<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________to _______________
Commission File Number : 0-26444
FORCENERGY INC
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0429338
---------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3838 North Causeway Boulevard, Suite 2300
Metairie, Louisiana
70002
------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (504) 838-7022
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ] .
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ] .
As of October 31, 2000, there were 24,302,295 shares of the
registrant's Common Stock, $.01 par value, outstanding.
<PAGE> 2
FORCENERGY INC
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements (Unaudited)
1) Consolidated Balance Sheets - September 30, 2000 and
December 31, 1999............................................................. 2
2) Consolidated Statements of Earnings - Three months and nine months
ended September 30, 2000 and 1999 ............................................ 3
3) Consolidated Statements of Cash Flows - Nine months ended
September 30, 2000 and 1999 .................................................. 4
4) Notes to Consolidated Financial Statements.................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................. 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................... 17
</TABLE>
FORWARD-LOOKING STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-Q 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. ALL STATEMENTS
OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS FORM 10-Q, INCLUDING
STATEMENTS UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" REGARDING PLANNED CAPITAL EXPENDITURES, THE
AVAILABILITY OF CAPITAL TO FUND CAPITAL EXPENDITURES, ESTIMATES OF PROVED
RESERVES, THE COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY AND OTHER PLANS
AND OBJECTIVES FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH
THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING
STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT ACTUAL RESULTS MAY NOT
DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS HEREIN FOR
REASONS INCLUDING, WITHOUT LIMITATION, PETITIONS FILED OR ACTIONS TAKEN IN
CONNECTION WITH ITS BANKRUPTCY PROCEEDINGS, 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. IN
ADDITION, RESERVOIR ENGINEERING IS A SUBJECTIVE PROCESS OF ESTIMATING
UNDERGROUND ACCUMULATIONS OF OIL AND GAS, AND RESERVE ESTIMATES ARE GENERALLY
DIFFERENT FROM QUANTITIES OF OIL AND GAS THAT ARE ULTIMATELY RECOVERED. ALL
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY SUCH FACTORS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-Q, WHICH SPEAK ONLY AS OF
THE DATE OF THIS FORM 10-Q. FORCENERGY UNDERTAKES NO OBLIGATION TO RELEASE
PUBLICLY THE RESULT OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS THAT
MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE FILING DATE OF THIS
FORM 10-Q OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORCENERGY INC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash $ 1,257 $ 96,506
Accounts receivable, net 40,732 41,332
Other current assets 33,205 18,862
--------- ---------
Total current assets 75,194 156,700
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost (full cost
method), net of accumulated depletion, depreciation
and amortization 581,201 512,000
--------- ---------
OTHER ASSETS 10,261 6,701
--------- ---------
$ 666,656 $ 675,401
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 11,036 $ 11,924
Accrued liabilities 51,758 49,860
Pre-petition accounts payable and accrued liabilities 1,851 47,908
Accrued reorganization costs -- 11,236
Current maturities of long-term debt 7,500 --
--------- ---------
Total current liabilities 72,145 120,928
--------- ---------
LONG-TERM DEBT 235,644 314,473
--------- ---------
COMMITMENTS AND CONTINGENCIES
14% SERIES A REDEEMABLE CUMULATIVE PREFERRED STOCK,
$.01 par value; 43,005 shares issued
and outstanding at September 30, 2000 32,043 --
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 100,000,000 shares
authorized; 24,271,176 outstanding 243 240
Capital in excess of par value 284,647 239,760
Retained earnings 43,101 --
Unearned stock compensation (945) --
Foreign currency translation (222) --
--------- ---------
Total stockholders' equity 326,824 240,000
--------- ---------
$ 666,656 $ 675,401
========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
2
<PAGE> 4
FORCENERGY INC
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
COMPANY COMPANY COMPANY COMPANY
------------- ------------- ------------- -------------
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 94,115 $ 67,172 $ 247,801 $ 191,768
Other 249 426 665 725
--------- --------- --------- ---------
94,364 67,598 248,466 192,493
--------- --------- --------- ---------
EXPENSES:
Lease operating 20,487 18,563 59,809 67,269
Depletion, depreciation and amortization 29,018 26,993 84,173 90,661
Production taxes 1,834 1,128 5,084 3,118
General and administrative 3,163 3,364 13,125 10,177
--------- --------- --------- ---------
54,502 50,048 162,191 171,225
--------- --------- --------- ---------
INCOME FROM OPERATIONS 39,862 17,550 86,275 21,268
Interest and other income 448 144 1,983 6,946
Interest expense, net of amounts capitalized (4,714) (6,608) (14,438) (24,150)
--------- --------- --------- ---------
INCOME BEFORE REORGANIZATION ITEMS
AND INCOME TAXES 35,596 11,086 73,820 4,064
--------- --------- --------- ---------
REORGANIZATION ITEMS:
Interest income -- 731 533 1,154
Professional and administrative fees -- (2,420) -- (3,446)
--------- --------- --------- ---------
-- (1,689) 533 (2,292)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 35,596 9,397 74,353 1,772
Income tax provision (13,583) (679) (28,221) (679)
--------- --------- --------- ---------
NET INCOME 22,013 8,718 46,132 1,093
PREFERRED STOCK DIVIDEND (1,460) -- (3,031) --
--------- --------- --------- ---------
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS $ 20,553 $ 8,718 $ 43,101 $ 1,093
========= ========= ========= =========
NET INCOME PER SHARE:
Basic $ .85 $ .35 $ 1.79 $ .04
Diluted $ .79 $ .35 $ 1.72 $ .04
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 24,080 24,756 24,027 24,753
Diluted 25,886 24,756 25,106 24,753
</TABLE>
The accompanying notes are an integral part of these
financial statements.
