<PAGE> 1
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)
February 10, 1997
---------------------------
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)
Total number of sequentially numbered pages: 36
<PAGE> 2
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 February 20, 1997 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 March 31, 1995 and 1996
Audited Statements of Operations for the Years
Ended March 31, 1995 and 1996
Audited Statements of Changes in Stockholders'
Equity for the Years Ended March 31, 1995 and 1996
Audited Statements of Cash Flows for the Years
Ended March 31, 1995 and 1996
Notes to Audited Financial Statements
Interim Financial Statements (unaudited):
Balance Sheet as of December 31, 1996
Statements of Operations for the nine months
ended December 31, 1995 and 1996
Statements of Cash Flows for the nine months
ended December 31, 1995 and 1996
Notes to Unaudited Financial Statements
(b) Unaudited Pro Forma Financial Information
Pro Forma Combined Balance Sheet as of
December 31, 1996
Pro Forma Combined Statement of Operations for the
Year Ended December 31, 1996
Notes to Pro Forma Combined Financial Statements
(c) Exhibits
<PAGE> 3
BISON ENERGY CORPORATION
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1996 AND 1995
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Independent Auditors' Report. . . . . . . . . . . . . . . 1
Consolidated Balance Sheets . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations . . . . . . . . . . 3
Consolidated Statements of Changes in
Stockholder's Equity . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . 6
</TABLE>
<PAGE> 5
Independent Auditors' Report
Board of Directors and Stockholder
Bison Energy Corporation
We have audited the accompanying consolidated balance sheets of Bison
Energy Corporation as of March 31, 1996 and 1995, and the related statements of
operations, changes in stockholder's equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We have 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bison
Energy Corporation at March 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/S/ SCHULTZ, WATKINS & COMPANY
Jackson, Mississippi
March 22, 1997
-1-
<PAGE> 6
BISON ENERGY CORPORATION
Consolidated Balance Sheets
March 31
ASSETS
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 974,462 $ 567,844
Accounts receivable 345,327 369,638
Warehouse stock 173,975 151,698
Other 20,661 -
----------- -----------
Total current assets 1,514,425 1,089,180
NON-CURRENT ASSETS (Note 2)
Accounts receivable-stockholder 7,553 35,422
Notes receivable affiliates 357,698 182,000
----------- -----------
365,251 217,422
PROPERTY (At Cost)(Note 1)
Oil and gas (successful efforts method)
(substantially pledged - Note 3) 1,132,858 1,041,280
Land 139,115 134,115
Office building and other 1,185,404 1,091,182
----------- -----------
2,457,377 2,266,577
Less accumulated depreciation and
depletion 1,116,018 951,457
----------- -----------
1,341,359 1,315,120
INVESTMENT IN EQUITY INVESTEES (Note 2) 321,253 187,398
OTHER ASSETS 30,392 72,398
----------- -----------
$ 3,572,680 $ 2,881,518
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 590,920 $ 445,980
Current maturity of long-term debt - 15,917
Income taxes payable 48,891 29,721
----------- -----------
Total current liabilities 639,811 491,618
DEFERRED INCOME TAX (Notes 1 & 4) 32,213 25,154
LONG TERM DEBT (Note 3) - -
STOCKHOLDER'S EQUITY (Note 7)
Common stock, $1.00 par, 3,000 shares
authorized, 500 issued and outstanding
in 1996 and 1995 500 500
Retained earnings 2,900,156 2,364,246
----------- -----------
2,900,656 2,364,746
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 6)
$ 3,572,680 $ 2,881,518
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 7
BISON ENERGY CORPORATION
Consolidated Statements of Operations
Years Ended March 31
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
REVENUE
Oil, gas and plant income $ 1,770,254 $ 1,805,520
(Loss) Gain on sale of assets (133,748) 28,364
Management income 168,000 128,625
Overhead income 573,056 678,958
Other 322,755 41,058
----------- -----------
2,700,317 2,682,525
----------- -----------
COST AND EXPENSES
Operating expenses, including plant,
and production taxes 852,374 971,897
Abandonment and dry hole costs 149,754 12,818
Depreciation, depletion and amortization 204,491 297,903
Interest 242 49,815
General and administrative 1,216,534 876,735
----------- -----------
2,423,395 2,209,168
----------- -----------
INCOME BEFORE INCOME TAXES AND
INVESTEE EARNINGS (LOSS) 276,922 473,357
INCOME TAX EXPENSE (BENEFIT) (Note 4)
Current 50,455 30,056
Deferred 7,059 (340)
----------- -----------
57,514 29,716
EQUITY IN NET EARNINGS(LOSS) OF EQUITY
INVESTEES (Note 2) 316,502 (325,191)
----------- -----------
NET INCOME $ 535,910 $ 118,450
=========== ===========
NET INCOME PER SHARE $ 1,072 $ 237
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE> 8
BISON ENERGY CORPORATION
Consolidated Statement of Changes in Stockholder's Equity
Years Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Common Stock
------------ Retained
Shares Amount Earnings Total
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE - April 1, 1994 500 $ 500 $ 2,245,796 $ 2,246,296
Net income 118,450 118,450
--- ------- ----------- -----------
BALANCE - March 31, 1995 500 500 2,364,246 2,364,746
Net Income 535,910 535,910
--- ------- ----------- -----------
BALANCE - March 31, 1996 500 $ 500 $ 2,900,156 $ 2,900,656
=== ======= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 9
BISON ENERGY CORPORATION
Consolidated Statements of Cash Flows
Years Ended March 31
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 535,910 $ 118,450
Depreciation, depletion & amortization 204,491 297,903
Loss (Gain) on sale of assets 69,400 (28,364)
(Income) Loss of equity investees (316,502) 325,191
Increase (Decrease) in deferred taxes 7,059 (340)
Decrease in receivables 24,311 133,036
Increase in payables and accruals 164,110 51,725
(Increase) Decrease in inventory (22,277) 40,501
Other 30,229 20,526
----------- -----------
Net cash provided by operating
activities 696,731 958,628
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (206,258) (194,118)
Proceeds from sale of assets 104,030 118,802
Investment in affiliates and equity
investees - (254,523)
Advances to affiliates-net (175,698) (182,000)
Other 3,730 62,015
----------- -----------
Net cash (used in) investing
activities (274,196) (449,824)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on loans (15,917) (425,700)
----------- -----------
Net cash (used in) financing
activities (15,917) (425,700)
----------- -----------
NET INCREASE IN CASH FOR THE YEAR 406,618 83,104
CASH AND CASH EQUIVALENTS - BEGINNING
OF YEAR 567,844 484,740
----------- -----------
CASH AND CASH EQUIVALENTS - END OF
YEAR $ 974,462 $ 567,844
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 242 $ 49,815
=========== ===========
Income taxes $ 31,285 $ (136,260)
=========== ===========
Non-cash investing and financing
activities:
Oil and gas properties contributed
to equity investee $ - $ 411,019
=========== ===========
Long term debt assumed by equity
investee $ - $ 800,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 10
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Bison Energy Corporation (the Company) was incorporated under the laws
of the State of Kansas on October 21, 1981. The Company is engaged in the
acquisition, development and production of oil and natural gas in the
contiguous United States.
