SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
June 24, 1996
(Date of Earliest Event Reported)
SEITEL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-14488 76-0025431
(Commission File Number) (IRS Employer Identification No.)
50 Briar Hollow Lane, West 7th Floor
Houston, Texas 77027
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code
(713) 627-1990
Page 1 of 12
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Page
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Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Historical Financial Information Related to Certain
Oil and Gas Properties Acquired by Seitel,
Inc. ("the Properties"):
Report of Independent Public Accountants F - 1
Statement of Revenue and Direct Operating Expenses F - 2
for the Year Ended December 31, 1995
and for the Six Months Ended June 30, 1996
and 1995 (Unaudited)
Notes to Statement of Revenue and Direct Operating F - 3
Expenses
(b) Pro Forma Financial Information
Seitel, Inc. and Subsidiaries Pro Forma Condensed
Consolidated Financial Statements:
Pro Forma Condensed Consolidated Statements of
Operations (Unaudited):
Year Ended December 31, 1995 F - 5
Six Months Ended June 30, 1996 F - 6
Notes to Pro Forma Condensed Consolidated Financial F - 7
Statements (Unaudited)
(c) Exhibits
23.1 Consent of Arthur Andersen LLP
Page 2 of 12
<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: September 5, 1996
SEITEL, INC.
BY: /s/ Paul A. Frame
----------------------------------------
PAUL A. FRAME
President and Chief Executive Officer
Page 3 of 12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Seitel, Inc.:
We have audited the accompanying Statement of Revenue and Direct Operating
Expenses for Certain Oil and Gas Properties of Cox & Perkins Exploration, Inc.
Acquired by Seitel, Inc., for the year ended December 31, 1995. This statement
is the responsibility of the management of Seitel, Inc. Our responsibility is to
express an opinion on this statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial 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 for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission for inclusion in
Form 8-K/A of Seitel, Inc. and is not intended to be a complete financial
presentation of the properties described above.
In our opinion, the statement referred to above presents fairly, in all material
respects, the Revenue and Direct Operating Expenses for Certain Oil and Gas
Properties of Cox & Perkins Exploration, Inc. Acquired by Seitel, Inc., for the
year ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
September 5, 1996
F-1
Page 4 of 12
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF REVENUE AND DIRECT OPERATING EXPENSES
FOR CERTAIN OIL AND GAS PROPERTIES OF
COX & PERKINS EXPLORATION, INC. ACQUIRED BY SEITEL, INC. (1)<F1>
(in thousands)
(Unaudited)
---------------------
For the Year For the Six Months
Ended Ended June 30,
December 31, ---------------------
1995 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenue............................................. $ 1,219 $ 4,107 $ 150
Direct Operating Expenses........................... 105 371 19
--------- --------- ---------
Excess of Revenue over Direct
Operating Expenses............................... $ 1,114 $ 3,736 $ 131
========= ========= =========
<FN>
<F1> (1) These statements reflect the revenue and direct operating
expenses attributable to the 28.5% working interest acquired by
Seitel, Inc.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
Page 5 of 12
<PAGE>
NOTES TO STATEMENTS OF REVENUE AND DIRECT OPERATING
EXPENSES FOR CERTAIN OIL AND GAS PROPERTIES OF
COX & PERKINS EXPLORATION, INC. ACQUIRED BY SEITEL, INC.
Note A - The Properties
On June 24, 1996, DDD Energy, Inc. ("DDD"), a wholly owned subsidiary of Seitel,
Inc., acquired an additional working interest of approximately 28.5% in oil and
gas exploration and production properties in Wharton County, Texas (the
"Properties") from Cox & Perkins Exploration, Inc. ("Cox & Perkins") for
approximately $25.2 million. The effective date of the transaction was April 1,
1996.
Note B - Basis for Presentation
During the periods presented, the Properties were not accounted for or operated
as a separate division by Cox & Perkins. Certain costs, such as depreciation,
depletion and amortization, general and administrative expenses, and corporate
income taxes were not allocated to the Properties. Accordingly, full separate
financial statements prepared in accordance with generally accepted accounting
principles do not exist and are not practicable to obtain in these
circumstances.
Revenue and direct operating expenses included in the accompanying statements
represent the net working interest acquired by DDD in the Properties and are
presented on the accrual basis of accounting. Depreciation, depletion and
amortization, allocated general and administrative expenses and corporate income
taxes have been excluded.
