<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report - February 18, 1997
GOTHIC ENERGY CORPORATION
Commission file number 0-19753
An Oklahoma Corporation IRS Employer No. 22-2663839
5727 S. Lewis Ave.
Tulsa, Oklahoma 74105-7148
Telephone Number (918) 749-5666
AMENDMENT NO. 1
The undersigned hereby amends the following items, financial statements,
exhibits or other portions of its Current Report on Form 8-K dated February 18,
1997, as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits
<PAGE>
FORM 8-K/A
GOTHIC ENERGY CORPORATION
TABLE OF CONTENTS
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of Business Acquired
Set forth below are the financial statements appearing in this report:
Page in
Norse, Horizon and Huffman Properties This Report
----------------------------------------------------------------------
Report of Independent Accountants F-1
Historical Schedule of Gross Revenues
and Direct Operating Expenses of the
Norse, Horizon and Huffman Properties for the Years Ended
December 31, 1996 and 1995 F-2
Notes to the Historical Schedule of Gross
Revenues and Direct Operating
Expenses of the Norse, Horizon and Huffman Properties F-3
(b) Pro Forma Financial Information - Gothic Energy Corporation
Set forth below is the pro forma financial
information appearing in this report:
Unaudited Pro Forma Consolidated Condensed
Balance Sheet as of December 31, 1996 P-1
Unaudited Pro Forma Consolidated Condensed
Statement of Operations for the Year Ended
December 31, 1996 P-2
Notes to Unaudited Pro Forma Consolidated
Condensed Financial Statements P-3
(c) Exhibits - Consent of Independent Accountants
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Gothic Energy Corporation
We have audited the accompanying historical schedule of gross revenues and
direct operating expenses of the Norse and Horizon Properties, as defined in
Note 1, (the "Schedule") for the year ended December 31, 1996. The Schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion on the Schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Schedule is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Schedule. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the Schedule. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying historical schedule of gross revenues and direct operating
expenses of the Norse and Horizon Properties was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (for inclusion in the Form 8-K of Gothic Energy Corporation dated
February 18, 1997) as described in Note 2 and is not intended to be a complete
presentation of the Norse and Horizon Properties' revenues and expenses.
In our opinion, the Schedule referred to above presents fairly, in all
material respects, the gross revenues and direct operating expenses described in
Note 2 of the Norse and Horizon Properties for the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
April 30, 1997
F-1
<PAGE>
GOTHIC ENERGY CORPORATION
HISTORICAL SCHEDULE OF GROSS REVENUES
AND DIRECT OPERATING EXPENSES OF THE
NORSE, HORIZON AND HUFFMAN PROPERTIES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NORSE HORIZON HUFFMAN NORSE HORIZON HUFFMAN
----- ------- ------- ----- ------- -------
(UNAUDITED)
Gross revenues $3,392,000 $2,915,000 $1,156,000 $2,094,000 $2,011,000 $711,000
Direct lease operating
expenses 128,000 549,000 134,000 102,000 736,000 61,000
Direct gas system expenses 2,166,000 - 593,000 1,368,000 - 374,000
---------- ---------- ---------- ---------- ---------- --------
Excess of gross revenues over
direct expenses $1,098,000 $2,366,000 $ 429,000 $ 624,000 $1,275,000 $276,000
========== ========== ========== ========== ========== ========
</TABLE>
The accompanying notes are
an integral part of this schedule.
F-2
<PAGE>
GOTHIC ENERGY CORPORATION
NOTES TO THE HISTORICAL SCHEDULE OF GROSS REVENUES
AND DIRECT OPERATING EXPENSES OF THE
NORSE, HORIZON AND HUFFMAN PROPERTIES
1. THE PROPERTIES
On December 11, 1996 the Company entered into a purchase and sale
agreement with Norse Exploration, Inc., and Norse Pipeline, Inc.
