UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT
UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number 0-19766
HOME-STAKE OIL & GAS COMPANY
(Exact name of small business issuer as specified in its charter)
Oklahoma 73-0288030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15 East 5th Street, Suite 2800
Tulsa, Oklahoma 74103
(Address of principal executive offices)
(918) 583-0178
(Registrant's telephone number)
The Home-Stake Oil & Gas Company
(Former name, if changed since last report)
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 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 X No
The number of shares outstanding of the Registrant's common stock, all of
which comprise a single class with $ .01 par value, as of July 30, 1998, the
latest practicable date, was 4,517,363.
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HOME-STAKE OIL & GAS COMPANY
FORM 10-QSB
JUNE 30, 1998
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - June 30, 1998
and December 31, 1997......................................... 4
Condensed Statements of Income and Retained
Earnings - six months ended
June 30, 1998 and 1997 ...................................... 5
Condensed Statements of Income and Retained
Earnings - three months ended
June 30, 1998 and 1997 ...................................... 6
Condensed Statements of Cash Flows -
six months ended June 30, 1998 and 1997 ..................... 7
Notes to Condensed Financial Statements ....................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and
Results of Operations ...................................... 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................ 14
Item 2. Changes in Securities and Use of Proceeds .................... 14
Item 3. Defaults upon Senior Securities .............................. 14
Item 4. Submission of Matters to a Vote of Security Holders .......... 14
Item 5. Other Information ............................................ 14
Item 6. Exhibits and Reports on Form 8-K ............................. 14
SIGNATURES ........................................................... 16
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
1998 1997
---- ----
Current assets:
Cash and cash equivalents.................... $ 987,949 $ 1,507,782
Accounts receivable.......................... 1,147,914 1,730,114
--------------
Prepaid expenses............................. 654,487 188,461
-------------- --------------
Total current assets.................. 2,790,350 3,426,357
Property and equipment, at cost:............... 48,253,185 40,624,204
Less accumulated depreciation,
depletion and amortization................ 16,990,696 15,613,520
-------------- --------------
Net property and equipment............ 31,262,489 25,010,684
Other assets................................... 233,446 246,918
-------------- --------------
$ 34,286,285 $ 28,683,959
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities..... $ 740,597 $ 1,517,932
Income taxes payable......................... 8,507 92,822
Current note payable (Note 3)................ 1,320,000 -
-------------- --------------
Total current liabilities............. 2,069,104 1,610,754
Long-term note payable (Note 3)................ 4,950,000 -
Deferred income taxes.......................... 5,238,515 5,207,548
Stockholders' equity:
Preferred stock, $1 par value -
2,000,000 shares authorized; none issued
Common stock, $ .01 par value -
12,000,000 shares authorized,
4,517,363 shares issued.................... 45,174 45,174
Additional paid-in capital................... 15,460,621 15,460,621
Retained earnings............................ 6,522,871 6,359,862
-------------- --------------
Total stockholders' equity............ 22,028,666 21,865,657
-------------- --------------
$ 34,286,285 $ 28,683,959
============== ==============
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED STATEMENTS OF INCOME
AND RETAINED EARNINGS
Six months ended June 30, 1998 and 1997
(Unaudited)
1998 1997
---- ----
Revenues:
Oil and gas sales............................ $ 5,115,677 $ 3,819,939
Gain on sales of assets...................... 14,126 99,708
Income from equity affiliates................ - 271,139
Other income................................. 159,428 160,822
-------------- --------------
5,289,231 4,351,608
Costs and expenses:
Production................................... 1,672,034 1,085,010
Exploration.................................. 153,286 417,262
General and administrative................... 1,283,730 539,933
Depreciation, depletion and amortization..... 1,423,800 676,166
Interest..................................... 131,961 36,086
Property and other taxes..................... 123,389 87,197
-------------- --------------
4,798,200 2,841,654
-------------- --------------
Income before provision for income taxes....... 491,031 1,509,954
Provision for income taxes:
Current...................................... 116,360 237,010
Deferred..................................... 30,967 181,806
-------------- --------------
147,327 418,816
-------------- --------------
Net income..................................... 343,704 1,091,138
Retained earnings at beginning of year......... 6,359,862 4,385,862
Cash dividends ($ .04 per share)............... (180,695) (125,654)
-------------- --------------
Retained earnings at end of period............. $ 6,522,871 $ 5,351,346
============== ==============
Weighted average number of common shares
outstanding:
Basic........................................ 4,517,363 3,396,857
============== ==========
Diluted...................................... 4,772,613 n/a
==============
Net income per common share:
Basic........................................ $ .08 $ .32
===== =====
Diluted...................................... $ .07 n/a
=====
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED STATEMENTS OF INCOME
AND RETAINED EARNINGS
Three months ended June 30, 1998 and 1997
(Unaudited)
1998 1997
---- ----
Revenues:
Oil and gas sales............................ $ 2,790,758 $ 1,581,920
Gain on sales of assets...................... 14,126 -
Income from equity affiliates................ - 80,839
Other income................................. 63,440 79,060
-------------- --------------
2,868,324 1,741,819
Costs and expenses:
Production................................... 758,901 449,064
Exploration.................................. 129,727 201,962
