) 1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Future cash inflows $ 57,440 $ 119,933 $ 159,307
Future production and development costs 23,739 61,768 74,685
-------- --------- ---------
Future net cash flows 33,701 58,165 84,622
Discount at 10% annual rate 15,450 25,700 36,994
-------- --------- ---------
Standardized measure of discounted
future net cash flows $ 18,251 $ 32,465 $ 47,628
======== ========= =========
<CAPTION>
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED
FUTURE NET CASH FLOWS - (UNAUDITED)
(In thousands) 1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Standardized measure, beginning of year $ 32,465 $ 47,628 $ 48,719
Sales and transfers of oil and gas produced,
net of production costs (6,807) (8,173) (7,722)
Net changes in prices and production costs (570) (15,293) 3,973
Extensions, discoveries
and improved recoveries,
net of future production
and development costs 1,708 5,952 1,058
Purchases of minerals in place - - 8,747
Sales of minerals in place (16,453) (37) (252)
Changes in estimated future development costs (747) (2,008) (4,366)
Development costs incurred during the year 1,497 4,971 2,802
Revisions of previous quantity estimates 4,408 (1,180) (12,738)
Accretion of discount 3,246 4,765 4,868
Changes in production rates (timing) and other (496) (4,160) 2,539
-------- -------- --------
Standardized measure, end of year $ 18,251 $ 32,465 $ 47,628
======== ======== ========
</TABLE>
- 17 -
<PAGE> 19
ANCON PROPERTIES
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - (CONTINUED)
RESERVE QUANTITY INFORMATION - (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1995 1994 1993
--------------------- ------------------- ---------------------
OIL GAS OIL GAS OIL GAS
(MBBLS) (MMCF) (MBBLS) (MMCF) (MBBLS) (MMCF)
--------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Proved Reserves
- ---------------
Balance, beginning of year 926 50,323 936 56,371 1,047 67,146
Purchases of minerals in place -- -- -- -- 235 7,576
Extensions, discoveries and
other additions 1 1,299 10 2,870 87 963
Revisions of previous estimates 197 3,779 201 (3,068) (221) (14,238)
Sales of minerals in place (115) (34,229) (12) (1) (55) (409)
Production (171) (4,973) (209) (5,849) (157) (4,667)
------ ------ ------ ------ ------ ------
Balance, end of year 838 16,199 926 50,323 936 56,371
====== ====== ====== ====== ====== ======
Proved Developed Reserves
- -------------------------
Balance, end of year 829 13,161 876 35,225 873 39,200
====== ====== ====== ====== ====== ======
</TABLE>
- 18 -
<PAGE> 20
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES
INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements (the "Pro Forma Statements") give effect to (i) that portion of the
acquisition of investors' interests in the APPL Programs (the "APPL
Consolidation") that was completed in the first half of 1995 for a purchase
price of approximately $9 million, (ii) the sale of the Sawyer Field (the
"Sawyer Sale") in July 1995 for proceeds of $64 million, net to the Company's
interest, plus additional proceeds of $24 million related to the Limited
Partners' interest in the Sawyer Field, (iii) the 1995 sales of interests in
several other fields for aggregate proceeds of approximately $2.5 million (the
"1995 Sales"), (iv) the acquisition in March 1996 of interests in five offshore
blocks in the Gulf of Mexico for a purchase price of approximately $14 million
(the "March 1996 Acquisition"), (v) the acquisition in September 1996 of
interests in two offshore blocks in the Gulf of Mexico for a purchase price of
approximately $39 million, net of certain interests which were sold to a third
party in November 1996 (the "September 1996 Acquisition"), (vi) the proposed
sales of certain properties in connection with the liquidation of certain
public oil and gas partnerships for which the Company acts as a co-general
partner and of certain related properties, including certain properties owned
by Ancon, (which sales were substantially completed in December 1996)
(collectively, the "1996 Sales"), and (vii) the acquisition in December 1996 of
the Limited Partners' interests in Ancon for a purchase price of $12.9 million
(the "Ancon Acquisition"). The Sawyer Sale, the 1995 Sales and the APPL
Consolidation are sometimes collectively referred to in the Pro Forma
Statements as the "1995 Transactions." The March 1996 Acquisition and the
September 1996 Acquisition are sometimes collectively referred to as the
"Offshore Acquisitions."