Significant Accounting Policies
The Company's accounting policies reflect industry standards and conform
to generally accepted accounting principles. The more significant of such
policies are described below.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Bison Production Company. Intercompany
balances and transactions have been eliminated in consolidation. Investments in
other equity investments are accounted for by the equity method.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company classifies all
cash investments with original maturities of three months or less as cash.
-6-
<PAGE> 11
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(continued)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Oil and Gas Property
The Company follows the successful efforts method of accounting for oil
and gas properties and accordingly, capitalizes all direct costs incurred in
connection with the acquisition, drilling and development of productive oil and
gas properties. Costs associated with unsuccessful exploration and development
are charged to expense currently. Geological and geophysical costs and costs
of carrying and retaining unevaluated properties are charged to expense.
Depletion, depreciation and amortization of capitalized costs are computed
separately for each property. Leasehold and intangible drilling costs are
depleted using the unit-of-production method using only proved oil and gas
reserves. Lease equipment was depreciated using an accelerated method which
approximates the units-of-production method. The Company reviews its
undeveloped properties continually and charges then to expense on a property by
property basis when it is determined that they have been condemned by dry
holes, or will not be retained, sold or drilled upon.
Site Restoration, Dismantlement & Abandonment Costs
Site restoration, dismantlement and abandonment costs (P & A costs) are
common in the oil and gas industry in which the Company conducts operations. P
& A costs are costs associated with removing the facilities and equipment
required to operate a well and restoring the well site to specified conditions.
P & A procedures are governed by federal and state regulations and contractual
obligations. P & A costs are incurred when the oil and gas reserves of a well
or wells are depleted or when production drops to the point that it is no
longer economically feasible to produce.
-7-
<PAGE> 12
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(continued)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company continually reviews its working interests with respect to
potential P & A costs. When conditions require that a well be abandoned, the
appropriate accounting procedures are followed. When a well or the last well of
a group of proved properties ceases to produce or is no longer economically
feasible to produce, the entire cost related to the well or group of wells,
which includes estimated future dismantlement and abandonment cost, is written
off and gain or loss is recognized. Any additional liabilities arising for P &
A costs, net of salvage value of the equipment, are accrued in the financial
statements and charged to expense in the current period. At March 31, 1996 and
1995, there were no P & A costs accrued.
Impairment of Long-Lived Assets
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
(SFAS #121) was issued in March 1995. This statement requires that long-lived
assets be reviewed for impairment when events or changes in circumstances
indicate that the carrying value of such assets may not be recoverable. This
review consists of a comparison of the carrying value of the asset with the
asset's expected future undiscounted cash flows without interest costs.
Estimates of expected future cash flows are to represent management's
best estimate based on reasonable and supportable assumptions and projections.
If the expected future cash flows exceed the carrying value of the asset, no
impairment is recognized. If the carrying value of the asset exceeds the
expected future cash flows, an impairment exists and is measured by the excess
of the carrying value over the estimated fair value of the asset. Any
impairment provisions recognized in accordance with SFAS #121 are permanent and
may not be restored in the future.
-8-
<PAGE> 13
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(continued)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
There were no impairment provisions required at March 31, 1996 or 1995.
Prior to the adoption of SFAS #121, the Company assessed its proved oil
and gas properties on an individual field basis using management's best
estimate of the expected future cash flows from the producing properties.
Other Property and Equipment
Property and equipment are stated at cost and depreciation is computed
on the accelerated method over the appropriate life for the property. Additions
and betterment's which provide benefits to several periods are capitalized.
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes required by Statement of Financial Accounting Standards No. 109. Under
the asset and liability method deferred tax assets and liabilities are
determined by applying enacted statutory tax rates applicable to future years
to the difference between the financial statement and tax bases of assets and
liabilities.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, revenue and expenses, and
the disclosure of contingent assets and liabilities to prepare the financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
-9-
<PAGE> 14
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(continued)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk
Financial instruments which subject the Company to concentrations of
credit risk consist primarily of cash and accounts receivable. The Company
places its cash investments with high credit qualified financial institutions.
