<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
FORCENERGY INC
(Exact name of registrant as specified in its charter)
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DELAWARE 1311 65-0429338
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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2730 S.W. 3RD AVENUE, SUITE 800
MIAMI, FLORIDA 33129-2237
(305) 856-8500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
E. JOSEPH GRADY
VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER
2730 S.W. 3RD AVENUE, SUITE 800
MIAMI, FLORIDA 33129-2237
(305) 856-8500
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------------
Copy to:
JOHN F. WOMBWELL
ANDREWS & KURTH L.L.P.
4200 TEXAS COMMERCE TOWER
HOUSTON, TEXAS 77002
(713) 220-4396
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable following the effectiveness of this Registration
Statement.
---------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE(2)
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Common Stock, $.01 par value(3)... 7,926,773 $20.20 $160,086,640 $47,226
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(1) Calculated in accordance with Rule 457(f)(1) and (2) under the Securities
Act of 1933, equal to (i) $152,936,640, based on the average of the high and
low prices of the 13,392,000 Forcenergy AB Series B Common Shares on the
Stockholm Stock Exchange on February 10, 1998 and (ii) $7,150,000, based on
$7.15, the book value per share of the 1,000,000 Forcenergy AB Series A
Common Shares to be received by the registrant in the proposed Exchange
Offer described herein. The book value per share was SEK 58.08 as of
September 30, 1997 (the latest practicable date). The Swedish kronor was
converted at an exchange rate of $1.00 to SEK 8.12 based on the closing spot
rate for SEK in the United States, as reported by the Federal Reserve Bank,
on February 10, 1998. The proposed maximum offering price per share is equal
to the proposed maximum offering price divided by the number of shares being
registered hereunder.
(2) Pursuant to Rule 457(b) under the Securities Act of 1933, $36,562 previously
paid on January 9, 1998 upon filing with the Commission of preliminary proxy
material of the registrant has been credited against the registration fee
payable in connection with this filing.
(3) Includes all shares in the Exchange Offer described herein. Also includes
preferred share purchase rights associated with the Common Stock. No
separate fee is payable in respect of the registration of such preferred
share purchase rights.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
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FORCENERGY INC
2730 S.W. 3RD AVENUE, SUITE 800
MIAMI, FLORIDA 33129-2237
LOGO (305) 856-8500
Dear Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Forcenergy Inc ("Forcenergy") to be held at 2730 S.W. 3rd
Avenue, Suite 800, Miami, Florida 33129-2237, on Tuesday, March 17, 1998 at 9:00
a.m. local time.
At the Special Meeting, you will be asked to consider and vote upon a
proposal (the "Proposal") by Forcenergy to authorize the issuance of shares of
Forcenergy's common stock, par value $0.01 per share ("FEN Common Stock"), in
exchange (the "Exchange Offer") for outstanding Series A and Series B common
shares (collectively, the "FAB Securities") of Forcenergy AB ("FAB"), upon the
terms and conditions set forth in the accompanying Proxy Statement/U.S. Exchange
Offer/Prospectus (the "Proxy Statement/Prospectus"). FAB currently owns
8,740,486 shares of FEN Common Stock, representing approximately 34% of the
outstanding shares of FEN Common Stock. Pursuant to the Exchange Offer,
Forcenergy may issue up to 7,926,773 shares of FEN Common Stock to holders of
FAB Securities, assuming the tender of all outstanding FAB Securities.
The Proposal and other related matters are discussed in more detail in the
accompanying Proxy Statement/Prospectus, which also describes certain conflicts
of interest and other considerations for Forcenergy stockholders. Please review
and consider the enclosed materials carefully.
THE BOARD OF DIRECTORS OF FORCENERGY BELIEVES THAT THE PROPOSED ISSUANCE OF
FEN COMMON STOCK PURSUANT TO THE EXCHANGE OFFER IS FAIR TO, AND IN THE BEST
INTERESTS OF, FORCENERGY'S STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE PROPOSAL. Eric Forss, President of FAB, and a director of
Forcenergy, has abstained from voting on the Board of Director's approval of the
Exchange Offer, including the issuance of FEN Common Stock pursuant thereto, and
in making these recommendations to Forcenergy's shareholders.
In making these recommendations, the Board of Directors of Forcenergy
received and took into account, among other factors, the pro forma financial
statements included in the Proxy Statement/Prospectus, the simplified
organizational structure and anticipated benefits in the capital markets. In
connection with the Exchange Offer, the Board of Directors also retained
Goldman, Sachs & Co. and Enskilda Securities as its financial advisors.
Because of the significance of the proposed Exchange Offer, it is important
that your shares be represented and voted at the Special Meeting. Accordingly,
whether or not you plan to attend the Special Meeting, please complete, sign,
date and return your proxy card in the enclosed envelope. If you attend the
Special Meeting, you may vote in person even though you have previously returned
your proxy. The issuance of FEN Common Stock in accordance with the Exchange
Offer will require the affirmative vote of holders of a majority of the
outstanding shares of FEN Common Stock having voting power, present in person or
represented by proxy. FEN Common Stock owned by FAB will not be entitled to vote
and will not be counted as present for quorum purposes. Abstentions will be
treated as present for quorum purposes and will have the same effect as a vote
"against" the Proposal. While a broker non-vote will be treated as present for
quorum purposes, it will not be treated as "voting power present" and will not
have any effect on the vote on the Proposal. Accordingly, your vote is very
important.
Sincerely,
Stig Wennerstrom
President and Chief Executive Officer
IF YOU HAVE ANY QUESTIONS REGARDING THE PROPOSAL OR NEED ASSISTANCE IN VOTING
YOUR COMMON STOCK, PLEASE CALL MICHAEL MCNAMARA AT FORCENERGY AT (305) 856-8500.
<PAGE> 3
FORCENERGY INC
2730 S.W. 3RD AVENUE, SUITE 800
MIAMI, FLORIDA 33129-2237
(305) 856-8500
NOTICE OF SPECIAL MEETING OF FORCENERGY STOCKHOLDERS
TO BE HELD ON MARCH 17, 1998
To the Stockholders of Forcenergy Inc:
A Special Meeting of Stockholders (the "Special Meeting") of Forcenergy
Inc, a Delaware corporation ("Forcenergy"), will be held on Tuesday, March 17,
1998 at 9:00 a.m., local time, at 2730 S.W. 3rd Avenue, Suite 800, Miami,
Florida 33129-2237 for the following purposes:
1. To consider and vote upon a proposal (the "Proposal") by Forcenergy to
authorize the issuance of shares of Forcenergy's common stock, par value $0.01
per share ("FEN Common Stock"), pursuant to an offer (the "Exchange Offer") in
exchange for outstanding Series A and Series B common shares (collectively, the
"FAB Securities") of Forcenergy AB ("FAB"), upon the terms and conditions set
forth in the accompanying Proxy Statement/U.S. Exchange Offer/Prospectus (the
"Proxy Statement/Prospectus"). FAB currently owns 8,740,486 shares of FEN Common
Stock, representing approximately 34% of the outstanding shares of FEN Common
Stock. Pursuant to the Exchange Offer, Forcenergy may issue up to 7,926,773
shares of FEN Common Stock to holders of FAB Securities, assuming the tender of
all outstanding FAB Securities; and
2. To transact such other business as may properly come before the Special
Meeting or any adjournment or postponements thereof.
The Proposal and other related matters are described in the accompanying
Proxy Statement/Prospectus, which also describes certain conflicts of interest
and other considerations for Forcenergy stockholders.
The Board of Directors of Forcenergy has fixed the close of business on
January 28, 1998 as the record date for the determination of stockholders
entitled to notice of, and to vote at, the Special Meeting and any adjournment
thereof. Only holders of record of shares of FEN Common Stock at the close of
business on the record date are entitled to notice of, and to vote at, the
Special Meeting. A complete list of such stockholders will be available for
examination at the offices of Forcenergy in Miami, Florida during normal
business hours by any Forcenergy stockholder, for any purpose germane to the
Special Meeting, for a period of ten days prior to the meeting.
Your vote is important. The Proposal will require the affirmative vote of
holders of a majority of the outstanding shares of FEN Common Stock having
voting power, present in person or represented by proxy. FEN Common Stock owned
by FAB will not be entitled to vote and will not be counted as present for
quorum purposes. Abstentions will be treated as present for quorum purposes and
will have the same effect as a vote "against" the Proposal. While a broker
non-vote will be treated as present for quorum purposes, it will not be treated
as "voting power present" and will not have any effect on the vote on the
Proposal. Accordingly, even if you plan to attend the Special Meeting in person,
we request that you sign and return the enclosed proxy or voting instruction
card and thus ensure that your shares will be represented and voted at the
Special Meeting if you are unable to attend. If you do attend the Special
Meeting and wish to vote in person, you may withdraw your proxy and vote in
person.
By Order of the Board of Directors,
Thomas F. Getten
Corporate Secretary
Miami, Florida
February 17, 1998
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU HAVE ANY QUESTIONS
CONCERNING THE PROPOSAL OR NEED ASSISTANCE IN VOTING YOUR COMMON STOCK, PLEASE
CALL MICHAEL MCNAMARA AT FORCENERGY AT (305) 856-8500.
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U.S. EXCHANGE OFFER/PROSPECTUS
U.S. OFFER TO EXCHANGE
FOR EACH SERIES A COMMON SHARE, PAR VALUE SEK 10 PER SHARE,
AND EACH SERIES B COMMON SHARE, PAR VALUE SEK 10 PER SHARE,
BENEFICIALLY OWNED BY A U.S. PERSON
OF FORCENERGY AB
FOR
COMMON STOCK, PAR VALUE $.01 PER SHARE, OF FORCENERGY INC
---------------------
FORCENERGY INC
PROXY STATEMENT
This Proxy Statement/U.S. Exchange Offer/Prospectus ("Proxy
Statement/Prospectus") is being furnished to stockholders of Forcenergy Inc, a
Delaware corporation ("Forcenergy"), in connection with the solicitation of
proxies by the Board of Directors of Forcenergy for use at the Special Meeting
of Stockholders of Forcenergy (the "Special Meeting"), including any
adjournments or postponements thereof. The Special Meeting is scheduled to be
held on Tuesday, March 17, 1998. This Proxy Statement/Prospectus relates to a
proposal (the "Proposal") by Forcenergy to issue shares of Forcenergy's common
stock, par value $.01 per share ("FEN Common Stock"), in exchange for
outstanding Series A and Series B common shares (collectively, the "FAB
Securities") of Forcenergy AB ("FAB"), upon the terms and conditions set forth
in this Proxy Statement/Prospectus (the "Exchange Offer"). FAB currently owns
8,740,486 shares of FEN Common Stock, representing approximately 34% of the
outstanding shares of FEN Common Stock. Pursuant to the Exchange Offer,
Forcenergy may issue up to 7,926,773 shares of FEN Common Stock to holders of
FAB Securities upon the terms and conditions set forth herein. Assuming the
tender of all outstanding shares of FAB Securities in the Exchange Offer, the
former shareholders of FAB will hold approximately 32% of FEN Common Stock, with
current Forcenergy shareholders, exclusive of FAB, holding the remaining 68%.
This Proxy Statement/Prospectus also constitutes a prospectus of Forcenergy
with respect to all shares of FEN Common Stock to be issued pursuant to the
Exchange Offer in exchange for currently outstanding FAB Securities. Pursuant to
the Exchange Offer, Forcenergy will exchange 0.75 shares of FEN Common Stock for
each FAB Series A Common Share and 0.5359 shares of FEN Common Stock for each
FAB Series B Common Share.
The shares of FEN Common Stock are listed on the New York Stock Exchange
("NYSE") under the symbol "FEN." The FAB Series B Common Shares are listed on
the Stockholm Stock Exchange ("SSE") under the symbol "FAB." On February 10,
1998, the last reported sales price of FEN Common Stock on the NYSE Composite
Tape was $22.1875 and the closing price of the FAB Series B Common Shares, as
reported by the SSE, was SEK 94.00. The FAB Series A Common Shares are owned by
Forsinvest AB and are not publicly traded.
See "Summary -- market price data" and "-- Exchange Rates."
Following the Exchange Offer, Forsinvest AB, FAB's controlling and
principal shareholder, and its affiliates will own approximately 8% of the
outstanding shares of FEN Common Stock (assuming the tender of all outstanding
FAB Securities).
SEE "RISK FACTORS, CONFLICTS OF INTEREST AND OTHER CONSIDERATIONS"
BEGINNING ON PAGE 24 FOR INFORMATION ON CERTAIN RISKS, CONFLICTS OF INTEREST AND
OTHER FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
SECURITIES OFFERED HEREBY.
This Proxy Statement/Prospectus, the accompanying form of proxy and the
other enclosed documents are first being mailed to shareholders of Forcenergy
and FAB on or about February 17, 1998.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE SSE
OR ANY STATE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, THE SSE
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Proxy Statement/Prospectus is February 11, 1998.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY FORCENERGY OR FAB. NEITHER THE DELIVERY
OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES
OFFERED HEREBY SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF FORCENERGY OR FAB SINCE THE DATE HEREOF OR
THAT THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN
OFFER OR PROXY SOLICITATION.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. FORCENERGY UNDERTAKES TO
PROVIDE COPIES OF SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE), WITHOUT CHARGE, TO
ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO, IN THE CASE
OF DOCUMENTS RELATING TO FORCENERGY, 2730 S.W. 3RD AVENUE, SUITE 800, MIAMI, FL
33129-2237, ATTENTION: MICHAEL MCNAMARA. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, SUCH REQUESTS SHOULD BE RECEIVED BY MARCH 3, 1998. QUESTIONS OR
REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES OF THIS PROXY STATEMENT/PROSPECTUS
AND THE OFFER LETTER OF TRANSMITTAL ENCLOSED HEREWITH MAY ALSO BE OBTAINED FROM
FORCENERGY, FAB OR FROM BROKERS, DEALERS AND COMMERCIAL BANKS OR TRUST
COMPANIES.
ANY U.S. PERSON (AS DEFINED HEREIN) DESIRING TO TENDER ALL OR ANY PORTION
OF SUCH PERSON'S SERIES B COMMON SHARES OF FAB, NOMINAL VALUE SEK 10 PER SHARE
(THE "FAB SERIES B COMMON SHARES"), SHOULD EITHER (1) COMPLETE AND SIGN THE
OFFER LETTER OF TRANSMITTAL DESCRIBED HEREIN IN ACCORDANCE WITH THE INSTRUCTIONS
THERETO AND MAIL OR DELIVER IT, TOGETHER WITH ANY OTHER REQUIRED DOCUMENTS, TO
THE U.S. EXCHANGE AGENT SPECIFIED THEREIN OR (2) REQUEST THAT A BROKER, DEALER,
COMMERCIAL BANK, TRUST OR OTHER NOMINEE EFFECT A TRANSACTION ON SUCH
STOCKHOLDER'S BEHALF. ANY STOCKHOLDER WHOSE FAB SECURITIES ARE REGISTERED IN THE
NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST
CONTACT SUCH PERSON IF SUCH STOCKHOLDER DESIRES TO TENDER SUCH FAB SECURITIES.
ALL SERIES A COMMON SHARES OF FAB, NOMINAL VALUE SEK 10 PER SHARE (THE "FAB
SERIES A COMMON SHARES"), ARE OWNED BY A NON-U.S. PERSON AND, ACCORDINGLY, MAY
NOT BE TENDERED PURSUANT TO THE U.S. OFFER. SEE "THE EXCHANGE
OFFER -- PROCEDURES FOR TENDERING FAB SECURITIES."
AVAILABLE INFORMATION
Forcenergy is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission" or the "SEC"). Reports,
proxy statements and other information filed by Forcenergy can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, NW, Washington, D.C. 20549 and at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621-2511. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, NW, Washington, D.C.
20549, at prescribed rates. In addition, reports, proxy statements and other
information concerning Forcenergy may be inspected at the offices of the NYSE,
20 Broad Street, New York, New York 10005. Certain of such reports, proxy
statements and other information filed by Forcenergy are also available on the
Commission's World Wide Web site at http://www.sec.gov.
Forcenergy has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the FEN Common Stock to be issued pursuant to
the Exchange Offer. The information contained herein with respect to Forcenergy
and its affiliates has been provided by Forcenergy, and the information
contained herein with respect to FAB and its affiliates has been provided by
FAB. This Proxy Statement/Prospectus does not contain all of the information set
forth in the
2
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Registration Statement, certain parts of which were omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
Forcenergy prepares annual and interim reports, which are distributed to
its stockholders, containing financial information examined and reported upon,
with opinions expressed, by Forcenergy's auditors. The consolidated financial
statements of Forcenergy included in such annual reports are presented in United
States dollars and are prepared in conformity with United States generally
accepted accounting principles ("U.S. GAAP").
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by Forcenergy with the
Commission pursuant to the Exchange Act, are incorporated herein by reference:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997;
(iii) Current Reports on Form 8-K filed on January 14, 1997, as
amended on February 21, 1997 and March 17, 1997, and November 5, 1997; and
(iv) The description of Forcenergy Common Stock and associated
preferred share purchase rights contained in Forcenergy's Registration
Statements on Form 8-A filed with the Commission on July 17, 1995 and
December 4, 1997, respectively, and any amendment or report filed for the
purpose of updating such descriptions.
All documents filed by Forcenergy pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated herein by reference
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.
3
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TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 3
TABLE OF CONTENTS........................................... 4
SUMMARY..................................................... 7
Overview of the Exchange Offer, the Shareholder Agreement
and the Special Meeting................................ 7
The Companies............................................. 7
The Special Meeting....................................... 8
Purposes.................................................. 8
Date, Time and Place...................................... 8
Record Dates; Shares Entitled to Vote..................... 8
Quorum; Vote Required..................................... 8
Proxies................................................... 9
Background to the Exchange Offer; Forcenergy Reasons for
the Proposal........................................... 9
Recommendation of the Forcenergy Board of Directors....... 10
Recommendation of the FAB Board of Directors.............. 10
Fairness Opinion of Morgan Stanley........................ 10
Interests of Certain Persons in the Proposal and the
Exchange Offer......................................... 10
The Exchange Offer........................................ 11
General................................................... 11
Terms of the U.S. Offer; Number of Shares; Expiration to
Date................................................... 12
Procedure for Tendering FAB Securities.................... 13
Withdrawal Rights......................................... 14
Acceptance for Exchange; Delivery of FEN Common Stock..... 14
Fractional Shares......................................... 16
Certain Conditions of the U.S. Offer...................... 16
Compulsory Acquisition.................................... 16
Certain U.S. Federal Income Tax Consequences.............. 16
Certain Swedish Income Tax Consequences................... 16
Comparative Rights of Forcenergy and FAB Stockholders..... 17
Risk Factors.............................................. 17
Forward-Looking Statements................................ 17
Market Price Data......................................... 18
Exchange Rates............................................ 19
Forcenergy -- Summary Historical Consolidated Financial
Information............................................ 20
Forcenergy AB -- Summary Historical Consolidated Financial
Information............................................ 22
Comparative Per Share Data................................ 23
RISK FACTORS, CONFLICTS OF INTEREST AND OTHER
CONSIDERATIONS............................................ 24
Tax Effects............................................... 24
Potential Conflicts of Interest........................... 24
No Independent Representation............................. 24
Regulatory Conditions and Approvals....................... 25
Costs of the Exchange Offer............................... 25
Provisions That May Discourage Changes of Control......... 25
Volatility of Natural Gas and Oil Prices and Hedging
Risk................................................... 25
Impairment of Oil and Gas Properties...................... 25
Replacement of Reserves................................... 26
Title of Properties....................................... 26
Uncertainty of Reserve Information and Future Net Revenues
Estimates.............................................. 26
Substantial Capital Requirements.......................... 27
Drilling Risks............................................ 27
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Acquisition Risks......................................... 27
Dependence on Key Personnel............................... 28
Government Regulation and Environmental Matters........... 28
Competition............................................... 28
Operating Risks of Oil and Gas Operations................. 28
THE COMPANIES............................................... 29
Forcenergy................................................ 29
FAB....................................................... 29
THE SPECIAL MEETING......................................... 30
Date, Time and Place...................................... 30
Purpose of the Special Meeting............................ 30
Record Date and Outstanding Shares........................ 30
Proxies................................................... 30
Quorum; Vote Required..................................... 30
Solicitation of Proxies and Expenses...................... 31
Other Matters............................................. 31
Background to the Exchange Offer; Reasons for the
Proposal............................................... 31
Recommendation of the Forcenergy Board of Directors....... 32
INTERESTS OF CERTAIN PERSONS IN THE PROPOSAL AND THE
EXCHANGE OFFER............................................ 32
THE EXCHANGE OFFER.......................................... 33
General................................................... 33
Recommendations of the Board of Directors of FAB.......... 34
Fairness Opinion of Morgan Stanley........................ 34
Terms of the U.S. Offer; Number of Shares; Expiration
Date................................................... 35
Procedures for Tendering FAB Securities................... 36
Withdrawal Rights......................................... 37
Acceptance for Exchange; Delivery of FEN Common Stock..... 37
Fractional Shares......................................... 38
Certain Conditions of the U.S. Offer...................... 38
Compulsory Acquisition.................................... 39
Certain U.S. Federal Income Tax Consequences.............. 39
Certain Swedish Income Tax Consequences................... 41
Costs of the Exchange Offer............................... 42
Restrictions on Resales by Affiliates..................... 42
PRO FORMA FINANCIAL INFORMATION............................. 43
INFORMATION REGARDING FORCENERGY............................ 49
Overview.................................................. 49
Strategy.................................................. 49
Technology................................................ 50
Recent Drilling Activity.................................. 50
Additional Future Projects................................ 51
Acquisitions.............................................. 52
Gulf of Mexico Properties................................. 54
Alaska Properties......................................... 54
Onshore Properties........................................ 54
Acreage Data.............................................. 55
Oil and Gas Reserves...................................... 56
Drilling Activity......................................... 57
Productive Wells.......................................... 57
FORCENERGY SELECTED FINANCIAL INFORMATION................... 58
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FORCENERGY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........... 59
Results of Operations.................................................................................... 59
Comparison of Nine Months Periods Ended September 30, 1997 and September 30, 1996........................ 59
Comparison of Years Ended December 31, 1996 and December 31, 1995........................................ 60
Comparison of Years Ended December 31, 1995 and December 31, 1994........................................ 61
Liquidity and Capital Resources.......................................................................... 62
FORCENERGY MANAGEMENT...................................................................................... 64
Directors of Forcenergy.................................................................................. 64
Executive Officers of Forcenergy......................................................................... 64
BENEFICIAL OWNERSHIP OF FEN COMMON STOCK................................................................... 66
DESCRIPTION OF SHAREHOLDER AGREEMENT....................................................................... 67
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS....................................................... 68
INFORMATION REGARDING FAB.................................................................................. 68
Business of FAB.......................................................................................... 68
FAB SELECTED FINANCIAL INFORMATION......................................................................... 69
OWNERSHIP OF FAB SECURITIES................................................................................ 70
DESCRIPTION OF FORCENERGY CAPITAL STOCK.................................................................... 70
Common Stock............................................................................................. 70
Preferred Stock.......................................................................................... 70
Preferred Share Purchase Rights.......................................................................... 71
Warrants................................................................................................. 73
Transfer Agent and Registrar............................................................................. 73
COMPARATIVE RIGHTS OF FORCENERGY AND FAB STOCKHOLDERS...................................................... 73
Number, Classification................................................................................... 73
Removal of Directors..................................................................................... 74
Voting Rights............................................................................................ 74
Power to Call Special Meetings........................................................................... 74
Stockholder Vote Required for Certain Transactions, Including Mergers and Consolidations................. 74
Business Combinations with Interested Stockholders....................................................... 75
Dissenters' Rights....................................................................................... 75
Action by Written Consent................................................................................ 76
Dividends................................................................................................ 76
Preemptive Rights........................................................................................ 76
Amendments of Charter Documents.......................................................................... 77
LEGAL MATTERS.............................................................................................. 77
EXPERTS.................................................................................................... 77
FAB FINANCIAL STATEMENTS................................................................................... F-1
FAIRNESS OPINION OF MORGAN STANLEY......................................................................... A-1
</TABLE>
6
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in or
incorporated by reference in this Proxy Statement/Prospectus. Stockholders are
urged to read carefully this Proxy Statement/Prospectus in its entirety. As used
in this Proxy Statement/ Prospectus, unless otherwise required by the context,
the term "Forcenergy" means Forcenergy Inc and its consolidated subsidiaries and
the term "FAB" means Forcenergy AB and its consolidated subsidiary.
OVERVIEW OF THE EXCHANGE OFFER, THE SHAREHOLDER AGREEMENT AND THE SPECIAL
MEETING
Upon the terms and conditions of the Exchange Offer, Forcenergy is offering
to exchange 0.75 shares of FEN Common Stock for each of the 1,000,000
outstanding FAB Series A Common Shares and 0.5359 shares of FEN Common Stock for
each of the 13,392,000 outstanding FAB Series B Common Shares, representing an
aggregate of 7,926,773 shares of FEN Common Stock for all of the outstanding FAB
Securities. The Exchange Offer is conditioned on, among other things, the valid
tender of at least 90% of (i) the issued and outstanding FAB Securities
(calculated on a fully diluted basis) and (ii) the total voting rights with
respect to the FAB Securities. Forsinvest AB, Stridor Invest AB and Eric Forss
(the "Forss Affiliates"), who beneficially own (including voting rights) all of
the 1,000,000 FAB Series A Common Shares and 2,224,633 FAB Series B Common
Shares (together, the "Forss Shares"), representing approximately 52% voting
interest and 22% equity interest in FAB, have entered into a Shareholder
Agreement with Forcenergy (the "Shareholder Agreement") pursuant to which the
Forss Affiliates have agreed unconditionally to tender their FAB Securities
pursuant to the terms and conditions of the Exchange Offer. The Exchange Offer
is also conditioned upon the affirmative vote of holders of a majority of the
outstanding shares of FEN Common Stock having voting power, present in person or
represented by proxy. Shares of FEN Common Stock held by FAB, which holds
approximately 34% of the outstanding shares of FEN Common Stock, will not be
entitled to vote or be counted for quorum purposes at the Special Meeting.
Abstentions will be treated as present for quorum purposes and will have the
same effect as a vote "against" the Proposal. While a broker non-vote will be
treated as present for quorum purposes, it will not be treated as "voting power
present" and will not have any effect on the vote on the Proposal. See "The
Special Meeting -- Quorum; Vote Required" below.
Pursuant to the Shareholder Agreement, if the Exchange Offer is allowed to
expire, or the Exchange Offer is terminated as a result of the conditions
precedent thereto not being met, as a result of a superior offer being made to
the shareholders of FAB by another party, Forcenergy has the option to purchase
all of the Forss Shares in exchange for either 1,947,403 shares of FEN Common
Stock or for cash equal to such number of shares times the greater of $33.00 or
the market price of FEN Common Stock at the time of the exercise of such option.
Pursuant to the Shareholder Agreement, the Forss Affiliates also granted to
Forcenergy an irrevocable proxy to vote the Forss Shares with respect to any
matter on which such shares are entitled to vote and to take any other actions
with respect to such shares as a shareholder of FAB. See "The Shareholder
Agreement."
At the Special Meeting, the stockholders of Forcenergy will be asked to
approve the issuance of shares of FEN Common Stock pursuant to the Exchange
Offer. This Proxy Statement/Prospectus describes these matters in more detail
below.
THE COMPANIES
Forcenergy. Forcenergy is an independent oil and gas company engaged in the
exploration, acquisition, development, exploitation and production of oil and
natural gas properties. The principal executive offices of Forcenergy are
located at 2730 S.W. 3rd Avenue, Suite 800, Miami, Florida 33129-2237, and its
telephone number at such offices is (305) 856-8500. Forcenergy has experienced
significant growth in the last six years, primarily through the exploitation,
enhancement and development of acquired producing properties in the Gulf of
Mexico and the 1996 acquisition of producing properties in the Cook Inlet,
Alaska. At December 31, 1996, Forcenergy had net proved reserves of
approximately 585 Bcfe, 58% of which were located in the Gulf of
7
<PAGE> 11
Mexico and 27% of which were located in Alaska. Approximately 56% of
Forcenergy's net proved reserves on such date were oil and approximately 78% of
proved reserves were classified as proved developed. Forcenergy currently
operates approximately 75% of its Gulf of Mexico production. Forcenergy's
primary focus is its Gulf of Mexico and Alaska activities; however, Forcenergy
has also acquired interests in certain undeveloped international leasehold
acreage, primarily in Gabon, Africa and Australia. Prior to its initial public
offering in 1995, Forcenergy was a wholly-owned subsidiary of FAB. FAB currently
owns approximately 34% of the outstanding FEN Common Stock. See "Information
Regarding Forcenergy."
FAB. FAB operates primarily as a holding company whose principal asset of
value currently consists of 8,740,486 shares of FEN Common Stock. The principal
executive offices of FAB are located at Birger Jarlsgatan, 73-75, Box 19040,
S104, 32, Stockholm, Sweden, and its telephone number at such offices is
46-8-7969910.
THE SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting will be held on Tuesday, March 17, 1998, at 2730 S.W.
3rd Avenue, Suite 800, Miami, Florida 33129-2237 commencing at 9:00 a.m. local
time.
PURPOSES
The purposes of the Special Meeting are (i) to consider and vote upon a
proposal to approve the issuance of shares of FEN Common Stock pursuant to the
Exchange Offer and (ii) to transact such other business as may properly come
before the Special Meeting.
RECORD DATES; SHARES ENTITLED TO VOTE
The Board of Directors of Forcenergy has fixed the close of business on
January 28, 1998 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Special Meeting and any
adjournment thereof. Only holders of record of shares of FEN Common Stock at the
close of business on the Record Date are entitled to notice of and to vote at
the Special Meeting. On such date, there were 25,513,102 shares of FEN Common
Stock outstanding, each of which (other than the 8,740,486 shares held by FAB)
will be entitled to one vote on each matter to be acted upon at the Special
Meeting.
QUORUM; VOTE REQUIRED
The presence, in person or by proxy, at the Special Meeting of the holders
of a majority of the shares of FEN Common Stock outstanding and entitled to vote
at the Special Meeting is necessary to constitute a quorum at the meeting. The
affirmative vote of holders of a majority of the outstanding shares of FEN
Common Stock having voting power, present in person or represented by proxy is
required to approve the Proposal. Because Forcenergy holds an irrevocable proxy
with respect to a majority voting interest in the election of directors of FAB,
the shares of FEN Common Stock held by FAB will not be entitled to vote or be
counted for quorum purposes at the Special Meeting. Abstentions will be counted
as present for purposes of determining whether a quorum is present and will have
the same effect as a vote against the Proposal. Under the rules of the National
Association of Securities Dealers, Inc. and the NYSE, brokers who hold shares in
street name for customers will not have the authority to vote on the Proposal
unless they receive specific instructions from beneficial owners. While such a
broker non-vote will be counted as present for purposes of a quorum, it will not
have any effect on the vote on the Proposal. See "The Special Meeting -- Quorum;
Vote Required."
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<PAGE> 12
PROXIES
If a stockholder does not attend the Special Meeting, such stockholder may
vote by proxy. A form of proxy for voting stock at the Special Meeting is
enclosed herewith. All shares of FEN Common Stock which are entitled to vote and
are represented at the Special Meeting by properly executed proxies received
prior to or at the Special Meeting, and not revoked, will be voted at the
Special Meeting in accordance with the instructions indicated on such proxies.
See "The Special Meeting -- Proxies."
IF NO INSTRUCTION IS SPECIFIED WITH RESPECT TO ADOPTION OF THE PROPOSAL,
THE SHARES REPRESENTED BY AN EXECUTED PROXY WILL BE VOTED "FOR" THE ADOPTION OF
THE PROPOSAL. IF ANY OTHER BUSINESS IS PROPERLY PRESENTED AT THE SPECIAL
MEETING, THE PROXY WILL BE VOTED BY THE PROXY HOLDERS IN THEIR DISCRETION,
TAKING INTO ACCOUNT ANY RECOMMENDATIONS OF MANAGEMENT OF FORCENERGY.
Any proxy given pursuant to this solicitation may be revoked by the person
giving such proxy at any time before it is voted. Proxies may be revoked by (i)
filing with the Secretary of Forcenergy, at or before the taking of the vote at
the Special Meeting, a written notice of revocation bearing a later date than
the proxy, (ii) duly executing a later dated proxy relating to the same shares
and delivering it to the Secretary of Forcenergy before the taking of the vote
at the Special Meeting or (iii) attending the Special Meeting and voting in
person (although attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Forcenergy Inc, 2730
S.W. 3rd Avenue, Suite 800, Miami, Florida 33129-2237, Attention: Secretary, or
hand delivered to the Secretary of Forcenergy, at or before the taking of the
vote at the Special Meeting. See "The Special Meeting -- Proxies."
BACKGROUND TO THE EXCHANGE OFFER; FORCENERGY REASONS FOR THE PROPOSAL
The Board of Directors of Forcenergy believes that the following are the
principal reasons to consummate the Exchange Offer at this time:
- The Exchange Offer will result in the issuance of up to 7,926,773 new
shares of FEN Common Stock and the indirect acquisition by Forcenergy of
the 8,740,486 shares of FEN Common Stock held by FAB. If Forcenergy
acquires over 90% of the outstanding FAB Securities, Forcenergy will
initiate compulsory acquisition procedures to acquire the remaining FAB
Securities, resulting in FAB being a 100% owned subsidiary of Forcenergy.
See "The Exchange Offer -- Compulsory Acquisition." The shares of FEN
Common Stock currently held by FAB will continue to be held by FAB and
will remain outstanding as treasury shares of Forcenergy and therefore
shall not be entitled to vote or be counted for quorum purposes pursuant
to the General Corporation Law of the State of Delaware (the "DGCL").
Subsequent to the Exchange Offer, the shares of FEN Common Stock
currently held by FAB, although remaining outstanding, will not be
considered as outstanding for purposes of calculating financial results.
Consequently, the transaction will be accretive to earnings and cash flow
per share of FEN Common Stock.
- The Exchange Offer will increase Forcenergy's investor base by allowing
current holders of FAB Securities to hold direct ownership of FEN Common
Stock, thereby expanding liquidity for all Forcenergy stockholders.
- The Exchange Offer will simplify Forcenergy's ownership structure, a
structure in which FAB's presence has heretofore caused confusion in the
financial markets' understanding of the companies. The Board of Directors
of Forcenergy believes that the separate existence of FAB, whose net
asset value consists primarily of shares of FEN Common Stock, has had a
negative impact on Forcenergy's market price and ability to raise capital
at optimal prices in the U.S. The consolidation of the two companies into
a simplified organizational and capital structure is expected to provide
benefits to all holders of Forcenergy's public securities.
9
<PAGE> 13
RECOMMENDATION OF THE FORCENERGY BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF FORCENERGY HAS DETERMINED THAT THE PROPOSAL IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF FORCENERGY AND
RECOMMENDS THAT THE STOCKHOLDERS OF FORCENERGY APPROVE THE PROPOSAL. See "The
Special Meeting -- Recommendations of the Board of Directors of Forcenergy" and
"-- Background to the Exchange Offer; Reasons for the Proposal." In considering
the recommendation of the Forcenergy Board with respect to the Proposal,
Forcenergy stockholders should be aware that certain officers and directors of
Forcenergy have certain interests respecting the Proposal, apart from their
interests as stockholders of Forcenergy. See "Interests of Certain Persons in
the Proposal and the Exchange Offer."
RECOMMENDATION OF THE FAB BOARD OF DIRECTORS
ON FEBRUARY 4, 1998, THE TWO INDEPENDENT FAB DIRECTORS DETERMINED THAT THE
EXCHANGE OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF FAB
AND RECOMMENDED THAT THE STOCKHOLDERS OF FAB ACCEPT THE EXCHANGE OFFER. See "The
Exchange Offer -- Recommendations of the Board of Directors of FAB." In
considering the recommendation of the FAB Board with respect to the Exchange
Offer, FAB stockholders should be aware that, although they have not made such
recommendation, certain officers and directors of FAB have certain interests
respecting the Exchange Offer, apart from their interests as holders of FAB
Series B Common Shares. See "Interests of Certain Persons in the Proposal and
the Exchange Offer."
FAIRNESS OPINION OF MORGAN STANLEY
On January 30, 1998, Morgan Stanley & Co. Limited ("Morgan Stanley")
delivered an opinion to the Board of Directors of FAB concerning the financial
fairness of the consideration to be received by holders of FAB Series B Common
Shares under the Exchange Offer. The full text of such opinion is set out in
Annex A attached hereto. FAB SHAREHOLDERS SHOULD READ SUCH OPINION IN ITS
ENTIRETY. Morgan Stanley's opinion is directed only to the consideration and
does not constitute a recommendation to any FAB shareholder as to whether such
shareholder should tender their shares in the Exchange Offer. See "The Exchange
Offer -- Fairness Opinion of Morgan Stanley" and Annex A attached hereto.
INTERESTS OF CERTAIN PERSONS IN THE PROPOSAL AND THE EXCHANGE OFFER
Certain officers and directors of Forcenergy are also officers, directors
and shareholders of FAB and Forsinvest AB. Eric Forss, a director of Forcenergy,
is the President and a director of FAB and the President of Forsinvest AB. The
Forss Affiliates beneficially own 1,000,000 FAB Series A Common Shares and
2,224,633 FAB Series B Common Shares, representing approximately 52% voting
interest and 22% equity interest in FAB. Stig Wennerstrom, the President and
Chief Executive Officer and a director of Forcenergy, beneficially owns 105,000
FAB Series B Common Shares. Robert Issal, a director of Forcenergy, beneficially
owns 7,000 FAB Series B Common Shares. Mr. Wennerstrom is also a Director of FAB
and Mr. Issal is the Chairman of FAB and Forcenergy. William Wallace, a director
of Forcenergy, owns 2,000 FAB Series B Common Shares. These relationships and
affiliations may present a conflict of interest of such directors and the
Forcenergy Board of Directors in recommending the Proposal to Forcenergy
shareholders. Messrs. Wennerstrom, Issal and Wallace disclosed their potential
conflicts of interest with respect to the terms of the Exchange Offer but did
not abstain from voting on the approval by the Forcenergy Board of Directors of
the terms of the Exchange Offer and the Proposal. Due to his conflicts of
interest, Mr. Forss abstained from voting by the Forcenergy Board of Directors
on the Exchange Offer and the Proposal.
In connection with the recommendation by the FAB Board, FAB Board members
Robert Issal and Stig Wennerstrom did not and will not take part in any
recommendation regarding the Exchange Offer due to their connection with
Forcenergy. In addition, Eric Forss will not participate in the final
recommendation. See "Risk Factors, Conflicts of Interest and Other
Considerations" and "Interests of Certain Persons in the Proposal and the
Exchange Offer."
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<PAGE> 14
THE EXCHANGE OFFER
FORCENERGY STOCKHOLDERS ARE NEITHER BEING ASKED TO, NOR WILL THEY BE
PERMITTED TO, TENDER THEIR SHARES OF FEN COMMON STOCK IN THE EXCHANGE OFFER.
FORCENERGY STOCKHOLDERS ARE ONLY BEING ASKED TO VOTE ON THE APPROVAL OF THE
PROPOSAL REGARDING THE ISSUANCE OF THE SHARES OF FEN COMMON STOCK PURSUANT TO
THE TERMS OF THE EXCHANGE OFFER.
GENERAL
Upon the terms and subject to the conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms and
conditions of any extension or amendment), Forcenergy will accept for exchange
and exchange FEN Common Stock for all FAB Securities which are validly tendered
prior to the Expiration Date and not withdrawn. The term "Expiration Date" means
9:00 a.m., New York City time (3:00 p.m. Stockholm time), on March 18, 1998
unless and until Forcenergy shall have extended the period of time during which
the Exchange Offer is open, in which event the term "Expiration Date" shall
refer to the latest time and date at which the Exchange Offer, as so extended by
Forcenergy, shall expire.
The Exchange Offer will be conducted in two parts: the U.S. Offer, and the
Swedish and International Offer. The U.S. Offer and the Swedish and
International Offer will be on substantially the same terms and subject to the
same conditions, except that holders of FAB Securities that are U.S. Persons
will receive shares of FEN Common Stock pursuant to the U.S. Offer and holders
of FAB Securities that are not U.S. Persons will receive, at their option,
either shares of FEN Common Stock or Swedish Depository Receipts representing
shares of FEN Common Stock ("SDRs") pursuant to the Swedish and International
Offer. The Swedish and International Offer will be made in accordance with the
Recommendation Concerning Public Offers to Purchase Shares promulgated in 1988
by the Joint Committee of the Stockholm Chamber of Commerce and the Federation
of Swedish Industries (the "Recommendation"), which is applicable to certain
takeovers of Swedish companies. The Swedish and International Offer is not being
made directly or indirectly in, or by use of the mails of, or by any means or
instrumentality (including, without limitation, the mail, facsimile
transmission, telex or telephone) of interstate or foreign commerce in, or any
facilities of a national securities exchange of, the United States.
The U.S. Offer is being made only to U.S. Persons who hold, beneficially or
of record, FAB Securities. Each holder tendering FAB Securities in the U.S.
Offer will be required to certify that such holder is a U.S. Person. As used
herein, the term "U.S. Person" has the meaning set forth in Regulation S
promulgated under the Securities Act; for purposes of the description of the
Exchange Offer contained in this section of the Proxy Statement/Prospectus, the
term "United States" or its abbreviation "U.S." means the United States of
America, including each of the 50 states and the District of Columbia, its
territories, its possessions and other areas subject to its jurisdiction.
In order to coordinate the making of the U.S. Offer with the Swedish and
International Offer, Forcenergy has requested a "no-action letter" (the
"No-Action Letter") and received oral confirmation from the SEC granting
Forcenergy relief with respect to certain of the SEC's rules pertaining to
tender and exchange offers in the United States under the Exchange Act,
particularly with respect to the timing of exchange for, or return of, tendered
securities, as described herein.
