U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
December 19, 1996
MIDDLE BAY OIL COMPANY, INC.
(Exact name of registrant as specified in its charter)
File No. 0-21702
(Commission File Number)
Alabama 63-1081013
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
115 SOUTH DEARBORN STREET, MOBILE, AL 36602
(Address of principal executive offices)
(334) 432-7540
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
<PAGE>
This Form 8-K/A amends the Current Report on Form 8-K of Middle Bay Oil
Company, Inc. (the "Registrant"), filed with the Securities and Exchange
Commission on December 30, 1996, to provide financial statements and
financial information with respect to the merged corporation.
ITEM 7- FINANCIAL STATEMENTS, PRO-FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of Business Acquired
Annual Financial Statements:
Report of Independent Auditors
Audited Balance Sheets as of December 31, 1994 and 1995
Audited Statements of Operations for the Years
Ended December 31, 1994 and 1995
Audited Statements of Changes in Stockholders
Equity for the Years Ended December 31, 1994 and 1995
Audited Statements of Cash Flows for the Years
Ended December 31, 1994 and 1995
Notes to Audited Financial Statements
Interim Financial Statements (unaudited):
Balance Sheet as of September 30, 1996
Statements of Operations for the nine months
ended September 30, 1995 and 1996
Statements of Cash Flows for the nine months
ended September 30, 1995 and 1996
Notes to Financial Statements
(b) Unaudited Pro Forma Financial Information
Pro Forma Combined Balance Sheet as of
September 30, 1996
Pro Forma Combined Statement of Operations for the
Year Ended December 31, 1995
Pro Forma Combined Statement of Operations for the
Nine Months Ended September 30, 1996
Notes to Pro Forma Combined Financial Statements
(c) Exhibits
<PAGE>
NPC ENERGY CORP.
December 31, 1995 and 1994
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENT OF CHANGES IN EQUITY
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
NPC Energy Corp.
We have audited the accompanying balance sheets of NPC Energy Corp. as of
December 31, 1995 and 1994, and the related statements of operations, changes
in equity and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements 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 financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NPC Energy Corp. as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
/s/ Grant Thorton LLP
Wichita, Kansas
March 8, 1996 (except for Note I, as to
which the date is December 13, 1996)
<PAGE>
NPC Energy Corp.
BALANCE SHEETS
December 31,
ASSETS
1995 1994
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 716,815 $ 275,915
Accounts receivable from affiliate 198,042 277,866
Refundable income taxes 92,922 25,000
--------- ---------
Total current assets 1,007,779 578,781
OIL AND GAS PROPERTIES, NET, USING THE
SUCCESSFUL EFFORTS METHOD OF
ACCOUNTING 1,867,003 2,318,608
OTHER ASSETS 2,362 3,251
--------- ---------
$2,877,144 $2,900,640
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable (including $232,414
in 1995 and $207,106 in 1994 to
affiliates) $ 237,790 $ 259,570
Current portion of long-term debt 331,080 331,080
--------- ---------
Total current liabilities 568,870 590,650
LONG-TERM LIABILITIES
Long-term debt 385,089 882,869
Deferred income taxes payable 432,000 340,853
--------- ---------
817,089 1,223,722
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized,
20,000,000 shares; issued and outstand-
inrg, 800,000 shares 8,000 8,000
Preferred stock, $.01 par value, authorized,
1,000,000 shares; issued and outstanding,
none - -
Paid-in capital 1,544,292 1,544,292
Accumulated deficit (61,107) (466,024)
--------- ---------
1,491,185 1,086,268
--------- ---------
$2,877,144 $2,900,640
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
NPC Energy Corp.
STATEMENTS OF OPERATIONS
Year ended December 31,
1995 1994
--------- ---------
Revenues
Oil and gas sales $1,532,813 $1,848,678
Gain on sale of oil and gas properties 629,165 48,669
Litigation proceeds - 185,663
Other 18,697 10,246
--------- ---------
2,180,675 2,093,256
Expenses
Lease operating expenses 1,003,785 1,259,851
Depreciation, depletion and amortization 276,952 510,002
General and administrative expense
incurred with affiliate 126,000 109,382
Other general and administrative expenses 113,580 66,838
Interest expense 100,216 110,992
--------- ---------
1,620,533 2,057,065
Earnings before income taxes 560,142 36,191
Income taxes 155,225 340,853
--------- ---------
NET EARNINGS (LOSS) $ 404,917 $ (304,662)
========= =========
Earnings per common share $.51
====
PRO FORMA INFORMATION
Historical earnings before income taxes $ 36,191
Pro forma income taxes 13,934
---------
Pro forma net earnings $ 22,257
=========
Pro forma earnings per common share $.03
====
The accompanying notes are an integral part of these statements.
<PAGE>
NPC Energy Corp.
