<PAGE>
UNITED STATESUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period from _____________________ to ______________________________.
Commission file number 0-19753
-------------------------------------------------------------
GOTHIC ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-2663839
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5727 SOUTH LEWIS, #700, TULSA, OKLAHOMA 74105-7148
(Address of principal executive offices)
918-749-5666
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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 X No .
--------- ---------
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of May 13, 1996, 12,369,991 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
GOTHIC ENERGY CORPORATIONGOTHIC ENERGY CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Unaudited Balance Sheets
March 31, 1996 and December 31, 1995 3
Consolidated Unaudited Statements of Operations
Three Months ended March 31, 1996 and 1995 4
Consolidated Unaudited Statements of Cash Flows
Three Months ended March 31, 1996 and 1995 5
Notes to Unaudited Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis or
Plan of Operations 9
PART II - OTHER INFORMATION PAGE
Signatures 13
<PAGE>
GOTHIC ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,588,320 $ 157,559
Oil and gas receivable 1,740,007 295,344
Receivable from officers and
employees 18,857 16,459
Other 51,104 74,697
------------ ------------
Total current assets 3,398,288 544,059
Property and equipment:
Oil and gas properties on full cost method 31,189,355 9,556,480
Equipment, furniture and fixtures 632,011 135,807
Accumulated depreciation, depletion and impairment (8,418,231) (1,696,414)
------------ ------------
Property and equipment, net 23,403,135 7,995,873
Notes receivable:
Affiliate - 123,000
Other 61,648 61,648
Investment - 200,000
Other assets, net 1,622,842 377,541
------------ ------------
Total assets $ 28,485,913 $ 9,302,121
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable trade $ 1,190,587 $ 1,019,543
Oil and gas revenue payable 1,312,294 94,841
Accrued liabilities 268,605 516,176
Notes payable 25,000 2,900,000
Current portion long-term debt 2,220,000 2,220,000
------------ ------------
Total current liabilities 5,016,486 6,750,560
Long-term debt 8,353,120 3,025,573
------------ ------------
Gas imbalance liability 1,189,956 -
Stockholders' equity:
Preferred stock, par value $.05,
authorized 500,000 shares; issued and
outstanding 5,540 shares 277 -
Common stock, par value $.01, authorized
30,000,000 shares; issued and outstanding
12,236,657 and 5,501,785 shares 122,367 55,018
Additional paid in capital 32,232,380 13,965,236
Accumulated deficit (18,428,673) (14,494,266)
------------ ------------
Total stockholders' equity 13,926,351 (474,012)
------------ ------------
Total liabilities and
stockholders' equity $ 28,485,913 $ 9,302,121
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
GOTHIC ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Oil and gas sales $ 1,608,216 $ 137,527
Well operations 161,213
Interest and other income 1,157 3,302
---------- -----------
Total revenues 1,770,586 140,829
Costs and expenses:
Lease operating expenses 883,097 86,469
Depletion, depreciation and amortization 534,370 60,900
Selling, general and administrative expense 406,307 232,934
Provision for impairment of oil and gas properties 5,050,000 486,000
---------- -----------
Operating loss (5,103,188) (725,474)
Interest expense 321,545 49,310
---------- -----------
Loss before income taxes and extraordinary item $(5,424,733) $ (774,784)
Income tax benefit 2,992,547 -
----------- -----------
Loss before extraordinary item (2,432,186) (774,784)
Loss on early extinguishment of debt 1,432,973 -
----------- -----------
Net loss $(3,865,159) $ (774,784)
Preferred dividend 69,250 -
----------- -----------
Net loss available for common shares $(3,934,409) $ (774,784)
=========== ===========
Loss per common share $ (.41) $ (.24)
=========== ===========
Weighted average common shares outstanding 9,673,237 3,187,777
=========== ===========
</TABLE>
See accompanying notes
<PAGE>
GOTHIC ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,865,159) $ (774,784)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 534,370 60,900
Amortization of discount and loan costs - 37,562
Provision for impairment of oil and gas properties 5,050,000 486,000
Deferred income tax benefit (2,992,547) -
Loss on early extinguishment of debt 1,432,973 -
Changes in assets and liabilities:
Increase in accounts receivable (247,533) (36,672)
Decrease in other current assets 40,653 2,527
Increase (decrease) in accounts and
revenues payable 81,904 (107,835)
Decrease in accrued liabilities (670,856) (19,288)
Decrease in other assets 205,700 -
------------ -----------
Net cash used by operating activities (430,495) (351,590)