U.S. Offer. Forcenergy hereby offers, upon the terms and subject to the
conditions set forth in this Proxy Statement/Prospectus and in the related Offer
Letter of Transmittal (as defined herein), to exchange for each outstanding FAB
Security that is owned of record or owned beneficially by a U.S. Person, 0.5359
shares of FEN Common Stock for each outstanding Series B Common Share of FAB
(collectively with the 0.75 shares of FEN Common Stock for each outstanding
Series A Common Share of FAB, the "Exchange Ratio").
Conditions. The Exchange Offer is conditioned upon, among other things, the
satisfaction of the Minimum Share Condition and Forcenergy Shareholder Approval
Condition. The "Minimum Share Condition" is the condition to the Exchange Offer
that the number of FAB Securities being validly tendered and not withdrawn prior
to the Expiration Date represents more than 90% of (i) the issued and
outstanding FAB Securities (calculated on a fully diluted basis) and (ii) the
total voting rights with respect to the FAB
11
<PAGE> 15
Securities. The Exchange Offer is also conditioned on the affirmative vote of
holders of a majority of the outstanding shares of FEN Common Stock having
voting power (which shall not include the shares owned by FAB), present in
person or represented by proxy (the "Forcenergy Stockholder Approval Condition")
and the satisfaction of, or the waiver by Forcenergy of, the other conditions
set forth in "The Exchange Offer -- Certain Conditions of the U.S. Offer"
occurring prior to or contemporaneously with the Effective Time (together with
the Minimum Share Condition and the Forcenergy Stockholder Approval Condition,
the "Offer Conditions"). Except for the Forcenergy Stockholder Approval
Condition, Forcenergy may, at its option, waive any of the Offer Conditions and
close the Exchange Offer. See "The Exchange Offer -- Certain Conditions of the
U.S. Offer."
Fees of Tendering Stockholders. Tendering stockholders of FAB will not be
obligated to pay brokerage fees or commissions. Forcenergy will bear all charges
and expenses of American Stock Transfer & Trust Company, as transfer agent for
Forcenergy, and Skandinaviska Enskilda Banken, as exchange agent in connection
with the U.S. Offer (the "U.S. Exchange Agent").
Other. The FEN Common Stock that Forcenergy hereby offers in exchange for
FAB Securities pursuant to this Proxy Statement/Prospectus has been registered
under the Securities Act, and is described in detail, together with financial
and other information concerning Forcenergy, elsewhere in this Proxy Statement/
Prospectus, which constitutes part of the Registration Statement. Application
will be made to list the shares of FEN Common Stock exchanged for FAB Securities
and issued in the Exchange Offer on the NYSE and the SDRs on the SSE.
For additional information concerning Forcenergy, see "Information
Regarding Forcenergy."
THIS PROXY STATEMENT/PROSPECTUS AND THE RELATED OFFER LETTER OF TRANSMITTAL
CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE
WITH RESPECT TO ACCEPTING THE U.S. OFFER.
TERMS OF THE U.S. OFFER; NUMBER OF SHARES; EXPIRATION DATE.
General. Upon the terms and subject to the conditions set forth in the U.S.
Offer, as it may be amended or supplemented from time to time, Forcenergy will,
in connection with the U.S. Offer, accept for exchange, and exchange, all
outstanding FAB Securities subject to the U.S. Offer that are validly tendered
in the Exchange Offer and not withdrawn prior to the final day of the Offer
Period (as defined below). U.S. Persons who wish to accept the U.S. Offer must
tender their FAB Securities during the period commencing February 17, 1998, and
ending 9:00 a.m., New York City time (3:00 p.m. Stockholm time), on March 18,
1998 (as such period may be extended as described in the following sentence, the
"Offer Period"). Forcenergy expressly reserves the right, in its sole
discretion, at any time or from time to time, to extend the Offer Period for any
reason, and in relation thereto, to delay delivery of the shares of FEN Common
Stock, by giving written notice of such extension to the U.S. Exchange Agent,
accompanied by a public announcement. Forcenergy intends to extend the U.S.
Offer if the Swedish and International Offer is similarly extended. The delivery
of shares of FEN Common Stock in exchange for FAB Securities tendered in the
U.S. Offer will not commence until Forcenergy has announced that all conditions
to the U.S. Offer have been met or waived. In accordance with customary Swedish
practice regarding determining the level of acceptances in tender and exchange
offers, Forcenergy may not announce the level of acceptance of the U.S. Offer
until at least five business days after the expiration of the Offer Period (such
period from the Expiration Date to the date of such announcement is referred to
as the "Interim Period"). Assuming that such announcement is made on or about
March 25, 1998, it is estimated that settlement can begin on or about March 31,
1998. Withdrawal rights will not be available during the Interim Period or the
period, if any, during which the U.S. Offer remains open following the
announcement by Forcenergy of the satisfaction of all conditions to the U.S.
Offer.
Subject to the applicable rules and regulations of the SEC and in
accordance with the Recommendation, Forcenergy also reserves the right, in its
sole discretion, at any time, to (a) delay acceptance for exchange of and,
regardless of whether any FAB Securities have theretofore been accepted for
exchange, delay delivery of shares of FEN Common Stock for any FAB Securities
tendered in the U.S. Offer pending receipt of any governmental or other
regulatory approvals or other actions specified in "Risk Factors -- Regulatory
12
<PAGE> 16
Conditions and Approvals," (b) terminate the U.S. Offer and not accept for
exchange any FAB Securities unless the Offer Conditions shall have been
satisfied or, if permissible, waived, (c) waive (to the extent permissible) any
Offer Condition, or otherwise amend the U.S. Offer in any respect, by giving
oral or written notice of such delay, termination, amendment or extension to the
U.S. Exchange Agent and by making a public announcement thereof, and (d) extend
the Exchange Offer and, subject to the rights of FAB stockholders to withdraw
FAB Securities as provided below, retain the FAB Securities for the time period
during which the Exchange Offer is extended. See "The Exchange Offer -- Certain
Conditions of the U.S. Offer."
Without limiting the manner in which Forcenergy may choose to make any
public announcement, whether in connection with an extension, delay,
termination, amendment or waiver of any of the terms of the U.S. Offer, and
except as provided by applicable law, Forcenergy shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a press release to the Dow Jones News Service. If such press
release relates to an extension of the U.S. Offer, Forcenergy will issue such
press release no later than 9:00 a.m. on the next business day after the
scheduled termination of the U.S. Offer. For purposes of the U.S. Offer, a
"business day" means any day other than a Saturday, Sunday or U.S. federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time.
Other. The U.S. Offer is conditioned upon the satisfaction or, if
permissible, waiver of the Offer Conditions (as defined below). See "The
Exchange Offer -- Certain Conditions of the U.S. Offer."
Forcenergy will not accept for exchange any FAB Securities tendered in the
U.S. Offer and the Swedish and International Offer during the Offer Period
unless all FAB Securities validly tendered in the U.S. Offer and the Swedish and
International Offer and not withdrawn prior to the Expiration Date are accepted
for exchange.
FAB has arranged for Forcenergy to obtain a list of holders of record of
FAB Securities that have registered addresses in the United States and that are
believed by FAB to be U.S. Persons, as well as the names of non-U.S. nominees
that are believed to be record holders of FAB Securities on behalf of U.S.
Persons. This Proxy Statement/Prospectus, the Offer Letter of Transmittal
(defined below) and other related materials will be mailed by Forcenergy to such
record holders and will be furnished by Forcenergy to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on such lists for subsequent transmittal to beneficial
owners of FAB Securities, or who otherwise indicate to Forcenergy that they are
holding FAB Securities for the benefit of U.S. Persons.
PROCEDURES FOR TENDERING FAB SECURITIES.
General. In order for a holder of FAB Securities to validly tender FAB
Securities pursuant to the U.S. Offer, an offer letter of transmittal (the
"Offer Letter of Transmittal"), must be properly completed and duly executed,
and, together with any other required documents, must be delivered to the U.S.
Exchange Agent specified in such Offer Letter of Transmittal. Record holders of
FAB Securities are registered directly with Vardepappercentralen VPC AB ("VPC,"
the Swedish Securities Register Center) and have a securities account in which
such shares are registered (a "VP account").
ANY STOCKHOLDER WHOSE FAB SECURITIES ARE REGISTERED WITH VPC IN THE NAME OF
A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT
SUCH PERSON IF SUCH STOCKHOLDER DESIRES TO TENDER SUCH FAB SECURITIES.
In order to accept the U.S. Offer, a holder of FAB Securities will need to
certify that such holder is a U.S. Person, or is holding such FAB Securities on
behalf of a U.S. Person.
THE METHOD OF DELIVERY OF ALL REQUIRED DOCUMENTS IS AT THE OPTION AND RISK
OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED OR OVERNIGHT COURIER WITH SIGNATURE REQUIRED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
13
<PAGE> 17
The valid tender of FAB Securities pursuant to the procedures described
above will constitute a binding agreement between the tendering stockholder and
Forcenergy upon the terms of and subject to the conditions of the U.S. Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of FAB
Securities will be determined by Forcenergy with respect to the U.S. Offer, in
its sole discretion, which determination shall be final and binding on all
parties. Forcenergy reserves the absolute right to reject any or all tenders
determined by it not to be in proper form, or the acceptance for exchange of
which may, in the opinion of its counsel, be unlawful or otherwise invalid.
Forcenergy also reserves the absolute right to waive any defect or irregularity
in the tender of any FAB Securities. No tender of FAB Securities will be deemed
to have been validly made until all defects or irregularities relating thereto
have been cured or waived. None of Forcenergy, the U.S. Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. The interpretation by Forcenergy of the terms and conditions of
the U.S. Offer (which includes the Offer Letter of Transmittal and the
instructions thereto) will be final and binding.
If the Offer Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the U.S. Exchange Agent, proper evidence satisfactory to the U.S. Exchange Agent
of their authority to so act must be submitted.
Other Requirements. The acceptance of FAB Securities by Forcenergy pursuant
to any of the procedures described above will constitute a binding agreement
between the tendering stockholder and Forcenergy upon the terms and subject to
the conditions applicable to the U.S. Offer.
WITHDRAWAL RIGHTS
Tenders of FAB Securities in the U.S. Offer are irrevocable, except as
otherwise provided in this section. FAB Securities tendered pursuant to the U.S.
Offer may be withdrawn pursuant to the procedures set forth below at any time
during the Offer Period except that withdrawal rights will not be available
during the period, if any, during which the U.S. Offer remains open following
the announcement by Forcenergy of the satisfaction of all conditions to the U.S.
Offer. In addition, holders of FAB Securities will not have withdrawal rights
during the Interim Period.
To be effective, a written notice of withdrawal or a telegraphic
transmission thereof must be timely received by the U.S. Exchange Agent at its
address set forth on the back cover of this Proxy Statement/ Prospectus and must
specify the name of the person having tendered FAB Securities to be withdrawn,
as well as the number and type of FAB Securities (including the VP account) to
be withdrawn.
Withdrawals of tendered FAB Securities may not be rescinded, and any FAB
Securities properly withdrawn will thereafter be deemed not validly tendered for
the purposes of the U.S. Offer. However, FAB Securities withdrawn during the
Offer Period may be re-tendered by following one of the procedures described in
"The Exchange Offer -- Procedures for Tendering FAB Securities" at any time
during the Offer Period.
All questions as to the validity (including time of receipt) of notices of
withdrawal with respect to the U.S. Offer will be determined by Forcenergy, in
its sole discretion, whose determination will be final and binding. None of
Forcenergy, the U.S. Exchange Agent or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
ACCEPTANCE FOR EXCHANGE; DELIVERY OF FEN COMMON STOCK
Upon the terms and subject to the satisfaction or waiver of the conditions
of the U.S. Offer (including, if the U.S. Offer is extended or amended, the
terms and conditions of any such extension or amendment), Forcenergy will accept
for exchange, and will exchange, as promptly as practicable after the Expiration
Date, all FAB Securities validly tendered into the U.S. Offer prior to the
Expiration Date and not withdrawn in
14
<PAGE> 18
accordance with procedures set forth in "The Exchange Offer -- Withdrawal
Rights." Subject to applicable rules of the SEC, Forcenergy expressly reserves
the right to delay acceptance for exchange of, or delivery of any consideration
for, FAB Securities tendered in the U.S. Offer pending receipt of any
governmental or other regulatory approvals, orders or actions specified in "Risk
Factors -- Regulatory Conditions and Approvals."
In all cases, exchange for FAB Securities accepted for exchange pursuant to
the U.S. Offer will be made only after timely receipt by the U.S. Exchange Agent
of an Offer Letter of Transmittal (or facsimile copy thereof) properly completed
and duly executed and any other documents required by the Offer Letter of
Transmittal.
For purposes of the U.S. Offer, Forcenergy will be deemed to have accepted
for exchange, and thereby acquired, FAB Securities validly tendered to it
pursuant to the U.S. Offer and not withdrawn as, if and when Forcenergy gives
oral or written notice to the U.S. Exchange Agent of its acceptance for exchange
of such FAB Securities tendered pursuant to the U.S. Offer.
In accordance with customary Swedish practice regarding determining the
level of acceptances of the Swedish and International Offer, Forcenergy
anticipates that it will be unable to announce the level of acceptances of the
U.S. Offer until the end of the Interim Period. Forcenergy acknowledges that
Rule 14e-1(c) under the Exchange Act provides that an offeror must pay the
consideration offered or return the securities deposited by, or on behalf of,
security holders promptly after the termination or withdrawal of an offer.
However, pursuant to the No-Action Letter, the SEC has granted Forcenergy
certain relief from the provisions of Rule 14e-1(c). If, after determination of
the results of the Exchange Offer following the end of the Offer Period, it is
determined that the Minimum Share Condition or any other Offer Condition has not
been satisfied and will not be waived, and Forcenergy determines to withdraw the
Exchange Offer, the tender of all securities previously tendered will thereafter
be treated as if such tenders had been withdrawn by the persons tendering such
shares.
Forcenergy acknowledges that Rule 14e-1(d) under the Exchange Act provides
that an extension must be accompanied by a public announcement, which must
include disclosure of the approximate number of securities deposited to date,
issued by 9:00 a.m., Eastern time, on the next business day after the scheduled
expiration date of the Exchange Offer. However, pursuant to the No-Action
Letter, the SEC has granted Forcenergy certain relief from the provisions of
Rule 14e-1(d). In accordance with the customary practice in Sweden with respect
to determining the level of acceptances in a Swedish exchange offer, Forcenergy
anticipates that it will not announce the level of acceptances of the U.S. Offer
until at least five business days after the end of the Offer Period.
If Forcenergy is delayed in its acceptance for exchange of, or issuance of
FEN Common Stock in exchange for, FAB Securities or is unable to accept for
exchange, or issue FEN Common Stock in exchange for, FAB Securities pursuant to
the U.S. Offer for any reason, then, without prejudice to the rights of
Forcenergy with respect to the U.S. Offer under this Proxy Statement/Prospectus
(but subject to compliance with applicable rules of the SEC and the
Recommendation), the U.S. Exchange Agent may nevertheless, on behalf of
Forcenergy, retain tendered FAB Securities, subject to withdrawal rights as
described in "The Exchange Offer -- Withdrawal Rights." Under no circumstances
will interest or other consideration be paid, nor will any additional FEN Common
Stock be issued, by Forcenergy, regardless of any delay in making such exchange.
In accordance with customary Swedish practices, after the Offer Letter of
Transmittal has been received and is registered by the U.S. Exchange Agent, the
FAB Securities will be transferred to a newly opened, blocked VP account in the
name of the stockholder. In connection with this, VPC will forward both a notice
(a "VP notice") which indicates the withdrawal from the original VP account and
a VP notice which indicates the deposit in the newly opened VP account.
FRACTIONAL SHARES
No fractional shares of FEN Common Stock will be issued upon the surrender
for exchange of FAB Securities and any fractional share interest held after the
Exchange Offer will not entitle such owner to vote or to any other rights of a
stockholder of Forcenergy. The holders of such fractional share interests will
be
15
<PAGE> 19
paid an amount in cash representing such holder's proportionate interest in the
net proceeds from the sale by the U.S. Exchange Agent on behalf of all such
holders of the aggregate of the fractions of shares of FEN Common Stock
attributable to such holders' fractional share interests (the "FEN Excess
Shares") (which FEN Excess Shares may be combined with other fractional shares
in the Exchange Offer and sold in the form of SDRs on the Stockholder Stock
Exchange). Until the net proceeds of the sales of the FEN Excess Shares are
distributed to the holders of the fractional share interests, the U.S. Exchange
Agent will hold such proceeds in trust on behalf of the holders of such
fractional share interests. Such proceeds (without interest) will be paid in
lieu of fractional shares to the holders of the fractional share interests as
soon as practicable after the U.S. Exchange Agent determines the portion of the
proceeds to which each such holder is entitled. Proceeds will be distributed to
the yield account linked to the VP account of the registered stockholder.
CERTAIN CONDITIONS OF THE U.S. OFFER
Notwithstanding any other term of the U.S. Offer, Forcenergy will not be
required to accept for exchange or, subject to the procedures described in "The
Exchange Offer -- Acceptance for Exchange; Delivery of FEN Common Stock," to
issue the shares of FEN Common Stock in exchange for, any FAB Securities
tendered pursuant to the U.S. Offer, and may terminate or amend the U.S. Offer
or postpone the acceptance of, or exchange for, FAB Securities tendered pursuant
thereto, unless the Offer Conditions described in "The Exchange Offer -- Certain
Conditions to the U.S. Offer" shall have been satisfied or, if permissible,
waived on or before the Expiration Date. The Offer Conditions include the
Minimum Share Condition and the Forcenergy Stockholder Approval Condition.
Pursuant to the Shareholder Agreement, the Forss Affiliates have agreed to
tender their FAB Securities, representing approximately 52% voting interest in
FAB, pursuant to the Exchange Offer and have also agreed not to solicit or
encourage any offer from any party concerning the possible disposition of FAB
Securities.
COMPULSORY ACQUISITION
If holders of more than 90% of the outstanding FAB Securities accept the
Exchange Offer or Forcenergy otherwise acquires more than 90% of the outstanding
FAB Securities (including voting rights), Forcenergy (and each remaining
stockholder of FAB) will have the right under the Swedish Companies Act (the
"Companies Act") to commence a process leading to a compulsory acquisition by a
newly formed, wholly owned subsidiary of Forcenergy organized under the law of
the Kingdom of Sweden (the "FEN Swedish Sub"). Under the compulsory acquisition,
any FAB stockholders who did not tender their securities will receive cash in a
taxable exchange for their FAB Securities. The price per share of a FAB Security
will be determined in accordance with the Companies Act, which may be higher or
lower than the value per share of FEN Common Stock being offered under the
Exchange Offer on the Expiration Date. The compulsory acquisition process may
take up to two years or longer. Accordingly, no assurance can be given as to the
timing or price thereof. See "The Exchange Offer -- Compulsory Acquisition."
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
Forcenergy has received a tax opinion from Andrews & Kurth L.L.P., tax
advisors to Forcenergy, regarding the U.S. federal income tax consequences of
the Exchange Offer to a U.S. FAB Holder (as defined in "The Exchange
Offer -- Certain U.S. Federal Income Tax Consequences"). Generally, for U.S.
federal income tax purposes, the exchange of FAB Securities for FEN Common Stock
in the Exchange Offer will constitute a taxable event for U.S. FAB Holders
unless Forcenergy acquires 100% of the outstanding FAB Securities solely in
exchange for shares of FEN Common Stock in such transaction.
CERTAIN SWEDISH INCOME TAX CONSEQUENCES
Enskilda Juridik, Skandinaviska Enskilda Banken, has acted as tax counsel
to Forcenergy regarding certain Swedish income tax consequences of the Exchange
Offer. Generally, a U.S. FAB Holder will not be liable for Swedish income tax
upon the Exchange of FAB Securities unless such Holder maintains a
16
<PAGE> 20
permanent establishment in Sweden or has been a resident of Sweden during a
certain period of time prior to the Exchange. See "The Exchange Offer -- Certain
Swedish Income Tax Consequences."
Each FAB stockholder should consult his or her own tax advisor regarding
the tax consequences of the Exchange Offer in light of such stockholder's own
situation, including the application and the effect of any state, local or
foreign income and other tax laws. For a more detailed discussion of these and
other tax considerations for FAB stockholders, see "The Exchange
Offer -- Certain U.S. Federal Income Tax Consequences" and "The Exchange
Offer -- Certain Swedish Income Tax Consequences."
COMPARATIVE RIGHTS OF FORCENERGY AND FAB STOCKHOLDERS
Rights of stockholders of FAB are currently governed by the laws of Sweden,
the rules of the SSE and the Articles of Association, as amended, of FAB (the
"FAB Charter"). Upon consummation of the Exchange Offer, FAB stockholders will
become stockholders of Forcenergy and their rights as stockholders of Forcenergy
will be governed by the DGCL, the Amended and Restated Certificate of
Incorporation of Forcenergy (the "Forcenergy Charter") and Forcenergy's Bylaws
(the "Forcenergy Bylaws"). There are various differences between the rights of
FAB stockholders and the rights of Forcenergy stockholders. See "Comparative
Rights of Forcenergy and FAB Stockholders" and "Description of Forcenergy
Capital Stock."
RISK FACTORS
FAB stockholders are urged to consider the matters set forth under "Risk
Factors, Conflicts of Interest and Other Considerations" in deciding whether to
tender their FAB Securities pursuant to the Exchange Offer in exchange for the
FEN Common Stock offered hereby.
FORWARD LOOKING STATEMENTS
This Proxy Statement/Prospectus includes forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. The words "anticipate," "believe," "expect," "plan," "intend," "estimate,"
"project," "will," "could," "may," "predict" and similar expressions are
intended to identify forward-looking statements. No assurance can be given that
actual results may not differ materially from those in the forward-looking
statements herein for reasons including the effect of competition, the level of
petroleum industry exploration and production expenditures, world economic
conditions, prices of and the demand for crude oil and natural gas, drilling
activity, weather, the legislative environment in the United States and other
countries, OPEC policy, conflict in the Middle East and other major petroleum
producing regions and the condition of the capital and equity markets.
17
<PAGE> 21
MARKET PRICE DATA
FEN Common Stock commenced trading on the NYSE under the symbol "FEN" on
June 18, 1997. Prior to then, FEN Common Stock was quoted on the Nasdaq National
Market (the "NASDAQ"). The FAB Series B Common Shares are listed on the
Stockholm Stock Exchange (the "SSE") under the symbol "FAB." The following table
sets forth, for the periods indicated, the range of high and low per share sales
prices for FEN Common Stock and FAB Series B Common Shares as reported on the
NASDAQ, NYSE and the SSE.
<TABLE>
<CAPTION>
FORCENERGY FAB -- SERIES B
--------------- ----------------
HIGH LOW HIGH LOW
------ ------ ------- ------
(US $) (SEK)
<S> <C> <C> <C> <C>
1995
First Quarter...................................... -- -- 34.60 30.50
Second Quarter..................................... -- -- 45.80 35.00
Third Quarter(1)................................... $11.38 $10.00 44.80 34.00
Fourth Quarter..................................... $11.50 $ 9.25 35.50 28.00
1996
First Quarter...................................... $11.69 $10.50 34.50 32.00
Second Quarter..................................... $19.25 $11.63 46.80 33.50
Third Quarter...................................... $24.88 $17.75 60.50 46.50
Fourth Quarter..................................... $37.88 $22.75 98.00 57.50
1997
First Quarter...................................... $37.13 $25.38 102.00 78.00
Second Quarter..................................... $35.13 $27.13 99.50 78.00
Third Quarter...................................... $38.81 $26.75 112.50 80.00
Fourth Quarter..................................... $39.00 $25.19 115.00 86.00
1998
First Quarter (through February 10, 1998).......... $25.88 $21.50 107.00 88.00
</TABLE>
- ---------------
(1) Forcenergy commenced trading on the NASDAQ on July 28, 1995. No public
market existed for FEN Common Stock prior to that date.
On December 18, 1997, the last trading day prior to the date of the
announcement of the Exchange Offer by Forcenergy, the closing per share sales
prices of FEN Common Stock and FAB Series B Common Shares, as reported on the
NYSE and the SSE, were US $27.00 and SEK 88.00, respectively. See the cover page
of this Proxy Statement/Prospectus for recent closing prices of FEN Common Stock
and FAB Series B Common Stock.
Following the Exchange Offer, FEN Common Stock will continue to be traded
on the NYSE and SDRs representing shares of FEN Common Stock will be listed on
the SSE. Following the Exchange Offer, the FAB Class B Common Shares will be
delisted as soon as permitted by the SSE.
18
<PAGE> 22
EXCHANGE RATES
All currency amounts in this Proxy Statement/Prospectus are expressed in
U.S. dollars ("US$" or "$") unless it is specifically indicated that a different
currency is being used. Certain portions of this Proxy Statement/Prospectus
contain amounts which have been converted from the Swedish kronor ("SEK" and one
million SEK is hereinafter referred to as "MSEK") into US$. For convenience, SEK
amounts have been converted using an exchange rate of US$1.00 to SEK 7.77 unless
it is indicated that a different exchange rate was used for a specific
conversion. The above exchange rate, which was used to perform the conversions,
represents the noon buying rate, certified by the Federal Reserve Bank of New
York for customs purposes in New York City for cable transfers in SEK (the "Noon
Buying Rate") on December 18, 1997. Use of this exchange rate is not a
representation that the converted SEK amounts actually represent the
corresponding US$ amounts or that SEK could be converted into US$ at the
exchange rate used or at any other exchange rate. The table below lists the Noon
Buying Rate at year-end for each of the years 1993 through 1997. The table also
indicates the average, the high and the low Noon Buying Rates for each of the
five years ended December 31, 1997.
<TABLE>
<CAPTION>
YEAR
-------------------------------------
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
End of period................................... 7.94 6.83 6.63 7.43 8.34
Average for period*............................. 7.65 6.71 7.14 7.72 7.80
High for period................................. 8.08 7.03 7.55 8.38 8.48
Low for period.................................. 6.87 6.55 6.50 7.06 7.06
</TABLE>
- ---------------
* The average for the period was calculated by averaging the daily Noon Buying
Rates during the relevant period.
During the period from January 1, 1998 to February 10, 1998, the high Noon
Buying Rate was SEK 8.12 and the low Noon Buying Rate was SEK 7.88. The closing
spot rate for SEK in the United States, as reported by the Federal Reserve Bank
of New York, on February 10, 1998, the most recent practicable date prior to the
printing of this Proxy Statement/Prospectus, was US$1.00 to SEK 8.12.
19
<PAGE> 23
FORCENERGY
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical financial information for each of the
years ended December 31, 1992 through December 31, 1996 have been derived from
Forcenergy's Consolidated Financial Statements, which have been audited by Price
Waterhouse LLP (for each of the years ended December 31, 1992 through 1994) and
Coopers & Lybrand L.L.P. (for each of the years ended December 31, 1995 through
December 31, 1996), independent public accountants, respectively. The selected
consolidated financial data for the nine months ended September 30, 1996 and
1997 have been derived from the unaudited consolidated financial statements of
Forcenergy, which have been prepared on the same basis as the Consolidated
Financial Statements of Forcenergy and, in the opinion of Forcenergy, reflect
and include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position and results of
operations of Forcenergy for such periods. The information set forth below is
qualified by reference to and should be read in conjunction with the
consolidated financial statements and related notes included in Forcenergy's
Annual Report on Form 10-K for the year ended December 31, 1996 and its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997,
incorporated by reference in this Proxy Statement/Prospectus. No cash dividends
have been declared for any of the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- -------- -------- -------- --------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Oil and gas sales............................ $ 196,929 $ 94,373 $ 138,698 $ 72,147 $ 58,345(1) $ 49,652(1) $ 24,937
Other........................................ 1,732 419 683 494 388(1) 441(1) 475
--------- --------- --------- -------- -------- -------- --------
Total revenues........................... 198,661 94,792 139,381 72,641 58,742 50,093 25,412
Expenses:
Lease operating.............................. 53,219 27,446 38,786 24,507 23,744 16,632 7,769
Depreciation, depletion and amortization..... 80,853 40,490 58,464 31,295 24,572 19,889 8,014
Production taxes............................. 3,310 2,498 3,454 1,868 1,701 1,560 606
General and administrative, net.............. 11,127 5,393 7,971 5,670 6,463 3,166 2,523
--------- --------- --------- -------- -------- -------- --------
Total operating expenses................. 148,509 75,827 108,675 63,340 56,480 41,247 18,912
--------- --------- --------- -------- -------- -------- --------
Income from operations......................... 50,152 18,965 30,706 9,301 2,262 8,846 6,500
Interest and other income (loss)............... 2,721 380 650 (561) 789 545 197
Interest expense, net of amounts capitalized... (22,970) (9,503) (13,367) (11,668) (9,529) (6,192) (2,303)
--------- --------- --------- -------- -------- -------- --------
Income (loss) before income taxes.............. 29,903 9,842 17,989 (2,928) (6,478) 3,199 4,394
Income tax provision (benefit)(2).............. 11,018 3,671 6,711 (1,075) (2,403) 2,337 --
Minority interest.............................. -- -- -- -- -- 107 132
--------- --------- --------- -------- -------- -------- --------
Net income (loss)(2)........................... $ 18,885 $ 6,171 $ 11,278 $ (1,853) $ (4,075) $ 755 $ 4,262
========= ========= ========= ======== ======== ======== ========
Net income (loss) per common and common
equivalent share(2).......................... $ .79 $ .34 $ .57 $ (.14) $ (.50)
========= ========= ========= ======== ========
UNAUDITED PRO FORMA DATA(2):
Income before income taxes, including minority
interest..................................... $ 3,092 $ 4,262
Income tax provision........................... 1,207 1,639
-------- --------
Net income..................................... 1,885 2,623
======== ========
Net income per share........................... $ .29 $ .41
======== ========
Weighted average common and common equivalent
shares....................................... 23,991 18,265 19,726 12,910 8,188 6,520 6,451
BALANCE SHEET DATA (AT END OF PERIOD):
Property, plant and equipment, net............. $ 746,744 $ 376,805 $ 523,711 $298,832 $186,241 $152,659 $112,441
Total assets................................... 828,674 417,523 585,925 335,090 220,287 187,786 127,685
Total long-term debt........................... 440,618 196,581 272,932 130,729 131,646 127,234 75,758
Stockholders' equity........................... 270,574 163,337 248,936 154,961 71,061 43,336 45,252
OTHER FINANCIAL DATA:
Capital Expenditures(3)........................ 296,935 115,011 283,977 144,689 58,169 53,371 67,660
EBITDA(4)...................................... 133,726 59,835 89,820 40,035 27,623 29,280 14,711
Ratio of Earnings to Fixed Charges(5).......... 2.1x 1.7x 2.0x 1.4x 2.9x
EBITDA Interest Coverage(6).................... 5.1x 5.4x 5.8x 2.8x 2.5x 4.5x 6.4x
Net cash flows provided by (used in):
Operating activities......................... 115,901 43,699 65,228 28,574 22,433 19,473 9,162
Investing activities......................... (284,980) (112,088) (279,864) (75,862) (55,298) (63,144) (69,206)
Financing activities......................... 163,473 66,105 221,309 47,096 34,172 43,883 60,574
</TABLE>
20
<PAGE> 24
- ---------------
(1) Natural gas liquid revenues for 1993 and 1994 have been reclassified from
plant processing and other revenues to oil and gas sales for consistent
presentation with 1995 and 1996 revenues.
(2) Prior to September 14, 1993, Forcenergy was exempt from United States
federal and certain state income taxes as a result of its partnership
status. The unaudited pro forma data reflects the income tax expense that
would have been recorded had Forcenergy not been exempt from paying such
income taxes. Net income per share data for 1992 and 1993 is described as
unaudited pro forma because of Forcenergy's former partnership status.
(3) Capital expenditures include acquisitions of oil and gas properties,
including a $46.4 million non-cash item relating to a 1995 acquisition and
normal end of period capital expenditure accruals of $17.2 million, $19.9
million, $34.4 million and $24.1 million for the years ended 1996 and 1995,
and for the periods ended September 30, 1997 and 1996, respectively.
(4) EBITDA is defined as earnings (including interest and other income) before
interest expense, taxes, depletion, depreciation and amortization and is
presented because it is a widely accepted financial indication of a
company's ability to service and incur debt. EBITDA is a non-GAAP financial
indicator and it is not a measure of net cash flows from operating
activities. EBITDA should not be considered as an alternative to earnings
(loss) as an indicator of Forcenergy's operating performance or to cash
flows as a measure of liquidity.
(5) For purposes of determining the ratio of earnings to fixed charges, earnings
are computed as net income (loss) before income taxes, plus fixed charges.
Fixed charges consist of interest expense, whether expensed or capitalized,
on all indebtedness plus amortization of debt issuance costs. Earnings were
not adequate to cover fixed charges in the years ended December 31, 1995 and
1994 by $5.5 million and $8.0 million, respectively.
(6) Represents the multiple by which EBITDA exceeds interest expense prior to
capitalization.
A press release of Forcenergy Inc's and Forcenergy AB's preliminary results
for 1997 will be made on or about March 3, 1998, sent to registered shareholders
of FAB and included in a Current Report on Form 8-K to be filed by Forcenergy
with the SEC.
21
<PAGE> 25
FORCENERGY AB
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary consolidated financial information
for FAB as of the dates and for the periods indicated. The summary historical
consolidated financial information for each of the years ended December 31, 1992
through 1996 have been derived from FAB's Consolidated Financial Statements,
which have been audited by Price Waterhouse (Sweden), independent public
accountants. The summary consolidated financial information for the nine months
ended September 30, 1996 and 1997 have been derived from the unaudited
consolidated financial statements of FAB, which have been prepared on the same
basis as that of the Consolidated Financial Statements of FAB and, in the
opinion of FAB, reflect and include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations of FAB for such periods. The summary
consolidated financial information should be reviewed in conjunction with the
consolidated financial statements of FAB and the notes thereto set forth
elsewhere in this Proxy Statement/Prospectus. See "Information Regarding FAB."
The information set forth in the table below is not covered by the report of
FAB's independent public accountants included elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------- --------- --------
(UNAUDITED) (SEK)(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Oil and gas sales and other................ -- -- 671 340,201 455,841 393,177 214,847
Oil trading revenues....................... 141,612 663,122 879,951 139,853 -- -- --
Equity in earnings of associated
companies................................ 86,861 37,142 59,280 2,755 -- -- --
-------- -------- -------- -------- --------- --------- --------
Total revenues......................... 228,473 700,264 939,902 482,809 455,841 393,177 214,847
Operating expenses........................... (149,414) (669,298) (890,133) (296,286) (252,218) (177,035) (98,047)
-------- -------- -------- -------- --------- --------- --------
Operating income before depreciation......... 79,059 30,966 49,769 186,523 203,623 216,142 116,800
Standard depreciation
Standard depreciation according to plan.... (190) (244) (273) (155,642) (185,485) (137,513) (71,378)
Prior year's depreciation revision......... -- -- -- (31,175) -- -- --
-------- -------- -------- -------- --------- --------- --------
Operating income after depreciation.......... 78,869 30,722 49,496 (294) 18,138 78,629 45,422
Financial items
Interest income............................ 1,559 1,056 1,834 5,143 5,929 3,688 1,007
Other financial items...................... (975) (1,205) 128,590 35,776 3,009 3,545 1,519
Interest expenses.......................... (45) (11) (734) (53,847) (58,157) (41,840) (21,656)
-------- -------- -------- -------- --------- --------- --------
Earnings after financial items............... 81,358 30,562 179,186 (13,222) (31,081) 44,022 26,292
Minority interest in earnings before tax..... -- -- -- 427 -- (1,248) (947)
-------- -------- -------- -------- --------- --------- --------
Earnings before tax.......................... 81,358 30,462 179,186 (12,795) (31,081) 42,774 25,345
Tax provision (benefit)...................... 30,935 13,966 29,236 (16,129) (8,892) 13,281 13,292
-------- -------- -------- -------- --------- --------- --------
Net income................................... 50,423 16,596 149,950 3,334 (22,189) 29,493 12,053
======== ======== ======== ======== ========= ========= ========
Earnings per share (before tax) SEK.......... 5.65 2.12 12.45 (0.89) (2.67) 5.23 3.44
Earnings per share (after tax) SEK........... 3.50 1.15 10.42 0.23 (1.91) 3.61 1.64
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................................. 842,602 598,612 743,139 616,828 1,757,749 1,637,914 950,149
Total long-term debt......................... -- -- -- -- 962,745 1,017,723 477,694
Stockholders' equity......................... 835,896 570,353 730,043 562,452 636,350 416,798 323,976
OTHER FINANCIAL DATA:
Net cash flows provided by (used in):
Operating activities....................... 286 15,083 6,272 249,896 195,325 180,217 103,748
Investing activities....................... (187) 1,817 45,742 (536,419) (452,460) (507,153) (463,665)
Financing activities....................... (14,393) (22,786) (22,786) 241,252 308,530 327,242 361,619
</TABLE>
22
<PAGE> 26
COMPARATIVE PER SHARE DATA
The information set forth below should be read in conjunction with the
respective audited and unaudited consolidated financial statements and related
notes of Forcenergy and FAB incorporated by reference or included in this Proxy
Statement/Prospectus and the unaudited pro forma condensed financial information
and notes thereto included elsewhere in this Proxy Statement/Prospectus.
FORCENERGY
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Historical Per Common Share Data:
Income from continuing operations........................ $ 0.57 $ .79
Book value............................................... 11.03 11.90
Pro Forma Per Common Share Data:
Pro forma income from continuing operations.............. $ 1.27 $ 1.16
Pro forma book value..................................... 13.90 15.01
</TABLE>
FAB
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(SEK)
<S> <C> <C>
Historical Per Common Share Data:
Income from continuing operations........................ 10.42 3.50
Book value............................................... 50.73 58.08
</TABLE>
23
<PAGE> 27
RISK FACTORS, CONFLICTS OF INTEREST AND OTHER CONSIDERATIONS
THE FOLLOWING RISK FACTORS, CONFLICTS OF INTEREST AND OTHER SPECIAL
CONSIDERATIONS, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS, SHOULD BE CAREFULLY EVALUATED PRIOR TO MAKING A DECISION
WITH RESPECT TO THE EXCHANGE OFFER OR THE PROPOSAL.
TAX EFFECTS
For U.S. federal income tax purposes, the exchange of FAB Securities for
FEN Common Stock in the Exchange Offer will constitute a taxable event for U.S.
FAB Holders (as defined in "The Exchange Offer -- Certain U.S. Federal Income
Tax Consequences") unless Forcenergy acquires 100% of the outstanding FAB
Securities solely in exchange for shares of FEN Common Stock in such
transaction.
The exchange of FAB Securities for FEN Common Stock in the Exchange Offer
by a U.S. FAB Holder may, in some specific circumstances, be taxable for Swedish
income tax purposes. See "The Exchange Offer -- Certain Swedish Income Tax
Consequences."
The distribution of shares of FEN Common Stock presently held by FAB would
constitute a taxable event to FAB under U.S. and Swedish laws. Accordingly,
Forcenergy currently intends to maintain the corporate existence of FAB and not
to make any distributions of such shares of FEN Common Stock.
Distributions from FAB to FEN will be subject to a 5% Swedish withholding
tax.
POTENTIAL CONFLICTS OF INTEREST
There is a potential conflict of interest among the shareholders of FAB and
between the stockholders of FAB and Forcenergy with respect to the determination
of the Exchange Ratio in the Exchange Offer. The Exchange Ratio was initially
determined after extended discussions and negotiations between Stig Wennerstrom
on behalf of Forcenergy and Eric Forss on behalf of Forsinvest AB, Stridor
Invest AB and himself. With respect to the Shareholder Agreement, the officers
and directors of Forcenergy negotiating with the Forss Affiliates were
independent, without material differences in interests, from other Forcenergy
shareholders. However, Forcenergy shareholders were not separately represented
in such discussions, and the interests of holders of FEN Common Stock may differ
from those of the representatives of Forcenergy with respect to the Exchange
Ratio agreed to with the Forss Affiliates that is offered in the Exchange Offer.
Since Stig Wennerstrom and the other directors of Forcenergy (excluding
Eric Forss) beneficially own an aggregate of approximately 5.7% of the shares of
FEN Common Stock, their interests in the determination of the Exchange Ratio
should generally be closely aligned with those of holders of FEN Common Stock.
Messrs. Wennerstrom, Issal and Wallace beneficially own 1,387,867, 31,000 and
13,166 shares of FEN Common Stock, respectively. Messrs. Wennerstrom and Issal
each own 105,000 and 7,000 FAB Series B Common Shares, respectively. Mr.
Wennerstrom is also a director of FAB and Mr. Issal is the Chairman of FAB and
Forcenergy. Mr. Wallace, a director of Forcenergy, owns 2,000 FAB Series B
Common Shares. These relationships may present a conflict of interest of such
directors and the Board of Directors in recommending the Proposal to Forcenergy
shareholders.
Messrs. Wennerstrom, Issal and Wallace disclosed their potential conflicts
of interest with respect to the terms of the Exchange Offer but did not abstain
from voting on the approval by the Forcenergy Board of Directors of the terms of
the Exchange Offer and the Proposal as they did not believe that such conflict
would affect their vote. Due to his conflicts of interest, Mr. Forss abstained
from voting by the Forcenergy Board of Directors on the Exchange Offer and the
Proposal.
NO INDEPENDENT REPRESENTATION
The Exchange Ratio for the Exchange Offer was negotiated with the Forss
Affiliates without independent representation of Forcenergy stockholders.
Independent representation on behalf of Forcenergy stockholders might have
caused the terms of the Exchange Ratio for the Exchange Offer to be different in
material respects from those described herein. In addition, Goldman, Sachs & Co.
and Enskilda Securities, the investment
24
<PAGE> 28
banking firms retained on behalf of Forcenergy to advise Forcenergy in
connection with the U.S. Offer and the Swedish and International Offer,
respectively, were not separately selected by Forcenergy stockholders.
