SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM 8-K
Filed on April 17, 1996
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) - April 17, 1996
DENBURY RESOURCES INC.
(Formerly Newscope Resources Ltd.)
(Exact name of Registrant as specified in its charter)
Canada
(State or other jurisdiction
of incorporation or organization)
33-93722 Not applicable
(Commission File Number) (I.R.S. Employer
Identification No.)
17304 Preston Road
Suite 200
Dallas, TX 75252
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (214)713-3000
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Audited statements of revenues and direct operating expenses
attributable to the purchased properties for the years ended
December 31, 1995, 1994 and 1993 and unaudited statements of
revenues and direct operating expenses for the three months
ended March 31, 1996 and 1995.
(b) Pro forma results of operations of Denbury Resources Inc. for
the year ended December 31, 1995 and three months ended March
31, 1996, as if the acquisition had occurred at the beginning
of each respective period and a pro forma balance sheet as of
March 31, 1996.
2
<PAGE>
Item 7 (a)
Statements of Revenues and Direct
Operating Expenses of Amerada Hess Properties
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Denbury Resources Inc.
We have audited the accompanying statements of revenues and direct operating
expenses attributable to certain oil and gas properties ("Amerada Hess
Properties") (see Note 1) acquired by Denbury Resources Inc. for the years
ended December 31, 1995, 1994 and 1993. These statements are the responsibility
of the management of Amerada Hess Corporation, as owner of the properties. Our
responsibility is to express an opinion on these 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 statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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.
The accompanying statements of revenues and direct operating expenses reflect
the revenues and direct operating expenses attributable to the Amerada Hess
Properties as described in Note 1 to the statements and is not intended to be a
complete presentation of the revenues and expenses of the Amerada Hess
Properties.
In our opinion, the accompanying statements present fairly, in all material
respects, the revenues and direct operating expenses of the Amerada Hess
Properties described in Note 1 for the years ended December 31, 1995, 1994 and
1993 in accordance with generally accepted accounting principles.
/s/ Deloitte & Touche
-------------------------------------
May 22, 1996
Dallas, Texas
4
<PAGE>
Statements of Revenues and
Direct Operating Expenses of
Amerada Hess Properties
(amounts in thousands)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended For the three months
December 31, ended March 31,
------------------------------- ------------------------
1995 1994 1993 1996 1995
-------- -------- ------- -------- -------
(Unaudited)(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Oil, gas and related product sales $18,210 $17,787 $26,087 $ 5,213 $ 3,740
Direct operating expenses:
Lease operating expense 7,888 6,598 7,908 1,749 1,798
------- ------- ------- ------- -------
Excess of revenues over
direct operating expenses $10,322 $11,189 $18,179 $ 3,464 $ 1,942
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Statements of Revenues and
Direct Operating Expenses of
Amerada Hess Properties
- - --------------------------------------------------------------------------------
1. The Properties
The accompanying statements represent the revenues and direct operating
expenses attributable to the net interest in producing wells and certain
non-producing leases sold to Denbury Resources Inc. ("Denbury"), by Amerada
Hess Corporation ("Amerada Hess") for approximately $42.0 million, before
adjustments which will include a purchase price reduction for interim net cash
flow from January 1, 1996, the effective date. This adjustment is projected to
be between $3.0 and $4.0 million. The properties are located in the states of
Louisiana, Mississippi, Alabama, and Ohio. The acquisition is subject to
certain preferential purchase rights held by third parties and the completion
of certain conditions before closing which are normal for a transaction of this
nature. Closing is scheduled for June 20, 1996.
2. Basis of Presentation
Historical financial statements reflecting financial position, results of
operations and cash flows required by generally accepted accounting principles
are not presented, as such information is neither readily available on an
individual property basis nor meaningful for the properties acquired because
the entire acquisition cost is being assigned to oil and gas properties.
Accordingly, these statements of revenues and direct operating expenses are
presented in lieu of the financial statements required under Rule 3-05 of
Securities and Exchange Commission Regulation S-X. All of the statements and
disclosures are stated in U.S. dollars.
The accompanying statements of revenues and direct operating expenses
represent Amerada Hess's net ownership interest in the properties acquired by
Denbury and are presented on the full cost accrual basis of accounting.
Depreciation, depletion, and amortization, allocated general and administrative
expenses, interest expense and income, and income taxes have been excluded
because the property interests acquired represent only a portion of a business
and the expenses incurred are not necessarily indicative of the expenses to be
incurred by Denbury.