General and administrative................... 657,161 281,189
Depreciation, depletion and amortization..... 746,800 338,083
Interest..................................... 130,374 9,353
Property and other taxes..................... 72,567 54,754
-------------- --------------
2,495,530 1,334,405
------------- --------------
Income before provision for income taxes....... 372,794 407,414
Provision for income taxes:
Current...................................... 111,072 80,965
Deferred..................................... 7,641 2,780
-------------- --------------
118,713 83,745
-------------- --------------
Net income..................................... 254,081 323,669
Retained earnings at beginning of period....... 6,359,138 5,090,504
Cash dividends ($ .02 per share)............... (90,348) (62,827)
-------------- --------------
Retained earnings at end of period............. $ 6,522,871 $ 5,351,346
============== ==============
Weighted average number of common shares
outstanding:
Basic........................................ 4,517,363 3,396,857
============== ==============
Diluted...................................... 4,772,613 n/a
==============
Net income per common share:
Basic........................................ $ .06 $ .10
===== =====
Diluted...................................... $ .05 n/a
=====
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1998 and 1997
(Unaudited)
1998 1997
---- ----
Operating activities:
Oil and gas sales, net of production taxes... $ 5,068,684 $ 3,634,659
Other........................................ 159,428 160,822
-------------- --------------
5,228,112 3,795,481
Cash paid to suppliers and employees......... 3,425,486 1,354,813
Interest paid................................ 131,961 36,086
Property and other taxes..................... 123,389 87,197
Income taxes paid............................ 219,483 174,470
-------------- --------------
3,900,319 1,652,566
-------------- --------------
Net cash provided by operating activities.. 1,327,793 2,142,915
Investing activities:
Proceeds from sales of property and equipment 36,261 329,391
Acquisition of property and equipment........ (7,979,279) (908,835)
Dividends from equity affiliate.............. - 30,337
-------------- --------------
Net cash used in investing activities...... (7,943,018) (549,107)
Financing activities:
Loan proceeds................................ 6,600,000 -
Note payments................................ (330,000) (1,366,035)
Cash dividends paid.......................... (174,608) (127,456)
-------------- --------------
Net cash provided by (used in)
financing activities...................... 6,095,392 (1,493,491)
-------------- --------------
Net increase (decrease) in cash and
cash equivalents........................ (519,833) 100,317
Cash and cash equivalents
at beginning of year.................... 1,507,782 626,864
-------------- --------------
Cash and cash equivalents at end of period... $ 987,949 $ 727,181
============== ==============
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Description of business
Home-Stake Oil & Gas Company ("HSOG" or the "Company") is an independent oil and
gas producer actively engaged in the acquisition, exploration, development and
production of oil and gas properties. Oil and gas exploration and production
activities are subject to numerous risks inherent in the business. These include
the volatility of oil and gas prices, environmental concerns and governmental
regulations, general business risks and hazards involving the acquisition and
operation of oil and gas properties, the ability to continue to find new
reserves to replace those being depleted and the highly competitive nature of
the business. Its principal geographic operating areas lie within the states of
Oklahoma, Montana and Texas.
Note 1 - General
The unaudited financial information provided in this report includes all normal
recurring adjustments which are, in the opinion of management, necessary to
fairly present the financial position, results of operations and cash flows of
the Company. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted or condensed. The Company believes that the
disclosures herein are adequate to make the information presented not
misleading; however, these financial statements should be read in conjunction
with the audited financial statements and related notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.
The results for interim periods are not necessarily indicative of trends or of
results to be expected for the full year.
Note 2 - Merger and pro forma financial information
On March 31, 1998, the Company purchased certain natural gas producing
properties from Sid R. Bass, Inc. et al (the "Bass Properties") for a purchase
price of approximately $6.6 million, subject to certain adjustments for
operations subsequent to January 1, 1998. The second quarter 1998 condensed
financial statements include the 1998 operating results of the Bass Properties.
The following pro forma financial information reflects the combined historical
amounts of the Company and the Bass Properties as if the acquisition had
occurred on January 1, 1997:
Six months ended
----------------
June 30, 1998 June 30, 1997
------------- -------------
Revenue........................................ $ 5,485,474 $ 4,787,576
Income before provision for income taxes....... 456,093 1,439,280
Net income..................................... 319,249 1,045,293
Basic net income per share..................... 0.07 0.31
On December 31, 1997, The Home-Stake Royalty Corporation ("HSRC") was merged
with and into the Company. This transaction was accounted for by the purchase
method of accounting for business combinations. The merged companies adopted the
name of HSOG, which was deemed to be the purchased entity for accounting
purposes since the former HSRC stockholders received approximately 61% of the
merged entity's common stock. Accordingly, the condensed statement of income and
retained earnings and statement of cash flows for the periods ended June 30,
1997, have been restated to reflect the historical operations of HSRC prior to
the merger. The balance sheets at June 30, 1998 and December 31, 1997, reflect
the assets and liabilities of the merged entities. All references to the number
of shares and per share amounts reflect the historical shares of HSRC, adjusted
for the 48.66 exchange ratio.