(collectively, "Norse"), to acquire various working interests in 11 oil and
gas producing properties and a 40.09% interest in the related Sycamore Gas
System (the "Sycamore System"), an Oklahoma gathering system, processing
plant and storage facility. The oil and gas wells and the gathering system
are located in the Springer Field in Carter County, Oklahoma. The total
purchase price was $10,750,000, plus two-year warrants to purchase 200,000
shares of the Company's Common Stock at a per share exercise price of
$2.50. The estimated fair value of such warrants at the date of acquisition
was approximately $254,000. The Company paid a deposit of $1,075,000 toward
the purchase price in December 1996.
The Company also entered into a purchase and sale agreement on January
22, 1997, with Horizon Gas Partners, L.P. and HSRTW, Inc. (collectively,
"Horizon"), to acquire various working and royalty interests in
approximately 100 oil and gas producing properties. The producing
properties are located in Major and Blaine counties of Oklahoma. The
purchase price was $10,000,000.
The Company also on December 13, 1996 entered into a purchase and sale
agreement with H. Huffman & Company ("Huffman"), an Oklahoma limited
partnership, to acquire various working interests in 13 oil and gas
producing properties and an additional 10.97% interest in the Sycamore
System. The oil and gas wells are located in the same producing area as
the properties acquired from Norse. The total purchase price for the assets
acquired was $3,950,000, of which the Company paid a deposit of $287,500
toward the purchase price in December 1996.
The effective date of all three acquisitions was January 1, 1997, with
the formal closing of the transactions occurring on February 18, 1997.
2. BASIS OF PRESENTATION
The schedule presents the historical gross revenues and direct
operating expenses related to the properties acquired. Expenses such as
depreciation, depletion and amortization, general and administrative
expenses and income taxes have not been included in the schedule because
such costs have historically not been directly attributed to nor allocated
to the operations of these properties.
3. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
ESTIMATED PROVED RESERVES - Proved reserves are estimated quantities of
crude oil and natural gas which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Proved
developed reserves are those which are expected to be recovered through
existing wells with existing equipment and operating methods.
F-3
<PAGE>
GOTHIC ENERGY CORPORATION
NOTES TO THE HISTORICAL SCHEDULE OF GROSS REVENUES
AND DIRECT OPERATING EXPENSES OF THE
NORSE, HORIZON AND HUFFMAN PROPERTIES
3. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED), CONTINUED
Estimated quantities of proved oil and natural gas reserves acquired
from Norse, Horizon and Huffman at January 1, 1997 (the date at which the
most recent reserve report was available) were:
PROVED RESERVES: Oil (Bbls) 141,702
Gas (Mcf) 29,156,760
PROVED DEVELOPED
RESERVES: Oil (Bbls) 90,621
Gas (Mcf) 18,940,401
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS OF PROVED OIL AND
GAS RESERVES - The standardized measure of discounted future net cash flows
("SMOG") of the Norse, Horizon and Huffman Properties was calculated using
December 31, 1996 prices and costs, and year-end statutory tax rates,
adjusted for permanent differences, that relate to existing proved oil and
natural gas reserves. The SMOG for the acquired properties is as follows
(in thousands):
<TABLE>
<S> <C>
Future cash flows $ 94,108
Future production costs and development costs (18,690)
Future income tax expense (19,273)
---------
Future net cash flows 56,145
10% annual discount for estimated timing of
cash flows (24,330)
---------
Standardizing measure of discounted future
net cash flows relating to proved oil and
natural gas reserves $ 31,815
=========
</TABLE>
The process of estimating oil and gas reserves is complex, requiring
significant subjective decisions in the evaluation of available geological,
engineering, and economic data for each reservoir. The data for a given
reservoir may change substantially over time as a result of, among other
things, additional development activity, production history, and viability
of production under varying economic conditions; consequently, material
revisions to existing reserve estimates may occur in the near future.
Although every reasonable effort has been made to ensure that the reserve
estimates reported herein represent the most accurate assessment possible,
the significance of the subjective decisions required and variances in
available data for various reservoirs make these estimates generally less
precise than other estimates presented in connection with financial
statement disclosures.
