<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 20, 1995
-----------------
SOUTHERN MINERAL CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada
---------------------------------------------
(State or other jurisdiction of incorporation)
0-8043 36-2068676
------------------------------ ------------------------------
(Commission File Number) (IRS Employer Identification No.)
500 Dallas, Suite 2800, Houston, Texas 77002-4708
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 658-9444
--- ---------------------
N/A
---------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
(b) Pro Forma Financial Information.
(c) Exhibits.
2.1 Purchase and Sale Agreement, dated as of October 31,
1995, by and among Stone & Webster, Incorporated,
Stone & Webster Oil Company, Inc. and Southern
Mineral Corporation (incorporated by reference to
Exhibit 2.1 to Form 8-K of Registrant dated October
31, 1995).
2.2 Escrow Agreement, dated as of October 31, 1995, by
and among Southern Mineral Corporation, Stone &
Webster, Incorporated, Stone & Webster Oil Company,
Inc. and Texas Commerce Bank National Association
(incorporated by reference to Exhibit 2.2 to Form 8-K
of Registrant dated October 31, 1995).
10.1 Credit Agreement, dated December 20, 1995, between
Southern Mineral Corporation, SMC Production Co., San
Salvador Development Company, Inc., Venture
Resources, Inc., Venture Pipeline Company, VenGas
Pipeline Company, Spruce Hills Production Company,
Inc., and Compass Bank-Houston for Reducing Revolving
Line of Credit of up to $25,000,000 (incorporated by
reference to Exhibit 10.1 to Form 8-K of Registrant
dated December 20, 1996).
10.2 Promissory Note, dated December 20, 1995, in the
original principal amount of $25,000,000, made by
Southern Mineral Corporation, SMC Production Co., San
Salvador Development Company, Inc., Venture
Resources, Inc., Venture Pipeline Company, VenGas
Pipeline Company, and Spruce Hills Production
Company, Inc. in favor of Compass Bank-Houston
(incorporated by reference to Exhibit 10.2 to Form
8-K of Registrant dated December 20, 1996).
10.3 Credit Agreement, dated December 20, 1995, between
Southern Mineral Corporation, SMC Production Co., San
Salvador Development Company, Inc., Venture
Resources, Inc., Venture Pipeline Company, VenGas
Pipeline Company, Spruce Hills Production Company,
Inc., and Compass Bank-Houston for Term Loan of
$3,500,000 (incorporated by reference to Exhibit 10.3
to Form 8-K of Registrant dated December 20, 1996).
10.4 Promissory Note, dated December 20, 1995, in the
original principal amount of $3,500,000, made by
Southern Mineral Corporation, SMC Production Co., San
Salvador Development Company, Inc., Venture
Resources, Inc., Venture Pipeline Company, VenGas
Pipeline Company, and Spruce Hills Production
Company, Inc. in favor of Compass Bank-Houston
(incorporated by reference to Exhibit 10.4 to Form
8-K of Registrant dated December 20, 1996).
-2-
<PAGE> 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Southern Mineral Corporation
We have audited the accompanying combined statement of revenue and
direct operating expenses of Stone & Webster's Oil and Gas Operations (Stone &
Webster) (see Note A), as of December 31, 1994 and 1993. These financial
statements are the responsibility of Stone & Webster's management. Our
responsibility is to express an opinion on the 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 reasonable basis
for our opinion.
The accompanying financial statements prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (for inclusion in the registration statement on Form 8-K of Southern
Mineral Corporation) as described in note A to the financial statements and are
not intended to be a complete presentation of the Stone & Webster revenues and
expenses.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined revenue and direct operating
expenses of Stone & Webster's Oil and Gas Operations, described in note A, as
of December 31, 1994 and 1993, in conformity with generally accepted accounting
principles.