The pro forma statements of operations for the nine months ended September
30, 1996 and for the year ended December 31, 1995 have been prepared assuming
that each of the transactions described above was consummated as of January 1,
1995. The pro forma statements of operations for the year ended December 31,
1995 do not include results from the High Island 116 well acquired in the
September 1996 Acquisition because the well did not produce during the period.
Similarly, the pro forma data for the nine months ended September 30, 1996
includes only two months of results from the High Island 116 well, which results
reflect the Company's acquired interest net of interests being sold to a third
party. The well commenced production in August 1996 at a net production rate of
300 Bbls of oil per day and 17,100 Mcf of natural gas per day. The pro forma
balance sheet was prepared assuming that the sale of certain assets acquired in
the September 1996 Acquisition, the 1996 Sales and the Ancon Acquisition were
consummated as of September 30, 1996.
The Pro Forma Statements are not necessarily indicative of the financial
results that would have occurred had the Company completed each of the
transactions described above as of January 1, 1995 or September 30, 1996, as the
case may be. Furthermore, future results may vary significantly from the results
reflected in the Pro Forma Statements due to changes in production levels,
changes in market prices for oil and gas, future expenditures for acquisitions,
development drilling and exploration and other factors.
- 19 -
<PAGE> 21
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and temporary cash investments..................... $ 6,780 $ 750 (a) $ 7,530
Accounts receivable..................................... 11,203 1,107 (a) 12,310
Assets held for sale.................................... 14,384 (8,634)(b) --
(5,750)(c)
Other current assets.................................... 2,158 2,158
-------- -------- --------
Total current assets............................ 34,525 (12,527) 21,998
Property, plant and equipment, net........................ 195,850 8,823 (a) 204,673
Other assets.............................................. 2,988 26 (a) 3,014
-------- -------- --------
Total assets.................................... $233,363 $ (3,678) $229,685
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 15,670 $ 564 (a) $ 16,234
Payable to partnerships................................. 1,678 (584)(d) 1,094
Accrued liabilities..................................... 18,800 18,800
-------- -------- --------
Total current liabilities....................... 36,148 (20) 36,128
Long-term debt............................................ 105,000 12,900 (e) 99,284
(2,766)(f)
(10,100)(g)
(5,750)(h)
Other long-term liabilities............................... 4,709 592 (a) 5,301
Stockholders' equity...................................... 87,506 1,466 (i) 88,972
-------- -------- --------
Total liabilities and stockholders' equity...... $233,363 $ (3,678) $229,685
======== ======== ========
</TABLE>
- 20 -
<PAGE> 22
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------------------
MARCH SEPTEMBER
1996 1996 1996 ANCON
HISTORICAL ACQUISITION ACQUISITION SALES ACQUISITION PRO FORMA
---------- ----------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil and gas sales............. $52,263 $ 1,964(j) $ 4,467(l) $(5,766)(n) $ 3,800 (p) $ 56,728
Other revenues, net........... 912 227 (p) 1,139
------- ------- ------- ------- ----- --------
Total revenues......... 53,175 1,964 4,467 (5,766) 4,027 57,867
------- ------- ------- ------- ----- --------
COSTS AND EXPENSES:
Production and operating...... 19,089 109(j) 963(l) (2,403)(n) 1,238 (p) 18,996
Depreciation, depletion and
amortization................ 20,871 728(j) 2,370(l) (1,313)(n) 953 (p) 23,609
General and administrative.... 5,036 359 (p) 5,395
Exploration................... 9,152 9,152
