SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 17, 1997
(December 30, 1996)
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
Item 7.(a) Financial statements of businesses acquired.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Forcenergy Inc
We have audited the accompanying historical statements of revenues
and direct operating expenses of the properties acquired by Forcenergy
Inc from Marathon Oil Company for the years ended December 31, 1996 and
1995 ("Historical Statements"). These Historical Statements are the
responsibility of the management of Marathon Oil Company and Forcenergy
Inc. Our responsibility is to express an opinion on the Historical
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
audits to obtain reasonable assurance about whether the Historical
Statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the Historical Statements. 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 Statements. We believe that our audits provide a reasonable
basis for our opinion.
As described in Note 1, the accompanying Historical Statements were
prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission for inclusion in certain SEC
regulatory filings and are not intended to be a complete financial
presentation of Marathon Oil Company's ownership interest in the
acquired properties.
In our opinion, the Historical Statements referred to above
present fairly, in all material respects, the revenues and direct
operating expenses of the properties acquired by Forcenergy Inc from
Marathon Oil Company for the years ended December 31, 1996 and 1995, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Miami, Florida
March 13, 1997
<PAGE>
HISTORICAL STATEMENTS OF
REVENUES AND DIRECT OPERATING EXPENSES
OF THE PROPERTIES ACQUIRED BY FORCENERGY INC
FROM MARATHON OIL COMPANY
(in thousands)
Years Ended
December 31,
1996 1995
------- -------
Oil revenues $49,619 $44,318
Direct operating expenses 19,635 18,874
------- -------
Revenues in excess of direct operating expenses $29,984 $25,444
======= =======
The accompanying notes are an integral part of this statement.
<PAGE>
NOTES TO THE HISTORICAL STATEMENTS OF REVENUES AND DIRECT
OPERATING EXPENSES OF THE PROPERTIES ACQUIRED BY FORCENERGY INC FROM
MARATHON OIL COMPANY
1. Basis of Presentation
On December 30, 1996, Forcenergy Inc (the "Company") acquired
Marathon Oil Company's ("Marathon") interest in certain crude oil
properties in the Cook Inlet area and Prudhoe Bay Unit, Alaska (the
"Acquired Properties") for a purchase price of $113,824,000, reduced to
a net cash consideration of $107,832,000 after adjustment for the net
operating results for the period between the Effective Date and the
Closing Date (December 30, 1996). The transaction was funded primarily
through the Company's existing senior credit facility. The results of
operations for the Acquired Properties are included in the Company's
results of operations from December 30, 1996.
The accompanying statements, prepared in accordance with generally
accepted accounting principles ("GAAP"), represent the historical
revenues and direct operating expenses ("Statements") of the Acquired
Properties and were prepared from Marathon's historical accrual basis
accounting records which are kept in accordance with GAAP. The
accompanying Historical Statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in certain SEC regulatory filings and are not
intended to be a complete financial presentation of Marathon Oil
Company's ownership interest in the acquired properties.
The revenues and associated direct operating expenses presented
relate to the net revenue interests and net working interests,
respectively, in the Acquired Properties. Revenues are recognized in the
period of delivery.
Historical financial statements reflecting financial position,
results of operations and cash flows required by GAAP are not presented
as the Acquired Properties were not maintained as a separate business
unit and assets, liabilities or indirect operating costs applicable to
the Acquired Properties were not segregated. The Statements do not
include depletion, depreciation and amortization, general and
administrative, interest or federal income tax expenses. It is not
practicable to identify all assets, liabilities or indirect operating
costs applicable to the properties.
<PAGE>
2. Supplementary Financial Information for Oil and Gas Producing
Activities (Unaudited)
Estimated Quantities of Proved Oil and Gas Reserves
Proved reserves are estimated quantities of crude oil 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 proved
reserves that can be expected to be recovered through existing wells
with existing equipment and operating methods.
The following table presents the estimated net proved and proved
developed oil and gas reserves attributable to the Acquired Properties
at December 31, 1996, 1995, and 1994 along with a summary of changes in
the quantities of net proved reserves during the years ended December
31, 1996 and 1995. The reserve information at December 31, 1996 below is
based on the January 1, 1997 reserve report as prepared for the Acquired
Properties by independent petroleum engineers contracted by the Company.
The December 31, 1995 and 1994 information has been computed by
adjusting the January 1, 1997 reserve report for production and
revisions.
Oil
(Mbbl)
-----------
Proved reserves at December 31, 1996 25,945
Production 2,791
-----------
Proved reserves at December 31, 1995 28,736
Production 3,087
-----------
Proved reserves at December 31, 1994 31,823
===========
Proved developed reserves at:
December 31, 1996 24,392
December 31, 1995 27,183
<PAGE>
Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved 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, future cash inflows were estimated by
applying December 31, 1996 and 1995 prices adjusted for fixed and
determinable escalations provided by contracts in existence at year end
to the estimated future production of proved reserves. Future cash
inflows for 1996 and 1995 were reduced by estimated future production,
development and dismantlement costs based on 1996 and 1995 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, provisions for depletion,
depreciation and amortization; and as no income taxes were allocated to
the Acquired Properties the Standardized Measure excludes income taxes.
The following Standardized Measure and changes in the Standardized
Measure are based on reserve estimates using year-end prices and costs.