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HOME-STAKE OIL & GAS COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2 - Merger and pro forma financial information (continued)
Since the merger of the Company and HSRC was accounted for by the purchase
method of accounting, the accompanying 1997 statement of income and retained
earnings does not include any revenues or expenses of the former HSOG. Following
is summarized pro forma 1997 information for the six months and quarter ended
June 30, 1997, assuming the acquisition had occurred on January 1, 1997. This
pro forma information reflects the combined historical amounts for the two
companies, adjusted to eliminate the income and amortization of each company
related to its ownership in the other, and the increases in depreciation,
depletion and amortization and income taxes related to the merger. Such pro
forma information is not intended to be indicative of the actual results of
operations had the transaction occurred on the date indicated.
Six Three
Months Months
Ended Ended
June 30, June 30,
1997 1997
--------- ---------
Revenues:
Oil and gas sales............................ $ 7,440,392 $ 3,065,660
Gain on sales of assets...................... 199,416 -
Other........................................ 302,325 150,790
------------- --------------
7,942,133 3,216,450
Costs and expenses:
Production................................... 2,158,521 891,298
Exploration.................................. 727,047 368,372
General and administrative................... 1,076,773 560,663
Depreciation, depletion and amortization..... 1,336,548 647,759
Interest..................................... 182,004 73,286
Property and other taxes..................... 158,400 94,705
------------- --------------
5,639,293 2,636,083
Income before income tax....................... 2,302,840 580,367
Income tax expense............................. 798,083 201,135
------------- --------------
Net income..................................... $ 1,504,757 $ 379,232
============= ==============
Weighted average number of shares outstanding.. 4,517,363 4,517,363
============= ==============
Basic net income per share..................... $ .33 $ .08
===== =====
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HOME-STAKE OIL & GAS COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 3 - Note payable
The note payable at June 30, 1998, represents the amounts due under the
Company's financing agreement which is due May 1, 2000 and provides for monthly
maturities of $110,000, plus interest at bank prime less 1/2 %. In addition, the
Company has a line of credit in the amount of $5,000,000 available until May 1,
1999 which provides for monthly payments of interest on the outstanding
borrowings at bank prime less 1%. In connection with this line of credit, the
Company pays a commitment fee of one-half of one per cent (1/2%) per annum on
the unused portion of the line.
This note and the line of credit described above are collateralized by certain
of the Company's producing properties.
Note 4 - Stock options and net income per share
On February 12, 1998, the Board of Directors granted qualified stock options in
varying amounts to all employees totaling 155,250 shares. Such options vest over
a 5-year period. In addition, there were non-qualified options issued to all
outside directors in the aggregate amount of 100,000 shares that are currently
exercisable. The options have an exercise price of $4.50 per share which
approximated the fair value of the Company's stock at the date of grant.
In accordance with Statement of Financial Accounting Standards No. 128, "Earning
per Share", net income per common share is computed using two calculations;
basic net income per share and diluted income per share. Basic net income per
common share is calculated based on the weighted average shares outstanding
during the period. Diluted net income per common share is calculated based on
the weighted average shares outstanding including stock options which are
dilutive.
Note 5 - Contingencies
The Company is involved in various legal actions arising in the normal course of
business. In the opinion of management, the Company's liabilities, if any, in
these matters will not have a material effect on the Company's financial
position, results of operations or cash flows.
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
General
As further described in Note 2 to the unaudited condensed financial statements,
on December 31, 1997, The Home-Stake Royalty Corporation ("HSRC") was merged
with and into the Company. This transaction was accounted for by the purchase
method of accounting for business combinations, with the merged entity adopting
the name of Home-Stake Oil & Gas Company, which was deemed to be the purchased
entity for accounting purposes. Accordingly, the condensed statements of income
included herein reflect the historical results of operations of HSRC for 1997
and the results of operations of the merged entities for 1998.
Results of Operations - First six months of 1998 compared with first six months
of 1997
Net income for the six months ended June 30 decreased $747,434 from $1,091,138
in 1997 to $343,704 in 1998. The principal reasons for this decrease are as
follows:
Oil sales increased $329,707 (14%) in 1998. The Company's oil production
increased from 114,348 barrels in 1997 to 193,021 barrels in 1998. This increase
is partially offset by a decrease in the average oil price from $20.06 per
barrel in 1997 to $13.59 per barrel in 1998. The increased production volume is
primarily attributable to the merger with HSRC, partially offset by the sale in
late 1997 of the Company's interest in the Countyline Unit.
Gas sales increased 60% ($914,977), primarily due to the increase in sales
volumes. Gas production increased from 624,695 mcf in 1997 to 1,108,472 mcf in
1998, primarily as a result of the merger and the additional production provided
by the Bass Properties which were purchased March 31, 1998. This increase
however, was partially offset by lower average gas prices which decreased from
$2.44 in 1997 to $2.20 in 1998.
Income from equity affiliates decreased $271,139. As described above, on
December 31, 1997, HSRC was merged with and into HSOG. Consequently, there is no
comparable 1998 amount.
Production expenses increased $587,024, due primarily to the $519,351 increase
in lease operating expenses resulting from the merger. Production taxes
increased $67,673 as a result of the higher product sales described above.
Exploration costs decreased $263,976 in 1998. Dry hole costs decreased $269,882
in 1998 due to a lower incidence of dry holes. This decrease was partially
offset by a modest increase in condemned and abandoned property expenses of
$5,906 in 1998.
