-----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, TchAp/+DdFJWVEnI/PUddkbimYBxHQAPHSffOVO98yI0MyyWQ2N2QiWa2sn6uiiU OPmasviJnWIuo62rwwElbQ== 0000899243-01-500073.txt : 20010417 0000899243-01-500073.hdr.sgml : 20010417 ACCESSION NUMBER: 0000899243-01-500073 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010213 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010416 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3TEC ENERGY CORP CENTRAL INDEX KEY: 0000903267 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 631081013 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-14745 FILM NUMBER: 1603535 BUSINESS ADDRESS: STREET 1: TWO SHELL PLZ STREET 2: 777 WALKER STE 2400 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132226275 MAIL ADDRESS: STREET 1: TWO SHELL PLZ STREET 2: 777 WALKER STE 2400 CITY: HOUSTON STATE: TX ZIP: 77002 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE BAY OIL CO INC DATE OF NAME CHANGE: 19930504 8-K/A 1 d8ka.txt AMENDMENT TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): FEBRUARY 13, 2001 3TEC ENERGY CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 001-14745 63-1081013 - ---------------------------- --------- ---------- (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) Two Shell Plaza, 777 Walker, Suite 2400, Houston, Texas 77002 (Address of principal executive offices and zip code) (713) 821-7100 Registrant's telephone number, including area code Purpose of this Amendment On February 13, 2001, the registrant filed its Form 8-K for the acquisition of 100% of the issued and outstanding stock of Classic Resources Inc. ("Classic"). Financial information required under Item 7 and Regulation S-B Item 310 was not available at the time of the filing. The purpose of this amendment is to include the required audited financial statements and pro forma information. ITEM 2 - ACQUISITION OF ASSETS On January 30, 2001, 3TEC Energy Corporation ("3TEC") closed the previously announced transaction to purchase 100% of the issued and outstanding stock of Classic as described in the registrant's Form 8-K filed on February 13, 2001. ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS The financial statement information required under Regulation S-B Item 310 is included after the signature page as follows: (a) Financial Statements of Business Acquired The following audited consolidated financial statements of Classic Resources, Inc., together with the independent auditors' report by Arthur Andersen LLP, appear as Exhibit 99.2 to this Current Report on Form 8-K/A and are hereby incorporated by reference: Consolidated Balance Sheet as of December 31, 2000 Consolidated Income Statement for the year ended December 31, 2000 Consolidated Statement of Retained Earnings for the year ended December 31, 2000 Consolidated Statement of Cash Flows for the year ended December 31, 2000 Notes to the Consolidated Financial Statements (b) Pro Forma Financial Information The following unaudited pro forma consolidated financial statements of the Registrant and Classic appear as Exhibit 99.3 to this Current Report on Form 8-K/A and are hereby incorporated by reference: Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2000 Unaudited Pro Forma Consolidated Income Statement for the year ended December 31, 2000 Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements (c) Exhibits. 2.1 Stock Purchase Agreement dated December 29, 2000 (incorporated by reference to Exhibit 2.1 to 3TEC's Form 8-K filed on February 13, 2001) 99.1 Press Release issued by the Registrant on January 31, 2001 (incorporated by reference to Exhibit 99.1 to 3TEC's Form 8-K filed on February 13, 2001) 99.2 The following audited consolidated financial statements of Classic with report with the independent auditors' report by Arthur Andersen LLP *: Consolidated Balance Sheet as of December 31, 2000 Consolidated Income Statement for the year ended December 31, 2000 Consolidated Statement of Retained Earnings for the year ended December 31, 2000 Consolidated Statement of Cash Flows for the year ended December 31, 2000 Notes to the Consolidated Financial Statements 99.3 The following unaudited pro forma condensed consolidated financial statements of the Registrant and Classic *: Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2000 Unaudited Pro Forma Consolidated Income Statement for the year ended December 31, 2000 Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements * Filed herewith SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 3TEC Energy Corporation (Registrant) Date: April 13, 2001 By: /s/ Floyd C. Wilson -------------------- Floyd C. Wilson Chief Executive Officer and Chairman of the Board INDEX TO EXHIBITS 2.1 Stock Purchase Agreement dated December 29, 2000 (incorporated by reference to Exhibit 2.1 to 3TEC's Form 8-K filed on February 13, 2001) 99.1 Press Release issued by the Registrant on January 31, 2001 (incorporated by reference to Exhibit 99.1 to 3TEC's Form 8-K filed on February 13, 2001) 99.2 The following audited consolidated financial statements of Classic with report with the independent auditors' report by Arthur Andersen LLP *: Consolidated Balance Sheet as of December 31, 2000 Consolidated Income Statement for the year ended December 31, 2000 Consolidated Statement of Retained Earnings for the year ended December 31, 2000 Consolidated Statement of Cash