Risk with respect to receivables is concentrated primarily in current
production revenue receivable from multiple oil and gas producers, both major
and independent, and is typical in the Industry.
(2) RELATED PARTY TRANSACTIONS
On August 5, 1994, NPC Energy Corp. (NPC) was incorporated in the State
of Oklahoma for the purpose of exchanging its stock for all the assets and
liabilities of ten limited partnerships and certain oil and gas assets and
liabilities of the Company. Effective August 1, 1994, the Company received
449,600 shares (56.2%) of NPC common stock for the exchange of certain of its
oil and gas properties, the assumption of $800,000 long term debt and its
ownership interest in the ten limited partnerships. NPC subsequently merged
with Middle Bay Oil Company, Inc. on December 31, 1996 (See Note 7).
The Company performs the accounting and administrative functions for
NPC. Total cost paid to the Company for these services was $126,000 and $94,500
for the years ended March 31, 1996 and 1995, respectively. In addition, a
substantial number of the oil and gas properties owned by NPC are operated by
Bison Production Company (BPC) for which BPC receives an overhead fee ranging
from $150 to $570 per month per well. BPC collects all the oil and gas revenue,
pays all of the lease operating expenses for all the leases it operates and all
nonoperated leases owned by NPC, and remits a net check each month to the NPC.
BPC does not charge an overhead fee for the nonoperated leases.
-10-
<PAGE> 15
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(continued)
The Company owned 60% of the outstanding common stock of Shawnee Well
Service, Inc. (Shawnee). Shawnee is a Kansas corporation engaged in oil and gas
well completions and workovers. The majority of Shawnee's work is performed in
south central Kansas. The Company sold it ownership interest in Shawnee to a
related party of the Company's stockholder on March 31, 1996 for $90,000.
The Company performs accounting and administrative functions for
Shawnee. Total cost paid to the Company for these services was $18,000 for
years ended March 31, 1996 and 1995. Shawnee performs completions and workovers
for wells operated by the Company. Total costs paid to Shawnee for these
services was $128,058 and $80,030 for the years ended March 31, 1996 and 1995,
respectively.
The Company owns 57% of the outstanding common stock of Bison NGL, Inc.
(NGL). NGL is Delaware corporation engaged in retail propane sales in the state
of Colorado. The investment was subsequently sold to the Company's stockholder
as part of the Merger Agreement with Middle Bay Oil Company on February 28,
1997 (See Note 7).
Bison has a note receivable for $90,000 from NGL at Year ended March 31,
1996.
At March 31, 1996 and 1995, the Company had advanced $365,251 and
$217,422, respectively, to the Company's stockholder and related affiliates.
The advances were subsequently repaid, with interest, prior to or as part of
the Merger Agreement with Middle Bay Oil Company, Inc. on February 28, 1997
(Note 7).
-11-
<PAGE> 16
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(continued)
(3) LONG-TERM DEBT
The Company has a revolving bank note payable for working capital
purposes with a maximum balance of $1,000,000, due August 31, 1996. The note is
collateralized by certain oil and gas properties and is guaranteed by the
stockholder of the Company. The loan did not have a balance March 31, 1996 and
1995.
(4) INCOME TAXES
Income tax expense (benefit) for the years ended March 31 consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current $ 50,455 $ 30,056
Deferred 7,059 (340)
-------- ---------
Total $ 57,514 $ 29,716
======== ========
</TABLE>
The reconciliation of income taxes computed at the U.S. Federal
statutory tax rates to the provision for income taxes is as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Income tax expense (benefit) at statutory
rate $ 231,435 $ 57,785
(Decrease) due to statutory depletion (108,429) (81,156)
(Decrease) Increase due to deferred income
tax (7,059) 340
(Decrease)Increase due to non-consolidated
affiliates (54,140) 69,881
(Decrease) due to tax credits (3,838) (190)
(Decrease) due to AMT credit carryforward - (6,569)
(Decrease) due to effect of graduated tax
rates (16,750) (16,750)
Increase due to state taxes and other 9,236 6,715
--------- ---------
Income tax expense (benefit) $ 50,455 $ 30,056
========= =========
</TABLE>
-12-
<PAGE> 17
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(continued)
The Company's net deferred tax liability at March 31, 1996 and 1995 is
as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax liability
Oil and gas properties $ 32,213 $ 25,154
========= =========
</TABLE>
As of March 31, 1996, the Company had a statutory depletion carryforward
of $264,293.
(5) RETIREMENT PLAN
The Company maintains a Code Section 401(K) profit sharing plan. All
eligible employees may elect to have the Company contribute a portion of their
compensation to the plan. For any calendar year these elective deferrals may
not exceed a specific dollar amount determined by the Internal Revenue Service.
For each plan year, the Company may contribute to the Plan an amount of
matching contribution determined by the Company at its discretion. The Company
may choose not to make a matching contribution for a particular year. The
Company contributed $22,000 to the plan for the year ended March 31, 1996.
(6) COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various other legal proceedings which are
considered routine litigation incidental to the Company's business, the
disposition or which management believes will not have a material effect on the
financial position or result of operations of the Company.
-13-
<PAGE> 18
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(continued)
(7) SUBSEQUENT EVENTS
On December 31, 1996, the Company exchanged all of its NPC Energy Corp.
common stock for 562,000 shares of Middle Bay Oil Company, Inc. (Middle Bay)
common stock. Middle Bay's common stock is traded in the Over-The-Counter
Market on the NASDAQ National Market System under the symbol "MBOC".