General and administrative expenses increased $753,797, from $539,933 in 1997 to
$1,293,730 in 1998. The primary reason for this increase is the merger and
higher personnel costs. 1998 expense also includes approximately $62,800
attributable to the merger, whereas 1997 included only $20,100.
Depreciation, depletion and amortization increased $747,634. This increase is
directly attributable to the increase in property and equipment following the
merger.
Interest expense increased $95,875 in 1998. 1997 expense included interest
attributable to certain outstanding bank debt retired during the first quarter
of 1997. 1998 expense includes interest on the March 31, 1998 bank loan wherein
the Company borrowed $6.6 million to finance the purchase of certain producing
gas properties from Sid R. Bass, Inc. et al.
Results of Operations - Second quarter 1998 compared with second quarter 1997
Net income for the second quarter decreased $69,588 from $323,669 in 1997 to
$254,081 in 1998. The principal reasons for this decrease are as follows:
Oil sales increased $435,119 (44%). The Company's oil production increased from
53,620 barrels in 1997 to 106,289 barrels in 1998. This increase was partially
offset by a decrease in the average oil price from $18.50 per barrel in 1997 to
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$13.42 per barrel in 1998. The increased production volume is primarily
attributable to the merger with HSRC, partially offset by the sale in late 1997
of the Company's interest in the Countyline Unit.
Gas sales increased 126% ($746,227), primarily due to the increase in sales
volumes. Gas production increased from 324,807 mcf in 1997 to 567,869 mcf in
1998, primarily as a result of the merger and the additional production provided
by the Bass Properties which were purchased March 31, 1998. This increase was
coupled with higher average gas prices which increased from $1.82 in 1997 to
$2.35 in 1998.
Income from equity affiliates decreased $80,839. As described above, on December
31, 1997, HSRC was merged with and into HSOG. Consequently, there is no
comparable 1998 amount.
Production expenses increased $309,837, due primarily to the $236,869 increase
in lease operating expenses resulting from the merger. Production taxes
increased $72,968 as a result of the higher product sales described above.
Exploration costs decreased $72,235 in 1998. Dry hole costs decreased $91,442 in
1998 due to a lower incidence of dry holes. This decrease was partially offset
by an increase of $19,207 in condemned and abandoned property expenses.
General and administrative expenses increased $375,972, from $281,189 in 1997 to
$657,161 in 1998. The primary reason for this increase is the merger. 1998
expense also includes higher personnel costs.
Depreciation, depletion and amortization increased $408,717. This increase is
directly attributable to the increase in property and equipment following the
merger.
Interest expense increased $121,021 in 1998. In 1997 there were no outstanding
bank loans during the second quarter. 1998 expense includes interest on the
March 31, 1998 bank loan wherein the Company borrowed $6.6 million to finance
the purchase of certain producing gas properties from Sid R. Bass, Inc. et al.
Financial Condition and Liquidity
The Company's operating activities have traditionally been self-financed through
internally generated cash flows. The principal use of cash flows has generally
been to fund the Company's exploration and production activities and for the
payment of dividends to stockholders. The use of borrowed funds has generally
been limited to the acquisition of producing oil and gas properties where future
revenues from such purchases are expected to fund the debt.
As a result of the depressed product prices, the Company has reduced its capital
budget for 1998 to $2 million. During the first six months of the year the
Company had capital expenditures of approximately $1.3 million and has current
drilling commitments of approximately $1.5 million, extending into 1999. In
addition, during the first quarter the Company acquired certain producing gas
properties at a cost of $6.6 million. The Company is continuing to actively
pursue other opportunities for the acquisition of producing properties whenever
possible.
Product prices have remained depressed throughout the year. Despite this
situation, the Company expects to finance its budgeted 1998 operations and
drilling through internally generated cash flows. In addition, the Company has a
$5 million line of credit available until May 1, 1999. There are currently no
advances under this line.
The Company has substantially completed addressing its "Year 2000" problem.
There was no disruption of operations or business activities while addressing
the situation and the Company did not incur any significant expenses in this
regard. Due to the nature of the Year 2000 problem, however, no assurance can be
given that all issues have been or will be identified and that all third-parties
that affect the Company's business will be Year 2000 compliant.
Forward-Looking Statements
Certain statements included in this report which are not historical facts are
"forward-looking statements", including statements with respect to oil and gas
reserves, the number and anticipated costs of wells to be drilled, future
capital expenditures (including the amount and nature thereof), anticipated date
of repayment of bank debt and other such matters. These forward-looking
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statements are based on current expectations, estimates, assumptions and beliefs
of management; and words such as "expects", "believes", "anticipates",
"intends", "plans" and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements involve risks and
uncertainties, including, but not limited to: dependence upon the prices for oil
and natural gas which prices are subject to significant fluctuations in response
to relatively minor changes in supply and demand for such products, market
uncertainty, political conditions in oil producing regions, domestic and foreign
government regulations, the price and availability of alternative fuels and a
variety of other factors; competition in the acquisition of oil and gas
properties and the development, production and marketing of oil and natural gas;
operating hazards typically associated with the exploration, development,
production and transportation of oil and natural gas; federal, state and local
laws relating to the exploration, development, production and marketing of oil
and natural gas, including environmental and safety matters; changes in laws and
regulations; and other factors, most of which are beyond the control of the
Company. Accordingly, actual results and developments may differ materially from
those expressed in the forward-looking statements. The Company assumes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
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Part II. Other Information
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the Company's stockholders was held in the
offices of the Company on June 1, 1998 for the purpose of electing two
directors whose terms were expiring and considering a proposal to
change the name of the Company such that the word "The" was removed
from the beginning. The nominees for Director were L.W. Allegood and
Larry F. Grindstaff. Both nominees proposed by management were
reelected for terms expiring in 2001, with each receiving 2,845,538
votes for and 8,712 votes withheld. The continuing Directors are Chris
K. Corcoran, Ronald O. Gutman, Joseph J. McCain, Jr., I. Wistar
Morris, III and Robert C. Simpson.
