<PAGE> 1
Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 4, 1996 (March 3, 1995)
FORCENERGY INC
(Exact name of registrant as specified in its charter)
Delaware 0-26444 65-0429338
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2730 SW 3rd Avenue, Suite 800, Miami, Florida 33129-2237
(Address of principal executive offices)
Registrant's telephone number, including area code 305-856-8500
Forcenergy Gas Exploration, Inc.
(Former name or former address, if changed since last report.)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On March 3, 1995 Forcenergy Inc (the "Company") acquired certain
producing offshore oil and gas properties from Conoco, Inc. ("Conoco") for net
cash consideration of $24.5 million.
On August 2, 1995 the Company completed a plan of merger with Ashlawn
Energy, Inc. ("Ashlawn") a privately held company with working interests in
certain producing offshore oil and gas properties. The purchase price
consisted of 3,000,000 shares of the Company's common stock at $10 per share,
cash of $3.3 million and assumption of $5.7 million in debt.
Item 7. Financial Statements and Exhibits
The financial statements and pro forma financial information
requirements of Regulation S-X Articles 3.05 and 11 as they apply to the
transactions discussed in Item 2 herein have been previously and timely
complied with in the Company's Registration Statement on Form S-1 filed on
June 2, 1995 as amended on July 6, 1995 and July 25, 1995. The financial
statements and pro forma financial information included herein under this Item
7 are filed with this Current Report on Form 8-K strictly for purposes of
incorporation by reference in future filings under the Securities Act of 1933.
(a) Financial statements of business acquired
1
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Forcenergy Inc
We have audited the accompanying Historical Statement of Revenues and Direct
Operating Expenses of the property acquired by Forcenergy Inc (formerly known
as Forcenergy Gas Exploration, Inc.) from Conoco Inc. for the years ended
December 31, 1993 and 1994. This historical statement is the responsibility of
Conoco Inc. and Forcenergy Inc. Our responsibility is to express an opinion on
this historical statement 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 historical statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the historical statement. We believe that our audits provide a reasonable
basis for our opinion.
The accompanying statement was prepared as described in Note 1 for the purpose
of complying with certain rules and regulations of the Securities and Exchange
Commission (SEC) for inclusion in certain SEC regulatory reports and filing of
Forcenergy Inc and are not intended to be a complete presentation of the
revenues and direct operating expenses of the property.
In our opinion, the historical statement referred to in the first paragraph of
this report presents fairly, in all material respects, the revenues and direct
operating expenses of the property as described in Note 1 for the years ended
December 31, 1993 and 1994, in conformity with generally accepted accounting
principles.
PRICE WATERHOUSE LLP
Houston, Texas
May 12, 1995
2
<PAGE> 4
SOUTH MARSH ISLAND BLOCKS 106, 136 AND 137
HISTORICAL STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------------------
1993 1994
------------- -------------
<S> <C> <C>
Revenues:
Oil and condensate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,304 $ 3,604
Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,202 5,725
------------- ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,506 9,329
Lease operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,456 2,196
------------- ------------
Revenues in excess of direct operating expenses . . . . . . . . . . . . . . . . . . $ 2,050 $ 7,133
============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 5
SOUTH MARSH ISLAND BLOCKS 106, 136 AND 137
NOTES TO HISTORICAL STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
(1) BASIS OF PRESENTATION
Under an agreement dated December 22, 1994 Forcenergy Inc (formerly known
as Forcenergy Gas Exploration, Inc.) (Forcenergy) has acquired Conoco Inc.'s
interest in South Marsh Island Blocks 106, 136 and 137 (the Conoco Property)
for approximately $27,500,000 in cash. The acquisition has been accounted for
as a purchase and the results of operations for the Conoco Property are
included in Forcenergy's results of operations effective March 3, 1995.
The accompanying statements of revenues and direct operating expenses
("Statement") were prepared from the historical accounting records of Conoco
(accrual basis, successful efforts method of accounting for oil and gas
activities, in accordance with generally accepted accounting principles).
Oil revenues and associated direct operating expense relate to the net
revenue interest and net working interest, respectively, in the Conoco
Property. With respect to gas sales, the sales method is used for recording
revenues. Under this approach, each party recognizes revenue based on sales
actually made regardless of its proportionate share of the related production.
Under the sales method, direct operating expenses are allocated to the Conoco
Property in proportion to the revenue recognized. Lease operating expenses
include labor, repairs and maintenance, fuel consumed and supplies utilized to
operate and maintain the wells and related equipment and facilities. The
Statement does not include general and administrative expenses, interest or
provisions for depreciation, depletion, amortization and dismantlement costs,
or for taxes on income.
Complete financial statements, including a balance sheet, are not presented
as the Conoco Property was not maintained as a separate business unit and
assets, liabilities or indirect operating costs applicable to the Conoco
Property were not segregated. It is not practicable to identify all assets,
liabilities or indirect operating costs applicable to the Conoco Property.
(2) SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED)
Estimated Quantities of Proved Oil and Gas Reserves
Reserve information presented below is based on the January 1, 1995 reserve
report prepared by an independent petroleum engineer. The December 31, 1993
and 1992 information has been computed by adjusting the January 1, 1995 reserve
report for production and known purchases.
Proved reserves are estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed reserves
are those which are expected to be recovered through existing wells with
existing equipment and operating methods. Below are the net quantities of
proved reserves and proved developed reserves for the Conoco Property:
4
<PAGE> 6
SOUTH MARSH ISLAND BLOCKS 106, 136 AND 137
NOTES TO HISTORICAL STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
Oil Gas
(Mbbls) (MMcf)
---------- ---------
<S> <C> <C>
Proved reserves at December 31, 1992 . . . . . . . . . . . . . . . . 842 11,522
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (212) (544)
Purchases of reserves in place . . . . . . . . . . . . . . . . . . . 370 9,174
---------- ---------
Proved reserves at December 31, 1993 . . . . . . . . . . . . . . . . 1,000 20,152
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (240) (2,916)
---------- ---------
Proved reserves at December 31, 1994 . . . . . . . . . . . . . . . . 760 17,236
========== =========
Proved developed reserves at:
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 689 9,107
========== =========
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 449 6,329
========== =========
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves
The "Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves" (Standardized Measure) is a disclosure
requirement under Statement of Financial Accounting Standards No. 69 (SFAS No.
