SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
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): November 26, 1997
BASIN EXPLORATION, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-20125 84-1143307
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
370 Seventeenth Street, Suite 3400, Denver, Colorado 80202
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (303) 685-8000
Not Applicable
Former Name or Former Address if Changed Since Last Report
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
On November 26, 1997, Basin Exploration, Inc. completed its acquisition of
certain assets of Midcon Offshore, Inc. ("Midcon") from Midcon's chapter 11
trustee, for a purchase price of approximately $31.3 million. A Current Report
on Form 8-K was filed on December 10, 1997 to report this transaction. An
audited statement of revenue and direct operating expenses of Midcon for the
year ended December 31, 1996 and an unaudited financial statement for the nine
month period ended September 30, 1997.
BASIN EXPLORATION, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Report of Independent Public Accountants 1
Statement of Revenue and Direct Operating Expenses 2
Notes to Statement of Revenue and Direct Operating Expenses 3
Pro Forma Consolidated Financial Statements 5
Pro Forma Consolidated Balance Sheet 6
Pro Forma Consolidated Statement of Operations for the
Nine Months Ended September 30, 1997 7
Pro Forma Consolidated Statement of Operations for the
Year Ended December 31, 1996 8
Notes to Pro Forma Consolidated Financial Statements 9
Signature Page 10
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Basin Exploration, Inc.:
We have audited the accompanying statement of revenue and direct operating
expenses for the oil and gas properties acquired from Midcon Offshore, Inc. for
the year ended December 31, 1996. This statement is the responsibility of Basin
Exploration, Inc.'s management. Our responsibility is to express an opinion on
this financial 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 statement of revenue and direct operating expenses for the oil and gas
properties acquired from Midcon Offshore, Inc. was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 1, and are not intended to be a complete
presentation of revenue and expenses.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenue and direct operating expenses for the oil and gas
properties acquired from Midcon Offshore, Inc. for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
January 22, 1998
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
STATEMENT OF REVENUE AND DIRECT OPERATING EXPENSES
FOR THE OIL AND GAS PROPERTIES ACQUIRED FROM
MIDCON OFFSHORE, INC.
(In thousands)
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
(Unaudited)
REVENUE
Oil sales $1,269 $2,060
Natural gas sales 5,383 7,000
------ ------
6,652 9,060
DIRECT OPERATING EXPENSES 5,511 7,171
------ ------
REVENUE IN EXCESS OF DIRECT
OPERATING EXPENSES $1,141 $1,889
====== ======
The accompanying notes to statement are an integral of this financial statement.
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<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO STATEMENT OF REVENUE AND DIRECT OPERATING EXPENSES
FOR THE OIL AND GAS PROPERTIES ACQUIRED FROM
MIDCON OFFSHORE, INC.
NOTE 1 - BASIS OF PRESENTATION
On November 26, 1997, Basin Exploration, Inc. ("Basin" or the "Company")
consummated an acquisition of certain oil and gas properties from Midcon
Offshore, Inc. ("Midcon"). The principal assets acquired were working interests
in six federal outer continental shelf blocks in the Gulf of Mexico, and the
related platforms and production facilities. Five of the blocks were operated by
Midcon.
These properties were never operated as a separate division by Midcon and,
accordingly, full separate financial statements prepared in accordance with
generally accepted accounting principles are not practically obtainable.
The accompanying statement of revenue and direct operating expenses was derived
from the historical accounting records and other applicable source documents of
the acquired properties and is presented on the accrual basis of accounting.
Certain other costs, such as depreciation, depletion and amortization, allocated
general and administrative, interest or income tax expenses, have been excluded.
NOTE 2 - UNAUDITED SUPPLEMENTAL OIL AND GAS INFORMATION
The determination of oil and gas reserves is complex and highly interpretive.
Assumptions used to estimate reserve information may significantly increase or
decrease such reserves in future periods. The estimates of reserves are subject
to continuing changes and therefore, an accurate determination of reserves may
not be possible for many years because of the time needed for development,
drilling, testing and studies of the reservoirs. Net proved oil and gas reserves
and the discounted future net cash flows related to the acquired properties were
estimated by the Company's petroleum engineers as of September 30, 1997 in
accordance with Statement of Financial Accounting Standards No. 69, "Disclosures
about Oil and Gas Producing Activities." Since reserve evaluations for earlier
dates had not been prepared, it is not practical to include any information as
to changes in reserve quantities, nor any change in present value disclosures.