On February 10, 1997, the Company executed a definitive merger agreement
with Middle Bay Oil Company, Inc., whereby Bison would be acquired as a wholly
owned subsidiary of Middle Bay. Pursuant to the terms of the agreement, Middle
Bay issued 1,167,556 shares of its common stock to the Bison stockholder and
cancelled the 562,000 shares of Middle Bay common stock owned by Bison. The
balance of the purchase price consisted of cash of $5,900,000. The transaction
closed on February 28, 1997.
(8) SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
CAPITALIZED COSTS AND COSTS INCURRED (UNAUDITED)
The following tables present the (1) capitalized costs related to oil
and gas producing activities and the related depreciation, depletion and
amortization and (2) costs incurred in oil and gas property acquisition and
exploration and development activities (in thousands).
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Capitalized Costs
Proved properties $ 478,381 $ 399,214
Nonproducing leasehold 60,421 99,202
Support equipment & facilities 594,056 542,864
Accumulated depreciation, depletion &
amortization (676,788) (547,363)
--------- ---------
Net $ 456,070 $ 493,917
========= =========
</TABLE>
-14-
<PAGE> 19
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
(continued)
<TABLE>
<S> <C> <C>
Cost Incurred
Proved properties $ 20,483 $ 74,065
Unproved properties 30,100 95,034
Exploration costs 131,363 -
Development costs 97,997 118,274
--------- ---------
Total $ 279,943 $ 287,373
========= =========
Depreciation, depletion &
amortization $ 111,807 $ 188,759
========= =========
</TABLE>
ESTIMATED QUANTITIES OF RESERVES (UNAUDITED)
STANDARDIZED MEASURE OF FUTURE NET CASH FLOWS FROM PROVED RESERVES
(UNAUDITED)
The Company has interests in oil and gas properties that are principally
located in Kansas. The Company does not own or lease any oil and gas properties
outside the United States. There are no quantities of oil or gas subject to
long-term supply or similar agreements with any governmental agencies.
Information with respect to estimated quantities of reserves and future
net cash flows from proved reserves at March 31, 1996 and 1995 was not
available without retaining an outside engineering firm. Until the subsequent
merger with Middle Bay Oil Company, Inc. (Note 7), the Company had only one
stockholder and had no reason to assemble this information. Management has
therefore elected to omit these disclosures.
-15-
<PAGE> 20
BISON ENERGY CORPORATION
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED DECEMBER 31, 1996
-16-
<PAGE> 21
BISON ENERGY CORPORATION
Consolidated Balance Sheets (Unaudited)
December 31
ASSETS
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 815,908 $ 606,767
Accounts receivable 512,632 443,969
Warehouse stock 187,431 175,335
Other 169,399 151,409
---------- ----------
Total current assets 1,685,370 1,377,480
NON-CURRENT ASSETS (Note 2)
Accounts receivable-stockholder 414 296
Notes receivable affiliates 546,163 213,069
---------- ----------
546,577 213,365
PROPERTY (At Cost)(Note 1)
Oil and gas (successful efforts method)
(substantially pledged - Note 3) 1,196,834 1,185,138
Land 139,115 139,115
Office building and other 1,317,556 1,212,847
---------- ----------
2,653,505 2,537,100
Less accumulated depreciation and
depletion 1,162,122 1,099,277
---------- ----------
1,491,383 1,437,823
INVESTMENT IN EQUITY INVESTEES (Note 2) 517,266 492,686
OTHER ASSETS 139,948 9,469
---------- ----------
$ 4,380,544 $ 3,530,823
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 517,284 $ 582,862
Income taxes payable 117,111 17,436
---------- ----------
Total current liabilities 634,395 600,298
DEFERRED INCOME TAX (Notes 1 & 4) 30,803 33,754
LONG TERM DEBT (Note 3) - -
STOCKHOLDER'S EQUITY (Note 6)
Common stock, $1.00 par, 3,000 shares
authorized, 500 issued and outstanding
in 1996 and 1995 500 500
Retained earnings 3,714,846 2,896,271
---------- ----------
3,715,346 2,896,771
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 5)
$ 4,380,544 $ 3,530,823
========== ==========
</TABLE>
-17-
<PAGE> 22
BISON ENERGY CORPORATION
Consolidated Statements of Operations (Unaudited)
Nine Months Ended December 31
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
REVENUE
Oil, gas and plant income $ 1,660,753 $ 1,302,434
Gain on sale of assets 38,241 -
Management income 116,000 108,000
Overhead income 418,872 446,804
Other 72,277 245,779
---------- ----------
2,306,143 2,103,017
---------- ----------
COST AND EXPENSES
Operating expenses, including plant,
and production taxes 650,737 636,820
Abandonment and dry hole costs 7,671 56,563
Depreciation, depletion and amortization 108,492 153,250
General and administrative 762,939 953,698
---------- ----------
1,529,839 1,800,331
---------- ----------
INCOME BEFORE INCOME TAXES AND
INVESTEE EARNINGS 776,304 302,686
INCOME TAX EXPENSE (BENEFIT) (Note 4)
Current 117,505 20,000
Deferred (1,410) 8,600
---------- ----------
116,095 28,600
EQUITY IN NET EARNINGS OF EQUITY
INVESTEES (Note 2) 154,481 257,939
---------- ----------
NET INCOME $ 814,690 $ 532,025
========== ==========
NET INCOME PER SHARE $ 1,629 $ 1,064
========== ==========
</TABLE>
-18-
<PAGE> 23
BISON ENERGY CORPORATION
Consolidated Statement of Cash Flows (Unaudited)
Nine Months Ended December 31
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 814,690 $ 532,025
Depreciation, depletion & amortization 108,492 153,250
(Gain) on sale of assets (38,241) -
(Income) of equity investees (154,481) (257,939)
(Decrease) Increase in deferred taxes (1,410) 8,600
(Increase) in receivables (160,166) (74,331)
(Decrease) Increase in payables and
accruals (5,416) 124,597
(Increase) in inventory (13,456) (23,637)
Other (148,738) (151,409)
---------- ----------
Net cash provided by operating
activities 401,274 311,156
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (220,275) (275,953)
Investment in affiliates and equity
investees (41,532) -
Advances to affiliates-net (188,465) 4,057
Other (109,556) 15,580
---------- ----------
Net cash (used in) investing
activities (559,828) (256,316)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment on loans - (15,917)
---------- ----------
NET (DECREASE) IN CASH FOR THE PERIOD (158,554) 38,923
CASH AND CASH EQUIVALENTS - APRIL 1, 1996 974,462 567,844
---------- ----------
CASH AND CASH EQUIVALENTS -
DECEMBER 31, 1996 $ 815,908 $ 606,767
========== ==========
</TABLE>
-19-
<PAGE> 24
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Bison Energy Corporation (the Company) was incorporated under the laws
of the State of Kansas on October 21, 1981. The Company is engaged in the
acquisition, development and production of oil and natural gas in the
contiguous United States.