3
<PAGE> 5
FORCENERGY INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
COMPANY COMPANY
------------ ------------
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 46,132 $ 1,093
Adjustments to reconcile net income to net cash
provided by operating activities before reorganization
items:
Reorganization items -- 2,292
Depletion, depreciation and amortization 84,173 91,716
Deferred taxes 28,221 679
Equity in net income of affiliate (778) (921)
Reorganization related severance 1,933
Stock compensation 135 --
Decrease (increase) in accounts receivable 600 (12,526)
Increase in other current assets (14,646) (9,605)
Increase in accounts payable and accrued liabilities 3,865 21,894
------------ ------------
103,503 93,529
------------ ------------
Net cash provided by operating activities before reorganization
activities 149,635 94,622
Reorganization items 533 (2,292)
Adjustments to reconcile reorganization activities to cash used in
reorganization activities:
Decrease in pre-petition accounts payable and accrued liabilities (46,057) --
Accrued reorganization costs (11,236) --
------------ ------------
Net cash used in reorganization activities (56,760) (2,292)
------------ ------------
Net cash provided by operating activities after reorganization
activities 92,875 92,330
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (1,108) (794)
Capital expenditures (153,416) (43,181)
Proceeds from sale of assets 1,150 60
Change in other assets (1,754) 5,661
------------ ------------
Net cash used in investing activities (155,128) (38,254)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under senior credit facility 134,557 26,473
Repayments under senior credit facility (209,030) (8,700)
Issuance of common stock 2,697 310
Issuance of preferred stock 38,800 --
Preferred dividends (20) --
------------ ------------
Net cash (used in) provided by financing activities (32,996) 18,083
------------ ------------
Net increase (decrease) in cash (95,249) 72,159
Cash at beginning of period 96,506 1,690
------------ ------------
Cash at end of period $ 1,257 $ 73,849
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE> 6
FORCENERGY INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
Forcenergy Inc, a Delaware corporation ("Forcenergy" or the "Company"),
and its subsidiaries is an independent oil and gas company engaged in the
exploration, acquisition, development, exploitation and production of oil and
natural gas properties. The Company's principal areas of operation are the Gulf
of Mexico and the Cook Inlet, Alaska.
Forcenergy and its wholly owned subsidiary Forcenergy Resources Inc.
("Resources") emerged from bankruptcy on February 15, 2000 (see Note 3 for a
more detailed discussion of the reorganized entity). The original voluntary
petition for relief under Chapter 11 of the U.S. Bankruptcy Code was filed on
March 21, 1999 (the "Petition Date") in order to facilitate the restructuring of
the Company's long-term debt, revolving credit, trade and other obligations.
While under Chapter 11, certain claims against the Company as of the Petition
Date were stayed while the Company continued its operations as a
debtor-in-possession and worked to restructure its debt. On January 19, 2000,
the Bankruptcy Court approved the Company's Plan of Reorganization (the "Plan"),
which became effective on February 15, 2000 (the "Emergence Date").
The unaudited interim consolidated financial statements of the Company
included herein reflect accounting principles set forth in the American
Institute of Certified Public Accountants Statement of Position 90-7 "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code", ("SOP
90-7"), which provides guidance for financial reporting by entities that have
filed voluntary petitions for relief under, and have reorganized in accordance
with, the Bankruptcy Code. In accordance with guidance provided by SOP 90-7, the
consummation of the Plan (the "Reorganization") has been reflected as though
effective on December 31, 1999 (the "Effective Date"). Under provisions of SOP
90-7 and fresh-start reporting (see Note 3), the December 31, 1999 Consolidated
Balance Sheet is the opening balance sheet of the reorganized company (the
"Successor Company"). The December 31, 1999 Consolidated Balance Sheet includes
all adjustments necessary to reflect assets at fair market value as of the
Effective Date and the Plan's treatment of creditor claims and previous equity
interests.
