<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): December 31, 1997
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.)
410 17TH STREET, SUITE 700, DENVER, COLORADO 80202
-----------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(303) 893-0102
--------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
475 17TH STREET, SUITE 1500, DENVER, COLORADO 80202
---------------------------------------------------
(FORMER ADDRESS)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) AND (b) The following financial statements and pro forma financial
information regarding the Woods Cross Refinery acquired by Inland
Refining, Inc., a wholly owned subsidiary of the Company, are
filed with the Report.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
(a) AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants F-1
Independent Auditors' Report F-2
Balance Sheets as of November 30, 1997 and 1996 F-3
Statements of Operations and Retained Earnings (Deficit) for the
Years Ended November 30, 1997 and 1996 F-4
Statements of Cash Flows for the Years Ended November 30, 1997
and 1996 F-5
Notes to Consolidated Financial Statements F-6
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Pro Forma Financial Information F-14
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997 F-15
Pro Forma Condensed Consolidated Statement of Operations for
the Nine-Month Period Ended September 30, 1997 F-16
Pro Forma Condensed Consolidated Statement of Operations for
the Twelve-Month Period Ended December 31, 1996 F-17
Notes to Unaudited Pro Forma Financial Statements F-18
</TABLE>
-2-
<PAGE>
<TABLE>
(c) EXHIBITS - The following exhibits are filed herewith:
<S> <C>
4.1 Credit Agreement dated as of December 24, 1997 between Inland
Refining, Inc. ("Refining") and Banque Paribas (without
exhibits).*
10.1 Asset Purchase and Sale Agreement dated as of July 14, 1997
between Crysen Corporation, Crysen Refining, Inc., Sound
Refining, Inc. and the Company, as amended by the first, second
and third amendments thereto.*
10.2 Assignment and Assumption Agreement dated as of December 24, 1997
between the Company and Inland Refining, Inc.*
10.3 Assignment and Assumption Agreement dated as of
December 24, 1997 between the Company and Refinery
Technologies, Inc.*
10.4 Assignment and Assumption Agreement dated as of
December 24, 1997 between the Company and San
Jacinto Carbon Company.*
23.1 Consent of Arthur Andersen LLP.**
23.2 Consent of KPMG Peat Marwick LLP.**
</TABLE>
- -------------
* Previously filed.
** Filed herewith.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amended No. One to this report to be signed on
its behalf by the undersigned hereunto duly authorized.
March 13, 1998
INLAND RESOURCES INC.
By: /s/ Kyle R. Miller
---------------------------------
Kyle R. Miller, President and
Chief Executive Officer
-4-
<PAGE>
CRYSEN REFINING, INC.
FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 1997 AND 1996
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Inland Refining, Inc.:
We have audited the accompanying balance sheet of CRYSEN REFINING, INC. (a
Delaware corporation) as of November 30, 1997, and the related statements of
operations and retained earnings (deficit) and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 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 audit provides 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 Crysen Refining, Inc. as of
November 30, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 6, 1998.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Crysen Refining, Inc.:
We have audited the accompanying balance sheet of Crysen Refining, Inc. as of
November 30, 1996, and the related statement of operations and retained
earnings and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements 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 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 audit provides 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 Crysen Refining, Inc. as of
November 30, 1996, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that Crysen
Refining, Inc. will continue as a going concern. The Company's working
capital deficit along with the significant future debt service requirements
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
KPMG PEAT MARWICK LLP
Salt Lake City, Utah
February 7, 1997
F-2
<PAGE>
CRYSEN REFINING, INC.
