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______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 7, 1996
BASIN EXPLORATION, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-20125 84-1143307
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
370 17th Street, Suite 1800, Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 685-8000
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PAGE 1 OF 12
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 7, 1996, Basin Exploration, Inc. (the "Company") closed
the sale of the remaining portion of its D-J Basin assets to
HS Resources, Inc. ("HS Resources") and its wholly owned subsidiary,
Orion Acquisition, Inc. ("Orion") (Orion and HS Resources, "HS"),
receiving $83.3 million in cash proceeds, net of purchase price
adjustments of $2.0 million and customary closing adjustments made to
reflect post-effective date revenues and expenses, transferred
receivables and payables, and interest on the purchase price from the
effective date. In this transaction, which was consummated pursuant
to an Agreement for the Purchase and Sale of Assets [Wattenberg] dated
as of February 24, 1996 between the Company and HS (the "Wattenberg
Agreement"), the Company sold oil and gas properties and related
assets that included the Company's interests in certain producing
wells and drilling locations in the north and east portions of the
Wattenberg Field in Colorado (the "Asset Sale"). The Asset Sale was
approved by the Company's stockholders at the Company's Annual Meeting
of Stockholders held on June 6, 1996. The sale was the second of two
separate transactions in which the Company sold to HS all of its oil
and gas properties in the D-J Basin in Colorado (representing the
Company's interests in approximately two-thirds of its producing
wells) and related assets for a combined adjusted cash purchase price
of $123.5 million, effective as of January 1, 1996, with interest of
7.5% per annum applicable from the effective date to the respective
closing dates.
In the first transaction, which was closed on March 15, 1996
pursuant to an Agreement for the Purchase and Sale of Assets
[Monetization] dated as of February 24, 1996 by and among the Company
and HS, the Company sold assets which included the Company's interests
in the Spindle Field and certain properties in the south and west
portions of the Wattenberg Field (the "HS Monetization"). Cash
proceeds received on closing of the first transaction, net of
applicable closing adjustments (but not reflecting any price
adjustments for defect claims, all of which were resolved in the
closing under the Wattenberg Agreement), totalled approximately $37.1
million.
The initial aggregate purchase price of $125.5 million for both
transactions was determined based on negotiations relating to the
parties' assessments of oil and gas reserves, future pricing, and
operating efficiencies resulting from consolidation in the D-J Basin.
The final purchase price of $123.5 million reflected the parties'
negotiated settlement of HS' claims for defect adjustments based on
the mechanisms provided in the purchase and sale agreements.
The Company used a portion of the combined proceeds from the HS
Monetization and the Asset Sale to repay all of its outstanding debt,
which totalled approximately $77 million in late-February 1996 when
the two sale agreements were announced, and the remainder has been or
is expected be used in the future for general corporate purposes,
including the funding of acquisition, exploration and development
projects. The Company's borrowing base under its bank line of credit
has not yet been formally redetermined to reflect the Asset Sale, but
is anticipated to be established shortly at a level of at least $20
million.
As a consequence of the significant reduction of operating assets
resulting from the HS Monetization and the Asset Sale, the Company is
currently in the process of reducing the staff size at its Denver
office headquarters and implementing certain related general and
administrative expense reductions.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(B) PRO FORMA FINANCIAL INFORMATION.
The following pro forma condensed consolidated statements of
income for the year ended December 31, 1995 and the three months ended
March 31, 1996, and pro forma condensed consolidated balance sheet as
of March 31, 1996, adjust the historical financial information of the
Company for the Asset Sale and, where appropriate, the HS
Monetization. The pro forma statement of income for the year ended
December 31, 1995 was prepared as if the sales transactions were
consummated on December 31, 1994. The pro forma statement of income
for the three months ended March 31, 1996 was prepared as if the sales
transactions were consummated on December 31, 1995. The pro forma
balance sheet was prepared as if the Asset Sale was consummated on
March 31, 1996 (the HS Monetization had been actually consummated by
such date). The pro forma adjustments are based on estimates and
assumptions explained in further detail in the accompanying notes.
The pro forma financial statements should be read in conjunction
with the related historical financial statements and related notes,
which are included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, filed with the Securities and
Exchange Commission on March 28, 1996, and in the Company's Quarterly
Report on Form 10-Q for the three months ended March 31, 1996, filed
with the Securities and Exchange Commission on May 15, 1996. The pro
forma information presented is not necessarily indicative of the
results that would have actually occurred had the transactions been
consummated on the dates or for the periods indicated or which may
occur in the future.
