FORCENERGY INC
--------------
INDEX
-----
Page Part I. FINANCIAL INFORMATION:
Number
----
- -Item 1. Financial Statements
a) Consolidated Balance Sheets - September 30, 1996
and December 31, 1995 1
b) Consolidated Statements of Operations - Three
months and nine months ended September 30, 1996
and 1995
2
c) Consolidated Statements of Cash Flows - Nine months
ended September 30, 1996 and 1995
3
d) Notes to Consolidated Financial Statements 4-
8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-
14
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
15
Part I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
FORCENERGY INC
--------------
CONSOLIDATED BALANCE SHEETS ----------------------
-----
(in thousands)
- ---------------------------- September 30, December 31,
1996 1995
------------- -----------
(Unaudited)
ASSETS:
- -------
Current Assets:
Cash $ 712 $ 2,996
Accounts receivable, net 22,828 16,338
Other current assets 8,986 5,986
---------- ----------
Total current assets 32,526 25,320
---------- ----------
Investment in surety bonds, at cost 3,869 6,164
---------- ----------
Property, plant and equipment, at cost
(full cost method) net of accumulated
depletion, depreciation and amortization 376,805 298,832
---------- ----------
Other assets 4,323 4,774
---------- ----------
$ 417,523 $ 335,090
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY: ---------------------------------
- ----
Current Liabilities:
Accounts payable $ 10,099 $ 17,811
Other accrued liabilities 31,522 15,000
Accrued acquisition obligation -- 4,284
---------- ----------
Total current liabilities 41,621 37,095
---------- ----------
Long-term debt 196,581 130,729
---------- ----------
Deferred income taxes 15,984 12,305
---------- ----------
Stockholders' Equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized; none
issued or outstanding --
- --
Common stock,$.01 par value; 50,000,000
shares authorized; 18,415,611 and
18,260,447 issued and outstanding
at September 30, 1996 and December 31,
1995, respectively 184 183
Capital in excess of par value 165,582 163,378
Accumulated deficit (2,429) (8,600)
----------- -----------
Total stockholders' equity 163,337 154,961
----------- -----------
$ 417,523 $ 335,090
=========== ===========
The accompanying notes are an integral part of these financial
statements.
FORCENERGY INC
--------------
CONSOLIDATED STATEMENTS OF OPERATIONS ------------------
-------------------
(Unaudited)
(in thousands, except per share data) -
----------------------------------------
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
Revenues:
Oil and gas sales $36,896 $17,864 $94,373 $52,004
Other 143 130 419 365
------- ------- ------- -------
37,039 17,994 94,792 52,369
------- ------- ------- -------
Expenses:
Lease operating 10,627 6,107 27,446 17,709
Depletion, depreciation
and amortization 16,328 7,742 40,490 23,302
Production taxes 845 487 2,498 1,410
General and administrative 1,818 1,289 5,393 4,110
-------- -------- -------- -------
- -
29,618 15,625 75,827 46,531
-------- -------- -------- -------
- -
Income from operations 7,421 2,369 18,965 5,838
Interest and other income 143 106 380 396
Interest expense, net of
amounts capitalized (3,590) (2,926) (9,503) (9,445)
-------- -------- -------- -------
- -
Income (loss) before income
taxes 3,974 (451) 9,842
(3,211)
Income tax provision (benefit) 1,483 (169) 3,671
(1,198)
-------- -------- -------- --------
- -
Net income (loss) $ 2,491 $ (282) $ 6,171 $
(2,013)
======== ======== ========
=========
Net income (loss) per common
and common equivalent share $ .13 $ (.02) $ .34 $ (.18)
======== ======== ========
=========
Weighted average common and
common equivalent shares
outstanding 19,282 15,182 18,265 11,110
======== ======== ======== =========
The accompanying notes are an integral part of these financial statements.
FORCENERGY INC
--------------
CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------
---------------------
(Unaudited)
Nine Months Ended
September 30,
---------------------
1996 1995
-------- ---------
(in thousands)
Cash flows from operating activities:
Net income (loss) $ 6,171 $ (2,013)
-------- ---------
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depletion, depreciation and amortization 41,241 24,288
Deferred taxes 3,573 (1,198)
Deferred interest 1,916 1,530
Other (153) (153)
Increase in accounts receivable (6,490) (949)
Increase in other current assets (3,000) (19)
Increase in other assets (300) (665)
Increase (decrease) in accounts payable (4,087) 4,948
Increase in other accrued liabilities 4,528 9,007
--------- ---------
37,228 36,789
--------- ---------
Net cash provided by operating activities: 43,399 34,776
--------- ---------
Cash flows from investing activities:
Acquisitions of oil and gas properties (23,488) (40,808)
Capital expenditures (91,523) (36,110)
Proceeds from sale of oil and gas properties 1,072 492
Purchase of surety bonds -- (1,020)
Proceeds from sale of surety bonds 2,151 2,730
--------- ---------
Net cash used in investing activities (111,788) (74,716)
--------- ---------
Cash flows from financing activities:
Bridge loan proceeds -- 8,000
Repayment of bridge loan -- (8,000)
Net borrowings (repayments) under senior
credit facility 65,936 (18,347)
Proceeds from sale of common stock 169 --
Issuance of common stock -- 55,669
--------- ---------
Net cash provided by financing activities 66,105 37,322
--------- ---------
Net decrease in cash (2,284) (2,618)
Cash at beginning of period 2,996 3,188
--------- ---------
Cash at end of period $ 712 $ 570
========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 9,770 $ 8,935
The Company accrued additions to oil and gas properties amounting to
approximately $24.1 million and $19.9 million at September 30, 1996
and December 31, 1995, respectively. The Company made non-cash invest
ments in oil and gas properties amounting to $46.4 million during
the nine months ended September 30, 1995.
The accompanying notes are an integral part of these financial
statements.
FORCENERGY INC
--------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -------------------
-----------------------
(Unaudited)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial
statements include the accounts of Forcenergy Inc and its wholly-
owned subsidiary, Forcenergy International Inc. (the "Company")
after elimination of intercompany balances and transactions.
The unaudited interim consolidated financial statements of the
Company for the periods indicated herein have been prepared by
the Company pursuant to the rules and regulations of the
Securities and Exchange Commission and in accordance with
generally accepted accounting principles for interim financial
reporting. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments, consisting of normal
recurring accruals, necessary to present fairly the information
in the accompanying consolidated financial statements have been
included. Interim period results are not necessarily indicative
of the results of operations or cash flows for a full year
period. Certain minor amounts previously reported in the
financial statements of the prior periods have been reclassified
here to conform to the current year presentation.
NOTE 2 -- EARNINGS PER SHARE
Earnings per share is calculated based on the weighted average
number of shares outstanding during each period for common stock,
and when dilutive, common stock equivalents. The dilutive effect
of common stock equivalents was greater than 3% for the quarter
and less than 3% for the nine months ended September 30, 1996.
The Company's 7% Exchangeable Subordinated Notes (the
"Exchangeable Notes") are convertible securities that were
antidilutive for the quarter and nine months ended September 30,
1996 and, therefore, did not yield a fully diluted earnings per
share computation. The common stock equivalents were anti
dilutive for the quarter and nine months ended September 30,
1995.
NOTE 3 -- COMMON STOCK AND NOTES OFFERINGS
On November 6, 1996 the Company closed the sale of 1,537,958
primary shares of common stock at a price of $26.875 per share
($25.525 net of underwriting fees and commissions), not including
the underwriters over-allotment option of 525,000 shares (the
"Common Stock Offering") and concurrently therewith the sale of
$175 million in 9 1/2% Senior Subordinated Notes due November
1, 2006 (the "Notes Offering" and together the "Offerings").
The following unaudited pro forma balance sheet as of September
30, 1996 gives affect to the Offerings, and includes the
conversion of the Exchangeable Notes into 2,205,221 shares of
common stock of the Company pursuant to the provisions of the
Note Exchange
and Registration Rights Agreement, as amended, and the
exercise of 214,866 options to purchase Common Stock by certain
holders of the Exchangeable Notes, as if these transactions had
occurred on September 30, 1996.