69). The Standardized Measure does not purport to present the fair market
value of the proved oil and gas reserves. This would require consideration of
expected future economic and operating conditions, which are not taken into
account in calculating the Standardized Measure.
Under the Standardized Measure, 1994 and 1993 future cash inflows were
estimated by applying December 31, 1994 and 1993 prices, respectively, adjusted
for fixed and determinable escalations, to the estimated future production of
proved reserves. Future cash inflows for 1994 and 1993 were reduced by
estimated future production, development and dismantlement costs based on 1994
and 1993 year-end costs, respectively, to determine pre-tax cash inflows.
Future net cash inflows were discounted using a 10% annual discount rate to
arrive at the Standardized Measure. No deduction has been made for general and
administrative expenses, interest or provisions for depreciation, depletion or
amortization, or for taxes on income.
The following Standardized Measure and changes in the Standardized Measure
are based on the reserve estimate performed as of December 31, 1994 using
appropriate year-end prices and costs.
Set forth below is the Standardized Measure (before income taxes) relating
to proved oil and gas reserves at December 31, (in thousands):
<TABLE>
<CAPTION>
1993 1994
----------- ------------
<S> <C> <C>
Future cash inflows . . . . . . . . . . . . . . . . . . . . . . . . $ 53,304 $ 43,975
Future production and development costs . . . . . . . . . . . . . . (14,432) (12,236)
----------- ------------
Future net cash inflows . . . . . . . . . . . . . . . . . . . . . . 38,872 31,739
10% annual discount for estimated timing of cash flows . . . . . . (7,750) (6,328)
----------- ------------
Standardized Measure (before income taxes) of discounted
future net cash flows . . . . . . . . . . . . . . . . . . . . . . $ 31,122 $ 25,411
=========== ============
</TABLE>
5
<PAGE> 7
SOUTH MARSH ISLAND BLOCKS 106, 136 AND 137
NOTES TO HISTORICAL STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES (CONTINUED)
The Standardized Measure of discounted future net cash flows is based on
the following oil and gas prices at December 31:
<TABLE>
<CAPTION>
1993 1994
---------- -----------
<S> <C> <C>
Oil (per Bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.27 $ 16.77
Gas (per Mcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.48 $ 1.81
</TABLE>
The following is an analysis of the changes in the Standardized Measure
(before income taxes) for the years ended December 31, (in thousands):
<TABLE>
<CAPTION>
1993 1994
----------- ------------
<S> <C> <C>
Standardized measure (before income taxes) -- beginning $ 16,804 $ 31,122
of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and transfers of oil and gas produced, net of production (2,050) (7,133)
costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of reserves in place . . . . . . . . . . . . . . . . . . 15,858 --
Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . 1,680 3,112
Changes in timing of production and other . . . . . . . . . . . . . (1,170) (1,690)
----------- ------------
Standardized measure (before income taxes) -- end of year . . . . . $ 31,122 $ 25,411
=========== ============
</TABLE>
6
<PAGE> 8
Board of Directors
Ashlawn Energy, Inc.
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Ashlawn Energy, Inc. as
of December 31, 1993 and December 31, 1994, and the related statements of
income, changes in stockholders' equity, and cash flows for the period from
inception (January 8, 1992) to December 31, 1992 and for the years ended
December 31, 1993 and December 31, 1994. These financial statements are the
responsibility of the Company'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.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ashlawn Energy, Inc. as of
December 31, 1993 and 1994, and the results of its operations and its cash
flows for the initial period then ended December 31, 1992 and the years then
ended December 31, 1993 and 1994 in conformity with generally accepted
accounting principles.
As explained in Note I to the financial statements, Ashlawn Energy, Inc.
retroactively changed from the full cost method to the successful efforts
method of accounting for its oil and gas properties as of January 1, 1994.
As explained in Note J to the financial statements, on May 25, 1995,
Ashlawn Energy, Inc.'s stockholders entered into an agreement and plan of
merger with another company.
LaPORTE, SEHRT, ROMIG & HAND
A Professional Accounting Corporation
Metairie, Louisiana
April 12, 1995 except for Note J
for which the date is May 25, 1995
7
<PAGE> 9
ASHLAWN ENERGY, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1994
-------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 188,158 $ 200,323
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 339,201 593,951
Oil and Gas Sales Receivable . . . . . . . . . . . . . . . . . . . . . 1,283,908 1,061,014
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,279 219,856
Other Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . 24,581 95,709
-------------- ---------------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . 2,081,127 2,170,853
PROPERTY AND EQUIPMENT (AT COST):
Oil and Gas Properties (Successful Efforts Method):
Proved Properties . . . . . . . . . . . . . . . . . . . . . . . . . 7,281,481 7,724,617
Wells and Related Equipment . . . . . . . . . . . . . . . . . . . . 1,677,489 3,251,811
Support Equipment and Facilities . . . . . . . . . . . . . . . . . . 2,776,162 2,895,207
Other Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 149,926 167,414
-------------- ---------------
11,885,058 14,039,049
Less: Accumulated Depreciation, Depletion and
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,770,677) (2,677,573)
-------------- ---------------
Net Property and Equipment . . . . . . . . . . . . . . . . . . . 10,114,381 11,361,476
OTHER ASSETS:
Financing Costs (Net of Accumulated Amortization
of $187,533 and $313,632, respectively) . . . . . . . . . . . . . . . 348,387 222,289
Investments and Other . . . . . . . . . . . . . . . . . . . . . . . . . 31,203 29,163
-------------- ---------------
Total Other Assets . . . . . . . . . . . . . . . . . . . . . . . 379,590 251,452
-------------- ---------------
$ 12,575,098 $ 13,783,781
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,045,253 $ 2,822,971
Accounts Payable -- Affiliate . . . . . . . . . . . . . . . . . . . . . 718,077 13,294
Joint Owner Advance Payments . . . . . . . . . . . . . . . . . . . . . 70,000 274,460
Royalties and Revenue Payable . . . . . . . . . . . . . . . . . . . . . 216,743 85,133
Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,936 32,823
-------------- ---------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . 2,080,009 3,228,681