The unaudited interim consolidated financial statements of the Company
included herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission and in accordance with
generally accepted accounting principles for interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary to present fairly the information in the accompanying
consolidated financial statements have been included. Interim period results are
not necessarily indicative of the results of operations or cash flows for a full
year period. The unaudited interim consolidated financial statements included
herein for the three and nine months ended September 30, 1999 and those of the
Company prior to the Reorganization (the "Predecessor Company") may not be
comparable in certain respects to the consolidated financial statements of the
Successor Company. Capitalized terms not defined herein have the meanings as
defined in the notes to the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
5
<PAGE> 7
NOTE 2 - PROPOSED MERGER
On July 10, 2000 the board of directors of Forcenergy approved a plan
of merger with Forest Oil Corporation ("Forest") (NYSE:FST). The plan of merger
provides that Forest will issue 1.6 common shares for each Forcenergy common
share outstanding and 68.6141 common shares for each Forcenergy share of
preferred stock outstanding, plus accrued, unpaid dividends. The merger is
subject to shareholder approval for both companies and will be treated as a
tax-free reorganization and accounted for as a pooling of interests. The joint
proxy statement/prospectus was approved by the Securities and Exchange
Commission on November 7, 2000 and declared effective, with the special meeting
of shareholders scheduled to be held on December 7, 2000.
NOTE 3 - REORGANIZATION AND FRESH-START REPORTING
In August 1999, the Company filed with the bankruptcy court a
disclosure statement that included the proposed Plan. The disclosure statement
was approved by the bankruptcy court on October 22, 1999, the Plan was approved
by the bankruptcy court on January 19, 2000 and the Company emerged from
bankruptcy on February 15, 2000.
On February 15, 2000, the Company issued 23,040,000 shares of New
Common Stock in exchange for all of the outstanding 8.5% and 9.5% Senior
Subordinated Notes (collectively, the "Senior Subordinated Notes"), and in
satisfaction of various other unsecured trade obligations. The unsecured
claimants were also entitled to participate in the rights offering discussed
below.
Also, on February 15, 2000, the Company and its existing bank lending
group entered into a new senior credit facility (the "New Senior Credit
Facility") that replaced the Company's prior senior credit facility (the "Prior
Facility") and satisfied all pre-petition claims thereunder (see Note 4).
Pursuant to provisions of the Plan and the New Senior Credit Facility, the
Company paid $66.9 million in cash to the bank group on the Effective Date,
which included a repayment of $40 million in principal outstanding under the
Prior Facility and $24.3 million in accrued interest.
In accordance with provisions of the Plan, all outstanding shares of
the common stock of the Predecessor Company (the "Old Common Stock") were
cancelled effective as of the Emergence Date and the holders of Old Common Stock
as of the January 28, 2000 record date received, on a pro-rata basis (i.e.
approximately one share of New Common Stock for each 25.849 shares of Old Common
Stock held): (i) 960,000 shares of New Common Stock; (ii) associated warrants to
purchase 240,000 shares of New Common Stock at $16.67 per share (expiring on
February 15, 2004); and (iii) warrants to purchase 240,000 shares of New Common
Stock at $20.83 per share (expiring on February 15, 2005). The cancellation of
Old Common Stock and issuance of these equity instruments is reflected in the
Successor Company's Consolidated Balance Sheet at December 31, 1999.
The Plan also required the Company to raise $40 million in additional
equity capital through a rights offering to unsecured claimants to purchase
preferred stock units, each of which included one share of 14% Series A
Cumulative Preferred Stock (the "Preferred Stock") and warrants ("Subscription
Warrants") to purchase 45 shares of New Common Stock (collectively, the "Rights
Offering"), for $1,000 per unit. On March 20, 2000 the Rights Offering was
closed with the issuance of 40,000 shares of Preferred Stock and Subscription
Warrants to purchase 1,800,000 shares of New Common Stock. The proceeds from the
Rights Offering were $38.8 million net of offering costs of $1.2 million. The
Company allocated $29.0 million to Preferred Stock and $11.0 million to the
Subscription Warrants (using the Black-Scholes valuation model), which is
included in capital in excess of par value. The proceeds were used to pay down
amounts outstanding under the New Senior Credit Facility.
For more detailed discussion of the reorganization and fresh-start
reporting refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
6
<PAGE> 8
NOTE 4 - LONG-TERM DEBT
NEW SENIOR CREDIT FACILITY
Pursuant to the Reorganization, the Company entered into the New Senior
Credit Facility on February 15, 2000 (see Notes 1 and 3).
The New Senior Credit Facility consists of a $250 million Revolving
Credit Facility (the "Revolver") and a $70 million Term Loan (the "Term Loan").
The amount that can be borrowed under the Revolver is subject to a
borrowing base limitation, which has been established initially at $250 million
through February 15, 2001. The Revolver provides for borrowings on a revolving
basis through August 15, 2003, at which time all outstanding amounts under the
Revolver become due and payable. Advances under the Revolver bear interest at
prime plus 1.5% or LIBOR plus 2% per annum at the election of the Company. The
interest rate under the Revolver was 8.6% at September 30, 2000. The agreement
provides for a commitment fee on the unused portion of the Revolver at .50% due
quarterly. The borrowing base is subject to semi-annual redetermination after
the first redetermination on February 15, 2001.
The terms of the Term Loan provide mandatory quarterly principal
repayments of $2.5 million each commencing on March 31, 2001, with a $50 million
lump sum repayment at maturity on August 15, 2003. Interest is payable monthly
at the prime rate plus 3% or LIBOR plus 3.5%. The interest rate in effect under
the Term Loan was 10.13% at September 30, 2000.
