-----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, LWd0qNYz1XmJFuBnjI/rIEEOVfkHWLUh7C72q6fOirPN+YfgxFEOknZUFaUSDn7W Am2voyI+oTAhPzHOThTT7w== 0001021088-97-000010.txt : 19970225 0001021088-97-000010.hdr.sgml : 19970225 ACCESSION NUMBER: 0001021088-97-000010 CONFORMED SUBMISSION TYPE: 8-K/A CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961219 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970205 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDDLE BAY OIL CO INC CENTRAL INDEX KEY: 0000903267 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 631081013 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-21702 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 115 S DEARBORNE ST CITY: MOBILE STATE: AL ZIP: 36602 BUSINESS PHONE: 3344327540 MAIL ADDRESS: STREET 1: PO BOX 390 CITY: MOBILE STATE: AL ZIP: 36602 8-K/A 1 MIDDLE BAY OIL COMPANY, INC., FORM 8-K U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) December 19, 1996 MIDDLE BAY OIL COMPANY, INC. (Exact name of registrant as specified in its charter) File No. 0-21702 (Commission File Number) Alabama 63-1081013 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 115 SOUTH DEARBORN STREET, MOBILE, AL 36602 (Address of principal executive offices) (334) 432-7540 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) This Form 8-K/A amends the Current Report on Form 8-K of Middle Bay Oil Company, Inc. (the "Registrant"), filed with the Securities and Exchange Commission on December 30, 1996, to provide financial statements and financial information with respect to the merged corporation. ITEM 7- FINANCIAL STATEMENTS, PRO-FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Business Acquired Annual Financial Statements: Report of Independent Auditors Audited Balance Sheets as of December 31, 1994 and 1995 Audited Statements of Operations for the Years Ended December 31, 1994 and 1995 Audited Statements of Changes in Stockholders Equity for the Years Ended December 31, 1994 and 1995 Audited Statements of Cash Flows for the Years Ended December 31, 1994 and 1995 Notes to Audited Financial Statements Interim Financial Statements (unaudited): Balance Sheet as of September 30, 1996 Statements of Operations for the nine months ended September 30, 1995 and 1996 Statements of Cash Flows for the nine months ended September 30, 1995 and 1996 Notes to Financial Statements (b) Unaudited Pro Forma Financial Information Pro Forma Combined Balance Sheet as of September 30, 1996 Pro Forma Combined Statement of Operations for the Year Ended December 31, 1995 Pro Forma Combined Statement of Operations for the Nine Months Ended September 30, 1996 Notes to Pro Forma Combined Financial Statements (c) Exhibits NPC ENERGY CORP. December 31, 1995 and 1994 FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS CONTENTS REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FINANCIAL STATEMENTS BALANCE SHEETS STATEMENTS OF OPERATIONS STATEMENT OF CHANGES IN EQUITY STATEMENTS OF CASH FLOWS NOTES TO FINANCIAL STATEMENTS REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors NPC Energy Corp. We have audited the accompanying balance sheets of NPC Energy Corp. as of December 31, 1995 and 1994, and the related statements of operations, changes in equity and cash flows for the years 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 audits. We conducted our audits 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 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 audits provide 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 NPC Energy Corp. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. GRANT THORNTON LLP /s/ Grant Thorton LLP Wichita, Kansas March 8, 1996 (except for Note I, as to which the date is December 13, 1996) NPC Energy Corp. BALANCE SHEETS December 31, ASSETS 1995 1994 ----------- ----------- CURRENT ASSETS Cash and cash equivalents $ 716,815 $ 275,915 Accounts receivable from affiliate 198,042 277,866 Refundable income taxes 92,922 25,000 --------- --------- Total current assets 1,007,779 578,781 OIL AND GAS PROPERTIES, NET, USING THE SUCCESSFUL EFFORTS METHOD OF ACCOUNTING 1,867,003 2,318,608 OTHER ASSETS 2,362 3,251 --------- --------- $2,877,144 $2,900,640 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable (including $232,414 in 1995 and $207,106 in 1994 to affiliates) $ 237,790 $ 259,570 Current portion of long-term debt 331,080 331,080 --------- --------- Total current liabilities 568,870 590,650 LONG-TERM LIABILITIES Long-term debt 385,089 882,869 Deferred income taxes payable 432,000 340,853 --------- --------- 817,089 1,223,722 STOCKHOLDERS' EQUITY Common stock, $.01 par value, authorized, 20,000,000 shares; issued and outstand- inrg, 800,000 shares 8,000 8,000 Preferred stock, $.01 par value, authorized, 1,000,000 shares; issued and outstanding, none - - Paid-in capital 1,544,292 1,544,292 