SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 13, 2000
TEXOIL, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEVADA 0-12633 88-0177083
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (IRS EMPLOYER
IDENTIFICATION NO.)
110 CYPRESS STATION DRIVE
SUITE NO. 220
HOUSTON, TEXAS 77090-1629
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(281) 537-9920
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(NOT APPLICABLE)
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
Texoil, Inc. ("Texoil") filed a Current Report on Form 8-K, on October 24,
2000, relating to an agreement signed on August 25, 2000, between Texoil and EEX
Operating, L.P. and EEX E&P Company ("EEX"), for Texoil to purchase certain oil
and gas properties (the "EEX Properties") from EEX. The transaction closed on
October 13, 2000, for approximately $10.5 million cash, net of estimated
post-closing adjustments. Audited historical statements of revenues and direct
operating expenses attributable to the EEX Properties and unaudited pro forma
financial information of Texoil adjusted for the EEX Properties were not
available at the time of filing the initial 8-K and are filed herewith. In
addition, at the time of closing and subsequent to the filing of the initial 8-K
related to this transaction, Texoil believed that financial statements would not
be required to be filed. Subsequently, based on additional information and
analysis Texoil determined that financial statements and Pro-forma information
were required and are included herein.
ITEM 7. Financial Statement, Pro Forma Information and Exhibits.
(a) Financial statement of business acquired.
Audited historical statement of revenues and direct operating expenses
pertaining to the EEX Properties for the nine months ended September 30, 2000.
(b) Pro forma financial information.
Unaudited pro forma consolidated statements of income of Texoil for the
nine months ended September 30, 2000 and the year ended December 31, 1999,
pertaining to the EEX Properties and borrowings under the Company's Credit
Agreement, as if they had been consummated on January 1 of each period, and an
unaudited pro forma balance sheet as of September 30, 2000, pertaining to the
EEX Properties and the borrowings under the Credit Agreement, as if they had
been consummated on September 30, 2000.
(c) Exhibits
EXHIBIT NO. EXHIBIT DESCRIPTION
---------- -------------------
10.20 Purchase and Sale Agreement between Texoil, Inc., and EEX
Operating, L.P. and EEX E&P Company, L.P. dated
August 25, 2000.
27.1 Financial Data Schedule
2
<PAGE>
TEXOIL, INC.
CURRENT REPORT ON FORM 8-K/A - 1
INDEX TO FINANCIAL INFORMATION
PAGE
1. BUSINESS ACQUIRED - EEX PROPERTIES, AUDITED
FINANCIAL STATEMENT:
Report of Independent Public Accountants............................. 4
Audited Historical Statement of Revenues and Direct
Operating Expenses pertaining to the EEX Properties
for the nine months ended September 30, 2000....................... 5
Notes to Historical Statement of Revenues and Direct
Operating Expenses................................................. 6
2. UNAUDITED TEXOIL, INC., PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS:
Introduction......................................................... 10
Unaudited Pro Forma Consolidated Balance Sheet as of
September 30, 2000................................................. 11
Unaudited Pro Forma Consolidated Statement of Income for
the nine months ended September 30, 2000........................... 12
Unaudited Pro Forma Consolidated Statement of Income for
the year ended December 31, 1999................................... 13
Notes to Unaudited Pro Forma
Consolidated Financial Statements.................................. 14
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Texoil, Inc.
We have audited the accompanying Historical Statement of Revenues and
Direct Operating Expenses of certain oil and gas properties acquired by Texoil,
Inc. ("Texoil" or the "Company") from EEX Operating, L.P. and EEX E&P Company,
L.P. (the "EEX Properties"), for the nine months ended September 30, 2000. This
historical statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this historical statement based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards required that we plan and perform
the audit to obtain reasonable assurance about whether the historical statement
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the historical statement. 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.
The accompanying statement was prepared as described in Note 1 for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and is not intended to be a complete presentation of the
revenues and direct operating expenses of the EEX Properties.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenues and direct operating expenses of the EEX
Properties for the nine months ended September 30, 2000, in conformity with
accounting principles generally accepted in the United States.
