- -----------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark one)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ------- to -------
Commission File No. 0-19136
NATIONAL ENERGY GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 58-1922764
(State or other jurisdiction(IRS Employer Identification No.)
of incorporation or organization)
1400 One Energy Square
4925 Greenville Avenue
Dallas, Texas 75206
(Address of principal executive offices)
(214) 692-9211
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes XX No
------ ------
Outstanding shares of the issuer's class of
Common Stock as of May 9, 1996:
Class A Common Stock ($0.01 par value) 12,096,532 shares
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL ENERGY GROUP, INC.
INDEX
PART I. Financial Information Page No.
--------
Item 1. Financial Statements
Balance Sheets -
March 31, 1996 and December 31, 1995. . . . . . . . . .3
Statements of Operations -
Three months ended March 31, 1996 and 1995 . . . . . .5
Statements of Cash Flows
Three months ended March 31, 1996 and 1995. . . . . . .6
Statement of Stockholders' Equity -
Three months ended March 31, 1996 . . . . . . . . . . .7
Notes to Financial Statements . . . . . . . . . . . . . .9
Item 2. Management's Discussion and Analysis
or Plan of Operation . . . . . . . . . . . . . . . .12
PART II. Other Information
Item 5. Other Information . . . . . . . . . . . . . . . . .16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . .16
2
<PAGE>
National Energy Group, Inc.
Balance Sheets
March 31, 1996 December 31, 1995
----------------------------------------
Assets
Current assets:
Cash and cash equivalents $1,005,118 $6,076,199
Marketable securities 1,472,550 1,824,724
Accounts receivable -
oil and gas sales 1,366,081 1,407,349
Accounts receivable -
joint interest and other 414,011 262,619
Other 1,042,070 335,751
----------------------------------------
Total current assets 5,299,830 9,906,642
Property and equipment:
Oil and gas properties,
full cost method
[including $2,020,773
(1996) and $707,913
(1995) not subject to
depletion, depreciation
and amortization] 44,054,703 38,201,307
Pipeline 481,108 --
Furniture, fixtures and
equipment 381,345 372,395
----------------------------------------
44,917,156 38,573,702
Accumulated depreciation,
depletion and amortization 7,246,890 5,602,571
-----------------------------------
Net property and equipment 37,670,266 32,971,131
Other Assets 615,354 613,593
----------------------------------------
Total Assets $43,585,450 $43,491,366
========================================
See accompanying notes.
3
<PAGE>
National Energy Group, Inc.
Balance Sheets
March 31, 1996 December 31, 1995
----------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable - trade $3,243,666 $3,630,603
Accounts payable - revenue
and other 1,028,860 984,299
Accounts payable - broker
margin 763,851 978,656
Accrued interest 246,471 128,938
Note payable and current
portion of long-term debt 4,709,000 6,500,000
----------------------------------------
Total current liabilities 9,991,848 12,222,496
Long-term debt, less current
portion 14,779,000 13,475,000
Other long-term liabilities 18,052 19,303
Stockholders' equity:
Convertible preferred stock,
$1.00 par:
Authorized shares -
1,000,000
Series B:
Authorized shares -
100,000
Issued shares - 52,500
Aggregate liquidation
preference - $5,250,000 52,500 52,500
Series C:
Authorized shares -
80,000
Issued shares - 40,000
Aggregate liquidation
preference - $4,000,000 40,000 40,000
Class A common stock $.01
par value:
Authorized shares -
50,000,000
Issued shares -
12,056,532
and 11,880,125 at March
31, 1996 and December 31,
1995 respectively 120,565 118,801
Additional paid-in capital 22,037,359 21,485,224
Unrealized loss on
available-for-sale securities,
net (212,699) (247,492)
Deficit (3,241,175) (3,674,466)
----------------------------------------
Total stockholders' equity 18,796,550 17,774,567
----------------------------------------
Total liabilities and
stockholders'equity $43,585,450 $43,491,366
========================================
See accompanying notes.
4
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National Energy Group, Inc.