Cash flows from investing activities:
Proceeds from sale of investment 200,000 -
Proceeds from collection on note receivable 123,000 -
Proceeds from sale of property 5,962 36,943
Purchase of property and equipment (220,939) (3,219,432)
Property development (126,431) (50,488)
Acquisition of business, net of cash acquired (17,592,973) -
Other - (8,950)
------------ -----------
Net cash used by investing activities (17,611,381) (3,241,927)
Cash flows from financing activities:
Payments on short-term debt (1,560,000) -
Proceeds of short-term debt - 1,850,000
Payments on long-term debt (6,913,258) (175,000)
Proceeds of long-term debt 11,000,000 -
Proceeds from sale of common stock, net 13,141,368 1,472,000
Proceeds from sale of preferred stock, net 3,997,430 -
Other (192,903) -
------------ -----------
Net cash provided by financing activities 19,472,637 3,147,000
Net change in cash and cash equivalents 1,430,761 (446,517)
Cash and cash equivalents, beginning of period 157,559 824,978
------------ -----------
Cash and cash equivalents, end of period $ 1,588,320 $ 378,461
============ ===========
</TABLE>
See accompanying notes
<PAGE>
GOTHIC ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL AND ACCOUNTING POLICIES
BUSINESS - The consolidated financial statements include the accounts of
Gothic Energy Corporation, (the "Company"), and its subsidiaries, Gothic Energy
of Texas, Inc. ("Gothic Texas"), since its inception in 1995 and Buttonwood
Energy Corporation and its subsidiaries Buttonwood Petroleum, Inc. and Dakota
Services, Inc. ("Buttonwood") since their acquisition on January 30, 1996.
Since November 1994, the Company has been primarily engaged in the business of
acquiring, developing and exploiting oil and gas reserves.
PREPARATION OF FINANCIAL STATEMENTS - The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
In the opinion of management of the Company, the accompanying financial
statements contain all adjustments, none of which were other than normal
recurring accruals, necessary to present fairly the financial position of the
Company as of March 31, 1996, and the results of its operations and cash flows
for the periods ended March 31, 1996 and 1995. The results of operations for
the periods represented are not necessarily indicative of the results of
operations to be expected for the full year.
NOTE 2. OIL AND GAS PROPERTIES
The Company's oil and gas reserves are estimated annually by petroleum
engineers. The Company's calculation of depletion, depreciation and
amortization ("DD&A") includes estimated future expenditures to be incurred in
developing proved reserves and estimated dismantlement and abandonment costs,
net of salvage values.
In the event the unamortized costs of oil and gas properties being
amortized exceeds the full cost ceiling as defined by the SEC, the excess is
charged to expense in the period during which such excess occurs. The full cost
ceiling is based principally on the estimated future discounted net cash flows
from the Company's oil and gas properties. With the recording of the Buttonwood
acquisition, and based on the reserve report for the quarter ending March 31,
1996, the Company recorded a $5,050,000 provision for impairment of oil and gas
properties at March 31, 1996. Estimates of oil and gas reserves are imprecise.
Changes in the estimates or declines in oil and natural gas prices could cause
the Company in the near-term to reduce the carrying value of its oil and natural
gas properties.
NOTE 3. OIL AND GAS PROPERTY ACQUISITION
BUTTONWOOD ACQUISITION - On January 30, 1996 the Company completed the
acquisition of Buttonwood Energy Corporation (the "Buttonwood Acquisition"), at
a price of $17,912,500, net of a $1,000,000 deposit paid in 1995 and charged to
expense. The aggregate purchase price of $18,008,712 including acquisition
costs of $389,212, was allocated to the assets acquired and liabilities assumed
as follows:
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 1,632,327
Property and equipment 20,784,016
Other assets 1,435,500
Current liabilities (1,660,628)
Gas imbalance (1,189,956)
Deferred income taxes (2,992,547)
------------
Aggregate purchase price 18,008,712
Less: Cash acquired (415,739)
Net cash paid $ 17,592,973
============
</TABLE>
The transaction was financed with proceeds from a public offering of the
Company's securities, a preferred stock financing, a bridge financing and the
establishment of a credit facility with Bank One, Texas. The public offering
and the preferred stock financing, generated net proceeds of $17,216,000. The
remaining purchase price was paid out of the proceeds from the Bank One, Texas
Credit Facility. The acquisition was accounted for under the purchase method
and, accordingly, results of operations of the acquired operations are included
in the Company's results of operations since the date of acquisition.