REGULATORY CONDITIONS AND APPROVALS
In addition to the conditions described elsewhere herein, the Exchange
Offer is conditioned upon the effectiveness of the prospectuses with the SEC and
the SSE and the approval for listing of the FEN Common Stock on the NYSE and the
SDRs on the SSE. In addition, any applicable waiting periods under any other
competition, foreign investment or similar law, regulation or other governmental
authority having jurisdiction over FEN or FAB with respect to such matters shall
have expired or been terminated. Although no other such approvals are known or
anticipated at this time, no assurance can be given that such approvals will be
obtained, or, if they are obtained, that they will be obtained in a timely
manner. See "The Exchange Offer -- Conditions to the Exchange Offer."
COSTS OF THE EXCHANGE OFFER
Transaction costs of approximately $3 million will be paid by Forcenergy,
for investment advisory fees, legal fees, and printing and solicitation costs
whether or not the Exchange Offer is completed. For a more detailed discussion
of the costs and expenses expected to be incurred, see "The Exchange
Offer -- Costs of Exchange Offer."
PROVISIONS THAT MAY DISCOURAGE CHANGES OF CONTROL
The Forcenergy Charter, the Forcenergy Bylaws and the DGCL contain certain
provisions that may have the effect of encouraging persons considering an
acquisition or takeover of Forcenergy to negotiate with the Board of Directors
rather than to pursue non-negotiated acquisitions or takeover attempts that a
shareholder might consider to be in the shareholders' best interest, including
offers that might result in a premium over market price for the FEN Common
Stock. These provisions include super-majority provisions relating to removal of
directors and a prohibition on shareholder action by less than unanimous written
consent. Forcenergy has also adopted a shareholder rights plan. See "Description
of Capital Stock -- Preferred Share Purchase Rights."
VOLATILITY OF NATURAL GAS AND OIL PRICES AND HEDGING RISK
Revenues generated from Forcenergy's operations are highly dependent upon
the price of, and demand for, oil and natural gas. Historically, the markets for
oil and natural gas have been volatile and are likely to continue to be volatile
in the future. Prices for oil and natural gas are subject to wide fluctuations
in response to relatively minor changes in the supply of and demand for oil and
natural gas, market uncertainty and a variety of additional factors that are
beyond the control of Forcenergy. These factors include the level of consumer
product demand, weather conditions, domestic and foreign governmental
regulations, the price and availability of alternative fuels, political
conditions in the Middle East, the foreign supply of oil and natural gas, the
price of foreign imports and overall economic conditions. It is impossible to
predict future oil and natural gas price movements with any certainty. Declines
in oil and natural gas prices may materially adversely affect Forcenergy's
financial condition, liquidity and results of operations. Lower oil and natural
gas prices also may reduce the amount of Forcenergy's oil and natural gas that
can be produced economically. In order to reduce its exposure to price risks in
the sale of its oil and natural gas, Forcenergy enters into hedging arrangements
from time to time. Forcenergy's hedging arrangements apply to only a portion of
its production and provide only limited price protection against fluctuations in
the oil and natural gas markets. While the use of hedging arrangements limits
the downside risk of adverse price movements, they may also limit future
revenues from favorable price movements.
IMPAIRMENT OF OIL AND GAS PROPERTIES
Forcenergy uses the full cost method of accounting for its investment in
oil and natural gas properties. Under the full cost method of accounting, all
costs of acquisition, exploration and development of oil and
25
<PAGE> 29
natural gas reserves are capitalized into a "full cost pool" as incurred, and
properties in the pool are depleted and charged to operations using the
unit-of-production method based on the ratio of current production to total
proved oil and natural gas reserves. To the extent that such capitalized costs
(net of accumulated depreciation, depletion and amortization) less deferred
taxes exceed the present value (using a 10% discount rate) of estimated future
net cash flows from proved oil and natural gas reserves, and the lower of cost
or fair value of unproved properties after income tax effects, such excess costs
are charged to operations. Once incurred, a write-down of oil and natural gas
properties is not reversible at a later date even if oil or natural gas prices
increase. While Forcenergy has never been required to write-down its asset base,
significant downward revisions of reserve estimates or declines in oil and gas
prices which are not offset by other factors could result in a write-down for
impairment of oil and gas properties.
REPLACEMENT OF RESERVES
In general, the volume of production from oil and gas properties declines
as reserves are depleted. The rate of decline depends on reservoir
characteristics, and varies from the steep decline rate characteristic of Gulf
of Mexico reservoirs, where Forcenergy has a significant portion of its
production, to the relatively slow decline rate characteristic of the long-lived
fields in the Rocky Mountain, Gulf Coast, Southwest and Appalachian regions.
Except to the extent Forcenergy acquires properties containing proved reserves
or conducts successful development and exploration activities, or both, the
proved reserves of Forcenergy will decline as reserves are produced.
Forcenergy's future oil and natural gas production is, therefore, highly
dependent upon its level of success in finding or acquiring additional reserves.
The business of exploring for, developing or acquiring reserves is capital
intensive. To the extent cash flows from operations is reduced and external
sources of capital become limited or unavailable, Forcenergy's ability to make
the necessary capital investment to maintain or expand its asset base of oil and
natural gas reserves would be impaired. In addition, there can be no assurance
that Forcenergy's future development, acquisition and exploration activities
will result in additional proved reserves or that Forcenergy will be able to
drill productive wells at acceptable costs.
TITLE TO PROPERTIES
Substantially all of Forcenergy's oil and gas properties are and will
continue to be mortgaged to secure borrowings under its bank loan agreement (the
"Senior Credit Facility"). In the event of Forcenergy's default under certain
provisions of the Senior Credit Facility, Forcenergy's ownership interest in
these properties may be subject to foreclosure by the lender.
UNCERTAINTY OF RESERVE INFORMATION AND FUTURE NET REVENUE ESTIMATES
There are numerous uncertainties inherent in estimating oil and natural gas
reserves and their estimated values, including many factors beyond the control
of the producer. The reserve data set forth in Forcenergy's Annual Report
represents only estimates. Reservoir engineering is a subjective process of
estimating underground accumulations of oil and natural gas that cannot be
measured in an exact manner. Estimates of economically recoverable oil and gas
reserves and of future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulations by governmental agencies and assumptions concerning future oil and
gas prices, future operating costs, severance and excise taxes, development
costs and workover and remedial costs, all of which may in fact vary
considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery, and estimates of the future net cash flows expected therefrom
prepared by different engineers or by the same engineers at different times may
vary substantially and such reserve estimates may be subject to downward or
upward adjustment based upon such factors. Actual production, revenues and
expenditures with respect to Forcenergy's reserves will likely vary from
estimates, and such variances may be material.
The present values of estimated future net cash flows referred to in
Forcenergy's Annual Report should not be construed as the current market value
of the estimated oil and natural gas reserves attributable to Forcenergy's
properties. In accordance with applicable requirements of the Commission, the
estimated
26
<PAGE> 30
discounted future net cash flows from proved reserves are generally based on
prices and costs as of the date of the estimate, whereas actual future prices
and costs may be materially higher or lower. In fact, prices received for
production have declined since the date on which such values were calculated.
Actual future net cash flows also will be affected by factors such as the amount
and timing of actual production, supply and demand for oil and natural gas,
curtailments or increases in consumption by gas purchasers and changes in
governmental regulations or taxation. The timing of actual future net cash flows
from proved reserves, and their actual present value, will be affected by the
timing of both the production and the incurrence of expenses in connection with
development and production of oil and gas properties. In addition, the
calculation of the present value of the future net revenues using a 10% discount
as required by the Commission, is not necessarily the most appropriate discount
factor based on interest rates in effect from time to time and risks associated
with Forcenergy's reserves or the oil and gas industry in general.
SUBSTANTIAL CAPITAL REQUIREMENTS
Forcenergy makes, and will continue to make, substantial capital
expenditures for the development, exploration, acquisition and production of oil
and natural gas reserves. Historically, Forcenergy has financed these
expenditures primarily with proceeds from bank borrowings, private placements
and public offerings of debt and equity securities and cash generated by
operations. Forcenergy made capital expenditures (including expenditures for
acquisitions) of $144.7 million during 1995, $284.0 million during 1996 and
approximately $444.5 million as of November 30, 1997. Forcenergy anticipates
that its 1998 capital expenditures, not including expenditures for acquisitions,
will be comparable to 1997 capital expenditures. If revenues decrease as a
result of lower oil and gas prices or operating difficulties, Forcenergy may be
limited in its ability to expend the capital necessary to undertake or complete
its drilling program in future years. There can be no assurance that additional
debt or equity financing or cash generated by operations will be available to
meet these requirements.
DRILLING RISKS
Drilling involves numerous risks, including the risk that no commercially
productive natural gas or oil reservoirs will be encountered. The cost of
drilling, completing and operating wells is often uncertain, and drilling
operations may be curtailed, delayed or canceled as a result of a variety of
factors, including unexpected drilling conditions, pressure or irregularities in
formations, equipment failures or accidents, adverse weather conditions and
shortages or delays in the delivery of equipment. Forcenergy's future drilling
activities may not be successful and, if unsuccessful, such failure will have an
adverse effect on Forcenergy's future results of operations and financial
condition.
ACQUISITION RISKS
Forcenergy's rapid growth in recent years has been largely the result of
acquisitions of producing properties. Forcenergy expects to continue to evaluate
and pursue acquisition opportunities which are available on terms management
considers favorable to Forcenergy. The successful acquisition of producing
properties requires an assessment of recoverable reserves, future oil and gas
prices, operating costs, potential environmental and other liabilities and other
factors beyond Forcenergy's control. Such assessments are necessarily inexact
and their accuracy inherently uncertain. In connection with such an assessment,
Forcenergy performs a review of the subject properties that it believes to be
generally consistent with industry practices. Such a review, however, will not
reveal all existing or potential problems nor will it permit a buyer to become
sufficiently familiar with the properties to fully assess their deficiencies and
capabilities. Inspections may not always be performed on every platform or well,
and structural and environmental problems are not necessarily observable even
when an inspection is undertaken. Forcenergy is generally not entitled to
contractual indemnification for pre-closing liabilities, including environmental
liabilities, and generally acquires interests in the properties on an "as is"
basis.
27
<PAGE> 31
DEPENDENCE ON KEY PERSONNEL
Forcenergy depends to a large extent on the services of its founder, Stig
Wennerstrom, and certain other senior management personnel. The loss of the
services of Mr. Wennerstrom and other senior management personnel could have a
material adverse effect on Forcenergy's operations. Forcenergy has entered into
employment agreements with Messrs. Wennerstrom, J. Russell Porter, E. Joseph
Grady and Thomas F. Getten. Forcenergy does not maintain any key-man insurance
on its senior management. Forcenergy believes that its success is also dependent
upon its ability to continue to employ and retain skilled technical personnel.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
Forcenergy's business is regulated by certain local, state and federal laws
and regulations relating to the exploration for, and the development,
production, marketing, pricing, transportation and storage of, oil and natural
gas. Forcenergy's business is also subject to extensive and changing
environmental and safety laws and regulations governing plugging and
abandonment, the discharge of materials into the environment or otherwise
relating to environmental protection. As with any owner of property, Forcenergy
is also subject to cleanup costs and liability for hazardous materials, asbestos
or any other toxic or hazardous substance that may exist on or under any of its
properties. In addition, Forcenergy is subject to changing and extensive tax
laws, and the effect of newly enacted tax laws cannot be predicted. The
implementation of new, or the modification of existing, laws or regulations,
including amendments to the Oil Pollution Act of 1990 or regulations which may
be promulgated thereunder, could have a material adverse effect on Forcenergy.
COMPETITION
The oil and gas industry is highly competitive. Forcenergy encounters
competition from other oil and gas companies in all areas of its operations,
including the acquisition of producing properties. Forcenergy's competitors
include major integrated oil and natural gas companies and numerous independent
oil and gas companies, individuals and drilling and income programs. Many of its
competitors are large, well-established companies with substantially larger
operating staffs and greater capital resources than Forcenergy and which, in
many instances, have been engaged in the energy business for a much longer time
than Forcenergy. Such companies may be able to pay more for productive oil and
natural gas properties and exploratory prospects and to define, evaluate, bid
for and purchase a greater number of properties and prospects than Forcenergy's
financial or human resources permit. Forcenergy's ability to acquire additional
properties and to discover reserves in the future will be dependent upon its
ability to evaluate and select suitable properties and to consummate
transactions in a highly competitive environment.
OPERATING RISKS OF OIL AND GAS OPERATIONS
The oil and gas business involves certain operating hazards such as well
blowouts, cratering, explosions, uncontrollable flows of oil, natural gas or
well fluids, fires, formations with abnormal pressures, pollution, releases of
toxic gas and other environmental hazards and risks, any of which could result
in substantial losses to Forcenergy. Forcenergy's offshore operations also are
subject to the additional hazards of marine operations, such as severe weather,
capsizing and collision. The availability of a ready market for Forcenergy's oil
and natural gas production also depends on the proximity of reserves to, and the
capacity of, oil and gas gathering systems, pipelines and trucking or terminal
facilities. In addition, Forcenergy may be liable for environmental damages
caused by previous owners of property purchased and leased by Forcenergy. As a
result, substantial liabilities to third parties or governmental entities may be
incurred, the payment of which could reduce or eliminate the funds available for
development, acquisitions or exploration, or result in the loss of Forcenergy's
properties. In accordance with customary industry practices, Forcenergy
maintains insurance against some, but not all, of such risks and losses.
Forcenergy does not carry business interruption insurance. The occurrence of an
event not fully covered by insurance could have a material adverse effect on the
financial condition and results of operations of Forcenergy.
28
<PAGE> 32
THE COMPANIES
FORCENERGY
Forcenergy is an independent oil and gas company engaged in the
exploration, acquisition, development, exploitation and production of oil and
natural gas. Forcenergy has experienced significant growth in the last six
years, primarily through the exploitation, enhancement and development of
acquired working interests in producing properties in the Gulf of Mexico and the
acquisition of producing properties in the Cook Inlet, Alaska. At December 31,
1996, Forcenergy had net proved reserves of 585 Bcfe, 58% of which were located
in the Gulf of Mexico and 27% of which were located in Alaska. Approximately 56%
of Forcenergy's net proved reserves on such date were oil and approximately 78%
of proved reserves were classified as proved developed. Forcenergy currently
operates approximately 75% of its Gulf of Mexico production. Although
Forcenergy's primary focus is its Gulf of Mexico and Alaska activities,
Forcenergy has also acquired interests in certain undeveloped international
leasehold acreage, primarily in Gabon, Africa and Australia. See "Information
Regarding Forcenergy," elsewhere in this Proxy Statement/Prospectus. Additional
information concerning Forcenergy and its subsidiaries is included in the
Forcenergy documents filed with the Commission, which are incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
FAB
FAB operates primarily as a holding company with a 34% equity interest in
Forcenergy, a 100% ownership of Svenska Oljequppen AB ("SOG") and a cash balance
of approximately SEK 30 million as of December 29, 1997. SOG is engaged in oil
trading. SOG's principal business consists of the purchase and sale of oil and
related products, primarily in Northern European markets.
29
<PAGE> 33
THE SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting of stockholders of Forcenergy will be held on Tuesday,
March 17, 1998, at 2730 S.W. 3rd Ave., Suite 800, Miami, Florida 33129-2237,
commencing at 9:00 a.m. local time.
PURPOSE OF THE SPECIAL MEETING
The purposes of the Special Meeting are (i) to consider and vote upon a
proposal to approve the issuance of shares of FEN Common Stock in connection
with the Exchange Offer; and (ii) to transact such other business as may
properly come before the Special Meeting.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of FEN Common Stock at the close of business on the
Record Date (January 28, 1998), and excluding shares of FEN Common Stock held by
FAB, are entitled to notice of, and to vote at, the Special Meeting. There were
approximately 3,500 holders of record of FEN Common Stock on the Record Date,
with 25,513,102 shares of FEN Common Stock (excluding the 8,740,486 shares of
FEN Common Stock held by FAB) issued and outstanding. Each share of FEN Common
Stock (other than the shares held by FAB) entitles the holder thereof to one
vote on each matter submitted for stockholder approval. There were no persons
other than FAB and Eric Forss known to the management of Forcenergy to be the
beneficial owners of more than 5% of the outstanding FEN Common Stock as of the
Record Date.
PROXIES
If a stockholder does not attend the Special Meeting, such stockholder may
vote by proxy. A form of proxy for voting stock at the Special Meeting is
enclosed herewith. All shares of FEN Common Stock which are entitled to vote and
are represented at the Special Meeting by properly executed proxies received
prior to or at the Special Meeting, and not revoked, will be voted at the
Special Meeting in accordance with the instructions indicated on such proxies.
See "The Special Meeting -- Proxies."
IF NO INSTRUCTION IS SPECIFIED WITH RESPECT TO ADOPTION OF THE PROPOSAL,
THE SHARES REPRESENTED BY AN EXECUTED PROXY WILL BE VOTED "FOR" THE ADOPTION OF
THE PROPOSAL. IF ANY OTHER BUSINESS IS PROPERLY PRESENTED AT THE SPECIAL
MEETING, THE PROXY WILL BE VOTED BY THE PROXY HOLDERS IN THEIR DISCRETION,
TAKING INTO ACCOUNT ANY RECOMMENDATIONS OF MANAGEMENT OF FORCENERGY.
Any proxy given pursuant to this solicitation may be revoked by the person
giving such proxy at any time before it is voted. Proxies may be revoked by (i)
filing with the Secretary of Forcenergy, at or before the taking of the vote at
the Special Meeting, a written notice of revocation bearing a later date than
the proxy, (ii) duly executing a later dated proxy relating to the same shares
and delivering it to the Secretary of Forcenergy before the taking of the vote
at the Special Meeting or (iii) attending the Special Meeting and voting in
person (although attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Forcenergy Inc, 2730
S.W. 3rd Avenue, Suite 800, Miami, Florida 33129-2237, Attention: Secretary, or
hand delivered to the Secretary of Forcenergy, at or before the taking of the
vote at the Special Meeting. See "The Special Meeting -- Voting and Revocation
of Proxies."
QUORUM; VOTE REQUIRED
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the shares of FEN Common Stock outstanding and entitled to vote
at the Special Meeting is necessary to constitute a quorum at the meeting.
Stockholder approval of the Proposal is required by Rules 312.03(b) and (c) of
the NYSE and requires the affirmative vote of a majority of the votes cast at
the Special Meeting pursuant to Rule 312.05 of the NYSE. However, pursuant to
the Forcenergy Bylaws, the Proposal will require the affirmative vote of holders
of a majority of the outstanding shares of FEN Common Stock having voting
30
<PAGE> 34
power, present in person or represented by proxy. Because Forcenergy holds an
irrevocable proxy with respect to a majority voting interest in the election of
directors of FAB, the shares of FEN Common Stock held by FAB will not be
entitled to vote or be counted for quorum purposes at the Special Meeting
pursuant to Section 160(c) of the DGCL. Abstentions will be counted as present
for purposes of determining whether a quorum is present and will have the same
effect as a vote against the Proposal. Under the rules of the National
Association of Securities Dealers and the NYSE, brokers who hold shares in
street name for customers will not have the authority to vote on the Proposal
unless they receive specific instructions from beneficial owners. While such a
broker non-vote will be counted as present for purposes of a quorum, it will not
be treated as "voting power present" and will not have any effect on the vote on
the Proposal.
SOLICITATION OF PROXIES AND EXPENSES
In addition to solicitation by mail, the directors, officers, employees and
agents of Forcenergy may solicit proxies from its stockholders by personal
interview, telephone, telegram or otherwise. Forcenergy will bear the costs of
the solicitation of proxies from its stockholders. Arrangements will also be
made with brokerage firms and other custodians, nominees and fiduciaries who
hold of record voting securities of Forcenergy for the forwarding of
solicitation materials to the beneficial owners thereof. Forcenergy will
reimburse such brokers, custodians, nominees and fiduciaries for the reasonable
out-of-pocket expenses incurred by them in connection therewith. Forcenergy has
engaged the services of American Stock Transfer & Trust Company, as Forcenergy's
transfer agent, to distribute proxy solicitation materials to brokers, banks and
other nominees and to assist in the solicitation of proxies from Forcenergy
stockholders for a nominal fee, plus reasonable out-of-pocket expenses.
OTHER MATTERS
At the date of this Proxy Statement/Prospectus, the Board of Directors of
Forcenergy does not know of any business to be presented at the Special Meeting
other than as set forth in the notice accompanying this Proxy
Statement/Prospectus. If any other matters should properly come before the
Special Meeting, it is intended that the shares represented by proxies will be
voted with respect to such matters in accordance with the judgment of the
persons voting such proxies.
BACKGROUND TO THE EXCHANGE OFFER; REASONS FOR THE PROPOSAL
The Board of Directors of Forcenergy considered a number of factors when
considering the approval of the Proposal, including the increase in income per
share as reflected in the pro forma financial statements included herein, the
simplified organizational structure and anticipated benefits in raising capital
in the financial markets. In connection with the Exchange Offer, the Board of
Directors also retained Goldman, Sachs & Co. and Enskilda Securities as its
financial advisors. The Board of Directors of Forcenergy believes that the
following are the principal reasons to consummate the Exchange Offer at this
time:
- The Exchange Offer will result in the issuance of up to 7,926,773 new
shares of FEN Common Stock and the indirect acquisition by Forcenergy of
the 8,740,486 shares of FEN Common Stock held by FAB. If Forcenergy
acquires over 90% of the outstanding FAB Securities, Forcenergy will
initiate compulsory acquisition procedures to acquire the remaining FAB
Securities, resulting in FAB being a 100% owned subsidiary of Forcenergy.
See "The Exchange Offer -- Compulsory Acquisition." The shares of FEN
Common Stock currently held by FAB will continue to be held by FAB and
will remain outstanding as treasury shares of Forcenergy and therefore
shall not be entitled to vote or be counted for quorum purposes pursuant
to the DGCL. Subsequent to the Exchange Offer, the shares of FEN Common
Stock currently held by FAB, although remaining outstanding, will not be
considered as outstanding for purposes of calculating financial results.
Consequently, the transaction will be accretive to earnings and cash flow
per share of FEN Common Stock.
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- The Exchange Offer will increase Forcenergy's investor base by allowing
current holders of FAB Securities to hold direct ownership of FEN Common
Stock, thereby expanding liquidity for all Forcenergy stockholders.
- The Exchange Offer will simplify Forcenergy's ownership structure, a
structure in which FAB's presence has heretofore caused confusion in the
financial markets' understanding of the companies. The Board of Directors
of Forcenergy believes that the separate existence of FAB, whose net
asset value consists primarily of shares of FEN Common Stock, has had a
negative impact on Forcenergy's market price and ability to raise capital
at optimal prices in the U.S. The consolidation of the two companies into
a simplified organizational and capital structure is expected to provide
benefits to all holders of Forcenergy's public securities.
RECOMMENDATION OF THE FORCENERGY BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF FORCENERGY HAS DETERMINED THAT THE PROPOSAL IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF FORCENERGY AND
RECOMMENDS THAT THE STOCKHOLDERS OF FORCENERGY APPROVE THE PROPOSAL. In
considering the recommendation of the Forcenergy Board with respect to the
Proposal, Forcenergy stockholders should be aware that certain officers and
directors of Forcenergy have certain interests respecting the Proposal, apart
from their interests as stockholders of Forcenergy. See "Interests of Certain
Persons in the Proposal and the Exchange Offer."
INTERESTS OF CERTAIN PERSONS IN THE PROPOSAL AND THE EXCHANGE OFFER
There is a potential conflict of interest among the stockholders of FAB and
between the stockholders of FAB and Forcenergy with respect to the determination
of the Exchange Ratio in the Exchange Offer. The Exchange Ratio was initially
determined after extended discussions and negotiations between Stig Wennerstrom,
on behalf of Forcenergy, and Eric Forss on behalf of Forsinvest AB, Stridor
Invest AB and himself. With respect to the Shareholder Agreement, the officers
and directors of Forcenergy negotiating with the Forss Affiliates were
independent without material differences from other Forcenergy shareholders.
However, Forcenergy shareholders were not separately represented in such
discussions, and the interests of holders of FEN Common Stock may differ from
those of the representatives of Forcenergy with respect to the Exchange Ratio
agreed to with the Forss Affiliates that is offered in the Exchange Offer.
Eric Forss, a director of Forcenergy, is the President and a director of
FAB. The Forss Affiliates beneficially own 1,000,000 Series A Common Shares and
2,224,633 Series B Common Shares of FAB, representing approximately 52% voting
interest in FAB. Since Stig Wennerstrom and the other directors of Forcenergy
(excluding Eric Forss and FAB) beneficially own an aggregate of approximately
5.7% of the shares of FEN Common Stock, their interests in the determination of
the Exchange Ratio should be closely aligned with those of holders of FEN Common
Stock generally. Messrs. Wennerstrom, Issal and Wallace beneficially own
1,387,867, 31,000 and 13,166 shares of FEN Common Stock, respectively. Messrs.
Wennerstrom and Issal each own 105,000 and 7,000 FAB Series B Common Shares,
respectively. Mr. Wennerstrom is also a director of FAB, and Mr. Issal is the
Chairman of FAB and Forcenergy. Mr. Wallace, a director of Forcenergy, owns
2,000 FAB Series B Common Shares. These relationships may present a conflict of
interest of such directors and the Board of Directors in recommending the
Proposal to Forcenergy shareholders.
Messrs. Wennerstrom, Issal and Wallace disclosed their potential conflicts
of interest with respect to the terms of the Exchange Offer but did not abstain
from voting on the approval by the Forcenergy Board of Directors of the terms of
the Exchange Offer and the Proposal. Due to his conflicts of interest, Mr. Forss
abstained from voting by the Forcenergy Board of Directors on the Exchange Offer
and the Proposal.
In connection with the recommendation by the FAB Board, FAB Board members
Robert Issal and Stig Wennerstrom did not and will not take part in any
recommendation regarding the Exchange Offer due to their connection with
Forcenergy. In addition, Eric Forss will not participate in the final
recommendation. See "Risk Factors, Conflicts of Interest and Other
Considerations."
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THE EXCHANGE OFFER
FORCENERGY STOCKHOLDERS ARE NEITHER BEING ASKED TO, NOR WILL THEY BE
PERMITTED TO, TENDER THEIR SHARES OF FEN COMMON STOCK IN THE EXCHANGE OFFER.
FORCENERGY STOCKHOLDERS ARE ONLY BEING ASKED TO VOTE ON THE APPROVAL OF THE
ISSUANCE OF THE SHARES OF FEN COMMON STOCK PURSUANT TO THE TERMS OF THE EXCHANGE
OFFER.
GENERAL
Upon the terms and subject to the conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms and
conditions of any extension or amendment), Forcenergy will accept for exchange
and exchange FEN Common Stock for all FAB Securities which are validly tendered
prior to the Expiration Date and not withdrawn. The term "Expiration Date" means
9:00 a.m., New York City time (3:00 p.m. Stockholm time), on March 18, 1998
unless and until Forcenergy shall have extended the period of time during which
the Exchange Offer is open, in which event the term "Expiration Date" shall
refer to the latest time and date at which the Exchange Offer, as so extended by
Forcenergy, shall expire.
The Exchange Offer will be conducted in two parts: the U.S. Offer, and the
Swedish and International Offer. The U.S. Offer and the Swedish and
International Offer will be on substantially the same terms and subject to the
same conditions, except that holders of FAB Securities that are U.S. Persons
will receive shares of FEN Common Stock pursuant to the U.S. Offer and holders
of shares of FAB Securities that are not U.S. Persons will receive, at their
option, either shares of FEN Common Stock or SDRs representing shares of FEN
Common Stock pursuant to the Swedish and International Offer. The Swedish and
International Offer will be made in accordance with the Recommendation, which is
applicable to certain takeovers of Swedish companies. The Swedish and
International Offer is not being made directly or indirectly in, or by use of
the mails of, or by any means or instrumentality (including, without limitation,
the mail, facsimile transmission, telex or telephone) of interstate or foreign
commerce in, or any facilities of a national securities exchange of, the United
States.
The U.S. Offer is being made to U.S. Persons who hold beneficially or of
record, FAB Securities. Each holder tendering FAB Securities in the U.S. Offer
will be required to certify that such holder is a U.S. Person. As used herein,
the term "U.S. Person" has the meaning set forth in Regulation S promulgated
under the Securities Act; for purposes of the description of the Exchange Offer
contained in this section of the Proxy Statement/Prospectus, the term "United
States" or its abbreviation "U.S." means the United States of America, including
each of the 50 states and the District of Columbia, its territories, its
possessions and other areas subject to its jurisdiction.
In order to coordinate the making of the U.S. Offer with the Swedish and
International Offer, Forcenergy has received the No-Action Letter from the SEC
granting Forcenergy relief with respect to certain of the SEC's rules pertaining
to tender and exchange offers in the United States under the Exchange Act,
particularly with respect to the timing of exchange for, or return of, tendered
securities, as described herein.
U.S. Offer. Forcenergy hereby offers, upon the terms and subject to the
conditions set forth in this Proxy Statement/Prospectus and in the related Offer
Letter of Transmittal (as defined herein), to exchange for each outstanding FAB
Security that is owned of record or owned beneficially by a U.S. Person, 0.5359
shares of FEN Common Stock for each outstanding share of Series B Common Stock
of FAB.
Conditions. The Exchange Offer is conditioned upon, among other things, the
satisfaction of the Minimum Share Condition and Forcenergy Shareholder Approval
Condition. The "Minimum Share Condition" is the condition to the Exchange Offer
that the number of FAB Securities being validly tendered and not withdrawn prior
to the Expiration Date represents more than 90% of (i) the issued and
outstanding FAB Securities (calculated on a fully diluted basis) and (ii) the
total voting rights with respect to the FAB Securities. The Exchange Offer is
also conditioned on the affirmative vote of holders of a majority of the
outstanding shares of FEN Common Stock having voting power (which shall not
include the shares owned by FAB), present in person or represented by proxy (the
"Forcenergy Stockholder Approval Condition") and the other conditions set forth
in "-- Certain Conditions of the U.S. Offer" occurring prior to or contemporane-
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ously with the Effective Time. Except for the Stockholder Approval Condition,
Forcenergy may, at its option, waive any of the Offer Conditions and close the
Exchange Offer.
Fees of Tendering Stockholders. Tendering stockholders of FAB will not be
obligated to pay brokerage fees or commissions. Forcenergy will bear all charges
and expenses of American Stock Transfer & Trust Company, as transfer agent for
Forcenergy, and Skandinaviska Enskilda Banken, as U.S. Exchange Agent in
connection with the U.S. Offer.
Other. The FEN Common Stock that Forcenergy hereby offers to exchange for
FAB Securities pursuant to this Proxy Statement/Prospectus has been registered
under the Securities Act, and is described in detail, together with financial
and other information concerning Forcenergy, elsewhere in this Proxy Statement/
Prospectus, which constitutes part of the Registration Statement. Application
will be made to list the shares of FEN Common Stock exchanged for FAB Securities
and issued in the Exchange Offer on the NYSE and the SDRs on the SSE.
For additional information concerning Forcenergy, see "Information
Regarding Forcenergy."
THIS PROXY STATEMENT/PROSPECTUS AND THE RELATED OFFER LETTER OF TRANSMITTAL
CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE
WITH RESPECT TO ACCEPTING THE U.S. OFFER.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF FAB
ON FEBRUARY 4, 1998, THE TWO INDEPENDENT FAB DIRECTORS DETERMINED THAT THE
EXCHANGE OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, FAB AND ITS
STOCKHOLDERS, AND RECOMMENDED THAT FAB STOCKHOLDERS ACCEPT THE EXCHANGE
OFFER. Certain members of the Board of Directors of FAB have interests in the
Exchange Offer apart from their interests as stockholders of FAB and apart from
their interest as a holder of FAB Series B Common Shares. See "Interests of
Certain Persons in the Proposal and the Exchange Offer" and "Beneficial
Ownership of FAB Common Stock."
FAIRNESS OPINION OF MORGAN STANLEY
On January 30, 1998, Morgan Stanley delivered an opinion to the Board of
Directors of FAB concerning the financial fairness of the consideration to be
received by holders of FAB Series B Common Shares under the Exchange Offer. The
full text of such opinion is set out in Annex A attached hereto. FAB
SHAREHOLDERS SHOULD READ SUCH OPINION IN ITS ENTIRETY. Morgan Stanley's opinion
is directed only to the consideration and does not constitute a recommendation
to any FAB shareholder as to whether such shareholder should tender their shares
in the Exchange Offer.
Morgan Stanley will receive a customary fee for rendering its opinion,
which is payable whether or not the Exchange Offer is consummated. FAB has
agreed to reimburse Morgan Stanley for its out-of-pocket expenses, including the
fees of its legal counsel, and to indemnify Morgan Stanley and its affiliates
against certain liabilities, including certain liabilities under federal
securities laws, which it may suffer or incur in connection with its engagement.
In the ordinary course of Morgan Stanley's trading, brokerage and financing
activities, Morgan Stanley or its affiliates may at any time hold long or short
positions, and may trade or otherwise effect transactions, for its own account
or the accounts of customers, in debt or equity securities or senior loans of
FEN or FAB. In particular, an affiliate of Morgan Stanley holds 1,049,060 FAB
Series B Common Shares (representing 7.8% of the outstanding FAB Series B Common
Shares) and has an outstanding obligation to re-deliver 291,850 shares of FEN
Common Stock (representing 1.1% of the outstanding FEN Common Stock) which has
been borrowed to satisfy a short sale of such number of shares.
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TERMS OF THE U.S. OFFER; NUMBER OF SHARES; EXPIRATION DATE.
General. Upon the terms and subject to the conditions set forth in the U.S.
Offer, as it may be amended or supplemented from time to time, Forcenergy will,
in connection with the U.S. Offer, accept for exchange, and exchange, all
outstanding FAB Securities subject to the U.S. Offer that are validly tendered
in the Exchange Offer and not withdrawn prior to the final day of the Offer
Period (as defined below). U.S. Persons who wish to accept the U.S. Offer must
tender their FAB Securities during the period commencing February 17, 1998 and
ending 9:00 a.m., New York City time (3:00 p.m. Stockholm time), on March 18,
1998 (as such period may be extended as described in the following sentence, the
"Offer Period"). Forcenergy expressly reserves the right, in its sole
discretion, at any time or from time to time, to extend the Offer Period for any
reason, and in relation thereto, to delay delivery of the shares of FEN Common
Stock, by giving written notice of such extension to the U.S. Exchange Agent,
accompanied by a public announcement. Forcenergy intends to extend the U.S.
Offer if the Swedish and International Offer is similarly extended. The delivery
of shares of FEN Common Stock in exchange for FAB Securities tendered in the
U.S. Offer will not commence until Forcenergy has announced that all conditions
to the U.S. Offer have been met or waived. In accordance with customary Swedish
practice regarding determining the level of acceptances in tender and exchange
offers, Forcenergy may not announce the level of acceptance of the U.S. Offer
until at least five business days after the expiration of the Offer Period (such
period from the Expiration Date to the date of such announcement is referred to
as the "Interim Period"). Assuming that such announcement is made on or about
March 25, 1998, it is estimated that settlement can begin on or about March 31,
1998. Withdrawal rights will not be available during the Interim Period or the
period, if any, during which the U.S. Offer remains open following the
announcement by Forcenergy of the satisfaction of all conditions to the U.S.
Offer.
Subject to the applicable rules and regulations of the SEC and in
accordance with the Recommendation, Forcenergy also reserves the right, in its
sole discretion, at any time, to (a) delay acceptance for exchange of and,
regardless of whether any FAB Securities have theretofore been accepted for
exchange, delay delivery of shares of FEN Common Stock for any FAB Securities
tendered in the U.S. Offer pending receipt of any governmental or other
regulatory approvals or other actions specified in "Risk Factors -- Regulatory
Conditions and Approvals," (b) terminate the U.S. Offer and not accept for
exchange any FAB Securities unless the Offer Conditions shall have been
satisfied or, if permissible, waived, (c) waive (to the extent permissible) any
Offer Condition, or otherwise amend the U.S. Offer in any respect, by giving
oral or written notice of such delay, termination, amendment or extension to the
U.S. Exchange Agent and by making a public announcement thereof, and (d) extend
the Exchange Offer and, subject to the rights of FAB stockholders to withdraw
FAB Securities as provided below, retain the FAB Securities for the time period
during which the Exchange Offer is extended. See "-- Certain Conditions of the
U.S. Offer."
Without limiting the manner in which Forcenergy may choose to make any
public announcement, whether in connection with an extension, delay,
termination, amendment or waiver of any of the terms of the U.S. Offer, and
except as provided by applicable law, Forcenergy shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a press release to the Dow Jones News Service. If such press
release relates to an extension of the U.S. Offer, Forcenergy will issue such
press release no later than 9:00 a.m. on the next business day after the
scheduled termination of the U.S. Offer. For purposes of the U.S. Offer, a
"business day" means any day other than a Saturday, Sunday or U.S. federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time.
Other. The U.S. Offer is conditioned upon the satisfaction or, if
permissible, waiver of the Offer Conditions (as defined below). See "-- Certain
Conditions of the U.S. Offer."
Forcenergy will not accept for exchange any FAB Securities tendered in the
U.S. Offer and the Swedish and International Offer during the Offer Period
unless all FAB Securities validly tendered in the U.S. Offer and the Swedish and
International Offer and not withdrawn prior to the Expiration Date are accepted
for exchange.
FAB has arranged for Forcenergy to obtain a list of holders of record of
other shares of FAB Securities that have registered addresses in the United
States and that are believed by FAB to be U.S. Persons, as well as the names of
non-U.S. nominees that are believed to be record holders of FAB Securities on
behalf of U.S.
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Persons. This Proxy Statement/Prospectus, the Offer Letter of Transmittal and
other related materials will be mailed by Forcenergy to such record holders and
will be furnished by Forcenergy to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on such lists for subsequent transmittal to beneficial owners of FAB
Securities, or who otherwise indicate to Forcenergy that they are holding FAB
Securities for the benefit of U.S. Persons.
PROCEDURES FOR TENDERING FAB SECURITIES.
General. In order for a holder of FAB Securities to validly tender FAB
Securities pursuant to the U.S. Offer, an Offer Letter of Transmittal must be
properly completed and duly executed, and, together with any other required
documents, must be delivered to the U.S. Exchange Agent specified in such Offer
Letter of Transmittal. Record holders of FAB Securities are registered directly
with VPC (the Swedish Securities Register Center) and have a securities account
in which such shares are registered.
ANY STOCKHOLDER WHOSE FAB SECURITIES ARE REGISTERED WITH VPC IN THE NAME OF
A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT
SUCH PERSON IF SUCH STOCKHOLDER DESIRES TO TENDER SUCH FAB SECURITIES.
In order to accept the U.S. Offer, a holder of FAB Securities will need to
certify that such holder is a U.S. Person, or is holding such FAB Securities on
behalf of a U.S. Person.
THE METHOD OF DELIVERY OF ALL REQUIRED DOCUMENTS IS AT THE OPTION AND RISK
OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED OR OVERNIGHT COURIER WITH SIGNATURE REQUIRED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
The valid tender of FAB Securities pursuant to the procedures described
above will constitute a binding agreement between the tendering stockholder and
Forcenergy upon the terms of and subject to the conditions of the U.S. Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of FAB
Securities will be determined by Forcenergy with respect to the U.S. Offer, in
its sole discretion, which determination shall be final and binding on all
parties. Forcenergy reserves the absolute right to reject any or all tenders
determined by it not to be in proper form, or the acceptance for exchange of
which may, in the opinion of its counsel, be unlawful or otherwise invalid.
Forcenergy also reserves the absolute right to waive any defect or irregularity
in the tender of any FAB Securities. No tender of FAB Securities will be deemed
to have been validly made until all defects or irregularities relating thereto
have been cured or waived. None of Forcenergy, the U.S. Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. The interpretation by Forcenergy of the terms and conditions of
the U.S. Offer (which includes the Offer Letter of Transmittal and the
instructions thereto) will be final and binding.
If the Offer Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the U.S. Exchange Agent, proper evidence satisfactory to the U.S. Exchange Agent
of their authority to so act must be submitted.
Other Requirements. The acceptance of FAB Securities by Forcenergy pursuant
to any of the procedures described above will constitute a binding agreement
between the tendering stockholder and Forcenergy upon the terms and subject to
the conditions applicable to the U.S. Offer.
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WITHDRAWAL RIGHTS
Tenders of FAB Securities in the U.S. Offer are irrevocable, except as
otherwise provided in this section. FAB Securities tendered pursuant to the U.S.
Offer may be withdrawn pursuant to the procedures set forth below at any time
during the Offer Period except that withdrawal rights will not be available
during the period, if any, during which the U.S. Offer remains open following
the announcement by Forcenergy of the satisfaction of all conditions to the U.S.
Offer. In addition, holders of FAB Securities will not have withdrawal rights
during the Interim Period.
To be effective, a written notice of withdrawal or a telegraphic
transmission thereof must be timely received by the U.S. Exchange Agent at its
address set forth on the back cover of this Proxy Statement/Prospectus and must
specify the name of the person having tendered FAB Securities to be withdrawn,
as well as the number and type of FAB Securities (including the VP account) to
be withdrawn.
Withdrawals of tendered FAB Securities may not be rescinded, and any FAB
Securities properly withdrawn will thereafter be deemed not validly tendered for
the purposes of the U.S. Offer. However, FAB Securities withdrawn during the
Offer Period may be re-tendered by following one of the procedures described in
"-- Procedures for Tendering FAB Securities" at any time during the Offer
Period.
All questions as to the validity (including time of receipt) of notices of
withdrawal with respect to the U.S. Offer will be determined by Forcenergy, in
its sole discretion, whose determination will be final and binding. None of
Forcenergy, the U.S. Exchange Agent or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
ACCEPTANCE FOR EXCHANGE; DELIVERY OF FEN COMMON STOCK
Upon the terms and subject to the satisfaction or waiver of the conditions
of the U.S. Offer (including, if the U.S. Offer is extended or amended, the
terms and conditions of any such extension or amendment), Forcenergy will accept
for exchange, and will exchange, as promptly as practicable after the Expiration
Date, all FAB Securities validly tendered into the U.S. Offer prior to the
Expiration Date and not withdrawn in accordance with procedures set forth in
"-- Withdrawal Rights." Subject to applicable rules of the SEC, Forcenergy
expressly reserves the right to delay acceptance for exchange of, or delivery of
any consideration for, FAB Securities tendered in the U.S. Offer pending receipt
of any governmental or other regulatory approvals, orders or actions specified
in "Risk Factors -- Regulatory Conditions and Approvals."
