<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
January 23, 1998
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
The undersigned hereby amends the following items, financial statements,
exhibits or other portions of its Current Report on Form 8-K dated
January 23, 1998, 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
Amoco Properties This Report
--------------------------------------------------------------------
Report of Independent Accountants F-1
Historical Schedule of Gross Revenues
and Direct Lease Operating Expenses of the
Amoco Properties for the Years Ended
December 31, 1996 and 1997 F-2
Notes to the Historical Schedule of Gross
Revenues and Direct Lease Operating
Expenses of the Amoco 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 Combined Condensed Statement
of Operations for the Year Ended December 31, 1997 P-1
Unaudited Pro Forma Combined Condensed Balance
Sheet as of December 31, 1997 P-2
Notes to the Unaudited Pro Forma Combined Condensed
Financial Statements P-3
(c) Exhibits - Consent of Independent Accountants
<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 8, 1998 BY: /S/ MICHAEL PAULK
----------------------------
MICHAEL PAULK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
S-1
<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 lease operating expenses of the Amoco Properties, as defined in Note 1,
(the "Schedule") for the years ended December 31, 1996 and 1997. The Schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on the Schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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
audits provide a reasonable basis for our opinion.
The accompanying historical schedule of gross revenues and direct lease
operating expenses of the Amoco 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/A of Gothic Energy dated January 23,
1998, as described in Note 2 and is not intended to be a complete presentation
of Amoco Properties' revenues and expenses.
In our opinion, the Schedule referred to above presents fairly, in all material
respects, the gross revenues and direct lease operating expenses described in
Note 2 of the Amoco Properties for the years ended December 31, 1996 and 1997,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
March 4, 1998
F-1
<PAGE>
GOTHIC ENERGY CORPORATION
HISTORICAL SCHEDULE OF GROSS REVENUES AND DIRECT LEASE
OPERATING EXPENSES OF THE AMOCO PROPERTIES
(In thousands)
FOR THE YEAR ENDED
DECEMBER 31,
-----------------
1996 1997
------- ------
Gross revenues............................................. $50,005 $57,475
Direct lease operating expenses............................ 10,051 9,295
------ ------
Excess of gross revenues over
direct lease operating expenses .......................... $39,954 $48,180
======= ======
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 LEASE OPERATING EXPENSES
OF THE AMOCO PROPERTIES
1. THE PROPERTIES
On January 23, 1998, Gothic Energy Corporation ("Gothic") purchased from
Amoco Production Company, a subsidiary of Amoco Corporation, natural gas
producing properties located in the Anadarko and Arkoma basins of Oklahoma (the
"Amoco Acquisition"). The consideration paid consisted of $237.5 million in
cash, subject to certain post-closing adjustments, warrants to purchase 1.5
million shares of Gothic's common stock exercisable at $3.00 per share, which
were valued by Gothic at $1.2 million, and the transfer of certain producing
properties owned by Gothic having a value of less than $1.8 million. The
purchase had an effective date of December 1, 1997. The Amoco Acquisition
involved interests in 821 gross wells, including operation of 291 of the
properties and approximately 240.0 Bcfe of proved reserves with a PV-10 of
approximately $230.1 million as of December 31, 1997.
2. BASIS OF PRESENTATION
The schedule presents the historical gross revenues and direct lease
operating expenses related to the productive properties acquired. Expenses such
as depreciation, depletion and amortization, general and administrative expenses
and income taxes have not been included in the schedule.
3. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
ESTIMATED QUANTITIES--Oil and natural gas reserves cannot be measured
exactly. Estimates of oil and natural gas reserves require extensive judgments
of reservoir engineering data and are generally less precise than other
estimates made in connection with financial disclosures.
Proved reserves are those quantities which, upon analysis of geological
and engineering data, appear with reasonable certainty to be recoverable in the
future from known oil and natural gas reservoirs under existing economic and
operating conditions. Proved developed reserves are those reserves which can be
expected to be recovered. Undeveloped reserves are those reserves which are
expected to be recovered from new wells on undrilled acreage or from existing
wells where a relatively major expenditure is required.
Estimated quantities of proved oil and natural gas reserves acquired
from Amoco at December 31, 1997 (the date at which the most recent reserve
report was available) were (in thousands):
Proved Reserves: Oil (Mbbls) 1,361
Gas (Mmcf) 231,795
Proved Developed
Reserves: Oil (Mbbls) 980
Gas (Mmcf) 182,332
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS OF PROVED OIL
AND GAS RESERVES ("SMOG")--Estimates of oil and natural gas reserves require
extensive judgments of reservoir engineering data as explained above. Assigning
monetary values to such estimates does not reduce the subjectivity and changing
nature of such reserve estimates. Indeed, the uncertainties inherent in the
disclosure are compounded by applying additional estimates of the rates and
timing of production and the costs that will be incurred in developing and
producing the reserves. The information set forth herein is therefore subjective
and, since judgments are involved, may not be comparable to estimates submitted
by other oil and natural gas producers. In addition, since prices and costs do
not remain static and no price or cost escalations or de-escalations have been
considered, the results are not necessarily indicative of the estimated fair
market value of estimated proved reserves nor of estimated future cash flows.