Flows for the year ended December 31, 2000 Notes to the Consolidated Financial Statements 99.3 The following unaudited pro forma condensed consolidated financial statements of the Registrant and Classic *: Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2000 Unaudited Pro Forma Consolidated Income Statement for the year ended December 31, 2000 Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements * Filed herewith EX-99.2 2 dex992.txt AUDITED CONSOLIDATED FINANCIAL STATEMENTS EXHIBIT 99.2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Classic Resources, Inc.: We have audited the accompanying consolidated balance sheet of Classic Resources, Inc., a Texas corporation, as of December 31, 2000, and the related consolidated statements of operations, shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Classic Resources, Inc. as of December 31, 2000, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Dallas, Texas, March 30, 2001 CLASSIC RESOURCES, INC. CONSOLIDATED BALANCE SHEET--DECEMBER 31, 2000 ASSETS 2000 ------ ---- CURRENT ASSETS: Cash and cash equivalents $ 2,259,967 Restricted cash 100,226 Accounts receivable 4,449,852 Prepaid expenses 456 ----------- Total current assets 6,810,501 PROPERTY AND EQUIPMENT: Oil and gas properties, at cost using the "successful efforts" method of accounting 25,099,176 Other fixed assets 50,978 Less- Accumulated depreciation, depletion, and amortization (3,847,537) ----------- Net property and equipment 21,302,617 OTHER ASSETS 286,317 ----------- Total assets $28,399,435 =========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 4,999,210 ----------- Total current liabilities 4,999,210 LONG-TERM LIABILITES: Notes payable 503,065 Deferred income taxes 2,582,155 ----------- Total long-term liabilities 3,085,220 SHAREHOLDERS' EQUITY: Common stock - $0.01 par value; 10,000,000 shares authorized 1,526,000 shares outstanding at December 31, 2000 15,260 Additional paid-in capital 20,117,624 Retained earnings 182,121 ----------- Total shareholders' equity 20,315,005 ----------- Total liabilities and shareholders' equity $28,399,435 =========== The accompanying notes are an integral part of these consolidated financial statements. CLASSIC RESOURCES, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 2000 ----------- OPERATING REVENUES: Oil and gas sales $11,033,218 ----------- Total operating revenues 11,033,218 OPERATING EXPENSES: Lease operating expenses 1,574,056 General and administrative expenses 850,183 Depreciation, depletion, and amortization 2,190,203 Dry hole expense 1,031,936 Non-cash stock based compensation 4,869,884 Impairment expense 633,728 ----------- Total operating expenses 11,149,990 ----------- OPERATING LOSS (116,772) OTHER INCOME (EXPENSE): Interest income 173,421 Gain on sale of assets 633,742 Interest expense (26,917) ----------- Total other income (expense) 780,246 ----------- NET INCOME BEFORE INCOME TAXES 663,474 INCOME TAX PROVISION (1,881,342) ----------- NET LOSS $(1,217,868) =========== The accompanying notes are an integral part of these consolidated financial statements. CLASSIC RESOURCES, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2000
Additional Total Common Common Paid-in Retained Shareholders' Shares Stock Capital Earnings Equity --------- ------- ----------- ------------ -------------- BALANCE, December 31, 1999 1,523,000 $15,230 $15,214,770 $ 1,399,989 $16,629,989 Issuance of common stock 3,000 30 32,970 - 33,000 Non-cash stock-based compensation - - 4,869,884 - 4,869,884 Net loss - - - (1,217,868) (1,217,868) --------- ------- ----------- ----------- ----------- BALANCE, December 31, 2000 1,526,000 $15,260 $20,117,624 $ 182,121 $20,315,005 ========= ======= =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. CLASSIC RESOURCES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2000 2000 ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (1,217,868) Gain on sale of fixed assets (633,742) Adjustments to reconcile net loss to net cash provided by operating activities- Depreciation, depletion, and amortization 2,190,203 Impairment expense 633,728 Non-cash stock-based compensation 4,869,884 Deferred income tax 1,881,342 Changes in current assets and liabilities- Changes in accounts receivable and other current assets (2,706,936) Changes in payables and accrued expenses 2,490,858 Change in noncurrent assets (209,423) ------------ Net cash provided by operating activities 7,298,046 ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Oil and gas property acquisitions and additions (10,630,627) Furniture and equipment acquisitions (15,571) Proceeds from sale of oil and gas property 2,208,789 Change in restricted cash 249,774 ------------ Net cash used in investing activities (8,187,635) ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 2,303,065 Payments on note payable (1,800,000) Proceeds from issuance of common stock 33,000 ------------ Net cash provided by financing activities 536,065 ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (353,524) CASH AND CASH EQUIVALENTS, beginning of period 2,613,491 ------------ CASH AND CASH EQUIVALENTS, end of period $ 2,259,967 ============ The accompanying notes are an integral part of these consolidated financial statements. CLASSIC RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 1. SUMMARY OF ORGANIZATION: Classic Resources, Inc. ("Classic" or the "Company"), a Texas corporation, was formed on July 7, 1998, for the purpose of acquiring interests in and further developing oil and natural gas properties. The Company is the sole shareholder in Classic Oil & Gas, Inc., created to operate the oil and gas properties owned by Classic. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Classic and its wholly owned subsidiary, Classic Oil & Gas, Inc. All significant intercompany balances and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. RESTRICTED CASH The Company is required to maintain a cash reserve balance with its broker related to hedging activities. The amount of the restricted cash reserve balance at December 31, 2000, was $100,226. OIL AND GAS PROPERTIES The Company follows the successful efforts method of accounting for its oil and gas properties. Under this method, costs of productive wells, development dry holes, oil and gas leasehold costs and productive leases are capitalized and amortized on a unit-of-production basis over the life of the remaining related oil and gas reserves. Cost centers for amortization purposes are determined on a field area basis. Wells in progress at December 31, 2000, totaled approximately $1,173,689, and such costs are not being amortized until the respective wells are placed on production. 1 CLASSIC RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 Unproved oil and gas properties and properties with significant acquisition costs are periodically assessed and any impairment in value is charged to expense. The Company had no unproved properties at December 31, 2000. The costs of unproved properties which are determined to be productive are transferred to proved oil and gas properties. Exploratory expenses, including geological and geophysical expenses and delay rentals for unevaluated oil and gas properties, are charged to expense as incurred. Exploratory drilling costs are initially capitalized as unproved property but charged to expense if and when the well is determined not to have found proved oil and gas reserves. OTHER PROPERTY AND EQUIPMENT Other property and equipment are mainly comprised of furniture, fixtures and automobiles. These items are amortized on a straight-line basis over their estimated useful lives, which range from five to seven years. IMPAIRMENT OF LONG-LIVED ASSETS The Company has adopted the provisions of SFAS No. 121, "Accounting for the Impairment of Long Lived Assets and Long-Lived-Assets to be Disposed Of" ("SFAS 121"). SFAS 121 requires the Company to assess the need for an impairment of capitalized costs of oil and gas properties on a property by property basis. If an impairment is indicated based on undiscounted expected future cash flows, then an impairment is recognized to the extent that net capitalized costs exceed discounted expected future cash flows. During 2000, the Company recorded impairment expense of $633,728 as a result of impairment of its oil and gas properties. REVENUE RECOGNITION POLICY Revenues are generally recorded when products have been delivered and services have been performed. COMPREHENSIVE INCOME In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 established reporting and disclosure requirements for comprehensive income and its components within the financial statements. The Company had no comprehensive income components as of December 31, 2000. Accordingly, comprehensive loss is the same as net loss for the period ended December 31, 2000. HEDGING ACTIVITIES AND OTHER DERIVATIVE INSTRUMENTS The Company periodically uses derivative financial instruments to manage natural gas price risk. As detailed in the table below, the Company currently utilizes "collars" and "swaps" to manage its price risk. A collar is a hedge that has a ceiling price and a floor price. If the particular product price stays in between the ceiling and the floor prices, then no payments are made by either party under the collar. A swap is a hedge that has a strike price only. If the strike price is above the product prices then a payment is made to the Company, but if the strike price is equal to or below the product price, then no payment is made by either party. As a result of these hedging transactions, the Company realized a loss of $1,967,727 in 2000. 2 CLASSIC RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 The Company adopted SFAS No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities" effective January 1, 2001. The statement establishes accounting and reporting standards that require the Company to record every derivative instrument (including certain derivative instruments embedded in other contracts) on the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company has elected not to formally designate the hedges in place at January 1, 2001, and thus account for the changes in fair value of the hedges through net income. Set forth below is the contract amount and material terms of all hedging instruments held by the Company at December 31, 2000. The terms "Put Floor Price" and "Call Ceiling Price" refer to the prices at which the Company has hedged its production and are expressed in the calendar monthly average of daily NYMEX closing prices for both crude oil and natural gas. Volumes refer to Mcf of gas, where one Mcf is equivalent to one MMBtu, and Bbl which refers to barrels of crude oil. The "Term" refers to the time period of the hedge.