Ernst & Young LLP
Houston, Texas
December 19, 2000
4
<PAGE>
EEX PROPERTIES
HISTORICAL STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30, 2000
------------------
Revenues:
Gas ...................... $2,635
Oil and condensate ....... 182
------
2,817
Direct Operating Expenses:
Lease Operating Expenses . 511
Production Taxes ......... 148
------
659
------
Revenues in excess of direct
Operating Expenses ....... $2,158
======
5
<PAGE>
EEX PROPERTIES
NOTES TO HISTORICAL STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES
1. BASIS OF PRESENTATION
On October 13, 2000, Texoil, Inc. (the "Company"), acquired from EEX
Operating, L.P. and EEX E&P Company, L.P., certain oil and gas properties
located in Texas (the "EEX Properties"), effective July 1, 2000.
The revenues and direct operating expenses associated with the EEX
Properties were derived from EEX's accounting records. Revenues and direct
operating expenses, as set forth in the accompanying historical statement,
includes oil and gas revenues and associated direct operating expenses related
to the net revenue interest and net working interest, respectively, in the
acquired properties. The historical statement includes oil and gas revenues net
of royalties. Lease operating expenses include labor, services, repairs,
maintenance, materials and supplies and other direct costs incurred in the
operation of wells and related equipment.
The accompanying historical statement varies from an income statement in
that it does not show certain expenses which were incurred in connection with
ownership of the acquired properties, such as general and administrative
expenses and income taxes. These costs were not separately allocated to the
acquired properties in EEX's accounting records. Any pro forma allocation would
be both time consuming and expensive and would not be a reliable estimate of
what these costs would actually have been had the acquired properties been
operated historically as a separate entity. In addition, these allocations, if
made using historical general and administrative structure and tax burdens,
would not produce allocations that would be indicative of the historical
performance of the acquired properties had they been assets of the Company, due
to the difference in the size, structure, operations and accounting of the two
companies. The accompanying historical statement also does not include
provisions for depreciation, depletion and amortization as such amounts would
not be indicative of those costs which would be incurred by the Company upon
allocation of the purchase price. For the same reason, primarily the lack of
segregated or readily obtainable reliable data on asset values and related
liabilities, a balance sheet is not presented for the EEX Properties.
At the end of the economic life of these fields, certain restoration and
abandonment costs in excess of salvage value may be incurred by the respective
owners of these fields. No accrual for these costs is included in direct
operating expenses.
6
<PAGE>
EEX PROPERTIES
NOTES TO HISTORICAL STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES - CONTINUED
With respect to gas sales, the sales method is used for revenue
recognition and gas imbalances, which recognizes over and under lifts of gas
when sold, to the extent sufficient gas reserves or balancing agreements are in
place. Gas sales volumes are not significantly different from the production
attributable to the acquired interests.
2. SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED)
PROVED RESERVE ESTIMATES
Proved oil and gas reserves cannot be measured exactly. Reserve estimates
are based on many factors related to reservoir performance which require
evaluations by the engineers interpreting the available data, as well as price
and other economic factors. The reliability of these estimates at any point in
time depends on both the quality and quantity of the technical and economic
data, the production performance of the reservoirs, as well as engineering
judgment. Consequently, reserve estimates are subject to revision as additional
data becomes available during the productive life of a reservoir. When a
commercial reservoir is discovered, proved reserves are initially determined
based on limited data from the first well or wells. Subsequent data may better
define the extent of the reservoir and additional production performance, well
tests and engineering and geological studies may improve the reliability of the
reserve estimate. The evolution of technology may also result in the application
of improved recovery techniques such as supplemental or enhanced recovery
projects, or both, which have the potential to increase reserves beyond those
envisioned during the early years of a reservoir's producing life.
Proved reserves are those quantities which, upon analysis of geological
and engineering data, appear with reasonable certainty to be recoverable in the
future from known oil and gas reservoirs under current prices and costs as of
the date the estimate is made. Proved reserves are classified as developed or
undeveloped. Proved developed reserves are those reserves which can be expected
to be recovered from existing wells. Proved undeveloped reserves are those
reserves which can be expected to be recovered from new wells on undrilled
acreage or from existing wells where a relatively major expenditure is required.
