<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
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): May 31, 1996
DLB OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
OKLAHOMA
(State or other jurisdiction of incorporation or organization)
0-26484 73-1358299
(Commission File Number) (I.R.S. Employer Identification No.)
1601 N.W. EXPRESSWAY, SUITE 700
OKLAHOMA CITY, OKLAHOMA 73118-1401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 405-848-8808
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Previously filed under Form 8-K dated May 31, 1996.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA CONSOLIDATED FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Amerada Hess Properties
Independent Auditors' Report
Statements of Revenues and Direct Operating Expenses, Years Ended
December 31, 1993, 1994 and 1995 and the Three Months Ended March 31,
1996 (Unaudited)
Notes to Statements of Revenues and Direct Operating Expenses
(b) Pro Forma Consolidated Financial Information - DLB Oil & Gas, Inc.
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1996
Unaudited Pro Forma Consolidated Statements of Operations, Year Ended
December 31, 1995 and the Three Months Ended March 31, 1996
Notes to Unaudited Pro Forma Consolidated Financial Statements
(c) Exhibits
2.0 Agreement for Purchase and Sale dated April 16, 1996, between
Amerada Hess Corporation and DLB Oil & Gas, Inc. (the "Agreement
for Purchase and Sale") *
2.1 Letter agreement amending Agreement for Purchase and Sale dated
May 7, 1996.*
2.2 Letter agreement amending Agreement for Purchase and Sale dated
May 31, 1996.*
99.5 Press release dated June 3, 1996.*
- ----------------------
* Previously filed under Form 8-K dated May 31, 1996.
2
<PAGE> 3
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 hereunto authorized.
DLB Oil & Gas, Inc.
/s/ Mike Liddell
-------------------------------------
Mike Liddell, Chief Executive Officer
Date: August 12, 1996
3
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
The Board of Directors
DLB Oil & Gas, Inc.:
We have audited the accompanying statements of revenues and direct operating
expenses of the Amerada Hess Properties (as defined in note 1) for each of the
years in the three-year period ended December 31, 1995. These financial
statements are the responsibility of the DLB's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying statements of revenues and direct operating expenses were
prepared for the purpose of complying with the rules and regulation of the
Securities and Exchange Commission and exclude material expenses, described in
note 1 of the financial statements, that would not be comparable to those
resulting from the proposed future operations of the properties.
In our opinion, the statements of revenues and direct operating expenses
referred to above present fairly, in all material respects, the revenues and
direct operating expenses of the Amerada Hess Properties for each of the years
in the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
July 9, 1996
4
<PAGE> 5
AMERADA HESS PROPERTIES
(AS DEFINED IN NOTE 1)
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE
-------------------------------------------- MONTHS ENDED
1993 1994 1995 MARCH 31, 1996
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Revenues: (UNAUDITED)
Natural gas sales $ 7,483,777 $ 5,952,447 $ 4,757,497 $ 1,543,202
Oil sales 5,499,451 4,991,422 4,970,264 1,353,420
------------ ------------ ------------ ------------
Total revenues 12,983,228 10,943,869 9,727,761 2,896,622
Direct operating expenses:
Lease operating 5,377,846 4,458,140 4,396,577 1,032,466
------------ ------------ ------------ ------------
Revenues in excess of direct
operating expenses $ 7,605,382 $ 6,485,729 $ 5,331,184 $ 1,864,156
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
AMERADA HESS PROPERTIES
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
DECEMBER 31, 1993, 1994 AND 1995 AND MARCH 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying statements present the historical revenues and direct
operating expenses relating to working and royalty interests in certain
Oklahoma oil and natural gas producing properties which were purchased by DLB
Oil & Gas, Inc. (the "Company") from Amerada Hess Corporation (Amerada Hess).
