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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report Filed Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): April 15, 1999
FORCENERGY INC
Debtor-In-Possession
(Exact name of registrant as specified in its charter)
<TABLE>
Delaware 0-26444 65-0429338
<S> <C> <C>
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
2730 S.W. 3rd Avenue, Suite 800
Miami, Florida 33129-2356
(Address of principal
executive offices
and zip code)
(305) 856-8500
(Registrant's telephone number,
including area code)
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ITEM 3. OTHER EVENTS
On March 21, 1999 (the "Petition Date"), Forcenergy Inc.
("Forcenergy") and its wholly-owned subsidiary, Forcenergy Resources, Inc.
("Resources"), each filed separate petitions for relief under Chapter 11 of
Title 11 of the United States Code (the "Bankruptcy Code"), 11 U.S.C. Section
101 ET SEQ., with the United States Bankruptcy Court for the Eastern District of
Louisiana (the "Bankruptcy Court"), under Case Nos. 99-11391 "A" and 99-11392
"A", respectively. Pursuant to Sections 1107 and 1108 of the Bankruptcy Code,
Forcenergy and Resources are continuing to operate their businesses and manage
their properties as debtors-in-possession. To date, no trustee or examiner has
been appointed in these bankruptcy cases.
Following the Petition Date, Forcenergy and Resources filed their
Emergency Motion for Interim Order Authorizing Use of Cash Collateral (the "Cash
Collateral Motion"), pursuant to which Forcenergy and Resources sought the use
of various purported secured parties' cash collateral in on-going operations. On
March 22, 1999, the Bankruptcy Court signed a Preliminary Order Authorizing Use
of Cash Collateral (the "Preliminary Cash Collateral Order"), thereby
authorizing Forcenergy's and Resource's use of cash collateral in accordance
with a budget attached thereto. Thereafter, on March 29, 1999 and April 9, 1999,
the Bankruptcy Court conducted further hearings on Forcenergy's and Resource's
continued use of cash collateral. Upon the conclusion of those hearings, the
Bankruptcy Court entered its Second Preliminary Order Authorizing Use of Cash
Collateral (the "Second Preliminary Order") and its Third Preliminary Order
Authorizing Use of Cash Collateral (the "Third Preliminary Order"),
respectively. By virtue of the Preliminary Cash Collateral Order, the Second
Preliminary Order and the Third Preliminary Order, Forcenergy and Resources have
been granted authority to use cash collateral in their on-going business
operations in accordance with budgets attached to each of those orders. A
further hearing on Forcenergy's and Resource's continued use of cash collateral
is presently scheduled for April 23, 1999.
Forcenergy is presently in negotiations with a number of potential
lenders to provide debtor-in-possession financing. The terms of such financing
have not been finalized as of this date, although Forcenergy anticipates
selecting a debtor-in-possession lender and finalizing the terms of a
debtor-in-possession financing facility in the near future. Thereafter,
Forcenergy will seek Bankruptcy Court approval of the debtor-in-possession
financing facility.
Presently, Forcenergy and Resources are operating pursuant to the
Third Preliminary Order and the budget attached thereto. To the extent that
on-going expenses are within the ordinary course of business, and reflected on
the budget, Forcenergy and Resources are permitted to make such expenditures
without further Bankruptcy Court order. Any expenditure, however, that is
outside the ordinary course of business, or that is not reflected on the
budget, must be specifically authorized by the Bankruptcy Court. The procedures
for payment of such expenses may be further specified in a debtor-in-possession
financing facility.
On March 31, 1999 the Company filed Form 12B-25 extending the time to
file the Annual Report on Form 10-K for the year ended December 31, 1998. The
extension of time was required because the Chapter 11 filing has imposed
certain difficulties on the Company in obtaining information and resolving
uncertainties (among other things, authorization by the bankruptcy court of the
employment of PricewaterhouseCoopers, LLP, the Company's independent
auditors) necessary to complete the Form 10-K.