STATEMENTS OF CHANGES IN EQUITY
<TABLE>
Owners' Common Paid-in Accumulated Total
equity stock capital deficit equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $1,295,587 $ - $ - $ - $1,295,587
Contributions 150,212 - - - 150,212
Distributions (54,869) - - - (54,869)
Net earnings prior to con-
version date 161,362 - - - 161,362
--------- ----- --------- -------- ---------
Balance, August 1, 1994 1,552,292 - - - 1,552,292
Conversion to corporation
(issued 800,000 shares) (1,552,292) 8,000 1,544,292 - -
Net loss after conversion date - - - (466,024) (466,024)
-------- ----- --------- -------- ---------
Balance, December 31, 1994 $ - 8,000 1,544,292 (466,024 1,086,268
========
Net earnings for the year - - 404,917 404,917
----- --------- ------- ---------
Balance, December 31, 1995 $8,000 $1,544,292 $(61,107) $1,491,185
===== ========= ======= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NPC Energy Corp.
STATEMENTS OF CASH FLOWS
Year ended December 31,
Increase (decrease) in cash and cash equivalents
1995 1994
-------- --------
Cash flows from operating activities
Net earnings (loss) $ 404,917 $ (304,662)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities
Depreciation, depletion and
amortization 276,952 510,002
Deferred income tax 91,147 340,853
Gain on sale of oil and gas
properties (629,165) (48,669)
Decrease in accounts receivable 79,824 136,775
Increase in refundable income taxes (67,922) (25,000
(Increase) decrease in other assets 889 (3,251)
Decrease in accounts payable (21,780) (10,302)
-------- --------
Net cash provided by operating
activities 134,862 595,746
======== ========
Cash flows from investing activities
Capital expenditures (201,145) (267,333)
Proceeds from sale of oil and gas
properties 1,004,963 126,032
--------- --------
Net cash provided by (used in)
investing activities 803,818 (141,301)
======== ========
Cash flows from financing activities
Contributions from owners - 150,212
Distributions to owners - (54,869)
Repayments of long-term debt (497,780) (315,222)
-------- --------
Net cash used in financing
activities (497,780) (219,879)
======== ========
Net increase in cash and cash equivalents 440,900 234,566
Cash and cash equivalents at beginning of year 275,915 41,349
-------- --------
Cash and cash equivalents at end of year $ 716,815 $ 275,915
========= =========
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 100,216 $ 110,992
Income taxes 132,000 25,000
The accompanying notes are an integral part of these statements.
<PAGE>
NPC Energy Corp.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
1. Formation and nature of business
On August 5, 1994, NPC Energy Corp. was incorporated in the State of
Oklahoma. for purposes of exchanging its stock for all the assets and
liabilities of ten limited partnerships and certain oil and gas assets and
liabilities of Bison Energy Corp. The ten partnerships were formed pursuant
to the Limited Partnership Acts of the States of Minnesota and Kansas to
engage in all phases of the oil and gas industry, primarily in the south
central region of the United States.
Effective August 1, 1994, the Company exchanged 800,000 shares of its
common stock for the transferred assets and liabilities. This transaction was
accounted for similar to a pooling of interests due to common ownership
between the partnerships and the other oil and gas assets and liabilities of
Bison Energy Corp. The statement of operations for 1994 includes the combined
operations of the ten partnerships and the direct revenues, direct operating
expenses and interest expense associated with liabilities assumed of certain
oil and gas assets and liabilities of Bison Energy Corp. for the period from
January 1, 1994 through July 31, 1994. No allocation of general and
administrative expenses was made by Bison Energy Corp.
Oil and gas sales comprise the majority of the Company's operating
revenues which could be adversely affected by a decrease in the price received
for a barrel of oil or a MCF of natural gas. In addition, the availability of
a ready market for the Company's oil and gas depends on numerous factors
beyond its control, including the demand for and the supply of oil and gas,
the proximity of the Company's natural gas reserves to pipelines, the capacity
of such pipelines, fluctuations in production and seasonal demand, the effects
of inclement weather and governmental regulation. New gas wells may be
shut-in for the lack of a market until a gas pipeline or gathering system with
available capacity is extended into the area. New oil wells may have
production curtailed until production facilities and delivery arrangements are
acquired or develop. Finally, the Company's properties may be susceptible to
hydrocarbon drainage from production by other operators on adjacent
properties.
2. Oil and gas properties
The Company follows the successful efforts method of accounting for its
oil and gas activities. In accordance with this method, the acquisition costs
of undeveloped leaseholds are capitalized. Exploration costs, including delay
rentals, are expensed. Development costs related to drilling and equipping
development wells are capitalized. Costs of drilling and equipping
exploratory oil and gas wells are capitalized pending determination of
quantities of proved reserves. If proved reserves are not found, such costs
are charged to expense. Costs of surrendered, expired and abandoned leases
are charged to expense.
Depreciation and depletion of proved properties is computed on individual
properties by the unit-of-production method based on periodic estimates of oil
and gas reserves as determined by the Company's independent petroleum reserve
engineer.
