<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
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Commission file number 0-16487
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INLAND RESOURCES INC.
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(Exact name of small business issuer as specified in its charter)
Washington 91-1307042
- ---------------------------------------- ---------------------------------
(State of incorporation or organization) (IRS Employer Identification No.)
475 17th Street, Suite 1500, Denver, Colorado 80202
- --------------------------------------------- ----------
(Address of principal executive offices) (ZIP Code)
Issuer's telephone number, including area code: (303) 292-0900
---------------------------------
(Former name, address and fiscal year, if changed, since last report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes xx No
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Number of shares of common stock, par value $.001 per share, outstanding as of
November 3, 1997: 8,359,830
---------
Transitional Small Business Disclosure Format:
Yes No xx
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<PAGE>
PART 1. FINANCIAL INFORMATION
INLAND RESOURCES INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,981,168 $10,030,982
Accounts receivable and accrued sales 1,474,487 2,077,661
Inventory 1,816,727 862,229
Other current assets 2,643,774 242,022
------------ -----------
Total current assets 10,916,156 13,212,894
------------ -----------
Property and equipment, at cost:
Oil and gas properties (successful efforts
method) 136,360,645 46,832,811
Accumulated depletion, depreciation and
amortization (7,697,749) (3,834,517)
------------ -----------
128,662,896 42,998,294
Other property and equipment, net 1,277,500 779,161
Debt issue costs and other long-term assets 3,165,777 338,262
------------ -----------
Total assets $144,022,329 $57,328,611
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 9,276,491 $ 4,236,734
Current portion of long-term debt 1,148,000
------------ -----------
Total current liabilities 9,276,491 5,384,734
------------ -----------
Long-term debt 91,732,674 19,972,014
Mandatorily redeemable Series C preferred stock 9,575,000
Accrued Series C preferred stock dividends 200,000
Warrants outstanding 1,300,000
Stockholders' equity:
Preferred Class A stock, par value $.001,
20,000,000 shares authorized; 0 and 1,000,000
shares of Series B issued and outstanding,
liquidation preference of $12,400,000 1,000
Additional paid-in capital - preferred 9,999,000
Common stock, par value $.001; 25,000,000 shares
authorized; issued and outstanding 8,355,830
and 6,312,059, respectively 8,355 6,312
Additional paid-in capital - common 41,820,308 29,129,185
Accrued preferred Series B dividends 670,000
Accumulated deficit (9,890,499) (7,833,634)
------------ -----------
Total stockholders' equity 31,938,164 31,971,863
------------ -----------
Total liabilities and stockholders' equity $144,022,329 $57,328,611
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
1
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Sales of oil and gas $ 3,914,971 $ 3,553,484 $10,402,750 $ 6,798,180
------------ ------------ ----------- ------------
Operating expenses:
Lease operating expenses 731,780 432,765 1,952,705 887,473
Production taxes 166,049 141,551 445,296 264,414
Exploration 13,558 154,152 43,484 167,355
Depletion, depreciation and amortization 1,652,388 1,339,341 4,067,232 2,224,603
General and administrative, net 490,830 397,479 1,332,074 1,069,023
------------ ------------ ----------- ------------
Total operating expenses 3,054,605 2,465,288 7,840,791 4,612,868
------------ ------------ ----------- ------------
Operating income 860,366 1,088,196 2,561,959 2,185,312
Interest expense (598,539) (515,908) (1,894,505) (1,023,171)
Other income, net 61,168 153,730 365,412 245,250
------------ ------------ ----------- ------------
Net income before extraordinary loss 322,995 726,018 1,032,866 1,407,391
Extraordinary loss on early extinguishment of debt (295,378) (1,159,731)
------------ ------------ ----------- ------------
Net income (loss) 27,617 726,018 (126,865) 1,407,391
Preferred Series A Stock dividend on cash redemption (214,000) (214,000)
Preferred Series B Stock redemption premium (580,000) (580,000)
------------ ------------ ----------- ------------
Net income (loss) available to common stockholders $ (552,383) $ 512,018 $ (706,865) $ 1,193,391
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Net income (loss) per share - Primary
Before extraordinary loss $(0.03) $0.09 $ 0.06 $0.25
Extraordinary loss $(0.04) $(0.16)
------------ ------------ ----------- ------------
Total $(0.07) $0.09 $(0.10) $0.25
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Weighted average common and common
equivalent shares outstanding - Primary 8,370,477 5,948,745 7,256,512 4,845,703
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Net income (loss) per share - Fully diluted
Before extraordinary loss $(0.03) $0.07 $ 0.06 $0.20
Extraordinary loss $(0.04) $(0.16)
------------ ------------ ----------- ------------
Total $(0.07) $0.07 $(0.10) $0.20
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Weighted average common and common
equivalent shares outstanding - Fully diluted 9,098,602 7,506,124 7,614,617 6,000,768
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Dividends per common share NONE NONE NONE NONE
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
2
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (126,865) $ 1,407,391
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Net cash used by discontinued operations (87,987)
Depletion, depreciation and amortization 4,067,232 2,224,603
Amortization of debt issue costs and debt discount 155,400 56,467
Loss on early extinguishment of debt 1,159,731
Effect of changes in current assets and liabilities:
Accounts receivable and accrued sales 603,174 (1,130,623)
Inventory (954,498) (286,607)
Other current assets (643,369) (349,118)
Accounts payable and accrued expenses 5,039,757 1,251,991
------------ -------------
Net cash provided by operating activities 9,300,562 3,086,117
------------ -------------
Cash flows from investing activities:
Acquisition of oil and gas properties (69,922,425)
Development expenditures and equipment purchases (21,907,748) (18,075,270)
------------ -------------
Net cash used by investing activities (91,830,173) (18,075,270)
------------ -------------
Cash flows from financing activities:
Net proceeds from sale of preferred stock 9,575,000 9,992,500
Proceeds from exercise of employee stock options 293,166 16,250
Redemption of preferred Series A stock (740,624)
Proceeds from issuance of long-term debt 131,345,524 16,584,993
Payments of long-term debt (60,099,355) (51,433)
Debt issue costs and prepaid interest (3,634,538)
------------ -------------
Net cash provided by financing activities 77,479,797 25,801,686
------------ -------------
Net increase (decrease) in cash and cash equivalents (5,049,814) 10,812,533
Cash and cash equivalents at beginning of period 10,030,982 2,970,305
------------ -------------
Cash and cash equivalents at end of period $ 4,981,168 $ 13,782,838
------------ -------------
------------ -------------
Noncash financing and investing activity:
Purchase of Farmout Inc. for common stock $ 6,542,500
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
3
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______
1. COMPANY ORGANIZATION:
Inland Resources Inc. (the "Company") is an independent energy company with
substantially all of its property interests located in the Monument Butte
Field within the Uinta Basin of Northeastern Utah.