BALANCE SHEETS
NOVEMBER 30, 1997 AND 1996
(In thousands except share amounts)
<TABLE>
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 630 $ 372
Trade accounts receivable; net of allowance of
$97 each year 8,424 10,067
Inventory of crude, products and other 5,040 5,896
Other current assets 174 165
------- -------
Total current assets 14,268 16,500
PROPERTY, PLANT AND EQUIPMENT, net 14,562 17,428
OTHER ASSETS 58 10
------- -------
$28,888 $33,938
------- -------
------- -------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 8,877 $11,447
Revolving credit agreement 3,146 3,949
Term loan to bank 14,549 14,549
Current portion of notes payable 315 324
------- -------
Total current liabilities 26,887 30,269
------- -------
NOTES PAYABLE, less current portion 2,811 3,073
ENVIRONMENTAL LIABILITY 1,000 -
COMMITMENTS AND CONTINGENCIES
(Notes 6 and 7)
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock, $0.10 par value; 100,000 authorized;
1,000 shares issued and outstanding - -
Retained earnings (deficit) (1,810) 596
------- -------
Total stockholder's equity (deficit) (1,810) 596
------- -------
$28,888 $33,938
------- -------
------- -------
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
CRYSEN REFINING, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
YEARS ENDED NOVEMBER 30, 1997 AND 1996
(In thousands)
<TABLE>
1997 1996
---- ----
<S> <C> <C>
SALES OF CRUDE AND REFINED PRODUCTS $114,934 $126,116
-------- --------
COST AND EXPENSES:
Refining operating costs 101,758 116,480
General and administrative 9,656 7,636
Environmental 1,000 -
Depreciation 1,455 1,327
Impairment 1,860 -
-------- --------
115,729 125,443
-------- --------
Operating income (loss) (795) 673
OTHER INCOME (EXPENSE), net:
Interest (1,955) (1,855)
Other income 344 8
-------- --------
Loss before income taxes (2,406) (1,174)
PROVISION FOR INCOME TAXES - -
-------- --------
Net loss (2,406) (1,174)
RETAINED EARNINGS, at beginning of year 596 1,770
-------- --------
RETAINED EARNINGS (DEFICIT), at end of year $ (1,810) $ 596
-------- --------
-------- --------
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
CRYSEN REFINING, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1997 AND 1996
(In thousands)
<TABLE>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,406) $(1,174)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities-
Depreciation 1,455 1,327
Impairment of property, plant and equipment 1,860 -
Changes in operating assets and liabilities-
Trade accounts receivable 1,643 1,179
Inventories 856 (700)
Other current assets (9) 95
Other noncurrent assets (48) (13)
Accounts payable and accrued liabilities (2,570) (1,597)
Environmental liability 1,000 -
------- -------
Net cash provided by (used in) operating activities 1,781 (883)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (449) (971)
------- -------
Net cash used in investing activities (449) (971)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit with bank (803) 2,423
Principal payments on notes payable (271) (197)
------- -------
Net cash provided by (used in) financing activities (1,074) 2,226
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 258 372
CASH AND CASH EQUIVALENTS, at beginning of year 372 -
------- -------
CASH AND CASH EQUIVALENTS, at end of year $ 630 $ 372
------- -------
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 1,960 $ 1,859
------- -------
------- -------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
CRYSEN REFINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1997 AND 1996
(All dollar amounts in thousands unless noted otherwise)
(1) DESCRIPTION OF BUSINESS AND SUBSEQUENT EVENT
DESCRIPTION OF BUSINESS
Crysen Refining, Inc. ("CRI") is a refinery engaged in the processing of crude
oil and the sale of petroleum and asphalt products. CRI is located in Woods
Cross, Utah and has the crude processing capacity of approximately 10,000
barrels per day and has tankage capacity of approximately 485,000 barrels. CRI
is a wholly owned subsidiary of the Crysen Corporation ("Crysen").
SUBSEQUENT EVENT
On December 31, 1997, certain assets and liabilities of CRI were sold to Inland
Refining, Inc. ("Inland"), a wholly owned subsidiary of Inland Resource Inc.
The purchase price paid by Inland of approximately of $22.9 million included the
purchase of trade receivables, crude and refined inventory, property, plant and
equipment, excluding Cowboy Oil property (see Note 7), crude payables, certain
accounts payable, accrued liabilities and environmental liabilities. At the
time of closing, the proceeds from Inland were applied towards CRI's bank
revolver and term loan and the bank forgave the remaining outstanding balances
and released CRI from any future obligations. The amount paid to the bank by
Inland was less than the carrying amount of the debt. Had Inland not purchased
the assets and liabilities of the CRI business, CRI's continued existence would
have been dependent upon the financial support and forebearane of its lenders
and its ability to resolve its liquidity problem. Additionally, Inland assigned
the rights to purchase the Cowboy Oil facilities to a company owned by certain
original owners of CRI. As a result, the assets and liabilities associated with
the Cowboy Oil facilities were not acquired by Inland. The financial statements
presented as of November 30, 1997, include adjustments associated with the fair
value determination of the property, plant and equipment purchased by Inland and
the recording of environmental liabilities.