Accumulated deficit (61,107) (466,024) --------- --------- 1,491,185 1,086,268 --------- --------- $2,877,144 $2,900,640 ========= ========= The accompanying notes are an integral part of these statements. NPC Energy Corp. STATEMENTS OF OPERATIONS Year ended December 31, 1995 1994 --------- --------- Revenues Oil and gas sales $1,532,813 $1,848,678 Gain on sale of oil and gas properties 629,165 48,669 Litigation proceeds - 185,663 Other 18,697 10,246 --------- --------- 2,180,675 2,093,256 Expenses Lease operating expenses 1,003,785 1,259,851 Depreciation, depletion and amortization 276,952 510,002 General and administrative expense incurred with affiliate 126,000 109,382 Other general and administrative expenses 113,580 66,838 Interest expense 100,216 110,992 --------- --------- 1,620,533 2,057,065 Earnings before income taxes 560,142 36,191 Income taxes 155,225 340,853 --------- --------- NET EARNINGS (LOSS) $ 404,917 $ (304,662) ========= ========= Earnings per common share $.51 ==== PRO FORMA INFORMATION Historical earnings before income taxes $ 36,191 Pro forma income taxes 13,934 --------- Pro forma net earnings $ 22,257 ========= Pro forma earnings per common share $.03 ==== The accompanying notes are an integral part of these statements. NPC Energy Corp. STATEMENTS OF CHANGES IN EQUITY Owners' Common Paid-in Accumulated Total equity stock capital deficit equity ------ ------ ------- ------- ------ Balance, January 1, 1994 $1,295,587 $ - $ - $ - $1,295,587 Contributions 150,212 - - - 150,212 Distributions (54,869) - - - (54,869) Net earnings prior to con- version date 161,362 - - - 161,362 --------- ----- --------- -------- --------- Balance, August 1, 1994 1,552,292 - - - 1,552,292 Conversion to corporation (issued 800,000 shares) (1,552,292) 8,000 1,544,292 - - Net loss after conversion date - - - (466,024) (466,024) -------- ----- --------- -------- --------- Balance, December 31, 1994 $ - 8,000 1,544,292 (466,024 1,086,268 ======== Net earnings for the year - - 404,917 404,917 ----- --------- ------- --------- Balance, December 31, 1995 $8,000 $1,544,292 $(61,107) $1,491,185 ===== ========= ======= =========
The accompanying notes are an integral part of these statements. NPC Energy Corp. STATEMENTS OF CASH FLOWS Year ended December 31, Increase (decrease) in cash and cash equivalents 1995 1994 -------- -------- Cash flows from operating activities Net earnings (loss) $ 404,917 $ (304,662) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities Depreciation, depletion and amortization 276,952 510,002 Deferred income tax 91,147 340,853 Gain on sale of oil and gas properties (629,165) (48,669) Decrease in accounts receivable 79,824 136,775 Increase in refundable income taxes (67,922) (25,000 (Increase) decrease in other assets 889 (3,251) Decrease in accounts payable (21,780) (10,302) -------- -------- Net cash provided by operating activities 134,862 595,746 ======== ======== Cash flows from investing activities Capital expenditures (201,145) (267,333) Proceeds from sale of oil and gas properties 1,004,963 126,032 --------- -------- Net cash provided by (used in) investing activities 803,818 (141,301) ======== ======== Cash flows from financing activities Contributions from owners - 150,212 Distributions to owners - (54,869) Repayments of long-term debt (497,780) (315,222) -------- -------- Net cash used in financing activities (497,780) (219,879) ======== ======== Net increase in cash and cash equivalents 440,900 234,566 Cash and cash equivalents at beginning of year 275,915 41,349 -------- -------- Cash and cash equivalents at end of year $ 716,815 $ 275,915 ========= ========= Supplemental disclosures of cash flow information Cash paid during the year for Interest $ 100,216 $ 110,992 Income taxes 132,000 25,000 The accompanying notes are an integral part of these statements. NPC Energy Corp. NOTES TO FINANCIAL STATEMENTS December 31, 1995 and 1994 NOTE A - SUMMARY OF ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows. 1. Formation and nature of business On August 5, 1994, NPC Energy Corp. was incorporated in the State of Oklahoma. for purposes of exchanging its stock for all the assets and liabilities of ten limited partnerships and certain oil and gas assets and liabilities of Bison Energy Corp. The ten partnerships were formed pursuant to the Limited Partnership Acts of the States of Minnesota and Kansas to engage in all phases of the oil and gas industry, primarily in the south central region of the United States. Effective August 1, 1994, the Company exchanged 800,000 shares of its common stock for the transferred assets and liabilities. This transaction was accounted for similar to a pooling of interests due to common ownership between the partnerships and the other oil and gas assets and liabilities of Bison Energy Corp. The statement of operations for 1994 includes