Collectively, these properties are hereafter referred to as the "Amerada Hess
Properties". The accompanying statements have been prepared using the accrual
basis of accounting for the purpose of complying with certain rules and
regulations of the Securities and Exchange Commission ("the SEC") and present
the revenues and direct operating expenses relating to the working and royalty
interests in the Amerada Hess Properties which were acquired by the Company.
All adjustments (all of which are normal and recurring) have been made which
are necessary to fairly state the revenues and direct operating expenses of the
Amerada Hess Properties for the three months ended March 31, 1996.
General and administrative expenses and other indirect expenses related to
the property interests are not included, as the amounts cannot be readily
determined or specifically allocated to the property interests. The
accompanying statements do not reflect provisions for depreciation, depletion
and amortization, as the amounts cannot be determined and since the acquisition
of the properties has been accounted for utilizing the purchase method.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of revenues and direct operating expenses to prepare
these statements of revenues and direct operating expenses of the Amerada Hess
Properties in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Gas Balancing
During the course of normal operations, joint interest owners of natural
gas reservoirs may take more or less than their ownership share of the natural
gas volumes produced. The volumetric imbalances are monitored over the lives of
the wells' production capability. If an imbalance exists at the time the wells'
reserves are depleted, cash settlements are made among the joint interest
owners under a variety of arrangements.
For the Amerada Hess Properties, the sales method of accounting for
natural gas imbalances is used. Revenue is not recognized if excess takes of
natural gas volumes for the Amerada Hess Properties exceed their estimated
remaining recoverable reserves. No receivables are recorded for those wells
where the Amerada Hess Properties have been credited with less than their
actual share of natural gas production.
6
<PAGE> 7
Income Taxes
Oil and natural gas property interests are not taxpaying entities. Taxable
income, if any, arising from the operations of such properties accrues to the
property interest owner. Accordingly, no provision for income taxes has been
reflected in the accompanying statements.
Subsequent Events
An interest owner in the Amerada Hess Properties filed a lawsuit against
Amerada Hess and the Company for denying the interest owner's election of
preferential purchase rights on certain leases included in the Amerada Hess
Properties. The interest owner is seeking performance of its election to
purchase the properties. Amerada Hess and the Company have asserted that the
interest owner's election to exercise its preferential rights was not valid.
If the Company is unsuccessful in defending its position on the claim
asserted by the interest owner, the interest in the properties will be
purchased by the interest owner, rather than the Company. The revenues
associated with the properties were $302,633, $215,492, $181,250 and $54,323
for the years ended December 31, 1993, 1994 and 1995 and the three month period
ended March 31, 1996. The direct operating expenses were $75,637, $59,459,
$47,997 and $13,732 for the years ended December 31, 1993, 1994 and 1995 and
the three month period ended March 31, 1996.
2. SUPPLEMENTAL INFORMATION ON OIL AND NATURAL GAS OPERATIONS (UNAUDITED)
The following supplemental information regarding the oil and natural gas
producing activities of the Amerada Hess Properties is presented pursuant to
the disclosure requirements promulgated by the SEC and Statement of Financial
Accounting Standards No. 69, "Disclosures About Oil and Gas Production
Activities".
Quantities of Oil and Natural Gas Reserves
Set forth below is a summary of the net quantities of oil and natural gas
reserves attributable to the Amerada Hess Properties purchased by the Company.
The December 31, 1995 quantities were estimated by an outside engineering firm,
Degoyler & MacNaughton Engineering ("D&M"). The December 31, 1992, 1993 and
1994 Amerada Hess Properties' reserves have been derived by the Company by
adding reserve quantities produced during the subsequent years. In addition, in
deriving the Amerada Hess Properties reserve estimates as of December 31, 1992,
1993 and 1994, the Company used production costs and the estimated sales prices
as of December 31, 1995. The Company has estimated the Amerada Hess Properties
reserves as of December 31, 1992, 1993 and 1994 in this manner because the
actual information necessary to calculate estimated proved reserves and related
information in accordance with the guidelines of the Securities and Exchange
Commission as of each date is not available. The Company believes that, because
of the methodology used, the Amerada Hess Properties reserve information
presented is more reflective of actual reserve quantities than estimates that
might have been generated as of such dates.