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400,000 2,300,000
-------------- ---------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . 9,480,009 5,528,681
COMMITMENTS AND CONTINGENCIES (NOTE F)
STOCKHOLDERS' EQUITY:
Common Stock -- No Par Value; 10,000 Shares
Authorized; 2,000 Shares Issued and Outstanding . . . . . . . . . . . 2,000 2,000
Additional Paid-In Capital . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,000,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,093,089 6,253,100
-------------- ---------------
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . 3,095,089 8,255,100
-------------- ---------------
$ 12,575,098 $ 13,783,781
============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 10
ASHLAWN ENERGY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION
(JANUARY 8, 1992)
TO FOR THE YEARS ENDED SEVEN MONTHS
DECEMBER 31, DECEMBER 31, ENDED JULY 31,
------------ -------------------------------- -----------------
1992 1993 1994 1995
---------- --------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Oil and Gas Sales . . . . . . . . . . . . . . . $ 3,704,504 $ 10,790,830 $ 8,481,832 $ 6,125,609
Gain on Sale of Oil and
Gas Leases and
Properties . . . . . . . . . . . . . . . . . 1,716,769 -- 4,108,585 --
Gain on Sale of Assets . . . . . . . . . . . . -- -- 1,278 --
Interest Income . . . . . . . . . . . . . . . . 7,520 10,130 48,149 --
Other . . . . . . . . . . . . . . . . . . . . . -- 50,289 15,359 26,974
---------- --------------- -------------- ----------------
Total Revenue . . . . . . . . . . . . . . . 5,428,793 10,851,249 12,655,203 6,152,583
---------- --------------- -------------- ----------------
COSTS AND EXPENSES:
Lease Operating . . . . . . . . . . . . . . . . 2,707,746 4,100,363 3,930,286 1,904,622
Well Workover . . . . . . . . . . . . . . . . . 888,632 352,312 244,103 165,053
Production Taxes . . . . . . . . . . . . . . . 431,565 1,018,370 791,986 508,605
Depreciation, Depletion
and Amortization . . . . . . . . . . . . . . 459,424 1,498,791 1,057,347 698,792
General and Administrative . . . . . . . . . . 184,632 238,840 654,050 584,385
Interest . . . . . . . . . . . . . . . . . . . 418,970 449,310 438,252 182,734
Bank Fees . . . . . . . . . . . . . . . . . . . 146,250 46,948 91,668 36,138
---------- --------------- -------------- ----------------
Total Costs and
Expenses . . . . . . . . . . . . . . . . . 5,237,219 7,704,934 7,207,692 4,080,329
---------- --------------- -------------- ----------------
NET INCOME . . . . . . . . . . . . . . . . . . . $ 191,574 $ 3,146,315 $ 5,447,511 $ 2,072,254
========== =============== ============== ================
EARNINGS PER COMMON
SHARE . . . . . . . . . . . . . . . . . . . . . $ 96 $ 1,573 $ 2,724 $ 1,036
========== =============== ============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 11
ASHLAWN, ENERGY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION
(JANUARY 8, 1992)
TO FOR THE YEARS ENDED
DECEMBER 31, DECEMBER 31,
1992 1993 1994
------------- ------------- ------------
<S> <C> <C> <C>
COMMON STOCK
Balance at Beginning of Year . . . . . . . . . . . . . . . . . $ -- $ 2,000 $ 2,000
Sale of Stock for Cash . . . . . . . . . . . . . . . . . . . . 2,000 -- --
------------- ------------- ------------
Balance at End of Period . . . . . . . . . . . . . . . . . . . $ 2,000 $ 2,000 $ 2,000
============= ============= ============
ADDITIONAL PAID-IN CAPITAL
Balance at Beginning of Year . . . . . . . . . . . . . . . . . $ -- $ 2,000,000 $ 2,000,000
Contributed Capital for Cash . . . . . . . . . . . . . . . . . 2,000,000 -- --
------------- ------------- ------------
Balance at End of Period . . . . . . . . . . . . . . . . . . . $ 2,000,000 $ 2,000,000 $ 2,000,000
============= ============= ============
RETAINED EARNINGS
Balance at Beginning of Year, as
Previously Reported . . . . . . . . . . . . . . . . . . . . . $ -- $ 302,402 $ 1,379,257
Cumulative Effect on Prior Years of
Retroactive Restatement for
Accounting Change . . . . . . . . . . . . . . . . . . . . . . -- (110,828) (286,168)
------------- ------------- ------------
Balance at Beginning of Year, as
Adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . -- 191,574 1,093,089
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . 191,574 3,146,315 5,447,511
Dividends Paid ($1,122 per share in
1993 and $144 per share in 1994) . . . . . . . . . . . . . . -- (2,244,800) (287,500)
------------- ------------- ------------
Balance at End of Period . . . . . . . . . . . . . . . . . . . $ 191,574 $ 1,093,089 $ 6,253,100
============= ============= ============
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . $ 2,193,574 $ 3,095,089 $ 8,255,100
============= ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 12
ASHLAWN ENERGY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION
(JANUARY 8, 1992)
TO FOR THE YEAR ENDED SEVEN MONTHS
DECEMBER 31, DECEMBER 31, ENDED JULY 31,
------------ ------------------------------ ---------------
1992 1993 1994 1995
---------- ------------- -------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . $ 191,574 $ 3,146,315 $ 5,447,511 2,072,254
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating Activities:
Depreciation, Depletion and Amortization . . . . 459,424 1,498,791 1,057,347 698,792
Gain on Sale of Oil and Gas Properties . . . . . (1,716,769) -- (4,108,585) --
Gain on Sale of Fixed Assets . . . . . . . . . . -- -- (1,278) --
(Increase) Decrease in Accounts
Receivable . . . . . . . . . . . . . . . . . . . (767,988) 428,787 (254,750) 367,335
(Increase) Decrease in Oil and Gas Sales
Receivable . . . . . . . . . . . . . . . . . . . (627,811) (656,097) 222,894 216,704
(Increase) Decrease in Insurance Claim
Receivable . . . . . . . . . . . . . . . . . . . (139,218) 139,218 -- --
(Increase) Decrease in Prepaid Insurance . . . . (143,070) (102,209) 25,423 219,856
Increase in Prepaid Intangible Drilling Cost . . -- -- -- (3,000,000)
(Increase) Decrease in Other Current
Assets . . . . . . . . . . . . . . . . . . . . . (20,681) (3,900) (71,128) 23,287
Increase (Decrease) in Accounts Payable . . . . . 1,830,296 (785,043) 1,777,718 (2,461,236)
Increase (Decrease) in Accounts
Payable -- Affiliates . . . . . . . . . . . . . 196,636 521,441 (704,783) --
Increase (Decrease) in Joint Owner
Advance Payments . . . . . . . . . . . . . . . . 151,079 (81,079) 204,460 (274,460)
Increase (Decrease) in Royalties and
Revenue Payable . . . . . . . . . . . . . . . . 72,634 144,109 (131,610) 30,885
Increase (Decrease) in Accrued Expenses . . . . . 29,632 304 2,887 (6,954)
----------- ------------- -------------- --------------
Net Cash Provided by (Used in)
Operating Activities . . . . . . . . . . . . . (484,262) 4,250,637 3,466,106 (2,113,537)