Statements of Operations
For the Three Months Ended March 31,
1996 1995
----------------------------------------
Revenue:
Oil and gas sales $3,795,203 $1,090,748
Costs and expenses:
Lease operating 607,064 296,359
Oil and gas production
taxes 187,786 61,156
Depreciation, depletion
and amortization 1,650,654 333,508
General and administrative 455,355 236,671
----------------------------------------
2,900,859 927,694
----------------------------------------
Operating income 894,344 163,054
Interest expense (475,821) (154,125)
Interest income and other 22,872 30,653
Gain (loss) on sale of
marketable securities (8,104) 65,404
----------------------------------------
Income before income taxes 433,291 104,986
Provision for income taxes -- --
----------------------------------------
Net income $ 433,291 $ 104,986
========================================
Income per common share $0.02 $0.00
========================================
Weighted average number
of common and common
equivalent shares
outstanding 12,043,247 9,267,536
========================================
See accompanying notes.
5
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National Energy Group, Inc.
Statements of Cash Flows
For the Three Months Ended March 31,
1996 1995
----------------------------------------
Operating activities:
Net income $433,291 $104,986
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation, depletion
and amortization 1,650,654 333,508
Amortization of loan
costs 21,060 9,968
Amortization of deferred
compensation 8,751 10,501
Warrants issued for
services 3,333 --
Restricted stock grants 3,999 --
Changes in operating
assets and liabilities:
Accounts receivable (110,124) (130,721)
Other current assets (710,318) (31,263)
Accounts payable and
accrued liabilities (440,899) (38,693)
----------------------------------------
Net cash provided by
operating activities 859,747 258,286
Investing activities:
Oil and gas acquisition,
exploration, and
development expenditures (5,399,368) (1,539,277)
Purchase of pipeline (481,108) --
Purchases of furniture,
fixtures and equipment (8,950) (11,029)
Proceeds from sales of
oil and gas properties -- 69,306
Purchase of marketable
securities (9,008) (1,095,010)
Sales of marketable
securities 395,975 631,668
Other 1,065 (11,089)
----------------------------------------
Net cash used in
investing activities (5,501,394) (1,955,431)
Financing activities:
Proceeds from exercise
of stock options
and warrants 57,769 --
Payments for redemption
of fractional shares (203) (164)
Repayments of long-term
debt (3,737,000) --
Proceeds from issuance
of long-term debt, net 3,250,000 --
----------------------------------------
Net cash used by financing
activities (429,434) (164)
Decrease in cash and cash
equivalents (5,071,081) (1,697,309)
Cash and cash equivalents
at beginning of period 6,076,199 2,593,645
----------------------------------------
Cash and cash equivalents
at end of period $1,005,118 $896,336
========================================
Supplemental cash flow
information:
Interest paid in cash $358,288 $160,564
========================================
6
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National Energy Group, Inc.
Statement of Changes in Stockholders' Equity
Three months ended March 31, 1996
Series B Series C
Preferred Stock Preferred Stock
----------------------------------------------------
Shares Amount Shares Amount
----------------------------------------------------
Balance at
December 31, 1995 52,500 $52,500 40,000 $40,000
Common stock issued
upon exercise of
options and warrants -- -- -- --
Warrants issued for
services -- -- -- --
Common stock issued to
acquire interests
in oil and gas
properties -- -- -- --
Unrealized loss on
marketable securities -- -- -- --
Net income -- -- -- --
----------------------------------------------------
Balance at
March 31, 1996 52,500 $52,500 40,000 $40,000
====================================================
7
<PAGE>
Unrealized
Gain (loss)on
Class A Additional Available- Total
Common Stock Paid -in for-sale Stockholders'
- --------------------
Shares Amount Capital Securities Deficit Equity
- -------------------------------------------------------------------------
11,880,125 $118,801 $21,485,224 $(247,492) $(3,674,466) $17,774,567
35,550 355 57,414 -- -- 57,769
-- -- 3,333 -- -- 3,333
140,857 1,409 491,388 -- -- 492,797
-- -- -- 34,793 -- 34,793
-- -- -- -- 433,291 433,291
- -------------------------------------------------------------------------
12,056,532 $120,565 $22,037,359 $(212,699) $(3,241,175) $18,796,550
=========================================================================
See accompanying notes.