Proved reserves represent the estimated recoverable volumes after deducting from
gross reserves the portion due landowners or others as royalty or operating
interests.
Estimates of proved reserves include and rely upon a production and
development strategy. The Company's estimates are based upon plans developed
using current information and reflect the Company's risk tolerance and
philosophy related to future capital expenditures associated with
7
<PAGE>
EEX PROPERTIES
NOTES TO HISTORICAL STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES - CONTINUED
producing incremental reserves during the remaining life of the acquired
properties, as well as its plans with respect to developing proved undeveloped
reserves. Proved undeveloped reserves typically involve a higher degree of
uncertainty and risk. In any case, many factors such as changes in prices or
costs or variances from sound technical estimates, made using best information
available, may cause estimates at any point in time to vary significantly from
actual future production.
Estimates of proved reserves were prepared by the Company retrospectively
using currently available information. The unaudited historical supplementary
oil and gas information was developed by the Company using as a base, the
Company's estimates of proved reserves, compiled in connection with financing
the acquisition, and (1) actual historical production data, (2) historical
operating expense rates, (3) estimates of production prices based on industry
indices and existing differentials, and (4) development costs estimated by the
Company. Management of the Company believes the supplemental oil and gas
information presented herein is reasonable, under the circumstances, and
methodologies employed are consistent with reasonable industry practices.
Estimated quantities of proved oil and gas reserves and of changes in
quantities of proved developed and undeveloped reserves for each of the period
indicated were as follows:
OIL GAS
(MBBLS) (MMCF)
------ ------
Proved reserves at December 31, 1999 ........ 128 16,900
Production .................................. (7) (842)
Revision of quantity estimates .............. 1 562
------ ------
Proved reserves at September 30, 2000 ....... 122 16,620
====== ======
Proved developed reserves at:
December 31, 1999 ........................ 94 12,341
September 30, 2000 ....................... 89 12,060
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The following disclosures concerning the standardized measure of
discounted future cash flows from proved oil and gas reserves are presented in
accordance with the Statement of Financial Accounting Standards No. 69 ("SFAS
69"). As prescribed by SFAS 69, the amounts shown are based on prices and costs
at the end of each period and a 10 percent annual discount factor. Since prices
and costs do not remain static, and no price or costs changes have been
considered, the results are not necessarily indicative of the fair market value
of the estimated proved reserves, but they do provide a common benchmark which
may enhance the user's ability to project future cash flows.
8
<PAGE>
EEX PROPERTIES
NOTES TO HISTORICAL STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES - CONTINUED
The standardized measure of discounted future net cash flows (before
income taxes) related to proved oil and gas reserves at September 30, 2000, was
as follows (in thousands):
Future cash inflows ..................................... $89,778
Future production costs ................................. 15,000
Future development costs ................................ 2,442
-------
Future net cash inflows ................................. 72,336
10% annual discount for estimated timing of cash flows .. 35,764
-------
Standardized measure of discounted future net cash
flows (before income taxes) .......................... $36,572
=======
The standardized measure is based on the following oil and gas prices:
SEPTEMBER DECEMBER
30, 2000 31, 1999
-------- --------
Oil (per Bbl) .................... $28.82 $23.61
Gas (per Mcf) .................... $ 5.19 $ 2.34
The principal sources of changes in the standardized measure for the nine
months ended September 30, 2000, as follows (in thousands):
Balance at beginning of the period .................... $ 15,976
Sales and transfers of oil and gas produced, net
of production costs ................................ (2,158)
Changes in prices and production costs ................ 22,254
Revision of quantity estimates ........................ 1,233
Changes in estimated timing of production and other ... (1,931)
Accretion of discount ................................. 1,198
--------
Balance at the end of the period ...................... $ 36,572
========
9
<PAGE>
INTRODUCTION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Statements of Income for
the nine months ended September 30, 2000 and for the year ended December 31,
1999 and the Unaudited Pro Forma Consolidated Balance Sheet as of September 30,
2000 (collectively, the "Pro Forma Consolidated Financial Statements") are based
on the historical consolidated financial statements of Texoil, Inc. (the
"Company") and the Historical Statements of Revenues and Direct Operating
Expenses of the EEX Properties adjusted to give effect for the EEX Properties
and borrowings under the Company's Credit Agreement. The Pro Forma Consolidated
Financial Statements account for the acquisition of the EEX Properties as a
purchase.