the combined operations of the ten partnerships and the direct revenues, direct operating expenses and interest expense associated with liabilities assumed of certain oil and gas assets and liabilities of Bison Energy Corp. for the period from January 1, 1994 through July 31, 1994. No allocation of general and administrative expenses was made by Bison Energy Corp. Oil and gas sales comprise the majority of the Company's operating revenues which could be adversely affected by a decrease in the price received for a barrel of oil or a MCF of natural gas. In addition, the availability of a ready market for the Company's oil and gas depends on numerous factors beyond its control, including the demand for and the supply of oil and gas, the proximity of the Company's natural gas reserves to pipelines, the capacity of such pipelines, fluctuations in production and seasonal demand, the effects of inclement weather and governmental regulation. New gas wells may be shut-in for the lack of a market until a gas pipeline or gathering system with available capacity is extended into the area. New oil wells may have production curtailed until production facilities and delivery arrangements are acquired or develop. Finally, the Company's properties may be susceptible to hydrocarbon drainage from production by other operators on adjacent properties. 2. Oil and gas properties The Company follows the successful efforts method of accounting for its oil and gas activities. In accordance with this method, the acquisition costs of undeveloped leaseholds are capitalized. Exploration costs, including delay rentals, are expensed. Development costs related to drilling and equipping development wells are capitalized. Costs of drilling and equipping exploratory oil and gas wells are capitalized pending determination of quantities of proved reserves. If proved reserves are not found, such costs are charged to expense. Costs of surrendered, expired and abandoned leases are charged to expense. Depreciation and depletion of proved properties is computed on individual properties by the unit-of-production method based on periodic estimates of oil and gas reserves as determined by the Company's independent petroleum reserve engineer. The Company charges maintenance and repairs directly to expense while betterments and renewals are capitalized in the property accounts. Undeveloped leaseholds and proved properties are assessed annually to determine whether they are impaired and appropriate valuation allowances are established when necessary. When property is retired or otherwise disposed of, the cost and applicable accumulated depreciation, depletion and valuation allowances are removed from the respective accounts and the resulting gain or loss is recorded in operations. 3. Income taxes Prior to August 1, 1994, income taxes on earnings of the Partnerships and certain oil and gas assets and liabilities of Bison Energy Corp. were payable by the partners individually and Bison Energy Corp., respectively, and, accordingly, are not reflected in the historical financial statements. The Company uses the liability method of accounting for income taxes. The liability method provides that deferred tax assets and liabilities are determined based on the difference between the tax basis of the assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets or liabilities at the end of each period are determined using the currently enacted tax rate expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be settled or realized. 4. Statements of cash flows For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. 5. Earnings per share Earnings per common share for the year ended December 31, 1995 are based upon the weighted average number of shares outstanding of 800,000 for the year. Earnings per share for 1994 are not applicable as NPC Energy Corp. was not incorporated until August 5, 1994. Pro forma earnings per share are based on the 800,000 shares that would have been outstanding had the partners been shareholders during all of 1994. 6. Use of estimates In preparing the Company's financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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. NOTE B - OIL AND GAS PROPERTIES A summary of oil and gas properties is as follows at December 31: 1995 1994 --------- --------- Proved properties, at cost Leasehold costs $2,218,088 $2,605,177 Intangible drilling and development costs 2,362,211 5,601,492 Lease and well equipment 2,090,535 3,839,247 --------- ---------- Total oil and gas properties, at cost 6,670,834 12,045,916 Accumulated depreciation, depletion and valuation allowances Leasehold costs 1,154,851 1,377,138 Intangible drilling and development costs 2,150,212 5,312,440 Lease and well equipment 1,498,768 3,037,730 --------- --------- Total accumulated depreciation, depletion and valuation allowances 