<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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): May 18, 2000
UNITED STATES EXPLORATION, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 1-13513 84-1120323
---------------- --------------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1560 Broadway, Suite 1900
Denver, Colorado 80202
------------------------------------------------ ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (303) 863-3550
--------------
(Former name or former address, if changed since last report): N/A
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 18, 2000, we completed the settlement of our obligations to our
principal lender, ING (U.S.) Capital LLC. At March 31, 2000, we owed ING
$31,250,000, plus accrued interest of approximately $2,222,500. These
obligations were settled on May 18, 2000 for an aggregate payment of
$17,000,000.
We obtained the funds to effect the settlement from several sources.
First, we sold our interests in 60 producing wells and associated undeveloped
acreage in the Wattenburg field of Northeastern Colorado to HS Resources, Inc.
for approximately $7.15 million, subject to customary adjustments. Second, we
sold 3,000,000 shares of our common stock to Bruce D. Benson, our chairman,
chief executive officer and president, for $1.10 per share, or a total of $3.3
million. Third, Benson Mineral Group, Inc. ("BMG"), a private company owned by
Mr. Benson, provided $4 million in debt financing. The balance of the payment to
ING was made from internally generated company funds.
The shares purchased by Mr. Benson were issued pursuant to an agreement
entered into on April 21, 2000. The closing price of our common stock on April
20, 2000 was $0.56 per share. Pursuant to that agreement, at the time the shares
were purchased, Mr. Benson's employment agreement was amended to extend its term
for an additional year, or until August 6, 2001, and Mr. Benson voluntarily
relinquished options to purchase 4,000,000 shares of common stock that were
granted pursuant to his employment agreement. The amendment also provides for a
severance payment of $1 million to Mr. Benson in the event that he is terminated
by the Company without cause prior to the end of the term of the agreement, a
majority of the board of directors changes during the period or the Company
defaults under the Agreement.
The proceeds of the debt financing provided by BMG were paid directly
to ING and ING assigned to BMG the Note, Credit Agreement and related security
documents entered into in connection with the ING loan. Upon that assignment,
BMG and the Company entered into an amendment to the Credit Agreement and the
Note that reduces the outstanding principal balance of the Note to $4 million,
forgives all interest and fees accruing prior to the date of the amendment,
provides for interest on the reduced principal amount at 9% per annum and
requires the Company to pay the Note in a lump sum no later than May 17, 2001.
In that amendment, the Company acknowledges that the financing was provided by
BMG as an accommodation and agrees to use its best efforts to refinance or
otherwise prepay the Note as soon as possible. The Company intends to seek
financing from a bank or other lender to pay the Note held by BMG and to provide
funds for the further development of its properties. In addition, the Note may
be paid from Company cash flow or the proceeds of additional property sales.
We had previously announced a letter of intent with a lender to provide
the funds necessary to settle with ING and to develop our properties. We decided
not to complete that financing because the terms of the transactions described
above were significantly more favorable to the Company. The lender would have
required a 6% overriding royalty on all of the Company's Colorado properties, in
addition to interest at 10% per annum.
2
<PAGE> 3
At March 31, 2000, the Company had a stockholders' deficit of
approximately $4.55 million. If the ING settlement and related transactions had
been effected as of that date, the Company would have had stockholders' equity
of approximately $14.5 million. The Company estimates that the operating cash
flow from the properties sold was approximately $423,000 in the quarter ended
March 31, 2000 or approximately 25% of total operating cash flow for the
quarter. However, the cash savings to the Company of the transactions described
above, as compared to the 6% overriding royalty interest and other costs of the
proposed lending arrangements previously announced, approximately offset the
reduction in operating cash flow from the properties sold. In addition, with
only $4 million of debt, as compared to $31.25 million under the ING loan or $12
million under the alternative proposed lending arrangement, the Company is in a
much stronger financial position. The Company had been accruing interest at the
rate of over $300,000 per month at the default rate on the ING loan. Interest
accruals under the interim loan will be $30,000 per month.