At October 31, 2000, the Company had drawn down $180.0 million under
the Revolver and an additional $5.5 million of availability was utilized for
outstanding letters of credit issued thereunder, leaving $64.5 million available
for general corporate purposes.
The New Senior Credit Facility is secured by substantially all of the
Company's oil and gas properties and contains events of default, representations
and warranties and covenants typical for facilities of this type.
NOTE 5 - EARNINGS PER SHARE
The following reconciles the numerators and denominators of the basic
and diluted EPS computations (in thousands, except per share data):
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------------------------- -------------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
----------- ----------- ---------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS:
Income available
to common stockholders............. $ 20,553 24,080 $ .85 $ 8,718 24,756 $ .35
EFFECT OF DILUTIVE SECURITIES:
Options and warrants ................ -- 1,806 (.06) -- -- --
----------- ----------- ---------- --------- --------- ----------
DILUTED EPS:
Income available to
common stockholders
and assumed exercises.............. $ 20,553 25,886 $ .79 $ 8,718 24,756 $ .35
=========== =========== ========= ========= ========= =========
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------------------------- -------------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
----------- ----------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS:
Income (loss) available
to common stockholders............. $ 43,101 24,027 $ 1.79 $ 1,093 24,753 $ .04
EFFECT OF DILUTIVE SECURITIES:
Options and warrants ................ -- 1,079 (.07) -- -- --
----------- ----------- ---------- ---------- --------- ----------
DILUTED EPS:
Income (loss) available to
Common stockholders
And assumed exercises.............. $ 43,101 25,106 $ 1.72 $ 1,093 24,753 $ .04
=========== =========== ========= ========== ========= =========
</TABLE>
NOTE 6 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company has historically entered into various financial instruments
with off-balance-sheet risk in the normal course of business to reduce its
exposure to changing commodity prices. The Company normally utilizes these
arrangements for 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 for varying time periods. The remaining portion of current production is
not hedged so as to provide the Company the opportunity to benefit from
increases in prices on that portion of the production, should price increases
materialize.
The Company has entered into several financial hedging contracts in the
form of swaps and no-cost collars with respect to its future oil and natural gas
production. The contracts, which are based on prices available in the financial
markets at the time the contracts are entered into, are settled in cash and do
not require physical deliveries of hydrocarbons. Under these agreements, monthly
settlements are based on the differences between the prices specified in the
instrument and/or the settlement price of certain oil and gas futures contracts
quoted on the New York Mercantile Exchange ("NYMEX"). In instances where the
applicable settlement price is less than the price specified in the contract,
the Company receives a settlement based on the difference and in instances where
the applicable settlement price is higher than the specified prices, the Company
pays an amount based on the difference.
Contracts in place at September 30, 2000 on future oil production were
as follows:
<TABLE>
<CAPTION>
SWAPS COLLARS
--------------------------------- ---------------------------------
WEIGHTED AVERAGE
NYMEX CONTRACT
WEIGHTED AVERAGE VOLUME PRICE PER BBL
VOLUME IN NYMEX CONTRACT IN BBLS --------------------
PERIOD BBLS PER DAY PRICE PER BBL PER DAY FLOOR CEILING
------ ------------ ------------- ------- ----- -------
<S> <C> <C> <C> <C> <C>
October 2000 - December 2000 12,000 $ 23.91
January 2001- December 2001 4,000 $ 26.49 $ 33.65
</TABLE>
8
<PAGE> 10
Contracts in place at September 30, 2000 on future natural gas
production were as follows:
<TABLE>
<CAPTION>
SWAPS COLLARS
--------------------------------- ---------------------------------
NYMEX CONTRACT
WEIGHTED AVERAGE VOLUME PRICE PER MCF
VOLUME IN NYMEX CONTRACT IN MCFS --------------------
PERIOD MCFS PER DAY PRICE PER MCF PER DAY FLOOR CEILING
------ ------------ ------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
October 2000 - December 2000 100,000 $ 2.83
January 2001 - December 2001 20,000 $ 3.75 $ 6.57
</TABLE>
The instruments contain an element of credit risk and price risk. The
Company attempts to minimize the extent of credit risk by limiting the
counterparties to major banks or significant industry participants. All of these
arrangements are entered into on a no-cost basis and are settled monthly. The
Company accounts for the swap and collar arrangements as hedging activities and,
accordingly, gains or losses are included in oil and gas revenues for the period
the production was hedged. The Company recorded a $22.1 million reduction in
revenues associated with hedging contracts in place during the quarter ended
September 30, 2000 and a $2.1 million reduction in revenues for the three months
ended September 30, 1999. The Company recorded a $46.2 million reduction in
revenues for the nine months ended September 30, 2000 and a $5.7 million
increase in revenues for the nine months ended September 30, 1999 associated
with its hedging activities.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid interest of $38.5 million and $14.2 million in the
nine-month periods ending September 30, 2000 and 1999, respectively. The
increase in interest paid over the previous year's period relates to the
implementation of the Plan, as $24.3 million of interest accrued during the
reorganization process was paid to the bank group on the Emergence Date.
