<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (date of earliest event reported) May 29, 1998
NORTH COAST ENERGY,INC.
(Exact name of registrant as specified in its charter)
Commission File Number 0-18691
Delaware 34-1594000
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification Number)
1993 Case Parkway
Twinsburg, Ohio 44087-2343
(Address of principal executive offices)
Registrants telephone number, including area code: (330) 425-2330
The purpose of this filing is to make the following amendments pursuant to Item
7(a) and 7(b) financial Statements and Exhibits:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
----------------------------------
(a) Financial Statements of Assets Acquired
---------------------------------------
Report of Independent Public Accountants
Statements of revenues and direct operating expenses for the years
ended December 31, 1995, 1996, 1997, and the three months Ended
March 31, 1998 Notes to statements of revenues and direct
operating expenses
(b) Pro Forma Financial Information
-------------------------------
Pro forma combined statement of operations for the year ended
March 31, 1998, Pro forma combined balance sheet March 31, 1998
Notes to pro forma combined financial statements
<PAGE> 2
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 officer.
NORTH COAST ENERGY, INC.
By /s/ Tim Wagers
--------------------------
Tim Wagers
Chief Financial Officer
July 10, 1998
<PAGE> 3
NORTH COAST ENERGY, INC.
FORM 8-K
THE KELT OHIO INTERESTS
FINANCIAL STATEMENTS
<PAGE> 4
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
North Coast Energy, Inc.:
We have audited the accompanying statements of revenues and direct operating
expenses of the Kelt Ohio Interests, as described in Note 1, for the years ended
December 31, 1995, 1996 and 1997. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial 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 of revenues and direct operating expenses. 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 audits provide a reasonable basis for our opinion.
The accompanying statements of revenues and direct operating expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission (for inclusion on Form 8-K/A of North Coast
Energy, Inc.), as described in Note 1, and are not intended to be a complete
presentation of the results of operations of the Kelt Ohio Interests.
In our opinion, the statements of revenues and direct operating expenses
referred to above present fairly, in all material respects, the revenues and
direct operating expenses of the Kelt Ohio Interests, as described in Note 1,
for the years ended December 31, 1995, 1996, and 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
May 7, 1998.
<PAGE> 5
THE KELT OHIO INTERESTS
-----------------------
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
----------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Year Ended Year Ended Year Ended Ended March 31,
December 31, December 31, December 31, 1998
1995 1996 1997 (Unaudited)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas production $4,694,922 $4,631,339 $4,038,907 $1,040,305
Transportation 204,934 236,161 439,730 42,786
---------- ---------- ---------- ----------
Total Revenues 4,899,856 4,867,500 4,478,637 1,083,091
Direct operating expenses 1,958,076 1,910,663 2,150,311 631,883
---------- ---------- ---------- ----------
Excess of revenues over direct
operating expenses $2,941,780 $2,956,837 $2,328,326 $ 451,208
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
THE KELT OHIO INTERESTS
-----------------------
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
-------------------------------------------------------------
1. GENERAL:
--------
Organization
- ------------
The accompanying statements present the revenues and direct operating expenses
of certain working and other interests in oil and gas properties and related
pipelines owned by Kelt Ohio, Inc. (the "Kelt Ohio Interests") which were
purchased by North Coast Energy, Inc. ("North Coast") in May, 1998. Such
financial statements were derived from the historical records of the predecessor
owner and represent North Coast's interest.
Basis of Presentation
- ---------------------
The historical financial statements reflecting financial position, results of
operations, and cash flows required by generally accepted accounting principles
are not presented, as such information is neither readily available on an
individual property basis nor meaningful for the Kelt Ohio Interests. During the
periods presented, the Kelt Ohio Interests were not accounted for as a separate
entity. These statements do not include depreciation, depletion and
amortization, general and administrative expenses, interest expense, federal
income tax expenses, or federal income tax credits allowed under Section 29 of
the Internal Revenue Code. These statements have been prepared solely as a
result of the requirements of Section 3.05 of Regulation S-X of the Securities
and Exchange Commission (SEC), for filing by North Coast as a part of the SEC
Form 8-K/A reporting the acquisition of the subject assets. Accordingly, the
accompanying financial statements are not intended to be a complete presentation
of the results of operations of the Kelt Ohio Interests in conformity with
generally accepted accounting principles.