Accordingly, these estimates are expected to change as future information
becomes available.
F-3
<PAGE>
GOTHIC ENERGY CORPORATION
NOTES TO THE HISTORICAL SCHEDULE OF
GROSS REVENUES AND DIRECT LEASE OPERATING EXPENSES
OF THE AMOCO PROPERTIES--(CONTINUED)
3. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)--CONTINUED
Future net cash inflows are based on the future production of proved
reserves of crude oil and natural gas as estimated by independent petroleum
engineers by applying current prices of oil and natural gas to estimated future
production of proved reserves. Prices used in determining future cash inflows
for oil and natural gas as of December 31, 1997, were $17.30 per barrel and
$2.30 per mcf, respectively.
Future net cash flows are then calculated by reducing such estimated
cash inflows by the estimated future expenditures (based on current costs) to be
incurred in developing and producing the proved reserves and by the estimated
future income taxes. Estimated future income taxes are computed by applying the
appropriate year-end tax rate to the future pretax net cash flows relating to
the estimated proved oil and gas reserves. The estimated future income taxes
give effect to permanent differences and tax credits and allowances.
The SMOG is based on criteria established by Financial Accounting
Standards Statement No. 69, "Accounting for Oil and Gas Producing Activities"
and is not intended to be a "best estimate" of the fair value of the acquired
oil and gas properties. For this to be the case, forecasts of future economic
conditions, varying price and cost estimates, varying discount rates and
consideration of other than proved reserves (i.e., probable reserves), would
have to be incorporated into the valuations.
Included in the estimated standardized measure of future cash flows are
certain capital projects. Gothic estimates the capital required to develop
undeveloped oil and natural gas reserves relating to the acquired Amoco
Properties over the next two years to be approximately $28.2 million, including
$14.7 million during the year ending December 31, 1998. The SMOG for the
acquired properties is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Future cash flows............................................................... $ 550,642
Future production costs and development costs................................... (144,341)
Future income tax expense....................................................... (64,144)
---------
Future net cash flows........................................................... 342,157
10% annual discount for estimated timing of cash flows.......................... (148,406)
---------
Standardized measure of discounted future net cash flows relating to
proved oil and natural gas reserves............................................ $ 193,751
=========
</TABLE>
F-4
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION -- GOTHIC ENERGY CORPORATION
GOTHIC ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------- ----------------------
AMOCO ACQUISITION
----------------------
1997
GOTHIC ACQUISITIONS(a) AMOCO(b) ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C>
Revenues:
Natural gas and oil
sales................. $17,418 $3,380 $56,809 $ -- $77,607
Gas system revenue..... 4,562 -- -- (4,562)(c) --
Well operations........ 1,283 301 745 2,329
------- ------ ------- ------- -------
Total revenues......... 23,263 3,681 57,554 (4,562) 79,936
------- ------ ------- ------- -------
Costs and expenses:
Lease operating
expense............... 6,860 1,019 9,424 -- 17,303
Gas system expense..... 3,501 -- -- (3,501)(c) --
Depreciation, depletion
and amortization...... 5,791 -- -- 25,994 (d) 31,785
General and
administrative
expense............... 2,318 -- -- 600 (e) 2,918
------- ------ ------- ------- -------
Operating income....... 4,793 2,662 48,130 (27,655) 27,930
------- ------ ------- ------- -------
Other income (expense):
Interest and
amortization of debt
issue costs........... (8,800) -- -- (24,194)(f) (32,994)
Interest and other
income................ 330 -- -- -- 330
------- ------ ------- ------- -------
Net other
income (expense)....... (8,470) -- -- (24,194) (32,664)
Income (loss) before
extraordinary item.... (3,677) 2,662 48,130 (51,849) (4,734)
------- ------ ------- ------- -------
Preferred dividends:
Cash.................. 264 264
Non cash.............. -- 5,180(g)
Amortization of
discount.............. -- 1,248(g)
------- --------
Income (loss) before
extraordinary item
available for common
shares................ $(3,941) $(11,426)
======= ========
Income (loss) before
extraordinary item per
common share.......... $ (0.28) $ (0.82)
======= ========
Weighted average shares
outstanding (both
basic and diluted).... 14,019 14,019
======= ========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
combined condensed financial statements.