FORCENERGY INC
--------------
PRO FORMA BALANCE SHEET
-----------------------
As of September 30, 1996
ASSETS:
Historical Adjustments Pro
Forma
---------- ----------- --------
- --
(in thousands)
Current Assets:
Cash $ 712 $ 3,386 (a) $
54,351
38,906 (b)
169,338 (c)
(157,991) (d)
Accounts receivable, net 22,828 --
22,828
Other current assets 8,986 --
8,986
--------- ---------- --------
- --
Total current assets 32,526 --
86,165
--------- ---------- --------
- --
Investment in surety bonds,
at cost 3,869 --
3,869
--------- ---------- --------
- --
Property, plant and equipment,
at cost (full cost method)
net of accumulated depletion,
depreciation and amortization 376,805 --
376,805
--------- ---------- --------
- --
Other assets 4,323 (1,447) (e)
8,538
5,662 (c)
--------- ---------- --------
- --
$ 417,523 $ 57,854 $
475,377
========= ==========
==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 10,099 $ -- $
10,099
Other accrued liabilities 31,522 --
31,522
--------- ---------- ---------
- -
Total current liabilities 41,621 --
41,621
--------- ---------- ---------
- -
Long-term debt 196,581 (32,000) (e)
175,000
(6,590) (e)
175,000 (c)
(157,991) (d)
--------- ---------- ---------
- -
Deferred income taxes 15,984 2,458 (e)
18,442
--------- ---------- ---------
- -
Stockholders' Equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized;
none issued or outstanding --
- --
Common stock, $.01 par value;
50,000,000 shares authorized;
18,415,611 and 22,373,656
issued and outstanding at
historical September 30, 1996
and proforma September 30, 1996,
respectively 184 22 (e)
223
2 (a)
15 (b)
Capital in excess of par value 165,582 34,663 (e)
242,520
3,384 (a)
38,891 (b)
Accumulated deficit (2,429) --
(2,429)
---------- --------- --------
-Total stockholders' equity 163,337 --
240,314
---------- --------- --------
-$ 417,523 $ 57,854 $
475,377 ========== =========
==========
Adjustments
a) Adjustments to reflect the exercise of options to purchase
214,866 shares of Common Stock at the exercise price of
$15.76 per share by certain holders of the Exchangeable
Notes.
b) Adjustment reflecting the net proceeds from the sale of
1,537,958 shares of Common Stock at $25.525 per share
($26.875, less $1.35 per share in underwriting fees and
commissions).
c) Adjustment reflecting the issuance of $175,000,000 in 9 1/2%
Senior Subordinated Notes, less offering costs.
d) Adjustment for repayment of outstanding borrowings under the
Senior Credit Facility.
e) Adjustment to reflect conversion of $32.0 million in
Exchangeable Notes into 2,205,221 shares of Common
Stock, including reversal of debt issuance cost and deferred
interest (and related deferred taxes thereon).
Note 4 -- LONG TERM DEBT
Senior Subordinated Notes
On November 6, 1996, the Company issued an aggregate
principal amount of $175 million in 9 1/2% Senior
Subordinated Notes (the "Senior Notes") which mature on
November 1, 2006. The Senior Notes
were issued under an Indenture (the
"Indenture") which provides that interest is payable
semiannually, in arrears, on May 1 and on November 1 of each
year, commencing May 1, 1997, with principal due at maturity.
The Senior Notes are redeemable in whole or in part at the
option of the Company, at any time on or after November 1, 2001,
at the redemption prices (expressed as percentages of principal
amount) set forth below plus, in each case, accrued and unpaid
interest, if any, thereon.
Year Percentage
---- ----------
2001 104.750%
2002 103.167%
2003 101.583%
2004 and thereafter 100.000%
Prior to November 1, 2001, the Company may redeem the
Senior Notes, in whole or in part, at the Make-Whole Price, plus
accrued and unpaid interest, if any, through the date of
redemption. The Make-Whole Price is defined as the greater of
(i) the sum of the outstanding principal amount and Make-Whole
Amount (defined below) of such Senior Note, and (ii)
the redemption price of such Senior Note on November 1,
2001, determined pursuant to the Indenture (109.5% of the
principal amount). The
Make-Whole is defined as the excess, if any, of
(i) the present value of the remaining interest premium
and principal payments due on such Senior Note as if such
Senior Note were redeemed on November 1, 2001, computed
using a discount rate equal to the Treasury Rate plus 50
basis points, over (ii) the outstanding principal amount of
such Senior Note. In addition, during the first 36 months
after October 31, 1996, the Company may redeem up to
$61.25 million in aggregate principal amount of the Senior
Notes at a redemption price of 109.5% of the principal
amount thereof plus accrued and unpaid interest, if any,
thereon to the redemption date with the net proceeds of an
offering of common equity; provided that at least $113.75
million to the redemption date in aggregate principal amount
of the Senior Notes remain outstanding immediately after the
occurrence of such redemption. Any such redemption must
occur within 60 days of the date of the closing of the
common equity offering.
The Senior Note holders may at their election require
that the Company prepay the Senior Notes upon the occurrence
of a "change of control" as defined in the Indenture. Upon a
"change of control", the holders may require the Company to
repurchase all or any part of the Senior Notes at a
repurchase price equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any,
thereon. Furthermore, under certain circumstances, the
Company may become obligated to offer to purchase all or a
portion of the Senior Notes at 100% of the principal amount
thereof, together with accrued and unpaid interest, if
any, with the net proceeds of certain asset sales.
The Indenture contains certain covenants which include
the following: (i) limitations on disposition of proceeds from
asset sales; (ii) limitations on payment of dividends,
making of distributions or certain investments; (iii)
limitations on the incurrence of additional debt or liens
(iv) limitations on sale and
leaseback transactions; (v) limitations on
mergers,
consolidations and transfers of substantially all of
the
Company's assets; and (vi) limitation on certain
transactions with affiliates.
The Senior Notes are subordinate to the Senior
Credit Facility.
Senior Credit Facility
On April 26, 1996 the company renegotiated its
Senior Credit Facility to provide for a total commitment
of $195 million, with a borrowing base of $175 million. On
September 30, 1996 the borrowing base was increased to $195
million. The net proceeds of the Offerings discussed in Note
3 were used to repay all of the outstanding indebtedness
under the Senior Credit Facility. The Company will retain
the Senior Credit Facility for future corporate
purposes, however, at
the
direction of the Company, the borrowing base has been reduced
to $50 million.
The Senior Credit Facility contains certain covenants
which include maintenance of a minimum tangible net worth,
certain financial ratios, restrictions on asset sales,
limitations on affiliated transactions and compensation and
certain limitations on dividends and additional debt or
liens. The Company is in compliance with these covenants,
or has received waivers in the event of non-compliance.
Exchangeable Notes
On September 25, 1996, $2.0 million of the
Exchangeable Notes were converted into 137,826 shares of
Common Stock. As discussed in Note 3 and concurrent
with the Common Stock Offering, the remaining $32.0 million
in Exchangeable Notes were converted into 2,205,221 shares of
common stock.
NOTE 5 -- ACQUISITION
On June 28, 1996 the Company acquired certain producing
oil and gas leasehold interests and related equipment from
Amerada Hess Corporation for a net cash consideration of $6.9
million. The acquisition has been accounted for using
the purchase method of accounting.
As required by Paragraph 96 of Accounting Principles
Board Opinion No. 16, the following pro forma information
has been prepared to give effect to the transaction as
if such transaction had occurred on January 1, 1995. The
historical results of operations of the Company have
been adjusted to
reflect (i) revenues and expenses from the properties,
(ii) depletion associated with production attributable
to the properties, (iii) the increase in interest expense
associated with the debt incurred to acquire the properties,
and (iv) the effect on income tax expense/benefit
giving retroactive
inclusion of the transaction. Management does not believe
the pro forma amounts purport to be indicative of the
results of operations that would have been reported had
the acquisition occurred on January 1, 1995 or that may be
reported in the future.
(in thousands, except per share data)
---------------------------------------
-
Pro Forma (unaudited)
---------------------------------------
-Nine Months Ended Nine Months
Ended
September 30, 1996 September 30,
1995 ------------------ ------------
-------
Revenues $ 104,055 $ 62,719
Income from operations $ 21,953 $ 5,254
Net income (loss) $ 7,908 $ (2,627)
Net income (loss) per share $ .43 $ (.24)
NOTE 6 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
As of October 1, 1996 the Company had entered into
future sales and swap contracts which fixed sales
prices on
approximately 76% and 60% of the Company's estimated net oil
and gas production, respectively, for the remainder of 1996,
based on current production levels, at average prices of $18.05
per barrel and $2.03 per Mcf.