F-6
<PAGE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at the lower of cost or realizable
value, for the assets purchased by Inland, based upon the sale described in
Note 1. CRI depreciates refinery equipment, buildings, storage facilities,
and other equipment using the straight-line method over the estimated useful
lives of the assets, which range from 3 to 25 years (see Note 4).
Maintenance and scheduled repairs (turnaround) of the refinery operating units
are expensed as incurred. Major improvements are capitalized, and the assets
replaced, are retired.
INVENTORIES AND EXCHANGES
Inventories of crude oil, unfinished oils and all finished products are recorded
at the lower of cost on a first-in, first-out basis or market. Materials and
supplies inventories are stated at cost and are charged to capital or expense,
as appropriate, when used.
Exchange transactions are considered asset exchanges with deliveries offset
against receipts. The net exchange balance is included in inventory.
ENVIRONMENTAL
Environmental costs are expensed or capitalized based upon their future economic
benefit. Costs which are improvements are capitalized. Costs related to
environmental remediation and reclamation are expensed. Liabilities for
remediation and reclamation costs are accrued when it is determined that an
obligation exists and the amount of the costs can be reasonably estimated.
HEDGE CONTRACTS
CRI periodically uses commodity futures contracts to hedge the impact of price
fluctuations on its crude oil requirements. Gains and losses on these hedges
are matched to specific inventory purchases and charged or credited to cost of
sales when such inventory is sold.
INCOME TAXES
CRI accounts for income taxes using the liability method, under which deferred
tax assets and liabilities are recorded based on the differences between the tax
bases of assets and liabilities and their respective carrying amounts for
financial reporting purposes, referred to as temporary differences. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in income in the period that
includes the enactment date.
F-7
<PAGE>
FAIR VALUE OF INSTRUMENTS
CRI's financial instruments consists of cash, trade receivables, trade payables,
revolving lines of credit and long-term debt. The carrying values of cash and
cash equivalents, trade receivables and trade payables are considered to be
representative of their fair market value, due to the short maturity of these
instruments. The fair value for long-term debt is estimated based on current
rates available for similar debt with similar maturities and credit risk of CRI
securities.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, CRI considers as cash
equivalents all highly liquid investments with an original maturity of three
months or less.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ from those
estimates.
(3) INVENTORIES
Inventories at November 30, 1997 and 1996, consist of the following:
<TABLE>
1997 1996
---- ----
<S> <C> <C>
Crude oil $1,340 $2,113
Refined product 3,428 3,520
Materials and supplies 272 263
------ ------
$5,040 $5,896
------ ------
------ ------
</TABLE>
F-8
<PAGE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
1997 1996
---- ----
<S> <C> <C>
Refinery $ 24,258 $ 23,338
Land, buildings and improvements 1,460 1,177
Storage facilities 4,884 4,782
Transportation and other equipment 80 442
Construction in progress 365 1,041
-------- --------
31,047 30,780
Less accumulated depreciation and impairment (16,485) (13,352)
-------- --------
$ 14,562 $ 17,428
-------- --------
-------- --------
</TABLE>
(5) INCOME TAXES
CRI has been in a federal tax loss position for all of 1997 and 1996, and as a
result, no current income tax provision was recorded as the Company has no
regular or alternative minimum tax liability. Income taxes have been calculated
on a standalone company basis. Additionally, a full valuation allowance is
provided, therefore CRI records no deferred income tax provision or benefit.