The Company charges maintenance and repairs directly to expense while
betterments and renewals are capitalized in the property accounts.
Undeveloped leaseholds and proved properties are assessed annually to
determine whether they are impaired and appropriate valuation allowances are
established when necessary. When property is retired or otherwise disposed
of, the cost and applicable accumulated depreciation, depletion and valuation
allowances are removed from the respective accounts and the resulting gain or
loss is recorded in operations.
3. Income taxes
Prior to August 1, 1994, income taxes on earnings of the Partnerships and
certain oil and gas assets and liabilities of Bison Energy Corp. were payable
by the partners individually and Bison Energy Corp., respectively, and,
accordingly, are not reflected in the historical financial statements.
The Company uses the liability method of accounting for income taxes.
The liability method provides that deferred tax assets and liabilities are
determined based on the difference between the tax basis of the assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets or liabilities at the end of each period are determined
using the currently enacted tax rate expected to apply to taxable income in
the periods in which the deferred tax asset or liability is expected to be
settled or realized.
4. Statements of cash flows
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less to be
cash equivalents.
5. Earnings per share
Earnings per common share for the year ended December 31, 1995 are based
upon the weighted average number of shares outstanding of 800,000 for the
year. Earnings per share for 1994 are not applicable as NPC Energy Corp. was
not incorporated until August 5, 1994. Pro forma earnings per share are based
on the 800,000 shares that would have been outstanding had the partners been
shareholders during all of 1994.
6. Use of estimates
In preparing the Company's financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE B - OIL AND GAS PROPERTIES
A summary of oil and gas properties is as follows at December 31:
1995 1994
--------- ---------
Proved properties, at cost
Leasehold costs $2,218,088 $2,605,177
Intangible drilling and
development costs 2,362,211 5,601,492
Lease and well equipment 2,090,535 3,839,247
--------- ----------
Total oil and gas properties,
at cost 6,670,834 12,045,916
Accumulated depreciation, depletion
and valuation allowances
Leasehold costs 1,154,851 1,377,138
Intangible drilling and development
costs 2,150,212 5,312,440
Lease and well equipment 1,498,768 3,037,730
--------- ---------
Total accumulated depreciation,
depletion and valuation
allowances 4,803,831 9,727,308
--------- ---------
Net oil and gas properties $1,867,003 $2,318,608
========= =========
NOTE C - LITIGATION
Several partnerships were plaintiffs in a lawsuit asserting that the
defendants wrongfully reduced the prices paid for gas under two contracts and,
subsequently, terminated the two contracts. During 1994 a settlement of
$185,663 was received by the partnerships.
NOTE D - LONG-TERM DEBT
Long-term debt consists of a 9.5% note payable to a bank which is payable
in monthly installments of $27,590 plus interest and is due August 31, 1998.
The note is collateralized by certain oil and gas properties. Maturities of
the note payable for the years following December 31, 1995 are $331,080 in
1996, $331,080 in 1997 and $54,009 in 1998.
Based on the borrowing rates currently available to the Company for bank
loans with similar maturities and terms, the fair value of long-term debt is
considered equal to the carrying amount.
The Company also has a revolving note payable to a bank for working
capital purposes with a maximum balance of $500,000 due August 31, 1996
(renewed July 31, 1995). It bears interest at .5% above prime (prime was 9.5%
at December 31, 1995) which is payable monthly, is collateralized by certain
oil and gas properties and is guaranteed by Bison Energy Corp., the majority
stockholder of the Company. The revolving note did not have a balance drawn
at December 31, 1995 or 1994.
The above note agreements contain covenants which provide for, among
other things, restrictions on additional indebtedness, dividends, and asset
acquisitions and sales.
NOTE E - OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCING
ACTIVITIES
Costs incurred (whether capitalized or charged to expense and all in the
United States) in oil and gas acquisition and development activities during
the years ended December 31 are as follows:
1995 1994
-------- --------
Property acquisition costs $ 18,603 $ 73,091
Development costs 182,542 194,242
NOTE F - INCOME TAXES
As described in Note A1, the assets of the Company were transferred from
various partnerships effective August 1, 1994. Accordingly, a charge of
$405,600 was recorded for the deferred tax liability related to temporary
differences existing at the date of transfer.