FORCENERGY INC
--------------
ITEM 2. Management's Discussion & Analysis Of Financial
Condition And Results Of Operations
Operating Data
- --------------
The following table sets forth the Company's historical operating
data for the periods indicated:
(in thousands, except per unit
data) ----------------------------
-------
Three Months Nine
Months Ended
Ended
September 30, September
30, ----------------- -----------
-----
1996 1995 1996
1995
------- -------- ------- ------
- --
Production:
Liquids (Mbbls)* 1,061 625 2,839
1,684
Natural Gas (Mmcf) 9,511 4,922 22,283
16,094
Total (Mmcfe) 15,877 8,672 39,317
26,198
Average realized sales prices:
Liquids (per Bbl) $ 16.49 $ 16.23 $ 16.65 $
16.03
Natural Gas (Mcf) 2.04 1.57 2.11
1.55
Expenses (per Mcfe):
Lease Operating $ .67 $ .70 $ .70 $
.68
Depletion, Depreciation
and Amortization 1.03 .89 1.03
.89
Production Taxes .05 .06 .06
.05
General Administrative, net .11 .15 .14
.16
*Includes crude oil, condensate and natural gas liquids.
Results of Operations
- ---------------------
Comparison of the three month periods ended September 30, 1996
and September 30, 1995
Operating and Net Income. Operating income rose to $7.4
million in the third quarter of 1996, a 208% increase over the
$2.4 million reported for the third quarter of 1995. Net income
for the 1996 quarter was $2.5 million compared to a loss of
$282,000 reported for the same 1995 period. The improvement in
both operating income and net income/loss was attributable
primarily to higher production levels and higher net realized
natural gas prices.
Production. The Company's net oil and gas production, on an
equivalent Mcf basis, increased to 15,877 Mmcfe in the 1996
quarter, an 83% increase over the 8,672 Mmcfe produced in the
comparable 1995 period. The increase in production was
attributable to new production from 1995 and 1996 acquisitions of
oil and gas properties and from successful drilling and workover
programs beginning in late 1995 and continuing through 1996 .
Net liquids production rose to 1,061 Mbbls in the 1996 third
quarter, a 70% increase over the 625 Mbbls produced in the third
quarter of 1995. Net gas production increased to 9,511 Mmcf in
the third quarter of 1996, a 93% increase over the 4,922 Mmcf
produced in the same period last year.
Revenues. Revenues for the third quarter of 1996 rose to
$37.0 million, a 106% increase over the $18.0 million
reported for the comparable 1995 period, primarily because
of higher production volumes and higher net realized prices.
Average net realized liquids prices rose to $16.49 per barrel
in the 1996 quarter, a 2% increase over the $16.23 per
barrel received for the third quarter of 1995. Average net
realized gas prices increased by 30% to $2.04 per Mcf in the
1996 third quarter, from $1.57 per Mcf in the same period last
year.
Average net realized oil prices (exclusive of plant
products) for the quarter were $16.63 per barrel compared to an
average of
$20.34 per barrel which would have been received before
the effects of hedging, resulting in a $3.7 million reduction
in oil revenues for the three months ended September 30,
1996. Average net realized gas prices for the three month
period were $2.04 per Mcf compared to an average of $2.19 per
Mcf which would have been received before the effects of
hedging, resulting in a $1.4 million reduction in gas
revenues for the quarter ended September 30, 1996. Effects of
hedging activities were not significant in
the three months ended September 30, 1995.
Lease Operating Expenses. Lease operating expenses for
the third quarter of 1996 rose to $10.6 million from the
$6.1 million reported for the comparable 1995 period. The
increase in
costs relates primarily to the addition of new fields
acquired during 1995 and 1996 and to workover-type repair and
maintenance activities taking place in 1996. On an
equivalent unit of
production basis, expenses decreased to $.67 per Mcfe in
1996 from $.70 per Mcfe in 1995. This decrease was
attributable primarily to the substantial increase in oil and
gas production on existing properties in the third
quarter of 1996, only partially offset by the increased
repair and maintenance costs incurred during 1996.
Depletion, Depreciation and Amortization ("DD&A").
DD&A
increased to $16.3 million for the 1996 quarter compared to
the $7.7 million reported for the same period last year.
The
increase was attributable to the higher production in 1996,
and to an increase in the DD&A rate, to $1.03 per Mcfe in the
third quarter of 1996 compared to a rate of $.89 per Mcfe
in the comparable 1995 period.
General and Administrative Costs. General and
administrative costs were $1.8 million in the 1996 quarter
compared with $1.3 million reported for the third quarter
of 1995, an increase primarily due to the overall growth
of the Company. On an
equivalent Mcfe produced basis, general and
administrative expenses declined to $.11 per Mcfe in the 1996
quarter from a rate of $.15 per Mcfe in the comparable 1995
period due to higher production levels in the 1996 period.
Interest Expense. Interest expense, net of
amounts
capitalized, increased to $3.6 million in the 1996
quarter, compared to $2.9 million in the third quarter of 1995,
as higher debt levels during 1996 were only partially
offset by lower interest rates during 1996 on the
Company's senior credit facility.
Income Tax Provision (Benefit). Income tax expense
increased to $1.5 million in the third quarter of 1996, from a
benefit of
$169,000 in the third quarter of 1995, due to the improvement
in
results of operations compared to the same period last year.
Comparison of the nine month periods ended September 30, 1996
and
September 30, 1995
Operating and Net Income. Operating income for the first
nine months of 1996 rose to $19.0 million, a 228% improvement
over the $5.8 million reported for the same period in 1995.
Net income for
the 1996 period was $6.2 million compared to a loss of $2.0
million for the comparable 1995 period. The improvement in
both operating income and net income/loss was attributable
primarily to higher production volumes and higher net realized
natural gas prices.
Production. On an equivalent unit basis, oil and
gas production increased to 39,317 Mmcfe in the 1996 period,
a 50% improvement over the 26,198 Mmcfe produced in the
first nine months of 1995. The increase in both oil and gas
production is
attributable to new production from 1995 and 1996 acquisitions
of oil and
gas properties and from successful drilling and workover
programs begun in late 1995 and continuing through 1996.
The
Company's net liquids production rose to 2,839 Mbbls for the
nine months ended September 30, 1996 from 1,684 Mbbls
in the
comparable 1995 period, a 69% improvement. Net gas
production increased to 22,283 Mmcf in the 1996 period, a 38%
increase over the 16,094 Mmcf produced in the same period last
year.
Revenues. Revenue for the 1996 period increased 81%, to
$94.8 million compared to the $52.4 million reported in the
same period last year, primarily because of higher production
volumes and higher net realized natural gas prices. Average
net realized liquids prices rose to $16.65 per barrel in the
1996 period, a 4% increase over the $16.03 per barrel received
for the comparable 1995 period. Average net realized gas
prices rose to $2.11 per Mcf in
the 1996 period, a 36% increase over the $1.55 per Mcf
reported in the first nine months of 1995.
Average net realized oil prices (exclusive of plant
products) for
the nine month period were $16.87 per barrel compared to an
average of $19.52 per barrel which would have been
received before the effects of hedging, resulting in a
$7.0 million reduction in oil revenues for the nine months
ended September 30, 1996. Average net realized gas prices for
the nine months were $2.11 per Mcf compared to an average
of $2.26 per Mcf, which would have been received before the
effects of hedging, resulting in a $3.3 million reduction in
gas revenues for the nine month period ended September 30,
1996. Effects of hedging activities were not significant in
the nine months ended September 30, 1995.
Lease Operating Expenses. Lease operating expenses for
the first nine months of 1996 were $27.4 million compared
to the $17.7 million reported for the same period last year,
an increase primarily due to new fields acquired during 1995
and 1996 and to
workover-type repair and maintenance activities in 1996. On
an
equivalent unit of production basis, expenses increased to
$.70 per Mcfe
in 1996 from $.68 in 1995, an increase attributable
primarily to the repair and maintenance activities.
Depletion, Depreciation and Amortization ("DD&A").
DD&A
increased to $40.5 million for the 1996 period from the
$23.3 million reported for the comparable 1995 period. The
increase was
attributable to higher production levels, and to an increase
in the DD&A rate per unit of production to $1.03 per Mcfe in
the first nine months of 1996 compared to $.89 in the same
period last year.
General and Administrative Costs. General and
administrative costs increased to $5.4 million, from the $4.1
million reported for
the comparable 1995 period, primarily due to the overall
growth of the Company during the latter half of 1995
through 1996. On an equivalent Mcfe produced basis,
general and administrative expenses decreased to $.14 per
Mcfe in the 1996 period from a rate of $.16 per Mcfe for the
first nine months of 1995.