P-1
<PAGE>
GOTHIC ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1997
(In thousands, except par value)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL -------------------------
GOTHIC ADJUSTMENTS COMBINED
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 16,722 $ 20,900 (1) $ 6,199
(6,850)(2)
187,909 (3)
(212,482)(4)
Available-for-sale
investments........... 406 -- 406
Natural gas and oil
receivables........... 3,200 (356)(5) 2,844
Receivable from
officers and
employees............. 82 -- 82
Other.................. 78 1,800 (3) 1,878
-------- --------- --------
Total current
assets.............. 20,488 (9,079) 11,409
-------- --------- --------
Property and equipment:
Natural gas and oil
properties on full
cost method:
Properties being
amortized............ 94,168 239,936 (4) 334,104
Unproved properties
not subject to
amortization......... 2,103 -- 2,103
Deposit for natural gas
and oil property
acquisition........... 23,750 (23,750)(4) --
Gas gathering and
processing system..... 5,404 467 (4) --
(5,404)(5)
(467)(5)
Equipment, furniture
and fixtures.......... 558 -- 558
Accumulated
depreciation,
depletion and
amortization.......... (9,456) 227 (5) (9,229)
-------- --------- --------
Property and equipment,
net................... 116,527 211,009 327,536
Other assets, net....... 1,360 2,975 (3) 7,407
3,072 (4)
Note receivable from
officer and director... 167 -- 167
-------- --------- --------
Total assets......... $138,542 $ 207,977 $346,519
======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ------------------------
GOTHIC ADJUSTMENTS COMBINED
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable and
accrued liabilities... $ 7,834 $ -- $ 7,834
Current portion of
long-term debt........ -- 82,000 (3) 78,500
(3,500)(5)
-------- -------- --------
Total current
liabilities........... 7,834 78,500 86,334
Long-term debt:
12 1/4% Senior Notes,
net................... 93,954 -- 93,954
Senior Secured Notes... -- -- --
Senior Secured Discount
Notes................. -- -- --
Existing Credit
Facility.............. 23,750 110,684 (3) 131,934
(2,500)(5)
-------- -------- --------
Total long-term debt,
net................... 117,704 108,184 225,888
Gas imbalance
liability............. 551 6,088 (4) 6,639
Series A redeemable
preferred stock, par
value $.05, 37,000
shares................ -- 20,900 (1) 33,909
13,950 (2)
(941)(6)
Stockholders' equity:
Series B preferred
stock, par value
$0.05, authorized
500,000 shares; issued
and outstanding -0-
and 50,000 shares..... -- -- --
Less: Unamortized
discount.............. -- -- --
Common stock, par value
$.01, authorized
100,000,000 shares;
issued and outstanding
16,261,640 shares..... 162 -- 162
Additional paid in
capital............... 36,043 1,155 (4) 38,139
941 (6)
Stockholder note
receivable............ (169) -- (169)
Accumulated deficit.... (23,462) (20,800)(2) (44,262)
Unrealized loss on
available-for-sale
investments........... (121) -- (121)
-------- -------- --------
Total stockholders'
equity................ 12,453 (18,704) (6,251)
-------- -------- --------
Total liabilities and
stockholders' equity.. $138,542 $207,977 $346,519
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
condensed financial statements.
P-2
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
NOTE 1--THE PROPERTIES
On January 23, 1998, Gothic purchased from Amoco, with an effective date of
December 1, 1997, various working interests in a total of 821 natural gas and
oil producing properties located in the Anadarko and Arkoma basins of
Oklahoma. Gothic operates 291 of the properties. The purchase price for the
properties acquired was $237.5 million in cash, subject to certain post-closing
adjustments, plus five-year warrants to purchase 1.5 million shares of
Gothic's Common Stock at a per share exercise price of $3.00. The estimated
fair value of the warrants at the date of acquisition was approximately $1.2
million. In addition, Gothic transferred certain properties to Amoco valued at
approximately $1.8 million.
NOTE 2--FINANCING
The $237.5 million purchase price for the Amoco Acquisition, together with
loan and consent fees totaling $27.7 million, was financed as follows: (i)
$216.4 million of borrowings under Gothic's credit facility with Bank One Texas,
N.A. (the "Credit Facility"), which included $156.4 million under a three-year
revolving loan and a $60.0 million bridge loan, (ii) $37.0 million in proceeds
from an offering of Gothic's Series A Preferred Stock and (iii) $11.8 million
from Gothic's working capital.
Gothic incurred $4.8 million in financing costs associated with the Credit
Facility, fees of $5.8 million paid in cash and $15.0 million paid in Series A
Preferred Stock and warrants for amendments to the terms of Gothic's 12 1/4%
Senior Notes which were issued in September 1997 and $2.1 million in offering
costs associated with the sale of 37,000 shares of Series A Preferred Stock.