----------- ------------- -------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Oil and Gas Properties . . . . . . . . . (13,664,537) (379,473) (2,361,231) --
Capital Expenditures on Oil and Gas Properties . . . -- (1,997,199) (1,580,878) (650,789)
Investments and Other . . . . . . . . . . . . . . . . (25,844) (5,359) 2,040 --
Proceeds from Sale of Oil and Gas Properties . . . . 6,022,841 -- 5,892,774 --
Proceeds from the Sale of Assets . . . . . . . . . . -- -- 6,000 --
Purchase of Other Fixed Assets . . . . . . . . . . . (116,300) (33,626) (25,146) (10,664)
----------- ------------- -------------- ---------------
Net Cash Provided by (Used in)
Investing Activities . . . . . . . . . . . . . (7,783,840) (2,415,657) 1,933,559 (661,453)
----------- ------------- -------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock . . . . . . . 2,000 -- -- --
Proceeds from Additional Paid-In Capital . . . . . . 2,000,000 -- -- --
Additions to Long-Term Debt . . . . . . . . . . . . . 15,000,000 7,400,000 2,200,000 8,200,000
Repayment of Long-Term Debt . . . . . . . . . . . . . (8,000,000) (7,000,000) (7,300,000) (4,800,000)
Dividends Paid . . . . . . . . . . . . . . . . . . . -- (2,244,800) (287,500) (650,350)
Finance Costs . . . . . . . . . . . . . . . . . . . . (535,920) -- -- --
----------- ------------- -------------- --------------
Net Cash Provided by (Used in)
Financing Activities . . . . . . . . . . . . . 8,466,080 (1,844,800) (5,387,500) 2,749,650
----------- ------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . 197,978 (9,820) 12,165 (25,340)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR . . . . . . . . . . . . . . . . . . . . . . . -- 197,978 188,158 200,323
----------- ------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . $ 197,978 $ 188,158 $ 200,323 $ 174,983
=========== ============= ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash Paid During the Period for Interest . . . . . . $ 418,970 $ 449,310 $ 438,252 $ 182,734
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 13
ASHLAWN ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ashlawn Energy, Inc. began operations in July 1992 as the operator and
interest owner of oil and gas producing properties. The Company grants
credit to selected customers substantially all of whom are related to the
petroleum industry.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Method of Accounting for Oil and Gas Properties
The Company uses the successful efforts method of accounting for oil
and gas producing activities, as set forth in the Statement of Financial
Accounting Standards No. 19, as amended. Costs to acquire mineral
interests in oil and gas properties, to drill and equip exploratory wells
that find proved reserves, and to drill and equip development wells are
capitalized. Costs to drill exploratory wells that do not find proved
reserves, geological and geophysical costs and costs of carrying and
retaining unproved properties are expensed as incurred.
Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized at
the time of impairment by providing a valuation allowance. Other unproved
properties are amortized based on the Company's experience of successful
drilling and average holding period. Capitalized costs of producing oil
and gas properties, after considering estimated dismantlement and
abandonment costs and estimated salvage values, are depreciated and
depleted by the unit-of-production method. Support equipment servicing
more than one property is carried at cost and depreciated using the
unit-of-production method according to the properties serviced. Other
property and equipment are carried at cost and depreciated over their
estimated useful lives.
On sale or retirement of a complete unit of a proved property, the
cost and related accumulated depreciation, depletion and amortization are
eliminated from the property accounts, and the resultant gain or loss is
recognized. On retirement or sale of a partial unit of proved property,
the cost is charged to accumulated depreciation, depletion and amortization
with a resulting gain or loss recognized in income.
On sale of an entire interest in an unproved property for cash or cash
equivalent, gain or loss on the sale is recognized taking into
consideration the amount of any recorded impairment if the property had
been assessed individually. If a partial interest in an unproved property
is sold, the amount received is treated as a reduction of the interest
retained.
Property and Equipment
Office equipment and vessels are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of
the assets (primarily five to seven years).
12
<PAGE> 14
ASHLAWN ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company is an S Corporation for Federal and state income tax
reporting purposes. Under this election, income or loss of the Company is
included in the stockholders' tax returns.
Earnings Per Common Share
Earnings per common share amounts are based on the weighted average
number of shares outstanding (2,000 in 1995, 1994, 1993 and 1992).
Interim Financial Statements
The financial statements for the seven-month period ended July 31,
1995 and all related footnote information for that period are unaudited and
reflect all normal and recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the Company's results of
operations and cash flows.
NOTE B.
PURCHASES OF INTERESTS IN OIL AND GAS PROPERTIES
In separate transactions completed in 1993, the Company purchased
interests in oil and gas leases, movable and immovable property in the
Grand Isle 76 Field, Offshore, Louisiana from Shell Offshore, Inc., SOI
Royalties, Inc., Devon Energy Corporation and Grand Isle Corporation. The
entire cost of each purchase was capitalized as oil and gas property under
the successful efforts method of accounting. In connection with these
transactions, the Company has agreed to workover a specific reservoir in a
certain well. Should the workover prove economically productive, the
Company has agreed to pay the seller 40% of the gross revenue attributable
to the Company's interest in the reservoir up to an aggregate maximum of
$2,616,500. In accordance with the sale of this property in 1994, this
agreement was transferred as part of the sale.
In November 1993, the Company purchased an interest in an oil and gas
lease and movable and immovable property in the Vermillion 28 Field,
Offshore, Louisiana from Chevron U.S.A., Inc. The entire cost of the
purchase was capitalized as oil and gas property under the successful
efforts method of accounting.
In 1994, the Company purchased an interest in an oil and gas lease and
movable and immovable property in Ship Shoal Blocks 25 and 26, Offshore,
Louisiana from Four Star Oil and Gas Company. The entire cost of the
purchase was capitalized as oil and gas property under the successful
efforts method of accounting.
NOTE C.
