<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A
(AMENDMENT NO. ONE)
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 12, 1996
INLAND RESOURCES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 0-16487 91-1307042
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER
IDENTIFICATION NO.)
475 17TH STREET, SUITE 1500, DENVER, COLORADO 80202
(ADDRESS OF PRINCIPAL EXECUTE OFFICES, INCLUDING ZIP CODE)
(303) 292-0900
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) and (b) The following financial statements and pro forma financial
information regarding the 20 wells indirectly acquired pursuant
to the Agreement are filed with this Report.
INDEX TO FINANCIAL STATEMENTS
(a) HISTORICAL SUMMARY OF OIL AND GAS REVENUES
<TABLE>
<S> <C>
Report of Independent Accountants F-1
Historical Summary of Oil and Gas Revenues and Direct Operating
Expenses of Certain Oil and Gas Properties of Farmout, Inc. Acquired
by Inland Resources Inc. F-2
Notes to Historical Summary of Oil and Gas Revenues and Direct
Operating Expenses of Certain Oil and Gas Properties of Farmout, Inc.
Acquired by Inland Resources Inc. F-3
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Pro Forma Financial Information F-6
Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1996 (Unaudited) F-7
Pro Forma Consolidated Statement of Operations for the Three-Month
Period Ended March 31, 1996 (Unaudited) F-8
Pro Forma Consolidated Statement of Operations for the
Year Ended December 31, 1995 (Unaudited) F-9
Pro Forma Reserve Information as of May 31, 1996 F-10
(c) EXHIBITS. The following exhibits are being filed herewith:
10.1 Form of Agreement dated June 12, 1996 between Registrant, IPC, Smith
Management, Farmout and the Farmout Stockholders.*
10.2 Form of Registration Rights Agreement dated June 12, 1996 between
Registrant, Smith Management and the Farmout Stockholders.*
10.3 Security Agreement dated June 12, 1996 between the Farmout
Stockholders and Registrant.*
</TABLE>
2
<PAGE>
10.4 Form of Agreement dated June 12, 1996 between Registrant and Pasmas.*
10.5 Form of Registration Rights Agreement to be entered into as of July
31, 1996 between Registrant and Pasmas.*
10.6 Form of Articles of Amendment to the Articles of Incorporation of
Registrant Designating the Series B Preferred Stock.*
23.1 Consent of Coopers & Lybrand, L.L.P.**
- ----------------------------
* Previously filed.
** Filed herewith.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. One to this report to be signed on
its behalf by the undersigned hereunto duly authorized.
July 18, 1996
INLAND RESOURCES INC.
By: /s/ Kyle R. Miller
-----------------------------------
Kyle R. Miller, President and
Chief Executive Officer
4
<PAGE>
INLAND RESOURCES INC.
_____________________
Report on Audit of Historical Summary of Oil and Gas Revenues and Direct
Operating Expenses of Certain Oil and Gas Properties of Farmout, Inc.
Acquired by Inland Resources Inc.
for the eleven-month period from July 1, 1995 to May 31, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
_____________________
To the Board of Directors and Shareholders of
Inland Resources Inc.:
We have audited the accompanying Historical Summary of Oil and Gas Revenues
and Direct Operating Expenses of Certain Oil and Gas Properties (the
"Properties") of Farmout, Inc. Acquired by Inland Resources Inc. (the
"Historical Summary") for the eleven-month period from July 1, 1995 to May
31, 1996. The Historical Summary is the responsibility of Inland Resources
Inc. management. Our responsibility is to express an opinion on the
Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Historical Summary is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Historical Summary. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation
of the Historical Summary. We believe that our audit provides a reasonable
basis for our opinion.
The Historical Summary was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission and is not
intended to be a complete presentation of the Properties' revenues and
expenses as described in Note 2.
In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the oil and gas revenues and direct operating expenses
of the Properties, for the eleven-month period from July 1, 1995 to May 31,
1996 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
July 15, 1996
F-1
<PAGE>
HISTORICAL SUMMARY OF OIL AND GAS REVENUES
AND DIRECT OPERATING EXPENSES OF
CERTAIN OIL AND GAS PROPERTIES OF FARMOUT, INC.
ACQUIRED BY INLAND RESOURCES INC.
_____________________
Eleven-Month
Period Ended
May 31, 1996
------------
Oil and gas revenues $ 2,716,260
Direct Operating Expenses:
Lease operating expenses (180,747)
Production taxes (154,934)
-----------
Revenues in excess of direct
operating expenses $ 2,380,579
-----------
-----------
The accompanying notes are an integral
part of the historical summary
F-2
<PAGE>
NOTES TO HISTORICAL SUMMARY OF OIL AND GAS REVENUES
AND DIRECT OPERATING EXPENSES OF
CERTAIN OIL AND GAS PROPERTIES OF FARMOUT, INC.