3. Contingent Liabilities
Given the nature of the properties acquired and as stipulated in the
purchase agreement, Denbury is subject to loss contingencies, if any, pursuant
to existing or expected environmental laws, regulations, and leases covering
the acquired properties.
4. Oil and Gas Reserves Information (Unaudited)
Unaudited reserve information related to the properties being acquired is
presented in the table below and is derived from internal engineering
evaluations by Denbury as of December 31, 1995, and calculated as of December
31, 1994 and 1993 and January 1, 1993 by adding production for 1995, 1994 and
1993 to the December 31, 1995 amount.
6
<PAGE>
<TABLE>
<CAPTION>
Oil Gas
Estimated Quantities of Proved Reserves (MBbl) (MMcf)
----------- -----------
<S> <C> <C>
January 1, 1993 9,244.7 15,397.5
Production (1,219.0) (3,391.4)
------------ -----------
December 31, 1993 8,025.7 12,006.1
Production (965.9) (2,303.6)
------------ -----------
December 31, 1994 7,059.8 9,702.5
Production (939.7) (2,540.7)
------------ -----------
December 31, 1995 6,120.1 7,161.8
============ ===========
Proved Developed Reserves:
As of January 1, 1993 8,785.3 15,305.6
As of December 31, 1993 7,566.3 11,914.2
As of December 31, 1994 6,600.4 9,610.6
As of December 31, 1995 5,660.7 7,069.9
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows and Changes Therein
Related to Oil and Gas Reserves
The standardized measure of discounted future net cash flows
("Standardized Measure") relating to oil and gas reserves being acquired is
calculated in accordance with Statement of Financial Accounting Standards No.
69. The Standardized Measure has been prepared assuming year-end selling prices
adjusted for future fixed and determinable contractual price changes, year-end
development and production costs and a 10% annual discount rate. The reserves
and the related Standardized Measure at December 31, 1995, derived from
internal engineering evaluations, were adjusted for production during 1995,
1994, and 1993 and, in addition, the Standardized Measure was also adjusted for
price changes to derive reserves and the Standardized Measure as of December
31, 1994 and 1993. The Standardized Measure is not a fair market value of the
mineral interests sold and the Standardized Measure presented for the proved
oil and gas reserves does not purport to present the fair market value of the
oil and gas properties. An estimate of such value should consider among other
factors, anticipated future prices of oil and gas, the probability of
recoveries of existing proved reserves, the value of probable reserves and
acreage prospects, and perhaps different discount rates. It should be noted
that estimates of reserve quantities are inherently imprecise and subject to
substantial revision. Since the purchase price is approximately equal to the
Standardized Measure of discounted future net cash flows, a tax provision has
not been included.
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1995 1994 1993
---------- --------- ---------
(amounts in thousands)
<S> <C> <C> <C>
Future cash inflows $ 110,108 $ 128,318 $ 146,105
Future production and development costs (48,242) (56,131) (62,728)
--------- --------- ---------
Future net cash flows undiscounted 61,866 72,187 83,377
10% annual discount for estimated timing of cash flows (18,554) (31,521) (38,102)
--------- --------- ---------
Standardized measure of discounted future net cash flows $ 43,312 $ 40,666 $ 45,275
========= ========= =========
</TABLE>
The following are principal sources of changes in the standardized measure of
discounted future net cash flows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1995 1994 1993
-------- -------- --------
(amounts in thousands)
<S> <C> <C> <C>
Standardized measure of discounted future net cash flows
at beginning of period $ 40,666 $ 45,275 $ 77,649
Changes resulting from:
Net change in prices 8,901 2,053 (21,961)
Sales of oil and gas produced (10,322) (11,190) (18,178)
Accretion of discount 4,067 4,528 7,765
-------- -------- --------
Standardized measure of discounted future net cash flows
at end of period $ 43,312 $ 40,666 $ 45,275
======== ======== ========
</TABLE>
7
<PAGE>
Item 7(b)
Unaudited Pro Forma Consolidated
Statements of Income and
Balance Sheet
8
<PAGE>
DENBURY RESOURCES INC.