7
<PAGE> 8
<TABLE>
<CAPTION>
OIL NATURAL GAS
(BBLS) (MCF)
------------ ------------
<S> <C> <C>
Proved reserves as of December 31, 1992 4,108,711 33,810,920
Production 356,087 3,672,071
------------ ------------
Proved reserves as of December 31, 1993 3,752,624 30,138,849
Production 342,784 3,215,095
------------ ------------
Proved reserves as of December 31, 1994 3,409,840 26,923,754
Production 312,667 3,156,734
------------ ------------
Proved reserves as of December 31, 1995 3,097,173 23,767,020
============ ============
</TABLE>
<TABLE>
<CAPTION>
OIL NATURAL GAS
Proved developed reserves as of: (BBLS) (MCF)
------------ ------------
<S> <C> <C>
December 31, 1993 3,059,151 30,062,559
December 31, 1994 2,716,367 26,847,464
December 31, 1995 2,403,700 23,690,730
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows
The following table presents the standardized measure of discounted future
net cash flows related to the Amerada Hess Properties' proved oil and natural
gas reserves. Future cash inflows and production and development costs as of
December 31, 1992, 1993 and 1994 were estimated by the Company based on the
methodology mentioned above. Future cash inflows as of December 31, 1995 were
estimated by the Company by applying period-end prices of oil and natural gas
to the estimated future production of proved oil and natural gas reserves
estimated by D&M. Future production and development costs as of December 31,
1995 were estimated by the Company, based on actual production costs incurred
during 1995 and current cost to be incurred for development of proved reserves,
assuming continuation of existing economic conditions. No effect has been given
to future income taxes for the same reasons specified in Note 1. The 10% annual
discount is applied to reflect the timing of the future net cash flows. The
standardized measure of discounted future net cash flows is the future net cash
flows less the computed discounts.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Future cash inflows $ 121,080,000 $ 110,136,000 $ 100,408,000
Future development costs (1,719,000) (1,719,000) (1,719,000)
Future production expenses (43,629,000) (39,171,000) (34,774,000)
------------- ------------- -------------
Future net cash flows 75,732,000 69,246,000 63,915,000
10% discount to reflect timing of cash flows (34,900,000) (30,817,000) (26,974,000)
------------- ------------- -------------
Standardized measure of future net cash flows $ 40,832,000 $ 38,429,000 $ 36,941,000
============= ============= =============
</TABLE>
The net weighted average prices at December 31, 1995 used in the
computation in the table above were $17.47 per barrel of oil and $1.95 per Mcf
of natural gas.
8
<PAGE> 9
Changes Relating to the Standardized Measure of Discounted Future Net Cash
Flows
Presented below is a reconciliation of the standardized measure of
discounted future net cash flows from December 31, 1992 to December 31, 1995.
The beginning of the year amounts have been calculated by revising the end of
the year amounts for the effects of actual net sales, price and cost changes
and the accretion of the 10% discount during the year.
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Beginning Balance $ 44,034,000 $ 40,832,000 $ 38,429,000
Sales of oil and natural gas net of
production and operating expenses (7,605,000) (6,486,000) (5,331,000)
Accretion of discount 4,403,000 4,083,000 3,843,000
------------ ------------ ------------
Ending Balance $ 40,832,000 $ 38,429,000 $ 36,941,000
============ ============ ============
</TABLE>
9
<PAGE> 10
PRO FORMA FINANCIAL INFORMATION
The following pro forma consolidated balance sheet combines the accounts
of the Company and the Amerada Hess Properties assuming the purchase had
occurred as of March 31, 1996. The pro forma consolidated statements of
operations for the year ended December 31, 1995 and the three months ended
March 31, 1996 have been prepared under the assumption that the purchase had
occurred as of January 1, 1995. The pro forma financial information should be
read in conjunction with the notes thereto, and the statements of revenues and
direct operating expenses, and related notes thereto, of the Amerada Hess
Properties included elsewhere in this Form 8-K.