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 December 31, 1996
and the results of operations and cash flows for the nine months ended December
31, 1996.
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.
Significant Accounting Policies
The Company's accounting policies reflect industry standards and conform
to generally accepted accounting principles. The more significant of such
policies are described below.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Bison Production Company. Intercompany
balances and transactions have been eliminated in consolidation. Investments in
other equity investments are accounted for by the equity method.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company classifies all
cash investments with original maturities of three months or less as cash.
-20-
<PAGE> 25
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(continued)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Oil and Gas Property
The Company follows the successful efforts method of accounting for oil
and gas properties and accordingly, capitalizes all direct costs incurred in
connection with the acquisition, drilling and development of productive oil and
gas properties. Costs associated with unsuccessful exploration and development
are charged to expense currently. Geological and geophysical costs and costs
of carrying and retaining unevaluated properties are charged to expense.
Depletion, depreciation and amortization of capitalized costs are computed
separately for each property. Leasehold and intangible drilling costs are
depleted using the unit-of-production method using only proved oil and gas
reserves. Lease equipment was depreciated using an accelerated method which
approximates the units-of-production method. The Company reviews its
undeveloped properties continually and charges then to expense on a property by
property basis when it is determined that they have been condemned by dry
holes, or will not be retained, sold or drilled upon.
Site Restoration, Dismantlement & Abandonment Costs
Site restoration, dismantlement and abandonment costs (P & A costs) are
common in the oil and gas industry in which the Company conducts operations.
P & A costs are costs associated with removing the facilities and equipment
required to operate a well and restoring the well site to specified conditions.
P & A procedures are governed by federal and state regulations and contractual
obligations. P & A costs are incurred when the oil and gas reserves of a well
or wells are depleted or when production drops to the point that it is no
longer economically feasible to produce.
The Company continually reviews its working interests with respect to
potential P & A costs. When conditions require that a well be abandoned, the
appropriate accounting procedures are followed. When a well or the last well of
a group of proved properties ceases to produce or is no longer economically
feasible to produce, the entire cost related to the well or group of wells,
which includes estimated future dismantlement and abandonment cost, is written
off and gain or loss is recognized. Any additional liabilities arising for P &
A costs, net of salvage value of the
-21-
<PAGE> 26
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(continued)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
equipment, are accrued in the financial statements and charged to expense in
the current period. At December 31, 1996 there were no P & A costs accrued.
Impairment of Long-Lived Assets
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
(SFAS #121) was issued in March 1995. This statement requires that long-lived
assets be reviewed for impairment when events or changes in circumstances
indicate that the carrying value of such assets may not be recoverable. This
review consists of a comparison of the carrying value of the asset with the
asset's expected future undiscounted cash flows without interest costs.
Estimates of expected future cash flows are to represent management's
best estimate based on reasonable and supportable assumptions and projections.
If the expected future cash flows exceed the carrying value of the asset, no
impairment is recognized. If the carrying value of the asset exceeds the
expected future cash flows, an impairment exists and is measured by the excess
of the carrying value over the estimated fair value of the asset. Any
impairment provisions recognized in accordance with SFAS #121 are permanent and
may not be restored in the future.
There were no impairment provisions required at December 31, 1996 or
1995.
Prior to the adoption of SFAS #121, the Company assessed its proved oil
and gas properties on an individual field basis using management's best
estimate of the expected future cash flows from the producing properties.
Other Property and Equipment
Property and equipment are stated at cost and depreciation is computed
on the accelerated method over the appropriate life for the property. Additions
and betterment's which provide benefits to several periods are capitalized.
-22-
<PAGE> 27
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(continued)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes required by Statement of Financial Accounting Standards No. 109. Under
the asset and liability method deferred tax assets and liabilities are
determined by applying enacted statutory tax rates applicable to future years
to the difference between the financial statement and tax bases of assets and
liabilities.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, revenue and expenses, and
the disclosure of contingent assets and liabilities to prepare the financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments which subject the Company to concentrations of
credit risk consist primarily of cash and accounts receivable. The Company
places its cash investments with high credit qualified financial institutions.
Risk with respect to receivables is concentrated primarily in current
production revenue receivable from multiple oil and gas producers, both major
and independent, and is typical in the Industry.