Note C - Supplemental Oil and Gas Information (Unaudited)
Oil and Gas Reserves: Proved reserves represent estimated quantities of crude
oil, condensate, natural gas and natural gas liquids that geological and
engineering data demonstrate, with reasonable certainty, to be recoverable in
future years from known reservoirs under economic and operating conditions
existing at the time the estimates were made. Proved developed reserves are
proved reserves expected to be recovered through wells and equipment in place
and under operating methods being utilized at the time the estimates were made.
The following table sets forth estimates of proved reserves and proved developed
reserves of crude oil (including condensate and natural gas liquids) and natural
gas attributable to the Properties. All 1995 reserve estimates presented herein
were computed from reserve estimates prepared by Forrest A. Garb & Associates,
Inc., independent petroleum reserve engineers, in connection with Seitel, Inc.'s
Form 10-K for the year ended December 31, 1995. It should be noted that these
reserve quantities are estimates and may be subject to substantial upward or
downward revisions. The estimates were based on the most current and reliable
information available at December 31, 1995; however, additional information
obtained through future production and experience and additional development of
existing reservoirs has and may continue to significantly alter previous
estimates of proved reserves. Subsequent to December 31, 1995, additional
exploratory and development drilling was done on the Properties resulting in an
increase in the estimated reserves.
<TABLE>
<CAPTION>
Oil Gas
(Mbbl) (MMcf)
------------- --------------
<S> <C> <C>
Proved reserves at December 31, 1994 - -
Extensions and discoveries.................. 347 6,507
Production.................................. (27 ) (503 )
============= ==============
Proved reserves at December 31, 1995............ 320 6,004
============= ==============
Proved developed reserves -
December 31, 1995............................. 241 4,920
============= ==============
Proved reserves at April 1, 1996................ 762 17,180
============= ==============
</TABLE>
F-3
Page 6 of 12
<PAGE>
NOTES TO STATEMENTS OF REVENUE AND DIRECT OPERATING
EXPENSES FOR CERTAIN OIL AND GAS PROPERTIES OF
COX & PERKINS EXPLORATION, INC. ACQUIRED BY SEITEL, INC.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil
and Gas Reserves: The following table sets forth the standardized measure of the
discounted future net cash flows attributable to the Properties' proved oil and
gas reserves as prescribed by Statement of Financial Accounting Standards No.
69. Future cash inflows were computed by applying year-end prices of oil and gas
to the estimated future production of proved oil and gas reserves. Future prices
actually received may differ from the estimates in the standardized measure.
Future production and development costs represent the estimated future
expenditures (based on current costs at December 31, 1995) to be incurred in
developing and producing the proved reserves, assuming continuation of year-end
economic conditions. Future income tax expenses were computed by applying
statutory income tax rates to the difference between pre-tax net cash flows
relating to the Properties' proved oil and gas reserves and the tax basis of
proved oil and gas properties, adjusted for tax credits and allowances. The
resulting annual net cash flows were then discounted to present value amounts by
applying a 10 percent annual discount factor.
<TABLE>
<CAPTION>
December 31,
1995
--------------
(in thousands)
<S> <C>
Future gross revenue........................................... $ 19,292
Future production costs........................................ (2,137)
Future development costs....................................... (311)
--------------
Future net cash flows before income taxes...................... 16,844
Future income taxes............................................ (4,748)
--------------
Future net cash flows.......................................... 12,096
10 percent annual discount for estimated timing of cash flows.. (3,289)
--------------
Standardized measure of discounted future net cash flows....... $ 8,807
==============
</TABLE>
As a result of the additional exploratory and development drilling done on the
Properties, future net cash flows before income taxes and discounted future net
cash flows before income taxes increased to the following amounts:
<TABLE>
<CAPTION>
April 1, 1996
-------------
(in thousands)
<S> <C>
Future net cash flows before income taxes..................... $ 44,786
==============
Future net cash flows before income taxes discounted at 10%... $ 36,863
==============
</TABLE>
The following are the principal sources of changes in the standardized measure
of discounted future net cash flows for the year ended December 31, 1995 (in
thousands):
<TABLE>
<CAPTION>
1995
------------
<S> <C>
Standardized measure, beginning of year........................... $ -
Extensions and discoveries, net of related costs.................. 13,360
Sales of oil and gas produced, net of production costs............ (1,114)
Net change in income taxes........................................ (3,439)
------------
Standardized measure, end of year................................. $ 8,807
============
</TABLE>
F-4
Page 7 of 12
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Year Ended December 31, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------- -------------------------------
Seitel, Inc. The Adjustments Consolidated
Properties
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUE $ 74,439 $ 1,219 $ - $ 75,658
EXPENSES
Depreciation, depletion and amortization 26,872 - 610(a) 27,482
Cost of sales 13,071 105 - 13,176
Selling, general and administrative expenses 15,393 - 120(b) 15,513
Net interest expense 3,078 - - 3,078
-------------- -------------- -------------- --------------
58,414 105 730 59,249
-------------- -------------- -------------- --------------
Income from continuing operations before provision
for income taxes 16,025 1,114 (730) 16,409
Provision for income taxes 5,898 - 142(c) 6,040
-------------- -------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS $ 10,127 $ 1,114 $ (872) $ 10,369
============== ============== ============== ==============
Income from continuing operations per share:
Primary $ 1.03 $ 1.05
============== ==============
Assuming full dilution $ .99 $ 1.01
============== ==============
Weighted average number of common and
common equivalent shares:
Primary 9,872 9,872
============== ==============
Assuming full dilution 10,358 10,358
============== ==============
</TABLE>
The accompanying notes are an integral part of these
pro forma condensed consolidated financial statements.