4,803,831 9,727,308 --------- --------- Net oil and gas properties $1,867,003 $2,318,608 ========= ========= NOTE C - LITIGATION Several partnerships were plaintiffs in a lawsuit asserting that the defendants wrongfully reduced the prices paid for gas under two contracts and, subsequently, terminated the two contracts. During 1994 a settlement of $185,663 was received by the partnerships. NOTE D - LONG-TERM DEBT Long-term debt consists of a 9.5% note payable to a bank which is payable in monthly installments of $27,590 plus interest and is due August 31, 1998. The note is collateralized by certain oil and gas properties. Maturities of the note payable for the years following December 31, 1995 are $331,080 in 1996, $331,080 in 1997 and $54,009 in 1998. Based on the borrowing rates currently available to the Company for bank loans with similar maturities and terms, the fair value of long-term debt is considered equal to the carrying amount. The Company also has a revolving note payable to a bank for working capital purposes with a maximum balance of $500,000 due August 31, 1996 (renewed July 31, 1995). It bears interest at .5% above prime (prime was 9.5% at December 31, 1995) which is payable monthly, is collateralized by certain oil and gas properties and is guaranteed by Bison Energy Corp., the majority stockholder of the Company. The revolving note did not have a balance drawn at December 31, 1995 or 1994. The above note agreements contain covenants which provide for, among other things, restrictions on additional indebtedness, dividends, and asset acquisitions and sales. NOTE E - OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCING ACTIVITIES Costs incurred (whether capitalized or charged to expense and all in the United States) in oil and gas acquisition and development activities during the years ended December 31 are as follows: 1995 1994 -------- -------- Property acquisition costs $ 18,603 $ 73,091 Development costs 182,542 194,242 NOTE F - INCOME TAXES As described in Note A1, the assets of the Company were transferred from various partnerships effective August 1, 1994. Accordingly, a charge of $405,600 was recorded for the deferred tax liability related to temporary differences existing at the date of transfer. The provision for income taxes consists of the following components for the year ended December 31: 1995 1994 -------- -------- Current $ 64,078 $ - Deferred 91,147 (64,747) Change in tax status of entity - 405,600 -------- -------- $ 155,225 $ 340,853 ======== ======== A reconciliation of income tax expense computed at the federal statutory rate of 34% to income taxes is as follows for the years ended December 31: 1995 1994 -------- -------- Income taxes at statutory rate $ 190,448 $ 12,305 Difference due to progressive tax rates (6,488) (6,876) Statutory depletion in excess of basis (39,648) - Partnership earnings taxed at the partner level - (54,863) Deferred income taxes related to temporary differences existing at date of conversion to corporation - 405,600 State income taxes and other 10,913 (15,313) -------- -------- $ 155,225 $ 340,853 ======== ======== The source and tax effects of temporary differences are as follows at December 31: 1995 1994 -------- -------- Deferred income tax assets Net operating loss carryforwards $ - $ 86,224 Statutory depletion carryforwards - 25,352 -------- -------- - 111,576 Deferred income tax liability Oil and gas properties 432,000 452,429 -------- -------- Net deferred income tax liability $ 432,000 $ 340,853 ======== ======== A pro forma adjustment for income taxes is shown on the statements of operations for the year ended December 31, 1994. Income taxes on the operations of the partnerships are a direct responsibility of the partners individually. The pro forma adjustments reflect a provision for income taxes as though the operations were conducted by a taxpaying entity at an effective combined federal and state rate of 38.5%. NOTE G - RELATED PARTIES The Company shares corporate facilities, personnel and other overhead costs with its majority stockholder, Bison Energy Corp. Total costs incurred to Bison Energy Corp. were $126,000 and $109,382 for the years ended December 31, 1995 and 1994, respectively. In addition, a substantial number of the Company's oil and gas properties are operated by Bison Production Company (Bison), a wholly-owned subsidiary of Bison Energy Corp. for which Bison receives an overhead fee ranging from $150 to $570 per month on each well . Bison collects all of the oil and gas revenue and pays all of the lease operating expenses for all leases it operates and all nonoperated leases ownedby the Company. Bison then remits a net check each month to the Company. No overhead fee is charged for the nonoperated leases. NOTE H - STOCKHOLDERS' EQUITY On October 26, 1995, the Company's Certificate of Incorporation was amended with the following provisions: 1. Increase the number of common stock authorized from 100,000 shares to 20,000,000 shares. 