The proposal to change the Company's name was also approved by
stockholders with a vote of 2,852,343 votes for the proposal, none
against and 1,907 abstentions. There were no broker non-votes.
Item 5. Other Information.
As set forth in the Company's Proxy Statement for its 1998 Annual
Meeting of Stockholders, stockholder proposals submitted pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934 for inclusion in
the Company's proxy material for its 1999 Annual Meeting of
Stockholders must be received by the Company no later than December
18, 1998. Any stockholder who intends to present a proposal at the
Company's 1999 Annual Meeting of Stockholders and has not sought
inclusion of the proposal in the Company's proxy materials pursuant to
Rule 14a-8, must provide the Company with notice of such proposal no
later than April 2, 1999.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following documents are included as exhibits to this Form 10-QSB.
Exhibit
Number Description
3.1 Amended and Restated Certificate of Incorporation
of the Company.
27 Financial Data Schedule.
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(b) Reports on Form 8-K.
A report on Form 8-K, dated March 31, 1998, was filed during the
quarter ended June 30, 1998, reporting under Item 2 the Company's
acquisition of certain producing gas properties from Sid R. Bass,
Inc. et al. The required financial statements and pro forma
financial information for such acquisition were also filed during
the quarter on Form 8-K/A1, dated June 15, 1998, under Item 7.
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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.
Home-Stake Oil & Gas Company
(Registrant)
Date: August 3, 1998 By: /s/ Robert C. Simpson
-------------------------
Robert C. Simpson
Chairman of the Board, C.E.O.
and President
Date: August 3, 1998 By: /s/ Chris K. Corcoran
-------------------------
Chris K. Corcoran
Executive Vice President,
Chief Financial Officer and
Corporate Secretary
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RESTATED AND AMENDED
CERTIFICATE OF INCORPORATION
OF
HOME-STAKE OIL & GAS COMPANY
NOTE: THE FOLLOWING CERTIFICATE OF INCORPORATION IS COMPILED FROM THE MOST
RECENT OFFICIAL RESTATEMENT OF THE CERTIFICATE OF INCORPORATION AND THE
SUBSEQUENT AMENDMENT THERETO.
ARTICLE ONE
The name of the Corporation is Home-Stake Oil & Gas Company.
ARTICLE TWO
The address of the Corporation's registered agent and office in the State
of Oklahoma is 15 E. 5th Street, Suite 2800, Tulsa, Oklahoma 74103, and its
registered agent's name is Robert C. Simpson.
ARTICLE THREE
The Corporation shall have perpetual existence.
ARTICLE FOUR
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Oklahoma General Corporation
Act.
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ARTICLE FIVE
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 14,000,000, of which 12,000,000 shares
shall be Common Stock, with a par value of $0.01 per share, and 2,000,000 shares
shall be Preferred Stock, with a par value of $1.00 per share.
The designations and the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of the shares of each class of stock are as follows:
Preferred Stock
The Preferred stock may be issued from time to time by the Board of
Directors as shares of one or more series. The description of shares of
each series of Preferred Stock, including any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption shall be as set forth
in resolutions adopted by the Board of Directors and in a Certificate of
Designations filed as required by law from time to time prior to the
issuance of any shares of such series.
The Board of Directors is expressly authorized, prior to issuance, by
adopting resolutions providing for the issuance of, or providing for a
change in the number of shares of any particular series of Preferred Stock
and, if and to the extent from time to time required by law, by filing a
Certificate of Designations to set or change the number of shares to be
included in each series of Preferred Stock and to set or change in any one
or more respects the designations, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms and conditions of redemption relating to the shares of each such
series. Notwithstanding the foregoing, the Board of Directors shall not be
authorized to change the right of the Common Stock of the Corporation to
vote one vote per share on all matters submitted for shareholder action.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, setting or changing
the following:
(a) the distinctive serial designation of such series and the
number of shares constituting such series (provided that the aggregate
number of shares constituting all series of Preferred Stock shall not
exceed 2,000,000);
(b) the annual dividend rate on shares of such series, whether
dividends shall be cumulative and, if so, from which date or dates;
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(c) whether the shares of such series shall be redeemable and, if
so, the terms and conditions of such redemption, including the date or
dates upon and after which such shares shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(d) the obligation, if any, of the Corporation to retire shares
of such series pursuant to a sinking fund;
(e) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and,
if so, the terms and conditions of such conversion or exchange,
including the price or prices or the rate or rates of conversion or
exchange and the terms of adjustment, if any;
(f) whether the shares of such series shall have voting rights,
in addition to the voting rights provided by law, and, if so, the
terms of such voting rights;
(g) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation; and
(h) any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof relating to such
series.