Impairment.................... 1,841 2,963 (p) 4,804
------- ------- ------- ------- ----- --------
Total costs and
expenses............. 55,989 837 3,333 (3,716) 5,513 61,956
------- ------- ------- ------- ----- --------
INCOME (LOSS) FROM OPERATIONS... (2,814) 1,127 1,134 (2,050) (1,486) (4,089)
Interest and other expense,
net........................... (2,957) (280)(k) (2,355)(m) 518(o) (608)(q) (5,682)
------- ------- ------- ------- ----- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM............ (5,771) 847 (1,221) (1,532) (2,094) (9,771)
Preferred stock dividends....... (1,350) (1,350)
------- ------- ------- ------- ----- --------
INCOME (LOSS) TO COMMON STOCK
BEFORE EXTRAORDINARY ITEM..... $(7,121) $ 847 $(1,221) $(1,532) $(2,094) $(11,121)
======= ======= ======= ======= ======= ========
LOSS BEFORE EXTRAORDINARY ITEM
PER COMMON SHARE:
Primary and fully diluted..... $ (0.60) $ (0.94)
======= ========
NUMBER OF COMMON AND EQUIVALENT
SHARES:
Primary and fully diluted..... 11,811 11,811
======= =======
</TABLE>
- 21-
<PAGE> 23
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------------------------------------
MARCH SEPTEMBER
1995 1996 1996 1996 ANCON
HISTORICAL TRANSACTIONS ACQUISITION ACQUISITION SALES ACQUISITION PRO FORMA
---------- ------------ ----------- ----------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil and gas sales.............. $70,768 $ (9,450)(r) $ 7,513 (j) $ 2,886(l) $(6,479)(n) $4,742 (p) $69,980
Gain (loss) on sales of oil and
gas properties............... 10,230 (10,643)(s) (58)(p) (471)
Other revenues, net............ 969 249 (r) 112 (p) 1,330
------- -------- ------- ------- ------- ------ -------
Total revenues........... 81,967 (19,844) 7,513 2,886 (6,479) 4,796 70,839
------- -------- ------- ------- ------- ------ -------
COSTS AND EXPENSES:
Production and operating....... 29,443 (3,885)(r) 662 (j) 1,265 (l) (3,984)(n) 1,639 (p) 25,140
Depreciation, depletion and
amortization................. 30,726 (2,853)(r) 3,506 (j) 1,376 (l) (1,846)(n) 1,314 (p) 32,223
General and administrative..... 8,304 56 (r) 612 (p) 8,972
Exploration.................... 4,826 4,826
Impairment..................... 1,822 1,822
------- -------- ------- ------- ------- ------ -------
Total costs and
expenses............... 75,121 (6,682) 4,168 2,641 (5,830) 3,565 72,983
------- -------- ------- ------- ------- ------ -------
INCOME (LOSS) FROM OPERATIONS.... 6,846 (13,162) 3,345 245 (649) 1,231 (2,144)
Interest and other expense,
net............................ (5,369) 3,013(t) (1,120)(k) (3,140)(m) 808 (o) 338 (u) (5,470)
------- -------- ------- ------- ------- ------ -------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM............. 1,477 (10,149) 2,225 (2,895) 159 1,569 (7,614)
Preferred stock dividends........ (1,800) (1,800)
------- -------- ------- ------- ------- ------ -------
INCOME (LOSS) TO COMMON STOCK
BEFORE EXTRAORDINARY ITEM...... $ (323) $(10,149) $ 2,225 $(2,895) $ 159 $1,569 $(9,414)
======= ======== ======= ======= ======= ====== =======
LOSS BEFORE EXTRAORDINARY ITEM
PER COMMON SHARE:
Primary and fully diluted...... $ (0.03) $ (0.80)
======= =======
NUMBER OF COMMON AND EQUIVALENT
SHARES:
Primary and fully diluted...... 11,812 11,812
======= =======
</TABLE>
-22-
<PAGE> 24
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The Pro Forma Condensed Consolidated Balance Sheet is presented as if the
sale of certain assets acquired in the September 1996 Acquisition, the 1996
Sales and the Ancon Acquisition occurred as of September 30, 1996. The Pro Forma
Condensed Consolidated Statements of Operations for the nine months ended
September 30, 1996 and for the year ended December 31, 1995 are presented as if
the 1995 Transactions, the March 1996 Acquisition, the September 1996
Acquisition and the sale of certain assets acquired therein, the 1996 Sales and
the Ancon Acquisition were consummated as of January 1, 1995.