The actual tax expense differs from the expected tax benefit computed by
applying the federal income tax rate of 34 percent to income (loss) before
income taxes as a result of the following:
<TABLE>
1997 1996
---- ----
<S> <C> <C>
Statutory rate 34.0% 34.0%
Change in the beginning-of-year valuation
allowance for deferred tax assets allocated
to income tax expense (36.7) (31.7)
Other 2.7 (2.3)
----- -----
- % - %
----- -----
----- -----
</TABLE>
F-9
<PAGE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at November 30, 1997 and
1996, are presented below. A full valuation allowance has been provided against
the net deferred tax asset as CRI cannot meet the recognition criteria of more
likely than not.
<TABLE>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,995 $ 1,807
Accounts receivable principally due to
allowance for doubtful accounts 37 37
Accrued liabilities 453 270
Debt restructure costs 74 112
------- -------
Total gross deferred tax assets 2,559 2,226
Less valuation allowance (1,039) (155)
------- -------
Net deferred tax assets 1,520 2,071
Deferred tax liabilities:
Plant and equipment, principally due to
differences in capitalization and
depreciation methods (1,520) (2,071)
------- -------
Net deferred tax assets $ - $ -
------- -------
------- -------
</TABLE>
At November 30, 1997 and1996, CRI had, for federal tax reporting purposes
operating loss carryforwards of $5,320 and $4,818, expiring in 2010 through
2012. Any use of net operating losses will be credited to operations.
The Internal Revenue Service is currently examining Crysen's prior year tax
returns.
(1) DEBT
REVOLVING CREDIT LOANS AND TERM LOAN
On January 31, 1995, CRI entered into an Amended and Restated Credit Agreement
(the "Agreement") with Banque Paribas. Substantially all of the Company's
assets were pledged as collateral on the Agreement. The Agreement provides for
the following loans:
F-10
<PAGE>
The Revolving Credit loan to CRI provided available credit in the amount of
$20,000, through the issuance of letters of credit and revolving loans. CRI
could borrow the net amount available under a borrowing base calculation up to a
maximum of $8,000. Interest on the borrowings was payable monthly and is
computed at the Chase Manhattan prime rate, plus 2 percent. The Agreement
required a commitment fee of one-half percent of the unused portion of the
revolver and originally matured in 1999. As of November 30, 1997 and 1996, CRI
had $3,146 and $3,949, respectively, in revolving loans outstanding at an
interest rate of 10.5 and 10.25 percent, respectively. In addition to the
revolving loans, CRI had $9,759 and $11,250 of letters of credit outstanding as
of November 30, 1997 and 1996, respectively. The weighted average interest rate
on the revolving loan was 10.4 percent and 10.3 percent in fiscal 1997 and 1996,
respectively.
Under the Agreement, CRI had a term loan of $28,500 of which $14,549 was
outstanding as of November 30, 1997 and 1996. Interest on the term loan was
payable monthly and was computed at the Chase Manhattan prime rate, plus 2
percent. As of November 30, 1997, the interest rate on the term loan was 10.5
percent. The term loan was guaranteed by CRI affiliates. The Agreement allowed
for certain contingent prepayments and regularly scheduled principal payments.
The Agreement called for $6 million of regularly scheduled principal payments to
be made in 1997 and 1996, respectively, however , the Company failed to make any
of these regularly scheduled principal payments, which was considered to be an
event of default. Under the terms of the Agreement, CRI had to comply with
certain financial and restrictive covenants. As a result of these conditions
and the Company's inability to make any of the regularly scheduled principal
payments, the entire amount of the term loan has been classified as a current
liability as of November 30, 1997 and 1996. As described in Note 1, the proceeds
from Inland, at closing, were applied towards CRI's bank revolver and term loan
and the bank forgave the remaining outstanding balances and released CRI from
any future obligations.
PHILLIPS NOTE
On July 12, 1993 Phillips Petroleum Company agreed to loan CRI $2,000, on an
unsecured basis, for the purposes of upgrading certain refining equipment. As
of November 30, 1997 and 1996, the remaining principal outstanding was $1,680
and $1,826, respectively. This note has repayment terms that are based on the
number of barrels of Phillips crude processed by CRI each month. The agreement
has minimum refining requirements. If the note is not repaid by June 2003, the
remaining principal outstanding at that date is repayable in equal monthly
installments over 5 years. Subsequent to June 2003, the remaining principal
outstanding bears interest at prime plus 3%, with a cap of 12%.