ACQUIRED BY INLAND RESOURCES INC.
_____________________
1. HISTORY OF TRANSACTION:
Effective July 1, 1995, Randall D. Smith ("Smith"), Inland Resources Inc.
("Inland" or the "Company") and Inland Production Company ("IPC"), a
wholly-owned subsidiary of Inland, entered into a Farmout Agreement
pursuant to which IPC agreed to farmout to Smith its interest in certain
40-acre drill sites and Smith agreed to drill wells on such drill sites
between July 1, 1995 and December 31, 1995. Pursuant to the Farmout
Agreement, 21 wells were drilled and funded by Smith, 20 of which were
producing wells and one of which was a developmental dry hole (the
"Acquired Properties").
Prior to June 1, 1996, Smith transferred a portion of his interests in
the farmout wells and the Farmout Agreement to Jeffrey A. Smith and John W.
Adams (collectively, with Smith, the "Farmout Stockholders"). The Farmout
Stockholders transferred all of said interests to Farmout, Inc. ("Farmout")
prior to June 1, 1996.
On June 12, 1996, Smith Management Company, Inc., an affiliate of Smith,
Farmout, the Farmout Stockholders, Inland and IPC entered into an agreement
pursuant to which the Farmout Stockholders transferred one hundred percent
(100%) of the outstanding capital stock of Farmout to Inland in exchange
for 1,309,880 shares of Inland's common stock. Farmout is a Utah
corporation whose only assets are the twenty producing farmout wells
drilled and operated by IPC during the period July 1, 1995 to May 31, 1996.
Farmout had no liabilities at the purchase date. Income tax liabilities
arising prior to June 12, 1996 are the responsibility of the Farmout
Stockholders and income tax liabilities from June 12, 1996 forward are the
responsibility of Inland. Smith and affiliated entities are a majority
shareholder of Inland.
2. BASIS OF PRESENTATION:
The accompanying Historical Summary is included to provide historical
information on the revenues and direct operating expenses of the property
interests acquired by the Company and may not be representative of future
operations. Direct operating expenses include lease operating expenses and
production taxes. A provision for depreciation, depletion and amortization
has not been included since the Company's basis in the Acquired Properties
is different from the previous owners' basis. General and administrative
expenses have not been included since general and administrative expenses
incurred by the previous owners are not comparable to amounts expected to
be incurred by the Company. The Historical Summary does not include federal
and state income taxes or interest.
F-3
<PAGE>
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. OIL AND GAS PRODUCING ACTIVITIES:
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
The Acquired Properties were drilled during the time period July 1, 1995
to May 31, 1996. Costs incurred to develop the Acquired Properties were
$6,961,354. There were no exploratory expenditures incurred. The Company's
purchase of the Acquired Properties did not include any undeveloped
acreage.
OIL AND GAS RESERVE QUANTITIES (UNAUDITED)
The reserve information presented below is based upon reports prepared by
the Company's in-house reserve engineer and has not been reviewed or
audited by an independent petroleum engineering firm. The Company
emphasizes that reserve estimates are inherently imprecise and that
estimates of new discoveries are more imprecise than those of oil and gas
properties that have produced for a period of time. As a result, revisions
to previous estimates are expected to occur as additional production data
becomes available or economic factors change.
Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas, and natural gas liquids 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 oil and gas reserves are those expected to be recovered
through existing wells with existing equipment and operating methods. All
of the Acquired Properties are classified as proved developed reserves.
Presented below is a summary of the changes in estimated reserves of the
Acquired Properties, all of which are located in Utah, for the eleven-month
period from July 1, 1995 to May 31, 1996:
Oil (MBbl) Gas (MMcf)
---------- ----------
Proved developed reserves - July 1, 1995 - -
Extensions and discoveries 633 1,254
Production (148) (52)
---- -----
Proved developed reserves - May 31, 1996 485 1,202
---- -----
---- -----
F-4
<PAGE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (UNAUDITED)
Statement of Financial Standards No. 69 prescribes guidelines for
computing a standardized measure of future net cash flow and changes
therein relating to estimated proved reserves. The Company has followed
these guidelines which are briefly discussed below.
Future cash inflows and future production and development costs are
determined by applying period-end prices and costs to the estimated
quantities of oil and gas to be produced. Estimated future income taxes are
computed using current statutory income tax rates including consideration
for future statutory depletion. The resulting future net cash flows are
reduced to present value by applying a 10% annual discount factor.
The assumptions used to compute the standardized measure are those
prescribed by the Financial Accounting Standards Board and, as such, do not
necessarily reflect the Company's expectations of actual revenues to be
derived from those reserves nor their present worth. The limitations
inherent in the reserve quantity estimation process, as discussed
previously, are equally applicable to the standardized measure computations
since these estimates are the basis for the valuation process.