F-4
<PAGE>
(B) PRO FORMA FINANCIAL INFORMATION - GOTHIC ENERGY CORPORATION
GOTHIC ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
---------- -------------------------------
GOTHIC ADJUSTMENTS COMBINED
--------------------------------------------------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 206,000 $ 137,000/(b)/ $ 343,000
Oil and gas receivable 2,802,000 - 2,802,000
Receivable from officers and employees 52,000 - 52,000
Assets held for sale 210,000 - 210,000
Other 79,000 - 79,000
----------- ----------- -----------
Total current assets 3,349,000 137,000 3,486,000
Property and equipment:
Oil and gas properties on full cost method 39,858,000 18,546,000/(a)/ 58,404,000
Gas gathering and processing system - 5,045,000/(a)/ 5,045,000
Equipment, furniture and fixtures 328,000 - 328,000
Accumulated depreciation, depletion
and amortization (3,636,000) - (3,636,000)
----------- ----------- -----------
Property and equipment, net 36,550,000 23,591,000 60,141,000
Other assets, net 1,567,000 1,607,000/(c)/ 3,174,000
----------- ----------- -----------
Total assets $41,466,000 $25,335,000 $66,801,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable trade 1,337,000 - 1,337,000
Revenues payable 1,978,000 - 1,978,000
Accrued liabilities 512,000 - 512,000
Current portion long-term debt 5,928,000 14,320,000/(b)/ 20,248,000
----------- ----------- -----------
Total current liabilities 9,755,000 14,320,000 24,075,000
Long-term debt 15,854,000 10,104,000/(b)/ 25,958,000
Gas imbalance liability 1,025,000 - 1,025,000
Stockholder's equity:
Preferred stock, par value $.05,
authorized 500,000 shares; issued and
outstanding 5,540 shares 1,000 - 1,000
Common stock, $.01 par value,
authorized 100,000,000 shares; issued and
outstanding 12,381,857 shares (14,913,226
pro forma shares) 124,000 2,000/(d)/ 126,000
Additional paid in capital 32,530,000 909,000/(d)/ 33,439,000
Accumulated deficit (17,823,000) - (17,823,000)
----------- ----------- -----------
Total stockholder's equity 14,832,000 911,000 15,743,000
----------- ----------- -----------
Total liabilities and stockholders' equity $41,466,000 $25,335,000 $66,801,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the unaudited
pro forma consolidated condensed financial statements.
P-1
<PAGE>
GOTHIC ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
----------------------------------------------------------- ---------------------------
GOTHIC NORSE/(f)/ HORIZON/(f)/ HUFFMAN/(f)/ ADJUSTMENTS COMBINED
------ ---------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Oil and gas sales $10,385,000 $3,392,000 $2,915,000 $1,156,000 - $17,848,000
Well operations 1,062,000 - - - 167,000/(e)/ 1,229,000
Interest and other income 68,000 - - - - 68,000
----------- ---------- ---------- ---------- ----------- -----------
Total revenues 11,515,000 3,392,000 2,915,000 1,156,000 167,000 19,145,000
Costs and expenses:
Lease operating expenses 4,807,000 128,000 549,000 134,000 - 5,618,000
Gas system expenses - 2,166,000 - 593,000 - 2,759,000
Depletion, depreciation
and amortization 2,856,000 - - - 1,609,000/(g)/ 4,465,000
General and
administrative expense 1,782,000 - - - - 1,782,000
Provision for impairment of
oil and gas properties 5,050,000 - - - - 5,050,000
Interest expense and
debt issuance costs 1,528,000 - - - 4,388,000/(h)/ 5,916,000
----------- ---------- ---------- ---------- ----------- -----------
Income (loss) before income taxes
and extraordinary item (4,508,000) 1,098,000 2,366,000 429,000 (5,830,000) (6,445,000)
Income tax benefit 2,993,000 - - - - 2,993,000
----------- ---------- ---------- ---------- ----------- -----------
Income (loss) before
extraordinary item $(1,515,000) 1,098,000 2,366,000 429,000 (5,830,000) (3,452,000)
Preferred dividend 381,000 - - - - 381,000
----------- ---------- ---------- ---------- ----------- -----------
Net income (loss) before
extraordinary item available
for common shares $(1,896,000) $1,098,000 $2,366,000 $ 429,000 $(5,830,000) $(3,833,000)
=========== ========== ========== ========== =========== ===========
Net income (loss) before
extraordinary item per common
share $ $(0.16) - $ (0.29)
=========== ===========
Weighted average shares
outstanding (both primary and
fully diluted) 11,663,117 1,595,057/(i)/ 13,258,174
=========== ========= ===========
</TABLE>
The accompanying notes are an integral part of the unaudited
pro forma consolidated condensed financial statements.