The provision for income taxes consists of the following components for
the year ended December 31:
1995 1994
-------- --------
Current $ 64,078 $ -
Deferred 91,147 (64,747)
Change in tax status of entity - 405,600
-------- --------
$ 155,225 $ 340,853
======== ========
A reconciliation of income tax expense computed at the federal statutory
rate of 34% to income taxes is as follows for the years ended December 31:
1995 1994
-------- --------
Income taxes at statutory rate $ 190,448 $ 12,305
Difference due to progressive tax rates (6,488) (6,876)
Statutory depletion in excess of basis (39,648) -
Partnership earnings taxed at the
partner level - (54,863)
Deferred income taxes related to temporary
differences existing at date of conversion
to corporation - 405,600
State income taxes and other 10,913 (15,313)
-------- --------
$ 155,225 $ 340,853
======== ========
The source and tax effects of temporary differences are as follows at
December 31:
1995 1994
-------- --------
Deferred income tax assets
Net operating loss carryforwards $ - $ 86,224
Statutory depletion carryforwards - 25,352
-------- --------
- 111,576
Deferred income tax liability
Oil and gas properties 432,000 452,429
-------- --------
Net deferred income tax liability $ 432,000 $ 340,853
======== ========
A pro forma adjustment for income taxes is shown on the statements of
operations for the year ended December 31, 1994. Income taxes on the
operations of the partnerships are a direct responsibility of the partners
individually. The pro forma adjustments reflect a provision for income taxes
as though the operations were conducted by a taxpaying entity at an effective
combined federal and state rate of 38.5%.
NOTE G - RELATED PARTIES
The Company shares corporate facilities, personnel and other overhead
costs with its majority stockholder, Bison Energy Corp. Total costs incurred
to Bison Energy Corp. were $126,000 and $109,382 for the years ended December
31, 1995 and 1994, respectively. In addition, a substantial number of the
Company's oil and gas properties are operated by Bison Production Company
(Bison), a wholly-owned subsidiary of Bison Energy Corp. for which Bison
receives an overhead fee ranging from $150 to $570 per month on each well .
Bison collects all of the oil and gas revenue and pays all of the lease
operating expenses for all leases it operates and all nonoperated leases
ownedby the Company. Bison then remits a net check each month to the
Company. No overhead fee is charged for the nonoperated leases.
NOTE H - STOCKHOLDERS' EQUITY
On October 26, 1995, the Company's Certificate of Incorporation was
amended with the following provisions:
1. Increase the number of common stock authorized from 100,000 shares
to 20,000,000 shares.
2. Decrease the common stock par value from $.10 per share to $.01
per share.
3. Authorized 1,000,000 preferred shares of stock with $.01 par value
per share with rights and preferences to be determined by the Board of
Directors when issued.
4. Each share of $.10 par value common stock previously issued and
outstanding prior to this amendment was automatically reclassified and changed
into sixteen fully paid and nonassessable shares of common stock with $.01 par
value.
All share and per share data amounts have been retroactively restated to
reflect the above changes.
NOTE I - PUBLIC FILING
On November 13, 1995, the Company filed a Form S-4 registration statement
with the Securities and Exchange Commission (SEC) in which the Company
proposed to register the distribution of shares of common stock (see Note A1)
to the limited partnerships which would result in the Company being a
publicly-traded entity. In connection with the review of the registration
statement, the SEC raised certain questions concerning the availability of an
exemption under Section 4(2) of the Securities Act of 1933, as amended, for
the issuance of the common stock to the limited partnerships. The Company has
responded to the SEC's questions, but at this date the issue is unresolved.
In December 1996, the Company executed a merger agreement pursuant to which
the Company will merge with and into Middle Bay Oil Company and as part of the
merger, the limited partnerships will receive a cash payment for the common
stock owned by them. If the merger is consummated, the Company will withdraw
its Form S-4 registration statement.
NOTE J - OIL AND GAS RESERVE INFORMATION (UNAUDITED)
The following schedules present (1) the Company's estimates of its proved
oil and gas reserves, (2) the standardized measure of discounted future net
cash flows from the production of proved oil and gas reserves and (3) a
summary of the change in discounted future net cash flows. All properties are
located in the United States.
These estimates have been prepared based on the reports of independent
registered petroleum engineers for each of the two years ended December 31,
1995 and 1994. The Company emphasizes that these types of estimates are
inherently imprecise. Estimates of reserves inevitably change over time as
additional data become available and are taken into account. The magnitude of
these changes can be substantial. Moreover, the standardized measure of
discounted future net cash flows should not be construed as the market value
of the Company's reserves, as such an estimate should take into account the
probability of future oil and gas recoveries in excess of proved resources,
anticipated future prices of oil and gas and changes in the related
development and production costs, and risks associated with future production
of proved reserves.
Proved reserves are estimated quantities of oil and natural gas which
geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs.
Proved developed reserves are those reserves which can be expected to be
recovered through existing wells with existing equipment and operating
methods. The estimates of proved developed reserves include reserves
estimated to be recoverable from existing wells after the incurrence of
completion costs.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 69 ("SFAS 69"), estimates of future cash flows were based upon
existing economic and operating conditions. Accordingly, current prices,
except for price escalations provided for in gas contracts, were used in
estimating future net revenues. Estimates of operating costs, production
taxes and development costs were based on current costs. SFAS 69 requires
the inclusion of a provision for estimated future income taxes computed by
applying the current statutory tax rate to estimated future cash flows before
income taxes, adjusted for book/tax differences in the recognition of revenues
and expenses relating to the development and production of proved reserves.