In all cases, exchange for FAB Securities accepted for exchange pursuant to
the U.S. Offer will be made only after timely receipt by the U.S. Exchange Agent
of an Offer Letter of Transmittal (or facsimile copy thereof) properly completed
and duly executed (together with any required signature guarantees) and any
other documents required by the Offer Letter of Transmittal.
For purposes of the U.S. Offer, Forcenergy will be deemed to have accepted
for exchange, and thereby acquired, FAB Securities validly tendered to it
pursuant to the U.S. Offer and not withdrawn as, if and when Forcenergy gives
oral or written notice to the U.S. Exchange Agent of its acceptance for exchange
of such FAB Securities tendered pursuant to the U.S. Offer.
In accordance with customary Swedish practice regarding determining the
level of acceptances of the Swedish and International Offer, Forcenergy
anticipates that it will be unable to announce the level of acceptances of the
U.S. Offer until the end of the Interim Period. Forcenergy acknowledges that
Rule 14e-1(c) under the Exchange Act provides that an offeror must pay the
consideration offered or return the securities deposited by, or on behalf of,
security holders promptly after the termination or withdrawal of an offer.
However, pursuant to the No-Action Letter, the SEC has granted Forcenergy
certain relief from the provisions of Rule 14e-1(c). If, after determination of
the results of the Exchange Offer following the end of the Offer Period, it is
determined that the Minimum Share Condition or any other Offer Condition has not
been satisfied and will not be waived, and Forcenergy determines to withdraw the
Exchange Offer, the tender of all securities previously tendered will thereafter
be treated as if such tenders had been withdrawn by to the persons tendering
such shares.
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Forcenergy acknowledges that Rule 14e-1(d) under the Exchange Act provides
that an extension must be accompanied by a public announcement, which must
include disclosure of the approximate number of securities deposited to date,
issued by 9:00 a.m., Eastern time, on the next business day after the scheduled
expiration date of the Exchange Offer. However, the SEC has orally granted, and
pursuant to the No-Action Letter the SEC will grant, Forcenergy certain relief
from the provisions of Rule 14e-1(d). In accordance with the customary practice
in Sweden with respect to determining the level of acceptances in a Swedish
exchange offer, Forcenergy anticipates that it will not announce the level of
acceptances of the U.S. Offer until at least five business days after the end of
the Offer Period.
If Forcenergy is delayed in its acceptance for exchange of, or issuance of
FEN Common Stock in exchange for, FAB Securities or is unable to accept for
exchange, or issue FEN Common Stock in exchange for, FAB Securities pursuant to
the U.S. Offer for any reason, then, without prejudice to the rights of
Forcenergy with respect to the U.S. Offer under this Proxy Statement/Prospectus
(but subject to compliance with applicable rules of the SEC and the
Recommendation), the Exchange Agent may nevertheless, on behalf of Forcenergy,
retain tendered FAB Securities, subject to withdrawal rights as described in
"-- Withdrawal Rights." Under no circumstances will interest or other
consideration be paid, nor will any additional FEN Common Stock be issued, by
Forcenergy, regardless of any delay in making such exchange.
In accordance with customary Swedish practices, after the Offer Letter of
Transmittal has been received and is registered by the U.S. Exchange Agent, the
FAB Securities will be transferred to a newly opened, blocked VP account in the
name of the stockholder. In connection with this, VPC will forward both a VP
notice which indicates the withdrawal from the original VP account and a VP
notice which indicates the deposit in the newly opened VP account.
FRACTIONAL SHARES
No fractional shares of FEN Common Stock will be issued upon the surrender
for exchange of FAB Securities, and any fractional share interest held after the
Exchange Offer will not entitle such owner to vote or to any other rights of a
stockholder of Forcenergy. The holders of such fractional share interests will
be paid an amount in cash representing such holder's proportionate interest in
the net proceeds from the sale by the U.S. Exchange Agent on behalf of all such
holders of the aggregate of the fractions of shares of FEN Common Stock
attributable to such holders' fractional share interests (the "FEN Excess
Shares") (which FEN Excess Shares may be combined with other fractional shares
in the Exchange Offer and sold in the form of SDRs on the Stockholm Stock
Exchange). Until the net proceeds of the sales of the FEN Excess Shares are
distributed to the holders of the fractional share interests, the U.S. Exchange
Agent will hold such proceeds in trust on behalf of the holders of such
fractional share interests. Such proceeds (without interest) will be paid in
lieu of fractional shares to the holders of the fractional share interests as
soon as practicable after the U.S. Exchange Agent determines the portion of the
proceeds to which each such holder is entitled. Proceeds will be distributed to
the yield account linked to the VP account of the registered stockholder.
CERTAIN CONDITIONS OF THE U.S. OFFER.
Notwithstanding any other term of the U.S. Offer, Forcenergy will not be
required to accept for exchange or, subject to the procedures described in
"-- Acceptance for Exchange; Delivery of FEN Common Stock," to issue the shares
of FEN Common Stock in exchange for, any FAB Securities tendered pursuant to the
U.S. Offer, and may terminate or amend the U.S. Offer or postpone the acceptance
of, or exchange for, FAB Securities tendered pursuant thereto, unless the
following conditions (the "Offer Conditions") shall have been satisfied or, if
permissible, waived on or before the Expiration Date:
a. there shall have been validly tendered under the Exchange Offer and
not withdrawn, a number of FAB Securities which constitutes more than 90%
of (i) the issued and outstanding FAB Securities (calculated on a fully
diluted basis) and (ii) the total voting rights with respect to the FAB
Securities;
b. all FAB Securities tendered pursuant to the Exchange Offer shall be
free and clear of all claims, liens, charges, encumbrances and security
interests;
38
<PAGE> 42
c. the issuance of the shares of FEN Common Stock pursuant to the
Exchange Offer shall have been duly approved by the stockholders of
Forcenergy entitled to vote at the Special Meeting;
d. there shall not have occurred any change (including any
announcement, governmental or regulatory initiative, condition, event or
development involving a change to the law) that, in the judgment of
Forcenergy, acting reasonably, directly or indirectly has a material
adverse effect in relation to the current business or operations of
Forcenergy or FAB in relation to the regulatory regime applicable to their
respective businesses and operations, or with respect to competing a
compulsory acquisition or any subsequent acquisition, transaction, or with
respect to any intended integration of FAB with Forcenergy, or with any
reorganization of FAB or Forcenergy in connection with any such intended
integration;
e. any required prospectus is declared effective by the SEC and the
SSE and that the shares of FEN Common Stock (or SDRs) to be issued in the
Exchange Offer are approved for registration and listing on the NYSE and
the SSE;
f. any applicable waiting period under any competition, foreign
investment or similar law, regulation or other governmental authority
having jurisdiction over Forcenergy or FAB with respect to such matters
shall have expired or been terminated in respect of such transaction;
g. any other requisite regulatory approvals (including, without
limitation, those of any stock exchanges or other regulatory authorities)
shall have been obtained by Forcenergy on terms and conditions satisfactory
to Forcenergy acting reasonably;
h. no act, action, suit or proceeding shall have been taken before or
by any federal, provincial or foreign court or other tribunal or
governmental agency or other regulatory or administrative agency or
commission or by any elected or appointed public official or private person
or corporation, and no law, regulation or policy shall have been enacted,
promulgated or applied, which would reasonably be expected to have a
material adverse effect on the consummation of the Exchange Offer; and
i. there shall not have occurred any material breach of any of the
terms of the Shareholder Agreement on behalf of the Forss Shares or any
termination of such agreement pursuant to the terms thereof, all
representations and warranties of with respect to FAB in the Shareholder
Agreement shall be true and correct in all material respects on the Closing
Date as if made on such date, and all covenants with respect to FAB in the
Shareholder Agreement shall have been performed or complied with.
The foregoing conditions are for the exclusive benefit of Forcenergy and
may be waived by Forcenergy in whole or in part at any time and from time to
time before or after the Expiration Date.
COMPULSORY ACQUISITION
If holders of more than 90% of the outstanding FAB Securities accept the
Exchange Offer or Forcenergy otherwise acquires more than 90% of the outstanding
FAB Securities, Forcenergy (and each remaining stockholder of FAB) will have the
right under the Swedish Companies Act (the "Companies Act") to commence a
process leading to a compulsory acquisition by a newly formed wholly owned
subsidiary of Forcenergy organized under the law of the Kingdom of Sweden (the
"FEN Swedish Sub"). Under the compulsory acquisition, any FAB stockholders who
did not tender their securities will receive cash in a taxable exchange for
their FAB Securities. The price per share of a FAB Security will be determined
in accordance with the Companies Act, which may be higher or lower than the
value per share of FEN Common Stock being offered under the Exchange Offer on
the Expiration Date. The compulsory acquisition process may take up to two years
or longer. Accordingly, no assurance can be given as to the timing or price
thereof.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
Forcenergy has received a tax opinion from Andrews & Kurth L.L.P., tax
advisors to Forcenergy, regarding the U.S. federal income tax consequences of
the Exchange Offer to U.S. FAB Holders (as defined below).
39
<PAGE> 43
The following is a summary of the material U.S. federal income tax
consequences of the Exchange Offer to U.S. FAB Holders (as defined below) under
current U.S. federal income tax law. This summary is based upon the Internal
Revenue Code of 1986, as amended ("Code"), administrative pronouncements,
judicial decisions and Treasury regulations, all of which are subject to
changes, possibly with retroactive effect. This summary does not purport to
address all of the tax consequences applicable to a particular taxpayer. In
particular, the discussion does not address the tax treatment of U.S. FAB
Holders subject to special tax rules, such as banks, insurance companies,
dealers in securities, holders who acquired their FAB Securities pursuant to the
exercise of employee stock options or otherwise as compensation, or holders who
acquire Forcenergy stock other than through the Exchange Offer. This discussion
applies to U.S. FAB Holders that hold FAB Securities as capital assets, as
defined in Section 1221 of the Code (generally property held for investment).
U.S. FAB Holders are urged to consult their tax advisors as to the particular
U.S. federal income tax consequences to them of the Exchange Offer and as to the
foreign, state, local income and other tax consequences thereof.
For purposes of this discussion, a "U.S. FAB Holder" is a holder of FAB
Securities that is (a) a U.S. citizen or resident, (b) a corporation,
partnership or other entity created or organized under the laws of the U.S. or
any political subdivision thereof, (c) an estate whose income is includible in
gross income for U.S. federal income tax purposes regardless of its source and
(d) a trust the income of which is includible in gross income for U.S. federal
income tax purposes regardless of its source or, for taxable years beginning
after December 31, 1996 (and, if a trustee so elects, for taxable years ending
after August 20, 1996), a trust if a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions of such
trust.
Forcenergy expects to receive the opinion of Andrews & Kurth L.L.P. prior
to the Expiration Date to the effect that, under current law, the transfer of
100% of the outstanding FAB Securities by holders thereof to Forcenergy pursuant
to the Exchange Offer in exchange solely for FEN Common Stock will constitute a
reorganization described in Section 368(a)(1)(B) of the Code. This opinion will
be based upon certain facts, and customary assumptions and representations
contained in certificates of officers, directors and shareholders of FAB and
Forcenergy, dated as of the Effective Time. Opinions of counsel are not binding
on the Internal Revenue Service ("IRS") or the courts, and no rulings will be
requested from the IRS with respect to the U.S. federal income tax consequences
of the Exchange Offer. Accordingly, there can be no assurance that the IRS will
not challenge such conclusion or that a court will not sustain such challenge.
Based upon the foregoing opinion, if 100% of the outstanding FAB Securities
are exchanged by holders thereof to Forcenergy pursuant to the Exchange Offer
solely for FEN Common Stock (other than for fractional shares) (a) U.S. FAB
Holders will not recognize gain or loss upon the receipt of FEN Common Stock in
exchange for their FAB Securities, (b) the tax basis of the shares of FEN Common
Stock received in the Exchange Offer by the U.S. FAB Holders will be the same as
the tax basis of the FAB Securities tendered in exchange therefor and (c) the
holding period of the shares of FEN Common Stock received by a U.S. FAB Holder
will include the holding period of the FAB Securities surrendered in exchange
therefor.
No fractional shares of FEN Common Stock will be issued in the Exchange
Offer. A U.S. FAB Holder that receives cash in lieu of a fractional share of FEN
Common Stock pursuant to the Exchange Offer will be treated as having received
such cash in exchange for such fractional share interest and will generally
recognize capital gain or loss on such deemed exchange in an amount equal to the
difference between the amount of cash received and the shareholder's adjusted
tax basis in such fractional share. For individuals that capital gain or loss
will be (a) long-term capital gain or loss if the holding period for the FAB
Securities with respect to which such fractional share would be issued exceeds
18 months or (b) mid-term capital gain or loss if the holding period for the FAB
Securities with respect to which such fractional share would be issued exceeds
12 months but is not more than 18 months as of the date FAB Securities are
accepted for exchange by Forcenergy.
If less than 100% of the outstanding FAB Securities are exchanged by the
holders thereof to Forcenergy pursuant to the Exchange Offer solely for FEN
Common Stock and the compulsory acquisition is conducted under Swedish law, U.S.
FAB Holders that receive FEN Common Stock pursuant to the Exchange Offer will
40
<PAGE> 44
generally recognize capital gain or loss on such exchange in an amount equal to
the difference between the fair market value of FEN Common Stock received and
the adjusted tax basis in FAB Securities tendered in exchange therefor. U.S. FAB
Holders who receive cash pursuant to the compulsory acquisition conducted under
Swedish law in exchange for FAB Securities will generally recognize capital gain
or loss on such exchange in an amount equal to the difference between the cash
received and the adjusted tax basis in FAB Securities tendered in exchange
therefor. For individuals any capital gain or loss will be (a) long-term capital
gain or loss if the holding period for the FAB Securities exchanged exceeds 18
months or (b) mid-term capital gain or loss if the holding period for the FAB
Securities exchanged exceeds 12 months but is not more than 18 months. In
certain circumstances, a portion of the cash received by a U.S. FAB Holder
pursuant to the compulsory acquisition may be taxable as interest income. In
addition, U.S. FAB Holders who receive cash pursuant to the compulsory
acquisition in a taxable year after the year in which title to the FAB
Securities is transferred pursuant to the compulsory acquisition may be entitled
to report such gain under the installment method of tax accounting. U.S. FAB
Holders participating in the compulsory acquisition should consult their tax
advisors with respect to the applicability of the installment method.
Long-term capital gain of individuals is currently taxed at a maximum rate
of 20%. Mid-term capital gain of individuals is currently taxed at a maximum
rate of 28%. Capital gain of corporations is currently taxed at the regular
corporate rates.
Backup Withholding. Under the U.S. backup withholding rules, a holder of
FEN Common Stock may be subject to backup withholding at the rate of 31% with
respect to dividends and proceeds of redemption, unless such shareholder (a) is
a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (b) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be credited
against the shareholder's U.S. federal income tax liability. Forcenergy may
require holders of FEN Common Stock to establish an exemption from backup
withholding or to make arrangements satisfactory to Forcenergy with respect to
the payment of backup withholding. A shareholder who does not provide Forcenergy
with his current taxpayer identification number may be subject to penalties
imposed by the IRS.
CERTAIN SWEDISH INCOME TAX CONSEQUENCES
Enskilda Juridik, Skandinaviska Enskilda Banken, has acted as Swedish tax
advisor to Forcenergy regarding the Swedish income tax consequences of the
Exchange Offer for the U.S. FAB Holders. The following is a summary of the
principal Swedish income tax considerations for U.S. FAB Holders. This summary
is (i) of a general nature only, (ii) not exhaustive of all potentially relevant
Swedish income tax considerations and (iii) not intended to be, nor should it
be, legal or tax advice to any particular shareholder. Therefore, such
shareholders should consult their tax advisors with respect to their particular
circumstances.
Generally a non-Swedish shareholder, other than an individual, is not
liable for tax in Sweden on the exchange of FAB Securities unless the
shareholder maintains a permanent establishment in Sweden and the holding of the
FAB Securities is effectively connected with such permanent establishment.
According to Swedish tax law, individuals who are non-residents of Sweden
for tax purposes may generally be taxed on the exchange of FAB Securities only
if the individual at any time during the ten calendar years immediately
preceding the year in which the exchange takes place (in this case 1988-1997)
has maintained his or her habitual abode or been a resident or lived permanently
in Sweden. Furthermore, such tax liability would arise only if an applicable
income tax treaty permits Sweden to levy tax or if no tax treaty is applicable.
The taxable gain, if any, will be taxed in Sweden at a rate of 30 percent. The
special Swedish share-for-share exchange tax provision, for which the capital
gains taxation is postponed, is not applicable for non-residents of Sweden.
The new tax treaty between Sweden and the United States (effective January
1, 1996) permits Sweden to tax the exchange of FAB Securities made by an
individual who is a United States resident and who has been a resident of Sweden
if the exchange takes place during the ten years following the date on which the
41
<PAGE> 45
individual ceased to be a resident of Sweden. However, if such taxation occurs,
Sweden will, according to the new treaty, permit a deduction against the Swedish
tax for the U.S. income tax paid.
BECAUSE OF THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH HOLDER OF FAB
SECURITIES IS URGED TO CONSULT SUCH HOLDER'S TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES TO SUCH HOLDER OF THE EXCHANGE OFFER, INCLUDING THE EFFECT OF U.S.
FEDERAL, STATE AND LOCAL, AND FOREIGN AND OTHER TAX RULES, AND THE EFFECT OF
POSSIBLE CHANGES IN TAX LAWS.
COSTS OF THE EXCHANGE OFFER
Fees and expenses of approximately $3 million will be paid by Forcenergy
for investment advisory fees, legal fees, and printing and solicitation costs,
whether or not the Exchange Offer is completed. Fees and expenses incurred by
FAB will be paid by FAB. If Forcenergy completes the Exchange Offer, these fees
and expenses will become indirectly attributable to and incurred by Forcenergy.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of FEN Common Stock to be received by FAB stockholders in
connection with the Exchange Offer have been registered under the Securities Act
and, except as set forth in this paragraph, may be traded without restriction.
The shares of FEN Common Stock to be issued in connection with the Exchange
Offer and received by persons who are deemed to be "affiliates" (as that term is
defined in Rule 144 under the Securities Act) of FAB prior to the Exchange Offer
may be resold by them only in transactions permitted by the resale provisions of
Rule 145 under the Securities Act (or, in case any such person should become an
affiliate of Forcenergy, Rule 144 under the Securities Act) or as otherwise
permitted under the Securities Act. The Forss Affiliates have also agreed with
Forcenergy not, without obtaining the prior written consent of Forcenergy (which
consent shall not be unreasonably withheld), to transfer, sell, exchange, pledge
or otherwise dispose of or encumber any of the shares of FEN Common Stock
received in the Exchange Offer for a period of six months following the
Expiration Date; provided, the Forss Affiliates may transfer, sell, exchange,
pledge or otherwise encumber (i) up to 25% of the total number of the shares of
FEN Common Stock received by the Forss Affiliates in accordance with the
Exchange Offer and (ii) up to 100% of such shares of FEN Common Stock for the
sole purpose of pledging such shares of FEN Common Stock to a lending
institution or institutions in connection with securing a bank line of credit
offered by such institution.
42
<PAGE> 46
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma consolidated statement of operations for the nine
months ended September 30, 1997 gives effect to the FAB merger, the Edisto
Resources Corporation ("Edisto") and Convest Energy Corporation ("Convest")
Mergers, the acquisition of Great Western Resources, Inc. ("Great Western") and
the acquisition of Cook Inlet properties from Stewart Petroleum Company
(collectively, the "1997 Acquisitions"), as if such transactions had been
consummated on January 1, 1996. The effective dates of the Great Western
acquisition, the acquisition of Cook Inlet properties from Stewart Petroleum
Company and the Edisto and Convest Mergers are January 21, 1997, June 4, 1997,
and October 22, 1997, respectively. The unaudited pro forma consolidated
statement of operations for the year ended December 31, 1996 gives effect to the
Marathon Acquisition (effective December 30, 1996), the Amerada Hess Acquisition
(effective June 28, 1996) (the "1996 Acquisitions"), the conversion during 1996
of the 7% Exchangeable Subordinated Notes (the "Exchangeable Notes") into
2,343,047 shares of Forcenergy Common Stock, the 1996 exercise of 214,866
options to purchase Forcenergy Common Stock by certain holders of the
Exchangeable Notes, the sale of 1,635,408 shares of Forcenergy Common Stock in
1996 (the "Common Stock Offering"), the 1996 issuance of $175,000,000 of 9 1/2%
Senior Subordinated Notes (the "1996 Notes Offering") (collectively, the "1996
Transactions"), the 1997 issuance of the $200,000,000 of 8 1/2% Senior
Subordinated Notes (the "1997 Notes Offering") and the 1997 Acquisitions as if
such transactions had occurred on January 1, 1996. The results of operations of
the 1996 Acquisitions and the Stewart Acquisition include only the historical
oil revenues and direct operating expenses for periods presented which does not
constitute a complete statement of operations. The results of operations of
Edisto and Great Western excludes the results of discontinued operations for the
year ended December 31, 1996. The unaudited pro forma consolidated balance sheet
as of September 30, 1997 gives effect to the issuance of a maximum of 2,829,913
shares of Forcenergy's Common Stock and approximately $69.3 million in cash to
purchase all of the outstanding stock of Edisto and Convest and the issuance of
7,926,773 shares of Forcenergy's Common Stock to purchase all of the outstanding
Series A and Series B shares of FAB as if such transactions had been consummated
on September 30, 1997. The unaudited pro forma information has been prepared
based on estimates and assumptions deemed by Forcenergy to be appropriate and
does not purport to be indicative of the financial position or results of
operations which would actually have been obtained if the 1996 Acquisitions, the
1996 Transactions, the 1997 Notes Offering and the 1997 Acquisitions had
occurred as presented in such statements 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.
The pro forma financial information presented does not incorporate
anticipated reductions in the general and administrative expenses (the "G&A")
associated with the Edisto, Convest and Great Western transactions. In the
opinion of its management, Forcenergy will be able to eliminate substantially
all of the G&A of Edisto and Convest. Forcenergy has realized a significant
reduction in the G&A associated with Great Western subsequent to the
acquisition, and such reductions are reflected in Forcenergy's historical
consolidated results of operations for the nine months ended September 30, 1997.
Forcenergy anticipates eliminating substantially all of the G&A associated with
Edisto and Convest in the future.
The pro forma financial information should be read in conjunction with the
historical financial statements of Forcenergy and the audited financial
information on the Amerada Hess Acquisition, the Marathon Acquisition and the
historical financial statements of Edisto and Convest, all of which are
incorporated herein by reference and the historical financial statements of FAB
which are presented elsewhere within this Prospectus.
The historical FAB Consolidated Financial Statements included elsewhere
herein have been prepared in accordance with generally accepted accounting
principles in Sweden ("Swedish GAAP") and denominated in Swedish kronor with a
reconciliation to restate net income and shareholder's equity in accordance with
generally accepted accounting principles in the United States ("US GAAP")
included in the Notes to the Consolidated Financial Statements.
43
<PAGE> 47
FORCENERGY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
GREAT
FORCENERGY EDISTO CONVEST WESTERN STEWART PRO FORMA
HISTORICAL (A) (B) (C) (D) ADJUSTMENTS
---------- ------- ------- ------- ------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Oil and gas sales........... $196,929 $ 27 $40,357 $2,105 $4,030 $
Equity in earnings of
affiliate................. -- -- -- -- --
Other....................... 1,732 -- -- 13 --
-------- ------- ------- ------ ------
Total revenues........ 198,661 27 40,357 2,118 4,030
-------- ------- ------- ------ ------
Operating Expenses:
Lease operating............. 53,219 66 9,951 578 808
Depletion, depreciation and
amortization.............. 80,853 -- 11,810 498 -- 15,720(E)
(12,308)(E)
Abandonment and exploration
costs..................... -- 103 1,293 -- (1,396)(F)
Production taxes............ 3,310 -- 795 -- 10
General and administrative,
net....................... 11,127 1,981 3,461 745 -- (G)
-------- ------- ------- ------ ------ --------
Total operating
expenses............ 148,509 2,150 27,310 1,821 818 2,016
-------- ------- ------- ------ ------ --------
Income from operations........ 50,152 (2,123) 13,047 297 3,212 (2,016)
Interest and other income..... 2,721 3,177 369 66 --
Interest expense, net of
amounts capitalized......... (22,970) (114) (89) (196) -- 3,007(H)
Minority interest............. -- -- -- -- -- (I)
-------- ------- ------- ------ ------ --------
Income before income taxes.... 29,903 940 13,327 167 3,212 991
Income tax provision.......... 11,018 232 156 7,185(J)
-------- ------- ------- ------ ------ --------
Net income.................... $ 18,885 $ 708 $13,171 $ 167 $3,212 $ (6,194)
======== ======= ======= ====== ====== ========
Net income per share.......... $ 0.79
========
Weighted average shares
outstanding................. 23,991
<CAPTION>
PRO FORMA FAB PRO FORMA
SUB TOTAL (K) ADJUSTMENTS PRO FORMA
--------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales........... $243,448 $ -- $ $243,448
Equity in earnings of
affiliate................. -- 11,429 (11,429)(L) --
Other....................... 1,745 1,745
-------- ------- -------- --------
Total revenues........ 245,193 11,429 (11,429) 245,193
-------- ------- -------- --------
Operating Expenses:
Lease operating............. 64,622 -- 64,622
Depletion, depreciation and
amortization.............. 96,573 25 96,598
Abandonment and exploration
costs..................... -- --
Production taxes............ 4,115 -- 4,115
General and administrative,
net....................... 17,314 -- 17,314
-------- ------- -------- --------
Total operating
expenses............ 182,624 25 182,649
-------- ------- --------
Income from operations........ 62,569 11,404 (11,429) 62,544
Interest and other income..... 6,333 333 6,666
Interest expense, net of
amounts capitalized......... (20,362) (6) (20,368)
Minority interest............. -- -- --
-------- ------- -------- --------
Income before income taxes.... 48,540 11,731 (11,429) 48,842
Income tax provision.......... 18,591 4,070 (4,070)(W) 18,591
-------- ------- -------- --------
Net income.................... $ 29,949 $ 7,661 $ (7,359) $ 30,251
======== ======= ======== ========
Net income per share.......... $ 1.12 $ 1.16
======== ========
Weighted average shares
outstanding................. 26,821 26,007
</TABLE>
44
<PAGE> 48
FORCENERGY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
FORCENERGY AMERADA GREAT
HISTORICAL HESS MARATHON EDISTO CONVEST WESTERN STEWART PRO FORMA
(M) (N) (O) (P) (Q) (R) (S) ADJUSTMENTS
---------- ------- -------- ------- ------- ------- ------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Oil and gas sales.......... $138,698 $9,263 $49,619 $ 83 $47,139 $23,564 $14,928 $
Equity in earnings of
affiliate................ -- -- -- -- -- -- --
Other...................... 683 -- -- -- -- -- --
-------- ------ ------- ------- ------- ------- -------
Total revenues....... 139,381 9,263 49,619 83 47,139 23,564 14,928
-------- ------ ------- ------- ------- ------- -------
Operating Expenses:
Lease operating............ 38,786 2,317 19,338 209 13,508 5,032 4,014
Depletion, depreciation and
amortization............. 58,464 -- -- 68 16,473 8,462 -- 51,280(E)
(25,003)(E)
Abandonment and exploration
costs.................... -- -- -- 246 1,775 3,584 -- (5,605)(F)
Impairments of oil and gas
properties............... -- -- -- -- 2,633 -- -- (2,633)(F)
Production taxes........... 3,454 -- 297 -- 1,272 -- 42
General and administrative,
net...................... 7,971 -- -- 1,584 4,792 3,351 --
-------- ------ ------- ------- ------- ------- ------- --------
Total operating
expenses............ 108,675 2,317 19,635 2,107 40,453 20,429 4,056 18,039(G)
-------- ------ ------- ------- ------- ------- ------- --------
Income from operations...... 30,706 6,946 29,984 (2,024) 6,686 3,135 10,872 (18,039)
Interest and other income... 650 -- -- 2,529 2,606 2,024 -- (1,586)(F)
(550)(B)
Interest expense, net....... (13,367) -- -- (3) (1,065) (1,868) -- (4,970)(U)
Minority interest........... -- -- -- -- -- -- -- (I)
-------- ------ ------- ------- ------- ------- ------- --------
Income before income
taxes...................... 17,989 6,946 29,984 502 8,227 3,291 10,872 (25,145)
Income tax provision........ 6,711 -- -- 230 157 27 12,519(J)
-------- ------ ------- ------- ------- ------- ------- --------
Net income.................. $ 11,278 $6,946 $29,984 $ 272 $ 8,070 $ 3,264 $10,872 $(37,664)
======== ====== ======= ======= ======= ======= ======= ========
Net income per share........ $ 0.57
========
Weighted average shares
outstanding................ 19,727
<CAPTION>
PRO FORMA FAB PRO FORMA
SUB TOTAL (V) ADJUSTMENTS PRO FORMA
--------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales.......... $$283,294 $ -- $ $283,294
Equity in earnings of
affiliate................ -- 7,800 (7,800)(L) --
Other...................... 683 -- 683
-------- ------- -------- --------
Total revenues....... 283,977 7,800 (7,800) 283,977
-------- ------- -------- --------
Operating Expenses:
Lease operating............ 83,204 -- 83,204
Depletion, depreciation and
amortization............. 109,744 36 109,780
Abandonment and exploration
costs.................... -- -- --
Impairments of oil and gas
properties............... -- -- --
Production taxes........... 5,065 -- 5,065
General and administrative,
net...................... 17,698 -- 17,698
-------- ------- --------
Total operating
expenses............ 215,711 36 215,747
-------- ------- --------
Income from operations...... 68,266 7,764 (7,800) 68,230
Interest and other income... 5,673 17,161 (17,015)(L) 5,819
Interest expense, net....... (21,273) (97) (21,370)
Minority interest........... -- -- --
-------- ------- -------- --------
Income before income
taxes...................... 52,666 24,828 (24,815) 52,679
Income tax provision........ 19,644 3,847 (3,847)(W) 19,644
-------- ------- -------- --------
Net income.................. $ 33,022 $20,981 $(20,968) $ 33,035
======== ======= ======== ========
Net income per share........ $ 1.23 $ 1.27
======== ========
Weighted average shares
outstanding................ 26,750 25,937
</TABLE>
45
<PAGE> 49
FORCENERGY
PROFORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
ADJUSTMENTS
FORCENERGY EDISTO CONVEST ------------------------------------
HISTORICAL (X) (Y) EDISTO CONVEST FORCENERGY
---------- ------- ------- -------- -------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash....................... $ 4,063 $ 268 $ 537 $ $ $
Accounts receivable, net... 29,126 1,926 11,179 (3,286)(Z)
Other current assets....... 27,890 519
-------- ------- ------- --------
Total current
assets.............. 61,079 2,194 12,235 (3,286)
Investments in surety bonds,
at cost.................... 4,094 -- --
Property, plant & equipment,
net........................ 746,744 73 52,862 49,440(Z)
Investment in affiliate..... -- 47,167 -- (47,167)(Z)
Other assets................ 16,757 28 3,050 (2,327)(Z)
4,289(Z)
-------- ------- ------- -------- --------
$828,674 $49,462 $68,147 $(47,167) $ 48,116
======== ======= ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable........... $ 20,010 $ 475 $ 4,812 $ $ $
Other accrued
liabilities.............. 65,783 2,962 6,146 6,704(Z)
(2,150)(Z)
(1,967)(Z)
-------- ------- ------- --------
Total current
liabilities......... 85,793 3,437 10,958 2,587
Long term debt.............. 440,618 -- --
Deferred revenue............ -- -- 513 (513)(Z)
Other noncurrent
liabilities................ -- 75 4,701 (6,423)(Z)
4,289(Z)
Deferred income taxes....... 31,689 -- --
STOCKHOLDERS' EQUITY
Common stock............... 227 143 106 (143)(Z) (106)(Z) 28(Z)
Capital in excess of par
value.................... 248,784 14,470 48,546 (14,470)(Z) (48,546)(Z) 98,906(Z)
Retained earnings.......... 21,563 31,699 3,323 (31,699)(Z) (3,323)(Z)
Treasury stock, at cost.... -- (362) -- 362(Z)
-------- ------- ------- -------- -------- -------
Total stockholders'
equity.............. 270,574 45,950 51,975 (45,950) (51,975) 98,934
-------- ------- ------- -------- -------- -------
$828,674 $49,462 $68,147 $(45,950) $(52,035) $98,934
======== ======= ======= ======== ======== =======
<CAPTION>
PRO FORMA
SUB TOTAL FAB(AA) ADJUSTMENTS PRO FORMA
--------- -------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash....................... $ 4,868 $ 4,190 $ $ 9,058
Accounts receivable, net... 38,945 788 39,733
Other current assets....... 28,409 596 29,005
-------- -------- ---------
Total current
assets.............. 72,222 5,574 77,796
Investments in surety bonds,
at cost.................... 4,094 -- 4,094
Property, plant & equipment,
net........................ 849,119 103 849,222
Investment in affiliate..... -- 104,973 (104,973)(AB) --
Other assets................ 21,797 219 22,016
-------- -------- --------- ---------
$947,232 $110,869 $(104,973) $ 953,128
======== ======== ========= =========
CURRENT LIABILITIES
Accounts payable........... $ 25,297 $ 111 $ $ 25,408
Other accrued
liabilities.............. 77,478 771 3,000(AB) 81,249
-------- -------- --------- ---------
Total current
liabilities......... 102,775 882 3,000 106,657
Long term debt.............. 440,618 -- 440,618
Deferred revenue............ 0 -- --
Other noncurrent
liabilities................ 2,642 -- 2,642
Deferred income taxes....... 31,689 -- 31,689
STOCKHOLDERS' EQUITY
Common stock............... 255 18,937 79(AB) 334
(18,937)(AB)
Capital in excess of par
value.................... 347,690 65,034 234,788(AB) 582,478
(65,034)(AB)
Retained earnings.......... 21,563 26,015 (26,015)(AB) 21,563
Treasury stock, at cost.... -- (232,854)(AB) (232,854)
-------- -------- --------- ---------
Total stockholders'
equity.............. 369,508 109,986 (107,973) 371,521
-------- -------- --------- ---------
$947,232 $110,869 $(104,973) $ 953,128
======== ======== ========= =========
</TABLE>
46
<PAGE> 50
ADJUSTMENTS
<TABLE>
<S> <C>
(A) This column reflects Edisto historical results of operations
for the nine months ended September 30, 1997 which excludes
the results of operations of Convest.
(B) This columns reflects Convest historical results of
operations for the nine months ended September 30, 1997.
(C) This column reflects Great Western historical results of
operations for the twenty-one days ended January 21, 1997,
exclusive of approximately $1.6 million in severance
payments.
(D) This column reflects the historical oil revenues and direct
operating expenses for the properties acquired in the
Stewart Acquisition from the period January 1, 1997 to June
4, 1997.
(E) Adjustment to depletion, depreciation and amortization of
oil and gas properties giving consideration to the
transactions reflected herein.
(F) Adjustments to convert Convest and Great Western from the
successful efforts method of accounting to the full cost
method of accounting utilized by Forcenergy.
(G) Though it is inappropriate to reflect an increase in the
results of operations for anticipated reductions in general
and administrative costs subsequent to acquisition, in the
opinion of management, the Company will eliminate
substantially all of the general and administrative expenses
of Edisto and a majority of those of Great Western.
(H) Net decrease in interest expense assuming a weighted average
interest rate of 8.97% and average actual debt outstanding
for the period adjusted for capitalized interest.
(I) The adjustment to eliminate the minority interest in Convest
acquired pursuant to the Edisto and Convest Mergers is
offset against the Edisto-Convest consolidation entry to
recognize the minority interest of approximately $2.6
million.
(J) Adjustment to income tax expense reflecting the results of
transactions herein using Forcenergy's historical combined
federal and state statutory rate of 37.3% and 38.3% for the
periods ended September 30, 1997 and December 31, 1996,
respectively.
(K) This column reflects FAB historical results of operations
for the nine months ended September 30, 1997. Results of oil
trading operations have been excluded from presentation
pursuant to Forcenergy's intent to discontinue such
operations. The results of operations have been converted to
U.S. dollars based on a conversion rate of SEK 7.60 to $1
USD.
(L) Adjustment to eliminate intercompany earnings.
(M) 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 the Marathon Acquisition from December 30, 1996
to December 31, 1996.
(N) This column includes the historical oil and gas revenues and
direct operating expenses for the Amerada Hess Acquisition
from January 1, 1996 to June 27, 1996.
(O) This column indicates the historical oil revenues and direct
operating expenses for the Marathon Acquisition from January
1, 1996 to December 29, 1996.
(P) This column reflects Edisto historical results of operations
for the year ended December 31, 1996, excluding the effects
of discontinued operations and the historical results of
operations of Convest.
(Q) This column reflects Convest historical results of
operations for the year ended December 31, 1996.
(R) This column reflects Great Western's historical results of
operations for the year ended September 30, 1996, excluding
the effect of discontinued operations.
</TABLE>
47
<PAGE> 51
(S) This column reflects the historical oil revenues and direct
operating expenses for the properties acquired in the
Stewart Acquisition for the year ended December 31, 1996.
(T) Adjustment to eliminate the sale of assets from Edisto to
Convest.
(U) Net increase in interest expense assuming the following
transactions occurred on January 1, 1996: (i) the 1996
conversion of the Exchangeable Notes; (ii) the 1996 Common
Stock Offering; (iii) the 1996 Notes Offering; (iv) the 1997
Notes Offering; (v) the Edisto and Convest Mergers; and (vi)
the 1997 Acquisitions; 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.
(V) This column reflects FAB historical results of operations
for the year ended December 31, 1996. Results of oil trading
operations have been excluded from presentation pursuant to
Forcenergy's intent to discontinue such operations. The
results of operations have been converted to U.S. dollars
based on a conversion rate of SEK 7.60 to $1 USD.
(W) Adjustment to income tax expense reflecting the elimination
of capital gains income and intercompany earnings for the
year ending December 31, 1996 and the elimination of
intercompany earnings for the nine months ended September
30, 1997.
(X) This column reflects Edisto's historical financial position
as of September 30, 1997, which excludes the financial
position of Convest, including the effects of the
distribution of approximately $69.3 million pursuant to the
terms of the merger agreement.
(Y) This column reflects Convest's historical financial position
as of September 30, 1997.
(Z) Purchase accounting adjustments and consolidating entries to
reflect the Edisto and Convest Mergers. The allocation of
the purchase price to the various summarized components of
assets and liabilities of Edisto and Convest are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Current assets......................................... $ 11,143
Property plant & equipment............................. 102,375
Noncurrent Assets...................................... 5,040
Current liabilities.................................... (16,982)
Noncurrent liabilities................................. (2,642)
--------
Purchase Price......................................... $ 98,934
========
(AA) This column reflects FAB's historical financial position as
of September 30, 1997. The financial position has been
converted to U.S. dollars based on a conversion rate of SEK
7.60 to $1 USD.
(AB) Purchase accounting adjustments and consolidating entries to
reflect the FAB acquisition assuming a closing price per
share of FEN Common Stock of $29.12.
</TABLE>
48
<PAGE> 52
INFORMATION REGARDING FORCENERGY
OVERVIEW
Forcenergy, formerly Forcenergy Gas Exploration, Inc., is an independent
oil and gas company engaged in the exploration, acquisition, development,
exploitation and production of oil and natural gas. Forcenergy and its
predecessors have been engaged in the oil and gas exploration and production
business since 1982, the year in which it was founded by the current President
and Chief Executive Officer, Stig Wennerstrom.
On August 2, 1995, Forcenergy completed an initial public offering of
6,210,000 shares of common stock of Forcenergy, at $10.00 per share, resulting
in net proceeds of $55.7 million (the "1995 Offering").
Forcenergy has experienced significant growth in the last six years,
primarily through the exploitation, enhancement and development of acquired
producing properties in the Gulf of Mexico and the 1996 acquisition of producing
properties in Cook Inlet, Alaska. At December 31, 1996, Forcenergy had net
proved reserves of approximately 585 Bcfe, 58% of which were located in the Gulf
of Mexico and 27% of which were located in Alaska. Approximately 56% of
Forcenergy's net proved reserves on such date were oil and approximately 78% of
proved reserves were classified as proved developed. Forcenergy currently
operates approximately 69% of its Gulf of Mexico production. Forcenergy's
primary focus is its Gulf of Mexico and Alaska activities. However, Forcenergy
has also acquired interests in certain undeveloped international leasehold
acreage, primarily in Gabon, Africa and Australia.
STRATEGY
Gulf of Mexico. Forcenergy's business strategy is to increase reserves and
cash flows primarily through the exploration, exploitation, and development of
its producing properties while also acquiring additional properties in the Gulf
of Mexico. Forcenergy believes it has assembled at least a three-year inventory
of development, exploitation and exploratory drilling opportunities in the Gulf
of Mexico, predominantly on acreage currently held by production. Most of the
prospects comprising this inventory are located in fields which have prolific
production histories and which Forcenergy believes, based on the past success of
Forcenergy and other industry participants in applying 3-D technology to mature
producing properties, will yield additional reserves through the application of
modern exploration and development technologies. Forcenergy believes that its
high quality asset base positions it for future growth through a continuing
program of further development through selective exploitation and exploratory
drilling and through the enhancement of production through workovers and
recompletions. Forcenergy emphasizes the use of 3-D seismic and computer-aided
exploration technology together with geologic and engineering studies of its
properties to evaluate and prioritize drilling prospects. Focusing drilling
activities on producing properties in a relatively concentrated area in the Gulf
of Mexico permits Forcenergy to utilize its base of geological, engineering, and
production experience in the region to maximize its drilling success and to
minimize finding and development costs. Furthermore, Forcenergy's concentration
of drilling activities on its producing properties allows the utilization of
existing infrastructure which greatly reduces incremental lease operating
expenses and capital costs associated with new production facilities and
minimizes timing delays in commencing production. Forcenergy plans to continue
to pursue acquisitions of working interests in producing properties that offer
further development potential and provide operating synergies with existing
properties.