Interest Expense. Interest expense, net of
amounts
capitalized, increased to $9.5 million for the first nine
months of 1996 compared to $9.4 million for the same period
last year. The slight increase in interest expense is
primarily due to higher debt levels during 1996 that were
only partially offset by the benefit derived from lower
interest rates on the Company's senior credit facility in
1996.
Income Tax Provision (Benefit). Income tax expense
increased to $3.7 million, from a benefit of $1.2 million in
the first nine months of 1995, due to the improvement in
results of operations compared to the 1995 period.
Liquidity and Capital Resources
The Company has historically funded its
operations, acquisitions, capital expenditures and
working capital
requirements with cash flow from operations, bank borrowings
and private and public placements of debt and equity
securities. The Company's primary sources of funds for the
periods indicated herein were as follows:
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
Net cash provided by
operating activities $16,584 $17,135 $43,399 $34,776
Borrowings under senior
credit facility 22,873 -- 65,936 --
Proceeds from issuance
of common stock -- 55,669 -- 55,669
In the first nine months of 1996, the Company
generated approximately $43.4 million in cash from operations
and borrowed, net of repayments, approximately $65.9 million
under its senior credit facility. The Company's cash flow
from operations has increased during 1996 because of the
additional production from acquired properties and new
production derived from exploratory and development drilling
and workovers. The Company had negative working capital of
$9.0 million at September 30, 1996 and $11.8 million at
December 31, 1995. Both the negative working capital and the
increase in borrowings under the senior credit facility are
primarily attributable to an increase in drilling
expenditures under the Company's active 1996 drilling program
and to acquisitions of oil and gas properties.
Total cash capital expenditures were $115 million during
the first nine months of 1996, including $23.5 million in
cash property acquisition costs. The total cash outlay
includes $19.9 million in cash payments on capital costs
accrued at December 31,
1995. In addition, the Company has 1996 capital
expenditures accrued at September 30, 1996 amounting to $24.1
million. The
Company's revised capital drilling budget for 1996
is
approximately $110 million. The Company intends to continue
its exploration and development programs during 1996 and
expects that those expenditures will be funded by cash flow
from operations, proceeds from the Offerings (discussed
below) and periodic borrowings under its senior credit
facility. The Company will continue to pursue property
acquisitions of various sizes, funding for which is
expected to be provided by cash flow from operations, the
proceeds of the Offerings funds available through the
Company's senior credit facility or other financing sources to
be negotiated, as needed. Upon retirement of the outstanding
balance of the Senior Credit Facility from the proceeds of
the Offerings and at the direction of the Company, the
borrowing base under the Senior Credit Facility was reduced to
$50 million with the maximum commitment of $195 million
remaining in place.
At
November 7, 1996 the Company had $50 million available under
the Senior Credit Facility.
The Company utilizes forward sales contracts and
commodity swaps for portions of its current net oil and gas
production to
achieve more predictable cash flows and to reduce its exposure
to fluctuations in oil and gas prices. The remaining
portion of
current net production has not been hedged so as to provide
the Company the opportunity to benefit from increases in
prices on
that portion of the production, should price
increases
materialize. As of October 1, 1996, the Company had
entered into
future sales and swap contracts as a hedge against
possible price declines that effectively fixed sales prices
on
approximately 76% of the Company's estimated net oil
production for the remainder of the year and for approximately
60% of the Company's estimated net natural gas production
for the remainder of 1996, based on current production levels,
at $18.05 per barrel and $2.03 per Mcf, respectively. Average
field prices for the nine month period ended September 30,
1996 were $19.52 per barrel and $2.26 per Mcf compared to
average realized prices of $16.87 per barrel and $2.11 per Mcf
for the same period.
On November 6, 1996 the Company closed the sale of
1,537,958 shares of common stock at $25.525 per share ($26.875,
less $1.35 per share in underwriting fees and commissions) not
including the underwriters over-allotment option of 525,000
shares (the "Common Stock Offering") and concurrently
therewith the sale of $175 million in 9 1/2% Senior
Subordinated Notes due November 1, 2006 ("the Notes
Offering") (together the "Offerings"). Concurrently, with the
Common Stock Offering all of the outstanding 7%
Exchangeable Subordinated Notes (the "Exchangeable Notes")
were converted into common stock and options to purchase
214,866 shares of common stock were exercised by certain
holders of the Exchangeable Notes. The Company received
approximately $208 million in net proceeds (after underwriting
fees, commissions and estimated offering expenses) which
were used to retire all outstanding
borrowings under the Company's Senior Credit
Facility. The balance of the proceeds will be utilized
for general corporate purposes, including future
capital
expenditures.
Management believes that cash flow from operations, the
net proceeds of the Offerings, and available borrowings
under the senior credit facility will be adequate to meet
future liquidity needs, including satisfying the Company's
financial obligations and funding its capital program.
However, should revenues decrease as a result of lower oil
or gas prices or operating difficulties, re-evaluation of a
portion of the 1996 capital budget would be required.
Part II. OTHER INFORMATION:
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 -- Form of Indenture dated as
of
November 6, 1996 (Filed as Exhibit 4.2 to
the Registration Statement on Form S-3 on October 30,
1996, as subsequently amended, and is included
herein by reference (File No. 333-13657)
Exhibit 10.2 -- Amendment to the Forcenergy Inc 1995
Stock Option Plan
Exhibit 11.1 -- Computation of Earnings per Share
Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K
On September 12, July 24 and July 15, 1996, the
Company filed Form 8-K/A Amendment No. 2, Form 8-K/A
Amendment No. 1 and Form 8-K, respectively,
relating to the Company's acquisition from Amerada
Hess Corporation of certain producing oil and gas
leasehold interests and related equipment located
offshore United States in the Gulf of Mexico.
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, in the City of Miami, State of Florida, on the 7th
day of November, 1996.
FORCENERGY INC
--------------
By:/s/ STIG WENNERSTROM -----------
----------
Stig Wennerstrom
President/Chief Executive Officer
By:/s/ E. JOSEPH GRADY ------------
--------
E. Joseph Grady
Vice President - Chief Financial Officer
(principal financial and accounting
officer)
EXHIBIT
10.2 FORCENERGY INC
1995 STOCK OPTION PLAN
[As Amended and Restated Effective as of August 29, 1996]
I. PURPOSE
The purpose of the FORCENERGY INC 1995 STOCK OPTION
PLAN (the "Plan") is to provide a means through which
FORCENERGY INC,
a Delaware corporation (the "Company"), and its subsidiaries
may attract able persons to enter the employ of the Company
and to provide a means whereby those key employees upon
whom the responsibilities of the successful administration and
management of the Company
rest, and whose present and potential
contributions to the welfare of the Company are of
importance, can acquire and maintain stock ownership, thereby
strengthening their concern for the welfare of the Company and
their desire to remain in its employ. A further purpose of
the Plan is to provide such key employees with additional
incentive and reward opportunities designed to enhance the
profitable growth of the Company.
Accordingly, the Plan provides for granting Incentive
Stock Options, options which do not constitute Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Performance Awards, Phantom Stock Awards, or any
combination of the foregoing, as is best suited to the
circumstances of the particular employee as provided herein.
The Plan as set forth herein constitutes an amendment
and restatement, effective as of the Restatement Effective Date
(as such term is hereinafter defined), of the
Forcenergy Gas
Exploration, Inc. 1995 Stock Option Plan, as previously
adopted by Forcenergy Gas Exploration, Inc. (which name was
changed to Forcenergy Inc at the 1996 Annual Meeting), and
shall supersede and replace in its entirety such previously
adopted plan.
II. DEFINITIONS
The following definitions shall be applicable throughout
the Plan unless specifically modified by any paragraph:
(a) "Award" means, individually or collectively,
any Option, Restricted Stock Award, Phantom Stock Award,
Performance Award or Stock Appreciation Right.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" means the occurrence of any of
the following events: (i) the Company shall not be the
surviving entity in any merger, consolidation or other
reorganization (or survives only as a subsidiary of an
entity), (ii) the Company sells, leases or exchanges all or
substantially all of its assets to any other person or
entity (other than a wholly owned subsidiary of the
Company), (iii) the Company is to be dissolved and liquidated,
(iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the 1934 Act, acquires or gains
ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the
Company's voting stock (based upon voting power), or (v) as
a result of or in connection with a contested election of
directors, the persons who were directors of the Company before
such election shall cease to constitute a majority of the Board.