The following summary sets forth the Acquired Properties future net cash
flows relating to proved oil and gas reserves based on the standardized
measure prescribed in Statement of Financial Accounting Standards No. 69.
(in thousands)
May 31, 1996
--------------
Future cash inflows $ 9,879
Future production costs (2,815)
Future income tax provision (2,026)
-------
Future net cash flows 5,038
Less effect of 10% discount factor (1,324)
-------
Standardized measure of discounted future net cash flows $ 3,714
-------
-------
The principal sources of changes in the standardized measure of discounted
future net cash flows for the Acquired Properties are as follows for the
eleven-month period from July 1, 1995 to May 31, 1996:
(in thousands)
--------------
Standardized measure, July 1, 1995 -
Extensions, discoveries and improved recovery $ 6,095
Sales of oil and gas produced, net of direct
production costs (2,381)
-------
Standardized measure, May 31, 1996 $ 3,714
-------
-------
F-5
<PAGE>
PRO FORMA FINANCIAL INFORMATION
INLAND RESOURCES INC.
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION
_____________________
The accompanying unaudited Pro Forma Financial Statements and Reserve
Information are presented to illustrate the effect of the Acquired Properties
on the Company's financial condition and results of operations as if the
transaction had occurred (a) as of May 31, 1996 for the Pro Forma Reserve
Information (b) as of March 31, 1996 for the Pro Forma Condensed Balance
Sheet (c) as of January 1, 1996 for the Pro Forma Statement of Operations for
the three-month period ended March 31, 1996, and (d) as of January 1, 1995
for the Pro Forma Statement of Operations for the year ended December 31,
1995.
The pro forma adjustments included in the accompanying Pro Forma Statements
of Operations are based on assumptions and estimates and are not necessarily
indicative of the results of operations of the Company as they may be in the
future or as they might have been had the transaction actually occurred as of
January 1, 1996 for the three-month period ended March 31, 1996 or as of
January 1, 1995 for the year ended December 31, 1995.
F-6
<PAGE>
INLAND RESOURCES INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1996
(unaudited)
<TABLE>
Asset
Historical Purchase Pro Forma
----------- ---------- -----------
<S> <C> <C> <C>
Assets:
Cash and cash equivalents $ 3,394,272 $ 3,394,272
Accounts receivable and accrued sales 1,091,021 1,091,021
Other current assets 791,430 791,430
Oil and gas property and equipment, net 20,679,462 $9,000,000 29,679,462
Other long-term assets 1,016,382 1,016,382
----------- -----------
Total assets $26,972,567 $35,972,567
----------- -----------
----------- -----------
Liabilities and Stockholders' Equity:
Current liabilities $ 3,587,532 $ 3,587,532
Long-term debt 9,154,864 9,154,864
Other long-term liabilities 390,250 390,250
Stockholders' equity 13,839,921 $9,000,000 22,839,921
----------- -----------
Total liabilities and stockholders'
equity $26,972,567 $35,972,567
----------- -----------
----------- -----------
</TABLE>
PRO FORMA ADJUSTMENT
The value of $9.0 million assigned to the Acquired Properties was based on
the average fair market value of the 1,309,880 shares of common stock given
as purchase consideration during the period shortly before and after the
transaction was announced.
F-7
<PAGE>
INLAND RESOURCES INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Three-Month Period Ended March 31, 1996
(unaudited)
<TABLE>
Acquired
Historical Properties Pro Forma
----------- --------------- -----------
<S> <C> <C> <C>
Sales of oil and gas $ 691,982 $1,103,004 (1) $1,794,986
--------- ----------- ----------
Operating expenses:
Lease operating expenses 164,336 73,954 (1) 238,290
Production taxes 31,217 62,332 (1) 93,549
Exploration 9,781 9,781
Depletion, depreciation and amortization 195,029 684,487 (1) 879,516
General and administrative, net 276,744 276,744
--------- ----------- ----------
Total operating expenses 677,107 820,773 1,497,880
--------- ----------- ----------
Operating income 14,875 282,231 297,106
Interest expense (186,934) (186,934)
Other income, net 32,571 32,571
--------- ----------- ----------
Net income (loss) $(139,488) $ 282,231 $ 142,743
--------- ----------- ----------
--------- ----------- ----------
Net income (loss) per share $ (.03) $ .03
--------- ----------
--------- ----------
Weighted average common shares and
common share equivalents outstanding 4,092,800 (2) 5,447,182
--------- ----------
--------- ----------
</TABLE>
PRO FORMA ADJUSTMENTS
(1) To reflect revenues, direct operating expenses and depletion related to the
Acquired Properties during the three-month period ended March 31, 1996.
(2) Assumes shares issued to purchase the Acquired Properties were outstanding
for the entire three-month period along with dilutive stock options and
warrants.