2. BASIS OF PRESENTATION:
The preceding financial information has been prepared by the Company pursuant
to the rules and regulations of the Securities and Exchange Commission
("SEC") and, in the opinion of the Company, includes all normal and recurring
adjustments necessary for a fair statement of the results of each period
shown. Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules
and regulations. Management believes the disclosures made are adequate to
ensure that the financial information is not misleading, and suggests that
these financial statements be read in conjunction with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996.
3. SALE OF PREFERRED STOCK:
On July 21, 1997, the Company closed the sale of 100,000 shares of a newly
designated Series C Cumulative Convertible Preferred Stock (the "Series C
Stock") to an affiliate of Enron Corp. for cash of $10 million ($9.6 million
net of closing fees). Concurrently with the issuance of the Series C Stock,
the Company called for redemption its outstanding Series B Convertible
Preferred Stock (the "Series B Stock"). The holders of the Series B Stock
waived redemption and instead elected to convert their Series B Stock into
1,977,671 shares of Inland Common Stock.
The Series C Stock is initially convertible at any time by the holder into
8.333 shares of Inland Common Stock, an effective conversion price of $12.00
per share. The Series C Stock bears a dividend of 10% per annum. Accumulated
dividends may also be converted by the holder at the same ratio as the Series
C Stock. Subsequent to July 21, 2000, (the third anniversary), the Company
has the option to redeem for cash at par value ($100 per share) all
outstanding shares of Series C Stock plus accrued dividends. If not converted
by the holder or redeemed for cash by the Company prior to the later of (i)
July 21, 2005 (the eighth anniversary) or (ii) six months following maturity
of any high yield offering or long-term debt financing in the aggregate
amount of at least $25 million obtained after July 21, 1997, the Company must
redeem the Series C Stock and all accrued dividends for (i) cash or, at the
Company's election, (ii) Common Stock issued at 80% of the market price of
the Common Stock on the day of redemption.
The Company must also redeem the Series C Stock if (a) the Company enters
into any new line of business (other than exploration, development and
production of oil and gas) and holders of Series C Stock elect to be redeemed
prior to the Company commencing such new line of business (closing on the
purchase of refining assets is considered to be an entry into a new line of
business), or (b) the Company proposes to enter into a merger, consolidation
or share exchange pursuant to which holders of Common Stock would receive
cash or other property (rather than stock in the surviving company) in a per
share amount less than the effective conversion price for the Series C Stock
(which is initially $12 per share). The Series C Stock votes with common
stockholders on all matters based on the number of shares of Inland Common
Stock the Series C Stock is convertible into; except for the approval of
amendments to the Series C Stock, the authorization of any other series of
preferred stock having equal or greater rights, and the approval of any
merger, consolidation or share exchange involving the Company unless the
holder of the Series C Stock receives equivalent stock with equivalent
rights. In these instances, the Series C Stock votes as a separate class. The
Series C Stock also carries anti-dilution protection, rights to demand
registration at the Company's expense and a liquidation preference equal to
par value of all outstanding shares plus accrued dividends.
4
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. ACQUISITION OF ASSETS:
On August 15, 1997, the Company acquired Enserch Exploration, Inc.'s
("Enserch") property interests and related assets in the Monument Butte Field
within the Uinta Basin of Northeastern Utah. The purchase price of $10.3
million included interests in 141 wells (47 net) including 52 wells operated
by Enserch and 43 wells already operated by the Company. The remaining
nonoperated production is comprised of 52 gross (2 net) wells. Also included
in the purchase were 9,600 net undeveloped acres, water rights and a water
transportation and distribution system.
On September 30, 1997, the Company acquired Equitable Resources Energy
Company's ("EREC") property interests and related assets in the Monument
Butte Field within the Uinta Basin of Northeastern Utah. The purchase of
$55.5 million included interests in 279 wells (184 net) including 227 wells
operated by EREC and 48 wells already operated by the Company. Also included
in the purchase were 23,400 net undeveloped acres, water rights, a water
transportation and distribution system and a gas gathering and processing
system.
The following presents unaudited, pro forma operating results as if the
purchase of EREC properties had occurred at January 1, 1996.
Year ended
December 31, 1996
-----------------
Revenues $19,183,000
Net income from continuing operations $ 253,000
Net income $ 223,000
Earnings per share - Primary $ 0.04
Earnings per share - Fully diluted $ 0.03
5. DEBT REFINANCING:
On June 30, 1997, the Company entered into a $50 million Credit Agreement
with Canadian Imperial Bank of Commerce (the "CIBC Loan Agreement"). The
initial advance of $26 million was funded on June 30, 1997. The loan
proceeds, along with cash on hand, were used to retire a loan obligation to
Trust Company of the West and to purchase an override on the Company's
properties held by Trust Company of the West. On August 15, 1997 an
additional $9 million was drawn under the facility to fund the acquisition of
properties from Enserch. Interest under the CIBC Loan Agreement was
calculated at the London interbank eurodollar rate ("LIBOR") plus a spread of
1.875% or approximately 7.5%.