/s/ GRANT THORNTON LLP
Houston, Texas
January 15, 1996
<PAGE> 4
STONE & WEBSTER OIL AND GAS OPERATIONS
COMBINED STATEMENTS OF REVENUE AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
------------------------------ ------------------------------
1994 1993 1995 1994
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Revenue
Oil and gas sales $ 6,906,579 $ 7,078,932 $ 4,539,939 $ 5,348,652
Pipeline operations
Gas sales 941,046 1,414,705 451,488 793,009
Transportation 623,923 800,179 286,096 500,169
------------ ------------ ------------ ------------
8,471,548 9,293,816 5,277,523 6,641,830
Direct operating expenses
Oil and Gas Production
Lease operations 1,394,800 1,328,475 1,139,405 989,938
Production taxes 270,534 303,921 150,727 218,131
Pipeline operations
Gas purchases 866,388 1,289,535 421,867 793,349
Operating expenses 188,448 255,299 38,048 76,810
------------ ------------ ------------ ------------
2,720,170 3,177,230 1,750,047 2,078,228
------------ ------------ ------------ ------------
Excess of revenue over direct
operating expenses $ 5,751,378 $ 6,116,586 $ 3,527,476 $ 4,563,602
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 5
STONE & WEBSTER OIL AND GAS OPERATIONS
NOTES TO COMBINED STATEMENTS OF
REVENUE AND DIRECT OPERATING EXPENSES
December 31, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. BASIS OF PRESENTATION AND GENERAL INFORMATION
The accompanying combined statements of revenue and direct operating
expenses present the ownership interest of Southern Mineral Corporation
(Company) in the revenue and direct operating expenses of certain oil and
gas property interests (Properties) and pipeline interests acquired from
Stone & Webster, Inc. The Company's acquisition included the stock of
Spruce Hills Production Co., Inc., San Salvador Development Company and
Venture Resources, Inc., and certain assets and liabilities of Stone &
Webster Oil Company, Inc. (collectively Stone & Webster Oil and Gas
Operations) on December 20, 1995. The combined statements include the
revenue and direct operating expenses of Stone & Webster Oil and Gas
Operations for the years ended December 31, 1994 and 1993 and the nine
months ended September 30, 1995 and 1994 (unaudited).
The accompanying combined statements do not reflect provisions for
depletion, depreciation and amortization, if any, which may have been
recorded in the financial records of the previous interest owner. The
combined statements also do not reflect certain additional expenses that may
have been incurred in connection with the ownership of the Properties such
as indebtedness and general and administrative expenses incurred
individually by the prior interest owners as such costs are not comparable
to those which will result from the future operation of the properties.
The interim financial statements for the nine months ended September 30,
1995 and 1994 are unaudited. However, in the opinion of management, these
interim financial statements include all necessary adjustments to fairly
present the results of the interim periods and all such adjustments are of a
normal recurring nature. The interim financial statements should be read in
conjunction with the audited financial statements for the years ended
December 31, 1994 and 1993.
2. UNAUDITED COMBINED STATEMENTS OF EARNINGS
As discussed above, the accompanying combined statements of revenue and
direct operating expenses do not include certain historical expense items
which are not necessarily indicative or comparable to future operations due
to either a change in the cost basis of the properties or in operational
factors relating to the new ownership. Additionally, these statements do
not include revenues and related expenses of natural gas marketing
transactions, which ceased after 1993. Complete, unaudited combined
historical statements of earnings are as follows:
4
<PAGE> 6
STONE & WEBSTER OIL AND GAS OPERATIONS
NOTES TO COMBINED STATEMENTS OF
REVENUE AND DIRECT OPERATING EXPENSES - CONTINUED
December 31, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Stone & Webster Oil and Gas Operations
COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year end Nine months ended
December 31, September 30,