Revenue Recognition
- -------------------
The Kelt Ohio Interests follows the full-cost method of accounting for its oil
and gas properties. Under this method of accounting, all costs incurred in the
acquisition of oil and gas properties and the exploration for the development of
oil and gas reserves are capitalized. Revenues are recognized when oil and gas
production is sold. Direct operating expenses are accrued when services are
provided.
Use of Estimates
- ----------------
Management has made a number of estimates and assumptions relating to the
reporting of revenues and direct operating expenses to prepare the accompanying
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
2. SALES TO MAJOR CUSTOMERS:
-------------------------
For the years ended December 31, 1995, 1996 and 1997 one purchaser accounted for
approximately 90% of total revenues, respectively.
<PAGE> 7
-2-
3. OIL AND GAS RESERVES INFORMATION (UNAUDITED):
---------------------------------------------
The estimates of the Kelt Ohio Interests in proved oil and gas reserves, which
are located entirely in the United States, are based on evaluations by an
independent petroleum engineer and by Kelt Ohio, Inc. These reserves were
estimated in accordance with guidelines established by the Securities and
Exchange Commission which require that reserve reports be prepared under
existing economic and operating conditions with no provision for price
escalations except by contractual arrangements.
North Coast's management emphasizes that reserve estimates are inherently
imprecise. Accordingly, the estimates are expected to change as future
information becomes available.
The following unaudited table sets forth the estimated proved oil and gas
reserve quantities of the Kelt Ohio Interests at December 31, 1995, 1996 and
1997:
<TABLE>
<CAPTION>
Crude Oil Natural Gas
(Bbls) (Mcfs)
--------------------- ----------------------
<S> <C> <C>
PROVED RESERVES:
Balance, December 31, 1994 263,400 24,260,000
Production (34,400) (1,929,000)
Sales (35,100) (1,128,000)
Revisions 23,300 1,513,000
--------------------- ----------------------
Balance, December 31, 1995 217,200 22,716,000
Production (15,600) (1,668,000)
Revisions 8,400 448,000
--------------------- ----------------------
Balance, December 31, 1996 210,000 21,496,000
Production (11,900) (1,480,000)
Extensions 30,600 1,084,000
Revisions 8,200 4,337,000
--------------------- ----------------------
Balance, December 31, 1997 236,900 25,437,000
===================== ======================
PROVED DEVELOPED RESERVES:
Balance, December 31, 1995 208,500 22,202,000
===================== ======================
Balance, December 31, 1996 195,700 20,395,000
===================== ======================
Balance, December 31, 1997 213,000 20,664,000
===================== ======================
</TABLE>
The "Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves" (Standardized Measure) is a disclosure requirement under
Statement of Financial Accounting Standards No. 69. The Standardized Measure
does not purport to present the fair market value of proved oil and gas
reserves. This would require consideration of expected future economic and
operating conditions, which are not taken into account in calculating the
Standardized Measure.
<PAGE> 8
-3-
Future net cash flows for the periods presented were derived from the December
31, 1995, 1996 and 1997 reserve estimates after considering historical
production and drilling activities. December 31, 1995, 1996 and 1997 prices in
the reserve estimates were adjusted for fixed and determinable escalations to
the estimated future production less estimated future production costs based on
period-end costs and future development costs. Future net cash inflows were
discounted using a 10% annual discount rate to arrive at the Standardized
Measure. Future income tax estimates are not included, as the historical tax
basis of the properties is not relevant.
The standardized measure of discounted future net cash flows relating to proved
oil and gas properties is as follows:
<TABLE>
<CAPTION>
As of As of As of
December 31, December 31, December 31,
1995 1996 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Future cash inflows $71,339,000 $61,189,000 $74,558,000
Future costs:
Production 36,466,000 31,410,000 33,730,000
Development 450,000 711,000 3,750,000
----------------- ----------------- -----------------
36,916,000 32,121,000 37,480,000
----------------- ----------------- -----------------
Undiscounted future net cash flows 34,423,000 29,068,000 37,078,000
10% discount factor 16,458,000 13,860,000 18,685,000
----------------- ----------------- -----------------
Standardized measure $17,965,000 $15,208,000 $18,393,000
================= ================= =================
</TABLE>
Changes in standardized measure of discounted future net cash flows from proved
reserve quantities are as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, December 31, December 31,
1995 1996 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Standardized measure, beginning of year 16,676,000 17,965,000 15,208,000
Extensions - - 2,330,000
Production (2,737,000) (2,721,000) (1,889,000)
Sales (986,000) - -
Accretion of discount (1,668,000) (1,797,000) (1,521,000)
Revisions of estimates, changes in price and other 6,680,000 1,761,000 4,265,000
----------------- ----------------- -----------------
Standardized measure, end of year 17,965,000 15,208,000 18,393,000
================= ================= =================
</TABLE>
<PAGE> 9
-4-
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
-------------------------------------------------
The accompanying unaudited pro forma combined financial statements give effect
to the purchase by North Coast of certain oil and gas properties from Kelt Ohio,
Inc. (the "Kelt Ohio Acquisition") in May 1998 for approximately $16 million.