8
<PAGE>
National Energy Group, Inc.
Notes to Financial Statements
March 31, 1996 and 1995
1. Basis of Presentation
In management's opinion, the accompanying financial statements
contain all adjustments (consisting solely of normal recurring
accruals) necessary to present fairly the financial position of
National Energy Group, Inc. (the "Company") as of March 31, 1996,
the related results of operations for the three month periods
ended March 31, 1996 and 1995 and cash flows for the three month
periods ended March 31, 1996 and 1995.
The accompanying unaudited financial statements have been
prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and disclosures
normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have
been omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to
make the information presented not misleading. These financial
statements should be read in conjunction with the Company's
financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1995.
The Company has capitalized internal costs of $33,400 and
$27,150 for the three months ended March 31, 1996 and 1995.
These capitalized internal costs are costs that can be directly
identified with acquisition, exploration and development
activities.
Fees from overhead charges billed to working interest owners of
$53,214 and $32,340 for the three months ended March 31, 1996 and
1995, respectively, have been classified as a reduction of
general and administrative expenses in the accompanying
statements of operations.
Certain previously reported amounts have been reclassified to
conform with the 1996 presentation.
The results of operations for the three months ended March 31,
1996 are not necessarily indicative of the results expected for
the full year.
Primary earnings (loss) per common and common equivalent share
data is computed by dividing net income (loss) adjusted for
preferred stock dividend requirements of $236,250 and $131,250
for the three months ended March 31, 1996 and 1995, respectively,
by the weighted average number of common and common equivalent
shares outstanding during each period. Shares issuable upon
exercise of options and warrants are included in the computation
of earnings per common and common equivalent share to the extent
they are dilutive. Fully diluted earnings (loss) per share
computations also assume conversion of the Company's preferred
stock if such conversion has a
9
<PAGE>
dilutive effect. Fully diluted earnings (loss) per share is not
shown because it would not be significantly different from the
amounts shown or would be antidilutive.
For the three months ended March 31, 1995, neither the
common equivalent shares nor the assumed conversion of the
preferred stock had a dilutive effect on the loss per share
calculations. Accordingly, the loss per share calculations for
such period are based on the weighted average number of common
shares outstanding during each period.
2. Acquisition of Oil and Gas Properties
In April 1995, the Company completed the acquisition of a
producing oil and gas property in Mustang Island in offshore
Nueces County, Texas ("Mustang Island") from Sierra Mineral
Development, L.C. and LLOG Production Company (the Company
assumed Sierra Mineral Development, L.C.'s contractual rights and
obligations with LLOG). Consideration for Mustang Island
consisted of $900,000, in cash and 352,000 shares of Common
Stock.
In June 1995, the Company completed the acquisition of
producing gas properties in the Oak Hill Field in Rusk County,
Texas ("Oak Hill") from Sierra 1994 I Limited Partnership
("Sierra") for $7,200,000 in cash and 612,311 shares of Common
Stock and warrants to purchase 200,000 shares of Common Stock at
$2.00 per share.
In June 1995, the Company completed the acquisition of
producing oil and gas properties in Eddy County, New Mexico from
Enron Oil and Gas Company (the "Enron Properties").
Consideration for the Enron Properties consisted of $2,119,295 in
cash.
In January 1996, the Company completed the acquisition of oil
and gas properties in offshore Nueces County, Texas, adjacent to
the Company's Mustang Island property, from C/A Limited, Chartex
Petroleum Company and Petrotex Engineering Company (the "CA
Acquisition"). The acquisition includes interests in five wells,
a pipeline and separation facility related to Mustang Island.
The consideration for this acquisition consisted of 140,857
shares of the Company's Common Stock and $675,000 in cash.
In February 1996, the Company completed the acquisition of two
oil and gas wells on one offshore block, interests in five other
offshore blocks, and a related production platform and equipment
in offshore Nueces County, Texas, adjacent to the Company's
Mustang Island property, from UMC Petroleum Corporation (the "UMC
Acquisition"). The Company paid UMC Petroleum Corporation
$1,500,000 in cash.
