UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported)
March 31, 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)
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Item 7. Financial Statements and Exhibits
(a) Financial statement of business acquired.
The financial information required by this Item begins at page F-1
following page 3 hereof.
(b) Pro forma financial information.
The financial information required by this Item begins at page F-6
following page 3 hereof.
(c) Exhibits
Exhibit
No. Description
2* Purchase and Sale Agreement between Sid R. Bass, Inc. et al and
The Home-Stake Oil & Gas Company, effective as of January 1,
1998.
10* Amended and Restated Loan Agreement dated March 31, 1998 between
Home-Stake Oil & Gas Company and NationsBank, N.A.
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* Previously filed with this Form 8-K.
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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.
Home-Stake Oil & Gas Company
(Registrant)
Date: June 15, 1998 By: /s/ Robert C. Simpson
----------------------
Robert C. Simpson
Chairman of the Board, C.E.O.,
President and Treasurer
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Home-Stake Oil & Gas Company
We have audited the accompanying statement of revenues and direct operating
expenses of certain natural gas producing properties of Sid R. Bass, Inc. et al
(the "Bass Properties") for the year ended December 31, 1997. This financial
statement is the responsibility of the management of Home-Stake Oil & Gas
Company, the purchaser. Our responsibility is to express an opinion on this
statement 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 financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of the Bass Properties for the year ended December 31, 1997
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 10, 1998
F - 1
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BASS PROPERTIES
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
Year ended December 31, 1997
Revenues:
Natural gas sales...................................... $ 1,641,750
Direct operating expenses:
Lease operating expenses............................... 47,316
Production taxes....................................... 147,890
------------
195,206
------------
Excess of revenues over direct operating expenses ....... $ 1,446,544
============
See accompanying notes.
F - 2
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BASS PROPERTIES
NOTES TO FINANCIAL STATEMENT
Note 1 - Bass Properties
The Bass Properties consist of certain Oklahoma natural gas interests which were
acquired by Home-Stake Oil & Gas Company ("HSOG") on March 31, 1998 from Sid R.
Bass, Inc. et al ("Bass").
Note 2 - Basis of presentation
The Statement of Revenues and Direct Operating Expenses of the Bass Properties
was derived from the historical accounting records of Bass. The revenues are
reflected net of existing royalties and overriding royalties. Revenues are
presented on the "sales method" when natural gas is sold. Under this method,
"sales" may be more or less than Bass' proportionate share of natural gas
production in a given period, creating an imbalance position. No asset or
liability has been recorded since the Bass Properties imbalance position can be
recouped from remaining reserves. Production expenses, including gathering and
processing charges, are presented on an accrual basis. The statement does not
include depreciation, depletion and amortization, general and administrative
expenses, interest expenses or income taxes.
F - 3
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Supplementary Information on Natural Gas Producing Activities (unaudited)
Estimated quantities of proved natural gas reserves
The estimated natural gas quantity and value information presented below is
based on the reserve estimates developed by employees of HSOG in connection with
their proposed acquisition of the Bass Properties. Prior period reserve
estimates by the seller are not available. Accordingly, reserve estimates for
prior periods are based solely on adjustments for production for the periods and
accordingly, no amounts are reflected for "revisions of previous estimates".
The following table sets forth the Bass Properties' estimated proved natural gas
reserves at December 31, 1997 and the related changes in such reserve estimates
for the year then ended.
(Mcf)
Proved developed and undeveloped:
Beginning of year..................................... 7,035,755
Production............................................. (606,610)
------------
End of year............................................ 6,429,145
============
Proved developed producing:
Beginning of year..................................... 6,322,587
============
End of year........................................... 5,715,977
============
Proved reserves are estimated quantities of natural gas which geological and
engineering data indicate with reasonable certainty to be recoverable in future
years under existing economic and operating conditions. Proved developed
reserves are proved reserves which are expected to be recoverable through
existing wells with existing equipment and operating methods. These estimates do
not include reserves whose estimates or recoverability are less precise,
commonly referred to as "probable" or "possible" reserves.