On September 30, 1997, the Company closed separate Credit Agreements with
Trust Company of the West and TCW Asset Management Company in their
capacities as noteholder and agent (collectively "TCW") and ING (U.S.)
Capital Corporation ("ING"). The TCW Credit Agreement provided the Company
with $75 million, all of which was funded at closing. The ING Credit
Agreement provided the Company with an initial borrowing base of $45.0
million of which $17.8 million was drawn at closing. The borrowing base under
the ING facility is limited to the collateral value of proved reserves as
determined semiannually by the lender. The proceeds from the loans were used
to finance the acquisition of the properties purchased from EREC, fund full
repayment of the CIBC Loan agreement, pay transaction costs and provide the
Company with working capital.
5
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The ING Credit Agreement constitutes a revolving line of credit until March
31, 1999, at which time it converts to a term loan payable in quarterly
installments through March 29, 2003. The quarterly installments, based on a
$45.0 million borrowing base, are $4.0 million for the first three quarters,
$3.0 million for the next four quarters, $2.5 million for the next four
quarters, $2.25 million for the next four quarters, and $2.0 million on March
29, 2003. The ING loan bears interest, at the Company's option, at either (i)
the average prime rates announced from time to time by The Chase Manhatten
Bank, Citibank, N.A. and Morgan Guaranty Trust Company of New York plus 0.5%
per annum; or (ii) at LIBOR plus 1.75%. The Company selected a 60 day LIBOR
rate resulting in an interest rate of 7.5% subsequent to closing. The ING
loan is secured by a first lien on substantially all assets of the Company.
The TCW Credit Agreement is comprised of a $65.0 million traunche and a $10.0
million traunche and is payable interest only, at a rate of 9.75% per annum,
quarterly until the earlier of December 31, 2003 or the date on which the ING
loan is paid in full. At that time, the TCW loan converts to a term loan
payable in twelve quarterly installments of principal and interest. The
quarterly principal installments are $6.25 million for the first four
quarters, $8.75 million for the next four quarters and $3.75 million for the
last four quarters. The Company granted warrants to TCW to purchase 100,000
shares of common stock (subject to anti-dilution adjustments) at an exercise
price of $10.00 per share (subject to anti-dilution adjustments) at any time
after September 23, 2000 and before September 23, 2007. The Company also
granted registration rights in connection with such warrants. TCW is also
entitled to additional interest on $65.0 million traunche in an amount that
yields TCW a 12.5% internal rate of return, such interest payment to be made
concurrently with the final payment of all principal and interest on the TCW
loan. For purposes of the internal rate of return calculation, the Company is
given credit for the funding fee of $2.25 million paid to TCW at closing. In
regards to the $10.0 million traunche, upon payment in full of the TCW loan
by the Company, TCW may elect to "put" their warrant back to the Company and
accept a cash payment which will cause TCW to achieve a 12.5% rate of return.
The TCW Credit Agreement restricts any repayment of the TCW indebtedness
until October 1, 1999. The TCW loan is secured by a second lien on
substantially all assets of the Company.
The TCW Credit Agreement and ING Credit Agreement have common covenants that
restrict the payment of cash dividends, borrowings, sale of assets, loans to
others, investment and merger activity and hedging contracts without the
prior consent of the lenders and requires the Company to maintain certain net
worth, interest coverage and working capital ratios. On September 30, 1997,
the Company's outstanding balance was $75 million under the TCW Credit
Agreement and $17,846,000 under the ING Credit Agreement.
6. EARNINGS PER SHARE:
The Financial Accounting Standards Board issued Statement No. 128 "Earnings
per Share" ("SFAS No. 128") effective for financial reports issued subsequent
to December 15, 1997. SFAS No. 128 replaces the calculation of Primary EPS
with a calculation called Basic EPS and replaces Fully Diluted EPS with a
calculation called Diluted EPS. Adoption of the SFAS No. 128 as of January 1,
1996 would not have had any effect on the Company's reported earnings per
share.
6
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. PROPOSED REFINERY ACQUISITION:
On July 14, 1997, the Company entered into a Purchase and Sale Agreement with
Crysen Refining, Inc. and Sound Refining, Inc. (collectively "Crysen")
covering the purchase of two oil refineries and related assets; one located
in Salt Lake City, Utah and one located in Tacoma, Washington. The purchase
price of approximately $27 million includes the physical plant and land, the
crude oil and finished products inventory and net receivable position of both
refineries. The closing is scheduled for November 30, 1997 and is subject to
Inland performing additional environmental, financial and engineering due
diligence and satisfaction of other closing conditions. The Company made
nonrefundable deposits of $250,000 on September 10, 1997 and $1.0 million on
October 3, 1997 related to this acquisition. The Crysen refinery, located in
Salt Lake City, Utah, has a nominal capacity of 12,500 barrels of oil per
day. The Sound refinery, located in Tacoma, Washington, has a nominal
capacity of 6,000 barrels of oil per day and is principally an asphalt
processing facility. The Company may consider assigning its right to acquire
the Tacoma facility to an unrelated purchaser prior to closing.