TYPE OF MONTHLY PUT FLOOR CALL CEILING TRANSACTION COMMODITY VOLUME PRICE PER MCF PRICE PER MCF TERM ----------- --------- ------- ------------- ------------- ---- Collar Oil 2,000 $27.00 $32.16 1-1-01 to 12-31-01 Collar Natural Gas 20,000 $ 2.30 $ 2.60 4-01-00 to 9-30-01 Collar Natural Gas 20,000 $ 2.55 $ 3.03 11-01-00 to 4-30-02 Collar Natural Gas 30,000 $ 2.75 $ 3.70 6-01-00 to 3-31-01 Collar Natural Gas 30,000 $ 3.00 $ 3.85 10-01-01 to 3-31-02 Collar Natural Gas 10,000 $ 3.70 $ 5.00 1-01-01 to 12-31-01 Collar Natural Gas 30,000 $ 3.50 $ 6.25 1-1-01 to 12-31-01 Collar Natural Gas 30,000 $ 3.25 $ 5.26 1-1-02 to 12-31-02 Swap Natural Gas 10,000 $ 2.20 $ 2.20 6-1-99 to 11-30-01 Swap Natural Gas 30,000 $ 2.20 $ 2.20 5-4-99 to 12-31-01
The fair value of these hedge arrangements represented a net liability of approximately $4,750,000 at December 31, 2000, which will be recorded on the balance sheet effective January 1, 2001. 3. SIGNIFICANT ACQUISITIONS AND DISPOSITIONS OF OIL AND GAS PROPERTIES: ACQUISITIONS In May 2000, the Company acquired proved undeveloped reserves from royalty owners in the Hunt unit for approximately $410,000. In July 2000, the Company acquired producing properties from Ocean Energy for approximately $1,975,000. DISPOSITIONS In January 2000, the Company sold properties to Samson Lone Star Limited Partnership for proceeds of approximately $2,200,000. The Company recognized a gain on the sale of approximately $634,000. 3 CLASSIC RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 4. INCOME TAXES: The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effective income tax rate in 2000 was 284%. The primary difference between the Company's effective rate and the statutory rate of 34% is the non-cash stock-based compensation expense which is not deductible for federal income tax purposes. The Company's net deferred tax position as of December 31, 2000, was as follows: Deferred tax assets- Organizational cost $ 34,197 NOL carryforward 157,894 Deferred tax liabilities- Depletion, depreciation and amortization (2,711,003) Other (63,243) ----------- Net deferred tax liability $(2,582,155) =========== The Company's net operating loss carryforwards were approximately $464,000 at December 31, 2000, and are scheduled to expire in 2020. 5. EMPLOYEE STOCK OPTION PLAN: On July 15, 1998, the Company's Board of Directors approved the Option Plan for certain officers and employees of the Company. The Plan provides for future awards of stock options of up to 268,765 shares of common stock with an initial exercise price of $10 which is to be increased 10% per annum. An analysis of the stock option activity for the year ended December 31, 2000, is as follows:
Number of Weighted Average Shares Option Price Option Price --------- ------------ ---------------- Options outstanding at December 31, 1999 223,074 $10.46 to $11.32 $10.54 Granted 26,877 $11.50 ------- Options outstanding at December 31, 2000 249,951 $10.46 to $11.50 $10.65 =======
4 CLASSIC RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require companies to record compensation cost for stock-based employee compensation at fair value. The Company has chosen to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations to account for stock- based compensation. Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair value of the Company's stock at the measurement date over the amount an employee must pay to acquire the stock. Since the stock options exercise price increases every year, the measurement date will not occur until the options are exercised. Accordingly, compensation expense is recorded based on the estimated fair value of the stock less the exercise price at each reporting period. Compensation expense of approximately $4,870,000 has been recorded as of December 31, 2000, related to outstanding stock options. The 2000 compensation expense was determined using the price per share received in the sale of stock to 3TEC Energy Corporation ("3TEC") in January 2001. 