Forcenergy prefers to operate its Gulf of Mexico properties because
functioning in that capacity positions it to more effectively manage production
performance and operating expenses and allows it to control the timing and
amount of capital expenditures. Forcenergy operates 93 structures and 494 wells
in the Gulf of Mexico, and believes that the operating expertise and experience
of its personnel have been instrumental in its ability to significantly enhance
and improve production rates and cash flows. Of particular importance, a
significant portion of the drilling prospects Forcenergy expects to pursue
during the next three to five years are accessible from existing production
facilities operated by Forcenergy.
Cook Inlet, Alaska. Forcenergy's business strategy in the Cook Inlet area
is to increase production and cash flow through the exploitation of existing
producing properties as well as conducting selective exploration activities.
Forcenergy believes that it has assembled a high-quality, producing asset base
with exploitation
49
<PAGE> 53
potential as well as exploratory lease positions that will give Forcenergy an
opportunity to add significant new reserves through drilling activities. Since
its discovery, oil and gas activities in the Cook Inlet area have been dominated
by major oil companies. Forcenergy believes that it will be able to economically
exploit opportunities previously not pursued by the major oil companies by
utilizing proprietary 3-D seismic data, smaller, less capital intensive offshore
production facilities and other methods that have proven successful in
Forcenergy's operations in the Gulf of Mexico.
International. Forcenergy's international business strategy is aimed at
achieving significant reserve growth through participation in selected
higher-risk, higher reward exploration projects. Forcenergy presently holds
exploratory acreage offshore Gabon, West Africa and onshore and offshore
Australia.
TECHNOLOGY
Forcenergy utilizes advanced technology in its exploration and development
activities in order to reduce drilling risks and finding costs and to more
effectively prioritize drilling prospects based on return potential. Forcenergy
currently has acquired 925 square miles of 3-D seismic surveys on 115 of its
offshore Gulf of Mexico lease blocks and 1,075 square miles on other Gulf of
Mexico blocks in which Forcenergy currently does not own an interest. Forcenergy
also owns approximately 140,000 square miles of high quality 2-D seismic data on
Gulf of Mexico blocks. Additionally, Forcenergy has acquired 973 square miles of
3-D seismic on its undeveloped lease acreage and concession in Gabon, Africa.
The ability to obtain the 3-D seismic data at reasonable costs has enabled
Forcenergy to identify multiple development and exploratory prospects in mature
producing fields which were not identified through earlier technologies.
Forcenergy's professional staff includes 24 geologists/geophysicists experienced
in interpreting 3-D data, and Forcenergy has invested in 26 Landmark geophysical
workstations for that purpose.
RECENT DRILLING ACTIVITY
During 1996 and continuing through October 1997, Forcenergy has continued
to focus on increasing reserves and cash flow by targeting development,
exploitation, and exploration prospects on recently acquired properties, with
the opportunities developed in most cases through the use of 3-D seismic data.
Forcenergy spent $130.4 million in capital drilling expenditures during 1996,
including $4.5 million in capitalized internal costs and $4.4 million on
geological and geophysical costs, including 3-D seismic data. During the ten
months ended October 1997, Forcenergy has spent $215.4 million on capital
drilling expenditures, including $9.7 million in capitalized internal costs and
$15.7 million on geological and geophysical costs. In the Gulf of Mexico,
Forcenergy successfully drilled nineteen of nineteen development wells and seven
of ten exploratory wells during 1996. For the first ten months of 1997 seven of
seven development wells and eighteen of thirty-two exploratory wells drilled
proved successful. The following is a brief description of properties where
significant activity has occurred, all of which were operated by Forcenergy
except for the South Timbalier 148 field. The working interest ownership of
Forcenergy is noted in parenthesis.
South Marsh Island Block 106 North (SMI 106 N/2) and Block 106 South (SMI
106 S/2) and South Marsh Island 115 (100% working interest). Forcenergy acquired
its working interests in these fields in a series of acquisitions from 1993 to
1995. During 1996, Forcenergy successfully drilled and completed six development
and two exploratory wells in SMI 106 N/2. These eight wells are producing at a
combined, net average rate of 1,634 BOPD and 10,340 MCFPD. During 1997, two
development wells were successfully drilled and are currently producing 86 BOPD
and 4,042 MCFPD, net to Forcenergy's interest. Combined, average net production
from these fields currently totals 2,970 BOPD and 17,316 MCFPD.
High Island 467 Field (100% working interest) and High Island 470 Field
(100% working interest). Forcenergy completed all three wells of a three-well
drilling project during 1996. Two development wells and one exploratory well
were drilled and were producing at a combined average rate of 128 BOPD and
11,116 MCFPD, net to Forcenergy, for October 1997. Forcenergy completed a
development well at High Island 467 which is currently producing at an average
rate of 14,817 MCFPD, net to Forcenergy's interest. Additionally, in June 1997,
Forcenergy drilled an exploratory well in the adjacent High Island 470 field
which is currently producing at an average rate of 8,404 MCFPD, net to
Forcenergy. These fields are currently
50
<PAGE> 54
producing at combined rates of 111 BOPD and 37,694 MCFPD, net to Forcenergy's
interest. Forcenergy plans to drill a development well at High Island 467 in
early 1998.
South Marsh Island 6/10/11/18/19/285 Complex (100% working interest). In
September 1996, Forcenergy completed drilling operations on an exploratory well
that encountered approximately 140 feet of TVD (true vertical depth) pay in four
sands and that added approximately 22.1 BCFE in estimated net proved reserves.
During the fourth quarter of 1996, Forcenergy completed two development wells
and drilled one exploratory dryhole. These wells are currently producing at
combined net rates of 1,304 BOPD and 9,674 MCFPD. In 1997, Forcenergy completed
a development well and an exploratory well that added 17.5 BCFE in estimated net
proved reserves and are currently producing approximately 50 BOPD and 5,084
MCFPD. These drilling activities have brought current net total field production
to rates of 1,809 BOPD and 28,149 MCFPD for the field complex.
High Island 280/286 Complex (100% working interest). Forcenergy completed
an exploratory well in July 1997 that is currently producing at an average rate
of 4,200 MCFPD, net to the Company, bringing total net production in this field
to 46 barrels of condensate per day and 4,908 MCFPD. Three additional
exploratory wells were successfully drilled and completed. The three wells are
currently producing at a combined rate of 11,000 MCFPD, net to Forcenergy.
South Timbalier 148 (15.5% working interest). An exploratory well was
successfully completed during 1996 and is currently producing 290 BOPD and 5,336
MCPD, net to Forcenergy. In the second quarter of 1997, an exploratory well was
completed and is currently producing 62 BOPD and 1,672 MCFPD, net to Forcenergy.
A second exploratory well was successfully drilled and completed in the fourth
quarter of 1997 and is currently awaiting pipeline connection. Total net
production from this field averaged at a curtailed rate of 312 BOPD and 7,080
MCFPD in December 1997. An anticipated reduction in curtailments during the
first quarter of 1998 is expected to increase the daily gas production rate.
Forcenergy plans to participate in the drilling of two additional exploratory
wells during 1998.
High Island 551 and High Island 552 (100% working interest). During April
1997, two exploratory wells were successfully completed in the High Island 552
field and are currently producing 11,361 MCFPD, net to Forcenergy, bringing
total current net production in this field to 11,534 MCFPD. Forcenergy
successfully drilled two exploratory wells during 1997 in the adjacent High
Island 551 field which added approximately 13.0 Bcfe of estimated proved
reserves. Forcenergy anticipates that production from these wells will be
established in early 1998 at estimated combined average rates of 500 BOPD and
15,000 MCFPD net to Forcenergy's interest. Forcenergy plans to drill four
additional exploratory wells in this field during early 1998.
Cook Inlet, Alaska. Forcenergy recently completed a successful exploitation
well in the 100% owned West McArthur River Field that increased field production
by approximately 490 BOPD, net to the Company.
International. In December 1997 and January 1998, Forcenergy drilled two
exploratory dry holes on its Phenix Marin concession located offshore Gabon,
West Africa. Additional exploratory opportunities have been identified within
the Phenix Marin Concession and Forcenergy is currently evaluating future plans
therein. Forcenergy and its 50% partner recently acquired a large-scale
proprietary 3-D seismic survey over the Gryphon Marin concession located
offshore Gabon. Forcenergy believes that numerous drilling opportunities will be
generated from the information obtained through this 3-D survey. Forcenergy is
also evaluating the potential of the northern portion of the Gryphon Marin
concession where a recent discovery approximately 12 miles from Forcenergy's
concession was announced.
ADDITIONAL FUTURE PROJECTS
In addition to the activity described above, Forcenergy has identified a
substantial inventory of additional exploitation, development, exploratory,
workover and recompletion projects on its existing offshore Gulf of Mexico and
Alaska properties which it may undertake over the next three to five years. Many
of these projects are currently being reviewed by Forcenergy's geologists and
geophysicists utilizing 3-D seismic data acquired in the last three years.
During 1998, Forcenergy currently plans to drill approximately 35 exploratory
wells and 14 development wells offshore Gulf of Mexico in addition to the plans
described above. Forcenergy also
51
<PAGE> 55
anticipates that it will drill approximately 2 developmental and 4 exploratory
wells in the Cook Inlet, Alaska area during 1998. Forcenergy recently completed
the largest proprietary 3-D seismic survey in Cook Inlet, Alaska. Additional 3-D
seismic data is being actively acquired to pursue numerous potential drilling
prospects. An active development and exploration program is planned for the next
two to three years. No assurance can be given that any future exploration or
development projects will lead to additional commercially viable reserves.
Forcenergy's 1998 capital expenditure budget is expected to approximate
1997 capital expenditures. Forcenergy currently plans to dedicate approximately
10-20% of its 1998 capital budget to international prospects. See "Forcenergy
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ACQUISITIONS
From January 1996 to October 1997, Forcenergy has spent an aggregate of
approximately $349.1 million in cash and common stock on several acquisitions
including, (1) all of Marathon Oil Company's interest in producing crude oil
properties in the Cook Inlet, Alaska area and Prudhoe Bay Unit, Alaska, and the
Cook Inlet Pipeline Company (the "Marathon Acquisition"), (2) Great Western
Resources, Inc., an independent oil and gas company ("Great Western
Acquisition"), (3) interests in certain producing crude oil properties in the
West McArthur River Field, located in Cook Inlet, Alaska from Stewart Petroleum
Company (the "Stewart Acquisition"), (4) Convest and Edisto, independent oil and
gas companies ("Convest/Edisto Acquisition") and (5) various working interests
in other oil and gas properties in the Gulf of Mexico, the Permian Basin, and
onshore Louisiana. Each of these acquisitions is discussed in more detail in the
following paragraphs.
The Marathon Acquisition. In December 1996, Forcenergy acquired the 48%
average working interest of Marathon Oil Company ("Marathon") in the McArthur
River Field (Trading Bay Unit) and Marathon's 50% interest in the Trading Bay
Field, both in the Cook Inlet, and Marathon's 0.05% working interest in the
Prudhoe Bay Unit for $107.8 million. In January 1997, Forcenergy acquired
Marathon's interest in the Cook Inlet Pipeline Company for $7.4 million in cash
and the guarantee of $6.7 million in Cook Inlet Pipeline Company debt. Net
production from the interests acquired is currently approximately 6,800 Bbls of
oil per day ("BOPD"). Net proved reserves associated with the Trading Bay Unit,
Trading Bay Field and Prudhoe Bay Unit totaled approximately 25.9 MMbbls of oil
as of December 31, 1996.
The Unocal Alliance. In December 1996, Forcenergy entered into an alliance
with Union Oil Company of California ("Unocal") to jointly pursue lease sale
activities and to further develop existing alliance properties in the Cook
Inlet. The agreement requires Forcenergy to expend on behalf of the alliance up
to $30 million within the next five years on lease acquisition and development
and exploratory drilling on prospects generated as a result of this alliance. It
also provides Forcenergy access to Unocal's geologic and geophysical data base
in the Cook Inlet, including approximately 37,000 linear miles of 2-D seismic
data and 6,000 square miles of 3-D seismic data. The agreement provides that
Forcenergy and Unocal shall each contribute technical staff to the alliance in a
joint effort to identify development prospects in and around existing alliance
properties in the Cook Inlet as well as exploratory opportunities in the area.
Forcenergy has identified a number of prospects that will be further evaluated
for drilling potential. As of October 31, 1997, Forcenergy had expended
approximately $5.4 million in 1997 for the acquisition of seismic data.
As part of its alliance with Unocal, in December 1996, Forcenergy acquired
a 50% interest in 17 State of Alaska lease tracts. Forcenergy's net expenditure
in the lease sale was approximately $1.7 million.
Great Western Acquisition. In January 1997, Forcenergy acquired all of the
outstanding stock of Great Western for approximately $48.3 million. Great
Western had oil and gas operations located primarily in the onshore Gulf Coast
regions of Louisiana and Texas and offshore Gulf of Mexico. Great Western's
highest value asset is South Marsh Island 18, which is strategically located
adjacent to Forcenergy's other South Marsh Island holdings. Estimated net
reserves added as a result of the Great Western Acquisition totaled
approximately 33.2 Bcf of natural gas equivalents. Great Western's current net
daily production is approximately 700 Bbls of oil and 7,000 Mcf of natural gas,
based on October 1997 production.
52
<PAGE> 56
Stewart Acquisition. In June 1997, Forcenergy acquired a 97.75% working
interest in the West McArthur River Field, located in Cook Inlet, Alaska from
Stewart Petroleum Company for $18.7 million and assumed operations of the field.
Net production is currently approximately 1,300 Bbls of oil per day, based on
October 1997 production. Net proved reserves approximated 2.6 MMbbl at June 5,
1997. In October 1997, Forcenergy increased its working interest in this field
to 100%.
Convest/Edisto Acquisition. In October 1997, Forcenergy acquired all of the
outstanding common stock of Edisto and Convest. Forcenergy issued 2,829,913
shares of common stock valued at $34.96 per share, or approximately $98.9
million. Through the mergers, Forcenergy acquired an average 30% working
interest in 43 Gulf of Mexico lease blocks, as well as additional interests
onshore in the Bluebell/Altamont and Culp Draw fields. Forcenergy estimates the
proven reserves associated with these acquisitions to be approximately 6.344
million barrels of oil and condensate and 45.9 Bcf of natural gas. Net daily
production associated with the acquired interests currently totals approximately
2,300 barrels of oil and condensate and 33,000 Mcf of natural gas.
Other Working Interest Acquisitions. In June 1996, Forcenergy acquired
working interests in eleven Gulf of Mexico producing fields from Amerada Hess
Corporation (the "Amerada Hess Acquisition") for a cash consideration of $6.9
million. In August 1996, Forcenergy acquired an additional working interest in
one of these fields, Mustang Island 742/754, for approximately $4.0 million,
increasing its total working interest in this field to 100%. In December 1996,
Forcenergy acquired interests in eight fields in the Gulf of Mexico in three
separate transactions for an aggregate purchase price of $23.5 million. The
first transaction involved the acquisition of a 33% working interest position in
Mustang Island Block 746, bringing Forcenergy's ownership in the block to 100%.
In the second transaction Forcenergy acquired a 33% working interest position in
the South Marsh Island Block 136/137 field, also bringing Forcenergy's ownership
in the field to 100%. In the third transaction, Forcenergy acquired an average
20% working interest in seven fields in the Gulf of Mexico. Estimated net proven
reserves associated with these acquisitions include approximately 862 Mbbls of
oil and 21.7 Bcfe of natural gas. The interests acquired were producing
approximately 500 BOPD and 12,000 Mcf of natural gas per day ("MCFPD"), net to
Forcenergy's interest at the end of 1996. In February 1997, Forcenergy acquired
an average 75% non-operated working interest in producing fields in the Permian
Basin for an aggregate purchase price of $14.5 million. Estimated proven
reserves associated with the properties totaled approximately 3.4 MMbbls of oil
and 7.2 Bcf of natural gas as of the acquisition date. Current average net daily
production from the properties is approximately 300 Bbls of oil and 700 Mcf of
natural gas. In September 1997, Forcenergy acquired various operated and
non-operated interests in the Paradis Field, an onshore Louisiana field, for a
cash consideration of $15.8 million. Estimated net proved reserves associated
with the Paradis Field acquisition totaled 2.3 MMBbls of crude oil and 4.5 Bcf
of natural gas. Forcenergy's estimated net daily production from this field is
estimated to be 500 BOPD and 1,000 MCFPD.
53
<PAGE> 57
GULF OF MEXICO PROPERTIES
Forcenergy currently holds working interests in 183 federal offshore and
state lease blocks located in the Gulf of Mexico and Gulf Coast, including a
100% working interest in 45 of these blocks and a 50% or greater working
interest in 21 other blocks, and operates 53 of the producing blocks
representing 69% of its current Gulf of Mexico/Gulf Coast production. The
following table lists the average working interest, net proved reserves and the
operator for Forcenergy's 13 largest offshore Gulf of Mexico properties,
comprising approximately 82% of Forcenergy's net proved reserves in the Gulf of
Mexico and 47% of Forcenergy's total net proved reserves, as of December 31,
1996:
<TABLE>
<CAPTION>
ESTIMATED NET PROVED RESERVES AT
DECEMBER 31, 1996
----------------------------------
AVERAGE OIL NATURAL GAS TOTAL
WORKING INTEREST (MMBLS) (MMCF) (MMCFE) OPERATOR
---------------- -------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
South Marsh Island
6/10/11/18/19/285 Complex:...... 100% 5,352 30,471 62,583 Forcenergy
South Marsh Island Block 106 North
and Block 106 South/Block 115... 100% 3,519 12,156 33,270 Forcenergy
South Marsh Island 137 Field,
Block 136/137................... 100% 886 21,071 26,387 Forcenergy
Ship Shoal 230 Field, Block 219... 100% 1,963 5,835 17,613 Forcenergy
West Cameron 205 Field............ 100% 103 13,719 14,337 Forcenergy
High Island A-467 Field........... 100% 93 10,453 11,011 Forcenergy
Ship Shoal 26 Field............... 100% 292 8,392 10,144 Forcenergy
Chandeleur 25 Field............... 100% -- 8,959 8,959 Forcenergy
High Island A-280 Field........... 100% 38 8,979 9,207 Forcenergy
Mustang Island 754................ 100% 20 4,604 4,724 Forcenergy
Vermilion 262 Field............... 88% 873 8,525 13,763 Forcenergy
East Cameron 14 Field............. 50% 358 12,150 14,298 Forcenergy
South Pass 24 Field............... 71% 6,606 10,405 50,041 Third Party
</TABLE>
ALASKA PROPERTIES
Forcenergy currently holds an average 48% working interest in the McArthur
River Field (Trading Bay Unit) and a 50% working interest in the Trading Bay
Field located in the Cook Inlet area. These fields had estimated net proved
reserves of 25.9 million barrels of oil and comprised approximately 27% of
Forcenergy's total estimated net proved reserves at December 31, 1996.
Forcenergy also purchased in June 1997 a 97.75% working interest in the West
McArthur River Field located in the Cook Inlet. Forcenergy operates this field
which had net proved reserves of 2.6 MMbbls of oil at June 5, 1997. In October
1997 Forcenergy increased its working interest in the West McArthur River Field
to 100%. Through the Unocal alliance, the Marathon and Stewart acquisitions and
several other smaller property acquisitions, Forcenergy has assembled the third
largest exploratory lease acreage position in the State of Alaska. An extensive
3-year exploratory program is currently planned by Forcenergy.
ONSHORE PROPERTIES
Forcenergy owns working and royalty interests in approximately 3,159
producing oil and gas wells in 1,088 fields in the Rocky Mountain, Gulf Coast,
Permian Basin and Appalachian regions of the United States. Management believes
that Forcenergy's stable reserve base of long-lived, primarily non-operated,
onshore properties complements the Gulf of Mexico operations by providing an
additional source of cash flow that requires limited management involvement.
Forcenergy's onshore properties accounted for approximately 15% of estimated net
proved reserves at December 31, 1996. Approximately $4.3 million in capital was
spent on onshore properties during 1996, 40% of which was incurred on the
waterflood project in the Howard Glasscock/Snyder Field. Capital expenditures on
onshore properties were insignificant during the eleven
54
<PAGE> 58
months ended November 30, 1997. The following is a summary of Forcenergy's most
significant onshore properties:
Altamont/Bluebell Field. The Altamont/Bluebell Field is located in Duchesne
and Uinta Counties, Utah. Forcenergy increased its ownership at this field
during October 1997 when the Company finalized its merger with Convest Energy
Corporation. Convest owned working and overriding royalty interests in Altamont
wells similar to those in which Forcenergy owned a working interest. The
Company's approximate, average working interest in the Altamont field increased
from 7% to 15.5% as a result of the merger. The Company also increased its
working interest in the Altamont natural gas processing plant from 8.125% to
21.55%. Post-merger net daily production, including gas plant liquids, currently
averages 837 BOPD and 2,222 MCFPD. Estimated net proved reserves as of December
31, 1996 were 1,108 Mbbls and 3,189 MMCF. The merger with Convest increased
Forcenergy's estimated net proved reserves by 1,617 Mbbls and 5,149 MMCF.
Mercy Field. Forcenergy owns non-operated working interest in twelve wells
at Mercy Field in San Jacinto County, Texas. The Company owns a 40.0% working
interest in nine gas wells, one oil well and one salt water disposal well, and a
28.3% working interest in one oil well. Production occurs from the Wilcox sands
ranging in depth from 8,000 feet to 12,000 feet. Forcenergy is aggressively
developing new field reserves. During the first quarter of 1997, the Company
restored to operation a refrigeration plant for natural gas liquid ("NGL")
extraction. Two successful gas wells were drilled and completed in the field's
major gas reservoir during the second and third quarter of 1997. The two wells
are currently producing at net daily average production rates of 487 Mcf and 33
barrels of condensate. A third well is currently being approved for drilling.
Forcenergy's net daily production in this field currently averages 2,222 Mcf and
106 barrels of condensate and 3,288 gallons of NGL product. Net proved reserves
as of December 31, 1996 were 6.7 Bcf of natural gas and 246 Mbbls of condensate.
Whitney Canyon Field. Forcenergy owns working interests ranging from 14.1%
to 18.9% in three producing wells in this Uinta County, Wyoming field and a
3.02% working interest in the Whitney Canyon Gas Processing Plant. Drilling
operations commenced during the fourth quarter of 1997 on a recovery enhancement
well for the Mission Canyon and Big Horn reservoirs. A successful well will
contribute both production rate acceleration and reserve growth. The Company
holds an 18.8% non-operated working interest in this well. Forcenergy's share of
total sales from processed gas and condensate and plant liquids currently
averages 95 BOPD and 1,360 MCFD. Estimated net proven reserves as of December
31, 1996 were 223 Mbbls of oil and 10.9 Bcf of natural gas
ACREAGE DATA
The following table sets forth the approximate developed and undeveloped
acreage in which Forcenergy held a leasehold, mineral or other interest at
October 31, 1997. Undeveloped acreage includes leased acres on which wells have
not been drilled or completed to a point that would permit the production of
commercial quantities of oil and gas, regardless of whether or not such acreage
contains proved reserves.
<TABLE>
<CAPTION>
DEVELOPED ACRES UNDEVELOPED ACRES
------------------- -----------------------
GROSS NET GROSS NET
--------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Offshore -- Gulf of Mexico...................... 596,085 261,268 129,709 70,312
Offshore -- Coastal Alaska...................... 69,381 33,072 149,009 92,047
Onshore -- United States........................ 1,015,426 151,637 383,465 95,861
Australia....................................... 1,000 500 32,786,623 15,314,356
Offshore -- Gabon, Africa....................... -- -- 3,082,428 1,882,428
Onshore -- Other international.................. -- -- 649,393 266,100
--------- ------- ---------- ----------
Total................................. 1,681,892 446,477 37,180,627 17,721,104
========= ======= ========== ==========
</TABLE>
55
<PAGE> 59
OIL AND GAS RESERVES
The following table summarizes the estimates of Forcenergy's historical net
proved reserves as of January 1, 1997 and the present values attributable to
those reserves on such date using constant prices and operating costs as of the
valuation date, discounted at a rate of 10% per annum, in accordance with
Commission guidelines. The reserve data and present values as of January 1, 1997
for the onshore properties, the Alaska properties and a small portion of the
offshore properties have been estimated by Netherland, Sewell & Associates,
Inc., independent petroleum engineering consultants. The reserve data and
present values as of January 1, 1997 for the majority of the offshore properties
have been estimated by Collarini Engineering Inc., independent petroleum
engineering consultants. (See Note 15 to Forcenergy's Financial Statements
incorporated herein by reference to Forcenergy's Form 10-K for the year ended
December 31, 1996).
<TABLE>
<CAPTION>
AS OF JANUARY 1,
1997
----------------
<S> <C>
Net Proved Reserves:
Liquids (Mbbls)(1).......................................... 54,659
Natural gas (Mmcf).......................................... 256,913
Total (MMcfe)..................................... 584,867
Present value of future net revenues before income taxes
(thousands)............................................... $1,055,911
Standardized measure of discounted future net cash flows
(thousands)(2)............................................ $ 802,145
</TABLE>
- ---------------
(1) Includes crude oil, condensate and natural gas liquids.
(2) The standardized measure of discounted future net cash flows represents the
present value of future net revenues after income taxes discounted at 10% in
accordance with Statement of Financial Accounting Standards No. 69.
Since January 1, 1996, Forcenergy has not filed any estimates of proved oil
and gas reserves with any federal authority or agency other than with the
Commission.
56
<PAGE> 60
DRILLING ACTIVITY
The following table sets forth the drilling activity of Forcenergy on its
properties for the twelve month periods ended December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994
------------- ------------ ------------
GROSS NET GROSS NET GROSS NET
----- ---- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C>
OFFSHORE DRILLING ACTIVITY:
Development:
Oil...................................... 11 10.4 8 5.9 1 1.0
Gas...................................... 8 5.7 2 1.7 5 3.7
Non-productive........................... 1 .2 -- -- 1 1.0
-- ---- -- --- -- ---
Total............................ 20 16.3 10 7.6 7 5.7
== ==== == === == ===
Exploratory:
Oil...................................... 5 4.4 5 5.0 -- --
Gas...................................... 2 1.3 2 1.5 1 0.3
Non-productive........................... 4 1.4 2 2.0 -- --
-- ---- -- --- -- ---
Total............................ 11 7.1 9 8.5 1 0.3
== ==== == === == ===
ONSHORE DRILLING ACTIVITY:
Development:
Oil...................................... 4 2.0 2 0.1 9 0.5
Gas...................................... -- -- -- -- 4 1.7
Non-productive........................... -- -- -- -- -- --
-- ---- -- --- -- ---
Total............................ 4 2.0 2 0.1 13 2.2
== ==== == === == ===
Exploratory:
Oil...................................... -- -- -- -- -- --
Gas...................................... -- -- 1 0.5 4 0.2
Non-productive........................... 1 .2 3 2.0 4 2.8
-- ---- -- --- -- ---
Total............................ 1 .2 4 2.5 8 3.0
== ==== == === == ===
</TABLE>
PRODUCTIVE WELLS
The following table sets forth the number of productive oil and gas wells
in which Forcenergy owned a working interest at October 31, 1997:
<TABLE>
<CAPTION>
TOTAL PRODUCTIVE WELLS GROSS NET
---------------------- ----- -----
<S> <C> <C>
Oil......................................................... 2,709 967
Gas......................................................... 757 270
----- -----
Total............................................. 3,466 1,237
===== =====
</TABLE>
Productive wells consist of producing wells and wells capable of
production, including gas wells awaiting pipeline connections. Forcenergy has
only 19 wells that are completed in more than one producing horizon; those wells
have been counted as single wells.
57
<PAGE> 61
FORCENERGY SELECTED FINANCIAL INFORMATION
The following table sets forth selected historical financial data for
Forcenergy as of and for each of the periods indicated. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Forcenergy's financial
statements included elsewhere in this prospectus or incorporated by reference.
No cash dividends have been declared for any of the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- ------- -------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Oil and gas sales(1).................. $196,929 $94,373 $138,698 $ 72,147 $58,354 $49,652 $24,937
Other(1).............................. 1,732 419 683 494 388 441 475
-------- ------- -------- -------- ------- ------- -------
198,661 94,792 139,381 72,641 58,742 50,093 25,412
-------- ------- -------- -------- ------- ------- -------
Expenses:
Lease operating....................... 53,219 27,446 38,786 24,507 23,744 16,632 7,769
Depletion, depreciation and
amortization........................ 80,853 40,490 58,464 31,295 24,572 19,889 8,014
Production taxes...................... 3,310 2,498 3,454 1,868 1,701 1,560 606
General and administrative............ 11,127 5,393 7,971 5,670 6,463 3,166 2,523
-------- ------- -------- -------- ------- ------- -------
148,509 75,827 108,675 63,340 56,480 41,247 18,192
-------- ------- -------- -------- ------- ------- -------
Income from operations.................. 50,152 18,965 30,706 9,301 2,262 8,846 6,500
Interest and other income (loss)........ 2,721 380 650 (561) 789 545 197
Interest expense, net of amounts
capitalized........................... (22,970) (9,503) (13,367) (11,668) (9,529) (6,192) (2,303)
-------- ------- -------- -------- ------- ------- -------
Income (loss) before income taxes....... 29,903 9,842 17,989 (2,928) (6,478) 3,199 4,394
Income tax provision (benefit)(2)....... 11,018 3,671 6,711 (1,075) (2,403) 2,337 --
Minority interest....................... -- -- -- -- -- 107 132
-------- ------- -------- -------- ------- ------- -------
Net income (loss)(2).................... $ 18,885 $ 6,171 $ 11,278 $ (1,853) $(4,075) $ 755 $ 4,262
======== ======= ======== ======== ======= ======= =======
Net income (loss) per common and common
equivalent share(2)................... $ .79 $ .34 $ .57 $ (.14) $ (.50)
======== ======= ======== ======== =======
UNAUDITED PRO FORMA DATA(2):
Income before income taxes,
including minority interest......... $ 3,092 $ 4,262
Income tax provision.................. 1,207 1,639
------- -------
Net income.............................. $ 1,885 $ 2,623
======= =======
Net income per common share............. $ .29 $ .41
======= =======
Weighted average common and common
equivalent shares..................... 23,991 18,265 19,727 12,910 8,188 6,520 6,451
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, AS OF DECEMBER 31,
-------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)......... $(24,714) $ (9,095) $ 6,745 $(11,775) $ 5,445 $ 1,865 $ (1,246)
Total assets...................... 828,674 417,523 585,925 335,090 220,287 187,786 127,684
Total liabilities................. 558,100 254,186 336,989 180,129 149,226 144,450 82,432
Long-term debt.................... 440,618 163,337 272,932 130,729 131,646 127,234 75,758
Stockholders' equity.............. 270,574 163,337 248,936 154,961 71,061 43,336 45,252
</TABLE>
- ---------------
(1) Natural gas liquid revenues for 1992, 1993 and 1994 have been reclassified
from other revenues to oil and gas sales for consistent presentation with
1995 and 1996 revenues.
(2) Prior to September 14, 1993, Forcenergy was exempt from United States
federal and certain state income taxes as a result of its partnership
status. The unaudited pro forma data reflects the income tax expense that
would have been recorded had Forcenergy not been exempt from paying such
income taxes. Net income per share data for 1993 and 1992 is described as
unaudited pro forma because of Forcenergy's former partnership status.
58
<PAGE> 62
FORCENERGY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Production Data
The following table sets forth Forcenergy's historical oil and natural gas
production data during the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31,
----------------- ---------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Production in thousands:
Liquids (MBbls)(1)........................ 5,924 2,839 4,006 2,343 1,753
Natural gas (MMcf)........................ 40,781 22,283 32,738 21,112 17,121
Total (MBOE).............................. 12,721 6,553 9,462 5,862 4,607
Average realized sales prices(2):
Oil (per Bbl)............................. $ 17.83 $ 16.87 $ 17.07 $ 17.23 $ 15.69
Plant products (per Bbl).................. 14.13 13.64 14.96 10.00 9.96
Liquids (per Bbl)(1)...................... 17.62 16.65 16.93 16.46 15.04
Natural gas (per Mcf)..................... 2.27 2.11 2.16 1.59 1.87
Expenses (per MBOE):
Lease operating........................... $ 4.18 $ 4.19 $ 4.08 $ 4.20 $ 5.16
Production taxes.......................... .26 .38 .36 .30 .36
Depletion, depreciation and
amortization........................... 6.36 6.18 6.18 5.28 5.28
General and administrative, net........... .87 .82 .84 .96 1.18
</TABLE>
- ---------------
(1) Includes crude oil, condensate and natural gas liquids.
(2) Net of effects of hedging.
COMPARISON OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30,
1996
Operating and Net Earnings. Forcenergy's operating earnings improved by
164% to $50.2 million for the nine months ended September 30, 1997 compared to
$19.0 million for the same period last year. Net earnings for the 1997 period
increased by 206% to $18.9 million compared to earnings of $6.2 million for the
1996 period. The increases in both operating earnings and net earnings were
attributable primarily to higher production levels and, to a lesser extent,
higher average net realized liquids and natural gas prices.
Production. Net liquids production increased by 109% to 5,924 Mbbls for the
first nine months of 1997 compared to the 2,839 Mbbls produced during the nine
months ended September 30, 1996. Net gas production increased to 40,781 Mmcf in
the 1997 period, an 83% improvement over the 22,283 Mmcf reported for the first
nine months of 1996. The increase in both liquids and gas production were
attributable primarily to Forcenergy's successful drilling activities during the
latter part of 1996 and 1997, from the acquisition of producing properties in
the Gulf of Mexico, and from the acquisition of crude oil producing properties
in the Cook Inlet area, Alaska.
Revenues. Revenues for the nine months ended September 30, 1997 increased
by 110% to $198.7 million compared to the $94.8 million reported for the same
period in 1996, due primarily to higher production volumes and, to a lesser
degree, higher average net realized liquids and natural gas prices. Average net
realized liquids prices increased by 6% to $17.62 compared to the $16.65
reported for the comparable period in 1996. Net realized natural gas prices rose
to $2.27 for the 1997 period, an 8% increase over the $2.11 received for the
comparable period of 1996.
59
<PAGE> 63
For the first nine months of 1997, average prices received for field
production were $18.33 per barrel and $2.36 per Mcf for liquids and natural gas,
respectively. Hedging activities during 1997 resulted in a $2.8 million
reduction in oil revenue and a $3.9 million reduction in natural gas revenue,
which reduced realized prices to $17.62 per barrel for liquids and $2.27 per Mcf
for natural gas. Average prices received for field production in 1996 were
$19.52 per barrel and $2.26 per Mcf for liquids and natural gas, respectively.
Hedging activities during the same period in 1996 resulted in a $7.0 million
reduction in oil revenue and a $3.2 million reduction in natural gas revenue,
thereby reducing realized liquids and natural gas prices to $16.65 per barrel
and $2.11 per Mcf, respectively.
Lease Operating Expenses. For the nine months ended September 30, 1997,
lease operating expenses increased by 94% to $53.2 million compared to the $27.4
million reported for the 1996 period. The increase related primarily to
properties acquired in the latter part of 1996 and 1997, and, to a lesser
degree, higher workover and repair and maintenance costs during the 1997 period.
On an equivalent unit of production basis, lease operating expenses for the 1997
period were comparable to lease operating expenses for the nine months ended
September 30, 1996. Excluding the Alaska properties, expenses per BOE decreased
from $4.19 in the 1996 period to $3.55 in 1997.
Depletion, Depreciation and Amortization. Depletion, depreciation and
amortization increased to $80.9 million during the nine months ended September
30, 1997 compared to the $40.5 million reported for the same period in 1996. The
increase was attributable to increased production from acquisitions and drilling
activities and, to a lesser extent, an increase in the depletion rate per unit
of production to $6.36 per BOE, from $6.18 per BOE in 1996.
General and Administrative Expense. General and administrative expense, net
of overhead reimbursements and capitalized internal costs, was $11.1 million, or
$.87 per BOE, for the first nine months of 1997 compared with $5.4 million, or
$.82 per BOE, for the comparable 1996 period. This increase was attributable to
the overall growth of Forcenergy, including the expansion of its onshore and
international operations, during the latter part of 1996 and the first nine
months of 1997.
Interest and Other Income. Interest and other income increased to $2.7
million in the first nine months of 1997 compared to the $380,000 reported for
the same period last year. The increase resulted primarily from Forcenergy's
equity in the earnings of Cook Inlet Pipeline Company ($1.4 million) and
interest income earned on higher cash balances maintained subsequent to
Forcenergy's late 1996 and early 1997 debt and equity offerings.
Interest Expense. Interest expense, net of amounts capitalized, increased
to $23.0 million in the nine months ended September 30, 1997, compared to the
$9.5 million reported for the comparable period of 1996. The increase in
interest expense was due primarily to an increase in long-term debt and, to a
lesser extent, higher interest rates on Forcenergy's new fixed-rate, long-term
subordinated debt issues.
Income Tax Provision. Income tax expense increased by $7.3 million to $11.0
million, resulting primarily from the improvement in earnings for the first nine
months of 1997 compared to the same period in 1996.
Earnings Per Share. Earnings per share improved by 132% to $.79 per common
and common equivalent share for the first nine months of 1997 compared to the
$.34 per share reported for the same period last year, calculated on weighted
average common and common equivalent shares of approximately 24.0 million and
18.3 million for 1997 and 1996, respectively.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Operating and Net Income. Operating income increased to $30.7 million for
the year ended December 31, 1996, a 230% improvement compared to the $9.3
million reported for the prior year. Net income for 1996 rose to $11.3 million
compared to a net loss of $1.9 million in 1995. The improvement in both
operating income and net income/loss was attributable primarily to higher
production volumes and higher net realized oil and gas prices.
60
<PAGE> 64
Production. Forcenergy's net liquids production rose to 4,006 Mbbls for the
year ended December 31, 1996 from 2,343 Mbbls in 1996, a 71% improvement. Net
gas production increased to 32,738 Mmcf in 1996, a 55% increase over the 21,112
Mmcf produced last year. On an equivalent unit basis, 1996 oil and gas
production increased to 56,774 Mmcfe, 61% more than the 35,170 Mmcfe produced
during 1995. The increase in both oil and gas production was attributable to new
production from recent acquisitions of oil and gas properties as well as from
successful drilling and workover programs begun in late 1995 and continuing
through 1996.
Revenues. Revenues for the 1996 year increased to $139.4 million, a 92%
improvement over the $72.6 million reported last year, primarily because of
higher production volumes and higher net realized prices. Average net realized
liquid prices rose to $16.93 per barrel in 1996, a 3% increase over the $16.46
per barrel received in 1995. Average net realized gas prices rose to $2.16 per
Mcf in 1996, a 36% increase over the $1.59 per Mcf reported in 1995.
Average prices received for field production for the 1996 year were $20.49
per bbl and $2.40 per mcf for oil and natural gas, respectively. After taking
into account the effects of 1996 hedging activities entered into to guarantee a
certain level of cash flow from production, specifically a $12.8 million
reduction in oil revenue and a $7.7 million reduction in gas revenue, net
realized prices were reduced to $17.07 per bbl and $2.16 per mcf for oil and
natural gas, respectively. Average realized prices for 1995 were $17.23 per bbl
of oil and $1.59 per mcf of gas. Effects of hedging activities were not
significant in the year ended December 31, 1995.
Lease Operating Expenses. Lease operating expenses were $38.8 million in
1996 compared to the $24.5 million reported for 1995, 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 decreased to $.68 per Mcfe in 1996 from $.70 per mcf in 1995, a
decrease attributable primarily to increased production levels on existing
properties during the latter part of 1996.
Depletion, Depreciation and Amortization ("DD&A"). DD&A expense increased
to $58.5 million in 1996 from the $31.3 million reported for 1995, an increase
attributable to higher production levels and to an increase in the DD&A rate per
unit of production to $1.03 per Mcfe, compared to $.88 per mcf in 1995.
General and Administrative. General and administrative costs were $8.0
million in 1996 compared with $5.7 million reported in 1995, an increase due to
the overall growth of Forcenergy during the latter half of 1995 and through
1996. On an equivalent Mcf produced basis, general and administrative expenses
decreased to $.14 per Mcfe in 1996 from a rate of $.16 per Mcfe in 1995,
primarily due to the higher production levels in 1996.
Income Tax Provision (Benefit). Income tax expense increased to $6.7
million in 1996, from a benefit of $1.1 million in 1995, due to the improvement
in results of operations compared to 1995.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Operating and Net Income. Operating income increased 304%, to $9.3 million
in 1995 from $2.3 million in 1994. Forcenergy's net loss for 1995 was $1.9
million compared with a net loss of $4.1 million in 1994. These improvements
were attributable to higher oil and gas production and lower per unit lease
operating costs.
Production. Net liquid production increased by 34%, to 2,343 Mbbls in 1995
from 1,753 Mbbls in 1994 and net gas production increased by 23%, to 21.1 Bcf in
1995 from 17.1 Bcf in 1994. Forcenergy's total net equivalent production
increased to 35.2 Bcfe in 1995, a 28% improvement over the 27.6 Bcfe produced in
1994, due primarily to the acquisition of additional offshore properties in late
1994 and in early 1995 and the addition of new production attained from the
successful 1995 drilling program.
Revenues. Total revenues increased 24% to $72.6 million in 1995 compared
with $58.7 million in 1994, primarily because of higher production volumes,
which in turn resulted from acquisitions closed during 1995 and Forcenergy's
successful drilling program. Oil revenues for the year increased by 47%, to
$38.6 million in 1995 from $26.3 million in the prior year. Average net realized
liquid prices of $16.46 per barrel in 1995 were
61
<PAGE> 65
9% higher than the $15.04 per barrel received in 1994. Gas revenues rose to
$33.6 million in 1995, 5% more than the $31.9 million in 1994; however, average
net realized gas prices declined to $1.59 per Mcf in 1995, 15% below the $1.87
average per Mcf received in 1994.