P-2
<PAGE>
GOTHIC ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
1. THE PROPERTIES
On December 11, 1996 the Company entered into a purchase and sale
agreement with Norse Exploration, Inc., and Norse Pipeline, Inc.
(collectively, "Norse"), to acquire various working interests in 11 oil and
gas producing properties and a 40.09% interest in the related Sycamore Gas
System (the "Sycamore System"), an Oklahoma gathering system, processing
plant and storage facility. The oil and gas wells and the gathering system
are located in the Springer Field in Carter County, Oklahoma. The total
purchase price was $10,750,000, plus two-year warrants to purchase 200,000
shares of the Company's Common Stock at a per share exercise price of
$2.50. The estimated fair value of such warrants at the date of acquisition
was approximately $254,000. The Company paid a deposit of $1,075,000 toward
the purchase price in December 1996.
The Company also entered into a purchase and sale agreement on January
22, 1997, with Horizon Gas Partners, L.P. and HSRTW, Inc. (collectively,
"Horizon"), to acquire various working and royalty interests in
approximately 100 oil and gas producing properties. The producing
properties are located in Major and Blaine counties of Oklahoma. The
purchase price was $10,000,000.
The Company also on December 13, 1996 entered into a purchase and sale
agreement with H. Huffman & Company ("Huffman"), an Oklahoma limited
partnership, to acquire various working interests in 13 oil and gas
producing properties and an additional 10.97% interest in the Sycamore
System. The oil and gas wells are located in the same producing area as
the properties acquired from Norse. The total purchase price for the assets
acquired was $3,950,000, of which the Company paid a deposit of $287,500
toward the purchase price in December 1996.
The effective date of all three acquisitions was January 1, 1997, with
the formal closing of the transactions occurring on February 18, 1997.
Financing for the acquisitions was provided primarily by bank
borrowings. On February 17, 1997, the Company and Bank One, Texas, N.A.,
entered into a Restated Loan Agreement (the "Credit Facility") which
currently enables the Company to borrow, from time to time and, subject to
meeting certain borrowing base requirements and other conditions, a maximum
aggregate of $75,000,000 as of February 17, 1997. The current maximum
aggregate available to be borrowed under the Credit Facility is $44,000,000
and is comprised of a $32,000,000 borrowing availability (the "borrowing
base") based on the Company's oil and gas reserve reports, a $10,000,000
special advance facility (the "Special Advance Facility") and a $2,000,000
special drilling facility. On February 18, 1997, the Company drew down
both the borrowing base and the Special Advance Facility for a total of
$41,668,000. These funds were used to repay all existing indebtedness then
outstanding owing to the bank in the amount of $21,264,000, to finance the
cash consideration paid for the three February 18, 1997 acquisitions
discussed above which aggregated $19,404,000, and to pay a $1,000,000 loan
fee to Bank One. An aggregate of $1,291,295 of the previously paid
deposits against the purchase price for the Norse and Huffman acquisitions
had been borrowed from the bank in December 1996 against the Company's
borrowing availability at the time.
P-3
<PAGE>
GOTHIC ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
The remaining funds necessary to complete the acquisitions were
provided by loans to the Company from two investors. On February 18,
1997, such persons loaned to the Company the aggregate sum of $4,500,000
represented by the Company's promissory notes. Of the aggregate amount,
$2,500,000 bears interest at 5% per annum and matures on April 18, 1997,
(the lender has verbally agreed to extend the maturity of this note to
July 31, 1997) with the remaining $2,000,000 bearing interest at 12% per
annum and maturing on October 31, 1997. In the event the principal and
accrued interest is not paid when due, such amount is automatically
converted into a number of shares of the Company's Common Stock determined
by dividing such amount by a sum equal to 75% of the closing bid price for
the Company's Common Stock on the five (5) days prior to the maturity date,
with respect to the $2,500,000 obligation, and on the maturity date with
respect to the $2,000,000 obligation. As additional consideration for
making the loan, the investors also purchased at a price of $.01 per share
a total of 250,000 shares of the Company's common stock. The fair value of
the Company's common stock was $2.63 per share on the date such shares were
issued.