At September 30, 1997, net proved reserves for the acquired properties were
estimated as 668 MBbls of oil and 26,657 MMcf of natural gas. Net production for
the year ended December 31, 1996, and the nine months ended September 30, 1997,
was 95 MBbls and 66 MBbls of oil and 3,577 MMcf and 3,045 MMcf of natural gas,
respectively.
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<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO STATEMENT OF REVENUE AND DIRECT OPERATING EXPENSES
FOR THE OIL AND GAS PROPERTIES ACQUIRED FROM
MIDCON OFFSHORE, INC.
NOTE 2 - UNAUDITED SUPPLEMENTAL OIL AND GAS INFORMATION (Continued)
The standardized measure of discounted future net cash flows at September 30,
1997, related to the estimated proved oil and gas reserves is as follows (in
thousands):
Future net revenue $90,397
Future production costs (11,126)
Future development and abandonment costs (16,564)
Future income taxes (10,240)
------
Future net cash flows 52,467
Discount (11,041)
------
Standardize measure of discounted future
net cash flows $41,426
=======
The calculated weighted average sales prices utilized for the purposes of
estimating the acquired properties' proved reserves and future net revenue were
$19.00 per barrel of oil and $2.91 per Mcf of natural gas. Total estimated
future net cash flows before income taxes, discounted at 10% per annum, was
$49,511,000 as of September 30, 1997.
During 1996 and the nine months ended September 30, 1997, Midcon sold
approximately 66% and 63%, respectively, of its natural gas production under a
volumetric production payment agreement ("VPP") with an unrelated third party.
Production sold under the VPP was at predetermined prices inherent in the
agreement. Production in excess of the volumes required under the VPP were sold
at prevailing market prices. During 1996 and the nine months ended September 30,
1997, weighted average natural gas sales prices under the VPP were $1.70 and
$1.64 per mcf, while the weighted average natural gas sales prices for excess
volumes were $2.47 and $1.98 per mcf, respectively. Natural gas sales included
in the statement of revenue and direct operating expenses have been reflected at
these VPP and excess volumes prices. The VPP was terminated immediately prior to
Basin's consummation of the Midcon acquisition.
During 1996 and the nine months ended September 30, 1997, approximately
$1,249,000 and $3,002,000, respectively, were expended for capital improvements
to the properties, none of which related to exploration.
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<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial information for the acquisition of Midcon follow.
BASIN EXPLORATION, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying pro forma consolidated balance sheet and pro forma consolidated
statements of operations give effect to Basin Exploration, Inc.'s ("Basin" or
the "Company") acquisition of the oil and gas properties from Midcon Offshore,
Inc. ("Midcon") and are based upon assumptions set forth in the notes to such
statements.
The pro forma consolidated financial statements comprise historical data which
have been retroactively adjusted or combined to reflect the effects of the above
mentioned transaction on the historical consolidated financial statements. The
historical information assumes that the transaction for which pro forma effects
are shown was consummated on September 30, 1997 for the pro forma consolidated
balance sheet and January 1 of each period presented for the pro forma
consolidated statements of operations. Such pro forma information should be read
in conjunction with the related historical financial information and is not
necessarily indicative of the results which would actually have occurred had the
transaction been in effect on the date or the beginning of the periods indicated
or which may occur in the future due to several factors, including, but not
limited to, commencement of production from new wells that has occurred
subsequent to the dates of the periods presented.
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<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(Unaudited, in thousands)
Historical Midcon Pro
Company Acquisition Forma
(a)
ASSETS
Current Assets:
Cash and equivalents $ 1,314 $ (589) $ 725
Accounts receivable 6,488 6,488
Stockholder note receivable 559 559
Prepaids and other 3,783 3,783
--------- --------- ---------
12,144 (589) 11,555
Property and Equipment, at cost:
Oil and gas properties
Proved 129,345 27,532 156,877
Unproved 10,733 5,057 15,790
Less accumulated depreciation,
depletion and amortization (41,273) (41,273)
--------- --------- ---------
98,805 32,589 131,394
Furniture and equipment, net 2,165 2,165
--------- --------- ---------
100,970 32,589 133,559
Other Assets 136 136
--------- --------- ---------
$ 113,250 $ 32,000 $ 145,250
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 11,919 $ 11,919
Accrued ad valorem taxes 2,192 2,192
Income taxes payable 42 42
Current portion of long-term debt 150 150
--------- --------- ---------
14,303 14,303
Long-term Debt 23,092 $ 32,000 55,092
Ad Valorem Taxes and Other 1,109 1,109
Deferred Income Taxes 5,412 5,412
Stockholders' Equity 69,334 69,334
--------- --------- ---------
$ 113,250 $ 32,000 $ 145,250
========= ========= =========
The accompanying notes are an integral of this pro forma financial statement.