Pro Forma Consolidated Statements of Income and Balance Sheet
(Unaudited)
The following unaudited pro forma consolidated statements of income for year
ended December 31, 1995 and three months ended March 31, 1996 combine the
historical information of the Company adjusted to give effect to: (i) the
properties acquired in the Ottawa Energy, Inc. property acquisition previously
disclosed on Form 8-K filed on April 3, 1996 and the Amendment No. 1 thereto
filed on April 18, 1996 ("Ottawa Properties"), (ii) the properties (see Note 1)
acquired in the Amerada Hess Corporation acquisition scheduled to close in
June, 1996 ("Amerada Hess Properties"), and (iii) the related pro forma
adjustments which are based on estimates and assumptions explained in further
detail in the following paragraphs. The statements of income for the year ended
December 31, 1995 and three months ended March 31, 1996 reflect the
consolidated operations of Denbury, the Ottawa Properties and the Amerada Hess
Properties as if the transactions were consummated as of the beginning of each
respective period. The pro forma balance sheet as of March 31, 1996 is
presented as if the transaction had been consummated on that date. All of the
presented pro forma statements are in U.S. dollars.
The unaudited pro forma consolidated statements of income and balance sheet
are provided for comparative purposes only and should be read in conjunction
with the historical consolidated financial statements of the Company and the
historical statements of revenues and direct operating expenses of the Amerada
Hess Properties. The pro forma information presented is not necessarily
indicative of the combined financial results as they may be in the future or as
they might have been for the periods indicated had the acquisitions been
consummated at the beginning of each respective period.
9
<PAGE>
DENBURY RESOURCES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Three months ended March 31, 1996
-------------------------------------------------------------
Amerada
Denbury Ottawa Hess Adjustments
Historical Properties Properties (Note 1) Pro Forma
--------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
Oil, gas and related product sales $ 9,017 $ 854 $ 5,213 $ -- $ 15,084
Interest and other 75 -- -- -- 75
-------- -------- -------- -------- --------
Total revenues 9,092 854 5,213 15,159
-------- -------- -------- -------- --------
Expenses
Production 2,044 168 1,749 -- 3,961
General and administrative 825 -- -- 125 950
Interest 105 -- -- 863 968
Imputed preferred dividend 375 375
Provision for loss on early
extinguishment of debt 440 -- -- -- 440
Depletion and depreciation 2,925 -- -- 2,278 5,203
Franchise taxes 53 -- -- -- 53
-------- -------- -------- -------- --------
Total expenses 6,767 168 1,749 3,266 11,950
========
-------- -------- -------- -------- --------
Income before tax 2,325 686 3,464 (3,266) 3,209
========
Provision for federal income tax 945 233 1,178 (1,110) 1,246
-------- -------- -------- -------- --------
Net income $ 1,380 $ 453 $ 2,286 $ (2,156) $ 1,963
======== ======== ======== ======== ========
Net income per common share $ 0.06 $ 0.02 $ 0.10 $ (0.09) $ 0.09
======== ======== ======== ======== ========
Average common shares outstanding 22,938 22,938 22,938 22,938 22,938
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
10
<PAGE>
DENBURY RESOURCES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Year ended December 31, 1995
---------------------------------------------------------------
Amerada
Denbury Ottawa Hess Adjustments
Historical Properties Properties (Note 1) Pro Forma
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Oil, gas and related product sales $ 20,032 $ 2,954 $ 18,210 $ -- $ 41,196
Interest and other 77 -- -- -- 77
-------- -------- -------- -------- --------
Total revenues 20,109 2,954 18,210 41,273
-------- -------- -------- -------- --------
Expenses
Production 6,789 659 7,888 -- 15,336
General and administrative 1,832 -- -- 500 2,332
Interest 2,085 -- -- 3,450 5,535
Loss on early extinguishment of debt 200 -- -- -- 200
Depletion and depreciation 8,022 -- -- 8,127 16,149
Franchise taxes 100 -- -- -- 100
-------- -------- -------- -------- --------
Total expenses 19,028 659 7,888 12,077 39,652
-------- -------- -------- -------- --------
Income before tax 1,081 2,295 10,322 (12,077) 1,621
Provision for federal income tax 367 780 3,509 (4,106) 550
-------- -------- -------- -------- --------
Net income $ 714 $ 1,515 $ 6,813 $ (7,971) $ 1,071
======== ======== ======== ======== ========
Net income per common share $ 0.05 $ 0.11 $ 0.50 $ (0.58) $ 0.08
======== ======== ======== ======== ========
Average common shares outstanding 13,739 13,739 13,739 13,739 13,739
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
12
<PAGE>
DENBURY RESOURCES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31, 1996
-------------------------------------------------------
Amerada
Denbury Ottawa Hess
Historical Properties Properties Pro Forma