The unaudited pro forma combined statement of income for the year ended March
31, 1998 was prepared as if the Kelt Ohio Acquisition had occurred on April 1,
1997, the beginning of North Coast's fiscal year. The accompanying unaudited pro
forma combined balance sheet as of March 31, 1998 has been prepared as if the
transaction had occurred as of that date which is North Coast's fiscal year end.
This information is not necessarily indicative of future consolidated results of
operations and it should be read in conjunction with the separate historical
statements and related notes of the respective entities appearing elsewhere in
this Form 8-K/A.
<PAGE> 10
-5-
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
-----------------------------------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS
------------------------------------------
YEAR ENDED MARCH 31, 1998
-------------------------
(Unaudited)
<TABLE>
<CAPTION>
North Coast Pro Forma North Coast
Historical Adjustments Pro Forma
---------------- ---------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas production $ 3,013,929 $ 4,155,463 (a) $ 7,169,392
Drilling revenues 2,988,371 - 2,988,371
Well operating transportation and other 1,622,608 465,507 (a) 2,088,115
Administrative and agency fees 965,724 - 965,724
---------------- ---------------- ---------------
8,590,632 4,620,970 13,211,602
---------------- ---------------- ---------------
COSTS AND EXPENSES:
Oil and gas production expenses 840,346 2,280,608 (a) 3,120,954
Drilling costs 2,516,588 - 2,516,588
Oil and gas operations 652,672 - 652,672
General and administrative expenses 2,215,961 123,550 (b) 2,339,511
Depreciation, depletion, amortization,
impairment and other 1,242,200 899,189 (c, d) 2,141,389
Abandonment of oil and gas properties 88,947 - 88,947
---------------- ---------------- ---------------
7,556,714 3,303,347 10,860,061
---------------- ---------------- ---------------
INCOME FROM OPERATIONS 1,033,918 1,317,623 2,351,541
OTHER INCOME:
Interest 62,263 - 62,263
Other 3,690 - 3,690
Gain on sale of property and equipment 1,609 - 1,609
---------------- ---------------- ---------------
67,562 - 67,562
---------------- ---------------- ---------------
OTHER EXPENSE:
Interest 839,342 1,608,750 (e) 2,448,092
---------------- ---------------- ---------------
839,342 1,608,750 2,448,092
---------------- ---------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 262,138 (291,127) (28,989)
PROVISION (CREDIT) FOR INCOME TAXES:
Current 12,000 - 12,000
Deferred (12,000) - (12,000)
---------------- ---------------- ---------------
NET INCOME (LOSS) $ 262,138 $ (291,127) $ (28,989)
================ ================ ===============
</TABLE>
<PAGE> 11
-6-
<TABLE>
<CAPTION>
North Coast Pro Forma North Coast
Historical Adjustments Pro Forma
---------------- ---------------- ---------------
<S> <C> <C> <C>
NET LOSS, applicable to common stock (after
preferred stock dividends paid or in arrears
of $268,264 in 1998) $ (6,126) $ (291,127) $ (297,253)
================ ================ ===============
BASIC AND DILUTED EARNINGS, per common share
$ $
(0.00) (0.02)
================ ===============
BASIC WEIGHTED AVERAGE SHARES, outstanding
14,106,492 14,106,492
================ ===============
</TABLE>
See notes to pro forma combined financial statements
<PAGE> 12
-7-
NORTH COAST ENERGY, INC. AND SUBSIDIARIES
-----------------------------------------
PRO FORMA COMBINED BALANCE SHEET
--------------------------------
MARCH 31, 1998
--------------
(Unaudited)
<TABLE>
<CAPTION>
North Coast Pro Forma North Coast
Historical Adjustments Pro Forma
---------------- --------------- ----------------
<S> <C> <C> <C>
ASSETS:
Current assets-
Cash and equivalents $ 1,578,984 $ - $ 1,578,984
Accounts receivable-
Trade, net 1,311,714 - 1,311,714
Affiliates 96,011 - 96,011
Inventories 189,223 - 189,223
Deferred income taxes 26,000 - 26,000
Refundable income taxes 38,000 - 38,000
Other, net 8,057 206,000(f) 214,057
---------------- --------------- ----------------
Total current assets 3,247,989 206,000 3,453,989
---------------- --------------- ----------------
Property and equipment, at cost:
Land 93,437 - 93,437