NOTE 3--BASIS OF PRESENTATION
The accompanying unaudited pro forma combined condensed statements of
operations and the balance sheet are presented to reflect the consummation of
various acquisitions made by Gothic in 1997 (the "1997 Acquisitions"), as
discussed below, and the Amoco Acquisition and related financings, as if these
transactions had occurred at January 1, 1997 for purposes of the statement of
operations and as of December 31, 1997 for purposes of the balance sheet, and
may not be indicative of the results that would have occurred if the
transactions had been effective on the dates indicated or of the results that
may be obtained in the future. The accompanying unaudited pro forma combined
condensed statement of operations and balance sheet should be read in
conjunction with the historical consolidated financial statements and notes to
consolidated financial statements of Gothic for the year ended December 31,
1997, and the Historical Schedule of Gross Revenues and Direct Lease Operating
Expenses of the Amoco Properties for the year ended December 31, 1997.
Other 1997 acquisitions made by Gothic include the acquisition from two
affiliates of HS Resources, Inc. ("HS") of various working interests in oil and
natural gas properties in September 1997 (the "HS Acquisition") as well as the
acquisition of interests in oil and natural gas properties and in a gas
gathering system in February 1997 from Norse Exploration, Inc., and Norse
Pipeline, Inc., (the "Norse Acquisition") and from H. Huffman & Company (the
"Huffman Acquisition"), as well as the acquisition of interests in oil and gas
properties in February 1997 from Horizon Gas Partners, L.P. (the "Horizon
Acquisition").
NOTE 4--PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma combined condensed statement of
operations includes the following adjustments:
P-3
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(a) Reflects the historical revenues and lease operating expenses of the
properties acquired during 1997 for the allocable portion of 1997 not
included in Gothic's historical 1997 financial statements. The 1997
Acquisitions' allocable results include properties acquired from Fina Oil
and Chemical Company for three months, properties acquired from Kerr-McGee
Corporation for seven months, and the properties acquired from HS
Resources, Inc. for eight months. The 1997 Acquisitions also reflect a
deduction for revenues and lease operating expenses associated with certain
properties sold in November 1997.
(b) Reflects the historical revenues and lease operating expenses during
1997 of the properties acquired in the Amoco Acquisition, net of the
historical revenues and lease opening expenses related to the properties
transferred to Amoco and the results of operations of the Amoco gas
gathering systems which were concurrently sold.
(c) Reflects the elimination of the results of operations of the Sycamore
gas gathering system which was sold concurrently with the Amoco Acquisition.
(d) Depreciation, depletion and amortization ("DD&A") was calculated
using a DD&A rate based on production for 1997, and estimated reserves at
the beginning of 1997, under the full cost method of accounting for natural
gas and oil properties, after giving effect to the Amoco Acquisition.
(e) Reflects estimated additional general and administrative costs
associated with operating the assets acquired in the Amoco Acquisition.
(f) Adjustment to interest expense to reflect the debt incurred
associated with the expanded credit facility used to finance the Amoco
Acquisition and amortization of debt issuance costs in connection
therewith.
(g) Reflects the payment-in-kind dividends and amortization of the excess of
the redemption amount over the carrying value associated with the 37,000
shares of Series A Preferred Stock. The payment-in-kind dividends reflect the
original stated amount of 14%, however this rate can increase 1% each quarter
until repaid if certain conditions are not met.
The accompanying unaudited pro forma combined balance sheets include the
following adjustments:
P-4
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(1) Reflects the net proceeds of $20.9 million related to 22,000 shares
of Gothic's Series A Preferred Stock issued in January 1998 for $1,000
per share, net of offering costs of $1.1 million.
(2) Reflects the payment of cash and issuance of 15,000 shares of Series
A Preferred Stock for consent fees related to the 12 1/4% Senior Notes and
placement fees related to 15,000 shares of Series A Preferred Stock.
(3) Reflects the borrowings under the Credit Facility of $132.7
million, the bridge loan of $60.0 million and the application of the
proceeds to cash for $187.9 million and loan fees of $4.7 million.
(4) Adjustment to reflect the Amoco Acquisition for $239.9 million,
including estimated post closing adjustments, and the estimated fair value
of $1.2 million for a warrant issued to Amoco to purchase 1.5 million
shares of Gothic's common stock and adjustments to the purchase price for
gas balancing adjustments.
(5) Reflects the sale of the Sycamore gas gathering system and gas gathering
systems acquired from Amoco and application of the proceeds to reduce debt.
(6) Reflects the issuance of warrants to purchase 1,175,778 shares of
Gothic's Common Stock in connection with the sale of the Series A
Preferred Stock.
P-5
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Form S-3/A of Gothic Energy Corporation (File No. 333-23239) of our report dated
March 4, 1998 on our audit of the historical schedule of gross revenues and
direct lease operating expenses of the Amoco Properties for the years ended
December 31, 1996 and 1997, which report is included in this Form 8-K/A.
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
April 7, 1998