2. BASIS OF PRESENTATION
The accompanying unaudited Pro Forma Consolidated Condensed Balance
Sheet and Statement of Operations are presented to reflect the consummation
of the Norse, Horizon and Huffman Property acquisitions in January 1997 as
if these transactions had occurred as of December 31, 1996 for purposes of
the balance sheet and at January 1, 1996, for purposes of the statement of
operations, and may not be indicative of the results that would have
occurred if the acquisitions had been effective on the dates indicated or
of the results that may be obtained in the future. The accompanying
unaudited Pro Forma Consolidated Condensed Balance Sheet and Statement of
Operations should be read in conjunction with the financial statements and
notes to consolidated financial statements of the Registrant for the year
ended December 31, 1996, and the Historical Schedule of Gross Revenues and
Direct Operating Expenses of the Norse, Horizon and Huffman Properties for
the years ended December 31, 1996 and 1995.
3. PRO FORMA ADJUSTMENTS
The accompanying unaudited Pro Forma Consolidated Condensed Balance
Sheet and Statement of Operations include the following adjustments:
(a) Adjustment to reflect the Norse acquisition for $9,929,000, net of the
down payment, the Horizon acquisition for $10,000,000, and the Huffman
acquisition for $3,662,000, net of the down payment, as discussed in
Note 1.
(b) Adjustment to debt to reflect the Company's restated Credit Facility
with Bank One and the Bridge Financing used to complete the Norse,
Horizon and Huffman acquisitions. Includes $137,000 of excess cash
from the loans.
P-4
<PAGE>
GOTHIC ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
3. PRO FORMA ADJUSTMENTS (CONTINUED)
(c) Adjustment to deferred loan costs to reflect $950,000 in fees
associated with the Bank One Credit Facility and $657,000 as the
estimated fair value of the 250,000 shares of common stock issued as
part of the Bridge Financing.
(d) Adjustment to reflect the $657,000 as the estimated fair value of the
250,000 shares of Common Stock issued as part of the Bridge Financing
and the $254,000 as the estimated fair value of the warrants to
purchase 200,000 shares of Common Stock issued as part of the Norse
Acquisition.
(e) Adjustment to well operations revenue to reflect additional revenues
as a result of operating approximately 30 wells acquired from Horizon.
(f) Oil and natural gas revenues and operating costs represent historical
revenues and direct operating expenses related to the properties
acquired from Norse, Horizon and Huffman.
(g) Depreciation, depletion and amortization ("DD&A") was calculated using
a DD&A rate based on production for 1996, and estimated acquired
reserves at the beginning of the year, under the full cost method of
accounting for oil and gas properties and the straight line method for
the related Sycamore System.
(h) Adjustment to interest expense to reflect debt incurred to purchase
the properties and amortization of discounts and debt issuance costs.
This pro forma adjustment includes $1,500,000 of imputed discount
amortization expense related to the possible conversion of the
$4,500,000 convertible debt. The Company intends to repay this debt
prior to conversion, but currently does not have a credit facility in
place to fund these payments.
(i) To adjust for 250,000 shares issued as additional debt costs on debt
incurred to purchase properties and 1,345,057 weighted average shares
assumed outstanding related to the $4,500,000 convertible debt. The
Company intends to repay the $4,500,000 in debt prior to conversion
into the Company's Common Stock.
P-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GOTHIC ENERGY CORPORATION
APRIL 30, 1997 BY: /S/ MICHAEL PAULK
----------------------------------------
MICHAEL PAULK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
S-1
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Form S-3 of Gothic Energy Corporation (File No. 333-23239) of our report dated
April 30, 1997 on our audit of the historical schedule of gross revenues and
direct operating expenses of the Norse and Horizon Properties for the year ended
December 31, 1996, which report is included in this Form 8-K/A.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
April 30, 1997