The Company paid non-cash dividends to the holders of Preferred Stock,
in the form of additional Preferred Stock with a stated value of $3,005,000
during the first nine months of 2000.
NOTE 8 - COMMITMENTS
In connection with the April 2000 termination of employment of Stig
Wennerstrom, the President and Chief Executive Officer of the Company, the
Company became obligated to make severance payments equal to approximately 2.5
times Mr. Wennerstrom's base salary. In addition all options previously granted
to Mr. Wennerstrom were immediately vested and became exercisable. Mr.
Wennerstrom was also granted certain health and life benefits as well as office
and secretarial services to be supplied by the Company.
On April 3, 2000 the Company entered into an employment agreement with
Richard G. Zepernick, Jr., its current President and Chief Executive Officer.
The employment agreement is subject to early termination by the Company for
cause or upon death or incapacity of Mr. Zepernick. If the employment agreement
is terminated without cause by the Company or with cause (excluding certain
changes in control of the Company) by Mr. Zepernick, the Company is obligated to
pay Mr. Zepernick a termination fee equal to 2.0 times the amount of his average
annual compensation for the prior two years. Upon a change of control of the
Company, Mr. Zepernick will receive a fee equal to 100% of his annual base
salary. Also, if Mr. Zepernick is terminated by the Company, or voluntarily
9
<PAGE> 11
terminates his employment, within two years of a change of control, Mr.
Zepernick will receive a fee equal to 2.5 times his average annual compensation
for the prior two years. If Mr. Zepernick's employment is terminated due to
death or permanent disability, he will receive a fee equal to 2.5 times his
average annual compensation for the prior two years. The employment agreement
also provides for cash incentive bonus payments to be awarded at the discretion
of the Board of Directors. The employment agreement expires April 3, 2002 but is
subject to automatic annual renewal for one-year periods that can be terminated
upon 120 days' prior notice.
NOTE 9 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement No. 133"). The statement
requires companies to report the fair market value of derivatives on the balance
sheet and record in income or other comprehensive income, as appropriate, any
changes in the fair value of the derivative. Statement No. 133 will become
effective with respect to the Company on January 1, 2001. The Company is
currently evaluating the impact of the statement.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 101 is applicable beginning with
the Company's fourth quarter of 2000. Based on the Company's current analysis,
SAB 101 will not have a material impact on the financial results of the Company.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is intended to assist in an understanding of
the Company's historical financial position and results of operations and should
be read in conjunction with the financial statements of the Company appearing
elsewhere in this report. For the period from March 21, 1999 to February 15,
2000 the Company operated as a debtor-in-possession. Effective December 31,
1999, the Company adopted fresh-start reporting. Accordingly the results of
operations for the three and nine months ended September 30, 1999 express those
results of the Predecessor Company (see Notes 1 and 3 to the interim
consolidated financial statements included in this Form 10-Q) while the results
presented for periods in 2000 represent those of the Successor Company.
Management has attempted to indicate the major effects on comparability from
adopting fresh-start reporting between the Successor Company and Predecessor
Company in the following discussion and analysis of financial condition and
results of operations for the three and nine months ended September 30, 2000.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER UNIT DATA)
-------------------------------------------------------
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ------------------------
2000 1999 2000 1999
----------- ----------- ---------- -----------
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
COMPANY COMPANY COMPANY COMPANY
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Production in thousands:
Liquids (MBbls) (1)....................................... 1,799 1,888 5,510 5,995
Natural Gas (MMcf)........................................ 14,994 13,826 41,756 48,400
Total (MBOE).............................................. 4,298 4,192 12,469 14,062
Average realized sales prices (2)
Liquids (per Bbl) (1)..................................... $ 25.04 $ 17.91 $ 22.61 $ 14.42
Natural gas (per Mcf)..................................... 3.27 2.41 2.95 2.18
Expenses (per BOE):
Lease operating........................................... $ 4.77 $ 4.43 $ 4.80 $ 4.78
Depletion, depreciation and
amortization............................................. 6.75 6.45 6.75 6.45
General and administrative, net........................... .74 .80 1.05 .72
</TABLE>
-------
Includes crude oil, condensate and natural gas liquids.
Net of hedging results
COMPARISON OF THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30,
1999
NET INCOME. Net income for the quarter ended September 30, 2000 was
$20.6 million compared to $8.7 million reported for the same period last year.
The increase in net income related primarily to higher realized liquids and
natural gas prices.
PRODUCTION. On an equivalent unit basis, liquids and natural gas
production increased to 4,298 thousand barrels of oil equivalent ("MBOE") in the
third quarter of 2000 compared with 4,192 MBOE reported for the 1999 quarter.
Net liquids production was 1,799 thousand barrels ("MBbls") in the third quarter
of 2000 and 1,888 MBbls in the third quarter of 1999. Net gas production was
14,994 MMcf in the 2000 quarter compared to 13,826 MMcf reported for the 1999
quarter.
REVENUES. Revenues were $94.4 million for the 2000 third quarter
compared to $67.6 million reported for the comparable 1999 quarter. Average net
realized liquids prices increased to $25.04 per Bbl for the 2000 quarter, a 40%
increase over the $17.91 per Bbl received during the same period in 1999.