2. Decrease the common stock par value from $.10 per share to $.01 per share. 3. Authorized 1,000,000 preferred shares of stock with $.01 par value per share with rights and preferences to be determined by the Board of Directors when issued. 4. Each share of $.10 par value common stock previously issued and outstanding prior to this amendment was automatically reclassified and changed into sixteen fully paid and nonassessable shares of common stock with $.01 par value. All share and per share data amounts have been retroactively restated to reflect the above changes. NOTE I - PUBLIC FILING On November 13, 1995, the Company filed a Form S-4 registration statement with the Securities and Exchange Commission (SEC) in which the Company proposed to register the distribution of shares of common stock (see Note A1) to the limited partnerships which would result in the Company being a publicly-traded entity. In connection with the review of the registration statement, the SEC raised certain questions concerning the availability of an exemption under Section 4(2) of the Securities Act of 1933, as amended, for the issuance of the common stock to the limited partnerships. The Company has responded to the SEC's questions, but at this date the issue is unresolved. In December 1996, the Company executed a merger agreement pursuant to which the Company will merge with and into Middle Bay Oil Company and as part of the merger, the limited partnerships will receive a cash payment for the common stock owned by them. If the merger is consummated, the Company will withdraw its Form S-4 registration statement. NOTE J - OIL AND GAS RESERVE INFORMATION (UNAUDITED) The following schedules present (1) the Company's estimates of its proved oil and gas reserves, (2) the standardized measure of discounted future net cash flows from the production of proved oil and gas reserves and (3) a summary of the change in discounted future net cash flows. All properties are located in the United States. These estimates have been prepared based on the reports of independent registered petroleum engineers for each of the two years ended December 31, 1995 and 1994. The Company emphasizes that these types of estimates are inherently imprecise. Estimates of reserves inevitably change over time as additional data become available and are taken into account. The magnitude of these changes can be substantial. Moreover, the standardized measure of discounted future net cash flows should not be construed as the market value of the Company's reserves, as such an estimate should take into account the probability of future oil and gas recoveries in excess of proved resources, anticipated future prices of oil and gas and changes in the related development and production costs, and risks associated with future production of proved reserves. Proved reserves are estimated quantities of oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs. Proved developed reserves are those reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. The estimates of proved developed reserves include reserves estimated to be recoverable from existing wells after the incurrence of completion costs. In accordance with the provisions of Statement of Financial Accounting Standards No. 69 ("SFAS 69"), estimates of future cash flows were based upon existing economic and operating conditions. Accordingly, current prices, except for price escalations provided for in gas contracts, were used in estimating future net revenues. Estimates of operating costs, production taxes and development costs were based on current costs. SFAS 69 requires the inclusion of a provision for estimated future income taxes computed by applying the current statutory tax rate to estimated future cash flows before income taxes, adjusted for book/tax differences in the recognition of revenues and expenses relating to the development and production of proved reserves. RESERVE QUANTITY INFORMATION (Unaudited) 1995 1994 ---------------------- ---------------------- Oil Gas Oil Gas (bbls) (mcf) (bbls) (mcf) ------- --------- ------- --------- Proved developed and undeveloped reserves, beginning of year 516,000 4,600,000 434,000 4,558,000 Revisions of previous estimates 40,000 (93,000) 136,000 283,000 Extensions and discoveries - - 17,000 204,000 Purchase of minerals in place 13,000 - - - Sales of minerals in place (44,000) (573,000) - - Production (56,000) (351,000) (71,000) (445,000) ------- --------- ------- --------- Proved developed and undeveloped reserves, end of year 469,000 3,583,000 516,000 4,600,000 ======= ========= ======= ========= Proved developed reserves: Beginning of year 370,000 3,353,000 305,000 3,545,000 ======= ========= ======= ========= End of year 352,000 2,648,000 370,000 3,353,000 ======= ========= ======= =========