NOTE 4. FINANCING ACTIVITIES
BANK ONE LOAN - Effective January 30, 1996, the Company entered into an
$11 million revolving loan facility with Bank One Texas. The proceeds of the
borrowing were used to finance a portion of the purchase price of the Buttonwood
Acquisition , and to repay outstanding indebtedness to Stratum Group, L.L.C.
("Stratum"). The amount outstanding on the Bank One Loan was $10,557,000 at
March 31, 1996.
The terms of the Bank One Loan provide for principal reduction payments at
the rate of $185,000 per month, plus interest, commencing the first month after
the borrowing is incurred with all outstanding principal and interest due and
payable three years from the initial borrowing date. Interest is payable at the
option of the Company, either at the rate of 1% over Bank One's base rate or up
to 3.75% (based on the principal balance outstanding), over the rate for
borrowed dollars by the lending bank in the London Interbank Market. The
indebtedness is collateralized by first liens on all of the Company's oil and
gas properties, including those acquired from Buttonwood. The loan agreement
relating to the loan facility includes various affirmative and negative
covenants including, among others, the requirements that the Company maintain
certain ratios of current assets to current liabilities, and debt service
coverage. The loan agreement also established an amount of minimum tangible net
worth and places a limitation on annual selling, general and administrative
expenses. Material breaches of these or other covenants which are not cured or
waived could result in this indebtedness becoming immediately due and payable
and empowering the lender to foreclose against the collateral for the loan.
STRATUM LOAN - On June 2, 1995, Gothic Texas entered into an agreement
with Stratum in which Stratum agreed to loan Gothic Texas a maximum aggregate of
$8,131,500, of which only $6,756,500 was drawn and was used to complete the
Johnson Ranch Acquisition. At January 30, 1996 the amount outstanding was
$6,575,687. On that date the Company, with proceeds from its new credit
facility, paid Stratum in full and terminated its loan agreement with them.
This transaction resulted in a loss on extinguishment of debt of $1,432,973.
<PAGE>
Effective January 30, 1996 Quest Capital Corporation ("Quest"), converted
$1,290,000 of its $1,850,000 note into 1,290 shares of the Company's 7 1/2%
Cumulative Convertible Preferred Stock. The remaining $560,000 of indebtedness
and $265,000 of accrued interest and other amounts due Quest were converted into
a subordinated note in the principal amount of $825,000 which was paid by the
Company on March 13, 1996.
BRIDGE FINANCING - A $1,000,000 note owing to Quest, Epoch Capital
Corporation and another lender , along with accrued interest, was paid, on
January 30, 1996 at the closing of the public offering by the Company.
PUBLIC OFFERING - The Company completed a public offering of 2,545,000
Units at a price of $6.00 per Unit. Each Unit consisted of three shares of the
Company's $.01 par value common stock and three redeemable common stock purchase
warrants, each redeemable for one share of common stock at $2.40 per share. The
offering netted the Company approximately $12,970,000, which, together with the
proceeds from the credit facility and preferred stock financing, was applied to
the purchase of Buttonwood and the repayment of indebtedness.
PREFERRED STOCK OFFERING - On January 30, 1996 the Company completed a
preferred stock financing of 5,540 shares of the Company's 7 1/2% Cumulative
Convertible Preferred Stock. The financing included 1,290 shares issued to
Quest in exchange for $1,290,000 principal amount of a note. The remaining 4,250
shares were sold for an aggregate cash price of $4,250,000. The 5,540 shares of
7 1/2% Cumulative Convertible Preferred Stock issued are convertible commencing
December 31, 1996, into shares of the Company's Common Stock at a conversion
price per share of Common Stock of $2.00, if calculated as of March 31, 1996.
On the basis of the above mentioned conversion price, an aggregate of 2,770,000
shares of Common Stock would be issuable on conversion.