Lease Operating Expenses. Lease operating expenses increased by $763,000,
or 3%, in 1995 compared to 1994 because of the addition of new properties;
however, on an Mcfe produced basis, costs declined 19% from $.86 per Mcfe in
1994 to $.70 per Mcfe in 1995. This decline in the per unit cost was
attributable to Forcenergy's success in adding new production through
development of new reserves from existing properties and facilities and through
acquiring new properties that provide operating synergies with existing
properties.
Depletion, Depreciation and Amortization. Total DD&A increased 27% to $31.3
million during 1995 compared with $24.6 million during 1994, primarily as a
result of higher production volumes in 1995 as the DD&A rate was substantially
the same for both years.
General and Administrative. General and administrative expenses declined to
$5.7 million in 1995, 12% less than the $6.5 million incurred in 1994. The costs
for 1994 reflected higher third-party engineering and consulting fees associated
with several acquisition possibilities that never materialized. Additionally,
Forcenergy billed more general and administrative expenses, as provided for in
joint operating agreements, to joint interest owners in 1995 due to the
increased drilling activity.
Interest Expense. Interest expense, net of amounts capitalized, increased
23% to $11.7 million, compared to $9.5 million in 1994. This increase was
primarily attributable to the acquisition related increases in Forcenergy's debt
levels prior to the repayment of a portion of that debt with proceeds from the
initial public offering.
Interest and Other Income. Interest and other income (loss) reflected a net
charge of $561,000 in 1995 compared with income of $789,000 in 1994. The 1995
charge included a non-cash adjustment to certain balance sheet items associated
with activities in previous years. Interest income was $474,000 in 1995 compared
with $454,000 in the prior year.
Income Tax Provision (Benefit). The income tax benefit decreased to $1.1
million in 1995, from $2.4 million in 1994, due to the improvement in the
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Forcenergy has historically funded its operations, acquisitions, capital
expenditures and working capital requirements through cash flows from
operations, bank borrowings and private and public placements of debt and equity
securities. Forcenergy's primary sources of funds for each of the periods
indicated herein were as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------- ------------------------------
1997 1996 1996 1995 1994
--------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities.......................... $ 115,901 $ 43,699 $ 65,228 $ 28,574 $22,433
Borrowings under the Senior Credit
Facility............................ 193,680 134,732 255,968 35,709 6,872
Repayments under the Senior Credit
Facility............................ (225,994) (68,796) (250,091) (38,666) --
Net proceeds from issuance of common
stock............................... 2,373 169 46,318 55,753 31,800
Issuance of long-term debt, net of
expenses............................ 193,414 -- 169,114 -- --
</TABLE>
Forcenergy had negative working capital of $24.7 million at September 30,
1997 compared to working capital of $6.7 million at December 31, 1996. The
decrease in working capital was mainly attributable to an increase in accounts
payable and accrued liabilities associated with Forcenergy's third quarter 1997
drilling activities and, to a lesser extent, accrued interest, which was
partially offset by an increase in other current assets resulting from
prepayments for drilling activities, seismic data, and lease operations.
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<PAGE> 66
Forcenergy generated approximately $115.9 million in cash from operations
during the first nine months of 1997 compared to $43.7 million during the same
period in 1996. Producing properties acquired, the successful 1996/1997 drilling
programs, and to a lesser extent, higher net realized oil and gas prices
contributed to the increase in cash flow.
Total capital expenditures were $285.1 million for the nine months ended
September 30, 1997, including $111.7 million for acquisitions. Capital
expenditures were funded by Forcenergy's existing Senior Credit Facility,
proceeds from the offering of 8 1/2% Senior Subordinated Notes, and cash
generated from operations.
Total long-term debt at September 30, 1997 was $440.6 million compared to
$272.9 million at December 31, 1996. During February 1997, Forcenergy completed
a private placement of $200 million in 8 1/2% Senior Subordinated Notes priced
at $99.338 for a yield to maturity of 8.6%. Forcenergy received approximately
$194.0 million in net proceeds and used the majority of the proceeds to repay
all outstanding indebtedness under Forcenergy's Senior Credit Facility and to
fund producing property acquisitions in June and September 1997.
As of December 31, 1997, the borrowing base under the Senior Credit
Facility was $195 million of which $59.3 million was available for borrowing.
The maximum commitment under the Senior Credit Facility is $200 million.
Forcenergy's cash capital expenditures, exclusive of acquisitions, were
$224.9 million as of November 30, 1997. Forcenergy currently anticipates that
its capital expenditure budget for 1998 will be comparable to 1997. Actual
levels of capital expenditures may vary significantly due to a variety of
factors, including drilling results, oil and gas prices, industry conditions and
outlook, future acquisitions of properties and the availability of capital.
Although Forcenergy does not budget for acquisitions, it will continue to pursue
selective acquisition opportunities with significant exploration and development
potential.
Forcenergy utilizes, from time to time, forward sales contracts and
commodity swaps on portions of its current 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 production is not hedged so as
to provide Forcenergy the opportunity to benefit from oil and natural gas price
increases, should they occur. Forcenergy has entered into forward sales and swap
arrangements with respect to approximately 19% of its estimated natural gas
production through May 1998 at a weighted average price of $2.36 per Mcf.
Forcenergy has also hedged an additional 26% of its estimated natural gas
production through March 1998 using a collar arrangement with a floor of $2.25
per Mcf and a ceiling of $3.00 per Mcf. Furthermore, Forcenergy has hedged,
through three-way options, 10% of its estimated first quarter 1998 natural gas
production, with a maximum benefit of $.30 per Mcf if prices decline below an
average floor of $2.71 per Mcf, and with no exposure if prices remain below an
average ceiling of $3.93 per Mcf. Forcenergy has also hedged approximately 17%
of its estimated oil production through December 1998 using collar arrangements
with weighted average floors of $18.21 per Bbl and weighted average ceilings of
$23.08 per Bbl. The production percentages reflected assume current production
rates. As a result of hedging activities, Forcenergy recognized an increase in
oil and gas sales revenue of $102,000 for the three months ended September 30,
1997 and a decrease in oil and gas sales revenue of $6.7 million for the nine
months ended September 30, 1997.
On October 22, 1997, Forcenergy completed its mergers with Edisto Resources
Corporation and Convest Energy Corporation. In connection with the mergers,
Forcenergy reserved for issuance 2,829,913 shares of FEN Common Stock at a value
of $34.96 per share, of which approximately 2.7 million shares have been issued
as of January 30, 1998.
Effective June 18, 1997, Forcenergy's Common Stock was accepted for listing
on the New York Stock Exchange. Forcenergy's Common Stock began trading under
the symbol FEN on that day.
Management believes that cash flows from operations and borrowing capacity
under Forcenergy's Senior Credit Facility will be adequate to meet currently
anticipated liquidity needs, including funding Forcenergy's financial
obligations and capital expenditure program.
63
<PAGE> 67
FORCENERGY MANAGEMENT
DIRECTORS OF FORCENERGY
Stig Wennerstrom, age 54, has been President and Chief Executive Officer
and a Director of Forcenergy since its inception in September 1993. From 1982
until the formation of Forcenergy, Mr. Wennerstrom was the President and Chief
Executive Officer of Forcenergy's predecessors.
Bruce L. Burnham, age 63, has served as a director of Forcenergy since
1996. Mr. Burnham has served as President of The Burnham Group, a privately-held
consulting and marketing firm formed by Mr. Burnham shortly after retiring from
Dayton's Department Stores in 1984. From 1981 to 1984, Mr. Burnham served as
Chairman and Chief Executive Officer of Dayton's Department Stores in
Minneapolis, Minnesota. From 1979 to 1980, Mr. Burnham was President and Chief
Executive Officer of Bonwit Teller in New York City. From 1978 to 1979, Mr.
Burnham was President and Chief Operating Officer of Jordan Marsh. He serves on
the Board of Directors of Paxson Communications Corporation, Financial Benefit
Group, Inc. and J.B. Rudolph, Inc.
Eric Forss, age 31, has been a Director of Forcenergy since June 1994. Mr.
Forss has been President of FAB since May 1991. Prior to serving as President of
FAB, Mr. Forss was Vice President of FAB from May 1990 through April 1991. Mr.
Forss has served on the Board of Directors of FAB since May 1994.
Robert Issal, age 51, has served as Chairman of the Board of Directors of
Forcenergy since May 1994 and has been a Director since Forcenergy's inception
in September 1993. Mr. Issal has also served as Chairman of FAB since May 1994
and served as Vice Chairman of FAB from April 1992 to April 1994. Mr. Issal
served as President and Chief Executive Officer of Forsheda AB, a Swedish public
company, from 1988 through 1991. From 1991 through 1994, Mr. Issal was the
Chairman and President of Abstracta Group. Since 1994, Mr. Issal has served as
Chairman and President of Rejmyre Belysning AB Sweden, a Swedish lighting
manufacturer.
William F. Wallace, age 57, has served as a director of Forcenergy since
1996. Mr. Wallace currently is an advisory member of The Beacon Group, a private
investment and advisory partnership. Prior to joining The Beacon Group in early
1996, Mr. Wallace was Vice Chairman of Barrett Resources/Plains Petroleum
Company and President and Chief Operating Officer of Plains Petroleum Company
from 1994 to March 1996. Prior to Joining Plains Petroleum Company in 1994, Mr.
Wallace spent a combined total of 22 years with Texaco, Inc., the last five of
which he served as Regional Vice President.
EXECUTIVE OFFICERS OF FORCENERGY
The executive officers of Forcenergy are Stig Wennerstrom, President and
Chief Executive Officer and those officers listed below. Biographical
information on Mr. Wennerstrom is included above under "--Directors of
Forcenergy".
Gary Carlson, age 51, is Vice President -- Exploration and Production
(Alaska Division) of Forcenergy and has responsibility for all Alaskan
operations. Prior to joining Forcenergy in March 1997, Mr. Carlson held various
positions during a tenure of 29 years with Unocal Corporation, most recently
serving as Unocal's General Manager for Health, Environmental and Safety Support
from 1995 until joining Forcenergy. Mr. Carlson also served as President and
Managing Director of Unocal Indonesia from 1992 to 1995 and as Managing Director
for Unocal Netherlands N.V. from 1989 to 1992.
Robert G. Gerdes, age 41, is Vice President -- Geoscience of Forcenergy,
with responsibility for technical overview of company-wide geoscience, as well
as technical evaluation of acquisitions and new ventures. Mr. Gerdes joined
Forcenergy in January 1994, after having worked as a consulting geologist since
September 1993. Mr. Gerdes served as Senior Geologist -- Corporate Staff for
Graham Resources from August 1987 to September 1993. Prior to joining Graham
Resources, Mr. Gerdes held various geological positions with Crescent
Exploration Company and Unocal Corporation.
64
<PAGE> 68
Thomas F. Getten, age 50, is Vice President, General Counsel and Secretary
of Forcenergy. Prior to joining Forcenergy in January 1997, Mr. Getten was in
private law practice in New Orleans, Louisiana. From May 1974 until December
1995, Mr. Getten was a partner and stockholder with Liskow & Lewis, and from
January 1996 until December 1996, Mr. Getten was a partner with Nesser, King &
LeBlanc.
E. Joseph Grady, age 44, is Vice President, Treasurer and Chief Financial
Officer of Forcenergy. From 1980 until joining Forcenergy in October 1995, Mr.
Grady held various financial management positions with Southdown, Inc. and its
subsidiaries, including Pelto Oil Company from 1980 through 1989, serving as
Vice President -- Finance in 1988 and 1989. Most recently Mr. Grady was Director
of Finance for Southdown Environmental Systems, Inc. from January 1991 until
joining Forcenergy.
Percy A. Payne, age 56, is Vice President -- Exploration and Production
(Gulf of Mexico Division) of Forcenergy and has responsibility for all Gulf of
Mexico and Gulf Coast operations. Prior to joining Forcenergy in August 1996,
Mr. Payne served as President of Payne Energy Associates, Inc., a privately held
consulting group formed by Mr. Payne in September 1994 serving the international
oil industry. Prior to establishing his consulting business, Mr. Payne held
various positions during a tenure of 27 years with Shell Oil Company USA, most
recently serving as Vice President of Pecten International, Shell Oil Company
USA's international subsidiary. Mr. Payne also served as General Manager of
Operations for the lower 48 states (less California) and Alaska for Shell
Western E&P from April 1986 to September 1991.
J. Russell Porter, age 35, is Executive Vice President. Prior to his
promotion to Executive Vice President in July 1997, Mr. Porter served as Vice
President -- Corporate Development from October 1995 to June 1997 and as Vice
President -- Financial Planning and Analysis from April 1994 to October 1995.
From January 1992 until joining Forcenergy, Mr. Porter held the position of Vice
President in the Natural Resources Group of Internationale Nederlanden (U.S.)
Capital Corporation in New York. From July 1990 to December 1991, Mr. Porter was
an Associate in the Energy Group of Manufacturers Hanover and Chemical Bank.
Neil M. Sullivan, age 55, is Vice President -- Onshore Exploration Houston
Division of Forcenergy. Prior to joining Forcenergy in October 1997, Mr.
Sullivan served as President of New Ventures Associates and its predecessor
company, Bluebonnet Petroleum, from 1987 to September 1997. Previously, Mr.
Sullivan held executive positions as Vice President of Gulf Coast Exploration at
Valero Energy Corporation and Vice President of Southern Region Exploration for
Anadarko Petroleum Corp. Mr. Sullivan was also employed by Conoco, Inc. and
Texaco, Inc. in various positions dating to 1970.
Mark Yelverton, age 42, is Vice President -- International Operations of
Forcenergy and is responsible for all international activities. Before joining
Forcenergy in April 1997, Mr. Yelverton served as Director General for Phibro
Energy (White Nights Joint Enterprise, Russia) from 1991-1997, where he was
Director General. Prior to joining Phibro, Mr. Yelverton was employed by Chevron
Corporation serving in various petroleum engineering and geological positions.
65
<PAGE> 69
BENEFICIAL OWNERSHIP OF FEN COMMON STOCK
The following table is furnished as of January 30, 1998 to indicate
beneficial ownership of shares of the FEN Common Stock by persons owning more
than 5% of the FEN Common Stock and all executive officers and directors of
Forcenergy individually and such executive officers and directors as a group.
The information in the following table is provided by such persons.
<TABLE>
<CAPTION>
FEN COMMON VESTED PERCENT
STOCK(1) OPTIONS(2) TOTAL OF CLASS
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Forcenergy AB(3)................................. 8,740,486 -- 8,740,486 34%
Stig Wennerstrom(3)(4)........................... 264,429 1,123,438 1,387,867 5%
Gary Carlson(3)(6)............................... 4,417 -- 4,417 *
Robert Gerdes(3)................................. 626 -- 626 *
Thomas F. Getten(3).............................. 906 -- 906 *
E. Joseph Grady(3)............................... 1,345 20,000 21,345 *
Percy A. Payne(3)................................ 1,039 10,000 11,039 *
J. Russell Porter(3)(5).......................... 4,493 123,337 127,830 *
Neil Sullivan(3)................................. -- -- -- *
Mark Yelverton(3)................................ -- -- -- *
Bruce L. Burnham(3).............................. 15,000 11,166 26,166 *
Eric Forss(3).................................... 8,740,486 31,000 8,771,486 34%
Robert Issal(3).................................. -- 31,000 31,000 *
William F. Wallace(3)............................ 2,000 11,166 13,166 *
Directors and officers, total as a group......... 9,034,741 1,361,107 10,395,848 39%
</TABLE>
- ---------------
* Less than 1%
(1) Except as otherwise noted, each stockholder has sole voting and investment
power with respect to the shares beneficially owned.
(2) Represent shares of FEN Common Stock issuable pursuant to stock option
grants that are vested or that will be vested within 60 days of the
effective date of this schedule.
(3) The address of Forcenergy AB and Messrs. Forss and Issal is Birger
Jarlsgatan, 73-75, Box 19040, S-10432 Stockholm, Sweden. The address of
Messrs. Wennerstrom, Getten, Grady and Porter is 2730 SW 3rd Avenue, Suite
800, Miami, Florida 33129. The address of Mr. Wallace is 30036 Snowbird
Lane, Evergreen, Colorado 80439. The address of Mr. Burnham is 10 Haig Point
Circle, Hilton Head, South Carolina 29938. The address of Messrs. Gerdes,
Payne and Yelverton is 3838 N. Causeway Boulevard, Lakeway 3, Suite 2300,
Metairie, Louisiana 70002. The address of Mr. Sullivan is 1111 Bagby St.,
Suite 4850, Houston, Texas 77002. The address of Mr. Carlson is 310 K
Street, Suite 700, Anchorage, Alaska 99501.
(4) Of the shares listed as beneficially owned by Mr. Wennerstrom, 3,000 shares
are owned by each of his children, Linda Wennerstrom and Henrik Wennerstrom,
for which Mr. Wennerstrom disclaims beneficial ownership.
(5) Of the shares beneficially owned by Mr. Porter, 1,000 shares are owned by
his wife, Deborah A. Porter.
(6) Of the shares beneficially owned by Mr. Carlson, 1,600 shares are owned by
his children Nathan Carlson (300 shares), Amanda Carlson (300 shares), Gary
Carlson (500 shares) and Rachael Carlson (500 shares). In addition, 200
shares are owned in trust for Gary Carlson.
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<PAGE> 70
DESCRIPTION OF SHAREHOLDER AGREEMENT
Pursuant to the Shareholder Agreement, the Forss Affiliates have agreed
unconditionally and irrevocably to accept the Exchange Offer in accordance with
the terms and conditions of the Exchange Offer, not later than the third
business day after the date on which the Exchange Offer period for acceptance
begins. The Forss Affiliates have also agreed not to solicit or encourage any
offer from any party other than Forcenergy concerning the possible disposition
of FAB Securities.
Forcenergy has agreed pursuant to the Shareholder Agreement to keep the
Exchange Offer open until March 31, 1998; provided that Forcenergy may, subject
to all legal and regulatory requirements, extend such period of time at its sole
discretion. Forcenergy has also agreed, subject to the Offer Conditions, to pay
for and receive the FAB Securities which have been tendered under the Exchange
Offer not later than ten business days after the Expiration Date at a purchase
price of 0.75 shares of FEN Common Stock for each FAB Series A Common Share and
0.5359 shares of FEN Common Stock for each FAB Series B Common Share. Pursuant
to the Shareholder Agreement, the Exchange Offer is conditioned on the
satisfaction or waiver of the Offer Conditions prior to the Expiration Date. See
"The Exchange Offer -- Conditions to the Exchange Offer."
If, as a result of a superior offer being made by another party to the
shareholders of FAB, the Exchange Offer is allowed to expire or the Exchange
Offer is terminated as a result of the conditions precedent thereto not being
met, Forcenergy has the option (the "Option") to purchase all of the Forss
Shares, representing approximately a 52% voting interest and a 22% equity
interest in FAB, in exchange for either (i) 1,947,403 shares of FEN Common Stock
or (ii) for cash equal to such number of shares times the greater of $33.00 or
the closing market price of FEN Common Stock on the date the Option is exercised
by Forcenergy, in each case exercisable at any time before the third business
day prior to the first publicly announced expiration date of the Exchange Offer;
provided, if the expiration date of the Exchange Offer occurs prior to the
Expiration Date of the Exchange Offer, Forcenergy shall have until the date on
which Forcenergy pays for and receives the FAB Securities which have been
tendered under the Exchange Offer not later than ten business days after the
Expiration Date (the "Closing Date").
Pursuant to the Shareholder Agreement, the Forss Affiliates also granted to
certain officers of Forcenergy in their capacity as officers of Forcenergy an
irrevocable proxy (the "Forss Proxy") to call and attend any and all meetings of
FAB's shareholders, to execute any and all written consents of FAB shareholders
and to vote all of the Forss Shares and any and all shares of any other class of
capital stock of FAB presently or at any future time owned beneficially or of
record by the Forss Affiliates, including any and all securities having voting
rights issued or issuable in respect thereof, which the Forss Affiliates are
entitled to vote, and to represent and otherwise act as the Forss Affiliates
could act, in the same manner and with the same effect as if the Forss
Affiliates were personally present, at any annual, special or other meeting of
the shareholders of FAB, or pursuant to any written consent in lieu of a meeting
or otherwise. The Forss Affiliates have also agreed not to vote or take any
action by written consent of shareholders in lieu of a meeting on any matter
that is subject to the Forss Proxy without Forcenergy's prior written consent.
The Forss Affiliates have also agreed with Forcenergy not to transfer,
sell, exchange, pledge or otherwise encumber, without obtaining the prior
written consent of Forcenergy (which consent shall not be unreasonably
withheld), any of the shares of FEN Common Stock received in the Exchange Offer
for a period of six months following with Expiration Date; provided, the Forss
Affiliates may transfer, sell, exchange, pledge or otherwise encumber (i) up to
25% of the total number of shares of FEN Common Stock received by the Forss
Affiliates in accordance with the Exchange Offer and (ii) up to 100% of such
shares of FEN Common Stock for the sole purpose of pledging such shares of FEN
Common Stock to a lending institution or institutions in connection with
securing a bank line of credit offered by such institution.
Eric Forss, Forsinvest AB and their affiliates may be deemed "affiliates"
of Forcenergy after the Exchange Offer and the shares of FEN Common Stock or
SDRs owned by them may be subject to certain resale limitations of Rule 144
under the Securities Act. Forcenergy has agreed, upon the acceptance of the
Exchange Offer, to enter into a registration rights agreement in order to give
the Shareholders the right on one occasion to require Forcenergy to register all
or part of the shares of FEN Common Stock received by the
67
<PAGE> 71
Shareholders in connection with the Exchange Offer under the Securities Act,
unless (i) an exemption for such proposed sale exists under the Securities Act
or (ii) Forcenergy has given notice of its intention to file a registration
statement. Forcenergy has also agreed to provide the Shareholders with piggyback
registration rights in any offering by Forcenergy of any of its securities to
the public except a registration statement on Forms S-4 or S-8. Forcenergy will
bear the expenses of all such registrations.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the Shareholder Agreement described above, Forcenergy is
currently a party to or has engaged in the following transactions with its
directors, officers and principal stockholders.
Forcenergy leases its principal offices in Miami, Florida from an affiliate
of the Forss family. The terms of the lease include current monthly payments of
$23,612, subject to a yearly escalation not to exceed 6%, and a term of five
years, expiring in November 1998. Forcenergy made payments under such lease of
$280,000 in 1996 and $267,000 for the first 11 months of 1997. Forcenergy
believes that the lease terms are comparable to those terms which could be
obtained from an unaffiliated third party.
In connection with Mr. Wennerstrom's currently outstanding stock options,
Forcenergy has granted certain piggy back registration rights and a put option
on the value of all such options and the FEN Common Stock acquired through the
exercise of such options, including the 1995 option grants.
Forcenergy has a consulting arrangement with Wictor Forss, the former
Chairman of the Board of Forcenergy and of FAB, whereby Mr. Forss receives
$10,000 per month in exchange for consulting services. The arrangement may be
terminated by either party upon 60 days notice. Forcenergy believes that Mr.
Forss' prior years of service to Forcenergy as a Director enable him to provide
business and financial advice to Forcenergy at a reasonable cost. Subsequent to
the Exchange Offer, Forcenergy currently expects this consulting arrangement
with Wictor Forss will be terminated.
INFORMATION REGARDING FAB
BUSINESS OF FAB
Business of Forcenergy AB. Forcenergy AB ("FAB") operates primarily as a
holding company with approximately a 34% equity interest in Forcenergy, a 100%
ownership of Svenska Oljegruppen AB ("SOG") and approximately SEK 30 million in
cash at December 29, 1997. Forcenergy is engaged in exploration and production
of oil and gas and represents the majority of the net worth of FAB. Forcenergy's
activities are conducted primarily offshore in the Gulf of Mexico and Alaska. As
of December 21, 1997, Forcenergy's average daily production was approximately
23.7 MBO and 226.3 MMcf. Forcenergy is incorporated in the State of Delaware,
USA and is listed on the NYSE under the symbol "FEN." SOG is engaged in oil
trading, SOG's principal business is comprised of the purchase and sale of oil
and related products, primarily in Northern European markets.
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<PAGE> 72
FAB SELECTED FINANCIAL INFORMATION
The following table sets forth selected historical financial data for FAB
as of and for each of the periods indicated. The following data should be read
in conjunction with FAB's financial statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- ---------- ---------- --------
(UNAUDITED) (SEK)(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Oil and gas sales and other........ -- -- 671 340,201 455,841 393,177 214,847
Oil trading revenues............... 141,612 663,122 879,951 139,853 -- -- --
Equity in earnings of associated
companies........................ 86,861 37,142 59,280 2,755 -- -- --
-------- -------- -------- -------- ---------- ---------- --------
Total revenues................. 228,473 700,264 939,902 482,809 455,841 393,177 214,847
Operating expenses................... (149,414) (669,298) (890,133) (296,286) (252,218) (177,035) (98,047)
-------- -------- -------- -------- ---------- ---------- --------
Operating income before
depreciation....................... 79,059 30,966 49,769 186,523 203,623 216,142 116,800
Standard depreciation
Standard depreciation according to
plan............................. (190) (244) (273) (155,642) (185,485) (137,513) (71,378)
Prior year's depreciation
revision......................... -- -- -- (31,175) -- -- --
-------- -------- -------- -------- ---------- ---------- --------
Operating income after
depreciation....................... 78,869 30,722 49,496 (294) 18,138 78,629 45,422
Financial items
Interest income.................... 1,559 1,056 1,834 5,143 5,929 3,688 1,007
Other financial items.............. (975) (1,205) 128,590 35,776 3,009 3,545 1,519
Interest expenses.................. (45) (11) (734) (53,847) 58,157 (41,840) (21,656)
-------- -------- -------- -------- ---------- ---------- --------
Earnings after financial items....... 81,358 30,562 179,186 (13,222) (31,081) 44,022 26,292
Minority interest in earnings before
tax................................ -- -- -- 427 -- (1,248) (947)
-------- -------- -------- -------- ---------- ---------- --------
Earnings before tax.................. 81,358 30,462 179,186 (12,795) (31,081) 42,774 25,345
Tax provision (benefit).............. 30,935 13,966 29,236 (16,129) (8,892) 13,281 13,292
-------- -------- -------- -------- ---------- ---------- --------
Net income........................... 50,423 16,596 149,950 3,334 (22,189) 29,493 12,053
======== ======== ======== ======== ========== ========== ========
Earnings per share (before tax)
SEK................................ 5.65 2.12 12.45 (0.89) (2.67) 5.23 3.44
Earnings per share (after tax) SEK... 3.50 1.15 10.42 0.23 (1.91) 3.61 1.64
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital...................... 35,654 13,194 54,225 22,677 137,076 93,073 (19,977)
Total assets......................... 842,602 598,612 743,139 616,828 1,757,749 1,637,914 950,149
Total liabilities.................... 6,706 28,259 13,096 54,376 1,121,399 1,221,116 626,173
Total long-term debt................. -- -- -- -- 962,745 1,017,723 477,694
Stockholders' equity................. 835,896 570,353 730,043 562,452 636,350 416,798 323,976
</TABLE>
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<PAGE> 73
OWNERSHIP OF FAB SECURITIES
The following table sets forth information as of December 30, 1997, with
respect to all stockholders known by FAB to be owners of more than 3% of FAB
Securities and the amount of FAB's share capital owned as of December 30, 1997
collectively by all directors and officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENT OF PERCENT OF
OWNER NUMBER OF SHARES OWNED SERIES CAPITAL VOTES
----- ------------------------ -------------- ---------- ----------
A B A B
(1 VOTE) (1/10 VOTE)
--------- -----------
<S> <C> <C> <C> <C> <C> <C>
Forss family and associates...... 1,000,000 2,224,633 100% 16.6% 22.4% 52.2%
Hoare Govett Secs Ltd............ -- 1,042,800 --% 7.8% 7.2% 4.5%
Wasa............................. -- 911,600 --% 6.8% 6.3% 3.9%
Credit Suisse First Boston....... -- 627,200 --% 4.6% 4.4% 2.7%
Presidents and Fellows of Harvard
College........................ -- 588,580 --% 4.4% 4.1% 2.5%
Fidelity......................... -- 585,000 --% 4.4% 4.7% 2.5%
GSI/Netcome Pledge Account....... -- 454,000 --% 3.4% 3.2% 1.9%
Directors and officers,
total as a group..... -- 271,000 --% 2.0% 1.9% 1.2%
</TABLE>
As of December 29, 1997, there were 14,392,000 FAB Securities outstanding
with a par value of SEK 10. The issued shares consisted of 1,000,000 Series A
Common Shares, equivalent to 7 percent of the capital and 42.7 percent of the
votes, and 13,392,000 Series B Common Shares, equivalent to 93 percent of the
capital and 57.3 percent of the votes. As of December 31, 1997, there were
approximately 4,000 holders of record of FAB Securities.
DESCRIPTION OF FORCENERGY CAPITAL STOCK
Forcenergy's authorized capital stock consists of 50,000,000 shares of FEN
Common Stock and 5,000,000 shares of Preferred Stock, par value $0.01 per share.
On January 28, 1998, there were 25,513,102 shares of FEN Common Stock issued and
outstanding. In addition, 96,306 shares remained issuable and reserved for
issuance in connection with the Convest and Edisto mergers.
COMMON STOCK
Holders of FEN Common Stock are entitled to one vote per share in the
election of directors and on all other matters submitted to a vote of common
stockholders and do not have cumulative voting rights. Holders of FEN Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Forcenergy Board of Directors out of funds legally available therefore,
subject to any preferential dividend rights of holders of outstanding Preferred
Stock. Upon the liquidation, dissolution or winding up of Forcenergy, the
holders of Common Stock are entitled to receive ratably the net assets of
Forcenergy available after payment of all debts and other liabilities, subject
to the prior rights of any outstanding shares of Preferred Stock. Holders of
Common Stock have no preemptive, subscription, redemption or conversion rights.
PREFERRED STOCK
The Board of Directors of Forcenergy is empowered, without approval of the
stockholders, to cause shares of Preferred Stock to be issued in one or more
series, with the numbers of shares of each series to be determined by it. The
Forcenergy Board of Directors is authorized to fix and determine variations in
the designations, preferences, and relative, participating, optional or other
special rights (including, without limitation, special voting rights to receive
dividends or assets upon liquidation, rights of conversion into Common Stock or
other securities, redemption provisions and sinking fund provisions) between
series and between the Preferred Stock or any series thereof and the Common
Stock, and the qualifications, limitations
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or restrictions of such rights; and the shares of Preferred Stock or any series
thereof may have full or limited voting powers, or be without voting powers.
PREFERRED SHARE PURCHASE RIGHTS
On November 26, 1997, the Board of Directors authorized the adoption of a
stockholder rights plan (the "Rights Plan"). Each preferred share purchase right
provided for by the Rights Plan (a "Right") entitles the registered holder to
purchase from Forcenergy one one-thousandth of a share of Junior Participating
Preferred Stock, par value $.01 per share (the "Preferred Shares"), of
Forcenergy, at a price of $200.00 per one one-thousandth of a Preferred Share
(the "Purchase Price"), subject to adjustment.
Detachment of Rights; Exercise. Initially, the Rights will attach to all
FEN Common Stock certificates representing outstanding shares and no separate
Right Certificate will be distributed. The Rights will separate from the FEN
Common Stock and a Distribution Date will occur upon the earlier of (i) 10
business days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired beneficial
ownership of 20% or more of the outstanding Voting Shares (as defined in the
Rights Agreement) of Forcenergy, or (ii) 10 business days following the
commencement or announcement of an intention to commence a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of such outstanding Voting Shares.
For purposes of the definition of an Acquiring Person, FAB or any Successor
Entity (as defined in the Rights Agreement) shall not be deemed to be an
Acquiring Person.
Until the Distribution Date (or earlier redemption or expiration of the
Rights) (i) the Rights will be evidenced, with respect to the FEN Common Stock
outstanding on December 10, 1997, by the certificates representing such shares
of FEN Common Stock with a copy of a Summary of Rights to Purchase Preferred
Shares (the "Summary of Rights") attached thereto, (ii) the Rights will be
transferred with and only with the shares of FEN Common Stock, (iii) new FEN
Common Stock certificates issued after December 10, 1997, upon transfer or new
issuance of the shares of FEN Common Stock, will contain a notation
incorporating the Rights Agreement by reference, and (iv) the surrender for
transfer of any certificates for FEN Common Stock outstanding as of December 10,
1997, even without such notation or a copy of the Summary of Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the shares of FEN Common Stock represented by such certificate.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (the "Right Certificates") will be mailed to
holders of record of the shares of FEN Common Stock as of the close of business
on the Distribution Date and such separate Right Certificates alone will
thereafter evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on December 10, 2007 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or the Rights are earlier redeemed or exchanged by
Forcenergy as described below.
If a person or group were to acquire 20% or more of the Voting Shares of
Forcenergy, each Right then outstanding (other than Rights beneficially owned by
the Acquiring Person which would become null and void) would become a right to
buy that number of shares of FEN Common Stock (or under certain circumstances,
the equivalent number of one onethousandths of a Preferred Share) that at the
time of such acquisition would have a market value of two times the Purchase
Price of the Right.
If Forcenergy were acquired in a merger or other business combination
transaction or assets constituting more than 50% of its consolidated assets or
producing more than 50% of its earning power or cash flow were sold, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction would have a market value of two times the
Purchase Price of the Right.
Preferred Shares. The dividend and liquidation rights, and the
non-redemption feature, of the Preferred Shares are designed so that the value
of one one-thousandth of a Preferred Share purchasable upon exercise of
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each Right will approximate the value of one share of FEN Common Stock. The
Preferred Shares issuable upon exercise of the Rights will be non-redeemable and
rank junior to all other series of Forcenergy's preferred stock. Each whole
Preferred Share will be entitled to receive a quarterly preferential dividend in
an amount per share equal to the greater of (i) $1.00 in cash, or (ii) in the
aggregate, 1,000 times the dividend declared on the shares of FEN Common Stock.
In the event of liquidation, the holders of the Preferred Shares will be
entitled to receive a preferential liquidation payment equal to the greater of
(i) $1,000 per share, or (ii) in the aggregate, 1,000 times the payment made on
the shares of FEN Common Stock. In the event of any merger, consolidation or
other transaction in which shares of FEN Common Stock are exchanged for or
changed into other stock or securities, cash or other property, each whole
Preferred Share will be entitled to receive 1,000 times the amount received per
share of FEN Common Stock. Each whole Preferred Share shall be entitled to 1,000
votes on all matters submitted to a vote of the stockholders of Forcenergy, and
Preferred Shares shall generally vote together as one class with the FEN Common
Stock and any other capital stock on all matters submitted to a vote of
stockholders of Forcenergy.
The offer and sale of the Preferred Shares issuable upon exercise of the
Rights will be registered with the Securities and Exchange Commission and such
registration will not be effective until the Rights become exercisable.
Antidilution and Other Adjustments. The number of one one-thousandths of a
Preferred Share or other securities or property issuable upon exercise of the
Rights, and the Purchase Price payable, are subject to customary adjustments
from time to time to prevent dilution.
The number of outstanding Rights and the number of one one-thousandths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the shares of FEN Common Stock or a
stock dividend on the shares of FEN Common Stock payable in shares of FEN Common
Stock or subdivisions, consolidations or combinations of the shares of FEN
Common Stock occurring, in any such case, prior to the Distribution Date.
Exchange Option. At any time after the acquisition by a person or group of
affiliated or associated persons (other than FAB or any Successor Entity) of
beneficial ownership of 20% or more of the outstanding Voting Shares of
Forcenergy and before the acquisition by a person or group of 50% or more of the
outstanding Voting Shares of Forcenergy, the Board of Directors may, at its
option, issue shares of FEN Common Stock in mandatory redemption of, and in
exchange for, all or part of the then outstanding and exercisable Rights (other
than Rights owned by such person or group which would become null and void) at
an exchange ratio of one share of FEN Common Stock (or one one-thousandth of a
Preferred Share) for each two shares of FEN Common Stock for which each Right is
then exercisable, subject to adjustment.
Redemption of Rights. At any time prior to the first public announcement
that a person or group (other than FAB or any Successor Entity) has become the
beneficial owner of 20% or more of the outstanding Voting Shares, the Board of
Directors of Forcenergy may redeem all but not less than all the then
outstanding Rights at a price of $0.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
No Rights as Stockholder. Until a Right is exercised, the holder thereof,
as such, will have no rights as a stockholder of Forcenergy, including, without
limitation, the right to vote or to receive dividends.
Amendment of Rights. The terms of the Rights may be amended by the Board of
Directors of Forcenergy without the consent of the holders of the Rights,
including an amendment to extend the Final Expiration Date, and, provided a
Distribution Date has not occurred, to extend the period during which the Rights
may be redeemed, except that after the first public announcement that a person
or group (other than FAB or any Successor Entity) has become the beneficial
owner of 20% or more of the outstanding Voting Shares, no such amendment may
materially and adversely affect the interests of the holders of the Rights.
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The foregoing description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, form of
Certificate of Designations of Junior Participating Preferred Stock, form of
Right Certificate, and the form of the Summary of Rights, filed with the SEC and
incorporated by reference herein.
WARRANTS
In connection with a previous offering of debt securities, Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") was granted warrants to
purchase 98,337 shares of FEN Common Stock at an exercise price of $14.51 per
share. The warrants are currently exercisable and have an expiration date of
September 14, 1998. DLJ exercised 49,168 warrants on April 1, 1997.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the FEN Common Stock is American Stock
Transfer & Trust Company.
COMPARATIVE RIGHTS OF FORCENERGY AND FAB STOCKHOLDERS
If the Exchange Offer is completed, holders of FAB Securities who tender
such shares into the Exchange Offer will own shares of FEN Common Stock or SDRs,
each representing one share of FEN Common Stock. FAB is a corporation organized
under the laws of the Kingdom of Sweden and Forcenergy is a corporation
incorporated under the laws of the State of Delaware. The DGCL is the statute
which governs Delaware corporations and the Companies Act governs Swedish
companies. The following is a summary of certain significant differences between
the rights of holders of FAB Securities and holders of FEN Common Stock. These
differences arise from differences between FAB's Articles of Association ("FAB
Charter") and the Forcenergy Amended and Restated Certificate of Incorporation
(the "Forcenergy Charter") and Forcenergy Bylaws, the governing instruments of
the two companies as well as the laws governing the companies. The following is
a brief summary of certain differences between the rights of Forcenergy
stockholders and the rights of FAB stockholders, and is qualified in its
entirety by reference to the relevant provisions of the DGCL, the Forcenergy
Charter and Forcenergy Bylaws and the FAB Charter. This discussion is not and
does not purport to be complete or to identify all differences that may, under
given fact situations, be material to stockholders.
NUMBER, CLASSIFICATION
Forcenergy
The Forcenergy Bylaws authorize that the number of directors to serve on
its Board of Directors may be increased or decreased with the approval of a
majority of the then-authorized number of directors. Newly created directorships
resulting from any increase in the authorized number of directors and any vacant
directorships may be filled by the affirmative vote of a majority of the
directors then in office. This provision of the Forcenergy Bylaws may be
altered, amended, or repealed by the affirmative vote of the majority of either
the Forcenergy Board of Directors or the outstanding shares of capital stock of
Forcenergy entitled to vote.
FAB
The FAB Charter provides that the FAB Board shall consist of not fewer than
three and not more than ten directors with not more than ten deputy directors.
Under Swedish law the managing director and at least half of the board members
must be resident in a European Economic Area unless the Swedish government or an
authority appointed by the government in a particular case grants an exception.
The term of office of a director is one year, but a director may serve any
number of consecutive terms. FAB currently has 5 directors and 0 deputy
directors. The directors and deputy directors are elected at the Annual General
Meeting of FAB stockholders for a term expiring at the end of the next Annual
General Meeting. The Chairman of the FAB Board is appointed by the FAB Board of
Directors.
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REMOVAL OF DIRECTORS
Forcenergy
The Forcenergy Charter provides that a director may be removed with or
without cause by the affirmative vote of the holders of a majority of the stock
entitled to vote for the election of directors.
FAB
Under Swedish law directors may be removed from office by a general meeting
of stockholders at any time, and vacancies in the Board, except when filled by a
Deputy Director, may only be filled by stockholder resolution and except where
statute or the Articles of Association prescribe otherwise.
VOTING RIGHTS
Forcenergy
The Forcenergy Charter does not provide for cumulative voting rights for
the election of directors or otherwise. Therefore, Forcenergy shareholders elect
directors by straight voting. Under section 216 of the DGCL Forcenergy directors
are elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors.
FAB
The Companies Act and the FAB Charter do not provide for cumulative voting
rights for the election of directors or otherwise.
POWER TO CALL SPECIAL MEETINGS
Forcenergy
The Forcenergy Charter provides that a special meeting of stockholders may
be called only by the Forcenergy Board of Directors or the President. Written
notice of a special meeting must be mailed not fewer than 10 nor more than 60
days before the meeting to each stockholder of record entitled to vote.
FAB
The Companies Act provides that the Board or shareholders representing 10%
of the shares may call a special meeting. Written notice of a special meeting
must be mailed and published not fewer than two weeks nor more than four weeks
before the meeting.
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS, INCLUDING MERGERS AND
CONSOLIDATIONS
Forcenergy
The DGCL requires that before a merger can be approved by the stockholders,
a resolution approving the merger must be adopted by the corporation's board of
directors. After approval by the board of directors, the merger agreement must
be submitted to the stockholders for adoption. Pursuant to the DGCL, a merger
must be approved by the affirmative vote of at least a majority of the
outstanding shares entitled to vote thereon.
Notwithstanding the foregoing, the Forcenergy Charter requires for approval
of certain business combinations and transactions with certain stockholders or
with corporations which are affiliated therewith, an affirmative vote of 75% of
the votes which the holders of the then outstanding shares of capital stock of
Forcenergy excluding those shares beneficially owned by such stockholder unless
such transaction is approved by a majority of disinterested stockholders. The
Forcenergy Charter also provides that a 75% approval of disinterested
stockholders is required to amend the provisions concerning interested
transactions.