11
<PAGE> 13
Average net realized natural gas prices increased to $3.27 per Mcf for the 2000
quarter, a 36% increase from the $2.41 per Mcf reported for the comparable 1999
period. Average prices received at the field level for the 2000 third quarter
were $28.95 per Bbl and $4.27 per Mcf for liquids and natural gas, respectively.
The net effect of financial hedging instruments on third quarter 2000 revenue,
and therefore, realized prices, was a $7.0 million decrease in liquids revenue
and a $15.0 million decrease in natural gas revenue. Average prices received at
the field level for the comparable 1999 period were $18.91 per Bbl and $2.43 per
Mcf for liquids and natural gas, respectively. After taking into account the
effect of financial hedging instruments for the 1999 quarter, specifically a
$1.9 million decrease in liquids revenue and $.2 million decrease in natural gas
revenue, average net realized prices decreased to $17.91 and $2.41 for liquids
and natural gas, respectively. (See Note 6 to the interim consolidated financial
statements included in this Form 10-Q).
LEASE OPERATING EXPENSES. Lease operating expenses were $20.5 million
for the quarter ended September 30, 2000 compared to the $18.6 million reported
for the same period in 1999. Lease operating expenses on an equivalent unit of
production basis were $4.77 per barrel of oil equivalent ("BOE") in the 2000
quarter compared with $4.43 per BOE in 1999. Total lease operating expenses were
higher due to general overall increases in market rates and prices charged by
service providers. Lease operating expenses on an equivalent unit of production
basis were further impacted by lower production volumes.
DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A"). DD&A expense was
$29.0 million for the 2000 third quarter, compared with $27.0 million reported
for the same period in 1999. The increase was primarily due to an increase in
the DD&A rate from $6.45 per BOE in 1999 to $6.75 per BOE in 2000.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative expenses,
net of capitalized internal costs and overhead reimbursements, remained
relatively flat at $3.2 million for the three months ended September 30, 2000,
compared to $3.4 million for the comparable 1999 period. On a per BOE produced
basis, general and administrative expenses declined to $.74 per BOE from the
$.80 per BOE reported in last year's quarter.
INTEREST EXPENSE. Interest expense was $4.7 million for the quarter
ended September 30, 2000, compared with $6.6 million for the 1999 third quarter,
a decrease resulting primarily from lower long-term debt levels (see Notes 3 and
4 to the interim consolidated financial statements included in this Form 10-Q).
INCOME TAX PROVISION. The Company recognized an income tax provision of
$13.6 million and $.7 million in the third quarter of 2000 and 1999
respectively, based on an effective combined federal and state income tax rate
of 38.3%. The tax provision for the third quarter of 1999 was lower due to
losses accumulated in the first eight months of the year.
PREFERRED STOCK DIVIDENDS. The Company paid approximately $1.5 million
in preferred stock dividends, in additional Preferred Stock, in the quarter
ended September 30, 2000 on the Preferred Stock issued on March 20, 2000 (see
Notes 1,3 and 7 to the interim consolidated financial statements included in
this Form 10-Q).
COMPARISON OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30,
1999
NET INCOME. Net income for the nine months ended September 30, 2000 was
$43.1 million compared to net income of $1.1 million reported for the same
period last year. Several factors contributed to the improvement in
12
<PAGE> 14
earnings. Higher realized liquids and natural gas prices, lower lease operating
and interest expenses and lower 2000 depletion, depreciation and amortization
expense were the main contributors to the increase in earnings.
PRODUCTION. On an equivalent unit basis, liquids and natural gas
production was 12,469 MBOE in the first nine months of 2000 compared with 14,062
MBOE reported for the comparable 1999 period. Net liquids production was 5,510
MBbls for the first nine months of 2000 and 5,995 MBbls for the same period in
1999. Net gas production was 41,756 MMcf in the 2000 period compared to 48,400
MMcf reported for the 1999 period. Production of both liquids and natural gas
declined as the Company significantly reduced its capital expenditure program
during the reorganization, thereby limiting the Company's ability to maintain
production rates through workovers, recompletions and new drilling. The
limitation on capital spending continued until February 15, 2000, at which time
the Company emerged from bankruptcy (see Notes 1 and 3 to the interim
consolidated financial statements included in this Form 10-Q).
REVENUES. Revenues were $248.5 million for the nine months ended
September 30, 2000 compared to the $192.5 million reported for the comparable
1999 period. Average net realized liquids prices increased to $22.61 per Bbl for
the 2000 period, a 57% increase over the $14.42 per Bbl received during the same
period in 1999. Average net realized natural gas prices increased to $2.95 per
Mcf for the nine months ended September 30, 2000, a 35% increase over the $2.18
per Mcf reported for the comparable 1999 period. Average prices received at the
field level for the 2000 period were $27.04 per Bbl and $3.47 per Mcf for
liquids and natural gas, respectively. The net effect of financial hedging
instruments on revenue for the first nine months of 2000 and therefore, on
realized prices, was a $24.5 million decrease in liquids revenue and a $21.7
million decrease in natural gas revenue. Average prices received at the field
level for the comparable 1999 period were $14.49 per Bbl and $2.05 per Mcf for
liquids and natural gas, respectively. The effects of hedging activities during
the first nine months of 1999 were a $.4 million decrease in liquids revenue and
a $6.1 million increase in natural gas revenue (see Note 6 to the interim
consolidated financial statements included in this Form 10-Q).