Standardized measure of discounted future net cash flows
In accordance with the requirements of Statement of Financial Accounting
Standards No. 69 ("SFAS No. 69") presented below are projections of future
natural gas cash flows (sales less production taxes, operating expenses, certain
development costs and estimated income taxes) and related present values of
proved natural gas reserves. As required by SFAS No. 69, these projections are
based on end of period prices and costs, held constant for all future periods.
Present values of the future net natural gas cash flows were calculated using a
10% discount factor as required. While this information was developed with
reasonable care and disclosed in good faith, it is emphasized that some of the
data are necessarily imprecise and represent only approximate amounts because of
the subjective judgments involved in developing such information. Accordingly,
this information may not represent the present financial condition of the Bass
Properties or their expected future results. This information does not include
any amounts applicable to "probable" or "possible" reserves which may become
proved in the future.
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Supplementary Information on Natural Gas Producing Activities (unaudited)
Although these disclosures have been prepared in accordance with SFAS No. 69,
this information does not purport to present the fair market value of the Bass
Properties or a fair estimate of the present value of future cash flows expected
to be obtained from their production. The reserve estimates, while carefully
made, may be significantly revised based on future events. In addition,
estimates of the timing of production, actual prices realized and related
production costs and taxes may also vary significantly from those used in these
calculations.
1997
Future net cash flows:
Natural gas sales...................................... $ 17,127,478
Lease operating expenses............................... (1,585,472)
Production taxes....................................... (1,215,195)
Development costs...................................... (44,729)
Income taxes........................................... (3,936,938)
------------
10,345,144
Less discount to present value at 10% rate........... (4,791,106)
------------
Standardized measure of discounted future net cash flows. $ 5,554,038
============
The following information summarizes the principal changes in the standardized
measure of discounted future net cash flows.
1997
Beginning of year........................................ $ 8,195,117
Sales of natural gas, net of production costs............ (1,446,544)
Net changes in prices and production costs............... (3,507,867)
Net change in income taxes............................... 1,493,820
Accretion of discount.................................... 819,512
------------
End of year.............................................. $ 5,554,038
============
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Unaudited Pro Forma Financial Statements
Home-Stake Oil & Gas Company
The accompanying unaudited pro forma combined financial statements have been
prepared to illustrate the effects of the acquisition of certain producing
natural gas properties from Sid R. Bass, Inc. et al (the "Bass Properties").
The unaudited pro forma balance sheet as of December 31, 1997 gives effect to
the acquisition as if it had occurred on that date. The unaudited pro forma
statement of operations for the year ended December 31, 1997 gives effect to the
acquisition as if it had occurred on January 1, 1997.
The historical balances included in these pro forma financial statements
represent the amounts included in the audited financial statements of Home-Stake
Oil & Gas Company ("HSOG" or the "Company"). These pro forma financial
statements are based on information available at the current time and reflect
adjustments and assumptions deemed by management of the Company to be
appropriate. These pro forma financial statements are not intended to be
indicative of the actual results of operations or financial position had the
transactions occurred as of the date indicated above, nor do they purport to
indicate operating results or financial positions which may be attained in the
future. Future results may vary significantly from the results reflected in the
unaudited pro forma statement of operations due to oil and gas production
fluctuations, changes in product prices, future acquisitions and divestitures,
future exploration and development activities and other factors.
The unaudited pro forma financial information should be read in conjunction with
the historical financial statements of the Company.