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FAB
Under the Companies Act, resolutions are normally passed by a simple
majority of votes cast unless otherwise specified in FAB Charter. There are
generally no quorum requirements. However, certain resolutions require special
quorums and majorities, including a resolution to disapply shareholders'
preemptive rights in connection with an issue of shares or to reduce share
capital or to approve a merger, which requires a majority of at least two-thirds
of the votes cast as well as at least two-thirds of the shares represented at
the meeting. However, if a resolution to reduce the share capital or to approve
a merger alters the legal relationship between shares, the unanimous approval of
the stockholders present at the meeting and representing at least 90% of all
shares issued is normally required. The same approval is required in order to
pass a resolution under which a public company is to merger with a private
company and be dissolved.
If the Exchange Offer is consummated, the former FAB stockholders shall be
subject to the provisions for approving interested transactions provided in the
Forcenergy Charter.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Forcenergy
Section 203 of the DGCL prohibits a corporation which has securities traded
on a national securities exchange, designated on the NASDAQ or held of record by
more than 2,000 stockholders from engaging in certain business combinations,
including a merger, sale of substantial assets, loan or substantial issuance of
stock, with an interested stockholder, or an interested stockholder's affiliates
or associates, for a three-year period beginning on the date the interested
stockholder acquires 15% or more of the outstanding voting stock of the
corporation. The restrictions on business combinations do not apply if (i) the
board of directors gives prior approval to the transaction in which the 15%
ownership level is exceeded, (ii) the interested stockholder acquires at one
time 85% of the corporation's stock (excluding those shares owned by persons who
are directors and also officers as well as employee stock plans in which
employees do not have a confidential right to vote) or (iii) the business
combination is approved by the board of directors and authorized at a meeting of
stockholders by the holders of at least two-thirds of the outstanding voting
stock, excluding shares owned by the interested stockholder. Although a Delaware
corporation may elect, pursuant to its certificate or bylaws, not to be governed
by this provision, the Forcenergy Charter and the Forcenergy Bylaws contain no
such election.
FAB
The Companies Act does not have provisions similar to those outlined above
with respect to business combinations with interested stockholders.
DISSENTERS' RIGHTS
Forcenergy
Under the DGCL, dissenters' rights of appraisal are limited. Rights of
appraisal are available to a stockholder of a corporation only in connection
with certain mergers or consolidations involving such corporation, amendments to
the certificate of incorporation of such corporation (if so provided in the
certificate of incorporation) or sales of all or substantially all of the assets
of such corporation. However, appraisal rights are not available under the DGCL
if the corporation's stock is (prior to the applicable transaction) listed on a
national securities exchange or designated on NASDAQ or held of record by more
than 2,000 stockholders; provided that appraisal rights will be available if the
merger or consolidation requires stockholders to exchange their stock for
anything other than shares of the surviving corporation, shares of another
corporation that will be listed on a national securities exchange, designated on
NASDAQ or held of record by more than 2,000 stockholders, cash in lieu of
fractional shares of any such corporation, or a combination of such shares and
such cash.
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FAB
Under the Companies Act, when a person alone or together with one or more
subsidiaries owns more than nine-tenths of all the share capital in a company
and these shares represent more than 90% of the votes entitled to be cast at a
meeting of stockholders, that person is entitled to purchase the remaining
shares of such company. A person whose shares are subject to a right of purchase
may require the 90% owner to purchase its shares. Absent an agreement regarding
the price, an arbitral tribunal will determine a reasonable price, which, in the
case of a compulsory acquisition following an offer to a substantial number of
persons pursuant to which more than the majority of the outstanding shares were
acquired by such owner (or its affiliate), will, as a general matter, be the
same as the price paid in such offer.
ACTION BY WRITTEN CONSENT
Forcenergy
The Forcenergy Charter provides that no action required or permitted to be
taken by the stockholders of the corporation may be effected by consent in
writing. Such action must be effected at an annual or special meeting of
stockholders.
FAB
The FAB Charter does not prohibit any action to be taken by FAB
stockholders by written consent.
DIVIDENDS
Forcenergy
The Forcenergy Bylaws provide that dividends may be declared at the
discretion of the Forcenergy Board only out of any assets or funds of Forcenergy
legally available for the payment of dividends.
FAB
Under the Companies Act, only a general meeting of stockholders may
authorize the payment of dividends, which may not exceed the amount recommended
by the FAB Board (except to a limited extent in the event of a demand by holders
of at least 10% of the total number of shares outstanding) and which may be paid
only from funds available for dividends. Under Swedish law, no interim dividends
may be paid in respect of a financial period as to which audited financial
statements have not been adopted by the Annual General Meeting of stockholders.
The normal practice in Sweden is for dividends to be paid only annually. Shares
issued after the date when the Directors have decided on the recommendation
generally do not entitle the holders thereof to the dividends in question. It is
the current practice of FAB's Board of Directors to decide upon their
recommendations in respect of the next preceding fiscal year in February of each
year, and the decision is made public at the same time. The recommendation of
the FAB Board is considered at FAB's Annual General Meeting, which is usually
held in May of the year following the year with respect to which the dividend is
paid.
PREEMPTIVE RIGHTS
Forcenergy
The Forcenergy Charter and the Forcenergy Bylaws do not provide for
preemptive rights. In addition, the DGCL does not provide for preemptive rights
unless specifically provided for in the certificate of incorporation of a
corporation.
FAB
Under Swedish law, stockholders must approve each issue of additional
shares. Existing stockholders have preferential rights to subscribe for cash for
issues of shares and debt instruments, convertible into shares in proportion to
their stockholdings, unless the resolution for the issue itself or the company's
articles of
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association provide otherwise. The FAB Class A Common Shares rank pari passu
with the FAB Class B Common Shares as regards rights of participation in FAB's
assets and profits.
AMENDMENTS OF CHARTER DOCUMENTS
Forcenergy
The Forcenergy Bylaws may be amended, altered or repealed either by the
Forcenergy Boards of Directors or by the holders of a majority of the then
outstanding shares of their respective capital stock present and entitled to
vote at a meeting as provided in the Forcenergy Charter and Bylaws.
FAB
The Companies Act provides that the affirmative vote of the holders of
two-thirds of the votes cast as well as two-thirds of all shares represented at
the meeting is required to amend provisions of a company's Articles of
Association. Resolutions to amend the FAB Charter which reduce any stockholder's
rights to profits or assets, restrict the transferability of shares or alter the
legal relationship between shares normally require the unanimous approval of the
stockholders present at the meeting representing 90% of all issued shares; and a
resolution to amend the FAB Charter for the purpose of limiting the number of
shares which a stockholder may vote at a general meeting or requiring the
retention of a larger amount of the net profit than required by the Companies
Act or amending the stockholder's rights in a liquidation or dissolution
normally requires the approval of the stockholders representing two-thirds of
the votes cast and 90% of the shares represented at the meeting.
LEGAL MATTERS
The validity of the FEN Common Stock to be issued in the Exchange Offer
will be passed upon for Forcenergy by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Forcenergy for the years ended
December 31, 1995 and 1996, incorporated by reference to the Annual Report on
Form 10-K of Forcenergy for the year ended December 31, 1996, have been so
incorporated in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
The historical statement of revenues and direct operating expenses of the
properties acquired by Forcenergy from Amerada Hess Corporation for the year
ended December 31, 1995, incorporated herein by reference to the report on Form
8-K/A of Forcenergy filed on September 12, 1996, have been so incorporated in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The historical statements of revenues and direct operating expenses of the
properties acquired by Forcenergy from Marathon Oil Company for the years ended
December 31, 1996 and 1995, incorporated herein by reference to the report on
Form 8-K/A of Forcenergy filed on March 17, 1997, have been so incorporated in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Forcenergy for the year ended
December 31, 1994 incorporated in this Proxy Statement/Prospectus by reference
to the Annual Report on Form 10-K of Forcenergy for the year ended December 31,
1996 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements and schedules of Edisto Resources
Corporation and Convest Energy Corporation for the year ended December 31, 1996
incorporated by reference in this Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
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report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
The estimates of Forcenergy's net proved oil and natural gas reserves as of
January 1, 1996 and 1997, incorporated herein by reference to Forcenergy's
Annual Report on Form 10-K, have been prepared by Collarini Engineering, Inc.
and Netherland, Sewell & Associates, Inc. and by Collarini Engineering, Inc. and
Joe C. Neal & Associates as of January 1, 1995 and 1994. The reserve estimates
prepared by such firms as of January 1, 1995 have also been audited by
Netherland, Sewell & Associates, Inc.
The consolidated financial statements of Forcenergy AB included in this
Registration Statement have been audited by Price Waterhouse (Sweden),
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
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FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FORCENERGY AB FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996:
FINANCIAL STATEMENTS
Report of Independent Public Accountants............... F-2
Consolidated Balance Sheets at September 30, 1997 and
at December 31, 1996 and 1995......................... F-3
Consolidated Statements of Income -- Nine Months Ended
September 30, 1997 and 1996 and Years Ended December
31, 1996, 1995 and 1994............................... F-4
Consolidated Statements of Cash Flows -- Nine Months
Ended September 30, 1997 and 1996 and Years Ended
December 31, 1996, 1995 and 1994...................... F-5
Notes to Consolidated Financial Statements............. F-6
</TABLE>
F-1
<PAGE> 83
FORCENCERGY AB
AUDITORS' REPORT
We have audited the accompanying consolidated financial statements of
Forcenergy AB and subsidiaries, expressed in Swedish kronor. 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 in Sweden. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and the 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
statements presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Forcenergy
AB and subsidiaries at 31 December 1995 and 1996 and the results of their
operations and their cash flows for the years ended 31 December 1994, 1995 and
1996 in conformity with accounting principles generally accepted in Sweden.
Stockholm, Sweden
April 8, 1997
<TABLE>
<S> <C>
Carl-Eric Bohlin Bo Hjalmarsson
Authorized Public Accountant Authorized Public Accountant
Price Waterhouse Price Waterhouse
</TABLE>
F-2
<PAGE> 84
FORCENERGY AB
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS; SEK)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------
1997 1996 1995
------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Current assets
Cash..................................................... 13,484 10,239 6,594
Temporary investments (Note 4)........................... 18,361 35,899 10,316
Accounts receivable...................................... 5,989 17,725 32,217
Prepaid expenses and accrued income...................... 3,366 1,953 14,596
Other current assets..................................... 818 896 6,356
Income tax receivable.................................... 342 609 28
Inventories.............................................. -- -- 6,946
------- ------- -------
Total current assets............................. 42,360 67,321 77,053
------- ------- -------
Non-current assets
Shares in associated company (Note 5).................... 797,796 673,369 535,291
Shares and participation rights (Note 6)................. 5 5 1,830
Machinery and equipment (Note 1)......................... 780 783 1,202
Deferred tax............................................. 1,661 1,661 1,452
------- ------- -------
Total non-current assets......................... 800,242 675,818 539,775
------- ------- -------
Total assets..................................... 842,602 743,139 616,828
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable......................................... 845 9,127 12,284
Accrued expenses and prepaid income...................... 5,541 1,909 21,087
Short-term debt.......................................... -- -- 17,749
Liabilities due to associated company.................... -- -- 245
Tax liability............................................ -- 1,934 --
Other current liabilities................................ 320 126 3,011
------- ------- -------
Total current liabilities........................ 6,706 13,096 54,376
------- ------- -------
Equity (Note 7)
Restricted equity
Share capital............................................ 143,920 143,920 143,920
Restricted reserves...................................... 494,261 570,326 412,427
Non-restricted equity
Dividend reserve......................................... 200,000 -- --
Free reserves............................................ 1,894 1,468 2,771
Net income............................................... (4,179) 14,329 3,334
------- ------- -------
Total shareholders' equity....................... 835,896 730,043 562,452
------- ------- -------
Total liabilities and shareholders' equity....... 842,602 743,139 616,828
======= ======= =======
Assets pledged
Cash and temporary investments........................... -- 625 3,151
Inventories.............................................. -- -- 164
Contingent liabilities................................... 226 170 189
</TABLE>
F-3
<PAGE> 85
FORCENERGY AB
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS; SEK)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Oil and gas sales and other............. -- -- 671 340,201 455,841
Oil trading revenues.................... 141,612 663,122 879,951 139,853 --
Equity in earnings of associated
companies............................ 86,861 37,142 59,280 2,755 --
-------- -------- -------- -------- --------
Total Revenues.................. 228,473 700,264 939,902 482,809 455,841
Operating expenses........................ (149,414) (669,298) (890,133) (296,286) (252,218)
-------- -------- -------- -------- --------
Operating income before depreciation...... 79,059 30,966 49,769 186,523 203,623
Standard depreciation (Note 1)
Standard depreciation according to
plan............................... (190) (244) (273) (155,642) (185,485)
Prior year's depreciation revision... -- -- -- (31,175) --
-------- -------- -------- -------- --------
Operating income after depreciation....... 78,869 30,722 49,496 (294) 18,138
Financial items
Interest income...................... 1,559 1,056 1,834 5,143 5,929
Other financial items (Note 2)....... 975 (1,205) 128,590 35,776 3,009
Interest expenses.................... (45) (11) (734) (53,847) (58,157)
-------- -------- -------- -------- --------
Earnings after financial items............ 81,358 30,562 179,186 (13,222) (31,081)
Minority interest in earnings before
tax..................................... -- -- ..... -- 427 --
-------- -------- -------- -------- --------
Earnings before tax....................... 81,358 30,562 179,186 (12,795) (31,081)
Tax provision (Note 3).................... (30,935) (13,966) (29,236) 16,129 8,892
-------- -------- -------- -------- --------
Net income................................ 50,423 16,596 149,950 3,334 (22,189)
======== ======== ======== ======== ========
Earnings per share (before tax) SEK....... 5.65 2.12 12.45 (0.89) (2.67)
Earnings per share (after tax) SEK........ 3.50 1.15 10.42 0.23 (1.91)
</TABLE>
F-4
<PAGE> 86
FORCENERGY AB
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; SEK)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. 50,423 16,596 149,950 3,334 (22,189)
Adjustments:
Standard depreciation................... 190 244 273 186,817 185,485
Minority shares......................... -- -- -- (305) --
Equity in earnings of associated
companies (after tax)................. (54,602) (22,953) (36,738) (1,522) --
Capital gains (after tax)............... -- -- (122,432) (37,112) --
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable................... 11,736 12,190 14,492 (1,378) 8,468
Prepaid expenses...................... (1,068) 10,307 12,643 (5,139) (2,953)
Other assets.......................... (1) 7,066 11,615 (23,262) 17,346
(Increase) decrease in:
Accounts payable...................... (8,284) 10,196 (3,157) 43,525 18,602
Other liabilities..................... 1,892 (18,563) (20,374) 86,055 (8,146)
Other adjustments..................... -- -- -- (1,117) (1,288)
-------- -------- -------- -------- --------
Total adjustments.................. (50,137) (1,513) (143,678) 246,562 217,514
-------- -------- -------- -------- --------
NET CASH FLOWS FROM OPERATING
ACTIVITIES....................... 286 15,083 6,272 249,896 195,325
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in oil and gas properties and
equipment............................... -- -- -- (539,582) (466,412)
Deposits and temporary investments......... -- -- -- (7,449) 22,019
Sales of surety bonds...................... -- -- -- 19,936 (164)
Deconsolidation of subsidiary.............. -- -- -- (4,163) --
Investments in subsidiary after cash
received................................ -- -- -- (3,668) --
Increase in receivables in connection with
acquisition............................. -- -- -- (5,123) --
Sales of non-current assets (after tax).... -- -- 45,854 --
Investments in office equipment............ (187) (134) (112) 37 (8,026)
Sales of oil and gas properties............ -- 1,952 -- 3,593 123
-------- -------- -------- -------- --------
NET CASH FROM INVESTING
ACTIVITIES....................... (187) 1,818 45,742 (536,419) (452,460)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in debt........................... -- -- -- 58,421 53,001
Principal payment on debt.................. -- (17,749) (17,749) (200,560) (36,972)
Dividend................................... (14,393) (5,037) (5,037) (9,354) 312,650
Contribution from minority................. -- 392,745 (20,149)
-------- -------- -------- -------- --------
NET CASH FLOWS FROM FINANCING
ACTIVITIES....................... (14,393) (22,786) (22,786) 241,252 308,530
-------- -------- -------- -------- --------
NET CHANGE IN CASH........................... (14,293) (5,885) 29,228 (45,271) 51,395
Translation effect......................... -- -- -- (507) (5,061)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH.............. (14,293) (5,885) 29,228 (45,778) 46,334
CASH AT BEGINNING OF PERIOD.................. 46,138 16,910 16,910 62,688 16,354
-------- -------- -------- -------- --------
CASH AT END OF PERIOD........................ 31,845 11,025 46,138 16,910 62,688
======== ======== ======== ======== ========
Non-cash financing and investing activities
Purchase of bond investment................ -- -- -- -- 4,628
Investments in oil and gas properties by
non-cash issuance of stock and increase
in deferred tax liability............... -- -- -- 297,140 --
Investment in associated company through
capital gains on new share issues....... -- -- 97,835 37,112 --
</TABLE>
F-5
<PAGE> 87
NOTES TO THE FINANCIAL STATEMENTS
GENERAL
This annual report has been established in accordance with Swedish
Financial Accounting Standards Council recommendations.
ORGANIZATION
The Group consists of the parent company, Forcenergy AB (FAB), based in
Stockholm, the wholly-owned subsidiary company, Svenska Oljegruppen AB, and
Forcenergy Inc (Forcenergy), which is owned to 38.7 percent is included as an
associated company.
Forcenergy's business concept is to operate in exploration, production and
trading of oil and gas.
The Group's parent company, Forcenergy AB, is a public company registered
in Stockholm and operates primarily as a holding company.
In 1995 Forcenergy, previously a fully owned subsidiary, went public and
issued 6.21 million new shares of Forcenergy common stock (FEN Common Stock) in
the USA. The net funds provided, USD 55.7 million or approximately SEK 392.7
million, were primarily used to reduce bank debt. In addition, 3.0 million
shares of FEN Common Stock, with a market value of USD 30 million, approximately
SEK 212 million, were issued in connection with the acquisition of Ashlawn
Energy, Inc. At the end of 1995, FAB's share holding in Forcenergy's amount to
9,040,486 shares of FEN Common Stock, corresponding to an ownership share of
49.5%.
During the financial year 1995 Forcenergy was consolidated in accordance
with the purchase method until August 31 and thereafter with the equity method.
Svenska Oljegruppen AB is reported as a subsidiary company from November
15, 1995.
In 1996, Forcenergy completed a secondary stock offering and conversion of
subordinated notes to FEN Common Stock. At the same time, FAB sold 300,000
shares of FAB Common Stock. The transactions resulted in capital gains of SEK
129.3 million before tax for the Group, including capital gains SEK 31.5 million
from the sale of the shares. The parent company's ownership in Forcenergy
decreased to 38.7%.
As of October 22, 1997, FAB's ownership in Forcenergy decreased to 34% due
to Forcenergy's issuance of shares of FEN Common Stock in connection with the
acquisition of Convest Energy Corporation and Edisto Resources Corporation.
CONSOLIDATED ACCOUNTS
The consolidated financial statements include the accounts of the parent
company and those companies in which the parent company, directly or indirectly,
owned more than 50 percent of the voting rights at the end of the year.
Investments in associated companies, in which the Group's ownership amounts
to at least 20 percent and at most 50 percent of the voting power, are accounted
for in accordance with the equity method. Investments in associated companies
are recorded as the Group's share in the equity, adjusted for non-amortized
goodwill. The difference between the recorded investment in the Group and parent
company balance sheets is accounted for as restricted reserves in the
consolidated accounts.
During 1995, the accounting for the Group's investment in Forcenergy was
changed to the equity method as a result of a deletion of ownership interest
previously the new accounts of Forcenergy were consolidated with that of the
group.
The consolidated balance sheet was established in accordance with the
purchase method. This means that the parent company's entered value of
subsidiary company shares is offset against the equity of each subsidiary
company at the time of purchase. Group surplus values arising in conjunction
with the purchase of
F-6
<PAGE> 88
companies are accounted on the basis of assessed market values as correction of
the entered value of the fixed assets of the subsidiary companies, and the
remainder as Group goodwill.
In connection with new capital issues in subsidiaries and associated
companies, capital gains or losses are calculated and recognized, in the
consolidated financial statements, corresponding with the change in the group's
share of equity in the issuing company.
FOREIGN CURRENCY TRANSLATION
The Group applies the current method when translating financial statements
in foreign currencies to SEK. The current method means that all assets and
liabilities are translated to SEK at the exchange rate applicable on the balance
sheet date. The income statement is translated at the average exchange rate for
the year. Any translation differences are accumulated under shareholders' equity
and are distributed between the restricted and non-restricted equity of the
Group. The non-restricted equity of the Group is thereby translated at the
exchange rate applicable on the balance sheet date. Translation differences are
realized and included in the income statement when Group companies are disposed
of.
ACCOUNTING FOR DEFERRED TAX
The Group accounts for deferred taxes on untaxed reserves and timing
differences. Timing differences relate to accelerated depreciation, for tax
purposes, of oil and gas assets. The estimated deferred tax is shown in the
balance sheets as deferred tax. The accumulated deferred tax liability is
remeasured each year with the application of current tax rates in the various
countries, and is disclosed in the balance sheet as deferred tax. Consideration
is given to deferred tax claims due to losses carried forward in acquired
companies. Remeasurement of the deferred tax liability due to changed tax rates
is included in the provision for deferred tax for the period. No provision is
made for deferred taxes on the difference between the book value and the tax
basis of the shareholding in Forcenergy. Deferred taxes are provided for when
sales of stock in or dividend payments from Forcenergy have been decided prior
to the end of the accounting period.
VALUATION PRINCIPLES
All receivables and liabilities in foreign currency are translated to SEK
at the exchange rate applicable on the balance sheet date. Exchange rate gains
and losses are divided into those relating to business operations and those
relating to financial gains and losses. The former are included in the operating
income whereas the latter are reported as other financial items. Revenues from
the sale of oil and gas are recognized when delivery takes place. The effects of
price hedging activities through financial instruments are included in the
operating income.
Costs associated with assuming long-term debts are capitalized as other
long-term assets and are amortized over the term of the loan as part of the
interest expense recorded. The Group applies US generally accepted accounting
principles (US GAAP) in accordance with APB 25 when assessing the value of
issued options and warrants. This means that for these options and warrants,
compensation expenses are recorded for the difference between the fair market
value and the subscription price. No adjustment is made for changes in the fair
market value except if the holder is entitled to redemption at market value. In
such cases a provision for increases in value is made.
The fixed assets of the Group are valued at cost less accumulated
depreciation. Equipment is depreciated over its expected economic life. Oil held
in inventory is valued at the lowest of acquisition value and replacement cost.
The oil and gas assets are valued in accordance with the full cost method
with deduction of accumulated depreciation. The full cost method means that all
costs associated with the acquisition and prospecting of oil and gas properties
are capitalized, including expenses incurred by commercially nonviable deposits.
The capitalized costs of oil and gas properties are limited to the present value
(10 percent) of proven oil and gas reserves. Revenue from sale of oil and gas
assets is not taken to income but reduces the book value of all oil and gas
properties. The depreciation for oil and gas properties is calculated in
accordance with the unit-of-
F-7
<PAGE> 89
production method. This means an annual depreciation equivalent to the ratio
between sold production and remaining reserves, taking into account future costs
for plugging and abandonment. Depreciation of costs relating to unproved
reserves is commenced when reserves are proved or ascertained to be
non-existent.
STATEMENT OF CASH FLOWS
The company presents its statement of cash flows in accordance with US GAAP
(SFAS 95). As opposed to a consolidated statement of changes in financial
position, a cash flow statement includes only activities that have affected the
Group's cash balance. Activities that do not affect the cash balance are thus
excluded, but are presented together with the statement of cash flows.
Transactions in foreign currency are translated in the cash flow statement at
the exchange rate on the transaction date. Consequently, the only translation
effects presented are those relating to the cash balance. As an approximation of
the transaction date exchange rate, the Group has applied the average exchange
rate for the applicable year. Cash balance is defined as cash, bank deposits and
temporary investments that can be converted to cash within three months.
ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES
Elements of the Company's accounting principles which differ significantly
from generally accepted accounting principles in the United States, as applied
by Forcenergy, are described below:
(a) Adjustment of previous years depreciation: In 1995 and before
Forcenergy went public, an error relating to prior years depreciation of
oil and gas reserves was identified. In FAB's financial statements, the
correction of the error was accounted for in the income statement for 1995.
In Forcenergy's financial statements, the correction was made retroactively
to each applicable year.
(b) Interest on Subordinated Notes: In the consolidated financial
statements, FAB used the nominal interest rate (7%) to accrue interest on
the Subordinated notes issued by Forcenergy. Under certain circumstances,
the holders of the notes were entitled to an additional payment on the
maturity date of an amount sufficient to provide the holders with a
compounded annual rate of return of 13%. For accounting purposes, FEN was
accruing interest on these Subordinated Notes at 13%.
(c) Accounting for acquisition of oil and gas reserves: In connection
with acquisitions of certain oil and gas reserves prior to 1994, FAB
included revenues from the acquired oil and gas reserves from the effective
date of the acquisition and charged the income with an estimated interest
on the purchase amount during the period between the effective date and the
closing date. In Forcenergy's financial statements, these revenues reduced
the purchase price and have not been included in the income statement. The
accumulated difference between the accounting policies used by FAB and
Forcenergy, is amortized over seven years in FAB's financial statements.
The application of US GAAP as described above would have the following
approximate effects on consolidated net income and stockholders' equity:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net income as reported in the consolidated income
statements................................................ 149,950 3,334 (22,189)
Adjustment of previous years depreciation................... -- 19,640 (11,249)
Accounting for acquisition of oil and gas reserves.......... 804 2,114 6,999
Interest on Subordinated Notes.............................. (4,358) (6,257) (9,908)
Approximate net income in accordance with US GAAP as applied
by Forcenergy............................................. 146,396 18,831 (36,347)
Approximate net income per share in accordance with US GAAP
as applied by Forcenergy.................................. 10.17 1.31 (3.12)
Approximate stockholders' equity in accordance with US GAAP
as applied by Forcenergy.................................. 728,921 557,062 --
</TABLE>
F-8
<PAGE> 90
NOTES
1. DEPRECIATION AND NON-CURRENT ASSETS (SEK 1,000)
STANDARD DEPRECIATION (SEK 1,000)
<TABLE>
<CAPTION>
1996 1995 1994
---- ------- -------
<S> <C> <C> <C>
Oil and gas properties................................... -- 184,867(1) 182,794
Machinery and equipment.................................. 273 1,950 2,691
--- ------- -------
Total.......................................... 273 186,817 185,485
=== ======= =======
</TABLE>
NON-CURRENT ASSETS (SEK 1,000)
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Machinery and equipment
Acquisition value...................................... 2,043 2,680 15,534
Accumulated standard depreciation...................... (1,260) (1,478) 5,131
------ ------ ------
Net book value................................. 783 1,202 10,403
====== ====== ======
</TABLE>
2. OTHER FINANCIAL ITEMS (SEK 1,000)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ -----
<S> <C> <C> <C>
Realized part of accumulated translation differences..... -- 7,413 --
Capital gains............................................ 129,316 29,699 --
Exchange differences, net................................ 493 (1,336) 2,849
Other financial items.................................... (1,219) -- 160
------- ------ -----
Total.......................................... 128,590 35,776 3,009
======= ====== =====
</TABLE>
3. TAX (SEK 1,000)
Provision for income tax consists of:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ -----
<S> <C> <C> <C>
Foreign income tax....................................... (6,884) -- 3,887
Swedish income tax....................................... (18) 3 --
Recalculation of prior years tax......................... -- 11,531 --
Minority share of tax provision.......................... -- (122) --
Equity in tax in associated company...................... (22,543) (1,233) --
Foreign deferred tax..................................... -- 6,105 5,005
Swedish deferred tax..................................... 209 (155) --
------- ------ -----
Total.......................................... (29,236) 16,129 8,892
======= ====== =====
</TABLE>
- ---------------
(1) Of which 31,175 was prior years' depreciation adjustments
The American tax rate is currently 37.3 percent (U.S. federal tax rate 34
percent) and the Swedish tax rate is currently 28 percent. Dividends from the
associated company are subject to U.S. withholding tax of five percent only.
Group loss carried forward amounted to SEK 34.3 million, of which SEK 29.0
million for Swedish operations and SEK 5.3 million for foreign operations.
F-9
<PAGE> 91
4. TEMPORARY INVESTMENTS (SEK 1,000)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Bonds and other interest-bearing securities, SEK............ 35,899 10,316
------ ------
Total............................................. 35,899 10,316
====== ======
</TABLE>
5. INVESTMENTS IN ASSOCIATED COMPANY (SEK 1,000)
<TABLE>
<CAPTION>
NO. OF PAR VALUE BOOK MARKET
SHARES SHARES (SEK) VALUE VALUE
------ --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Forcenergy Inc...................... 38.7% 8,740,486 0.7 673,369 2,177,000
</TABLE>
6. SHARES AND PARTICIPATION RIGHTS IN OTHER COMPANIES (SEK 1,000)
<TABLE>
<CAPTION>
SHARES AND
PARTICIPATION RIGHTS BOOK VALUE
-------------------- ----------
1996 1996
<S> <C> <C>
Forcenergy Inc..........................................
Partners 89 A LP........................................ 28.9% 0
Stockholms Fondbors AB.................................. 45 st 5
----
Total......................................... 5
</TABLE>
7. SHAREHOLDERS' EQUITY (SEK 1,000)
<TABLE>
<CAPTION>
NON-
SHARE RESTRICTED RESTRICTED
CAPITAL EQUITY EQUITY TOTAL
------- ---------- ---------- -------
<S> <C> <C> <C> <C>
According to the balance sheets of
01/01/96................................... 143,920 412,427 6,105 562,452
Dividend................................... -- -- (5,037) (5,037)
Translation differences.................... -- 22,678 -- 22,678
Net income................................. -- -- 149,950 149,950
Transfer between non-restricted equity and
restricted equity....................... -- 135,221 (135,221) --
------- ------- -------- -------
According to the balance sheet as of
31/12/96................................... 143,920 570,326 15,797 730,043
======= ======= ======== =======
</TABLE>
The number of registered shares is 14,392,000 with a nominal value of SEK
10, of which 1,000,000 are series A shares (one vote per share) and 13,392,000
series B shares ( 1/10 vote per share). All shares are non-restricted. The Board
of Directors has adopted a new dividend policy stating that from 1997, 3% of the
company's net asset value giving affect to 30 percent tax, is to be distributed
to the shareholders. In order to facilitate dividends in accordance with the
policy, the Board of Directors proposes that the legal reserve is reduced by
transferring SEK 200 million to a new non-restricted dividend reserve. The board
has proposed that SEK 200,000,000 is transferred to a new free reserve, dividend
reserve, from the legal reserve.
8. BOARD, PERSONNEL AND COMPENSATIONS
FORCENERGY AB
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Personnel
No. of employees.......................................... 4 4 4
Of which female........................................... 1 2 2
</TABLE>
F-10
<PAGE> 92
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Salaries and compensation
The Board of Directors and the President.................. 1,533 1,360 1,196
Other..................................................... 1,246 905 831
----- ----- -----
Total............................................. 2,779 2,265 2,027
===== ===== =====
</TABLE>
Board of Directors
In accordance with the resolution of the General Meeting, directors' fees
of SEK 525 (525) thousand paid, of which SEK 175 (175) thousand to the chairman
and SEK 350 (350) thousand to non-employed directors. No other compensation or
benefits were disbursed.
President
The president's salary, compensation and benefits amounted to SEK 1,008
(911) thousands, of which a bonus of SEK 235 (180) thousand. Bonus compensation
is based on Group earnings. Pension plan insurance premiums correspond to the
tax deductible amount. Eighteen months' notice of termination, if by the
company. No severance pay.
SVENSKA OLJEGRUPPEN AB
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Personnel
No. of employees.......................................... 6 6 5
Of which female........................................... 2 1 1
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Salaries and compensations SEK thousand
The Board of Directors and the President.................. 809 776 1,057
Other..................................................... 1,276 1,863 1,864
----- ----- -----
Total............................................. 2,085 2,639 2,921
===== ===== =====
</TABLE>
9. REVENUES, OIL, GAS TRADING AND OTHER
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Oil................................................... 0 179,932 189,250
Gas................................................... 0 157,445 246,717
Oil trading revenues.................................. 879,951 139,853 0
Other................................................. 671 2,824 19,874
------- ------- -------
Total....................................... 880,622 480,054 455,841
======= ======= =======
</TABLE>
Total oil trading revenues for Svenska Oljegruppen 1995 amounted to SEK
1,120 million.
The gross profit (trading margin) relating to the trading operation
amounted to SEK 3.6 million in 1996 (SEK 0.6 million in 1995). Svenska
Oljegruppen AB's loss before tax amounted to SEK 2.7 million (SEK 3.9 million).
10. STOCK OPTIONS
At an extraordinary meeting of the shareholders, held in June 1995, it was
decided that stock options in Forcenergy can be issued in accordance with three
plans. According to the plans, stock options without preferential rights to the
shareholders can be issued to management of the company, including members of
the Board and also to employees in Forcenergy and it subsidiaries. Together with
previous option plans (1993),
F-11
<PAGE> 93
options amounting to totally 10 percent of the shares of FEN Common Stock in
Forcenergy may be issued. At year end 1995 options corresponding to 7.5 percent
of the fully diluted shares of FEN Common Stock have been issued.
11. RELATED PARTY TRANSACTIONS
Forcenergy rents office premises under prevailing market rent from
Forsinvest Realty Inc, a company associated with the Forss family.
F-12
<PAGE> 94
ANNEX A
MORGAN STANLEY
The Board of Directors
Forcenergy A.B.
P. O. Box 19040
Birger Jarlsgatan 73-75
S-11356 Stockholm
Sweden
January 30, 1998
Gentlemen:
We understand that Forcenergy Inc ("FEN") intends to initiate an exchange offer
for the share capital of Forcenergy AB ("FAB") (the "Exchange Offer") whereby
FEN plans to offer 0.75 shares of FEN Common Stock in exchange for each of the
1,000,000 outstanding FAB Series A Common Shares (the "A Shares") and 0.5359
shares of EN Common Stock in exchange for each of the 13,392,000 outstanding FAB
Series B Common Shares (the "B Shares"), representing an aggregate of 7,926,773
shares of FEN Common Stock for all the outstanding FAB A Shares and B Shares.
The terms and conditions of the Exchange Offer will be set forth in the offer
document (the "Offer Document") which is to be despatched to the shareholders of
FAB in February 1998. For purposes of this opinion, we have relied upon the
description of the terms of the Offer set out in the Preliminary Proxy Statement
referred to below. We further understand that Forsinvest AB, Stridor Invest AB
and Eric Forss (together, the "Forss Affiliates"), who beneficially own in
aggregate the 1,000,000 A Shares and 2,224,633 of the B Shares, representing
approximately 52% voting and 22% equity interests in FAB, have entered into a
separate agreement with FEN pursuant to which the Forss Affiliates have agreed
irrevocably and unconditionally to accept and to tender their A Shares and B
Shares into the Exchange Offer.
You have asked for our opinion as to (i) the aggregate equity value of FAB and
the value of the consideration to be offered for FAB; and (ii) whether the
consideration to be received by the holders of the B Shares pursuant to the
Exchange Offer is fair from a financial point of view to such holders as a
class.
For the purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of both FAB and FEN;
(ii) analyzed certain internal financial statements and other financial
and operating data concerning FAB and FEN prepared by their
respective managements;
(iii) analyzed certain financial projections, including reserve estimates
and drilling, development and exploration programs and there
related economics as prepared by the management of FEN;
(iv) discussed the past and current operations and financial condition
and the prospects of FAB and FEN with their respective senior
executives;
(v) reviewed the reserve data and present values as of January 1, 1997
for the onshore properties, the Alaska Properties and a small
portion of the offshore properties that were estimated by
Netherland, Sewell & Associates, Inc., independent petroleum
engineering consultants, in their report for FEN dated March 3,
1997;
(vi) reviewed the reserve data and present values as of January 1, 1997
for the majority of the offshore properties that were estimated by
Collarini Engineering Inc., independent petroleum engineering
consultants, in their report for FEN dated February 7, 1997;
(vii) reviewed the reported prices and trading activity for the common
stock of FEN;
(viii) reviewed the reported prices and trading activity for the B Shares
of FAB;
A-1
<PAGE> 95
(ix) reviewed the reported prices and trading activity for the B Shares
of FAB relative to the reported prices and trading activity for the
common stock of FEN;
(x) reviewed the foreign exchange relationship and rates of the Swedish
Crown ("SEK") and the United States of America Dollar ("USD");
(xi) compared the financial performance of FEN and the prices and
trading activity of the FEN with that of certain other comparable
publicly-traded companies and their securities;
(xii) reviewed the financial terms, to the extent publicly available, of
certain comparable U.S. oil and gas acquisition transactions;
(xiii) reviewed the Registration Statement of Form S-4, including the
Preliminary Proxy Statement filed by FEN with the U.S. Securities
Exchange Commission (the Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934, dated 8 January, 1998) and
certain related documents; and
(xiv) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of both FAB and FEN.
We have not made any independent valuation or appraisal of the assets or
liabilities of either FAB or FEN, nor have we been furnished with any such
appraisals other than those noted above. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
We have acted as financial advisor to the Independent Committee of the Board of
Directors of FAB in connection with the rendering of the opinions set out in
this letter and will receive a fee for our services.
As you are aware, an affiliate of Morgan Stanley & Co. Limited has positions in
both the securities of FAB and FEN. It holds 1,049,060 B Shares in FAB
(representing approximately 7.8% of the outstanding B Shares). It also has an
outstanding obligation to re-deliver 291,850 shares of Common Stock of FEN
(representing approximately 1.1% of the outstanding Common Stock) which has been
borrowed to satisfy a short sale of such number of shares. The affiliate holds
these positions in the course of conducting its ordinary sales and trading
business which is separate from the investment banking activities carried on by
Morgan Stanley & Co. Limited.
It is understood that this letter is for the information of the Board of
Directors of FAB only and, except for the inclusion of this letter in its
entirety in the Offer Document, may not be referred to or disclosed to any third
party or used for any other purpose without our prior written consent.
Based on the foregoing, we are of the opinion on the date hereof that based on
the exchange rate of SEK 7.8876 per USD, and FAB unaudited cash reconciliation
report as of 7 January 1998, FAB's aggregate equity value range to be SEK
1,802MM to SEK 2,156MM which is necessarily comparable to the value of the
consideration to be received under the Exchange Offer, as the assets of FAB are
comprised primarily of a shareholding interest in FEN and cash. Furthermore, we
are of the opinion on the date hereof that based on this value view, and the
terms of the Exchange Offer noted above, the consideration to be received by the
holders of the B Shares is fair from a financial point of view to such holders
as a class.
Very truly yours,
MORGAN STANLEY & CO. LIMITED
By: /s/ MICHAEL CUNNINGHAM
------------------------------------
Michael Cunningham
Managing Director
A-2
<PAGE> 96
THE EXCHANGE AGENT FOR THE
U.S. OFFER IS:
SKANDINAVISKA ENSKILDA BANKEN
PUBLIKA EMISSIONER
S-106 40 STOCKHOLM
SWEDEN
<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL"), a Delaware corporation has the power, under specified
circumstances, to indemnify its directors, officers, employees and agents in
connection with threatened, pending or completed actions, suits or proceedings,
whether civil, criminal, administrative or investigative (other than an action
by or in right of the corporation), brought against them by reason of the fact
that they were or are such directors, officers, employees or agents, against
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred in any such action, suit or proceeding. Article XII of the
Forcenergy's Amended and Restated Certificate of Incorporation together with
Article VII of its Bylaws provide for indemnification of each person who is or
was made a party to any actual or threatened civil, criminal, administrative or
investigative action, suit or proceeding because such person is or was an
officer or director of the Forcenergy or is a person who is or was serving at
the request of the Forcenergy as a director, officer, employee or trustee of
another corporation or of a partnership, joint venture trust or other
enterprise, including service relating to employee benefit plans, to the fullest
extent permitted by the DGCL as it existed at the time the indemnification
provisions of the Forcenergy's Certificate of Incorporation and the Bylaws were
adopted or as may be thereafter amended. Article VII of the Forcenergy's Bylaws
expressly provides that it is not the exclusive method of indemnification.
Article VII of the Bylaws provides that the Forcenergy may maintain
insurance, at its own expense, to protect itself and any director, officer,
employee or agent of the Forcenergy or of another entity against any expense,
liability or loss, regardless of whether the Forcenergy would have the power to
indemnify such person against such expense, liability or loss under the DGCL.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
liability for unauthorized acquisitions or redemptions of, or dividends on,
capital stock) or (iv) for any transaction from which the director derived an
improper personal benefit. Article XII of the Forcenergy's Amended and Restated
Certificate of Incorporation contains such a provision.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1* -- Shareholder Agreement dated as of December 18, 1997 by
and among Forcenergy and Forsinvest AB.
4.1 -- Amended and Restated Certificate of Incorporation of
Forcenergy dated July 25, 1995 (filed as Exhibit 3.1 to
the Quarterly Form on 10-Q filed on November 14, 1995 for
the nine month period ending September 30, 1995 and is
included herein by reference (File No. 0-26444)) and
Amendment No. 1 thereto (filed with Amendment No. 2 to
the Registration Statement on Form S-1 filed on June 6,
1996 and is included herein by reference (File No.
333-4600)
4.2 -- Bylaws of Forcenergy (filed as Exhibit 3.2 to the
Registration Statement on Form S-1 filed on June 2, 1995,
as amended on July 6, 1995 and July 25, 1995 and is
included herein by reference (File No. 33-93020)).
5.1* -- Opinion of Andrews & Kurth L.L.P. regarding the legality
of the securities.
8.1* -- Form of Opinion of Andrews & Kurth L.L.P. regarding U.S.
tax matters.
</TABLE>
II-1
II-2
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
8.2* -- Form of Opinion of Enskilda Juridik, Skandinaviska
Enskilda Banken AB (publ) regarding Swedish tax matters.