RESERVE QUANTITY INFORMATION
(Unaudited)
<TABLE>
1995 1994
---------------------- ----------------------
Oil Gas Oil Gas
(bbls) (mcf) (bbls) (mcf)
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Proved developed and undeveloped
reserves, beginning of year 516,000 4,600,000 434,000 4,558,000
Revisions of previous estimates 40,000 (93,000) 136,000 283,000
Extensions and discoveries - - 17,000 204,000
Purchase of minerals in place 13,000 - - -
Sales of minerals in place (44,000) (573,000) - -
Production (56,000) (351,000) (71,000) (445,000)
------- --------- ------- ---------
Proved developed and undeveloped
reserves, end of year 469,000 3,583,000 516,000 4,600,000
======= ========= ======= =========
Proved developed reserves:
Beginning of year 370,000 3,353,000 305,000 3,545,000
======= ========= ======= =========
End of year 352,000 2,648,000 370,000 3,353,000
======= ========= ======= =========
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS RELATING TO PROVED RESERVES
(Unaudited)
December 31,
--------------------------
1995 1994
-------- --------
Future production revenues $15,413,000 $16,774,000
Future development costs (842,000) (1,110,000)
Future production costs (7,195,000) (7,684,000)
---------- ----------
Future net cash inflows before
income tax 7,376,000 7,980,000
Future income taxes (1,815,000) (1,801,000)
---------- ----------
Future net cash flows 5,561,000 6,179,000
Effect of 10% discount (2,264,000) (2,472,000)
---------- ----------
Standardized measure of discounted
net cash flow $ 3,297,000 $ 3,707,000
========== ==========
SUMMARY OF CHANGES IN THE STANDARDIZED
MEASURE OF DISCOUNTED FUTURE NET CASH
FLOWS FROM PROVED RESERVES
(Unaudited)
Year ended December 31,
--------------------------
1995 1994
-------- --------
Amount at beginning of year $3,707,000 $5,082,000
Changes in sales price and
production cost 444,000 282,000
Revisions of previous estimates,
including quantities, production
rates (timing) and other (302,000) (628,000)
Sales of oil and gas, net of
production costs and taxes (545,000) (589,000)
Changes in estimated development costs 175,000 (195,000)
Sales of minerals in place (715,000) -
Purchase of minerals in place 50,000 -
Accretion of discount 479,000 508,000
Net change in income taxes 4,000 (1,080,000)
Extensions and discoveries - 327,000
--------- ---------
(410,000) (1,375,000)
--------- ---------
Amount at end of year $3,297,000 $3,707,000
========= =========
NPC ENERGY CORP.
BALANCE SHEET
(Unaudited) (Audited)
As Of As Of
9/30/96 12/31/95
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 706,287 $ 716,815
Accounts receivable from affiliate 225,182 198,042
Refundable income taxes - 92,922
--------- ---------
Total Current Assets 931,469 1,007,779
Property (At cost using successful
efforts method)
Oil and gas properties 6,762,331 6,670,834
--------- ---------
6,762,331 6,670,834
Less:Accumulated Depletion and
Depreciation (4,925,113) (4,803,831)
--------- ---------
1,837,218 1,867,003
Other Assets 2,363 2,363
--------- ---------
$2,771,050 $2,877,145
========= =========
CURRENT LIABILITIES
Accounts payable $ 160,316 $ 237,790
Current portion of long-term debt 331,080 331,080
Income tax payable 21,888 -
--------- ---------
Total Current Liabilities 513,284 568,870
Long-term debt 136,779 385,090
Deferred income tax 432,000 432,000
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value 8,000 8,000
Paid-in capital 1,544,292 1,544,292
Retained earnings (deficit) 136,695 (61,107)
--------- ---------
Total Stockholders' Equity 1,688,987 1,491,185
$2,771,050 $2,877,145
========= =========
See accompanying Notes to Financial Statements.
NPC ENERGY CORP
STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
9/30/96 9/30/95
--------- ---------
Oil and gas sales $1,066,973 $1,241,612
Marketing and tax expense 53,978 69,000
--------- ---------
1,012,995 1,172,612
Operating expense 584,545 675,456
Depr and depl 121,282 235,530
--------- ---------
307,168 261,626
Intangible drilling costs - 17,569
--------- ---------
307,168 244,057
Other Income:
Gain on sale of assets 103,995 64,500
Other 22,165 8,353
--------- ---------
126,160 72,853
Other Expense
Administration department 137,824 177,154
Interest expense 43,814 80,101
--------- ---------
181,638 257,255
Operating profit 251,690 59,655
Pretax Profit 251,690 59,655
Provision for income taxes 53,888 21,999
--------- ---------
Net income $ 197,802 $ 37,656
========= =========
Net income per common share $ 0.25 $ 0.05
======== ========
See accompanying Notes to Financial Statements.