LEASE OPERATING EXPENSES. Lease operating expenses decreased 11% to
$59.8 million for the nine months ended September 30, 2000 compared to the $67.3
million reported for the same period in 1999. The decrease related primarily to
a reduction in workover costs and the development of operating efficiencies
during the reorganization proceedings, offset in part by recent overall
increases in market rates and prices charged by service providers. Total lease
operating expenses declined by $7.5 million and lease operating expenses on an
equivalent unit of production basis, despite lower production volumes, remained
relatively flat at $4.80 compared to $4.78 per BOE for the 1999 period.
DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A"). DD&A expense
decreased 7% to $84.2 million for the nine months ended September 30, 2000,
compared with $90.7 million reported for the same period in 1999. The decrease
was due to previously discussed decrease in production, offset by the increase
in the DD&A rate from $6.45 per BOE in 1999 to $6.75 per BOE in 2000.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative expenses,
net of capitalized internal costs and overhead reimbursements, were $13.1
million for the nine months ended September 30, 2000, compared to $10.2 million
for the comparable 1999 period. Reductions in general and administrative
expenses relating to 1999 company-wide staff reductions were offset by
reorganization-related severance costs paid or accrued in the second quarter of
2000. On a per BOE produced basis, general and administrative expenses increased
to $1.05 per BOE from $.72 per BOE reported in last year's nine month period
because of the severance costs. Exclusive of severance costs, general and
administrative costs would have been $.77 per BOE in the 2000 period.
INTEREST AND OTHER INCOME. Interest and other income was $2.0 million
in the nine months ended September 30, 2000, compared with $6.9 million in the
1999 period. The decrease related primarily to the Company's recognition in
13
<PAGE> 15
March 1999 of a $5.5 million settlement on the cancellation of hedging contracts
by the counterparties subsequent to the Company's Chapter 11 bankruptcy filing
(see Notes 1 and 3 to the interim consolidated financial statements included in
this Form 10-Q).
INTEREST EXPENSE. Interest expense was $14.4 million for the nine
months ended September 30, 2000, compared with $24.2 million for the 1999 third
quarter, a decrease primarily due to the reduction in long-term debt pursuant to
the execution of the Company's bankruptcy Plan of Reorganization (see Notes 3
and 4 to the interim consolidated financial statements included in this Form
10-Q) and the Company's discontinuation of the accrual of interest expense on
the 9 1/2% and 8 1/2% Senior Subordinated Note issues on March 21, 1999.
INCOME TAX PROVISION. The Company recognized income tax provisions of
$28.2 million and $.7 million in the first nine months of 2000 and 1999
respectively, based on an effective combined federal and state income tax rate
of 38.0%. The Company recorded only a marginal tax provision in the 1999 period
because of losses accumulated during the first eight months of the year.
PREFERRED STOCK DIVIDENDS. The Company paid $3.0 million in preferred
stock dividends, in additional Preferred Stock, during the nine months ended
September 30, 2000 on the Preferred Stock issued on March 20, 2000 (see Notes 1,
3 and 7 to the interim consolidated financial statements included in this Form
10-Q).
LIQUIDITY AND CAPITAL RESOURCES
The Company makes substantial capital expenditures for the exploration
and development of oil and natural gas reserves in the ordinary course of
business. Historically, the Company has financed its capital expenditures, debt
service and working capital requirements with cash flow from operations, public
offerings of equity, public and private offerings of debt, temporary borrowings
under its senior credit facility and other financings. Cash flow from operations
is sensitive to the prices the Company receives for its oil and natural gas.
Lower production associated with reductions in planned capital spending or an
extended decline in oil and gas prices could result in less than anticipated
cash flow from operations in the current fiscal year and later years, which
could have a material adverse affect on the Company. Such a decline in prices or
production could also adversely affect the amount that the Company could borrow
under its senior credit facility. The availability of capital to the energy
industry, in general, and specifically from the public equity and debt markets,
is also influenced by prevailing market sentiment that might be totally
unrelated to the industry's current performance or that of the Company.
On March 21, 1999, the Company and its wholly owned subsidiary,
Forcenergy Resources Inc., filed a voluntary petition for relief under Chapter
11 of the U.S. Bankruptcy Code in order to facilitate the restructuring of the
Company's long-term debt, revolving credit, trade and other obligations. The
filing was made in the U.S. District Court for the Eastern District of Louisiana
in New Orleans. The Company continued to operate as a debtor-in-possession
subject to the Bankruptcy Court's supervision and orders until February 15,
2000, at which time the Plan of Reorganization became effective (see Notes 1, 3
and 4 to the consolidated financial statements included elsewhere in this Form
10-Q).