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BASIN EXPLORATION, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Unaudited
--------------------------------------
Pro Forma
Adjustments Pro Forma
to Reflect the HS After the HS
Monetization and Monetization and
Historical the Asset Sale the Asset Sale
------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES:
Oil revenue $ 19,632 $(10,987)(a) $ 8,645
Gas revenue 20,013 (14,717)(a) 5,296
Other 674 674
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40,319 (25,704) 14,615
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OPERATING COSTS AND EXPENSES:
Production 11,674 (6,616)(a) 5,058
Depletion, depreciation and amortization 17,202 (12,036)(b) 5,166
General and administrative, net 5,498 (c) 5,498
Property impairment 26,500 (21,500)(d) 5,000
Other 497 497
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61,371 (40,152) 21,219
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Operating income (loss) (21,052) 14,448 (6,604)
Other income (expense), net (6,275) (6,432)(e) 157
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Income (loss) before taxes (27,327) 20,880 (6,447)
Income tax benefit (provision) 7,784 (5,380)(f) 2,404
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Net income (loss) $(19,543) $15,500 $ (4,043)
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Weighted average common shares
outstanding 10,710 10,710
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Earnings (loss) per share $ (1.82) $ (0.38)
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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BASIN EXPLORATION, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Unaudited
------------------------------------------------------
Pro Forma
Adjustments Pro Forma
to Reflect the HS After the HS
Monetization and Monetization and
Historical the Asset Sale the Asset Sale
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<S> <C> <C> <C>
OPERATING REVENUES:
Oil revenue $ 3,875 $(1,852)(a) $ 2,023
Gas revenue 3,611 (3,071)(a) 540
Other 23 23
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7,509 (4,923) 2,586
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OPERATING COSTS AND EXPENSES:
Production 2,402 (1,417)(a) 985
Depletion, depreciation and amortization 3,354 (2,293)(b) 1,061
General and administrative, net 1,189 (c) 1,189
Other 18 18
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6,963 (3,710) 3,253
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Operating income (loss) 546 (1,213) (667)
Other income (expense), net (1,462) 1,529 (e) 67
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Income (loss) before taxes (916) 316 (600)
Income tax benefit (provision) -- --
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Net income (loss) $ (916) $ 316 $ (600)
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Weighted average common shares
outstanding 10,687 10,687
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Earnings (loss) per share $ (0.09) $ (.06)
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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BASIN EXPLORATION, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Unaudited
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Pro Forma
Adjustments to Pro Forma
Reflect the Asset After the Asset
Historical Sale(g) Sale
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<S> <C> <C> <C>
ASSETS
Current assets $ 8,308 $ 39,697 $ 48,005
Oil and gas properties and equipment, net 97,254 (54,873) 42,381
Other noncurrent assets 1,773 (1,629) 144
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$107,335 $ (16,805) $ 90,530
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LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities $ 11,447 $ 1,400 $ 12,847
Long-term debt 40,164 (40,104) 60
Long-term portion of ad valorem taxes 3,311 (1,717) 1,594
Deferred income taxes -- 5,359 5,359
Stockholders' Equity 52,413 18,257 70,670
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$107,335 $(16,805) $ 90,530
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</TABLE>
The accompanying notes are an integral part of these statements.
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BASIN EXPLORATION, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The pro forma condensed financial statements reflect the adjustments
described below:
Statements of Income
The pro forma adjustments to the statement of income for the year
ended December 31, 1995 eliminate revenues, costs and expenses
associated with properties disposed of in the HS Monetization and the
Asset Sale, and related interest expense, for the entire year. Pro
forma adjustments to the statement of income for the three months
ended March 31, 1996 adjust for such amounts pertaining to the Asset
Sale properties for the entire period and for amounts relating to the
HS Monetization from the beginning of the period to the actual date of
disposition, March 15, 1996.
(a) Represents oil and gas revenues and related production
expenses directly attributable to the properties sold pursuant to the
HS Monetization and the Asset Sale.
(b) Depletion of oil and gas properties was computed using the
unit-of-production method.
(c) Although savings in general and administrative expenses
facilitated by reductions in assets under management are expected to
be realized, no adjustment has been shown as such savings are
dependent on staff and office space reductions, and similar savings,
which have not yet been effected. The Company estimates that total
annualized reductions in general and administrative expenses resulting
from the HS Monetization and the Asset Sale would approximate $2
million on a pro forma basis.