The Unaudited Pro Forma Consolidated Statements of Income for the nine
months ended September 30, 2000 for the year ended December 31, 1999 give effect
to the acquisition of the EEX Properties and the borrowings under the Credit
Agreement as if the acquisition and borrowings had been consummated on January 1
of each period. The Unaudited Pro Forma Consolidated Balance Sheet gives effect
to the acquisition of the EEX Properties and the borrowings under the Amended
Credit Facility as if the acquisition and borrowings had been consummated on
September 30, 2000.
The pro forma adjustments described in the accompanying Notes to Unaudited
Pro Forma Consolidated Financial Statements are based upon available information
and certain assumptions that management believes are reasonable.
The Pro Forma Consolidated Financial Statements are presented for
illustrative purposes only and do not purport to represent what the Company's
results of operations or financial condition would actually have been had the
acquisition of the EEX Properties occurred on such dates or to project the
Company's results of operations or financial condition for any future date or
period.
10
<PAGE>
TEXOIL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
EEX
PROPERTIES
COMPANY PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS COMBINED
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents ................ $ 1,721 $ 327 (a) $ 2,048
Accounts receivable and other ............ 8,746 -- 8,746
Other current assets ..................... 1,649 (834)(a) 815
-------- -------- --------
Total current assets ............... 12,116 (507) 11,609
-------- -------- --------
Property, plant and equipment, at cost:
Oil and natural gas properties (full-cost method):
Evaluated properties ..................... 71,538 10,507 (a) 82,045
Unevaluated properties ................... 5,015 -- 5,015
Office and other equipment ........................... 803 -- 803
-------- -------- --------
71,538 10,507 87,863
Accumulated depletion, depreciation and amortization . (15,022) -- (15,022)
-------- -------- --------
Net property, plant and equipment .................... 62,334 10,507 72,841
-------- -------- --------
Other assets ......................................... 273 -- 273
-------- -------- --------
Total assets ............................. $ 74,723 $ 10,000 $ 84,723
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities . $ 5,057 $ -- $ 5,057
Revenue and royalties payable ............ 3,917 -- 3,917
-------- -------- --------
Total current liabilities .......... 8,974 -- 8,974
-------- -------- --------
Long-term debt ....................................... 14,500 10,000(a) 24,500
Deferred tax liability ............................... 6,079 -- 6,079
Stockholders' equity: ................................ .
Series A preferred stock ................. 29 -- 29
Common stock ............................. 68 -- 68
Additional paid-in capital ............... 33,669 -- 33,669
Retained earnings ........................ 11,404 -- 11,404
-------- -------- --------
Total stockholders' equity .......... 45,170 -- 45,170
-------- -------- --------
Total liabilities and stockholders' equity $ 74,723 $ 10,000 $ 84,723
======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
11
<PAGE>
TEXOIL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
EEX
COMPANY PROPERTIES PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales ...................... $ 34,548 $ 2,817 $ -- $ 37,365
Operator and management fees ........... 959 -- -- 959
Interest and other ..................... 164 -- -- 164
----------- ----------- ----------- -----------
Total revenues ................ 35,671 2,817 -- 38,488
----------- ----------- ----------- -----------
Costs and Expenses:
Lease operating ........................ 8,494 511 9,005
Workover ............................... 163 -- -- 163
Production taxes ....................... 3,515 148 -- 3,663
General and administrative ............. 1,772 -- -- 1,772
Depletion, depreciation and amortization 5,021 -- 734 (b) 5,755
Interest ............................... 955 -- 593 (c) 1,548
----------- ----------- ----------- -----------
Total expenses ................ 19,920 659 1,327 21,906
----------- ----------- ----------- -----------
Income before income taxes ..................... 15,751 2,158 (1,327) 16,582