Additionally, as of the date of the 12B-25 filing, Forcenergy's
counsel transmitted a letter to the staff of the Securities and Exchange
Commission's Division of Corporation Finance (the "Staff") requesting
confirmation of its position that a company in Chapter 11 bankruptcy may file
its monthly reports to the bankruptcy court with the Securities and Exchange
Commission on Form 8-K within 15 calendar days of their submission to the court
in lieu of filing Form 10-K and Form 10-Q reports. At the date of this Form 8-K
filing, the Staff has yet to confirm this position.
Pending the filing of Form 10-K and/or the Staff's response to the
aforementioned letter from counsel the Company submits the following summary of
the year ended December 31, 1998 results. The Company does intend to finalize
and file the Form 10-K upon obtaining accurate information and the resolution of
uncertainties.
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FORCENERGY INC
(DEBTOR-IN-POSSESSION)
RESULTS FOR YEAR ENDED DECEMBER 31, 1998
FINANCIAL RESULTS
Forcenergy Inc reported a net loss of $39.5 million, or $1.59 per
share for the year ended December 31, 1998, exclusive of a non-cash impairment
of oil and gas assets, compared with net income of $28.0 million, or $1.21 per
share for the 1997 year, also exclusive of a non-cash impairment of oil and gas
assets. Also exclusive of the impairment provision for each period, the net loss
for the fourth quarter of 1998 was $19.7 million, or $.80 per share, compared
to income of $9.1 million, or $.37 per share for the 1997 quarter. Recognized in
the fourth quarter of 1998 and 1997 were $275.0 million and $162.8 million,
respectively in non-cash (after-tax) impairments of oil and gas assets under the
full cost accounting rules mandated by the Securities and Exchange Commission.
The net losses for the years 1998 and 1997, inclusive of the impairment
provisions, were $314.5 million and $134.8 million, or $12.65 and $5.83 per
share, respectively. Inclusive of the impairment provision the net losses
recorded in the fourth quarter of 1998 and 1997 were $294.7 million and $153.7
million, or $11.92 and $6.25 per share, respectively.
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Revenues for the year 1998 were $273.5 million compared to $284.2 million in
1997. Revenues for the fourth quarter of 1998 were $62.9 million compared to
$85.5 million in the 1997 quarter. Discretionary cash flow for 1998 was $103.9
million compared to $155.5 million in 1997, or $4.11 and $6.36 per
share-diluted, respectively. In the 1998 fourth quarter, discretionary cash flow
was $18.8 million, or $.76 per share, compared to $46.6 million, or $1.79 per
share-diluted, for the 1997 fourth quarter. The decreases in revenue and
discretionary cash flow for the quarter and year periods were attributable to
precipitous declines in the realized prices for oil and natural gas that were
only partially offset by production increases. Average realized prices per
barrel equivalent (inclusive of hedging results) declined 19% (to $12.79 per
BOE) for the year and 26% (to $12.32 per BOE) for the 1998 quarter.
Included in the fourth quarter 1998 and 1997 results, and results for
both years, were $275 million and $162.8 million ($200 million pre-tax) in
non-cash after-tax impairments of oil and gas assets under the "ceiling test"
provisions of the full cost accounting rules for oil and gas companies. Under
these rules mandated by the Securities and Exchange Commission, to the extent
the carrying cost of the Company's oil and gas assets associated with its proved
reserve base exceeds the discounted present value of its proved reserves(as of
the valuation date, held constant), that difference must be recognized as an
additional charge to depletion/depreciation expense in that quarter. Because of
the steep decline in oil and gas prices from year-end 1996 to year end 1997, and
further from year-end 1997 to year-end 1998, the Company's capitalized cost
exceeded the discounted present value of its proven reserves resulting in the
impairments.
OPERATING RESULTS
On an equivalent barrel basis, production for the year increased 20% to
21,313 thousand barrels of oil equivalent ("MBOE") (58.4 MBOE per day), while
fourth quarter production remained relatively flat at 5,099 MBOE (55.5 MBOE per
day) for the 1998 quarter. The production increase for the year resulted from
new production associated with the 1998 and 1997 drilling programs, the West
McArthur River (Cook Inlet, Alaska) and the Convest/Edisto acquisitions in June
and October 1997, respectively, and a series of smaller acquisitions in 1998.