(d) "Change of Control Value" shall mean (i) the per share
price offered to stockholders of the Company in any merger,
consolidation, reorganization, sale of assets or dissolution
transaction that constitutes a Change of Control, (ii) the price
per share offered to stockholders of the Company in any tender offer
or exchange offer whereby a Change of Control takes place, or (iii)
if a Change of Control occurs other than pursuant to a tender or
exchange offer, the fair market value per share of the shares into
which Awards are exercisable, as determined by the Committee,
whichever is applicable. In the event that the consideration offered
to stockholders of the Company consists of anything other than cash,
the Committee shall determine the fair cash equivalent of the
portion of the consideration offered which is other than cash.
(e) "Code" means the Internal Revenue Code of 1986, as
amended. Reference in the Plan to any section of the Code shall be
deemed to include any amendments or successor provisions to any
section and any regulations under such section.
(f) "Committee" means a committee of, and appointed by, the
Board which shall be comprised solely of two or more "outside
directors," within the meaning of section 162(m) of the Code and
applicable interpretive authority thereunder.
(g) "Company" means Forcenergy Inc.
(h) "Director" means an individual elected to the Board by the
stockholders of the Company or by the Board under applicable
corporate law who is serving on the Board on the date the Plan is
adopted by the Board or is elected to the Board after such date.
(i) An "employee" means any person (including an officer or a
Director) in an employment relationship with the Company or any
parent or subsidiary corporation (as defined in section 424 of the
Code).
(j) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any specified date, the
last reported sales price of the Stock on the NASDAQ National Market
or the principal exchange on which the Stock is reported; or, in
either case, if no prices are reported on that date, on the last
preceding date on which such prices of the Stock are so reported.
In the event Stock is not publicly traded at the time a
determination of its value is required to be made hereunder, the
determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
(l) "Holder" means an employee who has been granted an Award.
(m) "Incentive Stock Option" means an incentive stock option
within the meaning of section 422(b) of the Code.
(n) "Option" means an Award granted under Paragraph VII of the
Plan and includes both Incentive Stock Options to purchase Stock and
Options which do not constitute Incentive Stock Options to purchase
Stock.
(o) "Option Agreement" means a written agreement between the
Company and a Holder with respect to an Option.
(p) "Performance Award" means an Award granted under Paragraph
X of the Plan.
(q) "Performance Award Agreement" means a written agreement
between the Company and a Holder with respect to a Performance
Award.
(r) "Phantom Stock Award" means an Award granted under
Paragraph XI of the Plan.
(s) "Phantom Stock Award Agreement" means a written agreement
between the Company and a Holder with respect to a Phantom Stock
Award.
(t) "Plan" means the Forcenergy Inc 1995 Stock Option Plan, as
amended from time to time.
(u) "Restatement Effective Date" means the date of the
adoption of this amendment and restatement of the Plan by the Board.
(v) "Restricted Stock Agreement" means a written agreement
between the Company and a Holder with respect to a Restricted Stock
Award.
(w) "Restricted Stock Award" means an Award granted under
Paragraph IX of the Plan.
(x) "Rule 16b-3" means SEC Rule 16b-3 promulgated under the
1934 Act, as such may be amended from time to time, and any
successor rule, regulation or statute fulfilling the same or a
similar function.
(y) "Spread" means, in the case of a Stock Appreciation Right,
an amount equal to the excess, if any, of the Fair Market Value of a
share of Stock on the date such right is exercised over the exercise
price of such Stock Appreciation Right.
(z) "Stock" means the common stock of the Company.
(aa) "Stock Appreciation Right" means an Award granted under
Paragraph VIII of the Plan.
(bb) "Stock Appreciation Rights Agreement" means a written
agreement between the Company and a Holder with respect to an Award
of Stock Appreciation Rights.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan originally became effective on May 11, 1995. This
amendment and restatement of the Plan shall become effective upon
the Restatement Effective Date, provided this amendment and
restatement of the Plan is approved by the stockholders of the
Company within 12 months thereafter. No further Awards may be
granted under the Plan after May 11, 2005. The Plan shall remain in
effect until all Awards granted under the Plan have been satisfied
or expired.
Notwithstanding any provision herein to the contrary, if this
amendment and restatement of the Plan is not approved by the
stockholders of the Company within 12 months after the Restatement
Effective Date, then any Award made on or after the Restatement
Effective Date shall be void and canceled in its entirety, and the
Plan shall terminate with respect to any shares of Stock for which
Awards were not granted prior to the Restatement Effective Date.
IV. ADMINISTRATION
(a) Committee. The Plan shall be administered by the
Committee.
(b) Powers. Subject to the provisions of the Plan, the
Committee shall have sole authority, in its discretion, to determine
which employees shall receive an Award, the time or times when such
Award shall be made, whether an Incentive Stock Option, nonqualified
Option or Stock Appreciation Right shall be granted, the number of
shares of Stock which may be issued under each Option, Stock
Appreciation Right or Restricted Stock Award, and the value of each
Performance Award and Phantom Stock Award. In making such deter
minations the Committee may take into account the nature of the
services rendered by the respective employees, their present and
potential contribution to the Company's success and such other
factors as the Committee in its discretion shall deem relevant.
(c) Additional Powers. The Committee shall have such
additional powers as are delegated to it by the other provisions of
the Plan. Subject to the express provisions of the Plan, the
Committee is authorized to construe the Plan and the respective
agreements executed thereunder, to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry
out the Plan, and to determine the terms, restrictions and
provisions of each Award, including such terms, restrictions and
provisions as shall be requisite in the judgment of the Committee
to cause designated Options to qualify as Incentive Stock Options,
and to make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in any
agreement relating to an Award in the manner and to the extent it
shall deem expedient to carry it into effect. The determinations of
the Committee on the matters referred to in this Article IV shall be
conclusive.
V. GRANT OF OPTIONS, STOCK
APPRECIATION RIGHTS,
RESTRICTED STOCK
AWARDS,
PERFORMANCE AWARDS
AND PHANTOM STOCK
AWARDS;
SHARES SUBJECT TO THE
PLAN
(a) Stock Grant and Award Limits. The Committee may from time
to time grant Awards to one or more employees determined by it to be
eligible for participation in the Plan in accordance with the
provisions of Paragraph VI. Subject to Paragraph III and subject to
adjustment in the same manner as provided in Paragraph XII with
respect to shares of Stock subject to Options then outstanding, the
aggregate number of shares of Stock that may be issued under the Plan
shall not exceed 2,016,630 shares. Shares shall be deemed to have
been issued under the Plan only (i) to the extent actually issued and
delivered pursuant to an Award, or (ii) to the extent an Award granted
under Paragraph VII, VIII, IX or XI is settled in cash. To the extent
that an Award lapses or the rights of its Holder terminate, any shares
of Stock subject to such Award shall again be available for the grant
of an Award. Separate stock certificates shall be issued by the
Company for those shares acquired pursuant to the exercise of an
Incentive Stock Option and for those shares acquired pursuant to the
exercise of any Option which does not constitute an Incentive Stock
Option. Notwithstanding any provision in the Plan to the contrary,
the maximum number of shares of Stock that may be subject to Awards
granted to any one employee during any calendar year is 500,000 shares
of Stock (subject to adjustment in the same manner as provided in
Paragraph XII with respect to shares of Stock subject to Options then
outstanding). The limitation set forth in the preceding sentence
shall be applied in a manner which will permit compensation generated
in connection with the exercise of Options and Stock Appreciation
Rights and, if determined by the Committee, Restricted Stock Awards to
constitute "performance-based" compensation for purposes of section
162(m) of the Code, including, without limitation, counting against
such maximum number of shares, to the extent required under section
162(m) of the Code and applicable interpretive authority thereunder,
any shares subject to Options, Stock Appreciation Rights and, if
applicable, Restricted Stock Awards, that are canceled or repriced.
(b) Stock Offered. The stock to be offered pursuant to the
grant of an Award may be authorized but unissued Stock or Stock
previously issued and outstanding and reacquired by the Company.
V. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant,
are key employees. Awards may not be granted to any Director who is
not an employee. An Award may be granted on more than one occasion to
the same person, and, subject to the limitations set forth in the
Plan, such Award may include an Incentive Stock Option or an Option
which is not an Incentive Stock Option, a Stock Appreciation Right, a
Restricted Stock Award, a Performance Award, a Phantom Stock Award or
any combination thereof.
