SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
December 31, 1999
Date of Report (Date of earliest event reported)
GULFWEST OIL COMPANY
(Exact name of registrant as specified in its charter)
Texas
(State or other jurisdiction of incorporation)
1-12108 87-0444770
(Commission File Number) (IRS Employer
Identification Number)
397 N. Sam Houston Parkway E., Suite 375, Houston, Texas 77060
(Address of principal executive offices)
Registrant's telephone number, including area code: (281) 820-1919
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This Current Report on Form 8-K/A is intended to amend and restate in
its entirety Item 2 of the Company's Current Report on Form 8-K dated December
31, 1999 to ensure that the information contained in the report is true,
accurate and complete as of the date of the filing of this Current Report on
Form 8-K/A, April 25, 2000.
It was impracticable to provide the following items in the Company's
Current Report on Form 8-K dated December 31, 1999, which are included in this
Current Report on Form 8-K/A:
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
(b) Pro Forma Financial Information
2
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 31, 1999, GulfWest Oil Company ("GulfWest" or the
"Company") purchased all of the interests of Pozo Resources, Inc. ("Pozo") in
oil and gas leases, wells and equipment in Adams, Arapaho Elbert and Weld
Counties, Colorado, and Gregg and Palo Pinto Counties, Texas pursuant to a
purchase and sale agreement. On the same date, these interests were assigned to
GulfWest Oil & Gas Company, a wholly owned subsidiary of GulfWest.
The interests in the properties purchased from Pozo averaged 73%
working interest and 55% net revenue interest. The properties have proved
natural gas (70%) and oil (30%) reserves estimated at 14.6 billion cubic feet of
natural gas equivalent, net to the acquired interests. The leases include 54
producing wells, 4,000 developed acres and an estimated 21,000 acres for
development.
Under the terms of the purchase and sale agreement, GulfWest assumed
$6,257,403 in debt payable to Compass Bank and issued $242,597 in debt to Pozo.
The Company also issued Pozo $4 million of GulfWest preferred stock, par value
$.01 and liquidation value $500 per share, convertible after 3 years to 500,000
shares of GulfWest Common Stock, for a total purchase price of $10.5 million. In
addition, the Company paid a $65,000 commission to an unrelated party. On April
5, 2000, this debt to Compass Bank and Pozo was refinanced in a financing
agreement between GulfWest Oil & Gas Company and Aquila Energy Capital
Corporation. The refinanced debt is secured by interests in oil and gas
properties, bears interest at the prime rate plus 3.5% and matures May 29, 2004.
Monthly payments as to principal and interest are made from an 85% net revenue
interest in the secured properties. The lender retains a 7% overriding royalty
interest in the properties, with payments commencing after the loan is paid in
full.
Management of the Company negotiated the purchase price based upon a
report provided by an independent engineering firm.
3
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INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
GULFWEST OIL COMPANY AND SUBSIDIARIES
We have audited the accompanying statements of revenues and direct operating
expenses of the Pozo Resources, Inc. Acquired Properties (see Note 1) for the
years ended December 31, 1999 and 1998. These financial statements are the
responsibility of GulfWest Oil Company management.
Our responsibility is to express an opinion on these statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the statements of revenues and direct operating expenses
referred to above present fairly, in all material aspects, the revenues and
direct operating expenses of the Pozo Resources, Inc. Acquired Properties (see
Note 1), for the years ended December 31, 1999 and 1998, in conformity with
generally accepted accounting principles.
/s/Weaver and Tidwell, L.L.P.
- -----------------------------
WEAVER AND TIDWELL, L.L.P.
Dallas, Texas
March 21, 2000
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
THE POZO RESOURCES, INC. ACQUIRED PROPERTIES
Statements of Revenues and Direct Operating Expenses
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
REVENUES:
Oil and Gas Sales $ 1,005,314 $ 1,340,258
Operating Overhead Income 67,691 68,296
----------- ----------
1,073,005 1,408,554
----------- ----------
EXPENSES:
Production Taxes 76,395 96,272
Lease Operating Expenses 472,627 468,442
----------- ----------
Total Expenses 549,022 564,714
----------- -----------
REVENUES LESS DIRECT
OPERATING EXPENSES $ 523,983 $ 843,840
============ =============
</TABLE>
The accompanying Notes are an integral part of these statements.