------------------------------------- ----------------------------------
1994 1993 1995 1994
---------------- ----------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenue
Oil and gas sales $ 6,906,579 $ 7,078,932 $ 4,539,939 $ 5,348,652
Pipeline operations
Gas sales 941,046 1,414,705 451,488 793,009
Transportation 623,923 800,179 286,096 500,169
Gas marketing 125,272 1,551,590 27,409 108,198
Interest income 234,105 76,816 89,981 193,048
Other 30,109 52,807 7,111 1,031
---------------- ----------------- --------------- ---------------
8,861,034 10,975,029 5,402,024 6,944,107
---------------- ----------------- --------------- ---------------
Expenses
General and administrative expenses 2,078,944 1,844,228 1,353,527 1,428,261
Production 1,665,334 1,632,396 1,290,132 1,208,069
Depreciation, depletion and amortization 2,737,198 1,907,346 1,409,800 1,443,760
Exploration 603,197 267,958 126,662 523,725
Other 62,651 - 9,908 354
Pipeline operations
Gas purchases 866,388 1,289,535 421,867 793,349
Operating expenses 188,448 255,299 38,048 76,810
Gas marketing purchases 99,082 1,548,318 29,702 82,137
---------------- ----------------- --------------- ---------------
8,301,242 8,745,080 4,679,646 5,556,465
---------------- ----------------- --------------- ---------------
Earnings before income taxes 559,792 2,229,949 722,378 1,387,642
Provision for income taxes
Current 316,907 162,365 31,073 85,032
Deferred (53,350) (569,777) 37,491 3,653
Foreign 138,419 336,801 166,188 159,272
---------------- ----------------- --------------- ---------------
401,976 (70,611) 234,752 247,957
---------------- ----------------- --------------- ---------------
NET EARNINGS $ 157,816 $ 2,300,560 $ 487,626 $ 1,139,685
================ ================= =============== ===============
</TABLE>
5
<PAGE> 7
STONE & WEBSTER OIL AND GAS OPERATIONS
NOTES TO COMBINED STATEMENTS OF
REVENUE AND DIRECT OPERATING EXPENSES - CONTINUED
December 31, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
The entities that compose Stone & Webster Oil and Gas Operations were
components of a consolidated return. Tax expense was allocated to the
individual entities as if they were filing separate returns. Combined tax
expense differs from the amount calculated by applying the statutory
depletion, the non-recognition of deferred tax assets by entities with net
operating loss and, in 1993, due to the initial adoption of Statement of
Financial Accounting Standards No. 109, for which the Company does not have
sufficient records to separate the cumulative effect of this adoption from
the current period tax provision.
NOTE B - DISCLOSURE ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
The Properties' oil and gas activities are conducted in the United States
and Canada. A summary of the Properties' changes in quantities of proved
oil and gas reserves (all reserves are proved reserves) for the years ended
December 31, 1993 and December 31, 1994 follows:
<TABLE>
<CAPTION>
United United
Total Total States States Canada Canada
Oil (Bbl) Gas (Mcf) Oil (Bbl) Gas (Mcf) Oil (Bbl) Gas (Mcf)
--------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total proved reserves -
developed and undeveloped:
Balance, January 1, 1993 1,569,874 30,507,573 438,798 23,771,857 1,131,076 6,735,716
Production (149,628) (2,163,687) (32,772) (1,787,732) (116,856) (375,955)
Extensions, discoveries
and other additions 66,795 - - - 66,795 -
--------- ---------- ------- ---------- ---------- ---------
Balance, December 31, 1993 1,487,041 28,343,886 406,026 21,984,125 1,081,015 6,359,761
Production (153,739) (2,261,909) (31,807) (1,808,298) (121,932) (453,611)
Extensions, discoveries
and other additions 26,847 556,900 117 2,000 26,730 554,900
--------- ---------- ------- ---------- ---------- ---------
Balance, December 31, 1994 1,360,149 26,638,877 374,336 20,177,827 985,813 6,461,050
========= ========== ======= ========== ========== =========
Proved developed reserves:
January 1, 1993 1,569,874 30,507,573 438,798 23,771,857 1,131,076 6,735,716
========= ========== ======= ========== ========= =========
December 31, 1993 1,487,041 28,343,886 406,026 21,984,125 1,081,015 6,359,761