(d) To adjust the "ceiling limit" write down recorded by the
Company in its historical financial statements as of September 30,
1995 for the pro forma effects of the HS Monetization and the Asset
Sale, as if such transactions occurred at the beginning of 1995. In
computing such adjustment, the accounting treatment for the Asset Sale
was consistent with the reporting treatment described in note (g)
below, and the accounting treatment for the HS Monetization was to
credit sale proceeds to the Company's full cost pool with no
recognition of gain or loss. The adjustment represents the difference
between the impairment recorded on a historical basis and the
impairment that would have been recorded during the year on the oil
and gas properties remaining after the HS Monetization and the Asset
Sale, after giving effect to the two sale transactions in the manner
described. The impairment relating to the remaining properties was
calculated based on the proved reserves remaining after the HS
Monetization and the Asset Sale assuming that the full cost ceiling
test was calculated at the end of each fiscal quarter.
(e) To adjust interest expense to reflect reductions in bank
debt. No interest income or other revenue relating to residual cash
resulting from the Asset Sale has been recognized, but based on
estimated residual cash balances, giving consideration to both the HS
Monetization and the Asset Sale on a pro forma basis after retirement
of all long-term debt, if such balances were
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invested in interest bearing cash equivalents for the entire
respective periods, estimated interest income earned thereon would
approximate $2.5 million for the year ended December 31, 1995 and
$500,000 for the three months ended March 31, 1996.
(f) To record an adjustment to the provision for income taxes
resulting from the foregoing pro forma adjustments to revenues and
expenses.
Balance Sheet
(g) To reflect the Asset Sale. Because the transaction
constituted the sale of a significant portion of the Company's total
oil and gas reserves, which significantly altered the relationship
between the Company's capitalized costs and its proved reserves, net
capitalized costs of oil and gas properties were allocated between the
reserves sold and retained based on their estimated relative reserve
values as of March 31, 1996 (which approximated relative reserve
quantities at such date). A resulting gain has been recognized in the
amount of $18.3 million, net of related income taxes of $7.3 million.
Estimated adjusted sales proceeds, net of transaction costs and a
provision for current taxes, have been utilized primarily to eliminate
the Company's bank debt and to increase net working capital by $38.3
million. Amounts presented are based on the sales price for the Asset
Sale properties, as adjusted at closing for title and other defects.
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(C) EXHIBITS.
4.1 Agreement for Purchase and Sale of Assets [Wattenberg], dated as
of February 24, 1996, by and between the Company, HS Resources,
Inc. and Orion Acquisition, Inc., for the sale of $87.5 million
of the Company's assets in the D-J Basin, filed as Exhibit 4.2 to
the Company's Current Report on Form 8-K, dated February 24,
1996, with the Securities and Exchange Commission on March 6,
1996, and incorporated herein by reference.
99.1 Press Release, dated June 7, 1996.
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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 hereunto duly authorized.
BASIN EXPLORATION, INC.
Dated: June 24, 1996 By Howard L. Boigon
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Howard L. Boigon
Vice President - General Counsel
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EXHIBIT INDEX
Exhibit No. Description Page
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99.1 Press Release, dated June 7, 1996. 12
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Friday, June 7, 1996 Contact: Karen Acierno
(303) 685-8085
email: [email protected]
BASIN COMPLETES SECOND SALE OF D-J ASSETS
PROCEEDS OF $83.3 MILLION
Denver, CO -- Basin Exploration, Inc. (Nasdaq-NMS:BSNX) today
announced that it has closed the second of two scheduled transactions
for the sale of its D-J Basin properties to HS Resources, Inc. The
final aggregate adjusted purchase price of the two transactions
totaled $123.5 million, effective January 1, 1996. Basin received
$83.3 million in net proceeds at the second closing. Shareholder
approval of the second transaction was received at the company's
annual shareholders meeting held yesterday.
A portion of the proceeds from the second sale will be used to pay off
Basin's bank debt with the remaining $36 million to be invested in
short-term money market instruments until deployed to fund the
company's oil and gas property acquisition and exploration activities.
Basin Exploration, Inc. is engaged in oil and gas property
exploration, acquisition, exploitation and development. The company's
securities are traded on the Nasdaq National Market System under the
symbol BSNX.