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THE POZO RESOURCES, INC. ACQUIRED PROPERTIES
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statement presents the historical revenues
and direct operating expenses applicable to the oil and gas properties
acquired by GulfWest Oil Company and assigned to GulfWest Oil & Gas
Company, a wholly owned subsidiary, (the "Pozo Resources, Inc. Acquired
Properties"), effective December 31, 1999. The properties consist of
working interests in 54 oil and gas wells (and the related equipment
and facilities) in Adams, Arapaho, Elbert and Weld Counties in
Colorado, and Gregg and Palo Pinto Counties in Texas.
The accompanying statement of historical oil and gas revenues and
direct operating expenses of the properties does not include general
and administrative expenses, interest expense, depreciation, depletion
and amortization, or any provision for income taxes since historical
expenses of this nature incurred by the seller are not necessarily
indicative of the costs incurred by GulfWest Oil & Gas Company.
Revenues and direct operating expenses, as set forth in this financial
statement, include oil and gas revenues and overhead income from
operating the properties on behalf of the other working interest
owners, and associated direct operating expenses related to the net
working interest in the acquisition properties. Each owner recognizes
revenue and expenses based on its proportionate share of the related
production and costs. Expenses include labor, repairs and maintenance,
fuel consumed and supplies utilized to operate and maintain the wells
and related equipment and facilities, royalties, production taxes and
ad valorem taxes.
Historical financial information reflecting financial position, results
of operations, and cash flows of the properties is not presented
because the purchase price was assigned the oil and gas property
interests and related equipment acquired. Development and exploration
expenditures related to these properties were insignificant in the
relevant period. Accordingly, the historical statement of revenues and
direct operating expense of the Pozo Resources, Inc. Acquired
Properties is represented in lieu of the financial statements required
under Item 3-05 of Securities and Exchange Commission Regulation S-X.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and direct
operating expenses during the reporting period. Actual results could
differ from those estimates
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Note 2. Supplemental Oil and Gas Information (UNAUDITED)
The proved oil and gas reservesof the Pozo Resources, Inc. Acquired
Properties are estimated in accordance with guidelines established by
the Securities and Exchange Commission and the Financial Accounting
Standards Board, which require that reserve estimates be prepared under
existing economic and operating conditions with no provision for price
and cost escalations over prices and costs existing at year end except
by contractual arrangements.
GulfWest Oil & Gas Company emphasizes that reserve estimates are
inherently imprecise. Accordingly, the estimates are expected to change
as more current information becomes available. It is reasonably
possible that, because of changes in market conditions or the inherent
imprecision of these reserve estimates, that the estimate of future
cash inflows, future gross revenues, the amount of oil and gas
reserves, the remaining estimated lives of the oil and gas properties,
or any combination of the above may be increased or reduced in the near
term.
The estimates of proved reserves and information related to the
standardized measure of discounted future net cash flows related to
proved reserves ("Standardized Measure") were prepared by independent
petroleum engineers in accordance with Securities and Exchange
Commission guidelines as of December 31, 1999. Reliable information of
oil and gas reserves of the Pozo Resources, Inc. Acquired Properties
prior to December 31, 1999 does not exist. Accordingly, information on
reserves or the Standardized Measure at December 31, 1998 or the
changes in reserves or the changes in the Standardized Measure for the
years ended December 31, 1999 and 1998 is not presented.