SALE OF INTERESTS IN OIL AND GAS PROPERTIES
In September 1992, the Company sold one-third of the interests
acquired from Chevron U.S.A., Inc. in the South Pass 24 Field, Plaquemines
Parish, Louisiana, a proved property, for $6,040,989. The Company recorded
a gain from this transaction of $1,716,768.
13
<PAGE> 15
ASHLAWN ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE C.
SALE OF INTERESTS IN OIL AND GAS PROPERTIES (CONTINUED)
In 1994, the Company sold its entire interest in the Grand Isle 76
Field, a proved property, to Forcenergy Inc. for $4,250,000. The Company
recorded a gain from this transaction of $3,908,585.
In 1994, the Company sold 50% of its interest in Ship Shoal Blocks 25
and 26, a proved property, for $1,372,294. The Company recorded a gain
from this transaction of $200,000.
NOTE D.
INVESTMENTS
Investments consist of a U.S. Treasury Note with a par value of
$25,000 and an interest yield of 6.345%, maturing May 31, 1997. The market
value of the U.S. Treasury Note as of December 31, 1993 and 1994 was
$26,555 and $26,719, respectively. The U.S. Treasury Note has been pledged
to secure the Company's Louisiana Statewide Oil and Gas Lease Bond.
NOTE E.
LONG-TERM DEBT
The details of long-term debt as of December 31, 1993 and 1994 are as
follows:
<TABLE>
<CAPTION>
1993 1994
-------------- --------------
<S> <C> <C>
Note Payable -- Internationale Nederlanden (U.S.) Capital
Corporation; interest payable quarterly beginning June
1992 at 1.5% above the bank's prime lending rate; principal
payments due quarterly beginning December 1992 in
accordance with the amended credit agreement; maturity
December 1996 . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,000 $ 100,000
Note Payable -- Whitney National Bank; interest payable
at 6.5%; secured by a personal guaranty of a major
stockholder and all Company funds on deposit with the
financial institution; principal due January 6, 1994 . . . . . . 7,300,000 --
Note Payable -- Whitney National Bank; interest payable
at 8.5%; secured by a personal guaranty of a major
stockholder and all Company funds on deposit with the
financial institution; principal due January 6, 1995 . . . . . . -- 2,200,000
--------------- ---------------
7,400,000 2,300,000
Less: Current Maturities . . . . . . . . . . . . . . . . . . -- --
--------------- ---------------
Total Long-Term Debt . . . . . . . . . . . . . . . . . . . . . $ 7,400,000 $ 2,300,000
=============== ===============
The following is a schedule of note payable maturities:
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,300,000
===============
</TABLE>
14
<PAGE> 16
ASHLAWN ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE E.
LONG-TERM DEBT (CONTINUED)
Note Payable -- Whitney National Bank
Subsequent to December 31, 1993, the Company satisfied its Note
Payable -- Whitney National Bank with a loan from an affiliate. The Note
Payable -- Affiliate is unsecured, interest is payable monthly at the
Whitney National Bank's prime lending rate, and the principal is due
January 31, 1995.
Subsequent to December 31, 1994, the Company satisfied its Note
Payable -- Whitney National Bank with a loan from an affiliate. The Note
Payable -- Affiliate is unsecured, interest is payable monthly at the
Whitney National Bank's prime lending rate, and the principal is due
January 31, 1996.
Note Payable -- Internationale Nederlanden (U.S.) Capital Corporation
During 1993, the Company made principal reductions of $6,900,000
satisfying its obligation to the bank until December 1996.
In accordance with the terms of the credit agreement, the Company has
the option to subject all or any portion of its obligation to a fixed rate
of interest for periods of up to three months. As of December 31, 1993,
the Company exercised this option for the entire note balance at an
effective interest rate of 6.6250% for a three month period. As of
December 31, 1994, the Company has exercised this option for the entire
note balance at an effective interest rate of 9.750% for a three month
period.
The note is secured by mortgage liens on all of the Company's interest
in the South Pass 24 Field, Plaquemines Parish, Louisiana, the assignment
of production proceeds therefrom, and the limited guaranty of a major
stockholder.
The agreement with the lender contains provisions regarding the
maintenance of certain ratios, covenants requiring the Company to furnish
the bank certain financial, reserve, and production data within specified
time periods, as well as other restrictive covenants concerning debt,
ownership, dividends and contracts. As of December 31, 1993 and 1994, the
lender has waived compliance with certain financial ratios and covenants
contained in the credit agreement for a period of one year.
In consideration of the bank granting the Company this loan, the
Company has conveyed to the lending institution an overriding royalty
interest equal to 2.5% of the majority of the Company's operating interest
in oil, gas and other minerals produced from the South Pass 24 Field,
Plaquemines Parish, Louisiana. The Company has been granted an option to
purchase and reduce the overriding royalty percentage in accordance with
the agreements.
15
<PAGE> 17
ASHLAWN ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE F.
COMMITMENTS AND CONTINGENCIES
In connection with the 1992 purchase of certain oil and gas interests
in the South Pass 24 Field, Plaquemines Parish, Louisiana, the Company, by
agreement, assumed certain plugging and abandonment, reclamation,
restoration and clean up liabilities and obligations related thereto. To
secure these liabilities and obligations and to provide a source of funds
to satisfy the liabilities and obligations, a guarantee trust, funded by a
$4,500,000 letter of credit, was established. The original letter of
credit matured June 1993 and was renewed until December 31, 1994. The
letter of credit is secured by mortgage liens on all of the Company's
interest in the South Pass 24 Field, Plaquemines Parish, Louisiana, the
assignment of production proceeds therefrom, and the limited guaranty of a
major stockholder. In connection with the 1992 sale of a portion of the
Company's interest in the South Pass 24 Field, a letter of credit on behalf
of the purchasing company in the amount of $1,500,000 has been secured to
fund its share of the $4,500,000 guarantee trust.
In connection with the 1993 purchase of certain oil and gas interests
in the Vermillion 28 Field, Offshore, Louisiana, the Company, by agreement,
assumed certain plugging and abandonment, reclamation, restoration and
clean up liabilities and obligations related thereto. A $600,000 letter of
credit and a $600,000 corporate guaranty from an affiliate have been
established to secure these liabilities and obligations. The letter of
credit matures October 31, 1995 and is secured by a personal guaranty of a
major stockholder.