========= ========== ======= ========== ========= =========
December 31, 1994 1,360,149 26,638,877 374,336 20,177,827 995,813 6,461,050
========= ========== ======= ========== ========== =========
</TABLE>
6
<PAGE> 8
STONE & WEBSTER OIL AND GAS OPERATIONS
NOTES TO COMBINED STATEMENTS OF
REVENUE AND DIRECT OPERATING EXPENSES - CONTINUED
December 31, 1994 and 1993
NOTE B - DISCLOSURE ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) -
CONTINUED
The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves at December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------- ---------------------------------------
United United
States Canada Total States Canada Total
-------- ------ ----- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Future cash flows 45,860,823 26,143,342 72,004,165 50,247,399 27,980,446 78,227,845
Future production and
development costs 9,630,541 11,738,976 21,369,517 10,750,121 13,539,503 24,289,624
Income taxes 9,166,190 3,213,098 12,379,288 10,132,537 3,312,467 13,445,004
---------- ---------- ---------- ---------- ---------- ----------
Future net cash flows 27,064,092 11,191,268 38,255,360 29,364,741 11,128,476 40,493,217
10% annual discount for
estimated timing of cash flows (13,228,369) (3,288,290) (16,516,659) (14,606,886) (3,529,721) (18,136,607)
---------- ---------- ---------- ---------- ---------- ----------
Standardized measure of
discounted future net
cash flows 13,835,723 7,902,978 21,738,701 14,757,855 7,598,755 22,356,610
========== ========== ========== ========== ========== ==========
</TABLE>
The changes in the standardized measure of discounted future net cash flows
relating to proved oil and gas reserves for the years ended December 31,
1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------- ---------------------------------------
United United
States Canada Total States Canada Total
-------- ------ ----- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Sales of oil and gas produced,
net of production costs (3,337,196) (1,904,049) (5,241,245) (3,475,481) (1,971,055) (5,446,536)
Discoveries 350,545 350,545 386,982 386,982
Accretion of discount & other 2,415,064 1,857,727 4,272,791 3,515,650 1,496,876 5,012,526
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) (922,132) 304,223 (617,909) 40,169 (87,197) (47,028)
Beginning of period 14,757,855 7,598,755 22,356,610 14,717,686 7,685,952 22,403,638
End of period 13,835,723 7,902,978 21,738,701 14,757,855 7,598,755 22,356,610
========== ========== ========== ========== ========== ==========
</TABLE>
7
<PAGE> 9
SOUTHERN MINERAL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
As Of September 30, 1995
<TABLE>
<CAPTION>
Southern Stone & San Spruce Venture Pro Forma Pro Forma
Mineral Webster Oil Salvador Hills Resources Adjustments Consolidated
Corporation Company Development Production Inc Amount
Inc Co Co
(000's OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents 548 371 213 557 569 -1473 9 785
Marketable securities 1,249 0 -1249 2 0
0
Receivables 278 309 10 257 91 945
0
Other 45 817 81 -847 9 96
----------- ----------- ----------- ---------- --------- ---------- -------------
Total Current Assets 2,120 1,497 223 814 741 (3,569) 1,826
Investment in Subs 0 0
Property and Equipment, net 3,396 5,178 73 6,709 147 4096 1 19,599
0
Other assets 0 15 75 0 90
----------- ----------- ----------- ---------- --------- ---------- -------------
5,516 6,690 371 7,523 888 527 21,515
=========== =========== =========== ========== ========= ========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable 217 180 36 309 188 -535 9 395
Accrued Taxes 136 61 51 (49) -199 9 0
Deferred Income Taxes 29 43 28 -100 9 606
606 1
Notes Payable 22,915 -22915 2 15,215
15215 2
Stockholders' Equity 0
Common Stock 64 350 100 100 1 -551 3 64
Additional Paid in Capital 3,038 1,724 60 0 0 -1784 3 3,038
Retained Earnings 2,250 (18,615) 85 7,020 720 10790 3 2,250
----------- ----------- ----------- ---------- --------- ---------- -------------
5,352 (16,541) 245 7,120 721 8,455 5,352
Treasury Stock (53) -53
----------- ----------- ----------- ---------- --------- ---------- -------------
Total Stockholders' Equity 5,299 (16,541) 245 7,120 721 8,455 5,299