NPC ENERGY CORP.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
9/30/96 9/30/95
--------- ---------
Cash provided by operations:
After tax profit $ 197,802 $ 37,656
Items included in after tax profit
which do not affect cash:
Depreciation and depletion 121,282 235,530
Deferred income tax - 22,000
Gain on sale of assets (103,995) (64,500)
--------- ---------
215,089 230,686
Deduct current removals of
changes in working capital:
Accounts receivable (27,140) 55,613
Accounts payable (77,474) (126,660)
Prepaid expenses 92,922 -
Income taxes payable 21,888 -
--------- ---------
10,196 (71,047)
Cash used for investment activities:
Change in property and equipment 12,498 84,155
Change in other assets - -
--------- ---------
12,498 84,155
--------- ---------
Cash generated before financing 237,783 243,794
Cash used for financing activities:
Change in debt (248,310) (248,310)
Dividends - -
--------- ---------
(248,310) (248,310)
--------- ---------
Change in cash and temporary cash
investments $ (10,527) $ (4,516)
========= =========
See accompanying Notes to Financial Statements.
NPC ENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 and 1996
Basis of Presentation
In management's opinion, the accompanying financial statements contain all
adjustments (consisting solely of normal recurring adjustments) necessary to
present fairly the financial position of the Company as of September 30, 1996
and the results of operations and cash flows for the nine months ended
September 30, 1996 and 1995.
The accompanying financial statements have not been audited by an
independent accountant. Certain information and disclosures normally included
in annual audited financial statements prepared in accordance with generally
accepted accounting principles have been omitted, although the Company
believes that the disclosures made are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the Company's financial statements and notes thereto included
in the Company's Annual Report for the year ended December 31, 1995.
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The accompanying pro forma combined condensed financial statements (the "pro
forma financial statements")assume the merger is accounted for using the
purchase method of accounting. The pro forma financial statements are based
on the historical financial statements of Middle Bay Oil Company, Inc. (MBOC)
and NPC Energy Corp. (NPC).
The Pro Forma Combined Condensed Balance Sheet as of September 30, 1996
assumes the merger had been consummated on that date. The Pro Forma Combined
Condensed Statements of Operations for the nine months ended September 30,
1996 and the year ended December 31, 1995 have been prepared assuming the
merger had been consummated on January 1, 1995.
The pro forma adjustments are based upon available financial information and
assumptions that management of MBOC believe are reasonable. The pro forma
financial statements do not purport to represent the financial position or
results of operations which would have occurred had such transactions been
consummated on the dates indicated or MBOC's financial position or results of
operations for any future date or period. These pro forma financial
statements and note thereto should be read in conjunction with the historical
financial statements and notes thereto described above.
MIDDLE BAY OIL COMPANY, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
September 30, 1996
(Unaudited)
<TABLE>
<CAPTIONS>
Pro Forma
MBOC NPC Adjustments Pro Forma
Historical Historical for the Merger Combined
---------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 327,007 $ 706,287 $ (226,400) (5)(6) $ 806,894
(706,287) (7)
706,287
Notes and accounts receivable trade 829,723 225,182 (225,182) (7) 1,054,905
225,182
Other current assets 8,100 - 8,100
--------- --------- --------- ---------
Total current assets 1,164,830 931,469 (226,400) 1,869,899
Non-current assets 137,518 - 137,518
Investment in NPC Energy Corp. (3,228,400) (7) -
3,228,400 (6)
Property and equipment (at cost):
Oil and gas properties 12,399,339 6,762,331 (6,762,331) (7) 16,428,833
4,029,494
Other properties 361,461 - 361,461
Accumulated depletion and deprec. (4,773,665) (4,925,113) 4,925,113 (4,773,665)
---------- --------- --------- ---------
Property and equipment, net 7,987,135 1,837,218 2,192,276 12,016,629
Other assets 2,956 2,363 (2,363) (7) 3,586
630
Total assets $9,292,439 $2,771,050 $1,964,143 $14,027,632
========= ========= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 435,600 $ 331,080 $ (331,080) (7) $ 766,680
331,080
Accounts payable and accrued expenses 278,552 182,204 (182,204) (7)
147,204
35,000 (6) 460,756
--------- --------- --------- ----------
Total current liabilities 714,152 513,284 - 1,227,436
Long-term debt 4,848,310 136,779 (136,779) (7) 4,985,089
136,779
Deferred income taxes 496 432,000 (432,000) (7) 1,118,626
1,118,130
Redeemable common stock 528,183 - 528,183
Stockholders' Equity
Preferred stock - - 3,333 (5)(6) 3,333
Common stock 26,378 8,000 11,240 (5)(6) 37,618
(8,000) (6)
Paid-in capital 3,565,499 1,544,292 2,952,427 (5)(6) 6,517,926
(1,544,292) (6)