The pro forma results of operations are not necessarily indicative of the
Company's future operations. The effect of the Amerada Hess Properties on the
pro forma results is not indicative of the future effect which is expected from
such properties. The Company plans to spend approximately $6 million during
1996 and 1997 to drill exploratory and developmental wells, including infill
drilling from increased wellsite density, and to perform recompletions on
certain of the Amerada Hess Properties. These actions are expected to increase
revenues from the Amerada Hess Properties.
10
<PAGE> 11
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS
DLB (NOTE 3) PRO FORMA
----------- ------------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Assets:
Cash and cash equivalents $ 9,344 $ (3,293) (a) $ 6,051
Other current assets 7,086 1,795 (a) 8,881
Property and equipment, at cost
Oil and natural gas properties subject
to amortization 64,510 28,256 (a) 92,766
Oil and natural gas properties not subject
to amortization 12,737 3,828 (a) 16,565
Other property and equipment 3,251 3,251
Accumulated depreciation, depletion and amortization (19,908) (19,908)
Other non current assets 58 58
----------- ------------- -----------
Total assets $ 77,078 $ 30,586 $ 107,664
=========== ============= ===========
Liabilities:
Current liabilities $ 4,001 $ 586 (a) $ 4,587
Long-term debt - 30,000 (a) 30,000
Deferred income taxes 13,209 13,209
----------- ------------- -----------
Total liabilities 17,210 30,586 47,796
----------- ------------- -----------
Shareholders' equity:
Common stock 13 13
Additional paid-in capital 57,910 57,910
Retained earnings 2,126 2,126
Treasury stock (181) (181)
----------- ------------- -----------
Total shareholders' equity 59,868 59,868
----------- ------------- -----------
Total liabilities and shareholders' equity $ 77,078 $ 30,586 $ 107,664
=========== ============= ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
statements.
11
<PAGE> 12
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL DATA
----------------------------------
AMERADA HESS ADJUSTMENTS
DLB PROPERTIES (NOTE 3) PRO FORMA
----------- ------------ ------------- -----------
(THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Oil and natural gas sales $ 17,860 $ 9,728 $ $ 27,588
----------- ------------ ------------- -----------
Natural gas gathering processing
and transportation, net 3,293 3,293
Other 899 899
----------- ------------ ------------- -----------
Total revenues 22,052 9,728 31,780
Expenses:
Lease operating 4,945 4,397 9,342
Depreciation, depletion and
amortization 7,368 3,295 (b) 10,663
General and administrative 1,530 1,530
Interest expense 485 2,534 (c) 3,019
----------- ------------ ------------- -----------
Total expenses 14,328 4,397 5,829 24,554
----------- ------------ ------------- -----------
Income (loss) before income taxes 7,724 5,331 (5,829) 7,226
Income tax expense (benefit) 12,900 (189) (d) 12,711
----------- ------------ ------------- -----------
Net income (loss) $ (5,176) $ 5,331 $ (5,640) $ (5,485)
============ ============= ============== ============
Net loss per share $ (0.46) $ (0.49)
============ ============
Weighted average shares outstanding 11,250 11,250
============ ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
statements.
12
<PAGE> 13
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL DATA
-------------------------------------------
AMERADA HESS ADJUSTMENTS
DLB PROPERTIES (NOTE 3) PRO FORMA
-------------- ----------------- ------------- ------------
(THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Oil and natural gas sales $ 4,481 $ 2,897 $ $ 7,378
Other 273 273
------------ ----------- --------- ------------
Total revenues 4,754 2,897 7,651
Expenses:
Lease operating 1,211 1,032 2,243
Depreciation, depletion and
amortization 1,794 700 (b) 2,494
General and administrative 727 727
Interest - 447 (c) 447
Loss on sale of assets 208 208
------------ ----------- --------- ------------
Total expenses 3,940 1,032 1,147 6,119
------------ ----------- --------- ------------
Income (loss) before income taxes 814 1,865 (1,147) 1,532
Income tax expense 309 273 (d) 582
------------ ----------- --------- ------------
Net income (loss) $ 505 $ 1,865 $ (1,420) $ 950
============= =========== ========= ============
Net income per share $ 0.04 $ 0.07
============= ============
Weighted average shares outstanding 12,988 12,988
============= ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
statements.