NOTE 5. SUBSEQUENT EVENTS
ADDITIONAL ACQUISITIONS - Subsequent to the quarter ending March 31,
1996, the Company signed a purchase agreement to acquire from Comstock
Resources, Inc. ("Comstock"), its interest in 164 wells, located primarily in
Oklahoma and Arkansas, of which 71 will be operated by the Company. The
purchase price is $6.6 million, subject to any closing adjustments.
Additionally, the Company has signed a letter of intent to acquire
Stratum's 7% royalty interest in the Johnson Ranch properties which was assigned
to it as part of the Johnson Ranch Acquisition in consideration for the
financing provided. The purchase price is $800,000. In addition, the Company
has agreed to reduce to $3.25 per share the exercise price of the warrants to
purchase 1,000,000 shares of common stock issued to Stratum in consideration for
providing the Johnson Ranch Acquisition financing. Prior to such amendment, the
warrants were exercisable at $3.50 per share with respect to 500,000 shares and
$4.50 per share with respect to 500,000 shares.
The Company intends to fund these acquisitions with an anticipated increase
in its Bank One Credit Facility to approximately $17 million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The following is management's discussion and analysis of certain
significant factors which have affected the Company's earnings, financial
condition and liquidity during the periods included in the accompanying
Consolidated Financial Statements.
Commencing in the last quarter of 1994, the Company redirected its business
efforts toward acquiring natural gas and oil reserves and the production,
development and exploitation of those reserves. On November 30, 1994, the
Company sold the outstanding stock of its wholly owned subsidiary, Pike County
Dispatch, Inc. On January 19, 1995, the Company completed its first acquisition
of oil and gas reserves.
On January 30, 1996, the Company completed the following transactions: (i)
it completed the acquisition of Buttonwood Energy Corporation (the "Buttonwood
Acquisition"); (ii) it borrowed $11 million pursuant to a credit facility
(the "Credit Facility") entered into with a bank; (iii) it completed the
public sale of securities (the "Offering") yielding net proceeds of
approximately $12,970,000; and (iv) it sold 5,540 shares of 7 1/2% Cumulative
Preferred Stock (the "Preferred Stock Financing") for aggregate consideration of
$5,540,000 inclusive of $1,290,000 principal amount of a note of the Company
exchanged for shares.
RESULTS OF OPERATIONS
- - ---------------------
Revenues were $1,770,586 for the three months ended March 31, 1996, as
compared to $140,829 for the same period ended March 31, 1995. This increase is
the result of acquisitions of oil and gas properties made by the Company
described above. Higher prices for oil and gas sales also contribute to the
increase. Oil and gas revenues for the period ended March 31, 1996 were
$1,608,216, with $676,550 coming from oil sales and $931,666 from gas sales.
Oil sales were based on the sale of 35,807 barrels at an average price of $18.89
per barrel. Gas sales were based on the sale of 494,401 mcf at an average
price of $1.88 per mcf.
The Company incurred lease operating expenses in the three months ended
March 31, 1996 of $883,097. This compares to $86,469 for the same period in
1995. This increase is also a result of the acquisitions completed since
January 1995.
Depletion, depreciation and amortization expense increased to $534,370 for
the three months ended March 31, 1996 from $60,900 for the same period in the
prior year. Depletion on the oil and gas properties amounted to $515,000 for
the three months ended March 31, 1996 and $60,000 for the comparable period in
1995.
Selling, general and administrative costs were $406,307 for the three
months ended March 31, 1996, as compared to $232,934 for the three months ended
March 31, 1995. The major reason for this increase is the addition of personnel
and related costs due to acquisitions made since the quarter ending March 31,
1995. The increase also includes some one-time costs related to the completion
of the Buttonwood transaction. The Company also recorded a $5,050,000 full cost
ceiling write-down on its oil and gas properties at March 31, 1996.
<PAGE>
Interest and financing costs increased $272,235, to $321,545 for the three
months ended March 31, 1996 as compared to the same period in 1995. The
increase is the result of interest costs related to the financing used by the
Company to acquire oil and gas properties.
The Company recorded an extraordinary loss of $1,432,973 on the early
extinguishment of debt during the quarter ended March 31, 1996, with the payoff
of the Stratum loan. The Company also recognized $69,250 in preferred dividends
on its 7 1/2% cumulative preferred stock during the period.