COWBOY OIL NOTE
In conjunction with a letter of intent to purchase land and storage facilities
of Cowboy Oil Company for $2,000 secured by the deed of trust on the property, a
note payable over 10 years bearing interest at 12% was recorded. Payments are
due monthly based on an amortization schedule providing for equal monthly
payments of $24, including interest with the remaining principal and interest
due at the end of the 10 year period. As of November 30, 1997 and 1996, CRI
owed $1,432 and $1,545, respectively.
F-11
<PAGE>
OTHER
CRI leases certain equipment under capital leases. The outstanding principal
amounts due as of November 30, 1997 and 1996 were $15 and $26, respectively.
The following table represents the maturities of these notes at November 30,
1997:
<TABLE>
<S> <C>
1998 $17,987
1999 288
2000 1,300
2001 144
2002 144
Thereafter 960
--------
$20,823
--------
--------
</TABLE>
(7) COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL LAWS AND REGULATIONS
CRI, in recent years, has become subject to increasingly demanding
environmental standards imposed by federal, state and local environmental
laws and regulations. It is the policy of CRI to endeavor to comply with
applicable environmental laws and regulations.
Governmental regulations covering environmental issues are very complex and
are subject to continual change. Accordingly, changes in the regulations or
interpretations thereof, and the ultimate settlement of the amounts sought
from other parties, could result in material future costs to CRI in excess of
the amounts accrued.
LITIGATION
CRI is involved in legal actions resulting from the ordinary course of
business. Such actions are a result of disputes over contracts and other
general matters. Management believes that CRI has adequate legal defenses and
that the ultimate outcome of such actions will not have a material adverse
effect on its results of operations, cash flows and financial position.
401(k) PLAN
CRI has a 401(k) savings plan for eligible employees. CRI contributes 50% of
the participants' contribution up to a maximum of 5% of the participants'
salary. During 1997 and 1996, CRI contributed $59 and $62, respectively.
F-12
<PAGE>
LEASE COMMITMENTS
CRI leases certain office, refinery, railcars and other equipment. Rental
expense for the years ended November 30, 1997 and 1996 was $980 and $1,015,
respectively. Minimum future rentals under noncancelable operating leases at
November 30, 1997, are as follows:
<TABLE>
<S> <C>
Year ending November 30,
1998 $ 616
1999 465
2000 184
2001 184
2002 87
-------
$1,536
-------
-------
</TABLE>
COWBOY OIL PURCHASE
As of November 30, 1997, the closing specified by the letter of intent, as
described in Note 6, had not taken place, however, both companies had
complied with the letter of intent and an associated lease agreement. Legal
counsel has advised management that due to the amount of time the parties
have operated under the letter of intent and associated lease agreement, that
CRI has acquired title to the related assets subject to the associated
liabilities. Accordingly, CRI has reflected the assets and liabilities of
this purchase on its balance sheet at November 30, 1997 and 1996. As
discussed in Note 1, Inland assigned the rights to purchase the Cowboy Oil
facilities to a company owned by certain original owners of CRI.
(8) RELATED PARTY TRANSACTIONS
During fiscal 1996, CRI entered into a partnership agreement to build a card
lock fuel distribution site in Woods Cross, Utah. During the construction of
this site, one of CRI's creditors indicated that it would be unwilling to
finance the investment in the partnership unless certain conditions were met.
As a result, former officers and directors of CRI created a new entity to
assume the position of CRI. As of November 30, 1996, CRI held assets
totaling $140,000 which were subsequently sold at net book value to certain
officers and directors of CRI.
Additionally, CRI sold certain products to an affiliate in 1997 and 1996 and
had an amount outstanding as accounts receivable at November 30, 1996.
<TABLE>
Transactions with affiliates 1997 1996
---------------------------- ---- ----
<S> <C> <C>
Sales to affiliates $2,576 $2,577
Accounts receivable - Trade $ - $ 585
</TABLE>
F-13
<PAGE>
INLAND RESOURCES INC.