In conjunction with the Reorganization, the Company replaced the Prior
Facility with the New Senior Credit Facility. The New Senior Credit Facility
consists of a $250 million Revolving Credit Facility and a $70 million Term
Loan. The amount that can be borrowed under the Revolver is further subject to a
borrowing base, which has been initially established at $250 million through
February 15, 2001. The Revolver provides for borrowings on a revolving basis
through August 15, 2003, at which time all outstanding amounts under the
Revolver become due and payable. Advances under the Revolver bear interest at
prime plus 1.5% or LIBOR plus 2% per annum at the election of the Company. The
agreement provides for a commitment fee on the unused portion of the Revolver at
.50% due quarterly. The borrowing base is subject to semi-annual redetermination
14
<PAGE> 16
after the first redetermination on February 15, 2001. The terms of the Term Loan
provide for mandatory quarterly principal repayments of $2.5 million each
commencing on March 31, 2001, with a $50 million lump sum repayment at maturity
on August 15, 2003. Interest is payable monthly at prime plus 3% or LIBOR plus
3.5%.
On March 20, 2000 the Company received $40.0 million, $38.8 million net
of offering costs, in proceeds from a preferred stock and warrants issuance
required by the Plan of Reorganization (see Note 3 to the interim consolidated
financial statements included elsewhere in this Form 10-Q). The proceeds were
used to pay down amounts drawn under the Revolver. At October 31, 2000, $180.0
million was utilized under the Revolver with $64.5 million available for general
corporate purposes.
Historically, the Company has financed its capital expenditures, debt
service and working capital requirements with cash flow from operations, public
offerings of equity, private offerings of debt, borrowings under its senior
credit facility and other financings. The Company's primary sources and uses of
funds for each of the periods presented were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------
2000 1999 2000 1999
---------- ------------- ---------- -------------
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
COMPANY COMPANY COMPANY COMPANY
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities before
reorganization activities $ 114,689 $ 40,777 $ 149,635 $ 94,622
Cash used in reorganization activities (2,974) (1,689) (56,760) (2,292)
Borrowings under the Senior Credit Facility 64,500 -- 134,557 26,473
Repayments under the Senior Credit Facility (60,500) -- (209,030) (8,700)
Issuance of common and preferred stock 2,507 -- 41,497 310
Capital expenditures (65,600) (18,529) (154,524) (43,975)
</TABLE>
Working capital at September 30, 2000 was $3.0 million compared to
$35.8 million at December 31, 1999. The reduction in working capital relates
primarily to a decrease in cash balances on hand from $96.5 million at December
31, 1999 to $1.3 million at September 30, 2000. The decrease in cash relates
principally to the implementation of the Plan and the associated cash
distributions to secured creditors. The decrease in cash was partially offset by
an increase in cash prepayments paid to others for capital activities on
non-operated properties of approximately $4.7 million.
Cash flow from operating activities before reorganization activities
was $149.6 million in the first nine months of 2000 compared to $94.6 million in
the 1999 period.
Capital expenditures were $154.5 million for the nine months ended
September 30, 2000, compared with $44.0 million for the 1999 period. Capital
expenditures were lower in the 1999 period due to the Company's lack of
available capital preceding, and spending limitations subsequent to, its March
21, 1999 Chapter 11 bankruptcy filing. Capital expenditures in the nine months
ended September 30, 2000 were funded by cash flow from operations. The Company's
capital expenditure program for the year 2000 is planned at approximately $182
million, all of which is expected to be funded by cash flow from operations.
Management believes that cash flow from operations and temporary
borrowings available under the New Senior Credit Facility should be sufficient
to meet its anticipated capital expenditures and other operating requirements
remaining for 2000. However, because future cash flows and the availability of
financing are subject to a number of variables, such as oil and gas prices,
production operations, drilling results and the number and size of acquisitions
made by the Company, there can be no assurance that the Company's capital
15
<PAGE> 17
resources will be sufficient to maintain currently planned levels of capital
expenditures and to fund future acquisitions. Additional debt and equity
financings or an increase in the size of the Senior Credit Facility may be
required in connection with future acquisitions. The availability of these
capital sources will depend on prevailing market conditions and interest rates
and the then-existing financial condition of the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement No. 133"). The statement
requires companies to report the fair market value of derivatives on the balance
sheet and record in income or other comprehensive income, as appropriate, any
changes in the fair value of the derivative. Statement No. 133 will become
effective with respect to the Company on January 1, 2001. The Company is
currently evaluating the impact of the statement.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 101 is applicable beginning with
the Company's fourth quarter of 2000 consolidated financial statements. Based on
the Company's current analysis, SAB 101 will not have a material impact on the
financial results of the Company.
16
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 2000.
17
<PAGE> 19
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, in the City of Metairie, State of
Louisiana, on the 14th day of November, 2000.
FORCENERGY INC
By: /s/ E. JOSEPH GRADY
--------------------------------
E. Joseph Grady
Vice President - Chief Financial
Officer (Principal Financial
Officer and officer duly
authorized to sign on behalf of
the Registrant)