In April 1996, the Company won exploration rights on 16
offshore tracts (covering 7,765 acres) in the Mustang Island area
in offshore Nueces County, Texas through successful bids with the
State of Texas (the "Offshore Lease Acquisition"). The Company
paid $1,437,302 in cash for these rights.
10
<PAGE>
3. Note Payable and Long-Term Debt
In June 1995, the Company consummated a $33,000,000 reducing
revolving line of credit facility (the "Facility") with Bank
One. The initial advance under the Facility of $12,500,000 was
used to pay off the Company's credit facility with Texas Gas
Fund I, to purchase Oak Hill and the Enron Properties (Note 2),
and for closing fees. Subsequent advances have been used for
development of the Goldsmith Adobe Unit ("GAU"), other
acquisitions of oil and gas properties, and exploration
activities.
The Facility consists of a Revolving Note of up to $30,000,000,
subject to a borrowing base, and an Advance Note of up to
$3,000,000 (primarily for the development of GAU). Interest on
the Revolving Note is at a rate of prime plus 1% (subject to
reduction in certain circumstances) or LIBOR plus 3.75% (subject
to reduction in certain circumstances), at the Company's option.
Interest on the Advance Note is at a rate of prime plus 4%.
Payments of interest and principal are made monthly. The
Facility is secured by all of the Company's principal oil and gas
properties and related equipment, oil and gas inventory, and
related receivables. Prepayments are allowed at any time. At
March 31, 1996, the Company had $16,488,000 outstanding under the
Revolving Note and $3,000,000 outstanding under the Advance Note.
The Revolving Note has a maturity date of June 30, 1999. In
April 1996, a new Advance Note of up to $3,000,000 was issued to
the Company with a maturity date of March 31, 1997. The Advance
Note is to be used for specific development of the GAU and Oak
Hill. The Company's ability to borrow under the Revolving Note
is dependent upon the reserve value of its oil and gas
properties. At December 31, 1995, the borrowing base was
$17,000,000 and in April 1996, the borrowing base was increased
to $21,500,000. The borrowing base is subject to adjustment
quarterly based on the reserve value. Bank One has substantial
discretion in determining the reserve value and borrowing base.
In addition, the borrowing base is reduced monthly by an amount
redetermined semiannually by Bank One. The amount of such
required reduction was $175,000 per month for the period July 31,
1995 through January 31, 1996. Effective February 1, 1996 the
amount of the monthly reduction was adjusted to $256,000, and
effective May 1, 1996 the amount of the monthly reduction was
further adjusted to $315,000. If the amount outstanding under
the Revolving Note exceeds the borrowing base, the Company is
required to repay such excess.
The Facility contains restrictive and affirmative covenants,
and maintenance of required financial ratios. In addition, the
Company cannot pay any dividends on or redeem common stock.
However, cash dividends on and redemptions of preferred stock are
allowed, so long as no event of default, as defined, has occurred
and is continuing or would occur as a result of such payment. At
March 31, 1996, the Company was not in violation of any covenants
of the Facility.
11
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of
Operation.
Results of Operations
The following table sets forth certain information regarding
the production volumes, oil and gas sales, average sales prices,
average lease operating expenses and general and administrative
expenses associated with the Company's oil and gas sales for the
periods indicated.
Three months ended March 31,
---------------------------
1996 1995
----------- ------------
Net Production:
- ---------------
Oil (Bbls) 110,541 41,284
Gas (Mcf) 833,490 174,152
----------- ------------
BOE 249,456 70,309
----------- ------------
Oil and Gas Sales:
- ------------------
Oil $2,070,746 710,058
Gas 1,724,457 380,690
----------- ------------
$3,795,203 $1,090,748
----------- ------------
Average Sales Price:
- --------------------
Oil (Bbls) $18.73 $17.20
Gas (Mcf) $ 2.07 $ 2.19
Average Lease
- -------------
Operating Expenses:
-------------------
Per BOE $ 2.43 $ 4.22
General and Administrative
- --------------------------
Expenses:
---------
Per BOE $ 1.83 $ 3.37
12
<PAGE>
Three months ended March 31, 1996 compared with three months
- ------------------------------------------------------------
ended March 31, 1995
- --------------------
Revenues:
Total revenues increased by $2,704,455 (247.9%) to $3,795,203
for 1996 from $1,090,748 for 1995. The increase in revenues is
due to the increase in production from the development of the
GAU, acquisitions completed during 1995 and the UMC Acquisition
and the CA Acquisition completed during the first quarter of
1996. Also, in 1996, the Company recognized $112,875 in
hedging gains from commodity swap agreements (see "Changes in
Prices and Inflation" below).
