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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): September 24, 1998
ENERGY SEARCH, INCORPORATED
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 001-12679 62-1423071
(State or Other Jurisdic- (Commission (IRS Employer
tion of Incorporation) File Number) Identification No.)
280 FORT SANDERS WEST BLVD., SUITE 200
KNOXVILLE, TENNESSEE 37922
(Address of Principal Executive Offices) (Zip Code)
(800) 551-5810
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 24, 1998, Energy Search, Incorporated (the "Company") closed
the acquisition of working interests (the "Subject Interests") in a total
of 145 gross natural gas or oil wells (the "Wells") located in southeastern
Ohio. The effective date of the acquisition was June 30, 1998. All of the
Wells involved in the acquisition are operated by the Company.
The Subject Interests were owned by the following Tennessee limited
partnerships (the "Affiliated Partnerships"), each of which are affiliates
of the Company: Equity Financial Corporation Natural Gas/Tax Credit 1989
Limited Partnership (the "1989 LP"); Equity Financial Corporation Natural
Gas/Tax Credit 1990 Limited Partnership (the "1990 LP"); Equity Financial
Corporation Natural Gas/Tax Credit 1991 Limited Partnership (the "1991
LP"); Equity Financial Corporation Natural Gas/Tax Credit 1992 Limited
Partnership (the "1992 LP"); Energy Search Natural Gas/Tax Credit 1992-A
Limited Partnership (the "1992-A LP").
The Affiliated Partnerships were each syndicated by Equity Financial
Corporation ("EFC"), a wholly-owned subsidiary of the Company. Charles P.
Torrey, Jr. and Robert L. Remine, each executive officers and directors of
the Company, were the managing general partners of the 1989 LP and the 1990
LP, together owning an aggregate 2% partnership interest in each such
partnership. Messrs. Torrey and Remine, as well as Richard S. Cooper, an
executive officer and director of the Company, were managing general
partners of the 1991 LP and 1992 LP, together owning an aggregate 9%
partnership interest in each partnership. The Company was the managing
general partner of the 1992-A LP, and owned a 3% partnership interest in
such partnership.
The Company paid aggregate purchase consideration amounting to $2,223,941
for the Subject Interests acquired from the Affiliated Partnerships. This
total amount was comprised of $1,716,748 in Company common stock (221,515
shares) and $507,193 in cash.
The purchase consideration for the Subject Interests was based on a market
valuation of the Affiliated Partnership's oil and gas assets as of January
1, 1998, independently reviewed as to reasonableness by an independent
petroleum consultant. The purchase consideration for each Affiliated
Partnership's Subject Interests was payable in cash, Company common stock,
or a combination of both. The cash portion of the total purchase (the "Cash
Out Value") was equal to the percentage of the aggregate interest of
limited partners in the Affiliated Partnership who had elected the Cash Out
Option. The common stock portion of the total purchase consideration of the
Affiliated Partnership's Subject Interests was equal to the percentage of
the aggregate interest of limited partners in the Affiliated Partnership
who elected the Stock Option. The value of Company common stock issued in
satisfaction of the common stock portion of the purchase consideration,
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(the "Stock Value"), was equal to 1.75 times what would have been the Cash
Out Value had that portion of the purchase consideration been paid for in
cash pursuant to the Cash Out Option, rather than in common stock. The
number of shares of Company common stock issued to the Affiliated
Partnership was equal to the Stock Value divided by $7.75 per share.
Each Affiliated Partnership approved the sale of its Subject Interests to
the Company by majority vote of its limited partners. The limited partners
in each Affiliated Partnership voted on a restructuring plan (the
"Restructuring Plan") whereby an Affiliated Partnership's Subject Interests
were sold to the Company in consideration for cash and Company common
stock, and the Affiliated Partnership was thereafter to be liquidated.
Each limited partner of an Affiliated Partnership had the opportunity to
elect to have his or her Affiliated Partnership interest liquidated for
cash (the "Cash Out Option") or Company common stock (the "Stock Option").
Final tabulation of the elections of limited partners in the Affiliated
Partnerships was completed at closing on September 24, 1998. Liquidating
distributions of cash and common stock to limited partners of Affiliated
Partnerships are in the process of finalization.