Neither the Company nor, to its knowledge, any affiliate, director or
officer of the Company has any material relationship with HS Resources, Inc. or
any of its affiliates, directors or officers, except for customary agreements
relating to oil and gas properties in which the Company owns interests.
ITEM 5. OTHER EVENTS.
See Item 2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro forma financial information:
Unaudited pro forma consolidated balance sheet as of March 31,
2000.
Unaudited pro forma consolidated statements of operations for
the year ended December 31, 1999 and the three months ended
March 31, 2000.
Notes to unaudited pro forma consolidated financial
statements.
3
<PAGE> 4
U.S. Exploration, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2000
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
UNITED STATES ADJUSTMENTS
EXPLORATION, INCREASE/
INC. (DECREASE) PRO FORMA
------------- ----------- ---------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,295,961 D 3,300,000
E 6,977,675
F (13,000,000) $ 573,636
Accounts receivable 1,633,114 1,633,114
Due from related parties 73,094 73,094
Inventory 2,080 2,080
Prepaid expenses and deposits 38,820 38,820
------------- ----------- ---------------
Total current assets 5,043,069 2,320,744
Property and equipment, at cost, net:
Oil and gas property and
equipment 24,847,044 E (7,150,000) 17,697,044
Natural gas gathering systems 926,973 926,973
Other equipment and
leasehold improvements 283,167 283,167
------------- ----------- ---------------
26,057,184 18,907,184
Other assets:
Land held for resale 300,000 300,000
Pipeline lease, less accumulated
amortization of $311,546 at
March 31, 2000 395,763 395,763
Loan costs, less accumulated
amortization of $134,086 at
March 31, 2000 339,685 F (339,685) --
------------- ----------- ---------------
1,035,448 695,763
------------- ----------- ---------------
Total assets $ 32,135,701 $ 21,923,691
============= =========== ===============
</TABLE>
See the accompanying notes to the Unaudited Pro Forma Consolidated Financial
Statements.
4
<PAGE> 5
<TABLE>
<CAPTION>
HISTORICAL
UNITED STATES
EXPLORATION, PRO FORMA
INC. ADJUSTMENTS PRO FORMA
-------------- -------------- --------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,008,143 E (172,325)
F 380,000 $ 3,215,818
Accrued liabilities: 200,300 200,300
Due related parties 6,778 6,778
Due bank under credit facility 31,250,000 F (31,250,000) --
Accrued interest--credit facility 2,222,509 F (2,222,509) --
-------------- -------------- --------------
Total current liabilities 36,687,730 3,422,896
Due BMG under credit facility
(Due May 18, 2001) -- F 4,000,000 4,000,000
Commitments and contingencies
Stockholders' equity:
Preferred stock - $.01 par value:
Authorized - 100,000,000 shares;
issued and outstanding Series C
Cumulative Convertible - 443,166
shares (liquidation preference of
$3,031,256) 2,658,996 2,658,996
Common stock - $.0001 par value:
Authorized - 500,000,000 shares;
issued and outstanding - 15,620,631
shares, 18,620,631 pro forma 1,561 D 300 1,861
Capital in excess of par 32,937,040 D 3,299,700 36,236,740
Accumulated deficit (40,149,626) 15,752,824 (24,396,802)
-------------- -------------- --------------
Total stockholders' equity (deficit) (4,552,029) 14,500,795
-------------- -------------- --------------
Total liabilities and stockholders' equity
(deficit) $ 32,135,701 $ 21,923,691
============== ============== ==============
</TABLE>
See the accompanying notes to the Unaudited Pro Forma Consolidated Financial
Statements.