Treasury stock (68,040) - (68,040)
Retained earnings (deficit) (322,539) 136,695 (136,695) (7) (322,539)
--------- --------- --------- ----------
Total stockholders' equity 3,201,298 1,688,987 1,278,013 6,168,298
Total liabilities and
stockholders' equity $9,292,439 $2,771,050 $1,964,143 $14,027,632
========= ========= ========= ==========
562,000 (5)
Shares of common stock outstanding 1,297,144 800,000 (800,000) (5) 1,859,144
========= ======= ======= =========
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
MIDDLE BAY OIL COMPANY, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Twelve months ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTIONS>
Pro Forma
MBOC NPC Adjustments Pro Forma
Historical Historical for the Merger Combined
---------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $3,238,280 $1,532,813 $ - $4,771,093
Gain on sale of properties 125,550 629,165 754,715
Other income 174,816 18,697 193,513
--------- --------- --------- ---------
3,538,646 2,180,675 - 5,719,321
Costs and expenses:
Lease operating and production
taxes 1,436,869 1,003,785 2,440,654
Depletion, depreciation
and amortization 1,221,263 276,952 160,225 (1) 1,658,440
Abandonment expense 83,107 - 83,107
Interest expense 520,419 100,216 620,635
General and administrative 698,194 239,580 937,774
--------- --------- --------- ---------
3,959,852 1,620,533 160,225 5,740,610
Income (loss) before income taxes (421,206) 560,142 (160,225) (21,289)
Provision for income taxes (benefit) (90,153) 155,225 (66,069) (3) (997)
--------- --------- --------- ---------
Net income (loss) (331,053) 404,917 (94,156) (20,292)
Preferred stock dividend - - 80,000 (2) 80,000
--------- --------- --------- ---------
Net income (loss) applicable
to common stock $ (331,053) $ 404,917 $ (174,157) $ (100,293)
========= ========= ========= =========
Income (loss) per share $ (0.25) $ 0.51 $ (0.05)
========= ========= =========
Weighted average number of common and (800,000)
common equivalent shares outstanding 1,318,917 800,000 562,000 (4) 1,880,917
========= ========= ========= =========
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
MIDDLE BAY OIL COMPANY, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Nine months ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTIONS>
Pro Forma
MBOC NPC Adjustments Pro Forma
Historical Historical for the Merger Combined
---------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $3,186,255 $1,066,973 $ - $4,253,228
Gain on sale of properties 37,814 103,995 141,809
Other income 362,069 22,165 384,234
--------- --------- --------- ---------
3,586,138 1,193,133 - 4,779,271
Costs and expenses:
Lease operating and production
taxes 1,104,066 638,523 1,742,589
Depletion, depreciation and
amortization 901,995 121,282 138,869 (1) 1,162,146
Abandonment expense 249,568 - 249,568
Interest expense 375,799 43,814 419,613
General and administrative 511,048 137,824 648,872
--------- --------- --------- ---------
3,142,476 941,443 138,869 4,222,788
Income (loss) before income taxes 443,662 251,690 (138,869) 556,483
Provision for income taxes - 53,888 (60,453) (3) (6,565)
--------- --------- --------- ---------
Net income (loss) 443,662 197,802 (78,416) 563,048
Preferred stock dividend - - 60,000 (2) 60,000
--------- --------- --------- ---------
Net income (loss)applicable to
common stock $ 443,662 $ 197,802 $ (138,416) $ 503,048
========= ========= ========= =========
Income (loss) per share $ 0.34 $ 0.25 $ 0.27
========= ========= =========
Weighted average number of common and (800,000)
common equivalent shares outstanding 1,308,768 800,000 562,000 (4) 1,870,768
========= ========= ========= =========
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
MIDDLE BAY OIL COMPANY, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - Pro Forma Adjustments for the Merger
On December 18, 1996, MBOC and NPC entered into the Merger Agreement
whereby NPC will merge into MBOC. The merger will be accounted for using
the purchase method of accounting. In completing the merger, MBOC will issue
562,000 shares of MBOC common stock and $1,226,400 in cash in exchange for
all of the issued and outstanding NPC common stock.
The merger will be accounted for as a purchase of NPC by MBOC and as a
result of the purchase method of accounting, MBOC's cost of acquiring NPC will
be allocated to the assets and liabilities acquired based on estimated fair
values.
MBOC has incurred approximately $35,000 in legal and accounting expenses
related to the merger. The direct costs of the merger will be accrued and
included as a cost of the merger.
The accompanying Pro Forma Combined Condensed Statements of Operations
reflect the following adjustments for the merger:
(1) To adjust depletion, depreciation and amortization to reflect
MBOC's purchase price allocated to the property and equipment using the unit
of production method utilized by MBOC.
(2) To record the preferred stock dividends paid on the preferred
stock issued for the cash portion of the purchase price.
(3) To adjust the provision for income taxes for the change in
financial taxable income as a result of the entries (1) and (2).