7
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
______
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
RESULTS OF OPERATIONS:
THREE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996:
OIL AND GAS SALES - Oil and gas sales during the third quarter of 1997
exceeded the previous year third quarter by $361,000, or 10%. The increase was
attributable to increased oil and gas sales volumes as the Company drilled and
completed a total of 72 wells during the twelve months ending September 30,
1997. Although production increased 29% on a barrel of oil equivalent ("BOE")
basis, the sales increase was only 10% due primarily to a 22% decrease in the
average price received for crude oil production from $19.92 during the third
quarter of 1996 to $15.63 during the same period in 1997.
As further discussed in "Liquidity and Capital Resources" below, the Company
has entered into price protection agreements to hedge against volatility in
crude oil prices. Although hedging activities do not affect the Company's
actual sales price for crude oil in the field, the financial impact of hedging
transactions is reported as an adjustment to crude oil revenue in the period in
which the related oil is sold. Oil and gas sales were decreased by $33,000 and
$122,000 during the third quarters of 1997 and 1996, respectively, to recognize
hedging contract settlement losses and contract purchase cost amortization.
LEASE OPERATING EXPENSES - Lease operating expense per BOE sold was $2.66
during the third quarter of 1997, down from the $3.06 experienced during the
first half of 1997. The Company's operating expense rate per BOE was $2.03
during the third quarter of 1996. The Company expects to further improve upon
its 1997 operating expense rate per BOE sold by continuing its aggressive
development program and effectively integrating the recent property
acquisitions. The development activity and acquisitions should have the effect
of increasing sales volumes and creating more efficient field operations
thereby allowing a wider allocation of operating costs in relation to
incremental operating costs incurred.
PRODUCTION TAXES - Production tax expense consists of estimates of the
Company's yearly effective tax rate for Utah state severance tax and production
ad valorem tax. Changes in sales prices, tax rates, tax exemptions and the
timing, location and results of drilling activities can all affect the
Company's actual effective tax rate. During the third quarter of 1997 the
Company recorded production taxes at 4.2% of sales. The estimated production
tax rate recorded during the third quarter of 1996 was 3.8%.
EXPLORATION - Exploration expense represents the Company's share of costs to
retain unproved acreage.
DEPLETION, DEPRECIATION AND AMORTIZATION - The increase in depletion,
depreciation and amortization resulted from increased sales volumes offset by a
slightly lower rate. Depletion, which is based on the units-of-production
method, comprises the majority of the total charge. The depletion rate is a
function of capitalized costs and related underlying reserves in the periods
presented. The Company's average depletion rate was $5.65 per BOE sold during
the third quarter of 1997 compared to $5.96 per BOE sold during the third
quarter of 1996. Due to the effects of the recent acquisitions, the Company
expects to lower its depletion rate to $5.10 during the fourth quarter of 1997.
8
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
______
GENERAL AND ADMINISTRATIVE, NET - General and administrative expense
increased $93,000 on a net basis between quarters. General and administrative
expense is reported net of operator fees and reimbursements which were $568,000
and $512,000 during the third quarters of 1997 and 1996, respectively. Gross
general and administrative expense was $1,059,000 in 1997 and $909,000 in 1996.
The increase in expense and reimbursements is primarily a function of the level
of operated field activity. During the third quarter of 1997, the Company
operated 90 more wells than it did at July 1, 1996. In addition, the Company
began increasing its employee base to prepare for the property acquisitions.
INTEREST EXPENSE - Borrowings during the third quarter of 1997 were recorded
at an effective interest rate of 8.0% under the CIBC Credit facility.
Borrowings during the third quarter of 1996 were recorded at an effective
interest rate of 11% under the Trust Company of the West credit facility. The
increase in expense during the third quarter of 1997 was due to an increase in
the average amount of borrowings outstanding during the period.
OTHER INCOME - Other income represents interest earned on the investment of
surplus cash balances.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT - On September 30, 1997,
the Company refinanced an existing obligation to CIBC. Unamortized debt issue
costs of $295,000 were written off as an extraordinary loss.
INCOME TAXES - During 1997 and 1996, no income tax provision or benefit was
recognized due to net operating losses incurred and the recording and reversal
of a full valuation allowance.
PREFERRED SERIES B STOCK REDEMPTION PREMIUM - During July 1997, the Company
called for redemption its Series B Stock. All holders of Series B Stock elected
to convert their holdings to common stock rather than have their shares
redeemed for cash. The amount recorded as a redemption premium represents the
excess consideration paid over the carrying amount of the Series B Stock.
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996:
OIL AND GAS SALES - Oil and gas sales during the first nine months of 1997
exceeded the previous year initial nine months by $3.6 million or 53%. The
increase was attributable to increased oil and gas sales volumes as the Company
drilled and completed a total of 72 wells during the twelve months ending
September 30, 1997 and acquired 20 producing properties on June 12, 1996
through the purchase of Farmout Inc. Although production increased 67% on a
barrel of oil equivalent ("BOE") basis, the sales increase was 53% due
primarily to an 14% decrease in the average price received for crude oil
production from $19.77 during 1996 to $17.01 during 1997.
Oil and gas sales were decreased by $176,000 and $352,000 during 1997 and 1996,
respectively, to recognize hedging contract settlement losses and contract
purchase cost amortization.
LEASE OPERATING EXPENSES - Lease operating expense per BOE sold was $2.89
during the first nine months of 1997. The Company experienced a rate of $2.31
per BOE during the year ended December 31, 1996 and $2.19 per BOE during the
initial nine months of 1996. The Company expects to further improve upon its
1997 operating expense rate per BOE sold by continuing its aggressive
development program and effectively integrating the recent property
acquisitions. The development activity and acquisitions should have the effect
of increasing sales volumes and creating more efficient field operations
thereby allowing a wider allocation of operating costs in relation to
incremental operating costs incurred.