6. RELATED-PARTY TRANSACTIONS: During the year ended December 31, 2000, the Company made directors' fee payments to Natural Gas Partners, Inc. totaling $20,000 pursuant to the Advisory Services and Indemnification Agreement between the Company and Natural Gas Partners, Inc. The Company also paid $50,000 of finance advisory fees to Natural Gas Partners, Inc. in 2000. 7. DEBT: On November 17, 1999, the Company entered into a revolving credit facility of $50,000,000 provided by a syndicate of banks for which First Union National Bank serves as administrative agent, and of which $503,065 was outstanding as December 31, 2000. The borrowing base under the credit facility is currently $13,000,000. Such borrowing base may be affected from time to time by the performance of the Company's oil and gas properties and changes in oil and gas prices. The determination of the borrowing base is at the sole discretion of the bank. The revolving credit line under the bank credit facility bears interest at the option of the Company, based on the utilization of the borrowing base, at either (i) LIBOR plus 1.37% to 1.87%, or (ii) the "base rate " plus 0% to 0.50%. The Company incurs a commitment fee, based on the utilization of the borrowing base, of 0.25 to 0.375% per annum on the unused portion of the borrowing base. The revolving credit line matures on November 17, 2003, or such earlier date as the Company may elect. The bank credit facility contains covenants which, among other things, restrict the payments of cash dividends, limit the amount of consolidated debt, and limit the Company's ability to make certain loans and investments. Significant financial covenants include the maintenance of a current ratio, as defined, (1.0 to 1.0), and maintenance of an interest coverage ratio (2.5 to 1.0). The Company's bank credit facility is secured by the Company's oil and gas properties. 8. COMMITMENTS AND CONTINGENCIES: The Company is involved is various legal actions and claims arising in the ordinary course of business. In the opinion of management, such litigation and claims are likely to be resolved without material adverse effect on the Company's financial position or results of operations. 5 CLASSIC RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 9. SUBSEQUENT EVENT Effective January 31, 2001, 3TEC purchased all of the outstanding stock of the Company for $53.5 million, subject to certain closing adjustments. Accordingly, the Company became a wholly-owned subsidiary of 3TEC as of January 31, 2001. 6 EX-99.3 3 dex993.txt UNAUDITED PRO FORMA FINANCIAL STATEMENTS EXHIBIT 99.3 SELECTED UNAUDITED PRO FORMA FINANCIAL DATA Our unaudited pro forma condensed consolidated balanced sheet as of December 31, 2000 gives effect to the purchase of Classic Resources, Inc. ("Classic") as if it had occurred on that date. Classic was acquired on January 30, 2001 for approximately $53.5 million. Our unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2000 gives effect to the acquisition by 3TEC of the CWR Properties and Classic (the "Purchases") as if they occurred January 1, 2000. The columns headed "CWR Properties" and "Classic Resources" in the Unaudited Pro Forma Condensed Consolidated Statement of Operations give effect to the revenues and expenses of the respective acquisitions for the periods they were not included in our historical financial statements. The CWR Properties were acquired effective June 1, 2000. There are no adjustments at December 31, 2000 to the Unaudited Pro Forma Condensed Consolidated Balance Sheet related to the CWR Properties, as the effect of the acquisition is already included in the Company's balance sheet. The Purchases were accounted for by 3TEC using the purchase method of accounting. The following unaudited pro forma financial data have been included as required by the rules of the SEC and are provided for comparative purposes only. The unaudited pro forma financial data presented are based upon the historical consolidated financial statements of 3TEC and Classic and the historical statements of revenues and direct operating expenses of the CWR Properties and should be read in conjunction with such financial statements and related notes thereto included in this report. The pro forma financial data are based upon assumptions and include adjustments as explained in the notes to the unaudited pro forma condensed consolidated financial statements, and the actual recording of the transactions could differ. The unaudited pro forma financial data are not necessarily indicative of the financial results that would have occurred had the Purchases been effective on and as of the date indicated and should not be viewed as indicative of operations in future periods. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of December 31, 2000