Costs and Expenses:
Total costs and expenses increased $1,973,165 (212.7%) to
$2,900,859 for 1996 from $927,694 for 1995. Lease operating
expenses and production taxes increased $437,335 (122.3%) to
$794,850 for 1996 from $357,515 for 1995 primarily due to the
development of GAU, acquisitions completed during 1995, the UMC
Acquisition and the CA Acquisition. Lease operating expenses as
a percent of oil and gas sales decreased to 16.0% for 1996 from
27.2% for 1995. This decrease is a result of the lower operating
costs of the acquired properties combined with reductions in
costs at the GAU obtained through economies of scale resulting
from the additional wells drilled since August 1994.
Depreciation, depletion and amortization increased $1,317,146
(394.9%) to $1,650,654 for 1996 compared to $333,508 for 1995. This
increase is due to the increased production from the GAU and the
acquisitions noted above. The depletion rate per BOE was $6.62 for
1996 compared to $4.74 for 1995. This increase in the depletion rate
is primarily due to downard revisions in estimated, proved reserves
at December 31, 1995.
Although general and administrative expenses ("G & A")
increased $218,684 to $455,355 for 1996, G & A per BOE decreased
to $1.83 (45.7%) for 1996 from $3.37 for 1995. This decrease is
attributable to the increase in production from the GAU and the
acquisitions made during 1995 and 1996, without a proportionate
increase in the general and administrative costs to the Company.
Other Income and Expenses:
The increase of $321,696 (208.7%) in interest expense to
$475,821 for 1996 from $154,125 for 1995, was due to the increase
in the amount of outstanding debt as a result of borrowings under
the Facility during 1996.
Net Income:
Net income of $433,291 was generated for 1996, compared net
income of $104,986 for 1995. This increase is primarily the
result of the increased production on the GAU and the increase in
production resulting from aquisitions completed during 1995 and
the UMC Acquisition and the CA Acquisition completed during the
first quarter of 1996. This increase was offset, in part, by
higher costs and expenses.
13
<PAGE>
Liquidity and Capital Resources
Overview
Net cash provided by operating activities was $859,747 for the
three months ended March 31, 1996, compared to $258,286 for the
same period in 1995. The increase in cash flow from operating
activities is primarily due to the significant increase in income
from operations before depreciation, depletion and amortization
as discussed above.
Net cash used in investing activities was $5,501,394 for 1996
compared with $1,955,431 for 1995. This increase was principally
due to expenditures for development of the GAU and the cash used
in the UMC Acquisition and the CA Acquisition.
Net cash used by financing activities was $429,434 for 1996
compared with $164 for 1995. The cash used by financing
activities during 1996 primarily consisted of repayments under
the Facility of $3,737,000 offset by borrowings under the
Facility of $3,250,000. Borrowings under the Facility were used
to fund acquisitions, development of GAU and working capital.
The Company's working capital deficit at March 31, 1996 was
$4,692,018. This deficit is primarily attributable to the
inclusion of the current portion of the Facility which totals
$4,709,000, of this amount, $3,000,000 is not due until March 31,
1997.
Current cash flows from the Company's properties are adequate
for the Company's general requirements and are sufficient to meet
its debt service requirements. Anticipated cash flows from
operations, however, are not sufficient to fund the planned
capital expenditures for development and enhancement of the GAU
and the Company's other existing properties, which capital
expenditures will require additional advances under the Facility.