The following Unaudited Pro Forma Financial Statements are presented to show
the Pro Forma effect of the acquisition of specific assets and liabilities
purchased from Crysen Refining, Inc. ("CRI") in an agreement consummated
December 31, 1997. Additionally, the Pro Forma effects of the acquisition of
oil and gas properties pursuant to an agreement consummated September 30,
1997, between Inland Resources Inc. ("Inland") and Equitable Resources Energy
Company ("EREC") have been included in the unaudited Pro Forma Condensed
Consolidated Statements of Operations. The unaudited Pro Forma Condensed
Consolidated Statement of Operations for the twelve months ended December 31,
1996 and for the nine months ended September 30, 1997, are as if the
acquisitions had occurred on January 1, 1996. The unaudited Pro Forma
information associated with the CRI component included in the Pro Forma
Condensed Consolidated Statements of Operations includes the twelve months
ended November 30, 1996 and the nine months ended August 31, 1997. The EREC
component of the Pro Forma Condensed Consolidated Statement of Operations
includes direct sales and operating expenses of EREC for the twelve months
ended December 31, 1996 and the nine months ended September 30, 1997. The
Pro Forma Condensed Consolidated Balance Sheet is based on the assumption the
transaction was completed on September 30, 1997. The transaction is reported
using the purchase method of accounting.
Inland's unaudited historical interim financial statements have been prepared
pursuant to the rules and regulation of the SEC and, in the opinion of
Company, include all adjustments necessary for a fair statement of the
results of each period shown. The financial information presented is not
intended to reflect all financial information customarily reported under
generally accepted accounting principles. The Pro Forma adjustments included
in the accompanying Pro Forma Condensed Consolidated 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 may have been had the transaction actually occurred on January 1, 1996,
or September 30, 1997, as applicable. There are no adjustments made in the
accompanying Pro Forma Condensed Consolidated Balance Sheet to include the
EREC acquisition, as this acquisition is already included in the Inland
Resources Inc. balance sheet as of September 30, 1997.
F-14
<PAGE>
INLAND RESOURCES INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(In thousands)
(Unaudited)
<TABLE>
Condensed
Inland CRI Consolidated
Historical Acquisition Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 4,981 $ 4,981
Accounts receivables
Oil and gas sales 1,474 1,474
Trade receivables - $10,573 (a) 10,573
-------- --------
1,474 12,047
Inventory
Pipe and equipment 1,817 1,817
Crude and refined product - 4,980 (a) 4,980
-------- --------
1,817 6,797
Other current assets 2,644 2,644
-------- --------
Total current assets 10,916 26,469
Property, plant and equipment
Oil and gas property, net 128,663 128,663
Refinery property, plant and equipment - 13,049 (a) 13,049
Other long-term assets 4,443 1,500 (a) 5,943
-------- --------
Total assets $144,022 $174,124
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities $ 9,276 4,302 (a) $ 13,578
Long-term debt 91,733 24,605 (a) 116,338
Other long-term liabilities - 1,195 (a) 1,195
-------- --------
101,009 131,111
Mandatorily redeemable preferred stock 9,575 9,575
Accrued dividends 200 200
Warrants outstanding 1,300 1,300
Stockholders' equity 31,938 31,938
-------- --------
Total liabilities and stockholders' equity $144,022 $174,124
-------- --------
-------- --------
</TABLE>
See accompanying notes to unaudited pro forma
consolidated financial information.