The following schedules provide information concerning proved
quantities of reserves and the Standardized Measure, derived from
independent engineer reserve reports, as they apply to the Pozo
Resources, Inc. Acquired Properties at December 31, 1999:
Crude Oil Natural Gas
(Bbl) (Mcf)
QUANTITIES OF RESERVES
Proved developed 333,868 3,073,867
Proved undeveloped 426,594 7,415,130
-------- ---------
760,460 10,488,997
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Note 2. Supplemental Oil and Gas Information (UNAUDITED) - continued
STANDARDIZED MEASURE:
Standardized measure of discounted future net cash flows relating to
proved reserves:
Future net cash flows $ 40,129,683
Future production and development costs
Production (9,139,846)
Development (3,485,459)
-----------
Future cash flows before income taxes 27,504,378
Future income taxes (5,781,489)
-----------
Future net cash flows after income taxes 21,722,889
10% annual discount for estimated
timing of cash flows 10,837,902
----------
Standardized measure of discounted
future net cash flows $ 10,884,987
============
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Item 7b. Pro Forma Financial Information
GULFWEST OIL COMPANY
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
For the
Year Ended Pro Forma
December 31, Year Ended
1999 Pro Forma December 31,
GulfWest Adjustments 1999
-------------------- --------------------- -----------------
<S> <C> <C> <C>
OPERATING REVENUES
Oil and gas sales $ 2,533,304 $ 1,005,314 (a) $ 3,538,618
Well servicing revenues 116,791 116,791
Operating overhead and other income 162,544 67,691 (a) 230,235
-------------------- --------------------- -----------------
2,812,639 1,073,005 3,885,644
-------------------- --------------------- -----------------
OPERATING EXPENSE
Lease operating expenses 1,399,710 549,022 (a) 1,948,732
Cost of well servicing operations 190,399 190,399
Depreciation, depletion and amortization 703,533 343,350 (b) 1,046,833
General and administrative 1,983,091 - 1,983,091
-------------------- --------------------- -----------------
4,276,733 892,372 5,169,105
-------------------- --------------------- -----------------
LOSS FROM OPERATIONS (1,464,094) 180,633 (1,283,461)
OTHER INCOME AND EXPENSE
Interest income 5,162 5,162
Interest expense (889,796) (1,286,250) (c) (2,176,046)
Gain (loss) on sale of assets 79,222 - 79,222
-------------------- --------------------- -----------------
LOSS BEFORE INCOME TAXES (2,269,506) (1,105,617) (3,375,123)
INCOME TAXES - - -
-------------------- --------------------- -----------------
NET LOSS $ (2,269,506) $ (1,105,617) $ (3,375,123)
DIVIDENDS ON PREFERRED STOCK
(Paid 1999 - $344,288; 1998 - $101,254) (450,684) - (450,684)
-------------------- --------------------- -----------------
NET LOSS AVAILABLE TO
COMMON SHAREHOLDERS $ (2,720,190) $ (1,105,617) $ (3,825,807)
==================== ===================== =================
LOSS PER COMMON SHAREHOLDER-
BASIC AND DILUTED $ (0.34) $ (0.14) $ (0.48)
==================== ===================== =================
</TABLE>
See accompanying notes to the unaudited pro forma statements.
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GULFWEST OIL COMPANY
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited pro forma statements of operations present
the results of operations of the Company for the year ended December 31, 1999,
as if the purchase of the Pozo Resources, Inc. Acquired Properties had occurred
as of the beginning of 1999.
The unaudited pro forma information has been prepared and all
calculations have been made by the Company based upon assumptions deemed
appropriate by the Company. Certain of these assumptions are set forth in the
notes below. The pro forma presentation is not necessarily indicative of the
financial results of the Company that would have actually been obtained had the
transaction been consummated on January 1, 1999. The accompanying unaudited pro
forma financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
prepared in accordance with generally accepted accounting principles has been
condensed or omitted pursuant to those rules and regulations. The financial
statements of the Company and the related notes thereto presented in the Annual
Report on form 10-K should be read in conjunction with these pro forma
statements.
2. Pro Forma Adjustments
The accompanying unaudited pro forma statements of operations reflect
the following adjustments:
(a) To adjust oil and gas sales, overhead income (charges to unrelated
working interest owners) and lease operating expenses as a result of the
acquisition of the Pozo Resources, Inc. Acquired Properties.
(b) To adjust depreciation and depletion as a result of the acquisition of
the acquired properties.
(c) To adjust interest expense for loans associated with the purchase of
the properties.
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