VII. STOCK OPTIONS
(a) Option Period. The term of each Option shall be as
specified by the Committee at the date of grant.
(b) Limitations on Exercise of Option. An Option shall be
exercisable in whole or in such installments and at such times as
determined by the Committee.
(c) Special Limitations on Incentive Stock Options. To the
extent that the aggregate Fair Market Value (determined at the time
the respective Incentive Stock Option is granted) of Stock with
respect to which Incentive Stock Options granted after 1986 are
exercisable for the first time by an individual during any calendar
year under all incentive stock option plans of the Company and its
parent and subsidiary corporations exceeds $100,000, such Incentive
Stock Options shall be treated as Options which do not constitute
Incentive Stock Options. The Committee shall determine, in accordance
with applicable provisions of the Code, Treasury Regulations and other
administrative pronouncements, which of a Holder's Incentive Stock
Options will not constitute Incentive Stock Options because of such
limitation and shall notify the Holder of such determination as soon
as practicable after such determination. No Incentive Stock Option
shall be granted to an individual if, at the time the Option is
granted, such individual owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or
of its parent or subsidiary corporation, within the meaning of section
422(b)(6) of the Code, unless (i) at the time such Option is granted
the option price is at least 110% of the Fair Market Value of the
Stock subject to the Option and (ii) such Option by its terms is not
exercisable after the expiration of five years from the date of grant.
An Incentive Stock Option shall not be transferable otherwise than by
will or the laws of descent and distribution, and shall be exercisable
during the Holder's lifetime only by such Holder or the Holder's
guardian or legal representative.
(d) Option Agreement. Each Option shall be evidenced by an
Option Agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from
time to time shall approve, including, without limitation, provisions
to qualify an Incentive Stock Option under section 422 of the Code. An
Option Agreement may provide for the payment of the option price, in
whole or in part, by the delivery of a number of shares of Stock (plus
cash if necessary) having a Fair Market Value equal to such option
price. Each Option Agreement shall specify the effect of termination
of employment on the exercisability of the Option. Moreover, an
Option Agreement may provide for a "cashless exercise" of the Option
by establishing procedures whereby the Holder, by a properly
executed written notice, directs (i) an immediate market sale or
margin loan respecting all or a part of the shares of Stock to which
he is entitled upon exercise pursuant to an extension of credit by the
Company to the Holder of the option price, (ii) the delivery of
the shares of Stock from the Company directly to a brokerage firm and
(iii) the delivery of the option price from sale or margin loan
proceeds from the brokerage firm directly to the Company. Such Option
Agreement may also include, without limitation, provisions relating to
(i) subject to the provisions hereof accelerating such vesting on a
Change of Control, vesting of Options, (ii) tax matters (including
provisions (y) permitting the delivery of additional shares of Stock
or the withholding of shares of Stock from those acquired upon
exercise to satisfy federal or state income tax withholding
requirements and (z) dealing with any other applicable employee wage
withholding requirements), and (iii) any other matters not
inconsistent with the terms and provisions of the Plan that the
Committee shall in its sole discretion determine. The terms and
conditions of the respective Option Agreements need not be identical.
(e) Option Price and Payment. The price at which a share of
Stock may be purchased upon exercise of an Option shall be determined
by the Committee, but (i) such purchase price shall not be less than
the Fair Market Value of Stock subject to the Option on the date the
Option is granted and (ii) such purchase price shall be subject to
adjustment as provided in Paragraph XII. The Option or portion
thereof may be exercised by delivery of an irrevocable notice of
exercise to the Company. The purchase price of the Option or portion
thereof shall be paid in full in the manner prescribed by the
Committee.
(f) Stockholder Rights and Privileges. The Holder shall be
entitled to all the privileges and rights of a stockholder only with
respect to such shares of Stock as have been purchased under the
Option and for which certificates of stock have been registered in the
Holder's name.
(g) Options and Rights in Substitution for Stock Options Granted
by Other Corporations. Options and Stock Appreciation Rights may be
granted under the Plan from time to time in substitution for stock
options held by individuals employed by corporations who become
employees as a result of a merger or consolidation of the employing
corporation with the Company or any subsidiary, or the acquisition by
the Company or a subsidiary of the assets of the employing
corporation, or the acquisition by the Company or a subsidiary of
stock of the employing corporation with the result that such employing
corporation becomes a subsidiary.
VIII. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. A Stock Appreciation Right is
the right to receive an amount equal to the Spread with respect to a
share of Stock upon the exercise of such Stock Appreciation Right.
Stock Appreciation Rights may be granted in connection with the grant
of an Option, in which case the Option Agreement will provide that
exercise of Stock Appreciation Rights will result in the surrender of
the right to purchase the shares under the Option as to which the
Stock Appreciation Rights were exercised. Alternatively, Stock
Appreciation Rights may be granted independently of Options in which
case each Award of Stock Appreciation Rights shall be evidenced by a
Stock Appreciation Rights Agreement which shall contain such terms and
conditions as may be approved by the Committee. The terms and
conditions of the respective Stock Appreciation Rights Agreements need
not be identical. The Spread with respect to a Stock Appreciation
Right may be payable either in cash, shares of Stock with a Fair
Market Value equal to the Spread or in a combination of cash and
shares of Stock. With respect to Stock Appreciation Rights that are
subject to Section 16 of the 1934 Act, however, the Committee shall,
except as provided in Paragraph XII(c), retain sole discretion (i) to
determine the form in which payment of the Stock Appreciation Right
will be made (i.e., cash, securities or any combination thereof) or
(ii) to approve an election by a Holder to receive cash in full or
partial settlement of Stock Appreciation Rights. Each Stock
Appreciation Rights Agreement shall provide that the Stock
Appreciation Rights may not be exercised earlier than six months from
the date of grant and shall specify the effect of termination of
employment on the exercisability of the Stock Appreciation Rights.
(b) Exercise Price. The exercise price of each Stock
Appreciation Right shall be determined by the Committee, but such
exercise price (i) shall not be less than the Fair Market Value of a
share of Stock on the date the Stock Appreciation Right is granted (or
such greater exercise price as may be required if such Stock
Appreciation Right is granted in connection with an Incentive Stock
Option that must have an exercise price equal to 110% of the Fair
Market Value of the Stock on the date of grant pursuant to Paragraph
VII(c)), and (ii) shall be subject to adjustment as provided in
Paragraph XII.
(c) Exercise Period. The term of each Stock Appreciation Right
shall be as specified by the Committee at the date of grant.
(d) Limitations on Exercise of Stock Appreciation Right. A
Stock Appreciation Right shall be exercisable in whole or in such
installments and at such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) Forfeiture Restrictions To Be Established by the Committee.
Shares of Stock that are the subject of a Restricted Stock Award shall
be subject to restrictions on disposition by the Holder and an
obligation of the Holder to forfeit and surrender the shares to the
Company under certain circumstances (the "Forfeiture Restrictions").
The Forfeiture Restrictions shall be determined by the Committee in
its sole discretion, and the Committee may provide that the Forfeiture
Restrictions shall lapse upon (i) the attainment of targets
established by the Committee that are based on (1) the price of a
share of Stock, (2) the Company's earnings per share, (3) the
Company's revenue, (4) the revenue of a business unit of the Company
designated by the Committee, (5) the return on stockholders' equity
achieved by the Company, or (6) the Company's pre-tax cash flow from
operations, (ii) the Holder's continued employment with the Company
for a specified period of time, or (iii) a combination of any two or
more of the factors listed in clauses (i) and (ii) of this sentence.
Each Restricted Stock Award may have different Forfeiture
Restrictions, in the discretion of the Committee. The Forfeiture
Restrictions applicable to a particular Restricted Stock Award shall
not be changed except as permitted by Paragraph IX(b) or Paragraph
XII.
(b) Other Terms and Conditions. Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate
registered in the name of the Holder of such Restricted Stock Award.