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Home-Stake Oil & Gas Company
Unaudited Pro Forma Balance Sheet
December 31, 1997
Assets
Bass Pro Forma
istorical Properties Combined
Current assets:
Cash and cash equivalents.............$ 1,507,782 $ 2,537 (a) $ 1,510,319
Accounts receivable................... 1,730,114 1,730,114
Prepaid expenses...................... 188,461 188,461
----------- ---------- -----------
Total current assets................ 3,426,357 2,537 3,428,894
Property and equipment, at cost:
Producing oil and gas leases.......... 29,138,034 6,597,463 (a) 35,735,497
Producing royalty interests........... 9,075,949 9,075,949
Nonproducing oil and gas properties... 1,841,049 1,841,049
Office equipment and other............ 569,172 569,172
----------- ----------- -----------
40,624,204 6,597,463 47,221,667
Less accumulated depreciation,
depletion and amortization....... 15,613,520 15,613,520
----------- ----------- -----------
Net property and equipment.......... 25,010,684 6,597,463 31,608,147
Other assets............................ 246,918 246,918
----------- ---------- -----------
$28,683,959 $6,600,000 $35,283,959
=========== ========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and
accrued liabilities..............$ 1,517,932 $ 1,517,932
Income taxes payable.................. 92,822 92,822
Current notes payable................. - 1,320,000 (a) 1,320,000
----------- ---------- -----------
Total current liabilities........... 1,610,754 1,320,000 2,930,754
Long-term notes payable................. - 5,280,000 (a) 5,280,000
Deferred income taxes................... 5,207,548 5,207,548
Stockholders' equity:
Common stock.......................... 45,174 45,174
Additional paid-in capital............ 15,460,621 15,460,621
Retained earnings..................... 6,359,862 6,359,862
----------- ---------- -----------
Total stockholders' equity.......... 21,865,657 21,865,657
----------- ---------- -----------
$28,683,959 $6,600,000 $35,283,959
=========== ========== ===========
See accompanying notes to unaudited pro forma financial statements.
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Home-Stake Oil & Gas Company
Unaudited Pro Forma Statement of Operations
Year ended December 31, 1997
Bass Pro Forma
Historical Properties Combined
Revenues:
Oil and gas sales.....................$ 6,857,072 $1,641,750 (b) $ 8,498,822
Income from equity affiliates......... 534,690 534,690
Gain on sales of assets............... 325,472 325,472
Other income.......................... 353,284 353,284
----------- ---------- ------------
8,070,518 1,641,750 9,712,268
Costs and expenses:
Production............................ 2,054,149 195,206 (b) 2,249,355
Exploration........................... 790,517 790,517
General and administrative............ 1,143,448 1,143,448
Depreciation, depletion
and amortization................. 1,015,466 720,162 (c) 1,735,628
Interest.............................. 39,598 479,600 (d) 519,198
Property and other taxes.............. 126,567 126,567
----------- ---------- ------------
5,169,745 1,394,968 6,564,713
----------- ---------- ------------
Income before provision
for income taxes................. 2,900,773 246,782 3,147,555
Provision for income taxes:
Current............................... 448,214 75,840 (e) 524,054
Deferred.............................. 290,077 8,065 (e) 298,142
----------- ---------- ------------
738,291 83,905 822,196
----------- ---------- ------------
Net income..............................$ 2,162,482 $ 162,877 $ 2,325,359
=========== ========== ============
Shares outstanding...................... 3,396,857 3,396,857 3,396,857
=========== ========== ===========
Basic net income per common share....... $ .64 $ .04 $ .68
===== ===== =====
See accompanying notes to unaudited pro forma financial statements.
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Home-Stake Oil & Gas Company
Notes to Unaudited Pro Forma Financial Statements
Note 1 - Basis of Presentation
HSOG is an independent oil and gas producer actively engaged in the acquisition,
exploration, development and production of oil and gas properties. These pro
forma financial statements have been prepared on the purchase method of
accounting to illustrate the effects of the acquisition of certain producing
natural gas properties from Sid R. Bass, Inc. et al.
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 historical balance sheet at
December 31, 1997, reflects the assets and liabilities of the merged entity. The
historical statement of operations for the year ended December 31, 1997 reflects
the historical operations of HSRC prior to the merger.
Note 2 - Pro Forma Adjustments
(a) Acquisition of Bass Properties financed with bank debt.
(b) Revenues and operating expenses of the Bass Properties.
(c) Estimated depreciation and depletion on the Bass Properties provided
on the unit-of-production method based on estimates of proved
reserves.
(d) Estimated interest that would have been paid if the Company had
acquired the Bass Properties on January 1, 1997 with bank debt
amortized over 60 months and interest calculated at bank prime.
(e) Estimated additional income tax attributable to the pro forma income
and expense from the Bass Properties.
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