In connection with the 1993 purchase of certain oil and gas interests
in the Grand Isle 76 Field, Offshore, Louisiana, the Company, by agreement,
assumed certain plugging and abandonment, reclamation, restoration and
clean up liabilities and obligations related thereto.
In July 1993, a $250,000 letter of credit maturing July 30, 1994 and
since extended to July 31, 1995, and a corporate guaranty from an affiliate
were established to secure federal offshore operator's and right-of-way
bonds in connection with the Company's purchase of certain oil and gas
interests in the Grand Isle 76 Field. The letter of credit is secured by a
personal guaranty of a major stockholder.
In connection with the 1994 purchase of certain oil and gas interests
in the Ship Shoal Blocks 25 and 26, Offshore, Louisiana, the Company, by
agreement, assumed certain plugging and abandonment, reclamation,
restoration and clean up liabilities and obligations related thereto. A
$2,500,000 Guarantee Trust and Custodial Agreement has been established to
secure these liabilities and obligations. The Guarantee Trust and
Custodial Agreement is secured by assets of a major stockholder.
NOTE G.
RELATED PARTY TRANSACTIONS
During 1992, 1993 and 1994, the Company had purchases from affiliated
companies of approximately $251,717, $540,998 and $429,403, respectively.
Transactions with affiliates also included the advancement of funds,
payment of interest, the reimbursement of operating expenses and the
payment of certain administrative services at terms determined by
management. At December 31, 1993 and 1994, amounts due to the affiliates
were $718,077 and $13,294, respectively.
During 1992, the Company sold a substantial portion of its product to
one customer totaling $3,509,004.
16
<PAGE> 18
ASHLAWN ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE G.
RELATED PARTY TRANSACTIONS (CONTINUED)
During 1993 and 1994, the Company sold a substantial portion of its
product to two customers. At December 31, 1993, sales to those customers
aggregated $8,319,054 and $1,638,168, respectively. At December 31, 1993,
amounts due from those customers included in oil and gas sales receivable
were $450,204 and $490,218, respectively. At December 31, 1994, sales to
those customers aggregated $5,730,214 and $1,152, 834, respectively. At
December 31, 1994, amounts due from those customers included in oil and gas
sales receivable were $524,980 and $-0-, respectively.
NOTE H.
OFF-BALANCE SHEET RISK
During 1993 and 1994, the Company maintained balances in a financial
institution in excess of the federally insured limit.
NOTE I.
CHANGE IN ACCOUNTING PRINCIPLE
During 1994, the Company changed its method of accounting for its oil
and gas properties from the full cost method to the successful efforts
method. The Company believes that the new method more accurately reflects
the results of operations and is the more commonly used method in the
industry. The financial statements for 1992 and 1993 have been restated
for the change which resulted in a decrease of net income of $110,828 ($55
per share) and $175,340 ($88 per share), respectively. The effect of this
change was to increase net income in 1994 by approximately $3,320,000
($1,660 per share). Retained earnings have been adjusted for the
retroactive effect of the new method.
NOTE J.
SUBSEQUENT EVENT
Effective May 25, 1995, the Company entered into an agreement and plan
of merger with Forcenergy Inc. The consideration for the acquisition of
the Company will consist of $7.5 million in cash (to be reduced by any
long- term debt assumed, negative working capital, and dividends paid to
the Company's stockholders since January 1, 1995) and common stock of
Forcenergy Inc with a market value of $30.0 million based upon the initial
public offering price. This transaction is contingent upon the completion
of Forcenergy Inc's initial public offering of its common stock under the
Securities Act of 1933 as amended.
17
<PAGE> 19
ASHLAWN ENERGY, INC.
SUPPLEMENTARY INFORMATION REGARDING OIL AND
GAS PRODUCING ACTIVITIES (UNAUDITED)
The following supplementary oil and gas information is provided in
accordance with SFAS No. 69, "Disclosures about Oil and Gas Producing
Activities".
Capitalized Costs Relating to Oil and Gas Producing Activities
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1993 1994
---------------- ---------------
<S> <C> <C>
Proved Oil and Gas Properties . . . . . . . . . . . . . . . . . . $ 8,958,970 $ 10,976,428
Support Equipment and Facilities . . . . . . . . . . . . . . . . 2,926,088 3,062,621
---------------- ---------------
11,885,058 14,039,049
Less: Accumulated Depreciation, Depletion and
----- -----
Amortization . . . . . . . . . . . . . . . . . . . . . . . . (1,770,677) (2,677,573)
---------------- ---------------
Net Capitalized Costs . . . . . . . . . . . . . . . . . . . $ 10,114,381 $ 11,361,476
================ ===============
</TABLE>
Costs Incurred in Oil and Gas Producing Activities
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1992 1993 1994
------------- ------------- -------------
<S> <C> <C> <C>
Property Acquisition Costs Proved . . . . . . . . . . . $ 7,024,217 $ 257,264 $ 954,243
Exploration Costs . . . . . . . . . . . . . . . . . . . -- 253,884 107,609
Development Costs . . . . . . . . . . . . . . . . . . . 78,403 1,985,274 1,800,084
------------- ------------- -------------
$ 7,102,620 $ 2,496,422 $ 2,861,936
============= ============= =============
</TABLE>
Reserve Quantity Information
The following estimates, based on reports of independent petroleum
engineers, of proved developed and proved undeveloped reserve quantities and
related standardized measure of discounted net cash flow are estimates only,
and do not purport to reflect realizable values or fair market values of the
Company's reserves. The Company emphasizes that reserve estimates are
inherently imprecise and that estimates of new discoveries are more imprecise
than those of currently producing oil and gas properties. Accordingly, these
estimates are expected to change as future information becomes available. All
of the Company's reserves are located in the United States.
Proved reserves are estimated, reserves of crude oil (including condensate
and natural gas liquids) and natural gas that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. Proved
developed reserves are those expected to be recovered through existing wells,
equipment and operating methods.
18
<PAGE> 20
ASHLAWN ENERGY, INC.