13
<PAGE> 14
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND MARCH 31, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated financial information is
presented to reflect the Company's purchase of the Amerada Hess Properties as
described elsewhere herein. The unaudited pro forma consolidated balance sheet
is presented as if the purchase occurred on March 31, 1996. The unaudited pro
forma consolidated statements of operations for the year ended December 31,
1995 and the three months ended March 31, 1996 are presented as if the purchase
occurred as of January 1, 1995.
The accompanying unaudited pro forma consolidated financial
information has been prepared based on estimates and assumptions deemed
appropriate by the Company and does not purport to be indicative of the
financial position or results of operations which would actually have been
obtained if the purchase had occurred as presented in such statements, or which
may be obtained in the future. In addition, future results may vary
significantly from those reflected in the pro forma consolidated statements due
to normal oil and natural gas production variations, price changes, future
acquisitions and other factors, including the Company's drilling and
developmental plans for the Amerada Hess Properties.
2. METHOD OF ACCOUNTING FOR THE PURCHASE
The assets acquired have been accounted for at their estimated "fair
values" as required by the purchase method of accounting for business
combinations. The purchase price has been allocated to individual assets
acquired based on the Company's estimates of such assets' relative value.
3. PRO FORMA ADJUSTMENTS
(a) The accompanying pro forma consolidated balance sheet includes the
adjustment to reflect the purchase of the Amerada Hess Properties
from the seller for $33.3 million using cash on hand of approximately
$3.3 million and $30.0 million of borrowings from existing credit
lines which mature on December 31, 1999.
In addition, as a result of the acquisition, approximately $1.8
million of current assets were recognized which comprises net oil and
natural gas revenue receivables of $1.1 million and $0.7 million of
receivables related to the election of preferential purchase rights,
by working interest owners owning an interest in the Amerada Hess
Properties, subsequent to closing. In addition, $0.4 million of costs
payable to third parties related to the acquisition were capitalized
as oil and natural gas property costs. These costs were incurred
subsequent to March 31, 1996 and therefore are shown on the pro forma
balance sheet as an addition to current liabilities.
14
<PAGE> 15
The accompanying pro forma consolidated statements of operations include
the following adjustments:
(b) To adjust depreciation, depletion and amortization ("DD&A") for the
effect of adding the production from the Amerada Hess Properties. The
Company's actual rates of DD&A per equivalent barrel ("Boe") produced
were $5.52 per Boe for the year 1995 and $5.76 per Boe for the first
three months of 1996. Rates on a pro forma basis after including the
Amerada Hess Properties, were $4.87 per BOE for 1995 and the first
three months of 1996.
(c) To record interest expense, due to the amounts borrowed to partially
fund the acquisition.
(d) To adjust income tax expense for the effect of the additional
revenues and expenses resulting from the purchase of the Amerada Hess
Properties.
4. SUBSEQUENT EVENTS
An interest owner in the Amerada Hess Properties filed a lawsuit against
Amerada Hess and the Company for denying the interest owner's election of
preferential purchase rights on certain leases included in the Amerada Hess
Properties. The interest owner is seeking performance of its election to
purchase the properties. Amerada Hess and the Company have asserted that the
interest owner's election to exercise its preferential rights was not made on a
timely basis and is, therefore, not valid.