(4) To reflect the issuance of 166,667 shares of Series A Preferred
Stock and 562,000 shares of MBOC Common Stock. Pro forma net income (loss)
per common share information is computed by dividing net income (loss),
adjusted for the preferred stock dividend requirement of $80,000 for the year
ended December 31, 1995 and $60,000 for the nine months ended September 30,
1996 by the pro forma weighted average common and common equivalent shares
outstanding. Shares issuable upon exercise of options and upon the conversion
of preferred stock are included in the computations of the pro forma income
per common and common equivalent share if the effect is dilutive.
The accompanying Pro Forma Combined Condensed Balance Sheet as of
September 30, 1996 has been prepared as if the merger had occurred on that
date and includes the following adjustments:
(5) To record the issuance of the 166,667 shares of Series A
Preferred Stock, 562,000 shares of MBOC Common Stock and $226,400 in cash for
an aggregate consideration of $3,193,400. On a pro forma basis, there would
be 1,859,144 shares of MBOC Common Stock and 166,667 shares of Series A
Preferred Stock outstanding as of September 30, 1996.
(6) To record MBOC's cost of acquiring NPC (in thousands):
Estimated fair value of 562,000 shares
of MBOC Common Stock issued $1,967
Estimated fair value of 166,667 shares
of MBOC Series A Preferred Stock 1,000
Cash on hand 226
Other legal and accounting expenses 35
-----
$3,228
=====
The fair value of the securities to be issued in connection with
the merger has been calculated assuming the price of MBOC common stock is
$3.50 per share.
(7) To adjusts the assets and liabilities under the purchase method
of accounting based on MBOC's purchase price. MBOC's purchase price has been
allocated to the assets and liabilities of NPC based on the preliminary
estimates of fair values with the remaining purchase price allocated the
proved oil and gas properties. No goodwill has been recorded in this
transaction. The information presented herein may differ from the actual
purchase price allocation.
The preliminary allocation of the purchase price included in the pro
forma balance sheet is summarized as follows: (in thousands)
Working capital assumed, excluding current
portion of long-term debt $ 785
Oil and gas properties:
Proved 3,804
Unproved 225
Long-term debt assumed (468)
Deferred income taxes (1,118)
-----
$3,228
=====
Note C - Pro Forma Combined Supplemental Oil and Gas
Reserve and Standardized Measure Information
The following is a summary of the pro forma combined quantities of
proved reserves prepared by combining the historical information of MBOC
and NPC, derived from estimates prepared by MBOC's and NPC's respective
independent engineers. See the historical financial statements of NPC
contained elsewhere herein.
Oil Gas
(Mbbl) (Mmcf)
---- ----
December 31, 1994 1,057 9,373
Purchases of reserves in place 411 2,340
Sales of reserves in place (101) (1,003)
Extension and discoveries - -
Revisions of previous estimates 40 512
Production (163) (1,268)
----- -----
December 31, 1995 1,244 9,954
===== =====
Proved developed reserves:
December 31, 1994 912 8,126
December 31, 1995 1,122 8,955
The following is a summary of the pro forma combined standardized
measure of discounted net cash flows related to the proved crude oil and
natural gas reserves of MBOC and NPC. For these calculations estimated cash
flows from the estimated future production of proved reserves were computed
using crude oil and natural gas prices as of the end of each period presented.
Future development and production costs attributable to the proved reserves
were estimated assuming that existing conditions would continue over the
economic lives of the individual leases and costs were not escalated for the
future. Estimated future income tax expenses were calculated by applying
future statutory tax rates to the estimated future pretax net cash flows
related to the proved crude oil and natural gas reserves, less the tax basis
of the properties involved.
The pro forma combined standardized measure of discounted future net
cash flows relating to proved crude oil and natural gas reserves is summarized
as follows (in thousands):
December 31
1995
--------
Future cash inflows $ 41,605
Future production and development costs (18,897)
Future income tax expense (3,524)
-------
Future net cash flows 19,184
10% annual discount for timing (6,637)
-------
Standardized measure of discounted future
net cash flows $ 12,547
=======
The following are the principal sources of change in the pro forma
combined standardized measure of discounted future net cash flows (in
thousands):
Year ended
December 31,
1995
--------
Balance at beginning of year $ 9,492
Sales of oil and gas produced, net of costs (2,346)
Net changes in prices and production costs 2,056
Net change in estimated development costs 175
Purchases of reserves in place 3,252
Extensions and discoveries, net of costs -
Revisions of previous quantity estimates 520
Sales of reserves in place (1,193)
Accretion of discount 1,120
Net change in income taxes (529)
-------
Balance at end of year $ 12,547
=======
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.
MIDDLE BAY OIL COMPANY, INC.
(Registrant)
Date: January 14, 1997
By: /s/ Frank C. Turner, II
-------------------------------
Frank C. Turner II
Vice President and
Chief Financial Officer