SUPPLEMENTARY INFORMATION REGARDING OIL AND
GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
Reserve Quantity Information (Continued)
<TABLE>
<CAPTION>
Oil Gas
(Mbbls) (MMcf)
------------- --------------
<S> <C> <C>
1992
Proved Developed and Undeveloped Reserves:
Beginning of Year . . . . . . . . . . . . . . . . . . -- --
Revisions of Previous Estimates . . . . . . . . . -- --
Improved Recovery . . . . . . . . . . . . . . . . -- --
Purchases of Minerals in Place . . . . . . . . . . 8,319 5,170
Extensions and Discoveries . . . . . . . . . . . . -- --
Production . . . . . . . . . . . . . . . . . . . . (171) (95)
Sales of Minerals in Place . . . . . . . . . . . . (2,773) (1,724)
----------- ------------
End of Year . . . . . . . . . . . . . . . . . . . . . 5,375 3,351
=========== ============
Proved Developed Reserves:
Beginning of Year . . . . . . . . . . . . . . . . . . -- --
=========== ============
End of Year . . . . . . . . . . . . . . . . . . . . . 4,686 1,176
=========== ============
1993
Proved Developed and Undeveloped Reserves:
Beginning of Year . . . . . . . . . . . . . . . . . . 5,375 3,351
Revisions of Previous Estimates . . . . . . . . . (944) (1,685)
Improved Recovery . . . . . . . . . . . . . . . -- --
Purchases of Minerals in Place . . . . . . . . . . 103 7,363
Extensions and Discoveries . . . . . . . . . . . . -- --
Production . . . . . . . . . . . . . . . . . . . . (515) (915)
Sales of Minerals in Place . . . . . . . . . . . . -- --
----------- ------------
End of Year . . . . . . . . . . . . . . . . . . . . . 4,019 8,114
=========== ============
Proved Developed Reserves:
Beginning of Year . . . . . . . . . . . . . . . . . . 4,686 1,176
=========== ============
End of Year . . . . . . . . . . . . . . . . . . . . . 4,019 8,114
=========== ============
1994
Proved Developed and Undeveloped Reserves:
Beginning of Year . . . . . . . . . . . . . . . . . . 4,019 8,114
Revisions of Previous Estimates . . . . . . . . . 2,465 14,465
Improved Recovery . . . . . . . . . . . . . . . . -- --
Purchases of Minerals in Place . . . . . . . . . . 244 6,228
Extensions and Discoveries -- --
Production . . . . . . . . . . . . . . . . . . . . (447) (744)
Sales of Minerals in Place . . . . . . . . . . . . (299) (12,557)
----------- ------------
End of Year . . . . . . . . . . . . . . . . . . . . . 5,982 15,506
=========== ============
Proved Developed Reserves:
Beginning of Year . . . . . . . . . . . . . . . . . . 4,019 8,114
=========== ============
End of Year . . . . . . . . . . . . . . . . . . . . . 4,167 11,691
=========== ============
</TABLE>
Revisions of previous estimates in 1994 are primarily due to improved
seismic and geological data analysis. Purchases of minerals in place include
the purchase of oil and gas properties in 1992, 1993 and 1994. Sales of
minerals in place for 1994 included the sale of interests in Ship Shoal Block
26 and Grand Isle prospect.
19
<PAGE> 21
ASHLAWN ENERGY, INC.
SUPPLEMENTARY INFORMATION REGARDING OIL AND
GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
Standardized Measure of Discounted Future Net Cash Flows and Changes Therein
Relating to Proved Oil and Gas Reserves
The standardized measure of discounted future net cash flows is computed by
applying year-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated
future production of proved oil and gas reserves, less estimated future
expenditures (based on year-end costs) to be incurred in developing and
producing the proved reserves, and assuming continuation of existing economic
conditions. The estimated future net cash flows are then discounted using a
rate of 10 percent a year to reflect the estimated timing of the future cash
flows.
The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves is as follows (Dollars in Thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1992 1993 1994
------------- ------------ -------------
<S> <C> <C> <C>
Future Cash Inflows . . . . . . . . . . . . . . . . . . . . . $ 106,048 $ 71,094 $ 123,706
Future Production Costs . . . . . . . . . . . . . . . . . . . (61,409) (42,398) (48,729)
Future Development Costs . . . . . . . . . . . . . . . . . . (5,984) (2,511) (7,104)
------------ ----------- -----------
Future Net Cash Flows . . . . . . . . . . . . . . . . . . . . 38,655 26,185 67,873
Less: 10% Annual Discount for Estimated
Timing of Cash Flows . . . . . . . . . . . . . . . (16,851) (7,830) (25,586)
------------ ----------- -----------
Standardized Measure of Discounted Future Net Cash
Flows Relating to Proved Oil and Gas Reserves . . . . . . . $ 21,804 $ 18,355 $ 42,287
============ =========== ===========
</TABLE>
The following table reconciles the change in the standardized measure
of discounted future net cash flows (Dollars in Thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1992 1993 1994
----------- ------------ -----------
<S> <C> <C> <C>
Beginning of Year . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 21,804 $ 18,355
Sales of Oil and Gas Produced, Net of Production Costs . . . . 323 (5,320) (3,692)
Net Changes in Prices and Production Costs . . . . . . . . . . -- (6,842) 6,715
Net Change in Estimated Future Development Costs . . . . . . . -- 2,450 (3,681)
Revisions of Previous Quantity Estimates . . . . . . . . . . . -- (4,187) 24,087
Net Change From Purchases and Sales of Minerals in Place . . . 21,481 6,981 (2,779)
Accretion of Discount . . . . . . . . . . . . . . . . . . . . . -- 2,180 1,836
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,289 1,446
----------- ----------- ----------
End of Year . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,804 $ 18,355 $ 42,287
=========== =========== ==========
</TABLE>
20
<PAGE> 22
(b) Pro forma financial information
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
PRO FORMA FINANCIAL INFORMATION
On March 3, 1995, the Company completed the acquisition of offshore oil and
gas properties for a net purchase price of $24.5 million from Conoco. On
August 2, 1995, the Company completed a plan of merger with Ashlawn. The
consideration for the Ashlawn Acquisition was approximately $3.3 million in net
cash, common stock of the Company with an indicated market value of $30.0
million based on the initial public offering price and the assumption of $5.7
million of Ashlawn debt. During 1995 the Company also acquired oil and gas
properties from SONAT Exploration Company ("Sonat"), Amoco Production Company
("Amoco") and Texaco Exploration and Production, Inc. ("Texaco") for a combined
purchase price of $8.8 million. The Company used the purchase method to
account for these transactions.
The unaudited pro forma statement of operations for the year ended December
31, 1995 assumes the Conoco Acquisition, the other property acquisitions by the
Company during 1995, the Ashlawn Acquisition and gives effect to the
application of the net proceeds of the Initial Public Offering as if such
transactions had been consummated at January 1, 1995. The unaudited pro forma
statement of operations includes certain adjustments to the historical
statement of operations of the Company to give effect to the acquisition of the
oil and gas properties and estimated administrative cost increases due to
becoming a public entity.