F-15
<PAGE>
INLAND RESOURCES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
(In thousands except per share data)
(Unaudited)
<TABLE>
EREC Crysen Condensed
------------------------- ------------------------- Consolidated
Inland CRI
Historical Acquisition Pro Forma Historical Adjustments Pro Forma
SALES ---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales of oil and gas $ 10,403 $ 4,379(b) $ 14,782 $ - $ 14,782
Sales of crude and refined product - - - 89,777 89,777
--------- ---------- --------- -------- ---------
Total sales 10,403 4,379 14,782 89,777 104,559
--------- ---------- --------- -------- ---------
COSTS AND EXPENSES
Cost of sales of refined product - - - 80,336 80,336
Oil and gas operating costs 2,398 2,464(b) 4,862 - 4,862
Exploration 44 - 44 - 44
Depreciation on refinery assets - - - 1,084 (590)(g) 494
DD&A on oil & gas properties 4,067 1,531(c) 5,598 - 5,598
Impairment - - 1,500 1,500
Environmental - - 1,000 1,000
General and administrative, net 1,332 - (d) 1,332 7,209 8,541
--------- ---------- --------- -------- ---------
Total operating costs 7,841 3,995 11,836 91,129 102,375
--------- ---------- --------- -------- ---------
Operating income (loss) 2,562 384 2,946 (1,352) 2,184
INTEREST EXPENSE (1,894) (4,759)(e) (6,653) (1,486) (178)(f) (8,317)
OTHER INCOME AND EXPENSE, NET 365 - 365 208 573
--------- ---------- --------- -------- ---------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS 1,033 (4,375) (3,342) (2,630) (5,560)
EXTRAORDINARY LOSS (1,160) - (1,160) - (1,160)
--------- ---------- --------- -------- ---------
NET LOSS (127) (4,375) (4,502) (2,630) (6,720)
Less: preferred series b redemption (580) - (580) - (580)
--------- ---------- --------- -------- ---------
NET LOSS TO COMMON
SHAREHOLDERS $ (707) $ (4,375) $ (5,082) $ (2,630) $ (7,300)
--------- ---------- --------- -------- ---------
--------- ---------- --------- -------- ---------
PRIMARY EARNINGS (LOSS) PER
SHARE
Before extraordinary loss $ 0.06 $ (0.54) $ (0.85)
Extraordinary loss (0.16) (0.16) (0.16)
--------- --------- ---------
Total $ (0.10) $ (0.70) $ (1.01)
--------- --------- ---------
--------- --------- ---------
Weighted average shares
outstanding 7,256,512 7,256,512 7,256,512
--------- --------- ---------
FULLY DILUTED EARNINGS (LOSS)
PER SHARE
Before extraordinary loss $ 0.06 $ (0.54) $ (0.85)
Extraordinary loss (0.15) (0.16) (0.16)
--------- --------- ---------
Total $ (0.09) $ (0.70) $ (1.01)
--------- --------- ---------
Weighted average shares
outstanding 7,614,617 7,256,512 7,256,512
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to unaudited pro forma
consolidated financial information.
F-16
<PAGE>
INLAND RESOURCES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1996
(In thousands except per share data)
(Unaudited)
<TABLE>
EREC Crysen
------------------------ ------------------------- Condensed
Inland CRI Consolidated
Historical Acquisition Pro Forma Historical Adjustments Pro Forma
---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
SALES
Sales of oil and gas $ 10,704 $ 8,479 (b) $ 19,183 $ - $ 19,183
Sales of crude and refined product - - - 126,116 126,116
---------- ------- ----------- -------- ---------
Total sales 10,704 8,479 19,183 126,116 145,299
COSTS AND EXPENSES
Cost of sales of refined product - - - 116,480 116,480
Oil and gas operating costs 2,045 2,145 (b) 4,190 - 4,190
Exploration 167 - 167 - 167
Depreciation on refinery assets - - - 1,327 (660)(g) 667
DD&A on oil and gas properties 3,428 1,908 (c) 5,336 - 5,336
General and administrative, net 1,670 - (d) 1,670 7,636 9,306
---------- ------- ----------- -------- ----------
Total operating costs 7,310 4,053 11,363 125,443 136,146
---------- ------- ----------- -------- ----------
Operating income 3,394 4,426 7,820 673 9,153
INTEREST EXPENSE (1,633) (6,347)(e) (7,980) (1,855) (362)(f) (10,197)
OTHER INCOME, net 383 - 383 8 391
---------- ------- ----------- -------- ----------
NET INCOME (LOSS) 2,144 (1,921) 223 (1,174) (653)
Less- Preferred A stock dividend
on cash redemption (214) - (214) - (214)
---------- ------- ----------- -------- ----------
NET INCOME (LOSS)TO COMMON
SHAREHOLDERS $ 1,930 $(1,921) $ 9 $ (1,174) $ (867)
---------- ------- ----------- -------- ----------
---------- ------- ----------- -------- ----------
PRIMARY EARNINGS (LOSS)
PER SHARE $ 0.37 $ 0.00 $ (0.16)
---------- ----------- ----------
---------- ----------- ----------
Weighted average shares
outstanding 5,276,345 5,276,345 5,276,345
---------- ----------- ----------
---------- ----------- ----------
FULLY DILUTED EARNINGS (LOSS)
PER SHARE $ 0.29 $ 0.00 $ (0.16)
---------- ----------- ----------
---------- ----------- ----------
Weighted average shares
outstanding 6,561,225 6,561,225 5,276,345
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
See accompanying notes to unaudited pro forma
consolidated financial information.