5
<PAGE> 6
U.S. Exploration, Inc. and Subsidiaries
Consolidated Statement of Operations
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
UNITED STATES
EXPLORATION, PRO FORMA
INC. ADJUSTMENTS PRO FORMA
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Sale of purchased gas $ 946,785 $ 946,785
Sale of company produced oil
and gas 7,144,849 B (1,910,249) 5,234,600
Contracting and operating fees 86,082 86,082
-------------- -------------- --------------
8,177,716 6,267,467
Costs and expenses:
Gas acquisition costs 518,337 518,337
Gathering and transmission costs 400,031 400,031
Production costs--oil and gas 2,792,146 B (462,904) 2,329,242
Other operating expenses 114,787 114,787
Depletion, depreciation and 3,045,436 B (678,900)
Amortization C (71,513) 2,295,023
Provision for impairment of assets 400,000 400,000
General and administrative expenses 2,364,220 2,364,220
-------------- -------------- --------------
9,634,957 8,421,640
Loss from operations (1,457,241) (2,154,173)
Other income (expense):
Interest income 68,348 68,348
Interest expense (2,666,314) A 2,666,314
A (360,000) (360,000)
Other 404 404
-------------- -------------- --------------
Net income (loss) (4,054,803) (2,445,421)
Preferred stock dividends applicable
to the period (212,720) (212,720)
-------------- -------------- --------------
Net income (loss) applicable to common
Stockholders $ (4,267,523) $ (2,658,141)
============== ============== ==============
Basic and diluted income (loss) per
Common share $ (0.27) $ (0.14)
============== ============== ==============
Weighted average common shares
outstanding 15,591,831 18,591,831
============== ============== ==============
</TABLE>
See the accompanying notes to the Unaudited Pro Forma Consolidated Financial
Statements.
6
<PAGE> 7
U.S. Exploration, Inc. and Subsidiaries
Consolidated Statement of Operations
For the Three Months Ended March 31, 2000
<TABLE>
<CAPTION>
HISTORICAL
UNITED STATES
EXPLORATION, PRO FORMA
INC. ADJUSTMENTS PRO FORMA
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Sale of purchased gas $ 275,013 $ 275,013
Sale of company produced oil 2,304,859 B (540,996) 1,763,863
and gas
Contracting and operating fees 20,936 20,936
-------------- -------------- --------------
2,600,808 2,059,812
Costs and expenses:
Gas acquisition costs 156,324 156,324
Gathering and transmission costs 100,325 100,325
Production costs--oil and gas 700,567 B (117,828) 582,739
Other operating costs (41) (41)
Depletion, depreciation and
amortization 711,055 B (154,696)
C (17,878) 538,481
General and administrative expenses 458,387 458,387
-------------- -------------- --------------
2,126,617 1,836,215
Earnings from operations 474,191 223,597
Other income (expense):
Interest income 20,267 20,267
Interest expense (934,051) A 934,051
A (90,000) (90,000)
Other (11,875) (11,875)
-------------- -------------- --------------
(925,659) (81,608)
-------------- -------------- --------------
Income (loss) before extraordinary item (451,468) 141,989
Preferred stock dividends applicable
to the period (53,180) (53,180)
-------------- -------------- --------------
Net income (loss) applicable to common
stockholders before extraordinary item $ (504,648) $ 88,809
============== ============== ==============
Basic and diluted income (loss) per
common share before extraordinary item
$ (0.03) $ .00
============== ============== ==============
Weighted average common shares
Outstanding 15,620,631 18,620,631
============== ============== ==============
</TABLE>
See the accompanying notes to the Unaudited Pro Forma Consolidated Financial
Statements.
7
<PAGE> 8
United States Exploration, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
March 31, 2000
1. GENERAL
The accompanying unaudited pro forma consolidated financial statements reflect
the historical financial position and results of operations of United States
Exploration, Inc. (the "Company") adjusted to give effect to a series of
transactions as follows:
o The sale by the Company of 3,000,000 shares of common stock
for $3,300,000 to the Chairman, Chief Executive Officer and
President of the Company.
o The sale of certain of the Company's oil and gas properties
for $7,150,000 subject to preliminary closing adjustments of
$172,325. The effective date of this sale is May 1, 2000.
o The settlement of the Company's current indebtedness under its
credit facility for $13,000,000 in cash. At March 31, 2000,
the Company owed $31,250,000 in principal and $2,222,509 of
unpaid interest.
o The loan from Benson Mineral Group, Inc. (BMG) of $4,000,000,
which is due May 17, 2001. BMG took assignment of the original
note, credit agreement and other related loan documents due
under its then existing credit facility and by amendment,
reduced the balance due to $4,000,000, restated the interest
rate to 9% per annum and restated the maturity date to May 17,
2001. The loan from BMG is secured by substantially all of the
Company's properties. The Company agreed to use its best
efforts to refinance or otherwise prepay the loan from BMG as
soon as possible.
The Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2000 assumes
the transactions described above had been completed on that date. The Unaudited
Pro Forma Consolidated Statements of Operations for the three months ended March
31, 2000 and the year ended December 31, 1999 have been prepared assuming the
transactions described above had been completed at the beginning of the earliest
period presented.
The pro forma adjustments are based upon available information and assumptions
that management of the Company believes are reasonable. The Unaudited Pro Forma
Condensed Consolidated Financial Statements do not purport to represent the
financial position or results of operations which would have occurred had such
transactions been consummated on the dates indicated or the Company's financial
position or results of operations for any future date or period. The Unaudited
Pro Forma Condensed Consolidated Financial Statements and notes thereto should
be read in conjunction with the Company's historical financial statements and
the notes thereto.
8
<PAGE> 9
2. PRO FORMA ADJUSTMENTS
The accompanying Unaudited Pro Forma Condensed Consolidated Financial Statements
reflect the following pro forma adjustments related to the transactions
described above:
A. Elimination of interest expense due under the then existing credit
agreement and substitution of interest due on the loan from BMG.
B. Elimination of revenues, oil and gas production costs and depletion,
depreciation and amortization related to the oil and gas properties
sold.
C. Elimination of current period amortization of capitalized loan costs to
the credit facility which was settled.
D. Issuance of 3,000,000 shares of common stock for $3,300,000.
E. Sale of oil and gas properties for $7,150,000 net of preliminary
closing adjustments of $172,325. Proceeds have been credited to the oil
and gas full cost pool.
F. The settlement of the Company's current indebtedness under its credit
facility for $13,000,000 in cash, and the loan of $4,000,000 from BMG.
At March 31, 2000, the Company owed $31,250,000 in principal and
$2,222,509 of unpaid interest. Estimated costs of the transaction and
the write-off of the capitalized loan costs associated with the
original loan have been reflected in the pro forma adjustments.
The accompanying Unaudited Pro Forma Condensed Consolidated Statements of
Operations do not reflect the extraordinary gain of approximately $15,752,824
($0.85 per share), net of previously capitalized loan costs and estimated costs
relating to these transactions, resulting from the settlement of indebtedness
due under the Company's then existing credit agreement. The calculation of the
gain does not include interest accrued from April 1, 2000 until the settlement
date of the loan.
9
<PAGE> 10
(c) Exhibits.
10.1 Agreement between ING (U.S.) Capital LLC and United
States Exploration, Inc. dated April 14, 2000.*
10.2 Bruce D. Benson Offer to Purchase Common Stock dated
April 21, 2000.*
10.3 Purchase and Sale Agreement dated May 18, 2000
between the Company and HS Resources, Inc.*
10.4 Closing Agreement dated as of May 18, 2000 by and
among Benson Mineral Group, Inc., the Company,
Producers Service Incorporated and HS Resources,
Inc.*
10.5 First Amendment to Executive Employment Agreement
dated May 18, 2000 between the Company and Bruce D.
Benson.*
10.6 Registration Rights Agreement dated May 18, 2000
between the Company and Bruce D. Benson.*
10.7 Amendment to Credit Agreement and Note dated as of
May 18, 2000 among the Company, Producers Service
Incorporated and Benson Mineral Group, Inc.*
----------
* Incorporated by reference to the Company's Quarterly Report on Form 10-QSB for
the quarter ended March 31, 2000.
10
<PAGE> 11
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K to be signed on its behalf by
the undersigned thereunto duly authorized.
UNITED STATES EXPLORATION, INC.
Date: May 31, 2000 By: /s/ F. Michael Murphy
--------------------------------------
F. Michael Murphy, Vice President
11