The Holder shall have the right to receive dividends with respect to
Stock subject to a Restricted Stock Award, to vote Stock subject
thereto and to enjoy all other stockholder rights, except that (i) the
Holder shall not be entitled to delivery of the stock certificate
until the Forfeiture Restrictions shall have expired, (ii) the Company
shall retain custody of the Stock until the Forfeiture Restrictions
shall have expired, (iii) the Holder may not sell, transfer, pledge,
exchange, hypothecate or otherwise dispose of the Stock until the
Forfeiture Restrictions shall have expired, and (iv) a breach of the
terms and conditions established by the Committee pursuant to the
Restricted Stock Agreement shall cause a forfeiture of the Restricted
Stock Award. At the time of such Award, the Committee may, in its
sole discretion, prescribe additional terms, conditions or
restrictions relating to Restricted Stock Awards, including, but not
limited to, rules pertaining to the termination of employment (by
retirement, disability, death or otherwise) of a Holder prior to
expiration of the Forfeiture Restrictions. Such additional terms,
conditions or restrictions shall be set forth in a Restricted Stock
Agreement made in conjunction with the Award. Such Restricted Stock
Agreement may also include, without limitation, provisions relating to
(i) subject to the provisions hereof accelerating vesting on a Change
of Control, vesting of Awards, (ii) tax matters (including provisions
(y) covering any applicable employee wage withholding requirements and
(z) prohibiting or requiring an election by the Holder under
section 83(b) of the Code), and (iii) any other matters not
inconsistent with the terms and provisions of the Plan that the
Committee shall in its sole discretion determine.
(c) Payment for Restricted Stock. The Committee shall determine
the amount and form of any payment for Stock received pursuant to a
Restricted Stock Award, provided that in the absence of such a
determination, a Holder shall not be required to make any payment for
Stock received pursuant to a Restricted Stock Award, except to the
extent otherwise required by law.
(d) Agreements. At the time any Award is made under this
Paragraph IX, the Company and the Holder shall enter into a Restricted
Stock Agreement setting forth each of the matters contemplated hereby
and such other matters as the Committee may determine to be
appropriate. The terms and provisions of the respective Restricted
Stock Agreements need not be identical.
X. PERFORMANCE AWARDS
(a) Performance Period. The Committee shall establish, with
respect to and at the time of each Performance Award, a performance
period over which the performance criteria shall be measured.
(b) Performance Awards. Each Performance Award shall have a
maximum value established by the Committee at the time of such Award.
(c) Performance Measures. A Performance Award shall be awarded
to an employee contingent upon future performance of the employee, the
Company or any subsidiary, division or department thereof by or in
which is he employed during the performance period, or any combination
of the foregoing. The Committee shall establish the performance
measures applicable to such performance prior to the beginning of the
performance period but subject to such later revisions as the
Committee shall deem appropriate to reflect significant, unforeseen
events or changes.
(d) Awards Criteria. In determining the value of Performance
Awards, the Committee shall take into account an employee's
responsibility level, performance, potential, other Awards and such
other considerations as it deems appropriate.
(e) Payment. Following the end of the performance period, the
Holder of a Performance Award shall be entitled to receive payment of
an amount, not exceeding the maximum value of the Performance Award,
based on the achievement of the performance measures for such
performance period, as determined by the Committee. Payment of a
Performance Award may be made in cash, Stock or a combination thereof,
as determined by the Committee. Payment shall be made in a lump sum
or in installments as prescribed by the Committee. Any payment to be
made in Stock shall be based on the Fair Market Value of the Stock on
the payment date. If a payment of cash is to be made on a deferred
basis, the Committee shall establish whether interest shall be
credited, the rate thereof and any other terms and conditions
applicable thereto.
(f) Termination of Employment. A Performance Award shall
terminate if the Holder does not remain continuously in the employ of
the Company at all times during the applicable performance period,
except as may be determined by the Committee or as may otherwise be
provided in the Award at the time granted.
(g) Agreements. At the time any Award is made under this
Paragraph X, the Company and the Holder shall enter into a Performance
Award Agreement setting forth each of the matters contemplated hereby,
and, in addition such matters as are set forth in Paragraph IX(b) as
the Committee may determine to be appropriate. The terms and
provisions of the respective agreements need not be identical.
XI. PHANTOM STOCK AWARDS
(a) Phantom Stock Awards. Phantom Stock Awards are rights to
receive shares of Stock (or cash in an amount equal to the Fair Market
Value thereof), or rights to receive an amount equal to any
appreciation in the Fair Market Value of Stock (or portion thereof)
over a specified period of time, which vest over a period of time or
upon the occurrence of an event (including without limitation a Change
of Control) as established by the Committee, without payment of any
amounts by the Holder thereof (except to the extent otherwise required
by law) or satisfaction of any performance criteria or objectives.
Each Phantom Stock Award shall have a maximum value established by the
Committee at the time of such Award.
(b) Award Period. The Committee shall establish, with respect
to and at the time of each Phantom Stock Award, a period over which or
the event upon which the Award shall vest with respect to the Holder.
(c) Awards Criteria. In determining the value of Phantom Stock
Awards, the Committee shall take into account an employee's
responsibility level, performance, potential, other Awards and such
other considerations as it deems appropriate.
(d) Payment. Following the end of the vesting period for a
Phantom Stock Award, the Holder of a Phantom Stock Award shall be
entitled to receive payment of an amount, not exceeding the maximum
value of the Phantom Stock Award, based on the then vested value of
the Award. Payment of a Phantom Stock Award may be made in cash,
Stock or a combination thereof as determine by the Committee. Payment
shall be made in a lump sum or in installments as prescribed by the
Committee in its sole discretion. Any payment to be made in Stock
shall be based on the Fair Market Value of the Stock on the payment
date. Cash dividend equivalents may be paid during or after the
vesting period with respect to a Phantom Stock Award, as determined by
the Committee. If a payment of cash is to be made on a deferred
basis, the Committee shall establish whether interest shall be
credited, the rate thereof and any other terms and conditions
applicable thereto.
(e) Termination of Employment. A Phantom Stock Award shall
terminate if the Holder does not remain continuously in the employ of
the Company at all times during the applicable vesting period, except
as may be otherwise determined by the Committee or as set forth in the
Award at the time of grant.
(f) Agreements. At the time any Award is made under this
Paragraph XI, the Company and the Holder shall enter into a Phantom
Stock Award Agreement setting forth each of the matters contemplated
hereby and, in addition such matters as are set forth in
Paragraph IX(b) as the Committee may determine to be appropriate. The
terms and provisions of the respective agreements need not be
identical.
XII. RECAPITALIZATION OR REORGANIZATION
(a) The shares with respect to which Options may be granted are
shares of Stock as presently constituted, but if, and whenever, prior
to the expiration of an Option theretofore granted, the Company shall
effect a subdivision or consolidation of shares of Stock or the
payment of a stock dividend on Stock without receipt of consideration
by the Company, the number of shares of Stock with respect to which
such Option may thereafter be exercised (i) in the event of an
increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately
reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase
price per share shall be proportionately increased.
(b) If the Company recapitalizes, reclassifies its capital stock
or otherwise changes its capital structure (a "recapitalization"), the
number and class of shares of stock and securities covered by an
Option theretofore granted shall be adjusted so that such Option shall
thereafter cover the number and class of shares of stock and
securities to which the Holder would have been entitled pursuant to
the terms of the recapitalization if, immediately prior to such
recapitalization, the Holder had been the holder of record of the
number of shares of Stock then covered by such Option.
(c) In the event of a Change of Control, outstanding Awards
other than Options shall immediately vest and become exercisable or
satisfiable, as applicable. In the event of a Change of Control, the
Committee, acting in its sole discretion without the consent or
approval of any Holder, shall act to effect one or more of the
following alternatives with respect to outstanding Options, which
alternatives may vary among individual Holders and which may vary
among Options held by any individual Holder: (1) accelerate the time
at which Options then outstanding may be exercised so that such
Options may be exercised in full for a limited period of time on or
before a specified date (before or after such Change of Control) fixed
by the Committee, after which specified date all unexercised Options
and all rights of Holders thereunder shall terminate, (2) require the
mandatory surrender to the Company by selected Holders of some or all
of the outstanding Options held by such Holders (irrespective of
whether such Options are then exercisable under the provisions of the
Plan) as of a date, before or after such Change of Control, specified
by the Committee, in which event the Committee shall thereupon cancel
such Options and the Company shall pay to each Holder an amount of
cash per share equal to the excess, if any, of the Change of Control
Value of the shares subject to such Option over the exercise price(s)
under such Options for such shares, (3) make such adjustments to
Options then outstanding as the Committee deems appropriate to reflect
such Change of Control (provided, however, that the Committee may
determine in its sole discretion that no adjustment is necessary to
Options then outstanding) or (4) provide that the number and class of
shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and
class of shares of stock or other securities or property (including,
without limitation, cash) to which the Holder would have been entitled
pursuant to the terms of the agreement of merger, consolidation or
sale of assets and dissolution if, immediately prior to such merger,
consolidation or sale of assets and dissolution, the Holder had been
the holder of record of the number of shares of Stock then covered by
such Option. The provisions contained in this paragraph shall not
terminate any rights of the Holder to further payments pursuant to any
other agreement with the Company following a Change of Control.