9
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
______
PRODUCTION TAXES - Production tax expense consists of estimates of the
Company's yearly effective tax rate for Utah state severance tax and production
ad valorem tax. Changes in sales prices, tax rates, tax exemptions and the
timing, location and results of drilling activities can all affect the
Company's actual effective tax rate. During 1997 the Company recorded
production taxes at 4.2% of sales. The estimated production tax rate recorded
during 1996 was 3.7%.
EXPLORATION - Exploration expense represents the Company's share of costs to
retain unproved acreage. In addition, during the third quarter of 1996 the
Company drilled an uneconomic exploration well.
DEPLETION, DEPRECIATION AND AMORTIZATION - The increase in depletion,
depreciation and amortization resulted from increased sales volumes and an
increased depletion rate. Depletion, which is based on the units-of-production
method, comprises the majority of the total charge. The depletion rate is a
function of capitalized costs and related underlying reserves in the periods
presented. The Company's average depletion rate was $5.65 per BOE sold during
the initial nine months of 1997 compared to $5.19 per BOE sold during the same
period in 1996. Due to the effects of the recent acquisitions, the Company
expects to lower its depletion rate to $5.10 during the fourth quarter of 1997.
GENERAL AND ADMINISTRATIVE, NET - General and administrative expense
increased $263,000 on a net basis between nine month periods. General and
administrative expense is reported net of operator fees and reimbursements
which were $1.9 million and $1.4 million during the nine month periods ended
September 30, 1997 and 1996, respectively. Gross general and administrative
expense was $3.2 million in 1997 and $2.5 million in 1996. The increase in
expense and reimbursements is primarily a function of the level of operated
field activity. During the third quarter of 1997, the Company operated 110 more
wells than it did at January 1, 1996. In addition, the Company began increasing
its employee base to prepare for the property acquisitions.
INTEREST EXPENSE - Borrowings during 1997 and 1996 were recorded at
effective interest rates of 9.5% and 11%, respectively. The increase in
expense during 1997 was due to an increase in the average amount of
outstanding borrowings.
OTHER INCOME - Other income represents interest earned on the investment of
surplus cash balances.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT - On September 30, 1997,
the Company refinanced an existing obligation to CIBC and on June 30, 1997, the
Company refinanced an existing obligation to Trust Company of the West.
Unamortized debt issue costs of $295,000 related to the CIBC facility and
$291,000 related to the Trust Company of the West facility and an unamortized
loan discount of $573,000 related to the Trust Company of the West facility
were written off as an extraordinary loss.
INCOME TAXES - During 1997 and 1996, no income tax provision or benefit was
recognized due to net operating losses incurred and the recording and reversal
of a full valuation allowance.
PREFERRED SERIES A STOCK DIVIDEND ON CASH REDEMPTION - During August 1996,
the Company called for redemption its Series A Stock. The amount recorded as a
dividend represents the excess of the redemption amount over the carrying
amount for those Series A holders who elected to redeem their shares rather
than convert.
10
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
______
PREFERRED SERIES B STOCK REDEMPTION PREMIUM - During July 1997, the Company
called for redemption its Series B Stock. All holders of Series B Stock elected
to convert their holdings to common stock rather than have their shares
redeemed for cash. The amount recorded as a redemption premium represents the
excess consideration paid over the carrying amount of the Series B Stock.
LIQUIDITY AND CAPITAL RESOURCES
DEBT REFINANCING - On June 30, 1997, the Company entered into a $50 million
Credit Agreement with Canadian Imperial Bank of Commerce (the "CIBC Loan
Agreement"). The initial advance of $26 million was funded on June 30, 1997.
The loan proceeds, along with cash on hand, were used to retire a loan
obligation to Trust Company of the West and to purchase an override on the
Company's properties held by Trust Company of the West. On August 15, 1997 an
additional $9 million was drawn under the facility to fund the acquisition of
properties from Enserch. Interest under the CIBC Loan Agreement was calculated
at the London interbank eurodollar rate ("LIBOR") plus a spread of 1.875% or
approximately 7.5%.
On September 30, 1997, the Company closed separate Credit Agreements with Trust
Company of the West and TCW Asset Management Company in their capacities as
noteholder and agent (collectively "TCW") and ING (U.S.) Capital Corporation
("ING"). The TCW Credit Agreement provided the Company with $75 million, all of
which was funded at closing. The ING Credit Agreement provided the Company with
an initial borrowing base of $45.0 million of which $17.8 million was drawn at
closing. The borrowing base under the ING facility is limited to the collateral
value of proved reserves as determined semiannually by the lender. The proceeds
from the loans were used to finance the acquisition of the properties purchased
from EREC, fund full repayment of the CIBC Loan agreement, pay transaction
costs and provide the Company with working capital.
The ING Credit Agreement constitutes a revolving line of credit until March 31,
1999, at which time it converts to a term loan payable in quarterly
installments through March 29, 2003. The quarterly installments, based on a
$45.0 million borrowing base, are $4.0 million for the first three quarters,
$3.0 million for the next four quarters, $2.5 million for the next four
quarters, $2.25 million for the next four quarters, and $2.0 million on March
29, 2003. The ING loan bears interest, at the Company's option, at either (i)
the average prime rates announced from time to time by The Chase Manhatten
Bank, Citibank, N.A. and Morgan Guaranty Trust Company of New York plus 0.5%
per annum; or (ii) at LIBOR plus 1.75%. The Company selected a 60 day LIBOR
rate resulting in an interest rate of 7.5% subsequent to closing. The ING loan
is secured by a first lien on substantially all assets of the Company.
