-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OnBW0DNpjS6Q8eakHpKtZEtgrDXS8NZ8thwS5tbGqIq16rd68D1Pj4AitYW1RvrU xqbVJyQsxgJi+PX5gLeU0A== 0000277595-96-000018.txt : 19960904 0000277595-96-000018.hdr.sgml : 19960904 ACCESSION NUMBER: 0000277595-96-000018 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960810 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960903 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENERGEN CORP CENTRAL INDEX KEY: 0000277595 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 630757759 STATE OF INCORPORATION: AL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-07810 FILM NUMBER: 96625218 BUSINESS ADDRESS: STREET 1: 2101 SIXTH AVE N CITY: BIRMINGHAM STATE: AL ZIP: 35203 BUSINESS PHONE: 2053262742 MAIL ADDRESS: STREET 1: 2101 SIXTH AVE N CITY: BIRNINGHAM STATE: AL ZIP: 35203 FORMER COMPANY: FORMER CONFORMED NAME: ALAGASCO INC DATE OF NAME CHANGE: 19851002 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO FORM 8-K ON FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report August 10, 1996 Energen Corporation (Exact name of registrant as specified in its charter) Alabama (State or other jurisdiction of incorporation) 1-7810 63-0757759 (Commission File No.) (IRS Employer Identification No.) 2101 Sixth Avenue North Birmingham, Alabama 35203 (Address of principal (Zip Code) executive offices) (205) 326-2700 (Registrant's telephone number including area code) Item 2. Acquisition or Disposition of Assets As previously reported in the Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, of Energen Corporation (the "Company"), on July 31, 1996, with an effective date of July 1, 1996, a subsidiary of Taurus Exploration, Inc. ("Taurus"), the oil and gas exploration and production subsidiary of the Company, acquired a 100 percent working interest in the Black Warrior Basin coalbed methane properties of Houston-based Burlington Resources Inc. ("Burlington") for $61 million. The properties are part of Burlington's recently announced accelerated divestiture program. In addition to ownership, Taurus will operate the properties. Current production is located on more than 19,000 gross acres adjacent to existing Taurus coalbed methane interests in west central Alabama. The properties include more than 100 economic wells and estimated net proved reserves of 100 billion cubic feet ("Bcf"). Substantially all of the reserves are classified as proved producing, with net annual production currently exceeding 4.5 Bcf. Through the year 2002, production from 43 of the wells qualifies for the Nonconventional Fuels Tax Credit, which presently is valued at approximately $1 per thousand cubic feet of production and increases annually with inflation. Under applicable area of mutual interest agreements, Taurus was required to offer substantial participation in the acquired properties to two of its coalbed methane partners, which participation was not exercised. The majority of the participation rights expired on August 10, 1996, and the balance of such rights expired on August 20, 1996. Accordingly, such acquisition is being reported on this Form 8-K as a result of the expiration of participation rights on August 10, 1996. The Company initially used a portion of its existing short-term credit facilities to acquire the foregoing properties. The Company expects to refinance a portion of its current year acquisitions, including the acquisition reported hereby, through the issuance of long-term debt during the fourth quarter of this fiscal year. The Company expects to refinance the balance of such acquisitions as well as additional investments which may be made pursuant to its ongoing acquisition program through future issuances of long-term debt and equity. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired See "Index to Financial Statements Financial Statement of the Acquired Property" on page 4. (b) Pro Forma Financial Information See "Index to Financial Statements Unaudited Pro Forma Consolidated Financial Statements" on page 4. SIGNATURE 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, thereunto duly authorized. ENERGEN CORPORATION DATE: September 3, 1996 By /s/ G. C. Ketcham G. C. Ketcham Executive Vice President, Chief Financial Officer and Treasurer INDEX TO FINANCIAL STATEMENTS Page Financial Statement of the Acquired Property: Report of Independent Accountants 5 Statement of Revenues and Direct Operating Expenses of the Acquired Property for the Year Ended December 31, 1995 and Unaudited for the Six Months Ended June 30, 1996 6 Notes to the Statement of Revenues and Direct Operating Expenses 7 Supplementary Oil and Gas Disclosures for the Acquired Property (Unaudited) 8 Unaudited Pro Forma Consolidated Financial Statements: Explanatory Note 11 Unaudited Pro Forma Consolidated Statement of Income for the Year Ended September 30, 1995 12 Unaudited Pro Forma Consolidated Statement of Income for the Nine Months Ended June 30, 1996 13 Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1996 14 Notes to Unaudited Pro Forma Consolidated Financial Statements 15 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Energen Corporation We have audited the accompanying statement of revenues and direct operating expenses of the Acquired Property for the year ended December 31, 1995. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and direct operating expenses reflects the revenues and direct operating expenses attributable to the Acquired Property as described in Note 1 and is not intended to be a complete presentation of the revenues and expenses of the Acquired Property. In our opinion, the statement referred to above presents fairly, in all material respects, the revenues and direct operating expenses of the Acquired Property as described in Note 1 for the year ended December 31, 1995, in conformity with generally accepted accounting principles. COOPERS &LYBRAND L.L.P. Birmingham, Alabama August 30, 1996 THE ACQUIRED PROPERTY STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES (in thousands of dollars) Six Months Year Ended Ended December 31, June 30, 1996 1995 (Unaudited) Revenues $7,812 $6,360 Lease and other direct operating expenses 5,018 2,577 Excess of revenues over direct operating expenses $2,794 $3,783 The accompanying notes are an integral part of this financial statement. THE ACQUIRED PROPERTY NOTES TO THE STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES 1. Basis of Presentation The accompanying financial statement represents the revenues and direct operating expenses relating to Black Warrior Basin coalbed methane properties located in west central Alabama ("the Acquired Property") acquired by a subsidiary of Taurus Exploration, Inc. ("Taurus"). Taurus acquired a 100% working interest in the Acquired Property on July 31, 1996 for $61 million with an effective date of July 1, 1996. Under applicable area of mutual interest agreements, Taurus was required to offer substantial participation to two of its coalbed methane partners, which participation was not exercised. The majority of the participation rights expired on August 10, 1996, and the balance of such rights expired on August 20, 1996. The financial statement is derived from the operator's historical financial records as well as certain public information. This financial statement may not be representative of future operations. The historical financial statements reflecting financial position, results of operations and cash flows required by generally accepted accounting principles are not presented, as such information is neither readily available on an individual property basis nor meaningful for the Acquired Property. During the period presented, the Acquired Property was not accounted for as a separate entity. This statement does not include depreciation, depletion and amortization, general and administrative, interest, federal income tax expenses, or federal income tax credits allowed under Section 29 of the Internal Revenue Code. Accordingly, the accompanying financial statement is not intended to represent the financial position or results of operations of the Acquired Property in conformity with generally accepted accounting principles. 2. Interim Financial Information The accompanying financial information for the six month period ended June 30, 1996, is unaudited but reflects, in the opinion of Management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the revenues and direct operating expenses of the Acquired Property for such period. The revenues and direct operating expenses for such interim period is not necessarily indicative of results to be expected for the full year. 3. Related Party Transactions During the time periods presented, the majority of production from the Acquired Property was sold to a related entity. THE ACQUIRED PROPERTY SUPPLEMENTARY FINANCIAL INFORMATION SUPPLEMENTARY OIL AND GAS DISCLOSURES UNAUDITED The following gas reserve information was prepared by the Company based on studies performed by its petroleum engineering staff using information supplied by the former operator and other available information. The following table presents the estimated remaining net proved gas reserves attributable to the Acquired Property at December 31, 1995, along with a summary of changes in the quantities of net remaining proved reserves during such period. The Acquired Property produces pipeline-quality natural gas from coal (coalbed methane). Production of coalbed methane from wells drilled prior to January 1, 1993, qualifies through December 31, 2002, for federal income tax credits under Section 29 of the Internal Revenue Code of 1986, as amended. The tax credit currently approximates $1 per Mcf of qualifying production. Approximately 19 Bcf of the reserves of the Acquired Property qualifies for tax credit. Proved reserves are estimated quantities of natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Estimated Net Quantities of