(2) RELATED PARTY TRANSACTIONS
On August 5, 1994, NPC Energy Corp. (NPC) was incorporated in the State
of Oklahoma for the purpose of exchanging its stock for all the assets and
liabilities of ten limited partnerships and certain oil and gas assets and
liabilities of the Company. Effective August 1, 1994, the Company received
449,600 shares (56.2%) of NPC common stock for the exchange of certain of its
oil and gas properties, the assumption of $800,000 long term debt and its
ownership interest in the ten limited partnerships. NPC subsequently merged
with Middle Bay Oil Company, Inc. on December 31, 1996 (See Note 6).
-23-
<PAGE> 28
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(continued)
The Company performs the accounting and administrative functions for
NPC. Total cost paid to the Company for these services was $94,500 for the nine
months ended December 31, 1996 and 1995. In addition, a substantial number of
the oil and gas properties owned by NPC are operated by Bison Production
Company (BPC) for which BPC receives an overhead fee ranging from $150 to $570
per month per well. BPC collects all the oil and gas revenue, pays all of the
lease operating expenses for all the leases it operates and all nonoperated
leases owned by NPC, and remits a net check each month to the NPC. BPC does not
charge an overhead fee for the nonoperated leases.
The Company owns 57% of the outstanding common stock of Bison NGL, Inc.
(NGL). NGL is Delaware corporation engaged in retail propane sales in the state
of Colorado. The investment was subsequently sold to the Company's stockholder
as part of the Merger Agreement with Middle Bay Oil Company on February 28,
1997 (See Note 6).
At December 31, 1996 and 1995, the Company had advanced $546,163 and
$213,069, respectively, to related affiliates. The advances were subsequently
repaid, with interest, prior to or as part of the Merger Agreement with Middle
Bay Oil Company, Inc. on February 28, 1997 (Note 6).
(3) LONG-TERM DEBT
The Company has a revolving bank note payable for working capital
purposes with a maximum balance of $1,000,000, due August 31, 1997. The note is
collateralized by certain oil and gas properties and is guaranteed by the
stockholder of the Company. The loan did not have a balance December 31, 1996.
-24-
<PAGE> 29
BISON ENERGY CORPORATION
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(concluded)
(4) INCOME TAXES
Income tax expense (benefit) for the nine months ended December 31, 1996
and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current $ 117,505 $ 20,000
Deferred (1,410) 8,600
-------- --------
Total $ 116,095 $ 28,600
======== ========
</TABLE>
The Company's net deferred tax liability at December 31, 1996 and 1995
is as follows:
<TABLE>
<S> <C> <C>
Deferred tax liability
Oil and gas properties $ 30,803 $ 33,754
======== ========
</TABLE>
(5) COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various other legal proceedings which are
considered routine litigation incidental to the Company's business, the
disposition or which management believes will not have a material effect on the
financial position or result of operations of the Company.
(6) SUBSEQUENT EVENTS
On December 31, 1996, the Company exchanged all of its NPC Energy Corp.
common stock for 562,000 shares of Middle Bay Oil Company, Inc. (Middle Bay)
common stock. Middle Bay's common stock is traded in the Over-The-Counter
Market on the NASDAQ National Market System under the symbol "MBOC".
On February 10, 1997, the Company executed a definitive merger agreement
with Middle Bay Oil Company, Inc., whereby Bison would be acquired as a wholly
owned subsidiary of Middle Bay. Pursuant to the terms of the agreement, Middle
Bay issued 1,167,556 shares of its common stock to the Bison stockholder and
cancelled the 562,000 shares of Middle Bay common stock owned by Bison. The
balance of the purchase price consisted of cash of $5,900,000. The transaction
closed on February 28, 1997.
-25-
<PAGE> 30
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The accompanying pro forma combined condensed financial statements (the "pro
forma financial statements")assume the merger between Middle Bay Oil Company,
Inc. and Bison Energy Corp. and subsidiary (BEC), (the "Merger") is accounted
for using the purchase method of accounting. The pro forma financial
statements are based on the historical financial statements of MBOC and BEC.
The pro forma financial statements are also based, in part, on the historical
financial statements of NPC Energy Corp.(NPC), which merged into MBOC effective
December 31, 1996 and was accounted for as a purchase (the "NPC Merger"). Such
historical financial statements for the NPC Merger are included in the 8-K/A
Amendment No. 1 filed by MBOC on January 14, 1997.
The Pro Forma Combined Condensed Balance Sheet as of December 31, 1996 assumes
the Merger had been consummated on that date. The Pro Forma Combined Condensed
Statement of Operations for the year ended December 31, 1996 has been prepared
assuming the Merger and the NPC Merger had been consummated on January 1, 1996.
The pro forma adjustments are based upon available financial information and
assumptions that management of MBOC believes 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 notes thereto should be read in conjunction with the historical financial
statements and notes thereto described above.