The TCW Credit Agreement is comprised of a $65.0 million traunche and a $10.0
million traunche and is payable interest only, at a rate of 9.75% per annum,
quarterly until the earlier of December 31, 2003 or the date on which the ING
loan is paid in full. At that time, the TCW loan converts to a term loan
payable in twelve quarterly installments of principal and interest. The
quarterly principal installments are $6.25 million for the first four
quarters, $8.75 million for the next four quarters and $3.75 million for the
last four quarters. The Company granted warrants to TCW to purchase 100,000
shares of common stock (subject to anti-dilution adjustments) at an exercise
price of $10.00 per share (subject to anti-dilution adjustments) at any time
after September 23, 2000 and before September 23, 2007. The Company also
granted registration rights in connection with such warrants. TCW is also
entitled to additional interest on $65.0 million traunche in an amount that
yields TCW a 12.5% internal rate of return, such interest payment to be made
concurrently with the final payment of all principal and interest on the TCW
loan. For purposes of the internal rate of return calculation, the Company is
given credit for the funding fee of $2.25 million paid to TCW at closing. In
regards to the $10.0 million traunche, upon payment in full of the
11
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
______
TCW loan by the Company, TCW may elect to "put" their warrant back to the
Company and accept a cash payment which will cause TCW to achieve a 12.5%
rate of return. The TCW Credit Agreement restricts any repayment of the TCW
indebtedness until October 1, 1999. The TCW loan is secured by a second lien
on substantially all assets of the Company.
The TCW Credit Agreement and ING Credit Agreement have common covenants that
restrict the payment of cash dividends, borrowings, sale of assets, loans to
others, investment and merger activity and hedging contracts without the prior
consent of the lenders and requires the Company to maintain certain net worth,
interest coverage and working capital ratios. On September 30, 1997, the
Company's outstanding balance was $75 million under the TCW Credit Agreement
and $17,846,000 under the ING Credit Agreement.
SALE OF MANDATORY REDEEMABLE PREFERRED STOCK - On July 21, 1997, the Company
closed the sale of 100,000 shares of a newly designated Series C Cumulative
Convertible Preferred Stock (the "Series C Stock") to an affiliate of Enron
Corp. for cash of $10 million ($9.6 million net of closing fees). Concurrently
with the issuance of the Series C Stock, the Company called for redemption its
outstanding Series B Convertible Preferred Stock (the "Series B Stock"). The
holders of the Series B Stock waived redemption and instead elected to convert
their Series B Stock into 1,977,671 shares of Inland Common Stock.
The Series C Stock is initially convertible at any time by the holder into
8.333 shares of Inland Common Stock, an effective conversion price of $12.00
per share. The Series C Stock bears a dividend of 10% per annum. Accumulated
dividends may also be converted by the holder at the same ratio as the Series C
Stock. Subsequent to July 21, 2000, (the third anniversary), the Company has
the option to redeem for cash at par value ($100 per share) all outstanding
shares of Series C Stock plus accrued dividends. If not converted by the holder
or redeemed for cash by the Company prior to the later of (i) July 21, 2005
(the eighth anniversary) or (ii) six months following maturity of any high
yield offering or long-term debt financing in the aggregate amount of at least
$25 million obtained after July 21, 1997, the Company must redeem the Series C
Stock and all accrued dividends for (i) cash or, at the Company's election,
(ii) Common Stock issued at 80% of the market price of the Common Stock on the
day of redemption.
The Company must also redeem the Series C Stock if (a) the Company enters into
any new line of business (other than exploration, development and production of
oil and gas) and holders of Series C Stock elect to be redeemed prior to the
Company commencing such new line of business (closing on the purchase of
refining assets is considered to be an entry into a new line of business), or
(b) the Company proposes to enter into a merger, consolidation or share
exchange pursuant to which holders of Common Stock would receive cash or other
property (rather than stock in the surviving company) in a per share amount
less than the effective conversion price for the Series C Stock (which is
initially $12 per share). The Series C Stock votes with common stockholders on
all matters based on the number of shares of Inland Common Stock the Series C
Stock is convertible into; except for the approval of amendments to the Series
C Stock, the authorization of any other series of preferred stock having equal
or greater rights, and the approval of any merger, consolidation or share
exchange involving the Company unless the holder of the Series C Stock receives
equivalent stock with equivalent rights. In these instances, the Series C Stock
votes as a separate class. The Series C Stock also carries anti-dilution
protection, rights to demand registration at the Company's expense and a
liquidation preference equal to par value of all outstanding shares plus
accrued dividends.
12
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
______
PROPERTY ACQUISITIONS - On August 15, 1997, the Company acquired Enserch
Exploration, Inc.'s ("Enserch") property interests and related assets in the
Monument Butte Field within the Uinta Basin of Northeastern Utah. The purchase
price of $10.3 million included interests in 141 wells (47 net) including 52
wells operated by Enserch and 43 wells already operated by the Company. The
remaining nonoperated production is comprised of 52 gross (2 net) wells. Also
included in the purchase were 9,600 net undeveloped acres, water rights and a
water transportation and distribution system.
On September 30, 1997, the Company acquired Equitable Resources Energy
Company's ("EREC") property interests and related assets in the Monument Butte
Field within the Uinta Basin of Northeastern Utah. The purchase of $55.5
million included interests in 279 wells (184 net) including 227 wells operated
by EREC and 48 wells already operated by the Company. Also included in the
purchase were 23,400 net undeveloped acres, water rights, a water
transportation and distribution system and a gas gathering and processing
system.