CAPITAL RESOURCES AND LIQUIDITY
- - -------------------------------
GENERAL
- - -------
The Company's capital requirements relate to the acquisition, exploration,
enhancement, development and operation of oil and gas producing properties. In
general, because oil and gas reserves the Company has acquired and intends to
acquire are depleted by production over time, the success of its business
strategy is dependent upon a continuos acquisition, exploitation, enhancement,
development and operation program. In order to achieve profitability and
generate cash flow, the Company will be dependent upon acquiring or developing
additional oil and gas properties or entering into joint oil and gas well
development arrangements. The Company will continue to require access to debt
and equity capital or the availability of joint venture development
arrangements, among other possible sources, to pursue its business strategy of
additional property acquisition and development. The Company has no present
arrangements to raise additional capital from the sale of its securities or to
enter into joint development arrangements and no assurance can be given that the
Company will be able to obtain additional capital or enter into joint venture
development arrangements on satisfactory terms to implement the Company's
business strategy. The Company has funded its recent capital needs through the
issuance of capital stock and borrowings. Without raising additional capital or
entering into joint oil and gas well development arrangements, the Company will
be unable to acquire additional producing oil and gas properties and its ability
to develop its existing oil and gas properties will be limited to the extent of
the available cash flow. No assurance can be given as to the availability or
terms of any such additional capital or joint development arrangements or that
such terms as are available may not be dilutive to the interests of the
Company's stockholders.
At March 31, 1996 the Company had a cash position of $1,588,320 and a
working capital deficit of $1,618,198.
ACQUISITION FINANCING
- - ---------------------
Under the terms of the Buttonwood Acquisition agreement, which was
completed on January 30, 1996, the Company paid $17,912,500, in consideration
for the acquisition, net of a $1,000,000 deposit paid in 1995 and charged to
expense.
The Bank One Credit Facility currently enables the Company to borrow up to
$11 million. The proceeds of the borrowing were used on January 30, 1996 to
finance a portion of the purchase price for the Buttonwood Acquisition and repay
outstanding indebtedness. The terms currently provide for amortization payments
at the rate of $185,000 per month commencing February 1, 1996, with all
outstanding principal and interest due and payable three years from the initial
borrowing date.
<PAGE>
Interest is payable, at the option of Company, either at the rate of 1% over the
lending bank's base rate or up to 3.75% (based on the principal balance
outstanding) over the rate for borrowed dollars by the lending bank in the
London Interbank market. The indebtedness is collateralized by first liens on
all of the Company's oil and gas properties. The loan agreement relating to the
Credit Facility includes various affirmative and negative covenants, including,
among others, the requirements that the Company (i) maintain a ratio of current
assets to current liabilities, as defined, of not less than 1. 0 to 1.0, (ii)
maintain a debt service coverage ratio of net cash flow per quarter to required
quarterly reduction of indebtedness of less than 1.10 to 1.0, (iii) maintain
minimum tangible net worth at the end of each fiscal quarter of $10,250,000,
plus certain percentages of net income and proceeds received from the sale of
securities, and (iv) maintain selling, general and administrative expenses per
quarter not in excess of the lesser of $1,200,000 or 25% of consolidated net
revenues. Material breaches of these or other covenants which are not cured or
waived could result in a default under the loan agreement resulting in this
indebtedness becoming immediately due and payable and empowering the lender to
foreclose against the collateral for the loan.
Pursuant to the Preferred Stock Financing, the Company issued and sold
5,540 shares of its 7 1/2% Cumulative Convertible Preferred Stock for an
aggregate consideration of $5,540,000, of which $4,250,000 was paid in cash, and
$1,290,000 was paid by Quest by exchange of $1,290,000 of outstanding principal
amount of indebtedness held by Quest for 1,290 shares. The proceeds were used
by the Company, together with the net proceeds from the offering and the Credit
Facility, for the balance of the purchase price of the Buttonwood Acquisition
and to repay indebtedness and expenses of the 1996 Transactions. The 5,540
shares of 7 1/2% Cumulative Convertible Preferred Stock are convertible,
commencing December 31, 1996, into shares of the Company's Common Stock at a
conversion price per share of Common Stock equal to the lesser of (i) $2.00 or
(ii) a price equal to the average of the closing prices of the Company's Common
Stock during the 30 business days prior to the day the shares are converted less
a discount of 12 1/2%. The number of shares of Common Stock to be issued on
conversion is determined by multiplying the number of shares of 7 1/2%
Cumulative Convertible Preferred Stock to be converted by $1,000 and dividing
the result by the conversion price in effect. The shares pay a cumulative
preferred dividend of 7 1/2% of the stated value per annum payable semi-
annually. The shares of 7 1/2% Cumulative Convertible Preferred Stock have no
voting rights.