Gas Reserves Attributed to the Acquired Property Natural Gas (Mmcf) Proved Reserves at January 1, 1995 (a) 115,224 Production 5,237 Proved Reserves at December 31, 1995 109,987 (a) All proved reserves are developed Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil & Gas Reserves The following information has been developed utilizing procedures prescribed by Statement of Financial Accounting Standards No. 69, Disclosures about Oil and Gas Producing Activities (SFAS No. 69) and is based on natural gas reserve and production volumes estimated by the Company's engineering staff. The standardized measure of discounted future net cash flows is not intended, nor should it be interpreted, to present the fair market value of the Company's natural gas reserves. An estimate of fair market value would take into consideration factors such as, but not limited to, the recovery of reserves not presently classified as proved reserves, anticipated future changes in prices and costs, and a discount factor more representative of the time value of money and the risks inherent in reserve estimates. Under the Standardized Measure, future cash inflows were estimated by applying period-end oil and gas prices adjusted for fixed and determinable escalations to the estimated future production of period-end proved reserves. Future cash inflows were reduced by estimated future development, abandonment and production costs based on period-end costs in order to arrive at net cash flow. Future income tax estimates are included. Use of a 10% discount rate is required by SFAS No. 69. Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including varying estimates of price, cost, and tax credit assumptions considered more representative of a range of possible economic conditions that may be anticipated. The Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Gas Reserves attributed to the Acquired Property is as follows: As of December 31, 1995 (In thousands) Future gross revenues $ 249,254 Less related future production, development and abandonment costs 119,621 Future net cash flows before income taxes 129,633 Future income tax expense including tax credits 6,538 Future net cash flows after income taxes 123,095 Discount at 10% per annum 50,712 Standardized measure of discounted future net cash flows relating to proved gas reserves $ 72,383 A summary of the changes in standardized measure of discounted future net cash flows relating to proved gas reserves attributed to the Acquired Property is as follows: 1995 (In thousands) January 1 $ 66,610 Changes in prices and costs 18,089 Accretion of discount 6,661 Sales of gas, net of production costs (5,158) Net changes in income taxes (13,819) Net increase 5,773 December 31 $ 72,383 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited pro forma consolidated statements of income for the year ended September 30, 1995 and the nine month period ended June 30, 1996 include pro forma acquisition adjustments that give effect to the acquisition of the Acquired Property as if such acquisition had been completed October 1, 1994 and October 1, 1995, respectively. The accompanying unaudited pro forma consolidated balance sheet as of June 30, 1996 includes the acquisition of the Acquired Property as if such acquisition had occurred on June 30, 1996. The unaudited pro forma consolidated financial statements are based on the assumptions set forth in the notes to such statements. Such pro forma information should be read in conjunction with the Company's financial statements and related notes thereto and is not necessarily indicative of the results that actually would have occurred had the transactions been in effect on the dates or for the periods indicated, or of results that may occur in the future. ENERGEN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share data) Year Ended September 30, 1995 Pro Forma Adjustments Acquired Other Historical Property Adjustments Pro Forma Operating Revenues Natural gas distribution $295,967 $295,967 Oil and gas production 23,655 $7,812 (A) 31,467 Other 9,001 9,001 Intercompany eliminations (7,419) (7,419) Total operating revenues 321,204 7,812 329,016 Operating Expenses Cost of gas 130,220 130,220 Operations 95,509 5,018 (A) 100,527 Maintenance 9,849 9,849 DD&A 29,577 3,142 (B) 32,719 Taxes, other than income taxes 23,640 23,640 Total operating expenses 288,795 8,160 296,955 Operating Income 32,409 (348) 32,061 Other Income (Expense) Interest expense (11,818) (3,593)(C) (15,411) Other, net 2,398 2,398 Other income (expense) (9,420) (13,013) Income Before Income Taxes 22,989 19,048 Income tax expense (benefit) 3,681 (4,678)(D) (997) Net Income $19,308 $20,045 Earnings Per Share $1.77 $1.84 Average Shares Outstanding 10,906 10,906 See accompanying notes to the unaudited pro forma combined financial statements. ENERGEN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share data) Nine Months Ended June 30, 1996 Pro Forma Adjustments Acquired Other