In addition to the above closed purchase transactions, on July 14, 1997, the
Company entered into a Purchase and Sale Agreement with Crysen Refining, Inc.
and Sound Refining, Inc. (collectively "Crysen") covering the purchase of two
oil refineries and related assets; one located in Salt Lake City, Utah and one
located in Tacoma, Washington. The purchase price of approximately $27 million
includes the physical plant and land, the crude oil and finished products
inventory and net receivable position of both refineries. The closing is
scheduled for November 30, 1997 and is subject to Inland performing additional
environmental, financial and engineering due diligence and satisfaction of
other closing conditions. The Company made nonrefundable deposits of $250,000
on September 10, 1997 and $1.0 million on October 3, 1997 related to this
acquisition. The Crysen refinery, located in Salt Lake City, Utah, has a
nominal capacity of 12,500 barrels of oil per day. The Sound refinery, located
in Tacoma, Washington, has a nominal capacity of 6,000 barrels of oil per day
and is principally an asphalt processing facility. The Company may consider
assigning its right to acquire the Tacoma facility to an unrelated purchaser
prior to closing. The Company is presently working to secure financing for the
Crysen purchase, although there is no assurance that the Company will be
successful. As a result, the Company may have to forgo the purchase of the
Crysen facility, and forfeit the downpayment already made.
WORKING CAPITAL AND CASH HOLDINGS - In addition to the activity noted
above, during the initial nine months of 1997, the Company generated $7.0
million of cash from operations and increased accounts payable and accrued
expenses by $5.0 million. Subsequent to September 30, 1997, accounts payable
was reduced by $3.0 million to reflect normal payment terms. The Company used
these cash sources, cash on hand and proceeds from the new debt placement to
finance the drilling and completion of 58 wells, fund the Company's obligations
under the original Trust Company of the West Loan Agreement and CIBC Loan
agreement and purchase an inventory of drilling supplies. The effect of all
transactions and operations performed through September 30, 1997 resulted in a
net cash outflow of $5.0 million causing the Company's cash balance to decrease
to $5.0 million, and causing the Company's net working capital position to
decrease to $1.6 million.
The Company intends to use cash on hand, cash flow from operations and
availability under the ING Credit Agreement to continue to develop the Monument
Butte Field. The Company plans on drilling 22 additional wells during the
fourth quarter bringing total wells drilled during 1997 to 80 wells. The
Company also plans conforming expansion to its gas gathering and water delivery
and injection infrastructures. The Company believes its cash sources will be
sufficient to complete 1997 development plans and perform additional
development in 1998.
13
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
______
CRUDE OIL HEDGING ACTIVITIES - The Company has a hedge in place with
Enron Capital and Trade Resources Corp. (the "Enron Hedge") that hedges crude
oil production over a five year period beginning January 1, 1996 in monthly
amounts escalating from 8,500 Bbls in January 1996 to 14,000 Bbls in December
2000. The hedge is structured as a cost free collar whereby if the average
monthly price, based on NYMEX Light Sweet Crude Oil Futures Contracts, is
between $18.00 and $20.55 per barrel, no payment is due under the contract. If
the average price is less than $18.00, the Company is paid the difference
between $18.00 and the average price, multiplied by barrels of crude oil hedged
that month. Similarly, should the average price exceed $20.55 per barrel, the
Company is required to pay the difference between $20.55 and the average price,
multiplied by barrels of crude oil hedged that month. On January 1, 1997, the
Company paid $34,170 to enter into a contract with Koch Gas Services Company
("Koch") that exactly offsets the effect of the Enron Hedge during the period
January 1998 through December 2000. The combination of the two contracts
limits the Company's remaining exposure under the Enron Hedge to the
settlements during the period January 1997 through December 1997 at 10,900
barrels per month. In an effort to limit its downside exposure, on July 8,
1996, the Company purchased from Koch 720,000 put options for $133,200 with a
strike price of $15.00. The contract settles in monthly amounts of 60,000 put
options during the period January 1997 to December 1997. The Company has also
purchased for $33,000 from Enron 300,000 put options with a strike price of
$16.00 that settle in monthly amounts of 100,000 put options during the period
January through March 1998.
MARKETS - The availability of a ready market and the prices obtained for
the Company's oil and gas depend on many factors beyond the Company's control,
including the extent of domestic production, imports of oil and gas, the
proximity and capacity of oil and natural gas pipelines and other
transportation facilities, fluctuating demands for oil and gas, the marketing
of competitive fuels, and the effects of governmental regulation of oil and gas
production and sales. Crude oil produced from the Monument Butte Field is
called "Black Wax" and is sold at the posted field price (an industry term of
the fair market value of oil in a particular field) less a deduction of
approximately $0.85 to $1.00 per barrel for oil quality adjustments. As the
quantity of Black Wax produced within the Monument Butte Field grows, physical
limitations within the regional refineries, located in Salt Lake City, Utah,
will limit the amount of Black Wax that can be efficiently processed. The
Company has been conducting discussions with each refinery to inform them of
the outlook for Black Wax production in this region and has entered into an
agreement to purchase the assets of Crysen to provide a captured refining
source for its Black Wax crude oil, if determined to be desirable. Until the
Crysen acquisition is completed, or some other arrangement is reached, there
will continue to be short-term downward pressure on Black Wax pricing. If the
Company fails to close on the acquisition of Crysen, the Company expects to
negotiate a long-term marketing arrangement or some other agreement that will
be beneficial to the Company, although there can be no assurance it will be
able to do so.
The Company continues to aggressively seek other opportunities to acquire
existing oil and gas production in developed fields. The Company will attempt
to finance such acquisitions through (i) seller financing, whenever possible;
(ii) joint operating agreements with industry partners where the Company may
sell part of its position to provide acquisition and development funds; (iii)
sales of equity or debt of the Company; or (iv) traditional bank lines of
credit.