The shares of Preferred Stock of any one series shall be identical
with each other in all respects as to the dates from and after which
dividends thereon shall cumulate, if cumulative.
Common Stock
Subject to all of the rights of the Preferred Stock as expressly
provided herein, by law or by the Board of Directors pursuant to this
Article Five, the Common Stock of the Corporation shall possess all such
rights and privileges as are afforded to capital stock by applicable law in
the absence of any express grant of rights or privileges herein, including,
by not limited to, the following rights and privileges:
(a) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the Corporation legally
available for the payment of dividends;
(b) the holders of Common Stock shall have the right to vote for the
election of directors and on all other matters requiring shareholder
action, each share being entitled to one vote; and
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(c) upon the voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with
their respective rights and interests.
ARTICLE SIX
The amount of stated capital which the Corporation shall have is
$2,120,000.
ARTICLE SEVEN
[Intentionally omitted.]
ARTICLE EIGHT
The business of the Corporation shall be managed under the direction of a
Board of Directors. The number of directors constituting the entire Board of
Directors shall be not less than three (3) directors, nor more than fifteen (15)
directors, the exact number within such limits to be determined from time to
time by resolution adopted by the affirmative vote of a majority of the entire
Board of Directors; provided however, that the number of directors shall not be
reduced so as to shorten the term of any director at that time in office; and
provided further, that the number of directors constituting the entire Board of
Directors shall be seven (7) until otherwise fixed by a majority of the entire
Board of Directors.
ARTICLE NINE
To the fullest extent permitted by the Oklahoma General Corporation Act as
the same exists on the date hereof or may hereafter be amended, a director of
the Corporation shall not be liable to the Corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director. No amendment to or
repeal of this Article shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
ARTICLE TEN
Any action which may be or is required to be taken at an annual or special
meeting of the shareholders of the Corporation may be taken without a meeting,
without prior notice and without a vote, only if all of the shareholders of the
Corporation entitled to vote thereon consent to such action in writing.
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ARTICLE ELEVEN
1. As used in this Article:
(a) "Acquiring Person" means a Person who makes or proposes to
make, or Persons acting as a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, who make or propose
to make a Control Share Acquisition; provided, however, that
"Acquiring Person" does not include the Corporation;
(b) "Affiliate" means a Person who directly or indirectly
controls the Corporation. For purposes of this Article, "control"
means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of the Corporation,
whether through the ownership of Shares, by contract, or otherwise.
Beneficial Ownership of ten percent (10%) or more of All Voting Power
of the Corporation by a Person, except by a Person holding such voting
power in good faith as an agent, bank, broker, nominee, custodian or
trustee for one or more beneficial owners who do not individually or
as a group control the Corporation, creates a presumption that such
Person controls the Corporation;
(c) "All Voting Power" means the aggregate voting power that the
Shareholders of the Corporation would have in the election of
directors generally but for this Article;
(d) "Beneficial Ownership" shall have the same meaning ascribed
to such term by Rule 13d-3 under the Securities Exchange Act of 1934,
as amended;
(e) "Competing Control Share Acquisition" means a Control Share
Acquisition or proposed Control Share Acquisition that is the subject
of an acquiring person statement delivered to the Corporation pursuant
to Section 2 of this Article not less than twenty-five (25) days prior
to the scheduled annual or special meeting date which has been or is
required to be established pursuant to such Section with respect to a
pending Control Share Acquisition;
(f) "Control Share Acquisition" means the acquisition by any
Person of ownership of, or the power to direct the exercise of voting
power with respect to, Control Shares. "Control Share Acquisition"
does not include acquisition of any Control Shares if such acquisition
is made in good faith and not for the purpose of circumventing this
Article in any of the following circumstances:
(1) In the ordinary course of business by a Person for the
benefit of others when such Person is able to exercise or direct
the exercise of votes of such acquired Shares only after
requesting further instruction from others;
(2) Before the adoption of this Article;
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(3) Pursuant to a contract entered into before the adoption
of this Article;
(4) Pursuant to the laws of descent and distribution;
(5) Pursuant to the satisfaction of a pledge or other
security interest;
(6) Pursuant to a merger, consolidation, or acquisition of
Shares effected in compliance with the Oklahoma General
Corporation Act, if the Corporation is a party to the agreement
of merger, consolidation, or acquisition of Shares;
(7) By a donee receiving Shares pursuant to an inter vivos
gift;
(8) An increase in voting power resulting from any action
taken by the Corporation, provided the Person whose voting power
is thereby affected is not an Affiliate of the Corporation;
(9) Pursuant to the solicitation of proxies subject to
Regulation 14A under the Securities Exchange Act of 1934, as
amended, or in case the Corporation is not subject to such
Regulation 14A, the solicitation of proxies in accordance with
the laws of the State of Oklahoma;
(10) Pursuant to a transfer between or among Immediate
Family Members, or between or among persons under direct common
control;
(11) From any Person whose previous acquisition of Shares