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<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Midcon Pro
Company Acquisition Adjustments Forma
(h)
<S> <C> <C> <C> <C>
REVENUE:
Oil sales $ 6,720 $ 1,269 $ 7,989
Natural gas sales 5,910 5,383 $ 639(b) 11,932
Interest and other 254 254
-------- -------- -------- --------
12,884 6,652 639 20,175
-------- -------- -------- --------
COSTS AND EXPENSES:
Lease operating expenses 3,065 5,511 (c) 8,576
Production taxes 893 893
Depreciation, depletion
and amortization 5,375 4,096(d) 9,471
General and administrative 2,441 75(e) 2,516
Interest expense 487 1,608(f) 2,095
-------- -------- -------- --------
12,261 5,511 5,779 23,551
-------- -------- -------- --------
Income (loss) before income taxes 623 $ 1,141 (5,140) (3,376)
Income tax (provision) benefit (218) ======== 1,366(g) 1,148
-------- -------- --------
Net income (loss) $ 405 $ (3,774) $ (2,228)
======== ======== ========
Earnings (loss) per share $ 0.04 $ (0.21)
======== ========
Weighted average common
shares outstanding 10,720 10,720
======== ========
</TABLE>
The accompanying notes are an integral of this pro forma financial statement.
-7-
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Midcon Pro
Company Acquisition Adjustments Forma
(h)
<S> <C> <C> <C> <C>
REVENUE:
Oil sales $ 11,292 $ 2,060 $ 13,352
Natural gas sales 6,890 7,000 $ 1,586(b) 15,476
Interest and other 1,009 1,009
Gain on sale of assets 22,472 22,472
-------- -------- -------- --------
41,663 9,060 1,586 52,309
-------- -------- -------- --------
COSTS AND EXPENSES:
Lease operating expenses 4,776 7,171 (c) 11,947
Production taxes 1,829 1,829
Depreciation, depletion
and amortization 7,606 4,672(d) 12,278
General and administrative 3,850 100(e) 3,950
Interest expense 2,254 2,560(f) 4,814
Other 18 18
-------- -------- -------- --------
20,333 7,171 7,332 34,836
-------- -------- -------- --------
Income before income taxes 21,330 $ 1,889 (5,746) 17,473
Income tax provision (5,760) ======== 1,439(g) (4,321)
-------- -------- --------
Net income $ 15,570 $ (4,307) $ 13,152
======== ======== ========
Earnings per share $ 1.45 $ 1.23
======== ========
Weighted average common
shares outstanding 10,700 10,700
======== ========
</TABLE>
The accompanying notes are an integral of this pro forma financial statement.
-8-
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(a) To reflect Basin's acquisition of oil and gas properties from Midcon and
the related utilization of cash and increase in long-term debt.
(b) Represents the increase in natural gas revenue that would have been
realizable from the termination of the VPP.
(c) Although substantial savings in lease operating expenses are expected to be
realized through changes in contract operators, modifications in production
techniques, economies of scale and similar savings, no adjustment has been
shown as such cost saving procedures have only recently been effected and
exact results are not known. The Company estimates that total annualized
reductions in lease operating expenses may exceed $4 million.
(d) Represents the increase in depreciation, depletion and amortization expense
resulting from the inclusion of the Midcon acquisition in Basin's full cost
pool computed on the units of production method.
(e) Represents the incremental increase in general and administrative expense
expected as a result of the Midcon acquisition.
(f) Represents the approximate increase in interest expense as a result of
borrowing $32 million under the Company's then-existing bank line of
credit.
(g) To record an adjustment to the provision (benefit) for income taxes
resulting from the transaction and pro form adjustments.
(h) Pro forma financial data are not expected by the Company to be
representative of future operating results due to several factors,
including, but not limited to, commencement of production from new wells
that has occurred subsequent to the dates of the periods presented.
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<PAGE>
SIGNATURES
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.
(Registrant)
Date: February 9, 1998 By: /S/ NEIL L. STENBUCK
-------------------------------------
Neil L. Stenbuck
Vice President - Finance, Chief
Financial Officer
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