The pro forma statement of operations does not purport to be indicative of
the results of operations of the Company had such transactions occurred on the
dates assumed, nor is the pro forma statement necessarily indicative of the
future results of operations of the Company. The pro forma statement should be
read together with the Financial Statements of the Company, including the Notes
thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Ashlawn Pro Forma Adjustments
Forcenergy Conoco Energy, Inc. Other ------------------------- Pro Forma
Historical Acquisition(1) Historical(2) Properties(3) Acquisitions Offering Combined
---------- ------------- ------------- ------------- ------------ -------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Oil and gas sales . . . . . . $ 72,147 $ 1,283 $ 6,126 $ 600 $ -- $ -- $ 80,156
Other . . . . . . . . . . . . 494 0 27 0 -- -- 521
---------- ------------- ------------- ------------- ------------ -------- --------
Total revenues . . . . . 72,641 1,283 6,153 600 -- -- 80,677
Operating Expenses:
Lease operating . . . . . . . 24,507 293 2,070 233 -- -- 27,103
Depreciation, depletion and
amortization . . . . . . . 31,295 -- 699 -- 2,323 -- 34,317
Production taxes . . . . . . 1,868 -- 509 43 -- -- 2,420
General and administrative,
net . . . . . . . . . . . . 5,670 -- 621 -- (621)(5) 100 5,770
---------- ------------- ------------- ------------- ------------ -------- --------
Total operating expenses 63,340 293 3,899 276 1,702 100 69,610
---------- ------------- ------------ ------------- ------------ -------- --------
Income (loss) from operations . 9,301 990 2,254 324 (1,702) (100) 11,067
Interest and other income
(loss) . . . . . . . . . . (561) -- -- -- -- -- (561)
Interest expense, net . . . . . (11,668) -- (183) -- (188)(7) 2,608 (9,431)
---------- ------------- ------------- ------------- ------------ -------- --------
Income (loss) before income
taxes . . . . . . . . . . (2,928) 990 2,071 324 (1,890) 2,508(8) 1,075
Income tax provision (benefit) (1,075) -- -- -- 558(9) 935(9) 418
---------- ------------- ------------- ------------- ------------ -------- --------
Net income (loss) . . . . . . . $ (1,853) $ 990 $ 2,071 $ 324 $ (2,448) $ 1,573 $ 657
========== ============= ============= ============= ============ ======== ========
Net income (loss) per share . . $ (0.14) $ .04
========== ========
Weighted average shares
outstanding . . . . . . . . . 12,910 18,250
</TABLE>
(1) The Forcenergy Historical results of operations reflect oil and gas
revenues and direct operating expenses for the Conoco Acquisition from the
acquisition date, March 3, 1995, through December 31, 1995. The pro forma
results of operations for "Conoco Acquisition" reflects the oil and gas
revenues and direct operating expenses for these properties from January 1,
1995 to the acquisition date.
21
<PAGE> 23
(2) This column represents the historical results of operations of Ashlawn for
the period from January 1, 1995 to July 31, 1995.
(3) The Forcenergy Historical results of operations reflect oil and gas
revenues and direct operating expenses for Other Properties from their
respective acquisition dates, February 2, 1995 for properties acquired from
Sonat, April 26, 1995 for properties acquired from Texaco and March 14,
1995 for properties acquired from Amoco, through December 31, 1995. The
Other Properties column reflects the historical oil and gas revenues and
direct operating expenses for these properties from January 1, 1995 to
their acquisition dates.
(4) Adjustment to reflect the depreciation, depletion and amortization of oil
and gas properties, using the full cost method, based on the Company's 1995
historical rate per equivalent mcf of production.
(5) No additional general and administrative expense has been incurred as a
result of the Ashlawn Acquisition.
(6) Historical general and administrative costs for the seven months ended
July 31, 1995 have been adjusted by estimated incremental general and
administrative expenses associated with the Company becoming a publicly
traded entity.
(7) Adjustment to reflect increased interest expense on $42.1 million of
borrowings incurred in connection with the Conoco Acquisition and the
acquisition of other properties by the Company during 1995, net of
interest capitalization.
(8) Adjustment to reflect the repayment of $57.7 million in debt including a
portion of the Senior Credit Facility and additional debt assumed in
connection with the acquisition of oil and gas properties from Texaco.
(9) Adjustment to income tax expense to reflect the combined results of
operations.
22
<PAGE> 24
(c) Exhibits
2.1* Purchase and Sale/Exchange Agreement dated December 12, 1994
between Conoco, Inc. and the Company.
2.2* Purchase and Sale Agreement dated September 15, 1994 between
Ashlawn Energy, Inc. and the Company
23.1** Consent of Price Waterhouse LLP
23.2** Consent of LaPorte, Sehrt, Romig & Hand, APAC
- ---------------------------
* Filed previously
** Filed herewith
23
<PAGE> 25
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 duly authorized.
FORCENERGY INC
Date: October 7, 1996 E. JOSEPH GRADY
----------------------------------------
E. Joseph Grady
Vice President - Chief Financial Officer
24
<PAGE> 26
INDEX TO EXHIBITS
EXHIBIT NO.
-----------
2.1* Purchase and Sale/Exchange Agreement dated December 12, 1994
between Conoco, Inc. and the Company.
2.2* Purchase and Sale Agreement dated September 15, 1994 between
Ashlawn Energy, Inc. and the Company
23.1** Consent of Price Waterhouse LLP
23.2** Consent of LaPorte, Sehrt, Romig & Hand, APAC
- ---------------------------
* Filed previously
** Filed herewith
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (No. 33-80919) of
Forcenergy Gas Exploration Inc of our report dated May 12, 1995 appearing on
page 2 of this Form 8-K.
PRICE WATERHOUSE LLP
Houston, Texas
October 4, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (No. 33-80919) of
Forcenergy Gas Exploration, Inc. of our report on the Financial Statements of
Ashlawn Energy, Inc. dated April 12, 1995 except for Note J for which the date
is May 25, 1995 appearing on page 7 of this Form 8-K.
LAPORTE, SEHRT, ROMIG AND HAND
A PROFESSIONAL ACCOUNTING CORPORATION
Metairie, Louisiana
October 4, 1996