3TEC CLASSIC PRO FORMA PRO FORMA CONSOLIDATED RESOURCES ADJUSTMENTS CONSOLIDATED -------------- ------------- --------------- --------------- Current Assets Cash and cash equivalents $ 4,436,497 $ 2,360,193 $ (503,065)(f) $ 6,293,625 Accounts receivable 26,137,738 4,449,852 - 30,587,590 Other current assets 5,389,848 456 - 5,390,304 -------------- ------------- ----------- ------------ Total current assets 35,964,083 6,810,501 $ (503,065) 42,271,519 Properties and Equipment, at cost: Oil and gas properties, successful efforts method 270,277,796 25,099,176 55,806,721 (e) 351,183,693 Other property and equipment 2,030,310 50,978 (50,973)(e) 2,030,310 Accumulated depreciation, depletion & amortization (56,170,333) (3,847,537) 3,847,537 (e) (56,170,333) -------------- ------------- ------------ ------------ Net Properties and Equipment 216,137,773 21,302,617 59,603,280 297,043,670 Other assets 2,662,201 286,317 (286,317)(e) 2,662,201 -------------- ------------- ------------ ------------ Total assets $ 254,764,057 $ 28,399,455 $(58,813,898) $341,977,390 ============== ============= ============ ============ Current liabilities Accounts payable 10,746,140 4,999,210 - 15,745,350 Accrued liabilities 2,191,826 - - 2,191,826 Series C Preferred stock redemption 2,855,521 - - 2,855,521 Income taxes payable 4,461,928 - - 4,461,928 Other current liabilities 467,152 - 1,500,000(e) 1,967,152 -------------- ------------- ---------- ------------ Total current liabilities 20,722,567 6,499,210 - 27,221,777 Long-term debt 63,000,000 503,065 52,996,935 (e)(f) 116,500,000 Senior subordinated notes 13,223,844 - - 13,223,844 Deferred income taxes 6,770,981 2,582,155 24,631,968 (e) 33,985,104 Other liabilities 58,424 - - 58,424 Minority interest 1,393,578 - - 1,393,578 Stockholders' equity Preferred stock, $.02 par value, 20,000,000 shares authorized 266,667 designated Series B, 2,300,000 shares designated Series C and 725,167 shares designated Series D, none other designated - - Convertible preferred stock Series B, $7.50 stated value, 266,667 shares issued and outstanding. $2,000,000 aggregate liquidation preference 3,627,000 3,627,000 Convertible preferred stock Series D, 5% $24.00 stated value, 621,930 shares issued and outstanding at December 31, 2000, $14,926,320 aggregate liquidation preference. 7,571,553 7,571,553 Common stock, $.02 par value, 60,000,000 shares authorized, 14,687,906 shares issued at December 31, 2000 293,758 - - 293,758 Common stock, $.01 par value, 10,000,000 authorized, 1,526,000 shares outstanding at December 31, 2000 - 15,260 (15,260)(g) - Additional paid-in capital 136,382,775 20,117,624 (20,117,624)(g) 136,382,775 Retained earnings 2,768,417 182,121 (182,121)(g) 2,768,417 Treasury stock (1,048,840) - - (1,048,840) -------------- ------------- ----------- ------------ Total stockholders' equity 149,594,663 20,315,005 - 149,594,663 -------------- ------------- ----------- ------------ Total liabilities and stockholders' equity $ 254,764,057 $ 28,339,435 $58,813,898 $341,977,390 ============== ============= =========== ============ See accompanying notes to unaudited pro forma condensed consolidated financial data.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 2000