Set forth below is the Standardized Measure (before income taxes)
relating to proved oil reserves:
December 31
1996 1995
------ ------
(in thousands)
Future cash inflows $534,683 $186,711
Future production, development
and dismantlement costs (301,481) (105,277)
--------- ---------
Future net cash flows 233,202 81,434
10% annual discount to reflect timing of
net cash flows (58,245) (20,339)
--------- ---------
Standardized Measure (before income taxes)
of discounted future net cash flows
relating to proved reserves $174,957 $61,095
========= =========
<PAGE>
The Standardized Measure of discounted future net cash flows
(before income taxes) is based on oil prices of $21.37 and $13.98 per
barrel at December 31, 1996 and 1995, respectively.
The following is an analysis of the changes in the Standardized
Measure:
December 31
1996 1995
------ ------
(in thousands)
Standardized Measure (before income taxes)-
beginning of year $61,095 $68,861
Sales and transfers of oil produced,
net of production costs (29,984) (25,444)
Increase in prices 141,341 15,972
Accretion of discount 6,109 6,886
Changes in timing of production and other (3,604) (5,180)
--------- --------
Standardized Measure (before income taxes) -
end of year $174,957 $61,095
Item 7.(b) Pro forma financial information.
The unaudited pro forma statement of operations for the year ended
December 31, 1996 gives effect to the Marathon Acquisition, the
previously reported Amerada Hess Acquisition (the "1996 Acquisitions"),
the conversion during 1996 of the 7% Exchangeable Subordinated Notes
(the "Exchangeable Notes") into 2,343,048 shares of Common Stock, the
1996 exercise of 214,866 options to purchase Common Stock by certain
holders of the Exchangeable Notes, the sale of 1,635,408 shares of
Common Stock in 1996 (the "Common Stock Offering") and the 1996 issuance
of $175,000,000 of 9-1/2% Senior Subordinated Notes (the "Notes
Offering") and, collectively, (the "1996 Transactions"), as if they had
occurred on January 1, 1996. Such unaudited pro forma financial
information includes only revenues and direct operating expenses of the
acquisitions and is not a complete statement of operations. The
unaudited pro forma financial information has been prepared based on
estimates and assumptions deemed by the Company to be appropriate and
does not purport to be indicative of the results of operations which
would actually have been obtained if the 1996 Acquisitions and 1996
Transactions had occurred on January 1, 1996 or the results which may be
obtained in the future. Future results may vary significantly from the
results reflected in such statements due to price changes, production
declines, supply and demand, acquisitions and other factors.
<PAGE>
<TABLE>
FORCENERGY INC
PRO FORMA STATEMENTS OF OPERATIONS
Year Ended December 31, 1996
(unaudited)
<CAPTION>
Amerada
Forcenergy Hess Marathon Pro forma
Historical Acquisition Acquisition adjustments Pro Forma
(a) (b) (c)
---------- ----------- ---------- --------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues
Oil & gas sales $138,698 $9,263 $49,619 -- $197,580
Other 683 -- -- -- 683
-------- ------ ------- ----- --------
Total revenues 139,381 9,263 49,619 -- 198,263
-------- ------ ------- ----- --------
Operating expenses
Lease operating 38,786 2,317 19,338 -- 60,441
Depletion, depreciaion
and amortization 58,464 -- -- 15,503 (d) 73,967
Production taxes 3,454 -- 297 -- 3,751
General & administra-
tive, net 7,971 -- -- -- 7,971
------- ------ ------ ------ -------
Total operating
expenses 108,675 2,317 19,635 15,503 146,130
------- ------ ------ ------ -------
Income from operations 30,706 6,946 29,984 (15,503) 52,133
Interest and other income 650 -- -- -- 650
Interest expense, net (13,367) -- -- (7,683)(e) (21,050)
Income before income
taxes 17,989 6,946 29,984 (23,186) 31,733
Income tax provision 6,711 -- -- 5,126 (f) 11,837
------- ------ ------ ------- -------
Net income $11,278 $6,946 $29,984 $(28,312) $19,896
======= ====== ======= ========= =======
Net income per share $ .57 $ .83
======= =======
Weighted average common
and common equivalent
shares 19,727 23,919
<PAGE>
<FN>
1. Adjustments
<FNA>
(a)Forcenergy Historical Results include the historical oil and gas
revenues and direct operating expenses for the Amerada Hess Acquisition
from closing date June 28, 1996 to December 31, 1996 and Marathon
Acquisition from December 30, 1996 to December 31, 1996.
<FNB>
(b)This column includes the historical oil revenues and direct operating
expenses for the Amerada Hess Acquisition from January 1, 1996 to June
27, 1996.
<FNC>
(c)This column indicates the historical oil revenues and direct operating
expenses for the Marathon Acquisition from January 1, 1996 to December
29, 1996.
<FND>
(d)Adjustment to reflect the depletion, depreciation and amortization of
oil and gas properties giving consideration to the 1996 Acquisitions.
<FNE>
(e)Net increase in interest expense assuming the following transactions
occurred on January 1, 1996: (i) conversion of the Exchangeable
Notes;(ii)the Common Stock Offering; and (iii) the Notes Offering; and
assuming a weighted average interest rate of 8.97% and average actual
debt outstanding for the period (excluding the Exchangeable Notes)
adjusted for 1996 Acquisitions costs, debt issuance cost and
capitalized interest.
<FNF>
(f)Adjustment to income tax expense reflecting the results of the
transactions reflected herein using the combined federal and state
statutory rate of 37.3%.
</FN>
</TABLE>
<PAGE>
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: March 17, 1997 E. Joseph Grady
Vice President - Chief Financial Officer