F-8
<PAGE>
INLAND RESOURCES INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1995
(unaudited)
<TABLE>
Acquired
Historical Properties Pro Forma
----------- -------------- -----------
<S> <C> <C> <C>
Revenues:
Sales of oil and gas $ 1,904,810 $1,029,301 (1) $ 2,934,111
Management fees 326,178 (326,178)(2)
----------- ---------- -----------
Total revenue 2,230,988 703,123 2,934,111
----------- ---------- -----------
Operating expenses:
Lease operating expenses 1,010,050 69,461 (1) 1,079,511
Production taxes 132,417 58,092 (1) 190,509
Exploration 342,081 342,081
Depletion, depreciation and amortization 857,570 645,633 (1) 1,503,203
General and administrative, net 1,335,263 1,335,263
----------- ---------- -----------
Total operating expenses 3,677,381 773,186 4,450,567
----------- ---------- -----------
Operating income (1,446,393) (70,063) (1,516,456)
Interest expense (749,307) (749,307)
Other income, net 127,537 127,537
Gain on sale of Duchesne County Field 850,000 850,000
----------- ---------- -----------
Loss from continuing operations before
extraordinary loss $(1,218,163) $ (70,063) $(1,288,226)
----------- ---------- -----------
----------- ---------- -----------
Loss per share from continuing operations
before extraordinary loss $ (.40) $ (.29)
----------- -----------
----------- -----------
Weighted average common shares outstanding 3,071,110 (3) 4,380,990
----------- -----------
----------- -----------
</TABLE>
PRO FORMA ADJUSTMENTS
(1) To reflect revenues, direct operating expenses and depletion related to
the Acquired Properties during the year ended December 31, 1995.
(2) To reverse management fees charged to Farmout, Inc. and prior owners by
the Company for land, geological, engineering and accounting services.
(3) Assumes shares issued to purchase the Acquired Properties were outstanding
for the entire year.
F-9
<PAGE>
INLAND RESOURCES INC.
PRO FORMA RESERVE INFORMATION
MAY 31, 1996
(unaudited)
The following tables set forth the estimated oil and gas reserves of the
Company (attributable to its net working interest only) and the estimated
discounted future net cash inflows as of May 31, 1996. The reserve
information is based on reports prepared by the Company's in-house reserve
engineer. The reserve data has not been reviewed or audited by an independent
petroleum engineering firm.
The first two tables set forth the estimated net quantities of proved
developed and proved undeveloped oil and gas reserves owned by the Company at
May 31, 1996. The last table sets forth, for the net quantities reported, the
future net cash inflows discounted to present value at an annual rate of 10%.
The discounted future net cash inflows were calculated in accordance with
current Securities and Exchange Commission guidelines concerning the use of
constant oil and gas prices and operating costs in reserve evaluations.
Future net cash inflows from reserves at May 31, 1996 were calculated on the
basis of prices in effect on that date, $18.30 per barrel of oil and $1.32
per Mcf of gas.
ESTIMATED NET QUANTITIES OF PROVED DEVELOPED RESERVES
Acquired
Historical Properties Pro Forma
---------- ---------- ----------
Oil (MBbl) 2,706 485 3,191
Gas (MMcf) 4,467 1,202 5,669
ESTIMATED NET QUANTITIES OF PROVED UNDEVELOPED RESERVES
Acquired
Historical Properties Pro Forma
---------- ---------- ----------
Oil (MBbl) 2,160 - 2,160
Gas (MMcf) 6,028 - 6,028
F-10
<PAGE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET
CASH FLOWS RELATING TO PROVED RESERVES
(in thousands)
(unaudited)
Acquired
Historical Properties Pro Forma
---------- ---------- ---------
Future cash inflows $ 97,948 $ 9,879 $ 107,827
Future production costs (30,930) (2,815) (33,745)
Future development costs (19,824) - (19,824)
Future income tax provision (10,477) (2,026) (12,503)
-------- ------- ---------
Future net cash flows 36,717 5,038 41,755
Less effect of 10% discount factor (14,924) (1,324) (16,248)
-------- ------- ---------
Standardized measure of discounted
future net cash flow $ 21,793 $ 3,714 $ 25,507
-------- ------- ---------
-------- ------- ---------
F-11
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Inland Resources Inc. on Form S-8 (File No. 33-41662), Form S-8 (File No.
33-84640), Form S-3 (File No. 33-84766) and Form S-3 (File No. 33-80392) of
our report dated July 15, 1996, on our audit of the Historical Summary of Oil
and Gas Revenues and Direct Operating Expenses of Certain Oil and Gas
Properties of Farmout, Inc. Acquired by Inland Resources Inc. for the
eleven-month period from July 1, 1995 to May 31, 1996, which report is
included in this Amendment No. One to Form 8-K dated June 12, 1996.
Coopers & Lybrand L.L.P.
Denver, Co.
July 18, 1996