CWR CLASSIC 3TEC PROPERTIES CLASSIC PRO FORMA PRO FORMA PRO FORMA CONSOLIDATED OF CWR RESOURCES ADJUSTMENTS ADJUSTMENTS CONSOLIDATED ------------ ---------- ----------- ----------- -------------- ------------- REVENUES: Oil and gas sales and plant income $103,210,199 $4,891,080 $11,079,080* $ - $ - $119,180,359 Gain on sale of properties 800,338 - 633,743 - - 1,434,081 Other 812,616 - 293,618* - - 1,106,234 ------------ ---------- ----------- ----------- ----------- ------------ Total Revenues 104,823,153 4,891,080 12,006,441 - - 121,720,674 EXPENSES: Lease operations 15,326,014 876,490 1,031,499 - - 17,234,003 Production, severance and ad valorem 6,691,508 - 542,558 - - 7,234,066 Gathering, transportation and other 2,223,396 - 166,058* - - 2,389,454 Geological and geophysical 666,089 - - - - 666,089 Dry hole and impairment 29,261 - 1,665,664 - - 1,694,925 General and administrative 6,141,297 - 850,184 190,000(a) - 7,181,481 Non-cash compensation expense - - 4,869,884 - - 4,869,884 Interest 7,555,529 - 26,917 1,764,967(b) 4,403,534 (b) 13,750,947 Depreciation, depletion and amortization 19,779,218 - 2,190,203 1,347,560(c) 3,357,036 (c) 26,674,017 ------------ ---------- ----------- ----------- ----------- ------------ Total expenses 58,412,312 876,490 11,342,967 3,302,527 7,760,570 81,694,866 ------------ ---------- ----------- ----------- ----------- ------------ Income (loss) before inc taxes & minority interest 46,410,841 4,014,590 663,474 (3,302,527) (7,760,570) 40,025,808 ------------ ---------- ----------- ----------- ----------- ------------ Minority interest (304,534) - - - (304,534) Income tax provision (14,442,267) - (1,881,342) (223,018)(d) 2,578,904 (d) 13,967,723 ------------ ---------- ----------- ----------- ----------- ------------ Net income (loss) 31,664,040 4,014,590 (1,217,868) (3,525,545) (5,181,665) 25,753,552 ------------ ---------- ----------- ----------- ----------- ------------ Dividends to preferred shareholders 1,487,561 - - - - 1,487,561 ------------ ---------- ----------- ----------- ----------- ------------ Net income (loss) attributable to common shareholders $30,176,479 $4,014,590 $(1,217,868) $(3,525,545) $(5,181,665) $ 24,265,991 ============ ========== =========== =========== =========== ============ Net income (loss) per common share (basic) $ 2.91 $ 2.34 ------------ ------------ Weighted average common shares outstanding (basic) 10,382,836 10,382,836 ------------ ------------ * Incorporates reclassifications made to conform to 3TEC presentation. See accompanying notes to unaudited pro forma condensed consolidated financial data.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA The unaudited pro forma financial data has been prepared to give effect to the acquisition by 3TEC of the CWR Properties and Classic Resources, Inc. The columns headed "CWR Properties" and "Classic Resources" in the Unaudited Pro Forma Condensed Consolidated Statement of Operations give effect to the revenues and direct operating expenses of the respective acquisitions for the periods they were not included in our historical financial statements. There are no adjustments at December 31, 2000 to the Unaudited Pro Forma Condensed Consolidated Balance Sheet related to the CWR Properties, as the effect of this acquisition is already included in the Company's balance sheet. The unaudited pro forma condensed consolidated statements are not necessarily indicative of the results of our future operations. (a) To record additional general and administrative expenses relating to additional costs anticipated to be incurred related to the acquisition of the CWR Properties. (b) To record the net change in interest expense (at 8.28% for Classic and 8.15% for the CWR Properties) as a result of the increased borrowings under the Company's credit facility. (c) To adjust depreciation, depletion and amortization expense to give effect to the purchase price allocated to the CWR Properties and to Classic Resources using the unit of production method under the successful effort method of accounting. (d) To record income tax expense on the pro forma adjustments based on 3TEC's effective tax rate. (e) To record the acquisition of Classic Resources and related assets, liabilities and borrowings under our credit facility, at fair market value. (f) To record the pay down of the existing bank debt of Classic Resources at the closing of the acquisition. (g) Reflects the elimination of the historical equity of Classic in applying the purchase price. -----END PRIVACY-ENHANCED MESSAGE-----