After reflecting the exchange of $1,290,000 principal amount of
indebtedness for 1,290 shares of 7 1/2% Cumulative Convertible Preferred Stock
in the Preferred Stock Financing, the remaining $560,000 of principal and
accrued interest of $173,000 owing to Quest on a note, and other obligations
owing to Quest aggregating $92,000 were replaced at the closing of the Preferred
Stock Financing with a new subordinated note in the principal amount of $825,000
bearing interest at 7 1/2% per annum, due, together with all accrued interest
thereon, ten years from the date it is issued. The $825,000 note was repaid on
March 13, 1996.
ADDITIONAL ACQUISITIONS - Subsequent to the quarter ending March 31,
1996, the Company signed a purchase agreement to acquire from Comstock
Resources, Inc. ("Comstock"), its interest in 164 wells, located primarily in
Oklahoma and Arkansas, of which 71 will be operated by the Company. The
purchase price is $6.6 million, subject to any closing adjustments.
<PAGE>
Additionally, the Company has signed a letter of intent to acquire
Stratum's 7% royalty interest in the Johnson Ranch properties which was assigned
to it as part of the Johnson Ranch Acquisition in consideration for the
financing provided. The purchase price is $800,000. In addition, the Company
has agreed to reduce to $3.25 per share the exercise price of the warrants to
purchase 1,000,000 shares of common stock issued to Stratum in consideration for
providing the Johnson Ranch Acquisition financing. Prior to such amendment, the
warrants were exercisable at $3.50 per share with respect to 500,000 shares and
$4.50 per share with respect to 500,000 shares.
The Company intends to fund these acquisitions with an anticipated increase
in its Bank One Credit Facility to approximately $17 million.
CASH FLOW
- - ---------
Net cash used in operating activities increased to $430,495 for the three
months ended March 31, 1996 as compared to net cash used of $351,590 for same
period in 1995. This was primarily a result of the net loss of $3,865,159, the
full cost ceiling write-down of $2,057,453 and the loss on early extinguishment
of debt of $1,432,973 and net changes in operating assets and liabilities.
The Company used $17,611,381 of net cash in investing activities for the
first quarter of 1996 compared with $3,241,927 for the same period in 1995.
This was due to the acquisition of Buttonwood, net of cash acquired, for
$17,592,973, and oil and gas well enhancements in the amount of $126,431 and
other producing property acquisitions of $220,939.
Net cash provided by financing activities for the quarter ended March 31,
1996 was $19,472,637 compared to $3,147,000 provided in 1995. During the
quarter ended March 31, 1996 the Company received proceeds from long-term debt
of $11,000,000, proceeds from the issuance of common stock of $13,141,368 and
proceeds from the issuance of preferred stock of $3,997,430. The Company also
used funds of $8,473,258 to pay short and long-term debt during the quarter.
CAUTIONARY STATEMENT - Reference is made to the Cautionary Statement for
------------------------
Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation
- - -----------------------------------------------------------------------------
Reform Act of 1995 contained in the Company's Annual Report on Form 10-KSB for
- - ------------------
the year ended December 31, 1995, which Cautionary Statement is incorporated
herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOTHIC ENERGY CORPORATION
DATE: MAY 13, 1996 BY: /S/ MICHAEL PAULK
------------------------------------------
MICHAEL PAULK,
PRESIDENT, CHIEF EXECUTIVE OFFICER
DATE: MAY 13, 1996 BY: /S/ ANDREW MCGUIRE
------------------------------------------
ANDREW MCGUIRE,
CONTROLLER
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
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0
277
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<EPS-PRIMARY> (.41)
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</TABLE>