Production for the 1998 fourth quarter was flat with the 1997 quarter primarily
because of normal field decline in the Gulf of Mexico wells that was not
replaced because of the severely restricted drilling programs in the last half
of 1998. Lease operating expenses per BOE increased 8% to $4.66 and $5.07 per
BOE for the year and fourth quarter of 1998, respectively. This increase was
attributable to slightly higher lease operating expenses associated with new
properties acquired in late 1997 and early 1998 and to higher 1998 workover
expenses.
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FORCENERGY INC
(DEBTOR-IN-POSSESSION)
SUMMARY OPERATING DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------- ---------------------
1998 1997 % CHANGE 1998 1997 % CHANGE
------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
LIQUIDS PRODUCTION (MBbl):
Gulf of Mexico................. 827 1,202 (31)% 3,576 4,400 (19)%
Alaska......................... 790 659 20% 3,068 2,618 17%
Onshore........................ 482 425 13% 1,866 1,192 57%
International.................. -- -- -- 3 -- N/M
Total...................... 2,099 2,286 (8)% 8,513 8,210 4%
LIQUID PRICES
Average field price per Bbl of liquids:
Gulf of Mexico................. $ 11.75 $ 17.43 (33)% $ 12.94 $ 18.52 (30)%
Alaska......................... $ 8.28 $ 15.03 (45)% $ 9.97 $ 16.10 (38)%
Onshore........................ $ 9.43 $ 17.02 (45)% $ 11.70 $ 17.71 (34)%
Total...................... $ 9.91 $ 16.65 (40)% $ 11.59 $ 17.70 (35)%
Average price per Bbl of liquids
(net of hedging).................. $ 11.60 $ 16.62 (30)% $ 12.54 $ 17.34 (28)%
Average NYMEX....................... $ 12.87 $ 20.34 (37)% $ 15.74 $ 20.71 (24)%
GAS PRODUCTION (Mmcf):
Gulf of Mexico................. 16,243 15,344 6% 70,046 52,269 34%
Onshore........................ 1,758 1,612 9% 6,753 5,468 24%
Total...................... 18,001 16,956 6% 76,799 57,737 33%
GAS PRICES
Average field price per Mcf of gas:
Gulf of Mexico................. $ 2.03 $ 3.00 (32)% $ 2.07 $ 2.58 (20)%
Onshore........................ $ 1.74 $ 2.89 (40)% $ 1.90 $ 2.27 (16)%
Total..................... $ 2.00 $ 2.99 (33)% $ 2.06 $ 2.55 (19)%
Average price per Mcf of gas:
(net of hedging)................. $ 2.02 $ 2.76 (27)% $ 2.16 $ 2.41 (10)%
Average NYMEX...................... $ 2.20 $ 2.97 (26)% $ 2.38 $ 2.55 (7)%
AVERAGE NET DAILY PRODUCTION:
Liquids (Bbls)................. 22,815 24,848 (8)% 23,323 22,493 4%
Gas (Mcf)...................... 195,663 184,304 6% 210,408 158,184 33%
Equivalent (BOE)............... 55,426 55,565 -- 58,391 48,857 20%
EXPENSES (PER BOE):
Lease operating................ $ 5.07 $ 4.69 8% $ 4.66 $ 4.33 8%
General and administrative, net $ .83 $ .81 2% $ .81 $ .85 (5)%
</TABLE>
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FORCENERGY INC
(DEBTOR-IN-POSSESSION)
CONDENSED FINANCIAL DATA
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- ---------------------------
STATEMENTS OF OPERATIONS 1998 1997 1998 1997
- ------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES................................................ $ 62,918 $ 85,524 $ 273,549 $ 284,185
EXPENSES:
Lease operating ................................... 25,842 23,955 99,242 77,174
Depletion, depreciation and amortization........... 34,928 32,494 145,856 113,347
Impairment provision............................... 275,000 200,000 275,000 200,000
Production taxes................................... 841 1,481 4,218 4,791
General and administrative, net.................... 4,249 4,117 17,222 15,244
----------- ----------- ----------- -----------
340,860 262,047 541,538 410,556
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INCOME FROM OPERATIONS.................................. (277,942) (176,523) (267,989) (126,371)
Interest and other income............................... 530 633 1,572 3,354
Interest expense, net................................... (13,142) (9,452) (48,077) (32,422)
Income tax benefit (provision).......................... (4,153) 31,639 -- 20,621
------------ ----------- ----------- -----------
NET LOSS................................................ $ (294,707) $ (153,703) $ (314,494) $ (134,818)
=========== ============ ============ ============