-26-
<PAGE> 31
MIDDLE BAY OIL COMPANY, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS Pro Forma
Adjustments
MBOC BEC for the
Historical Historical Asset Sale
---------------------------------------------------
<S> <C> <C> <C>
Current assets:
Cash $ 556,026 $ 815,908 $1,445,890 (14)
-
Notes and accounts receivable trade 1,129,417 512,632
Other current assets 58,137 356,830 -
---------------------------------------------------
Total current assets 1,743,580 1,685,370 1,445,890
Non-current assets 159,215 546,577 -
Investment in Bison Energy Corp. (1,445,890)(14)
Property and equipment (at cost):
Oil and gas properties 16,252,576 1,196,834
Other properties 354,603 1,456,671 -
Accumulated depletion and deprec. (5,332,517) (1,162,122) -
---------------------------------------------------
Property and equipment, net 11,274,662 1,491,383 -
Investment in Equity Investees 517,266
Other assets 7,523 139,948 -
Total assets $13,184,980 $4,380,544 $ -
====================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 554,601 $ -
Accounts payable and accrued expenses 402,796 634,395
---------------------------------------------------
Total current liabilities 957,397 634,395
Long-term debt 5,158,477 -
Deferred income taxes 610,785 30,803
Redeemable common stock 421,179 -
Stockholders' Equity
Preferred stock 1,000,000 -
Common stock 37,618 500
Paid-in capital 5,628,263 -
Treasury stock (68,040) -
Retained earnings (deficit) (560,699) 3,714,846 -
---------------------------------------------------
Total stockholders' equity 6,037,142 3,715,346 -
Total liabilities and stockholders' equity $13,184,980 $4,380,544 $ -
===================================================
Shares of common stock outstanding 1,859,144 500
===================================================
ASSETS
Pro Forma
Adjustments Pro Forma
for the Merger Combined
-----------------------------------------------------
<S> <C> <C>
Current assets:
Cash (654,114)(11)(12) $ 717,820
(815,908)(13)
815,908
(1,445,890)(14)
Notes and accounts receivable trade (512,632)(13) 1,642,049
512,632
Other current assets (356,830)(14) 58,137
-----------------------------------------------------
Total current assets (2,456,834) 2,418,006
Non-current assets (546,577)(14) 159,215
Investment in Bison Energy Corp. 10,019,672 (12) -
(10,019,672)(13)
1,445,890 (14)
Property and equipment (at cost):
Oil and gas properties (1,196,834)(13) 27,206,684
10,954,108
Other properties (1,456,671)(13)(14) 879,920
525,317 (13)
Accumulated depletion and deprec. 1,162,122 (5,332,517)
-----------------------------------------------------
Property and equipment, net 9,988,042 22,754,087
Investment in Equity Investees (517,266)(13) -
Other assets (139,948)(14) 7,523
Total assets $ 7,773,307 $25,338,831
=====================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt - $ 554,601
Accounts payable and accrued expenses (634,395)(13)
634,395
35,000 (12) 1,072,191
-----------------------------------------------------
Total current liabilities 35,000 1,626,792
Long-term debt - 5,158,477
Deferred income taxes (30,803)(13) 2,764,355
2,153,570
Redeemable common stock 421,179
Stockholders' Equity
Preferred stock 6,000,000 (11)(12) 7,000,000
Common stock (500)(11) 49,729
12,111 (11)(12)
Paid-in capital 3,318,775 (11)(12) 8,947,038
Treasury stock (68,040)
Retained earnings (deficit) (3,714,846)(13) (560,699)
-----------------------------------------------------
Total stockholders' equity 5,615,540 15,368,028
Total liabilities and stockholders' equity $ 7,773,307 $25,338,831
=====================================================
605,556 (11)
Shares of common stock outstanding (500)(11) 2,464,700
=====================================================
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
-27-
<PAGE> 32
MIDDLE BAY OIL COMPANY, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Twelve months ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
MBOC NPC Adjustments MBOC
Historical Historical for NPC Merger Pro Forma
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $4,474,786 $1,456,121 $5,930,907
Gain on sale of properties 37,815 103,995 141,810
Overhead income
Management income
Other income 373,820 29,603 403,423
--------------------------------------------------------------------
4,886,421 1,589,719 0 6,476,140
Costs and expenses:
Lease operating and
production taxes 1,516,011 868,879 2,384,890
Depletion, depreciation and amortization 1,462,196 161,000 212,925 (1) 1,836,121
Abandonment expense 428,598 0 428,598
Interest expense 504,945 54,488 559,433
General and administrative 694,300 172,132 866,432
--------------------------------------------------------------------
4,606,050 1,256,499 212,925 6,075,474
Income (loss) before income taxes
and investee earnings 280,371 333,220 (212,925) 400,666
Provision for income taxes (benefit) 74,871 71,000 (68,300)(3) 77,571
Equity in net earnings of equity investees 0 0 0
--------------------------------------------------------------------
Net income (loss) 205,500 262,220 (144,624) 323,096
Preferred stock dividend 0 0 80,000 (2) 80,000
--------------------------------------------------------------------
Net income (loss) applicable to common stock $ 205,500 $ 262,220 ($224,624) $243,096
====================================================================
Income (loss) per share-Primary $ 0.15 $ 0.33 $0.13
====================================================================
Income (loss) per share-Fully diluted $ 0.15 $ 0.33 $0.13
====================================================================
Weighted average common shares outstanding
562,000
Primary 1,332,141 800,000 (800,000)(4) 1,894,141
====================================================================
Fully diluted 1,358,662 800,000 (800,000)(4) 1,920,662
====================================================================
<CAPTION>
Pro Forma
BISON Adjustments Pro Forma
Historical for the Merger Combined
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $2,128,573 $8,059,480
Gain on sale of properties (95,507) 46,303
Overhead income 545,124 545,124
Management income 176,000 (176,000) (10) 0
Other income 149,253 552,676
--------------------------------------------------------------------
2,903,443 (176,000) 9,203,583
Costs and expenses:
Lease operating and
production taxes 866,291 3,251,181
Depletion, depreciation and amortization 159,733 848,600 (5) 2,844,454
Abandonment expense 100,862 529,460
Interest expense 242 559,675
General and administrative 1,025,775 (126,000) (10) 1,766,207
--------------------------------------------------------------------
2,152,903 722,600 8,950,977
Income (loss) before income taxes
and investee earnings 750,540 (898,600) 252,606
Provision for income taxes (benefit) 145,009 (331,328) (7) (108,748)
Equity in net earnings of equity investees 213,044 (213,044) (9) 0
--------------------------------------------------------------------
Net income (loss) 818,575 (567,272) 361,355
Preferred stock dividend 0 480,000 (6) 560,000
--------------------------------------------------------------------
Net income (loss) applicable to common stock $ 818,575 $(1,047,272) $ (198,645)
====================================================================
Income (loss) per share-Primary $ 1,637.15 $ (0.08)
====================================================================
Income (loss) per share-Fully diluted $ 1,637.15 $ (0.08)
====================================================================
Weighted average common shares outstanding
(500)
Primary 500 605,556 (8) 2,499,697
====================================================================
(500)
Fully diluted 500 605,556 (8) 2,526,218
====================================================================
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
-28-
<PAGE> 33
MIDDLE BAY OIL COMPANY, INC. NOTES TO
PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS
(Unaudited)
Note A- Pro Forma Adjustments for the NPC Merger
On December 18, 1996, MBOC and NPC entered into the Merger Agreement whereby
NPC was merged into MBOC effective December 31, 1996. The merger was accounted
for using the purchase method of accounting. In completing the merger, MBOC
issued 562,000 shares of MBOC common stock and paid $1,226,400 in cash in
exchange for all of the issued and outstanding NPC common stock.