If the Company is unsuccessful in defending its position on the claim
asserted by the interest owner, DLB would receive an additional $2.4 million
from the interest owner of the leases. The Company would also be required to
reimburse the interest owner for revenues received on the respective leases,
net of production costs. The Company does not anticipate that this legal action
would significantly impact its financial position, liquidity, or results of
operations.
15
<PAGE> 16
5. SUPPLEMENTAL PRO FORMA INFORMATION ON OIL AND NATURAL GAS OPERATIONS
The following pro forma supplemental information regarding oil and natural
gas activities is presented pursuant to the disclosure requirements promulgated
by the SEC and Statement of Financial Accounting Standards No. 69, "Disclosures
About Oil and Gas Producing Activities."
Quantities of Oil and Natural Gas Reserves
Set forth below is a pro forma summary of the changes in the net
quantities of oil and natural gas reserves for the year ended December 31,
1995, as estimated by independent petroleum consultants and in-house engineers,
assuming the purchase of the Amerada Hess Properties was consummated as of
January 1, 1995.
<TABLE>
<CAPTION>
OIL NATURAL GAS
(BBLS) (MCF)
----------- -----------
<S> <C> <C>
Proved reserves as of December 31, 1994 4,846,000 26,377,000
Purchase of the Amerada Hess Properties 3,410,000 26,924,000
Extensions and discoveries 521,000 9,454,000
Purchase of reserves 130,000 803,000
Revisions of previous estimates (171,000) (4,969,000)
Production (1,021,000) (6,179,000)
----------- -----------
Proved reserves as of December 31, 1995 7,715,000 52,410,000
=========== ===========
Proved developed reserves as of December 31, 1995 6,450,000 50,096,000
=========== ===========
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows
The accompanying table reflects the pro forma standardized measure of
discounted future net cash flows relating to the Company's interests in proved
oil and natural gas reserves as of December 31, 1995, assuming consummation of
the purchase of the Amerada Hess Properties as of December 31, 1995:
<TABLE>
<S> <C>
Future cash inflows $ 244,477,000
Future costs:
Development (8,955,000)
Production (77,268,000)
Future income tax expense (39,361,000)
-------------
Future net cash flows 118,893,000
10% discount to reflect timing of cash flows (45,277,000)
-------------
Standardized measure of discounted future net cash flows $ 73,616,000
=============
Discounted future net cash flows before income taxes $ 98,443,000
=============
</TABLE>
16
<PAGE> 17
Future cash inflows are computed by applying year-end prices of oil and
natural gas relating to the year-end pro forma quantities of those reserves.
Future development and production costs are computed by independent petroleum
consultants and in-house engineers by estimating the expenditures to be
incurred in developing and producing proved oil and natural gas reserves at the
end of the year, based on year-end costs and assuming continuation of existing
economic conditions.
Future income tax expenses are computed by applying the appropriate
statutory tax rates to the future pro forma pretax net cash flows relating to
proved reserves, net of the tax basis of the properties involved. The future
income tax expenses give effect to permanent differences and tax credits, but
do not reflect the impact of continuing operations.
Changes Relating to the Standardized Measure of Discounted Future Net Cash Flows
Principal changes in the pro forma standardized measure of discounted
future net cash flows attributable to proved reserves for the year ended
December 31, 1995 is as follows, assuming consummation of the purchase of the
Amerada Hess Properties as of January 1, 1995:
<TABLE>
<S> <C>
Balance as of December 31, 1994 $ 45,417,000
Purchase of Amerada Hess Properties 30,275,000
Sales of oil and gas, net of production costs (18,246,000)
Net changes in prices and production costs 4,787,000
Extensions, discoveries, and improved recovery,
net of future development costs 9,654,000
Purchase of reserves 1,617,000
Development costs incurred during the period
which reduced future development costs 1,993,000
Revisions of quantity estimates (8,339,000)
Accretion of discount 10,231,000
Net change in income taxes (313,000)
Other, primarily changes in timing (3,460,000)
---------------
Balance as of December 31, 1995 $ 73,616,000
===============
</TABLE>
17