The Company's acquisition of the Subject Interests from Affiliated
Partnerships followed a group of smaller transactions (the "Minor Interest
Acquisitions") pursuant to which the Company acquired minor working
interests and overriding royalty interests (the "Minor Interests") in the
Wells from nine individuals (the "Minor Interest Owners") in consideration
for cash and Company common stock. The Minor Interest Acquisitions closed
in July of 1998 and had an effective date of April 16, 1998. The total
purchase consideration for the Minor Interests was $227,740, comprised of
10,114 shares of Company common stock and $121,543 in cash. The cash
value, common stock value and the number of shares of common stock issued
in consideration for the Minor Interests was determined in a similar manner
as was the Company's purchase of Subject Interests from the Affiliated
Partnerships as described above.
The Minor Interest Owners included Messrs. Torrey, Remine and Cooper,
executive officers and directors of the Company, who were paid an aggregate
of $109,254 in consideration for sale of their Minor Interests.
The cash portion of the purchase consideration for the Company's
acquisition of the Subject Interests and the Minor Interests was funded by
utilization of the Company's operating line of credit with Bank One -
Texas, N.A.
The Company's acquisition of Subject Interests and Minor Interests included
interests in oil and gas wells and all associated equipment, casing,
tubing, leases and right-of-ways. These assets will be used by the Company
to continue to produce oil and gas for sale from the Wells.
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The Company is in the process of evaluating financial statements relating
to the assets acquired. To the extent the Company determines that any such
financial statements are required, an amendment to this Current Report on
Form 8-K will be filed within 60 days of the date of filing of this report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND
EXHIBITS.
(c) Exhibits:
99 Press Release
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: September 24, 1998 ENERGY SEARCH, INCORPORATED
By /s/Richard S. Cooper
Richard S. Cooper, President
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EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
99 Press Release
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EXHIBIT 99
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CONTINENTAL 195 Wekiva Springs Road
CAPITAL Suite 200
& EQUITY Longwood, FL 32779
CORPORATION Phone: 407-682-2001
- ------------- Fax: 407-682-2544
APPROVED ____________________________ DATE _________________
PRESS RELEASE
ENERGY SEARCH, INCORPORATED ACQUIRES
REMAINING INTEREST IN 145 GAS PRODUCING WELLS
KNOXVILLE, TN - (PR NEWSWIRE) - SEPTEMBER 28, 1998 - Energy Search,
Incorporated (NASDAQ: EGAS, BSE: EYS) has acquired the remaining interest
in 145 producing wells operated by the Company in Washington County, Ohio
for $1,716,748 in restricted stock and $507,193 in cash, for a total of
$2,223,941.
Charles P. Torrey, Chairman and CEO of Energy Search, stated, "This is a
synergistic acquisition of properties in our immediate area of operation
which can be maintained without any increase in field personnel.
Management considers this a significant addition to our existing Ohio
fields which have produced high drilling success rates. This acquisition,
coupled with the best drilling results the Company has ever experienced, is
expected to increase the Company's daily net gas production to more than 5
million cubic feet (MMCF) per day, up from 2 million at year end 1997."
Energy Search, Incorporated is an independent oil and gas exploration and
production company focused primarily on developmental drilling and
production of natural gas reserves in the Appalachian Basin and elsewhere
in the mid-continent region of the United States.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: THE STATEMENTS WHICH ARE NOT HISTORICAL FACTS CONTAINED IN THIS PRESS
RELEASE ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS AND
UNCERTAINTIES INCLUDING BUT NOT LIMITED TO RISKS ASSOCIATED WITH THE
UNCERTAINTY OF FUTURE FINANCIAL RESULTS, ADDITIONAL FINANCING REQUIREMENTS,
DEVELOPMENT OF NEW PRODUCTS, GOVERNMENT APPROVAL PROCESSES, THE IMPACT OF
COMPETITIVE PRODUCTS OR PRICING, TECHNOLOGICAL CHANGES, THE EFFECT OF
ECONOMIC CONDITIONS AND OTHER UNCERTAINTIES DETAILED IN THE COMPANY'S
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
FOR MORE INFORMATION, PLEASE CALL
CONTINENTAL CAPITAL & EQUITY CORPORATION
INVESTOR CONTACT: DODI B. ZIRKLE; [email protected]
BROKER CONTACT: BRENDAN HOPKINS
407-682-2001