Net loss per share - basic............................. $ (11.92) $ (6.25) $ (12.65) $ (5.83)
- diluted........................... $ (11.92) $ (6.25) $ (12.65) $ (5.83)
Weighted average common shares - basic.................. 24,716 24,589 24,856 23,142
- diluted................ 24,716 24,589 24,856 23,142
CONDENSED STATEMENTS OF CASH FLOWS
Net cash provided by operating activities............... $ 42,455 $ 61,720 $ 144,701 $ 177,621
Capital expenditures.................................... (57,450) (113,864) (283,475) (287,229)
Acquisitions............................................ (88) (7,810) (53,956) (119,503)
Net cash provided by other investing
activities............................................ 7,796 5,705 12,875 5,783
Net cash provided by financing activities............... 6,471 66,234 165,497 229,707
----------- ----------- ----------- -----------
Net (decrease) increase in cash......................... (816) 11,985 (14,358) 6,379
Cash at beginning of period............................. 2,506 4,063 16,048 9,669
----------- ----------- ----------- -----------
Cash at end of period................................... $ 1,690 $ 16,048 $ 1,690 $ 16,048
=========== =========== =========== ===========
DISCRETIONARY CASH FLOW................................. $ 18,779 $ 46,600 $ 103,929 $ 155,500
DISCRETIONARY CASH FLOW PER SHARE - basic.............. $ .76 $ 1.90 $ 4.18 $ 6.72
- diluted............ $ .76 $ 1.79 $ 4.11 $ 6.36
</TABLE>
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS DECEMBER 31, DECEMBER 31,
1998 1997
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<S> <C> <C>
ASSETS
Current assets..................................... $ 49,791 $ 89,781
Property, plant and equipment, net................. 610,948 713,983
Other assets....................................... 17,729 20,466
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$ 678,468 $ 824,230
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities subject to compromise.................. $ 778,720 $ --
Current liabilities not subject to compromise...... -- 102,675
Long-term debt not subject to compromise........... -- 506,564
Stockholders' equity (deficit)..................... (100,252) 214,991
-------------- -------------
$ 678,468 $ 824,230
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</TABLE>
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FORCENERGY INC
(DEBTOR-IN-POSSESSION)
RESERVE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
RESERVE RECONCILIATION OIL GAS EQUIVALENT RESERVE
(MBBL) (MMCF) (MBOE) REPLACEMENT
-------- ------- ---------- -----------
<S> <C> <C> <C> <C>
January 1, 1998........................... 58,043 380,761 121,503
Acquisitions.............................. 3,206 38,081 9,553 45%
Drilling.................................. 3,204 47,088 11,052 52%
Revisions................................. (6,551) (19,188) (9,749) (46)%
Production................................ (8,513) (76,799) (21,313)
------ -------- -------
January 1, 1999........................... 49,389 369,943 111,046 (9)%
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</TABLE>
<TABLE>
<CAPTION>
RESERVE REPLACEMENT GULF OF U.S.
BY REGION (MBOE) MEXICO ONSHORE ALASKA TOTAL
- ------------------- -------- ------- ------ -------
<S> <C> <C> <C> <C>
Acquisitions.............................. 8,741 812 0 9,553
Drilling.................................. 8,727 -- 2,325 11,052
Revisions................................. (2,296) (5,018) (2,435) (9,749)
------- ------- ------- -------
15,172 (4,206) (110) 10,856
====== ======= ======= ======
COST INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
1998 1997
------------ ----------
Acquisition of properties:
Proved properties..................... $ 37,880 $ 168,450
Unproved properties................... 17,430 41,907
Exploration costs.......................... 158,331 176,543
Development costs.......................... 106,601 106,260
---------- ----------
Total............................ $ 320,242 $ 493,160
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</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FORCENERGY INC
Date: April 15, 1999
By: /s/ E. Joseph Grady
---------------------------------
E. Joseph Grady
Vice President, Treasurer and
Chief Financial Officer