(d) In the event of changes in the outstanding Stock by reason
of recapitalization, reorganizations, mergers, consolidations,
combinations, exchanges, a Change of Control or other relevant changes
in capitalization occurring after the date of the grant of any Award
and not otherwise provided for by this Paragraph XII, such Award and
any agreement evidencing such Award shall be subject to adjustment by
the Committee, acting in its sole discretion without the consent or
approval of the Holder of such Award, as to the number and price of
shares of Stock or other consideration subject to such Award.
(e) The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the
Company, any issue of debt or equity securities ahead of or affecting
Stock or the rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or
any part of its assets or business or any other corporate act of
proceeding.
(f) Any adjustment provided for in Subparagraphs (a), (b), (c)
or (d) above shall be subject to any required stockholder action.
(g) Except as hereinbefore expressly provided, the issuance by
the Company of shares of stock of any class or securities convertible
into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares of obligations of the
Company convertible into such shares or other securities, and in any
case whether or not for fair value, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number
of shares of Stock subject to Awards theretofore granted or the
purchase price per share, if applicable.
XIII. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time
with respect to any shares for which Awards have not theretofore been
granted. The Board shall have the right to alter or amend the Plan or
any part thereof from time to time; provided that no change in any
Award theretofore granted may be made which would impair the rights of
the Holder without the consent of the Holder; and provided, further,
that the Board may not, without approval of the stockholders, amend
the Plan to 1. increase the maximum aggregate number of shares that
may
be issued under the Plan or 1. change the class of employees eligible
to receive Awards under the Plan.
XIV. MISCELLANEOUS
(a) No Right To An Award. Neither the adoption of the Plan by
the Company nor any action of the Board or the Committee shall be
deemed to give an employee any right to be granted an Award or any
other right hereunder except as may be evidenced by an Award or by an
Option Agreement, Stock Appreciation Rights Agreement, Restricted
Stock Agreement, Performance Award Agreement or Phantom Stock Award
Agreement duly executed on behalf of the Company, and then only to the
extent and on the terms and conditions expressly set forth therein.
The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other
segregation of funds or assets to assure the payment of any Award.
(b) No Employment Rights Conferred. Nothing contained in the
Plan shall (i) confer upon any employee any right with respect to
continuation of employment with the Company or any subsidiary or (ii)
interfere in any way with the right of the Company or any subsidiary
to terminate his or her employment at any time.
(c) Other Laws; Withholding. The Company shall not be obligated
to issue any Stock pursuant to any Award granted under the Plan at any
time when the shares covered by such Award have not been registered
under the Securities Act of 1933 and such other state and federal
laws, rules or regulations as the Company or the Committee deems
applicable and, in the opinion of legal counsel for the Company,
there is no exemption from the registration requirements of such
laws, rules or regulations available for the issuance and sale of
such shares. No fractional shares of Stock shall be delivered, nor
shall any cash in lieu of fractional shares be paid. The Company
shall have the right to deduct in connection with all Awards any
taxes required by law to be withheld and to require any payments
required to enable it to satisfy its withholding obligations.
(d) No Restriction on Corporate Action. Nothing contained in
the Plan shall be construed to prevent the Company or any subsidiary
from taking any corporate action which is deemed by the Company or
such subsidiary to be appropriate or in its best interest, whether
or not such action would have an adverse effect on the Plan or any
Award made under the Plan. No employee, beneficiary or other person
shall have any claim against the Company or any subsidiary as a
result of any such action.
(e) Restrictions on Transfer. An Award (other than an
Incentive Stock Option, which shall be subject to the transfer
restrictions set forth in Paragraph VII(c)) shall not be
transferable otherwise than (i) by will or the laws of descent and
distribution, (ii) pursuant to a "qualified domestic relations
order," as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder, or
(iii) with the consent of the Committee.
(f) Rule 16b-3. It is intended that the Plan and any grant of
an Award made to a person subject to Section 16 of the 1934 Act meet
all of the requirements of Rule 16b-3. If any provision of the Plan
or any such Award would disqualify the Plan or such Award under, or
would otherwise not comply with, Rule 16b-3, such provision or Award
shall be construed or deemed amended to conform to Rule 16b-3.
(g) Section 162(m). It is intended that the Plan comply fully
with and meet all the requirements of Section 162(m) of the Code so
that Options and Stock Appreciation Rights granted hereunder and, if
determined by the Committee, Restricted Stock Awards, shall
constitute "performance-based" compensation within the meaning of
such section. If any provision of the Plan would disqualify the Plan
or would not otherwise permit the Plan to comply with Section
162(m) as so intended, such provision shall be construed or deemed
amended to conform to the requirements or provisions of Section
162(m); provided that no such construction or amendment shall have
an adverse effect on the economic value to a Holder of any Award
previously granted hereunder.
(h) Governing Law. This Plan shall be construed in accordance
with the laws of the State of Florida.
EXHIBIT
11.1
FORCENERGY INC
--------------
COMPUTATION OF EARNINGS PER SHARE -----------------
----------------
(in thousands, except per share data)
PRIMARY EARNINGS PER SHARE
Three Months Nine
Months
Ended Ended
September 30, September
30,
----------------- ------------------
1996 1995 1996 1995
------- -------- ------- ---------
Net Income (Loss) $ 2,491 $ (282) $ 6,171 $ (2,013)
Weighted Average Shares and Share
Equivalents Outstanding 19,282 15,182 18,265 11,110
------- -------- ------- ---------
Primary Earnings Per Share $ 0.13 $ (0.02) $ 0.34 $ (0.18)
======= ======== ======= =========
FULLY DILUTED EARNINGS PER SHARE
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- ------------------
1996 1995 1996 1995
-------- ------- ------- --------
Net Income (Loss) $ 2,491 $ (282) $ 6,171 $(2,013)
Effect of retirement of ESN notes
on interest expense 1,169 1,105 3,700 3,315
Tax effect related to interest expense (436) (412) (1,380) (1,236)
-------- ------- -------- --------
Net Income (Loss) as adjusted $ 3,224 $ 411 $ 8,491 $ 66
Weighted Average Shares and Share
Equivalents Outstanding 21,819 17,525 21,771 13,453
-------- ------- -------- -------
Fully Diluted Earnings Per Share $ .15 $ .02 $ .39 --
======== ======= ======== =======
WEIGHTED AVERAGE SHARES AND SHARE EQUIVALENTS OUTSTANDING (PRIMARY EPS)
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
Weighted Average Shares of Common
Stock 18,281 15,182 18,265 11,110
Dilutive Common Stock Equivalents,
Greater than 3%
Effect on Primary EPS 1,001 -- -- --
------- ------- ------- -------
19,282 15,182 18,265 11,110
======= ======= ======= =======
WEIGHTED AVERAGE SHARES AND SHARE EQUIVALENTS OUTSTANDING (FULLY DILUTED EPS)
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
1996 1995 1996 1995
------- ------- ------ --------
Weighted Average Shares of Common
Stock 18,281 15,182 18,265 11,110
Dilutive Common Stock Equivalents
Effect on Fully Diluted EPS 1,202 -- 1,165 --
Conversion of Subordinated Notes 2,336 2,343 2,341 2,343
------- ------- ------- -------
21,819 17,525 21,771 13,453
======= ======= ======= =======
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM SEPTEMBER 30, 1996 BALANCE SHEET AND STATEMENT OF
OPERATIONS OF FORCENERGY INC FOR THE NINE MONTH PERIOD ENDED SEPTEMBER
30,1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 712
<SECURITIES> 0
<RECEIVABLES> 22,828
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,526
<PP&E> 376,805
<DEPRECIATION> 0
<TOTAL-ASSETS> 417,523
<CURRENT-LIABILITIES> 41,621
<BONDS> 196,581
0
0
<COMMON> 184
<OTHER-SE> 163,153
<TOTAL-LIABILITY-AND-EQUITY> 417,523
<SALES> 94,373
<TOTAL-REVENUES> 94,792
<CGS> 0
<TOTAL-COSTS> 75,827
<OTHER-EXPENSES> (380)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,503
<INCOME-PRETAX> 9,842
<INCOME-TAX> 3,671
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,171
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