Provision for deferred income taxes ............ 5,276 -- 278 (d) 5,554
----------- ----------- ----------- -----------
Net income (loss) .............................. 10,475 2,158 (1,605) 11,028
Preferred stock dividend ....................... 2,063 -- -- 2,063
----------- ----------- ----------- -----------
Net income attributable to common shareholders . $ 8,412 $ 2,158 $ (1,605) $ 8,965
=========== =========== =========== ===========
Basic Net income (loss) per share .............. $ 1.27 $ 1.35
=========== ===========
Basic weighted average shares .................. 6,646,057 6,646,057
=========== ===========
Diluted net income (loss) per share ............ $ 0.79 $ 0.83
=========== ===========
Diluted weighted average shares ................ 13,326,171 13,326,171
=========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
12
<PAGE>
TEXOIL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
EEX
COMPANY PROPERTIES PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales ....................... $ 22,533 $ 4,323 $ -- $ 26,856
Operator and management fees ............ 995 -- -- 995
Interest and other ...................... 176 -- -- 176
---------- ---------- ---------- ----------
Total revenues ..................... 23,704 4,323 -- 28,027
---------- ---------- ---------- ----------
Costs and Expenses:
Lease operating ......................... 7,624 989 -- 8,613
Workover ................................ 178 -- -- 178
Production taxes ........................ 1,821 224 -- 2,045
General and administrative .............. 2,000 -- -- 2,000
Depletion depreciation and amortization . 4,856 -- 813(b) 5,669
Interest ................................ 2,482 -- 780(c) 3,262
---------- ---------- ---------- ----------
18,961 1,213 1,593 21,767
---------- ---------- ---------- ----------
Income before income taxes ........... 4,743 3,110 (1,593) 6,260
Provision for income taxes ........... 1,591 -- 508(d) 2,099
---------- ---------- ---------- ----------
Net income ........................... 3,152 3,110 (2,101) 4,161
Preferred stock dividends .................... 280 -- -- 280
---------- ---------- ---------- ----------
Net income attributable to common shareholders $ 2,872 $ 3,110 $ (2,101) $ 3,881
========== ========== ========== ==========
Basic net income per share ................... $ 0.44 $ 0.59
========== ==========
Basic weighted average shares ............... 6,555,126 6,555,126
========== ==========
Diluted net income per share ................ $ .41 $ .54
========== ==========
Diluted weighted average shares ............. 7,754,866 7,754,866
========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements.
13
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Adjustments
(a) Represents the recording of the estimated purchase price of $10,507,000 to
oil and gas property costs and borrowings under the Company's Credit
Agreement. The $11.1 million purchase price, effective July 1, 2000, per
the Purchase and Sale Agreement ("Agreement") dated August 25, 2000, has
been further adjusted to reflect activity from such date to closing and
arrive at the above estimated net purchase price. Such adjustments
primarily include revenues less direct operating expenses, capital
expenditures, production imbalances, pro- rated ad valorem taxes, title
defects, material changes in wells and other adjustments for the period
July 1, 2000 through October 13, 2000, the closing date, as set forth in
the Agreement. Certain adjustments have been made at closing and further
adjustments will be made post-closing pursuant to the Agreement. Earnest
money in the amount of $834,000 was paid in September, 2000. The balance
of $9,876,000 was paid at closing, through borrowings under the Credit
Agreement of $10,000,000.
(b) Represents adjustment to depletion depreciation, and amortization based
upon combined historical production, reserves and cost basis.
(c) Represents adjustment to interest expense to reflect borrowings under the
Company's Credit Agreement, at the Company's historical average interest
rate of 7.9% in 2000 and 7.8% in 1999.
(d) Represents adjustment to income tax expense as a result of the acquisition
of the EEX Properties assuming an effective tax rate of 33.5%.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: December 22, 2000 TEXOIL, INC.
By: /s/ FRANK A. LODZINSKI
Name: Frank A. Lodzinski
Title: President
15