Because the Company's oil and gas reserves are depleted by
production, the success of its business strategy depends on a
continuous development and/or exploration program. Thus, the
Company's capital requirements relate primarily to the further
development of the GAU and certain other properties, acquisitions
of producing oil and gas properties and/or companies with oil and
gas production and exploratory drilling. Subject to sufficient
funding, the Company expects to incur approximately $18.9 million
in capital expenditures over the next twelve months. The
Company anticipates funding the development of the GAU primarily
from working capital and advances under the Facility pursuant to
anticipated increases to the borrowing base under the Facility.
Acquisitions may be funded from advances under the Facility,
proceeds from the issuance of debt or equity securities, new
credit facilities, currently available cash and/or internally
generated funds. However, there can be no assurances that such
sources of funds will actually be available to fund future
development and acquisition activities.
14
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Credit Facility
In June 1995, the Company consummated a $33,000,000 reducing
revolving line of credit facility (the "Facility") with Bank One.
The initial advance of $12,500,000 was used to pay off the
Company's credit facility with Texas Gas Fund I, to purchase Oak
Hill and the Enron Properties and for closing fees. Subsequent
advances have been used for development of the GAU, other
acquisitions of oil and gas properties and exploration
activities. The Facility is more fully described in Note 3 to
the Financial Statements.
Changes in Prices and Inflation
The Company's revenues and the value of its oil and gas
properties have been and will continue to be affected by changes
in oil and gas prices. Oil and gas prices are subject to
seasonal and other fluctuations that are beyond the Company's
ability to control or predict.
In December 1995, the Company began hedging natural gas prices
through the use of commodity swap agreements in an effort to
reduce the effects of the volatility of the price of natural gas
on the Company's operations. These agreements involve the
receipt of fixed-price amounts in exchange for variable payments
based on NYMEX prices and specific volumes. In connection with
the commodity swap agreements, the Company may also enter into
basis swap agreements to reduce the effects of unusual
fluctuations between prices actually received at the well head
and NYMEX prices. Through the use of commodity price and basis
swap agreements, the Company can fix the price to be received for
specified volumes of production to the commodity swap price less
the basis swap price. The differential to be paid or received,
under the swap agreement, is accrued in the month of the related
production and recognized as a component of natural gas sales.
The Company does not hold or issue financial instruments for
trading purposes.
While the use of hedging arrangements limits the downside risk
of adverse price movements, it may also limit future gains from
favorable movements. All hedging is accomplished pursuant to
swap agreements based upon standard forms. The Company addresses
market risk by selecting instruments whose value fluctuations
correlate strongly with the underlying commodity being hedged.
Credit risk related to hedging activities is managed by requiring
minimum credit standards for counterparties, periodic
settlements, and mark to market valuations. The Company has not
been required to provide collateral relating to its hedging
activities.
At March 31, 1996, the Company is entered into various swap
agreements to fix the selling prices for natural gas at a
weighted average NYMEX price of $2.064 per Mcf for 1,000,000 Mcf
of natural gas to be produced during 1996. The Company has also
entered into swap agreements to fix the selling price of crude at
a weighted average NYMEX price of $19.75 per barrel for 15,000
barrels of oil to be produced during 1996. In addition, the
Company entered into a basis swap agreement with a basis
differential of $.205 covering 900,000 Mcf of natural gas to be
produced during 1996.
The Company had closed positions prior to March 31, 1996
resulting in a deferred loss of $41,900 which will be recognized
in the second quarter of 1996. During the first quarter of 1996,
the Company has recognized a gain of $112,875 related to hedging
transactions.
15
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PART II - OTHER INFORMATION
Item 5. Other Information
On December 29, 1995, the Company and Alexander Energy
Corporation ("Alexander") signed a letter of intent providing for
the merger of Alexander and the Company. The letter of intent
was subject to, among other conditions, the execution of a
definitive merger agreement by February 15, 1996. The Company
and Alexander extended the time to sign a definitive merger
agreement to April 30, 1996. On March 25, 1996, the Company and
Alexander modified the terms of the letter of intent to reduce
the original exchange ratio from 1.8 to 1.7 shares of the
Company's Common Stock for each share of Alexander common stock.