The Ancon Acquisition, the Offshore Acquisitions, and the portion of the
APPL Consolidation completed in 1995 have been accounted for in the Pro Forma
Statements using the purchase method of accounting. The value of the interests
acquired in the Ancon Acquisition and the Offshore Acquisitions represents the
cash consideration given to the seller. The total value of the acquired
interests in the APPL Consolidation was determined based upon the fair value of
the common stock and cash offered to the investors.
(2) LOSS PER COMMON SHARE
Loss per common share has been calculated by dividing net loss before
extraordinary items by the number of common shares outstanding at the end of the
respective period.
(3) PRO FORMA ADJUSTMENTS
Balance Sheet
(a) To reflect the acquisition of the Limited Partners' interests in Ancon for a
purchase price of $12.9 million.
(b) To eliminate the net book value of the Company's assets sold in the 1996
Sales.
(c) To eliminate that portion of assets acquired in the September 1996
Acquisition that were sold to a third party in November 1996.
(d) To eliminate the historical balance of the intercompany receivable from the
Limited Partners.
(e) To reflect the $12.9 million increase in outstanding bank debt to fund the
Ancon Acquisition.
(f) To reflect the application of the proceeds of $2.8 million from the
disposition of certain property interests of the Limited Partners (in
conjunction with the 1996 Sales) to repay amounts outstanding under the
Company's revolving bank credit agreement (the "Credit Agreement").
(g) To reflect the application of the net proceeds of $10.1 million from the
1996 Sales to repay amounts outstanding under the Credit Agreement.
(h) To reflect the application of the net proceeds of $5.7 million from the sale
of a portion of the assets acquired in the September 1996 Acquisition to
repay amounts outstanding under the Credit Agreement.
(i) To reflect the pro forma gain on the 1996 Sales.
Statement of Operations
(j) To reflect the results of operations for properties acquired in the March
1996 Acquisition.
(k) To adjust historical interest expense to reflect the $14 million increase in
outstanding bank debt to fund the March 1996 Acquisition assuming an annual
interest rate of 8%, based on the Company's weighted average interest rate
on its bank borrowings.
(l) To reflect the results of operations for the Company's interest in the
properties acquired in the September 1996 Acquisition, net of certain
interests which were subsequently sold to a third party.
(m) To adjust historical interest expense to reflect the $39.3 million net
increase in outstanding bank debt to fund the September 1996 Acquisition
(net of interests sold to a third party) assuming an annual interest rate
of 8%, based on the Company's weighted average interest rate on its bank
borrowings.
(n) To eliminate the results of operations related to the 1996 Sales.
- 23 -
<PAGE> 25
(o) To adjust historical interest expense to reflect the application of the net
proceeds of $10.1 million from the 1996 Sales to reduce outstanding bank
debt assuming an annual interest rate of 8%, based on the Company's
weighted average interest rate on its bank borrowings.
(p) To reflect the results of operations for the properties acquired in the
Ancon Acquisition.
(q) To adjust historical interest expense to reflect the $12.9 million increase
in outstanding bank debt to fund the Ancon Acquisition assuming an annual
interest rate of 8%, based on the Company's weighted average interest rate
on its bank borrowings.
(r) To reflect the impact of the 1995 Transactions on the Company's results of
operations.
(s) To eliminate the nonrecurring gain on the Sawyer Sale.
(t) To adjust historical interest expense to reflect the repayment of $62.5
million of outstanding bank debt using the proceeds from the Sawyer Sale
and assuming an annual interest rate of 8%, based on the Company's weighted
average interest rate on its bank borrowings.
(u) To adjust historical interest expense to reflect the repayment of $24
million of outstanding bank debt using the Limited Partners' share of
proceeds from the Sawyer Sale, net of the $12.9 million increase in
outstanding bank debt to fund the Ancon Acquisition, assuming an annual
interest rate of 8%, based on the Company's weighted average interest rate
on its bank borrowings.
- 24 -
<PAGE> 26
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 hereunto duly authorized.
AMERICAN EXPLORATION COMPANY
Date: March 3, 1997 By: /s/ CINDY L. GEROW
---------------------------------
Cindy L. Gerow
Vice President and Controller