The merger was 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 was allocated
to the assets and liabilities acquired based on estimated fair values.
MBOC incurred approximately $35,000 in legal and accounting expenses related
to the merger. The direct costs of the merger was accrued and included as a
cost of the merger.
The accompanying Pro Forma Combined Condensed Statements of Operations for
the year ended December 31, 1996 has been prepared as if the NPC Merger had
occurred on January 1, 1996 and it reflects the following adjustments:
(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, 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.
-29-
<PAGE> 34
MIDDLE BAY OIL COMPANY, INC. NOTES TO
PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS
(Unaudited)
Note B- Pro Forma Adjustments for the Merger
On February 10, 1997, MBOC and BEC entered into the Merger Agreement whereby
BEC will merge into and continue to exist as a wholly-owned subsidiary of MBOC.
The merger will be accounted for using the purchase method of accounting. In
completing the merger, MBOC will issue 605,556 shares of MBOC common stock and
pay $6,654,114 in cash in exchange for all of the issued and outstanding BEC
common stock.
The merger will be accounted for as a purchase of BEC by MBOC and as a result
of the purchase method of accounting, MBOC's cost of acquiring BEC 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:
(5) 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.
(6) To record the preferred stock dividends paid on the preferred stock
issued for the cash portion of the purchase price.
(7) To adjust the provision for income taxes for the change in
financial taxable income as a result of the entries (1) and (2).
(8) To reflect the issuance of 1,000,000 shares of Series A Preferred
Stock and 605,556 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 $480,000 for the year ended
December 31, 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.
(9) To remove equity in net earnings of equity investees that were not
purchased and to remove BEC's share of NPC's net earnings.
(10) To remove management income for accounting and administrative
functions performed by BEC for other entities and for NPC. Management income
for services performed for NPC amounted to $10,500 per month or $126,000
annually and is recorded on NPC's financial statements as general and
administrative expenses. Subsequent to the Merger, BEC will no longer perform
such accounting and administrative functions.
-30-
<PAGE> 35
MIDDLE BAY OIL COMPANY, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The accompanying Pro Forma Combined Condensed Balance Sheet as of December
31, 1996 has been prepared as if the merger had occurred on that date and
includes the following adjustments:
(11) To record the issuance of the 1,000,000 shares of Series A Preferred
Stock at $6.00 per share, 605,556 shares of MBOC Common Stock and $654,114 in
cash for an aggregate consideration of $9,984,672. On a pro forma basis, there
would be 2,464,700 shares of MBOC Common Stock and 1,166,667 shares of Series A
Preferred Stock outstanding as of December 31, 1996.
(12) To record MBOC's cost of acquiring NPC (in thousands):
Estimated fair value of 605,556 shares
of MBOC Common Stock issued ...............$3,330
Estimated fair value of 1,000,000 shares
of MBOC Series A Preferred Stock ..........6,000
Cash on hand 654
Other legal and accounting expenses 35
------
10,019
======
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 $5.50
per share.
(13) To adjusts the assets and liabilities under the purchase method of
accounting based on MBOC's purchase price. MBOC's purchase price has been
allocated to the assets and liabilities of BEC based on the preliminary
estimates of fair values with the remaining purchase price allocated to the
proved oil and gas properties. No goodwill has been recorded in this
transaction. The information presented herein may differ from the actual
purchase price allocation.
The preliminary allocation of the purchase price included in the pro forma
balance sheet is summarized as follows: (in thousands)
Working capital ............................$ 694
Oil and gas properties:
Proved .....................................10,954
Yard Inventory and equipment................... 525
Deferred income taxes .........................(2,154)
-------
$10,019
=======
(14) To record the sale of certain assets to an affiliated entity
immediately after the closing of the merger. The sold assets consisted solely
of non-oil and gas assets. MBOC purchased the assets in the Merger and sold
the assets for the same price as it paid. Therefore, no gain or loss was
recorded for financial statement purposes.
-31-
<PAGE> 36
Note C- Pro Forma Combined Supplemental Oil and Gas
Reserve and Standardized Measure Information
No summary of the pro forma combined quantities of proved reserves,
prepared by combining the historical oil and gas reserve information of MBOC
and BEC, is available because the reserve data for BEC was not available.
-32-
<PAGE> 37
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: April 25, 1997 By:/s/ Frank C. Turner, II
--------------------------------------
Frank C. Turner, II
Vice President and Chief Financial Officer
-33-