----------- ----------- ----------- ---------- --------- ---------- -------------
5,516 6,690 371 7,523 888 527 21,515
=========== =========== =========== ========== ========= ========== =============
</TABLE>
<PAGE> 10
SOUTHERN MINERAL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Southern Stone & San Spruce Venture PRO FORMA Pro Forma
Mineral Webster Oil Salvador Hills Resources ADJUSTMENTS Consolidated
Corporation Company Development Production Inc NOTE
Inc Co Co AMOUNT REF
(000's OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Oil and Gas 1,611 1,862 439 2,236 765 6913
Interest 67 39 6 17 28 157
Other 101 811 0 (10) 0 -800 4 102
------------- ------------- ----------- ------------ ----------- --------- ------------
1,779 2,712 445 2,243 793 -800 7,172
------------- ------------- ----------- ------------ ----------- --------- ------------
Expenses
Production 466 633 83 575 490 2247
Exploration 198 58 0 27 0 283
Depletion and Depreciation 458 682 53 693 23 -18 7 2228.92
338 8
Valuation Reduction 0 0 0 0 0 0
General and Administrative 675 581 99 410 263 2028
Interest Expense 1,022 5 1022
Other 0 0 0 0 0 0
------------- ------------- ----------- ------------ ----------- --------- ------------
1,797 1,954 235 1,705 776 1,342 7,809
------------- ------------- ----------- ------------ ----------- --------- ------------
Net income (loss) before
income taxes (18) 758 210 538 17 (2,142) -636.92
------------- ------------- ----------- ------------ ----------- --------- ------------
Income tax 0 1 62 184 (13) (234) 6 0
------------- ------------- ----------- ------------ ----------- --------- ------------
net income (loss) (18) 757 148 354 30 (1,908) (637)
============= ============= =========== ============ =========== ========= ============
net loss per share 0 ($0.12)
============= ============
average common and common
equivalent shares outstanding 5,507 5,507
============= ============
</TABLE>
<PAGE> 11
SOUTHERN MINERAL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Twelve Months Ended December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
Southern Stone & San Spruce Venture PRO FORMA Pro Forma
Mineral Webster Oil Salvador Hills Resources ADJUSTMENTS Consolidated
Corporation Company Development Production Inc NOTE
Inc Co Co AMOUNT REF
(000's OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C><C>
Revenues
Oil and Gas 1,747 3,340 682 2,791 1,690 10,250
Interest 56 154 18 21 42 291
Other 86 329 93 1 0 -300 4 209
----------- ----------- ----------- ---------- --------- ----------- ------------
1,889 3,823 793 2,813 1,732 -300 10,750
----------- ----------- ----------- ---------- --------- ----------- ------------
Expenses
Production 548 966 105 595 1,154 3,368
Exploration 1,566 292 1 292 0 2,151
Depletion and Depreciation 704 1,677 68 852 173 -1217 8 2,708
451 7
Valuation Reduction 1,724 63 0 0 0 1,787
General and Administrative 903 810 101 488 664 2,966
Interest Expense 1,369 5 1,369
Other 135 0 0 0 0 135
----------- ----------- ----------- ---------- --------- ----------- ------------
5,580 3,808 275 2,227 1,991 603 14,484
----------- ----------- ----------- ---------- --------- ----------- ------------
Net income (loss) before (3,691) 15 518 586 (259) -903 (3,734)
income taxes
----------- ----------- ----------- ---------- --------- ----------- ------------
Income tax (558) 4 148 179 70 -401 6 (558)
----------- ----------- ----------- ---------- --------- ----------- ------------
Net income (loss) (3,133) 11 370 407 (329) (502) (3,176)
----------- ----------- ----------- ---------- --------- ----------- ------------
net loss per share ($0.78) ($0.79)
----------- ------------
average common and common
equivalent shares outstanding 4,024,421 4,024,421
----------- ------------
</TABLE>
<PAGE> 12
SOUTHERN MINERAL CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE BALANCE SHEET AS SEPTEMBER 30, 1995,
FOR THE STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
AND FOR THE STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995
(UNAUDITED)
1. REFLECTS THE STEP-UP IN BASIS OF THE PURCHASE OF STONE & WEBSTER OIL
COMPANY, SPRUCE HILLS PRODUCTION COMPANY, SAN SALVADOR COMPANY, AND VENTURE
RESOURCES INC (NET).