F-5
Page 8 of 12
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Six Months Ended June 30, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------------- --------------------------------
Seitel, Inc The Adjustments Consolidated
Properties
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUE $ 47,446 $ 4,107 $ - $ 51,553
EXPENSES:
Depreciation, depletion and amortization 18,157 - 1,494 (a) 19,651
Cost of sales 7,669 371 - 8,040
Selling, general and administrative expenses 8,849 - 485 (b) 9,334
Net interest expense 1,311 - - 1,311
-------------- -------------- -------------- --------------
35,986 371 1,979 38,336
-------------- -------------- -------------- --------------
Income from continuing operations before
provision for income taxes 11,460 3,736 (1,979 ) 13,217
Provision for income taxes 4,240 - 650 (c) 4,890
-------------- -------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS $ 7,220 $ 3,736 $ (2,629 ) $ 8,327
============== ============== ============== ==============
Income from continuing operations per share:
Primary $ .72 $ .82
============== ==============
Assuming full dilution $ .71 $ .81
============== ==============
Weighted average number of common and common equivalent shares:
Primary 10,131 10,131
============== ==============
Assuming full dilution 10,248 10,248
============== ==============
</TABLE>
The accompanying notes are an integral part of these
pro forma condensed consolidated financial statements.
F-6
Page 9 of 12
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
The unaudited pro forma condensed consolidated statements of operations reflect
the combination of Seitel, Inc.'s historical results of operations with the
historical revenue and direct operating expenses of certain oil and gas
properties acquired from Cox and Perkins Exploration, Inc. (the "Properties").
Such statements of operations reflect income from continuing operations as if
the acquisition of the Properties occurred at the beginning of the periods
presented.
A pro forma balance sheet has not been presented as the acquisition of the
Properties was reflected in Seitel, Inc.'s balance sheet as of June 30, 1996,
included in Seitel, Inc.'s From 10-Q for the quarterly period ended June 30,
1996.
The pro forma data are based on assumptions and include adjustments as explained
in Note B below. The pro forma data are not necessarily indicative of the
financial results that would have occurred had the transaction been effective on
and as of the dates referenced above, and should not be viewed as indicative of
operations in future periods. The unaudited pro forma consolidated condensed
financial statements should be read in conjunction with Seitel, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, and Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1996, and the
Statements of Revenue and Direct Operating Expenses included elsewhere in this
Form 8-K.
Note B - Pro Forma Adjustments
The unaudited pro forma statements of operations reflect the following
adjustments:
(a) To record incremental depreciation, depletion and amortization expense
related to the purchase of the Properties.
(b) To record increases in general and administrative expenses as a result
of the purchase of the Properties.
(c) To record additional income tax expense relating to the excess of
revenue over direct operating expenses of the Properties and the pro
forma adjustments, assuming an effective federal and state tax rate of
37 percent.
F-7
Page 10 of 12
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EXHIBIT INDEX
-------------
Page
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23.1 Consent of Independent Public Accountants 12
Page 11 of 12
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated September 5, 1996, included in this Form 8-K/A,
into the Seitel, Inc. previously filed Form S-3 Registration Statements Files
Nos. 33-80574, 33-89890, 33-71968, 33-78554, 333-9293, and Form S-8 Registration
Statements File Nos. 33-78560, 33-89934, 333-01271 and 33-36914.
/s/ Arthur Andersen LLP
Houston, Texas
September 5, 1996
Page 12 of 12