Oil and gas properties 25,754,748 12,828,650(f) 38,583,398
Pipelines 4,380,772 1,800,000(f) 6,180,772
Vehicles 420,026 278,350(f) 698,376
Disposal wells and drilling equipment - 778,000(f) 778,000
Furniture and fixtures 508,417 - 508,417
Buildings and improvements 786,689 - 786,689
---------------- --------------- ----------------
31,944,089 15,685,000 47,629,089
Less - Accumulated depreciation, depletion, amortization and
impairment (13,155,288) - (13,155,288)
---------------- --------------- ----------------
18,788,801 15,685,000 34,473,801
---------------- --------------- ----------------
Other assets, net 274,726 1,609,000(f) 1,883,726
---------------- --------------- ----------------
22,311,516 17,500,000 39,811,516
================ =============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities-
Current portion of long-term debt 88,300 - 88,300
Accounts payable 1,824,740 - 1,824,740
Accrued expenses 250,073 100,000(f) 350,073
Billings in excess of costs on uncompleted contracts 302,881 - 302,881
---------------- --------------- ----------------
Total current liabilities 2,465,994 100,000 2,565,994
---------------- --------------- ----------------
Long-term debt, net of current portion 7,171,035 16,500,000(f) 23,671,035
Deferred income taxes, net 335,200 - 335,200
Other liabilities - 900,000 900,000
</TABLE>
<PAGE> 13
-8-
<TABLE>
<CAPTION>
North Coast Pro Forma North Coast
Historical Adjustments Pro Forma
---------------- --------------- ----------------
<S> <C> <C> <C>
Stockholders' equity:
Preferred stock 3,438 - 3,438
Common stock 166,129 - 166,129
Additional paid-in-capital 16,859,237 - 16,859,237
Retained deficit (4,689,517) - (4,689,517)
---------------- --------------- ----------------
Total stockholders' equity 12,339,287 - 12,339,287
---------------- --------------- ----------------
$ 22,311,516 $17,500,000 $39,811,516
================ =============== ================
</TABLE>
See notes to pro forma combined financial statements
<PAGE> 14
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NORTH COAST ENERGY, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
------------------------------------------------
(Unaudited)
1. PRO FORMA ADJUSTMENTS FOR THE YEAR ENDED MARCH 31, 1998:
--------------------------------------------------------
The accompanying unaudited pro forma consolidated statement of income for the
year ended March 31, 1998 has been prepared as if the transaction had occurred
on April 1, 1997, the beginning of North Coast's fiscal year, and reflects the
following adjustments:
(a) To record historical revenues and direct operating expenses of the Kelt
Ohio Interests for the period April 1, 1997 to March 31, 1998, which
reflects North Coast's fiscal year.
(b) To record additional general administrative expenses for additional payroll
costs related to the Kelt Ohio Interests.
(c) To record the estimated adjustments to depreciation, depletion,
amortization, impairment and other expenses attributable to the allocation
of the purchase price using the successful efforts method of accounting.
(d) To record additional amortization expense on deferred financing costs
associated with the related financing of the Kelt Ohio Acquisition.
(e) To record additional interest expense on the Kelt Ohio Interests purchase
price of $16 million, plus other acquisition costs incurred, using North
Coast's weighted average interest rate of 9 3/4%. A 1/4% per annum increase
in the interest rate would increase the loss before taxes by $42,000.
2. PRO FORMA ADJUSTMENTS FOR THE KELT OHIO ACQUISITION AS OF MARCH 31, 1998:
-------------------------------------------------------------------------
The accompanying unaudited pro forma consolidated balance sheet as of March 31,
1998 has been prepared as if the acquisition occurred on March 31, 1998, North
Coast's fiscal year end and reflecting the following adjustment:
(f) To record assets and liabilities under the purchase method of accounting
based upon the purchase price of $16 million plus other acquisition costs
incurred. Such purchase price has been allocated to the assets and
liabilities based upon preliminary estimated fair values.