F-17
<PAGE>
INLAND RESOURCES INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The Unaudited Pro Forma Condensed Consolidated Statements of Operations dated
December 31, 1996, are based on Inland's Audited Consolidate Statement of
Operations for the year ended December 31, 1996, CRI's Audited Financial
Statements for the year ended November 30, 1996, and the Audited Statement of
Revenue and Direct Operating Expenses of certain oil and gas properties of EREC
for the year ended December 31, 1996. The Unaudited Pro Forma Condensed
Consolidated Statements of Operations dated September 30, 1997, are based on
Inland's Unaudited Consolidated Statement of Operations for the nine months
ended September 30, 1997, CRI's Unaudited Results of Operations for the nine
months ended August 31, 1997 and the Unaudited Results of Revenue and Direct
Operating Expenses of certain oil and gas properties of EREC for the nine months
ended September 30, 1997. The Unaudited Pro Forma Condensed Consolidated
Balance Sheet is based on Inland's unaudited financial statements as of
September 30, 1997, which includes EREC and the necessary adjustments to record
the purchase of assets and liabilities from CRI.
(2) PRO FORMA ADJUSTMENTS
The Unaudited Pro Forma Condensed Consolidated Balance Sheet and Unaudited Pro
Forma Condensed Consolidated Statements of Operations reflect the following
adjustments:
(a) Represents the purchase of CRI assets and liabilities purchased with debt
by Inland.
(b) Sales of oil and gas and operating costs were adjusted based on the audited
Statement of Revenues and Direct Operating Expenses for the year ended
December 31, 1996 and from the unaudited accounting records of EREC for the
nine months ended September 30, 1997.
(c) DD&A is adjusted based on calculations using units of production method
based on reserve reports for the acquired EREC properties and the
proportion of the purchase price allocated to proved properties.
(d) The EREC acquisition does not include any adjustment for net general and
administrative expense since the increase in gross general and
administrative expense related to the acquisition is offset by COPAS
producing overhead reimbursements on the operated properties acquired. The
CRI acquisition also does not have any adjustment for general and
administrative expense as any terminations of CRI employees were replaced
with new Inland employees.
(e) Interest expense associated with the EREC acquisition is adjusted using
Inland's blended cost of capital to finance the EREC acquisition.
F-18
<PAGE>
(f) Amount reflects the adjustment to record the additional interest expense
Inland would have incurred to fund the acquisition cost of CRI, as compared
to the actual interest expense of CRI.
(g) Represents the adjustment to depreciation on refinery assets based on the
purchase price paid by Inland for the refinery property, plant and
equipment.
F-19
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K, into the Company's previously filed
Registration Statements on Form S-8 (File No. 33-41662), Form S-8 (File No.
333-27449), Form S-8 (File No. 33-38640) and Form S-3 (File No. 33-84766).
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 13, 1998.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS'
The Board of Directors
Crysen Refining, Inc.:
We consent to the incorporation by reference in the registration statements
(Nos. 33-41662, 333-27499, and 33-84640) on Form S-8 and No. 33-84766 on Form
S-3 of Inland Resources Inc. of our report dated February 7, 1997, with respect
to the balance sheet of Crysen Refining, Inc. as of November 30, 1996, and the
related statements of operations and retained earnings, and cash flows for the
year ended November 30, 1996, which our report appears in the Form 8-K of Inland
Resources Inc. dated January 14, 1998, as amended.
KPMG PEAT MARWICK LLP
Salt Lake City, Utah
March 11, 1998