would have constituted a Control Share Acquisition but for
subsections (1) through (10) above and (12) below, provided the
acquisition does not result in the Acquiring Person holding
voting power within a higher range of voting power than that of
the Person from whom the Control Shares were acquired; or
(12) By a Person of additional Shares within the range of
voting power for which such Person has received approval pursuant
to Section 5 of this Article or within the range of voting power
resulting from Shares acquired in a transaction described in
subsections (1) through (11) above;
(g) "Control Shares" means Shares that, but for this Article,
would have voting power, when added to all other Shares, whether owned
of record or through Beneficial Ownership by an Acquiring Person or in
respect to which such Acquiring Person may exercise or direct the
exercise of voting power, that would increase the voting power of, and
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<PAGE>
entitle such Acquiring Person immediately after acquisition of such
Shares, directly or indirectly, to exercise or direct the exercise of
the voting power of the Corporation in the election of directors within
any of the following ranges of voting power:
(1) One-fifth (1/5) or more but less than one-third (1/3) of
All Voting Power;
(2) One-third (1/3) or more but less than a majority of All
Voting Power; or
(3) A majority or more of All Voting Power;
(h) "Immediate Family Member" means any relative or spouse of a
Person, or any relative of such spouse, who has the same home as such
Person;
(i) "Interested Shares" means the Shares in respect of which any
of the following Persons may exercise or direct the exercise, as of
the applicable record date, of the voting power of the Corporation in
the election of directors other than solely by the authority of a
revocable proxy:
(1) The Acquiring Person;
(2) Any officer of the Corporation; or
(3) Any employee of the Corporation who is also a director
of the Corporation;
(j) "Noninterested Shares" means all Shares other than Interested
Shares.
(k) "Person" means any individual, corporation, partnership,
unincorporated association or other entity;
(l) The "Shareholders" means the owners of the Shares; and
(m) "Shares" means shares of capital stock of the Corporation
entitled to vote on any matter pursuant to the Oklahoma General
Corporation Act, the By-Laws of the Corporation or this Certificate of
Incorporation.
2. Any Acquiring Person who proposes to make a Control Share
Acquisition may, at such Person's election, and any Acquiring Person who
has made a Control Share Acquisition shall, deliver an acquiring person
statement ("Acquiring Person Statement") to the Corporation at its
registered office in Tulsa, Oklahoma. The Acquiring Person Statement must
set forth the following:
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(a) The identity of the Acquiring Person;
(b) A statement that the Acquiring Person Statement is given
pursuant to this Article;
(c) The number of Shares owned, directly or indirectly, by the
Acquiring Person, the acquisition date(s) thereof and the
price(s) at which such Shares were acquired;
(d) The voting power to which the Acquiring Person, but for this
Article, would be entitled;
(e) A form of resolution (the "Resolution") to be considered by
the Shareholders pursuant to this Article; and
(f) If the Control Share Acquisition has not yet occurred,
(1) a description in reasonable detail of the terms of the
proposed Control Share Acquisition, and
(2) representations of the Acquiring Person, together with a
statement in reasonable detail of the facts upon which they are
based, that the proposed Control Share Acquisition, if
consummated, will not be contrary to law, and that the Acquiring
Person has the financial capacity to make the proposed Control
Share Acquisition.
3. (a) If at the time of delivery of an Acquiring Person Statement,
the Acquiring Person requests a special meeting of the Shareholders
and gives an undertaking to pay the Corporation's expenses of the
special meeting, within ten (10) days thereafter the directors of the
Corporation shall call a special meeting of the Shareholders for the
purpose of considering the voting rights to be accorded the shares
acquired in a Control Share Acquisition.
(b) Unless the Acquiring Person agrees in writing to another
date, the special meeting of Shareholders shall be held within fifty
(50) days after receipt by the Corporation of the request.
(c) If no request is made, the voting rights to be accorded the
shares acquired in the Control Share Acquisition shall be presented to
the next special or annual meeting of Shareholders.
(d) If the Acquiring Person so requests in writing at the time of
delivery of the Acquiring Person Statement, the special meeting shall
not be held sooner than thirty (30) days after receipt by the
Corporation of the Acquiring Person Statement.
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<PAGE>
4. (a) If a special meeting of Shareholders is requested as provided
in Section 3 of this Article, notice of the special meeting shall be
given as promptly as reasonably practicable by the Corporation to all
Shareholders of record as of the record date set for the meeting,
whether or not they are entitled to vote at the meeting.
(b) Notice of the special or annual meeting of Shareholders at
which the voting rights are to be considered must include or be
accompanied by both of the following:
(1) A copy of the Acquiring Person Statement; and
(2) A statement by the Board of Directors of the Corporation
of its position or recommendation, or that it is taking no
position or making no recommendation, with respect to the
proposed Control Share Acquisition.
5. (a) All votes cast for or against the Resolution contained in the
Acquiring Person Statement must be identified as Noninterested Shares.
To be approved, the Resolution must receive the affirmative vote of a
majority of All Voting Power excluding all Interested Shares. If the
Resolution is not approved, the Acquiring Person, not sooner than
twelve (12) months after disapproval of the Resolution, may present a
new resolution for a vote of the Shareholders in accordance with
Sections 3 and 4 of this Article at any subsequent meeting of
Shareholders.