2. TO REFLECT THE ACQUSITION COSTS OF STONE & WEBSTER OIL CO AND ITS
AFFILIATES
3. TO ELIMINATE STONE & WEBSTER OIL COMPANY, SPRUCE HILLS PRODUCTION COMPANY,
SAN SALVADOR DEVELOPMENT COMPANY, AND VENTURE RESOURCES, INC EQUITY.
4. TO ELIMINATE DIVIDEND INCOME FROM SUBSIDIARY.
5. TO REFLECT INTEREST EXPENSE ON NOTE FOR STONE & WEBSTER ACQUISTION.
6. TO REFLECT TAX BENEFIT ADJUSTMENTS.
7. TO ELIMINATE AMORTIZATION OF GOODWILL OF PURCHASED ENTITIES
8. TO RECORD ADDITIONAL DD&A RELATED TO OIL & GAS PROPERTIES STEP-UP IN BASIS
9. TO ELIMINATE ASSETS AND LIABILITIES NOT TRANSFERRED IN THE ACQUISITION
10. NO ADJUSTMENTS HAVE BEEN MADE TO REFLECT FUTURE EXPECTED REDUCTIONS OF
GENERAL AND ADMINISTRATIVE EXPENSES.
<PAGE> 13
STONE & WEBSTER OIL AND GAS OPERATIONS
NOTES TO COMBINED STATEMENTS OF
REVENUE AND DIRECT OPERATING EXPENSES - CONTINUED
December 31, 1994 and 1993
NOTE B - DISCLOSURE ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) -
CONTINUED
The estimate of proved reserves and related valuations were determined based
primarily upon the reserve report prepared by independent petroleum
engineers in accordance with the provisions of Statement of Financial
Accounting Standards No. 69 (SFAS 69) "Disclosures about Oil and Gas
Producing Activities." The reserve report was prepared at December 31,
1995. Reserves for 1994 and 1993 were computed using these amounts,
adjusted for production and discoveries; accordingly, no revisions of prior
estimates are indicated. Stone & Webster Oil and Gas Operations had not
prepared reserve reports for 1994 or 1993.
The estimates of proved reserves are inherently imprecise and are
continually subject to revision based on production history, results of
additional exploration and development, price changes and other factors.
The standardized measure of discounted future net cash flows related to
proved oil and gas reserves and the changes in standardized measure of
discounted future net cash flows relating to proved oil and gas reserves
were prepared in accordance with the provisions of SFAS 69. Future cash
inflows were computed by applying year-end 1995 prices to estimated future
production, computed as discussed above. Future production and development
costs are computed by estimating the expenditures to be incurred in
developing and producing the proved oil and gas reserves at year-end, based
on 1995 year-end costs and assuming continuation of existing economic
conditions. Accordingly, no changes in prices and production/development
costs are indicated. Future net cash flows are discounted at a rate of 10%
annually to derive the standardized measure of discounted future net cash
flows. This calculation procedure does not necessarily result in an
estimate of the fair market value or the present value of the Stone &
Webster Oil and Gas Operations properties.
8
<PAGE> 14
99 News Release of Southern Mineral Corporation dated
December 20, 1995 (incorporated by reference to
Exhibit 99 to Form 8-K of Registrant dated December
20, 1996).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
March 4, 1996 SOUTHERN MINERAL CORPORATION
By: /s/ Steven H. Mikel
----------------------
Steven H. Mikel, President
-3-