----------- ---------- --------- ---------
Assets
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 7,096 $ (6,500) $ -- $ 596
Receivables 6,064 -- -- 6,064
--------- --------- --------- ---------
Total current assets 13,160 (6,500) 6,660
--------- --------- --------- ---------
Property and equipment (using full cost accounting)
Oil and gas properties 81,183 7,500 38,500 127,183
Unevaluated oil and gas properties excluded from depletion 5,584 -- -- 5,584
Less accumulated depreciation and depletion (16,830) -- -- (16,830)
--------- --------- --------- ---------
Net property and equipment 69,937 7,500 38,500 115,937
--------- --------- --------- ---------
Other assets 909 -- -- 909
--------- --------- --------- ---------
Total assets $ 84,006 $ 1,000 $ 38,500 $ 123,506
========= ========= ========= =========
Liabilities and Shareholders' Equity
Current liabilities $ 7,325 $ -- $ -- $ 7,325
--------- --------- --------- ---------
Long-term liabilities 6,002 1,000 38,500 45,502
--------- --------- --------- ---------
Convertible First Preferred Shares, Series A
1,500,000 shares authorized;
outstanding - 1,500,000 shares 15,375 -- -- 15,375
--------- --------- --------- ---------
Shareholders' equity
Common shares, no par value;
unlimited shares authorized;
outstanding - 23,024,134 shares 50,487 -- -- 50,487
Retained earnings 4,817 -- -- 4,817
--------- --------- --------- ---------
Total shareholders' equity 55,304 -- -- 55,304
--------- --------- --------- ---------
Total liabilities and shareholders' equity $ 84,006 $ 1,000 $ 38,500 $ 123,506
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE>
DENBURY RESOURCES INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Consolidated Statements of
Income and Balance Sheet
1. Pro Forma Adjustments
The accompanying unaudited pro forma consolidated statements of income
reflect the following adjustments:
(a) The information reflected as "Ottawa Properties" herewith pertains only
to certain producing properties in Texas, Louisiana, and Mississippi
acquired from Ottawa Energy, Inc., which purchase closed during April,
1996. The acquisition includes 29 producing working interest wells,
plus over-riding royalty interests in 65 wells. This acquisition was
previously disclosed on Form 8-K filed on April 3, 1996 and the
Amendment No. 1 thereto filed on April 18, 1996.
(b) The information reflected as "Amerada Hess Properties" pertains only to
certain producing working interest properties in Mississippi,
Louisiana, Alabama, plus certain over-riding royalty interests in Ohio,
acquired from Amerada Hess Corporation, which purchase is scheduled to
close during June, 1996. The acquisition includes approximately 344
producing wells.
(c) Depreciation, depletion and amortization expense has been computed
using the units of production method and reflects the Company's
increased investment in oil and gas properties.
(d) Adjustments were made to interest expense for the period reflecting
that $46,000,000 of bank debt would have been required to fund the two
acquisitions had they occurred as of the beginning of the respective
periods. The interest rate was reduced from the Company's historical
bank interest rate by 1.375% to reflect the reduction in the LIBOR
premium as a result of the change to a new bank credit facility with
NationsBank of Texas. This change was required in order to allow the
Company to make this acquisition.
(e) An additional $500,000 of general and administrative expense is
expected, on an annual basis, for additional personnel and associated
costs, net of anticipated allocations to operations and capitalization
of exploration costs.
(f) Income taxes were computed on a pro forma basis using the statutory
rate of 34%.
The accompanying unaudited pro forma consolidated balance sheet reflects the
following adjustment:
(a) The acquisitions were funded by available cash and bank debt on a pro
forma basis. The acquisition prices, net of estimated interim net cash
flow, were assumed to be the purchase prices. The Company has not
allocated the purchase price between evaluated and unevaluated
properties as of the date of this filing.
2. Oil and Gas Reserve Information
The estimated proved reserves, as of December 31, 1995, relating to
the Acquired Properties which total approximately 7.3 million barrels of
oil equivalents on a 6:1 basis ("BOE") would have represented approximately
50% of Denbury Resources Inc.'s total proved reserves as of December 31,
1995 which, after including the Acquired Properties, would have been
approximately 21.6 million BOE. The reserve quantities were computed by the
Denbury's engineers in accordance with guidelines established by the
Securities and Exchange Commission. All of the reserves are located within
the United States.
14
<PAGE>
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.
Denbury Resources Inc.
(Registrant)
DATE: June 7, 1996 By: /s/ Phil Rykhoek
----------------------------
Phil Rykhoek
Chief Financial Officer
<PAGE>