(b) A proxy relating to a meeting of Shareholders to be held
pursuant to Section 3 of this Article shall be solicited separately
from the offer to purchase or solicitation of an offer to sell shares
of the Corporation.
6. After a Control Share Acquisition occurs, Control Shares of
the Acquiring Person have only the following voting rights:
(a) Subject to the provisions of subsections (b) through (d)
below, the voting power of Control Shares having voting power of
one-fifth (1/5) or more of All Voting Power is reduced to zero unless
the Shareholders of the Corporation approve a resolution, pursuant to
the procedures set forth in Sections 3, 4 and 5 of this Article,
according such Control Shares the same voting rights as they had
before they became Control Shares;
(b) Except as provided in Section 5(a) of this Article, the
voting power of Control Shares representing voting power of less than
one-fifth (1/5) of All Voting Power is not affected by this Article;
(c) If Control Shares of the Acquiring Person previously have
been accorded, pursuant to the procedures set forth in Sections 3, 4
and 5 of this Article, the same voting rights they had before they
became Control Shares, or if such Control Shares were acquired in a
transaction excluded from the definition of "Control Share
Acquisition", then only the voting power of Control Shares acquired in
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a subsequent Control Share Acquisition by such Acquiring Person within
a higher range of voting power shall be reduced to zero; and
(d) The voting rights of Control Shares are restored to those
accorded such Shares prior to the Control Share Acquisition in any of
the following circumstances:
(1) If, by reason of subsequent issuances of Shares or other
transactions by the Corporation, the voting power of those
Control Shares is reduced to a range of voting power for which
approval has been granted or is not required; or
(2) Upon transfer to a Person other than an Acquiring
Person; or
(3) The expiration of three (3) years after the date of a
vote of the Shareholders, pursuant to Section 5 of this Article,
failing to approve the Resolution according voting rights to
those Control Shares; or
(4) If the Resolution receives the affirmative votes of a
majority of All Voting Power, excluding all Interested Shares,
pursuant to Section 5 of this Article.
7. (a) In the event that a Competing Control Share Acquisition is
made or proposed, the Corporation shall, at the option of the
Acquiring Person making the Competing Control Share Acquisition, call
for a vote of the Shareholders to consider the resolution relating to
the voting rights of the Competing Control Share Acquisition at the
same meeting that has been or is to be called to consider the voting
rights of the pending Control Share Acquisition. In the event the
Acquiring Person making the Competing Control Share Acquisition does
not elect in writing to have the resolution relating to the voting
rights of the Competing Control Share Acquisition considered at the
same meeting, any vote shall be held as provided in this Article,
except that in such case no vote shall be called on the Competing
Control Share Acquisition prior to the earlier of the vote on the
Resolution relating to voting rights of the pending Control Share
Acquisition or fifty-one (51) days after receipt by the Corporation of
the request for a meeting by the Acquiring Person making the pending
Control Share Acquisition.
(b) If more than one resolution relating to a Control Share
Acquisition is to be considered at any meeting or at meetings
scheduled for or occurring on the same day, all such resolutions
relating to the voting rights of Acquiring Persons shall be considered
by the Shareholders in the order in which the initial Acquiring Person
Statements relating to such Control Share Acquisitions were delivered
to the Corporation. However, no resolution approved by the
Shareholders shall become effective until midnight of the date on
which the respective Shareholder approval occurs.
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<PAGE>
(c) If resolutions relating to two (2) or more Control Share
Acquisitions are subject to shareholder vote pursuant to this Article,
shares held by an Acquiring Person are considered Interested Shares
only for purposes of a vote on a resolution relating to a Control
Share Acquisition by that same Acquiring Person.
8. (a) In the event Control Shares acquired in a Control Share
Acquisition are accorded full voting rights and the Acquiring Person
has acquired Control Shares with a majority of All Voting Power, all
Shareholders of the Corporation shall have dissenters' rights. (b) As
soon as practicable after such events have occurred, the Board of
Directors shall cause a notice to be sent to all Shareholders advising
them of the facts and that they have dissenters' rights to receive the
fair value of their Shares pursuant to Section 1091 of the Oklahoma
General Corporation Act, as amended from time to time.
(c) As used in this Section 8, "fair value" means a value not
less than the highest price paid per share by the Acquiring Person in
the Control Share Acquisition.
9. Should any conflict arise between the provisions of this Article
and the provisions of the Oklahoma General Corporation Act or other laws,
the provisions of this Article shall control to the extent permitted by
law.
ARTICLE TWELVE
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to adopt,
amend or repeal the Bylaws of the Corporation.
ARTICLE THIRTEEN
The Corporation may, as determined by the Board of Directors of the
Corporation, indemnify and advance expenses to a director, officer, employee or
agent to the maximum extent permitted by and in accordance with Section 1031 of
the Oklahoma General Corporation Act as the same exists on the date hereof or
may hereafter be amended.
ARTICLE FOURTEEN
All rights, privileges, immunities, restrictions, penalties, duties,
obligations and liabilities of the Corporation and of the shareholders of the
Corporation shall be governed solely by the Oklahoma General Corporation Act as
the same exists on the date hereof or may hereafter be amended."
-11-
<PAGE>
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