14
<PAGE>
PART 1. FINANCIAL INFORMATION (CONTINUED)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
______
ENVIRONMENTAL MATTERS - The Company is subject to numerous federal and
state laws and regulations relating to environmental matters. Increasing focus
on environmental issues nationally has lead the Company to continue to evaluate
its responsibilities to the environment. During 1996, the Vernal, Utah office
of the Bureau of Land Management ("BLM") undertook the preparation of an
Environmental Assessment ("EA") relating to certain lands within the Monument
Butte Field. Due to this process, the Company reduced its activities on these
lands during the last six months of 1996 and January 1997 pending issuance of
the EA by the BLM. The formal Record of Decision relating to the EA was issued
by the BLM on February 3, 1997. The Company believes it will be able to comply
with the Record of Decision without causing a material impact on its future
drilling plans in the Monument Butte Field.
The Company believes it is in compliance in all material respects with
applicable federal, state and local environmental regulations. There are no
environmental proceedings pending against the Company.
INFLATION AND CHANGES IN PRICES
The Company's revenues and the value of its oil and gas properties have
been and will be affected by changes in oil and gas prices. The Company's
ability to borrow from traditional lending sources and to obtain additional
capital on attractive terms is also substantially dependent on oil and gas
prices. Oil and gas prices are subject to significant seasonal and other
fluctuations that are beyond the Company's ability to control or predict.
Although certain of the Company's costs and expenses are affected by the level
of inflation, inflation did not have a significant effect on the Company's
result of operations during 1997 or 1996.
FORWARD LOOKING STATEMENTS
Certain statements included in this Management's Discussion and Analysis
or Plan of Operation are forward looking statements that predict the future
development of the Company. The realization of these predictions will be
subject to a number of variable contingencies, and there is no assurance that
they will occur in the time frame proposed. The risks associated with the
potential actualization of the Company's plans include: contractor delays, the
availability and cost of financing, the availability of materials, and
regulatory approvals, to name a few.
15
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
INLAND RESOURCES INC.
______
Items 1, 3, 4 and 5 are omitted from this report as inapplicable.
ITEM 2. CHANGES IN SECURITIES.
The Company accrued for issuance 106,858 shares of common stock dividends
related to its Series B Stock during the period from January 1, 1997 to July
21, 1997. The Company also accrued for issuance 16,204 shares of common stock
dividends related to its Series C Stock during the period from July 21, 1997 to
September 30, 1997. The Company relied on the exemption provided by Section 4
(2) of the Securities Act of 1933, as amended.
As previously discussed in Part I - items 1 and 2, the Company issued 100,000
shares of Series C Stock for gross proceeds of $10 million ($9.6 million net of
closing fees) on July 21, 1997, and in connection therewith called its Series B
Stock for redemption, but the holders of Series B Stock waived redemption and
instead elected to convert their Series B Stock into 1,977,671 shares of Common
Stock. The Company relied on the exemption provided by Section 4 (2) of the
Securities Act of 1933, as amended, for the issuance of the Series C Stock and
the issuance of the Common Stock upon conversion of the Series B Stock.
The general provisions of the Series C Stock, and the effects on the holders of
Common Stock, are discussed in items 1 and 2 and reference is hereby made to
such discussion.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Quarterly Report on
Form 10-QSB.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
3.1 Amended and Restated Articles of Incorporation, as amended through
July 21, 1997 (filed as exhibit 3.1 to the Company's Quarterly Report
on Form 10-QSB for the quarter ended June 30, 1997, and incorporated
herein by reference).
3.2 Bylaws of the Company (filed as Exhibit 3.2 to the Company's
Registration Statement of Form S-18, Registration No. 33-11870-F, and
incorporated herein by reference).
3.2.1 Amendment to Article IV, Section 1 of the Bylaws of the Company
adopted February 23, 1993 (filed as Exhibit 3.2.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1992, and incorporated herein by reference).
3.2.2 Amendment to the Bylaws of the Company adopted April 8, 1994 (filed
as Exhibit 3.2.2 to the Company's Registration Statement of Form S-4,
Registration No. 33-80392, and incorporated herein by reference).
3.2.3 Amendment to the Bylaws of the Company adopted April 27, 1994 (filed
as Exhibit 3.2.3 to the Company's Registration Statement of Form S-4,
Registration No. 33-80392, and incorporated herein by reference).
27.1 Financial Data Schedule required by Item 601 of Regulation S-B.*
* Filed herewith.
16
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
INLAND RESOURCES INC.
______
(b) Reports on Form 8-K:
(i) The Company filed a current report on Form 8-K dated August 21,
1997 reporting an event dated August 15, 1997, which Form 8-K
covered the following items:
Item 5 - Other Events
Item 7 - Financial Statements and Exhibits
(ii) The Company filed a current report on Form 8-K dated October 13,
1997 reporting an event dated September 23, 1997, which Form 8-K
covered the following items:
Item 2 - Acquisition or Disposition of Assets
Item 5 - Other Events
Item 7 - Financial Statements and Exhibits including the
following report:
"Report of Independent Public Accountants on the Statement
of Revenues and Direct Operating Expenses for Certain of
the Oil and Gas Properties of Equitable Resources Energy
Company acquired by Inland Resources Inc. for each of the
years ended December 31, 1996 and 1995"
17
<PAGE>
INLAND RESOURCES INC.
SIGNATURES
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.
INLAND RESOURCES INC.
(Registrant)
Date: NOVEMBER 5, 1997 By: /s/ Kyle R. Miller
--------------------------------
Kyle R. Miller
Chief Executive Officer
Date: NOVEMBER 5, 1997 By: /s/ Michael J. Stevens
--------------------------------
Michael J. Stevens
Vice President - Accounting and
Administration
(Principal Accounting Officer)
18
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,981,168
<SECURITIES> 0
<RECEIVABLES> 1,474,487
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<CURRENT-ASSETS> 10,916,156
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<COMMON> 41,828,663
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<TOTAL-LIABILITY-AND-EQUITY> 144,022,329
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