11.1 -- Computation of Earnings per Share dated as of March 31,
1997 and December 31, 1996 (set forth in the Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997
and the Annual Report on Form 10-K for the fiscal year
December 31, 1996, respectively. These reports have been
incorporated herein by reference).
12.1* -- Computation of Ratios.
23.1 -- Consent of Andrews & Kurth L.L.P. (set forth in Exhibits
5.1 and 8.1).
23.2 -- Consent of Enskilda Juridik, Skandinaviska Enskilda
Banken AB (publ) (set forth in Exhibit 8.2).
23.3* -- Consent of Coopers & Lybrand L.L.P.
23.4* -- Consent of Arthur Andersen LLP (Edisto).
23.5* -- Consent of Arthur Andersen LLP (Convest).
23.6* -- Consent of Price Waterhouse LLP (Forcenergy).
23.7* -- Consent of Price Waterhouse (FAB).
23.8* -- Consent of Collarini Engineering, Inc.
23.9* -- Consent of Joe C. Neal & Associates.
23.10* -- Consent of Netherland, Sewell & Associates, Inc.
(Forcenergy).
23.11 -- Consent of Morgan Stanley
24.1 -- Powers of Attorney (set forth on signature page).
99.1* -- Form of Forcenergy Proxy.
</TABLE>
- ---------------
* Filed herewith
FINANCIAL STATEMENT SCHEDULES:
Not applicable.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required in Section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement;
II-3
<PAGE> 99
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
tide offering thereof;
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request;
(6) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form;
(7) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the Company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE> 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Miami, State of Florida, on the 11th day of February,
1998.
FORCENERGY INC
By: /s/ E. JOSEPH GRADY
----------------------------------
E. Joseph Grady
Vice President -- Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE
APPEARS BELOW IN SO SIGNING ALSO MAKES, CONSTITUTES AND APPOINTS STIG
WENNERSTROM, THOMAS F. GETTEN AND E. JOSEPH GRADY, OR EITHER OF THEM, HIS TRUE
AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL
CAPACITIES, TO EXECUTE AND CAUSE TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ANY AND ALL AMENDMENTS AND POSTEFFECTIVE AMENDMENTS TO THIS
REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND
OTHER DOCUMENTS IN CONNECTION THEREWITH, AND HEREBY RATIFIES AND CONFIRMS ALL
THAT SAID ATTORNEYS-IN-FACT AND AGENTS AND THEIR SUBSTITUTES OR SUBSTITUTES MAY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STIG WENNERSTROM Chairman of the Board of February 11, 1998
- ----------------------------------------------------- Directors, President and Chief
Stig Wennerstrom Executive Officer (Principal
Executive Officer)
/s/ E. JOSEPH GRADY Vice President -- Chief Financial February 11, 1998
- ----------------------------------------------------- Officer (Principal Financial and
E. Joseph Grady Accounting Officer)
/s/ BRUCE L. BURNHAM Director February 11, 1998
- -----------------------------------------------------
Bruce L. Burnham
/s/ ERIC FORSS Director February 11, 1998
- -----------------------------------------------------
Eric Forss
/s/ ROBERT ISAAL Director February 11, 1998
- -----------------------------------------------------
Robert Isaal
/s/ WILLIAM F. WALLACE Director February 11, 1998
- -----------------------------------------------------
William F. Wallace
</TABLE>
II-4
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1* -- Shareholder Agreement dated as of December 18, 1997 by
and among Forcenergy and Forsinvest AB.
4.1 -- Amended and Restated Certificate of Incorporation of
Forcenergy dated July 25, 1995 (filed as Exhibit 3.1 to
the Quarterly Form on 10-Q filed on November 14, 1995 for
the nine month period ending September 30, 1995 and is
included herein by reference (File No. 0-26444)) and
Amendment No. 1 thereto (filed with Amendment No. 2 to
the Registration Statement on Form S-1 filed on June 6,
1996 and is included herein by reference (File No.
333-4600)
4.2 -- Bylaws of Forcenergy (filed as Exhibit 3.2 to the
Registration Statement on Form S-1 filed on June 2, 1995,
as amended on July 6, 1995 and July 25, 1995 and is
included herein by reference (File No. 33-93020)).
5.1* -- Opinion of Andrews & Kurth L.L.P. regarding the legality
of the securities.
8.1* -- Form of Opinion of Andrews & Kurth L.L.P. regarding U.S.
tax matters.
8.2* -- Form of Opinion of Enskilda Juridik, Skandinaviska
Enskilda Banken AB (publ) regarding Swedish tax matters.
11.1 -- Computation of Earnings per Share dated as of September
30, 1997 and December 31, 1996 (set forth in the
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 and the Annual Report on Form 10-K for
the fiscal year December 31, 1996, respectively. These
reports have been incorporated herein by reference).
12.1* -- Computation of Ratios.
23.1 -- Consent of Andrews & Kurth L.L.P. (set forth in Exhibit
5.1).
23.2 -- Consent of Enskilda Juridik, Skandinaviska Enskilda
Banken AB (publ) (set forth in Exhibit 8.2).
23.3* -- Consent of Coopers & Lybrand L.L.P.
23.4* -- Consent of Arthur Andersen LLP (Edisto).
23.5* -- Consent of Arthur Andersen LLP (Convest).
23.6* -- Consent of Price Waterhouse LLP (Forcenergy).
23.7* -- Consent of Price Waterhouse (FAB).
23.8* -- Consent of Collarini Engineering, Inc.
23.9* -- Consent of Joe C. Neal & Associates.
23.10* -- Consent of Netherland, Sewell & Associates, Inc.
(Forcenergy).
23.11* -- Consent of Morgan Stanley
24.1 -- Powers of Attorney (set forth on signature page).
99.1* -- Form of Forcenergy Proxy.
</TABLE>
- ---------------
* Filed herewith
II-6
<PAGE> 1
EXHIBIT 2.1
December 18, 1997
Forsinvest AB
Mr. Eric Forss
Stridor Invest AB
Birger Jarlsgatan 73-75
Box 19040
S-104 32 Stockholm, Sweden
RE: FORCENERGY AB
Dear Sirs:
We understand that Forsinvest AB, Eric Forss and Stridor Invest AB (the
"Shareholders") are the beneficial owners of, or exercise control and direction
over, certain shares of stock of Forcenergy AB (the "Company") identified in the
attached Exhibit A (such shares as well as any additional Shares acquired by the
Shareholders as provided in Section 2.2(c), the "Forss Shares"). Forcenergy Inc
("FEN") proposes to make an offer to purchase all of the outstanding shares of
stock of the Company (the "Shares"). This letter sets forth the agreement
between the Shareholders and FEN relating to the Shareholders tendering the
Forss Shares.
1. THE OFFER
1.1. FEN intends to make an offer (the "Offer") to purchase all of the
outstanding Shares of the Company at a price per share determined in the
manner set forth in Exhibit B and subject to the other conditions set forth
therein. The Offer shall be made in accordance with applicable securities
laws, rules of applicable stock exchanges and applicable laws.
1.2. The Offer will be conditional upon more than 90% of the outstanding Shares
being tendered under and not withdrawn from the Offer as well as certain
conditions precedent as set forth in Exhibit B.
1.3. In the event that the press release with respect to the Offer is not made
to the shareholders of the Company on or before January 15, 1998, or if FEN
has withdrawn the Offer prior to the Expiry Date, the Shareholders may
terminate their obligations under this Agreement by notice to FEN. In the
event that the transactions contemplated by the Offer are not consummated
on or before the Closing Date (as defined in Exhibit B), or where the
conditions precedent to the Offer are not satisfied on or before the Expiry
Date, except as provided for in Section 4 hereof, the Shareholders'
obligations under this Agreement shall also terminate in the manner
provided under Section 9 of this Agreement. The Offer shall be made in
accordance with the requirements of applicable Swedish and securities laws
including the Recommendation Concerning Public Offers to Purchase Shares
promulgated in 1988 by the Joint Committee of the Stockholm Chamber of
Commerce and the Federation of Swedish Industries, as amended from time to
time and in effect (the "Recommendation").
1.4. Notwithstanding anything contained herein to the contrary, except (i) with
respect to the price per Series A Shares and Series B Shares under Section
4 of Exhibit B, and (ii) the obligations being incurred by the Shareholders
under Sections 2, 3, 4 and 5 hereof in order to induce FEN to make the
Offer to all shareholders, the Offer described in Exhibit B shall be made
by FEN, and the resultant exchange of Shares for FEN Shares shall be
effected, with respect to all shareholders and Shares of the Company, on
the same terms and conditions.
-1-
<PAGE> 2
2. COVENANTS OF THE SHAREHOLDERS
2.1. The Shareholders agree:
(a) to unconditionally and irrevocably accept the Offer in accordance with
the terms and conditions of the Offer, not later than the 3rd business
day after the date on which the Offer period for acceptance begins;
(b) prior to the expiry or termination of the Option provided for in
Section 4 below, not to sell, assign, convey or otherwise dispose of
any of the Forss Shares other than pursuant to the Offer or the Option;
(c) not to grant any proxy, power-of-attorney or other authorization or
interest in or with respect to the Forss Shares; and
(d) not to deposit the Forss Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Forss Shares.
2.2. The Shareholders also agree:
(a) not to solicit or initiate proposals or offers from, or negotiations
with, directly or indirectly, any person other than FEN relating to
the Shares or concerning any transaction involving the Company as a
whole;
(b) not to initiate, propose, assist or participate in any solicitation of
shareholders of the Company which may reduce the likelihood of the
Offer being successfully completed; and
(c) that any shares of the Company that the Shareholders purchase or with
respect to which the Shareholders otherwise acquire beneficial
ownership after the date of this Agreement and prior to the
termination of this Agreement shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted
Forss Shares.
2.3. This Agreement shall not restrict any director of the Company from acting
in accordance with such person's fiduciary obligations as a director of the
Company.
3. PROXY
3.1. The Shareholders hereby revoke all previous proxies granted with respect to
any of the Forss Shares owned by the Shareholders that would conflict with
the terms of the Proxy granted hereby.
3.2. Effective as of the date the Offer is made by FEN, the Shareholders hereby
irrevocably constitute and appoint FEN and Stig Wennerstrom, President and
Chief Executive Officer of FEN or E. Joseph Grady, Vice President,
Treasurer and Chief Financial Officer of FEN, in their respective
capacities as officers of FEN, and any individual who shall hereafter
succeed to such respective offices, and each of them individually, as its
true and lawful proxy and attorney-in-fact, with full power of
substitution, for and in the name, place and stead of the Shareholders, to
call and attend any and all meetings of the Company's shareholders, and any
adjournments thereof, to execute any and all written consents of
shareholders of the Company and to vote all of the Forss Shares and any and
all shares of any other class of capital stock of the Company presently or
at any future time owned beneficially or of record by the Shareholders,
including any and all securities having voting rights issued or issuable in
respect thereof, which the Shareholders are entitled to vote (all of the
foregoing being collectively referred to as the "Subject Stock"), and to
represent and otherwise act as the Shareholders could act, in the same
manner and with the same effect as if the Shareholders were personally
present, at any such annual, special or other meeting of the shareholders
of the Company, and at any adjournment thereof (a "Meeting"), or pursuant
to any written consent in lieu of meeting or otherwise. Such attorneys and
proxies are hereby authorized to vote the Subject Stock in accordance with
the terms of the Proxy contemplated hereby.
3.3. The Shareholders hereby covenant and agree that they will not vote or take
any action by written consent of shareholders in lieu of meeting on any
matter that is subject to the Proxy without FEN's prior consent.
-2-
<PAGE> 3
3.4. The Shareholders acknowledge that FEN will make the Offer in reliance upon
this Agreement, including the Proxy, and that the Proxy is granted in
consideration for the making of the Offer by FEN.
4. OPTION
4.1. If as a result a superior offer being made by another party ("Third Party
Offeror") to the shareholders of the Company, (i) the Offer is allowed to
expire or (ii) the Offer is terminated as a result of the conditions
precedent thereto not being met, in each case without FEN taking up and
paying for any Shares deposited under the Offer, then FEN shall have an
option (the "Option") to purchase all of the Forss Shares identified in
Exhibit A for a consideration with respect to Series A Shares of (i) all
cash in an amount equal to 755,000 times the greater of $33 and the closing
price of a FEN Share as of the date the Option is exercised by FEN, or (ii)
755,000 FEN Shares, and with respect to each Series B Share of (i) all cash
in an amount equal to 1,192,403 times the greater of $33 and the closing
price of a FEN Share as of the date the Option is exercised by FEN, or (ii)
1,192,403 FEN Shares, in each case exercisable at any time before the third
business day prior to the first publicly announced expiry date of the said
offer; provided if the expiry date of said offer shall occur prior to the
Expiry Date of the Offer, FEN shall have until the Closing Date to exercise
the Option. FEN shall have the option of paying either cash as provided in
subsection (i) or stock as provided in subsection (ii) with respect to the
Series A and Series B Shares. FEN shall indemnify the Shareholders for all
taxes incurred by the Shareholders as a result of the exercise of the
Option by FEN. The Option may be exercised by written notice to the
Shareholders. If FEN exercises the Option, settlement of the purchase shall
be effected by the Shareholders causing to be delivered to Enskilda
Securities, as agent for FEN, at its principal offices in Stockholm,
Sweden, an assignment to FEN of the Forss Shares in respect of which the
Option is exercised, and such other documents as may be required under
Swedish law to effectively transfer the Forss Shares to FEN, against
payment of the purchase price therefor, or shall be effected in such other
manner and at such other time as may be agreed by the Shareholders and FEN.
4.2. Notwithstanding anything herein provided, FEN may at any time at its sole
discretion terminate the Option by notice in writing delivered or sent by
telecopy to the Shareholders and forthwith upon the delivery or receipt of
the telecopy of any such notice, the Option shall forthwith expire and
terminate as to such of the Forss Shares in respect of which the Option has
not been exercised.
4.3. Nothing contained herein or done pursuant hereto shall obligate FEN to
purchase and pay for any of the Forss Shares except those Forss Shares in
respect of which FEN shall have exercised the Option in the manner
hereinbefore provided.
4.4. Any Shares of the Company that the Shareholders purchase or with respect to
which the Shareholders otherwise acquire beneficial ownership after the
date of this Agreement and prior to the termination of this Agreement shall
be subject to the Option.
4.5. In the event FEN acquires the Forss Shares pursuant to the Option (i) FEN
shall not transfer the Forss Shares except to the Third Party Offeror
without obtaining the prior written consent of the Shareholders (which
consent shall not be unreasonably withheld), and (ii) if FEN transfers the
Forss Shares to the Third Party Offeror in accordance with its tender
offer, as amended or revised, or, as a result of such tender offer, FEN
transfers the Forss Shares to another party within 30 days of the
expiration date of such tender offer, FEN shall pay the Shareholders 75% of
the amount equal to the proceeds received by FEN less (a) the value of the
consideration paid the Shareholders by FEN in exercising the Option, and
(b) the aggregate costs and expenses incurred by FEN in connection with
making the Offer, exercising the Option and the transfer to the Third Party
Offeror.
4.6. Nothing contained herein shall give FEN the right to withdraw the Offer
once made except in accordance with the terms of the Offer, and the Option
is granted to FEN to be exercisable only in the event an offer for the
Shares is made by a Third Party Offeror.
-3-
<PAGE> 4
5. COVENANTS, REPRESENTATIONS AND WARRANTIES
5.1. The Shareholders covenant, represent and warrant to FEN as follows.
(a) The Shareholders are duly authorized to execute and deliver this
Agreement and this Agreement is a valid and binding agreement,
enforceable against the Shareholders with respect to all Forss Shares
in accordance with its terms. Neither the execution of this Agreement
by the Shareholders nor the completion by the Shareholders of the
transactions contemplated hereby will constitute a violation of or
default under, or conflict with, any contract, commitment, agreement,
understanding, arrangement or restriction of any kind to which the
Shareholders will be parties or by which they will be bound at the
time of such completion.
(b) The Shareholders are the beneficial owners of, or exercise control and
direction over, the Forss Shares and have the authority to enter into
this Agreement on behalf of all owners or holders of the Forss Shares
and carry out the transactions contemplated hereby.
(c) The Forss Shares are validly issued, fully paid and non-assessable
shares of the Company and the transfer of the Forss Shares to FEN will
pass good and marketable title to the Forss Shares, free and clear of
all claims, liens, charges, encumbrances and security interests.
(d) The Shareholders have no agreement, option, right or privilege capable
of becoming an agreement, option, right or privilege, for the
purchase, subscription or issuance of any of the unissued shares in
the capital of the Company, the outstanding Shares or for the issue of
any other securities of any nature or kind of the Company.
(e) Without obtaining the prior written consent of FEN (which consent
shall not be unreasonably withheld), the Shareholders agree not to
transfer, sell, exchange, pledge or otherwise dispose of or encumber
any of the FEN Shares received pursuant to the Offer, at any time
prior to 6 months from the date that the Shareholders acquire the FEN
Shares; provided, however, that notwithstanding the foregoing, the
Shareholders may transfer, sell, exchange, pledge or otherwise dispose
of or encumber (i) up to 25% of the total number of FEN Shares the
Shareholders receive in accordance with the Offer and (ii) up to 100%
of such FEN Shares for the sole purpose of pledging such FEN Shares to
a lending institution or institutions in connection with securing a
bank line of credit offered by such institution. The lock up provided
herein shall not preclude such pledge or resulting foreclosure of such
FEN Shares.
5.2. FEN hereby represents and warrants to the Shareholders that FEN is duly
authorized to execute and deliver this Agreement and that this Agreement is
a valid and binding agreement, enforceable against FEN in accordance with
its terms. Neither the execution of this Agreement nor the consummation by
FEN of the transactions contemplated hereby will constitute a violation of
or default under, or conflict with, any contract, commitment, agreement,
understanding, arrangement or restriction of any kind to which FEN is a
party or by which FEN is bound, except for prohibitions contained in
agreements for which FEN shall obtain waivers prior to making the Offer.
5.3. FEN acknowledges that the Forss Shares are presently pledged to secure
certain lines of credit, and that the pledge and subsequent foreclosure of
such pledge does not constitute a misrepresentation by the Shareholders of
the representations of the Shareholders contained herein. It is intended
that the pledge of such shares shall be released in connection with any
transfer of such shares to FEN, and that the FEN Shares received by the
Shareholders in exchange therefore would be pledged to secure such lines of
credit.
5.4. Upon consummation of the transactions contemplated by the Offer, FEN shall
cause the Company to discharge the directors of the Company from liability
provided such discharge is recommended by the auditors of the Company,
Price Waterhouse.
6. EXPENSES
6.1. Each party hereto agrees to pay its own expenses incurred in connection
with this Agreement.
-4-
<PAGE> 5
7. PUBLIC DISCLOSURE OF OFFER
Each party shall consult with the other and the Company before making any
public disclosure or announcement of, or pertaining to, this Agreement and any
such disclosure or announcement shall be mutually satisfactory to both parties;
provided that this paragraph shall not apply to any disclosure or announcement
pertaining to this Agreement which a party is advised by legal counsel is
required to be made by applicable laws, stock exchange rules or policies of
regulatory authorities having jurisdiction, in which case the other party to
this Agreement shall be so notified.
8. AMENDMENTS
This Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by the parties
hereto. No party to this Agreement may assign any of its rights or obligations
under this Agreement without the prior written consent of the other party.
9. TERMINATION OF AGREEMENT
The Shareholders' obligations under this Agreement shall be terminated
under Section 1.3 or, except as provided in Section 4.1, on the first business
day following the Closing Date of the Offer.
10. TIME
Time shall be of the essence of this Agreement.
11. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon, enure to the benefit of and be
enforceable by the Shareholders and FEN.
12. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the Kingdom of Sweden. All disputes arising in connection with this
Agreement shall be finally settled by arbitration in Stockholm, Sweden, in
accordance with the Swedish Arbitration Act.
13. NOTICES
Any notice, request, demand or other instrument which may be required or
permitted to be delivered, given or served upon any party hereto shall be
sufficiently delivered, given to or served upon the party in question, if in
writing, and if either delivered by hand, by facsimile or by any other means of
instant written telecommunication, in each case addressed, in the case of each
of the Shareholders, to:
Birger Jarlsgatan 73-75
Box 19040
S-104 32 Stockholm Sweden
Telecopy No. +46 (0)8-723 10 15
and in the case of FEN, to:
Forcenergy Inc
2730 SW 3d Avenue
Suite 800
Miami, FL 33129
Attention: President
Telecopy No. (305) 856-4300
Any written communication as aforesaid, if delivered or sent by facsimile
or any other means of instant written telecommunication, shall be deemed to have
been given or made on the day on which it was delivered
-5-
<PAGE> 6
or sent as aforesaid if it is received at or before 3:30 p.m. Miami, FL time on
the day in question or, if such day is not a business day, delivery shall be
deemed to have occurred on the next following business day. Any party hereto may
from time to time change its address for service hereunder by notice to the
other party.
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof by signing and returning the enclosed duplicate of this
letter. This letter may be signed in two counterparts which together shall be
deemed to constitute one valid and binding agreement and delivery of the
counterparts may be effected by means of telecopier from us to you and from you
to us.
Yours truly,
Forcenergy Inc
By: /s/ Stig Wennerstrom
- --------------------------------------------------
President
The foregoing is in accordance with our understanding and is accepted and
agreed this 18th day of December, 1997.
Forsinvest AB Stridor Invest AB
By: /s/ Eric Forss By: /s/ Eric Forss
------------------------------- --------------------------------
Eric Forss
By: /s/ Eric Forss
-------------------------------
-6-
<PAGE> 7
EXHIBIT A
<TABLE>
<CAPTION>
NAME OF OWNER SERIES NO. OF SHARES
------------- ------ -------------
<S> <C> <C>
Forsinvest AB............................................... A 1,000,000
B 2,154,433
Stridor Invest AB........................................... B 40,000
Eric Forss.................................................. B 30,200
---------
Series
Total A 1,000,000
Series
B 2,224,633
</TABLE>
-7-
<PAGE> 8
EXHIBIT B
TERMS OF THE OFFER
1. GENERAL TERMS
The Offer shall be made to the Shareholders and all other shareholders of
the Company in compliance with the applicable laws and the Recommendation.
2. EXPIRY DATE
The Offer shall be open until March 31, 1998 (provided that FEN may, subject
to all legal and regulatory requirements, extend such period of time at its
sole discretion) (the "Expiry Date").
3. CLOSING DATE
FEN shall pay for and receive the Shares which have been tendered under the
Offer not later than ten business days after the Expiry Date (the "Closing
Date")
4. PRICE PER SHARE
The Offer shall provide that FEN shall pay 0.75 FEN Share for each Series A
Share of the Company (the "A Shares") and 0.5359 FEN Share for each Series B
Share of the Company (the "B Shares"), which in each case have been tendered
under the Offer.
5. CONDITIONS OF THE OFFER
The Offer shall not be subject to any conditions other than the hereinafter
described conditions which must be satisfied on or before the Expiry Date
and remain satisfied until the Closing Date:
a. There shall have been validly tendered under the Offer and not
withdrawn, a number of Shares which constitutes more than 90% of (i) the
issued and outstanding Shares (calculated on a fully diluted basis) and
(ii) the total voting rights with respect to the Shares.
b. All Shares tendered under the Offer shall be free and clear of all
claims, liens, charges, encumbrances and security interests.
c. The Offer and issuance of the FEN Shares provided for in paragraph 4
shall have been approved by the shareholders of FEN at a special meeting
of the shareholders called for such purpose.
d. There shall not have occurred any change (including any announcement,
governmental or regulatory initiative, condition, event or development
involving a change to the law) that, in the judgment of FEN, acting
reasonably, directly or indirectly has a material adverse effect in
relation to the current business or operations of FEN or the Company in
relation to the regulatory regime applicable to their respective
businesses and operations, or with respect to completing a compulsory
acquisition or any subsequent acquisition, transaction, or with respect
to any intended integration of the Company with FEN, or with any
reorganization of the Company or FEN in connection with any such
intended integration.
e. Any required prospectus is declared effective by the U.S. Securities and
Exchange Commission and the Stockholm Stock Exchange and that the FEN
Shares are approved for registration and listing on the NYSE and the
Stockholm Stock Exchange.
f. Any applicable waiting periods under any competition, foreign investment
or similar law, regulation or other governmental authority having
jurisdiction over FEN or the Company with respect to such matters shall
have expired or been terminated in respect of such transactions.
-8-
<PAGE> 9
g. Any other requisite regulatory approvals (including, without limitation,
those of any stock exchanges or other regulatory authorities) shall have
been obtained by FEN on terms and conditions satisfactory to FEN acting
reasonably.
h. No act, action, suit or proceeding shall have been taken before or by
any federal, provincial or foreign court or other tribunal or
governmental agency or other regulatory or administrative agency or
commission or by any elected or appointed public official or private
person or corporation, and no law, regulation or policy shall have been
enacted, promulgated or applied, which would reasonably be expected to
have a material adverse effect on the consummation of the transactions
contemplated by the Offer.
i. There shall not have occurred any material breach of any of the terms of
the agreement with the Shareholders on behalf of the Forss Shares or any
termination of such agreement pursuant to the terms thereof, all
representations and warranties with respect to the Company in Exhibit
B-1 hereto shall be true and correct in all material respects, and all
covenants with respect to the Company in Exhibit B-2 shall have been
performed or complied with. In this regard, the Shareholders make no
representations, warranties or covenants with regard to Exhibits B-1 and
B-2.
The foregoing conditions are for the exclusive benefit of FEN and may be
waived by FEN in whole or in part at any time and from time to time before or
after the Expiry Date.
-9-
<PAGE> 10
EXHIBIT B-1
REPRESENTATIONS AND WARRANTIES
1. Capitalization. There are 14,392,000 Shares issued and outstanding,
consisting of 1,000,000 Series A Shares and 13,392,000 Series B Shares.
There are no options, warrants, or other commitments obligating the
Company or any Subsidiary to issue or sell any shares of any capital
stock of the Company or any of its Subsidiaries.
2. FEN Shares. The Company is the record and beneficial owner of 8,740,486
shares of common stock of FEN (the "FEN Shares"). The FEN Shares are
free and clear of all security interests, liens, charges, encumbrances
or other evidence of indebtedness, and rights of others, except
1,100,000 FEN Shares are pledged to secure an unutilized line of credit
in which no indebtedness is outstanding.
3. Absence of Changes. Since December 31,1996 (i) the Company has conducted
its business only in the ordinary course, (ii) no liability or
obligation of any nature material to the Company has been incurred, and
(iii) there has not been any adverse change in the financial conditions,
results of operations or businesses of the Company.
4. Employment Agreements. The Company is not a party to any written or oral
policy, agreement, obligation or understanding providing for severance
or termination payments to, or any employment agreement with, any person
except for payments required under Swedish law and payments due under
employment contracts, copies of which have been delivered to FEN.
5. Financial Statements. The Company's 1996 Annual Report, and the
unaudited financial statements for 1997 up to and including the
statements for the third quarter of 1997, were prepared in accordance
with generally accepted accounting principles in Sweden consistently
applied.
6. Litigation, etc. There is no claim, action, proceeding or investigation
pending or threatened against or relating to the Company or any
Subsidiary that, if adversely determined, is likely to have a material
adverse effect on the Company or prevent or materially delay
consummation of the transactions contemplated by the Offer.
7. Returns Filed and Taxes Paid. All tax returns required to be filed by or
on behalf of the Company or any material Subsidiaries have been duly
filed on a timely basis and, such returns are true, complete and correct
in all material respects. All taxes shown to be payable on the returns
or on subsequent assessments with respect thereto have been paid in
full, and no other taxes are payable by the Company or any material
Subsidiaries with respect to items or periods covered by such returns.
8. Insurance. The Company maintains insurance policies naming the Company
as an insured covering risks reasonably and prudently foreseeable in the
operation and conduct of the business of the Company and the
Subsidiaries.
-10-
<PAGE> 11
EXHIBIT B-2
ORDINARY COURSE OF BUSINESS
Unless FEN shall otherwise agree in writing, or unless the contrary is
expressly contemplated or permitted by the terms of the Offer, each of the
Company and its subsidiaries shall, prior to the Expiry Date:
(a) conduct its business only in, and not take any action except in, the
usual, ordinary and regular course of business consistent with past
practices;
(b) not:
(i) issue, sell, pledge, or dispose of:
(A) any shares of FEN held by the Company; or
(B) any additional Shares of, or rights of any kind to acquire any
Shares of, any capital stock of the Company;
(C) except in the ordinary course of business consistent with past
practices, any assets of the Company.
(ii) amend the Articles of Association or other corporate governance
documents;
(iii) split, combine or reclassify any outstanding Shares, or declare,
set aside or pay any dividend or other distribution with respect
to the Shares;
(iv) redeem, purchase or offer to purchase any Shares of the Company;
(v) reorganize, consolidate or merge the Company with any other
person, corporation, partnership or other business organization
whatsoever;
(vi) incur or commit to incur any indebtedness for borrowed money or
issue any debt securities except the Company's wholly owned
subsidiary, Svenska Oljegruppen AB (SOG) may incur indebtedness
in the ordinary course of business consistent with past
practices.
(c) not to:
(i) take any action with respect to any employment, severance,
arrangements or with respect to the grant of any bonuses, salary
increases, stock options, pension benefits, retirement allowances,
deferred compensation, severance or termination pay, or any other
form of compensation or profit sharing or with respect to any
increase of benefits payable otherwise than pursuant to
agreements, policies or arrangements in effect (without amendment)
on the date hereof;
(d) not take any action that would render, or that reasonably may be
expected to render, any representation or warranty with respect to the
Company in Exhibit B-1 untrue at any time prior to the Expiry Date
unless any particular representation or warranty contained herein
cannot reasonably be expected to apply as of the Expiry Date.
-11-
<PAGE> 1
EXHIBIT 5.1
<TABLE>
<C> <C> <C>
Andrews & Kurth
OTHER OFFICES: L.L.P. TELECOPIER: (713) 220-4200
WASHINGTON, D.C. ATTORNEYS TELECOPIER: (713) 220-4285
DALLAS TEXAS COMMERCE TOWER
LOS ANGELES 600 TRAVIS, SUITE 4200
NEW YORK HOUSTON, TEXAS 77002
THE WOODLANDS (713) 220-4200
LONDON TELEX: 79-1208
</TABLE>
February 10, 1998
Board of Directors
Forcenergy Inc
2730 S.W. 3rd Ave., Suite 800
Miami, Florida 33129-2237
Gentlemen:
We have acted as special counsel to Forcenergy Inc, a Delaware corporation
("Forcenergy"), in connection with the proposed issuance by Forcenergy of up to
7,926,773 shares (the "Shares") of Common Stock, par value $0.01 per share, of
Forcenergy. The Shares are proposed to be offered to holders of Series A and
Series B common shares (the "FAB Securities") of Forcenergy AB, a company
organized under the laws of the Kingdom of Sweden ("FAB"), in exchange for FAB
Securities pursuant to the terms and conditions described in the U.S. Exchange
Offer/Prospectus/Proxy Statement (the "Prospectus") included in Forcenergy's
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. Each Share will be
issued with an associated preferred stock purchase right ("Right") to be issued
pursuant to that certain Rights Agreement dated as of November 21, 1997 between
Forcenergy and American Stock Transfer & Trust Company, as rights agent. This
opinion is being delivered in connection with Forcenergy's Registration
Statement relating to the registration of the offering and sale of the Shares
(with associated Rights).
As the basis for the opinion hereinafter expressed, we have examined such
statutes, regulations, corporate records and documents, certificates of
corporate and public officials and other instruments as we have deemed necessary
or advisable for the purposes of this opinion. In such examination, we have
assumed the authenticity of all documents submitted to us as originals and the
conformity with the original documents of all documents submitted to us as
copies.
Based on the foregoing and on such legal considerations as we deem
relevant, we are of the opinion that the Shares to be issued by Forcenergy to
stockholders of FAB in the manner described in the Prospectus included in the
Registration Statement, have been duly authorized and, when issued and delivered
in exchange for FAB Securities in the manner set forth in the Prospectus, will
be validly issued, fully paid and non-assessable. The associated Rights issued
with the Shares will, upon issuance and delivery of the Shares in accordance
with the Prospectus, be validly issued by Forcenergy.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Registration Statement.
Very truly yours,
/s/ ANDREWS & KURTH L.L.P.
Andrews & Kurth L.L.P.
<PAGE> 1
EXHIBIT 8.1
February 11, 1998
Forcenergy Inc
2730 S.W. 3rd Avenue, Suite 800
Miami, Florida 33129-2237
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel in connection with this Registration Statement on
Form S-4, (the "Registration Statement") of Forcenergy Inc (the "Company"),
relating to the registration of the offering of up to 7,926,733 shares of common
stock in the Company in exchange for outstanding Series A and Series B common
shares of Forcenergy AB (the "Exchange Offer"). In connection therewith, we have
participated in the preparation of the discussion set forth under the caption
"The Exchange Offer -- Certain U.S. Federal Income Tax Consequences" (the
"Discussion") in the Registration Statement. Capitalized terms used and not
otherwise defined herein are used as defined in the Registration Statement.
The Discussion, subject to the qualifications stated therein, constitutes
our opinion as to the material United States federal income tax consequences of
the Exchange Offer to U.S. FAB Holders.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Discussion. The
issuance of such consent does not concede that we are an "expert" for the
purposes of the Securities Act of 1933.
Very truly yours,
/s/ ANDREWS & KURTH L.L.P.
Andrews & Kurth L.L.P.
<PAGE> 1
EXHIBIT 8.2
Ref. AR/YB
Forcenergy Inc February 4, 1998
2730 S.W. 3rd Avenue, Suite 800
Miami, Florida 33129-2237
USA
Gentlemen:
We are acting as your Swedish counsel in connection with the Registration
Statement on Form F-4 (the "Registration Statement") filed with the United
States Securities and Exchange Commission by Forcenergy Inc, a Delaware
corporation, USA ("Forcenergy"), in connection with the offer by Forcenergy to
acquire all the issued and outstanding shares of Forcenergy AB, Sweden, in
exchange for shares of common stock of Forcenergy.
We hereby confirm, in all material respects, our opinion with respect to
Swedish Income tax laws contained in the Registration Statement under the
caption "The Exchange Offer -- Certain Swedish Income Tax Consequences" subject
to the assumptions and limitations set forth therein.
We hereby consent to the use of our name under the caption "The Exchange Offer
- -- Certain Swedish Income Tax Consequences" in the Registration Statement and
to the filing, as an exhibit to the Registration Statement, of this letter. In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations adopted by the Securities and
Exchange Commission thereunder.
Very truly yours,
Enskilda Juridik,
Skandinaviska Enskilda Banken AB (publ)
/s/ Goran Nystrom /s/ Anne Rutberg
- ------------------------------- ---------------------------------
Goran Nystrom Anne Rutberg
<PAGE> 1
EXHIBIT 12.1
FORCENERGY INC
COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges:
Net income before income
taxes...................... $4,394 $3,199 $(6,478) $(2,928) $17,989 $ 9,842 $29,903
Fixed Charges(1).............. 2,303 6,192 9,419 11,668 13,367 9,503 22,970
------ ------ ------- ------- ------- ------- -------
Earnings................... $6,697 $9,391 $ 3,051 $ 8,740 $31,356 $19,345 $52,873
====== ====== ======= ======= ======= ======= =======
Fixed Charges(2)........... $2,303 $6,549 $11,058 $14,234 $15,594 $11,086 $24,735
====== ====== ======= ======= ======= ======= =======
Ratio of Earnings to Fixed
Charges(3).................... 2.9x 1.4x -- -- 2.0x 1.7x 2.1x
====== ====== ======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Includes interest expense exclusive of amounts capitalized.
(2) Includes interest expense prior to capitalization.
(3) Earnings were not adequate to cover fixed charges in the years ended
December 31, 1994 and 1995 by $8.0 million and $5.5 million, respectively.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4 of our report dated February 17, 1997, on our audits of the
consolidated financial statements of Forcenergy Inc as of December 31, 1996 and
1995 and for the years then ended, which report is included in the annual report
on Form 10-K filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934. We consent to the incorporation by reference in
this registration statement on Form S-4 of our report dated August 30, 1996, on
our audit of the historical statement of revenues and direct operating expenses
of the properties acquired by Forcenergy Inc from Amerada Hess Corporation for
the year ended December 31, 1995, which report is included in the Form 8-K/A
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934. We consent to the incorporation by reference in this
registration statement on Form S-4 of our report dated March 13, 1997, on our
audits of the 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, which report is included in the Form
8-K/A filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934. We also consent to the reference to our firm
under the captions "Experts" and "Forcenergy Summary Historical Consolidated
Financial Data".
Coopers & Lybrand L.L.P.
Miami, Florida
February 10, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report on Edisto Resources
Corporation dated March 20, 1997 included in Forcenergy Inc's Form 8-K filed
with the Securities and Exchange Commission on November 5, 1997 and to all
references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report on Convest Energy
Corporation dated March 20, 1997 included in Forcenergy Inc's Form 8-K filed
with the Securities and Exchange Commission on November 5, 1997 and to all
references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Forcenergy Inc of our report dated June 1, 1995, except as to the common
stock reclassification and conversion described in Note 1 which is as of July 6,
1995, appearing on page F-3 of Forcenergy Inc's Annual Report on Form 10-K for
the year ended December 31, 1996. We also consent to the references to us under
the headings "Experts" and "Summary Historical Consolidated Financial
Information" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Summary Historical
Consolidated Financial Information."
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Houston, Texas
February 10, 1998
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in the Proxy Statement/Prospectus
constituting part of this Registration Statement on Form S-4 of Forcenergy Inc
of our report dated April 8, 1997 with respect to Forcenergy AB. We also consent
to the references to us under the headings "Experts" and "Forcenergy AB Summary
Historical Financial Information" in such Proxy Statement/Prospectus. However,
it should be noted that Price Waterhouse has not prepared or certified such
"Forcenergy AB Summary Historical Consolidated Financial Information".
/s/ PRICE WATERHOUSE
Price Waterhouse
Stockholm, Sweden
February 10, 1998
<PAGE> 1
EXHIBIT 23.8
February 11, 1998
To the Board of Directors of Forcenergy Inc:
We hereby consent to the use of our reports dated February 7, 1997,
February 9, 1996 and May 26, 1995, and our estimates of the net proved natural
gas and oil reserves of Forcenergy Inc (the "Company"), as of January 1, 1997,
1996 and 1995, and to all references to our estimates of the net proved natural
gas and oil reserves of the Company as of those dates, and to the references to
our firm under the headings "Information Regarding Forcenergy -- Oil and Gas
Reserves" and "Experts" in the Registration Statement and the Proxy
Statement/Prospectus included therein.
COLLARINI ENGINEERING INC.
/s/ CHERYL R. COLLARINI, P.E.
Cheryl R. Collarini, P.E.
President
<PAGE> 1
EXHIBIT 23.9
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
As independent petroleum engineers, we hereby consent to the use of our
reports dated February 24, 1994 and May 24, 1995 and our estimates of net proved
oil and natural gas reserves of Forcenergy Inc as of January 1, 1994 and 1995
and to all references to our firm included in this Registration Statement.
Joe C. Neal & Associates
Midland, Texas
February 11, 1998
<PAGE> 1
EXHIBIT 23.10
CONSENT OF NETHERLAND, SEWELL & ASSOCIATES, INC.
To the Board of Directors of Forcenergy Inc:
We hereby consent to the use of our reports dated March 3, 1997 and March
1, 1996, of the estimates of net proved oil and natural gas reserves of
Forcenergy Inc, and their present values, as of January 1, 1997 and 1996, and
the inclusion of our audit report dated May 25, 1995, of the estimates of the
net proved oil and natural gas reserves of Forcenergy Inc and their present
values, as of January 1, 1995, in this Form S-4 Registration Statement and the
Proxy Statement/Prospectus incorporated therein, and all references to our firm
therein.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ DANNY D. SIMMONS
-------------------------------------
Danny D. Simmons
Senior Vice President
Houston, Texas
February 11, 1998
<PAGE> 1
EXHIBIT 23.11
CONSENT OF MORGAN STANLEY
We hereby consent to the inclusion in the Proxy Statement/Prospectus (the
"Proxy Statement/Prospectus") contained in the Registration Statement on Form
S-4 of Forcenergy Inc of our opinion dated January 30, 1998, with respect to the
financial fairness of the consideration to be received by holders of the FAB
Series B Common Shares in connection with the Exchange Offer referred to in the
Proxy Statement/Prospectus, and the reference to Morgan Stanley & Co. Limited in
the Proxy Statement/Prospectus in the form attached.
For and on behalf of
Morgan Stanley & Co. Limited
Signed: /s/ Michael Uva
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Date: February 11, 1998
<PAGE> 1
EXHIBIT 99.1
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FORCENERGY INC
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF STOCKHOLDERS ON MARCH 17, 1998
The undersigned, hereby revoking all prior proxies, hereby appoints Stig
Wennerstrom, E. Joseph Grady and Thomas F. Getten, and each of them, his true
and lawful agents and proxies, with full power of substitution, to represent and
vote, as designated below, all shares of Common Stock of Forcenergy Inc owned by
the undersigned at the Special Meeting of Stockholders of Forcenergy Inc to be
held on March 17, 1998, and at any adjournment thereof, on all matters coming
before said meeting, hereby revoking all previous proxies. Either of the proxies
or their respective substitutes, who shall be present and acting, shall have and
may exercise all the powers hereby granted.
1. PROPOSAL TO APPROVE THE ISSUANCE OF SHARES OF FORCENERGY INC COMMON STOCK in
exchange for shares of Series A Common Stock and Series B Common Stock of
Forcenergy AB pursuant to the Exchange Offer.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE LISTED
PROPOSAL.
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
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<PAGE> 2
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DATED: _________________, 1998
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(Signature)
------------------------------
Print Name
(PLEASE SIGN EXACTLY AS YOUR
NAME APPEARS AT LEFT. FOR
JOINT ACCOUNTS, EACH JOINT
OWNER SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC.
SHOULD ALSO SO INDICATE WHEN
SIGNING).
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY BY USING THE ENCLOSED ENVELOPE.
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