Although the letter of intent has expired, the Company
is actively negotiating a definitive merger agreement.
Accordingly, the merger between the Company and Alexander is
subject to the execution of a definitive merger agreement,
satisfactory due diligence and other material conditions.
Therefore, the merger may or may not be consummated.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required to be furnished.
(1) The Agreement of Merger, dated December 17, 1990, by
and among the Company, Big Piney Oil and Gas Company, VP Oil,
Inc., Big Piney Acquisition Corp. and VP Acquisition Corp., has
been filed as Appendix A to Company's Registration Statement on
Form S-4 (No. 33-38331), dated April 23, 1991. The Asset Purchase
and Sale Agreement, dated as of December 30, 1993, between the
Company and Bligh Petroleum, Inc. has been filed as Exhibit 10.9
to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1993. Agreement for Purchase and Sale (Oak Hill),
dated April 12, 1995, between the Company and Sierra 1994 I
Limited Partnership, and the Agreement for Purchase and Sale
(Mustang Island), dated April 20, 1995, between the Company and
Sierra Mineral Development L.C., have been filed as Exhibits 10.1
and 10.2, respectively, to the Company's Current Report on Form
8-K, dated July 17, 1995, and the Purchase and Sale Agreement,
dated March 29, 1995, between the Company and Enron Oil and Gas
Company has been filed as Exhibit 10.3 to such Current Report.
The Company's Certificate of Incorporation, as amended, has been
filed as Exhibit 4.1 to the Company's Registration Statement,
16
<PAGE>
as amended, dated July 27, 1994 (File No. 33-81172). The
Certificate of Designations of National Energy Group, Inc. of 10%
Cumulative Convertible Preferred Stock, Series B has been filed
as Exhibit 10.4 to the Company's Current Report on Form 8-K,
dated June 13, 1994. The Certificate of Designations of National
Energy Group, Inc. of 10 1/2% Cumulative Convertible Preferred
Stock, Series C has been filed as Exhibit 10.6 to the Company's
Current Report on Form 8-K, dated July 17, 1995. The Loan
Agreement, dated June 30, 1995, between National Energy Group,
Inc. and Bank One, Texas, N.A. has been filed as Exhibit 10.4 to
the Company's Current Report on Form 8-K, dated July 17, 1995.
The Stock Purchase Agreement, dated as of June 14, 1995, among
the Company, Arbco Associates L.P., Offence Group Associates
L.P., Kayne Anderson Nontraditional Investments L.P. and
Opportunity Associates L.P. has been filed as Exhibit 10.5 to the
Company's Current Report on Form 8-K, dated July 17, 1995. The
Stock Purchase Agreement, dated as of June 2, 1994, among the
Company, Arbco Associates L.P., Offense Group Associates L.P.,
Kayne Anderson Nontraditional Investments L.P., and Opportunity
Associates L.P. has been filed as Exhibit 10.2 to the Company's
Current Report on Form 8-K, dated June 13, 1994.
(b) Reports on Form 8-K.
None
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NATIONAL ENERGY GROUP, INC.
(Registrant)
Date: May 15, 1996 By:--------------------------
Miles D. Bender
President and Chief Executive
Officer
Date: May 15, 1996 By:--------------------------
Robert A. Imel
Chief Financial Officer
Date: May 15, 1996 By:--------------------------
Melissa H. Rutledge
Controller and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10QSB for the three months ended March 31, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,005,118
<SECURITIES> 1,472,550
<RECEIVABLES> 1,780,092
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,299,830
<PP&E> 44,917,156
<DEPRECIATION> 7,246,890
<TOTAL-ASSETS> 43,585,450
<CURRENT-LIABILITIES> (9,991,848)
<BONDS> 0
0
(92,500)
<COMMON> (120,565)
<OTHER-SE> (22,037,359)
<TOTAL-LIABILITY-AND-EQUITY> (43,585,450)
<SALES> (3,795,203)
<TOTAL-REVENUES> (3,795,203)
<CGS> 0
<TOTAL-COSTS> 2,900,859
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 475,821
<INCOME-PRETAX> 433,291
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 433,291
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