Historical Property Adjustments Pro Forma Operating Revenues Natural gas distribution $312,553 $312,553 Oil and gas production 24,678 $8,767 (E) 33,445 Other 1,677 1,677 Intercompany eliminations (1,968) (1,968) Total operating revenues 336,940 8,767 345,707 Operating Expenses Cost of gas 161,645 161,645 Operations 72,760 3,680 (E) 76,440 Maintenance 8,451 8,451 DD&A 27,567 2,338 (F) 29,905 Taxes, other than income taxes 24,090 24,090 Total operating expenses 294,513 6,018 300,531 Operating Income 42,427 2,749 45,176 Other Income (Expense) Interest expense (9,926) (2,519)(G) (12,445) Other, net 1,966 1,966 Other income (expense) (7,960) (10,479) Income Before Income Taxes 34,467 34,697 Income tax expense (benefit) 7,688 (2,374)(D) 5,314 Net Income $26,779 $29,383 Earnings Per Share $2.44 $2.67 Average Shares Outstanding 10,991 10,991 See accompanying notes to the unaudited pro forma combined financial statements. ENERGEN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (in thousands) June 30, 1996 Pro Forma Historical Adjustments Pro Forma Assets Property, Plant and Equipment Utility plant $270,187 $270,187 Oil and gas properties 93,611 61,017 (H) 154,628 Other property 4,060 4,060 Total PP&E, net 367,858 61,017 428,875 Current Assets 105,775 105,775 Other Assets 13,956 13,956 Total Assets $487,589 $61,017 $548,606 Capital and Liabilities Capitalization Common stock $111 $111 Premium on capital stock 84,512 84,512 Retained earnings and capital surplus 110,034 110,034 Total Common Shareholders' Equity 194,657 194,657 Long-term debt 130,652 130,652 Total Capitalization 325,309 325,309 Current Liabilities Notes payable to banks 19,000 60,376 (H) 79,376 Other current liabilities 130,290 641 (H) 130,931 Total Current Liabilities 149,290 61,017 210,307 Deferred Credits and Other Liabilities 12,990 12,990 Commitments and Contingencies 0 0 Total Liabilities 162,280 61,017 223,297 Total Capital and Liabilities $487,589 $61,017 $548,606 See accompanying notes to the unaudited pro forma combined financial statements. ENERGEN CORPORATION NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited pro forma consolidated financial statements of the Company have been prepared to reflect adjustments to the Company's historical financial statements for the acquisition of the Acquired Property, on the dates indicated, for total consideration of $61 million. The pro forma adjustments are described as follows: (A) Represents pro forma adjustments to reflect the recognition of revenues and direct operating expenses of the Acquired Property for the year ended September 30, 1995. (B) Represents pro forma adjustments to reflect additional estimated depreciation, depletion and amortization attributable to the acquisition as if such acquisition had occurred on October 1, 1994. The additional depreciation, depletion and amortization amounts were calculated on the unit-of-production method based on pro forma capitalized costs and estimated future development, dismantlement and abandonment costs and estimates of total pro forma proved reserves. The Company's actual and pro forma depletion rates for the year ended September 30, 1995, were $0.88 and $0.78 per Mcfe produced, respectively. (C) Represents pro forma adjustments to reflect increased interest expense as if the Company incurred borrowings under its credit agreement to finance the $61 million acquisition cost at an average interest rate of 5.95% for the Acquired Property as of October 1,1994. (D) Represents pro forma adjustments for estimated federal income tax expense using the Company's average tax rate of 35% and pro forma recognition of Section 29 federal income tax credits. (E) Represents pro forma adjustments to reflect the recognition of revenues and direct operating expenses of the Acquired Property for the nine month period ended June 30, 1996. (F) Represents pro forma adjustments to reflect additional estimated depreciation, depletion and amortization attributable to the acquisition as if such acquisition had occurred on October 1, 1995. The additional depreciation, depletion and amortization amounts were calculated on the unit-of-production method based on pro forma capitalized costs and estimated future development, dismantlement and abandonment costs and estimates of total pro forma proved reserves. The Company's actual and pro forma depreciation, depletion and amortization rates for the period ended June 30, 1996 were $1.06 and $0.93 per Mcfe produced, respectively. (G) Represents pro forma adjustments to reflect increased interest expense as if the Company incurred borrowings under its credit agreement to finance the $61 million aggregate acquisition cost at an average interest rate of 5.68% for the Acquired Property on October 1, 1995. (H) Represents pro forma adjustments to reflect the acquisition of the Acquired Property for total consideration of $61 million as if such acquisition occurred on June 30, 1996. -----END PRIVACY-ENHANCED MESSAGE-----