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED RESERVES (Unaudited) December 31, -------------------------- 1995 1994 -------- -------- Future production revenues $15,413,000 $16,774,000 Future development costs (842,000) (1,110,000) Future production costs (7,195,000) (7,684,000) ---------- ---------- Future net cash inflows before income tax 7,376,000 7,980,000 Future income taxes (1,815,000) (1,801,000) ---------- ---------- Future net cash flows 5,561,000 6,179,000 Effect of 10% discount (2,264,000) (2,472,000) ---------- ---------- Standardized measure of discounted net cash flow $ 3,297,000 $ 3,707,000 ========== ========== SUMMARY OF CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM PROVED RESERVES (Unaudited) Year ended December 31, -------------------------- 1995 1994 -------- -------- Amount at beginning of year $3,707,000 $5,082,000 Changes in sales price and production cost 444,000 282,000 Revisions of previous estimates, including quantities, production rates (timing) and other (302,000) (628,000) Sales of oil and gas, net of production costs and taxes (545,000) (589,000) Changes in estimated development costs 175,000 (195,000) Sales of minerals in place (715,000) - Purchase of minerals in place 50,000 - Accretion of discount 479,000 508,000 Net change in income taxes 4,000 (1,080,000) Extensions and discoveries - 327,000 --------- --------- (410,000) (1,375,000) --------- --------- Amount at end of year $3,297,000 $3,707,000 ========= ========= NPC ENERGY CORP. BALANCE SHEET (Unaudited) (Audited) As Of As Of 9/30/96 12/31/95 ---------- ---------- CURRENT ASSETS Cash and cash equivalents $ 706,287 $ 716,815 Accounts receivable from affiliate 225,182 198,042 Refundable income taxes - 92,922 --------- --------- Total Current Assets 931,469 1,007,779 Property (At cost using successful efforts method) Oil and gas properties 6,762,331 6,670,834 --------- --------- 6,762,331 6,670,834 Less:Accumulated Depletion and Depreciation (4,925,113) (4,803,831) --------- --------- 1,837,218 1,867,003 Other Assets 2,363 2,363 --------- --------- $2,771,050 $2,877,145 ========= ========= CURRENT LIABILITIES Accounts payable $ 160,316 $ 237,790 Current portion of long-term debt 331,080 331,080 Income tax payable 21,888 - --------- --------- Total Current Liabilities 513,284 568,870 Long-term debt 136,779 385,090 Deferred income tax 432,000 432,000 STOCKHOLDERS' EQUITY Common stock, $0.01 par value 8,000 8,000 Paid-in capital 1,544,292 1,544,292 Retained earnings (deficit) 136,695 (61,107) --------- --------- Total Stockholders' Equity 1,688,987 1,491,185 $2,771,050 $2,877,145 ========= ========= See accompanying Notes to Financial Statements. NPC ENERGY CORP STATEMENTS OF OPERATIONS (UNAUDITED) Nine Months Nine Months Ended Ended 9/30/96 9/30/95 --------- --------- Oil and gas sales $1,066,973 $1,241,612 Marketing and tax expense 53,978 69,000 --------- --------- 1,012,995 1,172,612 Operating expense 584,545 675,456 Depr and depl 121,282 235,530 --------- --------- 307,168 261,626 Intangible drilling costs - 17,569 --------- --------- 307,168 244,057 Other Income: Gain on sale of assets 103,995 64,500 Other 22,165 8,353 --------- --------- 126,160 72,853 Other Expense Administration department 137,824 177,154 Interest expense 43,814 80,101 --------- --------- 181,638 257,255 Operating profit 251,690 59,655 Pretax Profit 251,690 59,655 Provision for income taxes 53,888 21,999 --------- --------- Net income $ 197,802 $ 37,656 ========= ========= Net income per common share $ 0.25 $ 0.05 ======== ======== See accompanying Notes to Financial Statements. NPC ENERGY CORP. STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Nine Months Ended Ended 9/30/96 9/30/95 --------- --------- Cash provided by operations: After tax profit $ 197,802 $ 37,656 Items included in after tax profit which do not affect cash: Depreciation and depletion 121,282 235,530 Deferred income tax - 22,000 Gain on sale of assets (103,995) (64,500) --------- --------- 215,089 230,686 Deduct current removals of changes in working capital: Accounts receivable (27,140) 55,613 Accounts payable (77,474) (126,660) Prepaid expenses 92,922 - Income taxes payable 21,888 - --------- --------- 10,196 (71,047) Cash used for investment activities: Change in property and equipment 12,498 84,155 Change in other assets - - --------- --------- 12,498 84,155 --------- --------- Cash generated before financing 237,783 243,794 Cash used for financing activities: Change in debt (248,310) (248,310) Dividends - - --------- --------- (248,310) (248,310) --------- --------- Change in cash and temporary cash investments $ (10,527) $ (4,516) ========= ========= See accompanying Notes to Financial Statements. NPC ENERGY CORP. NOTES TO FINANCIAL STATEMENTS September 30, 1995 and 1996 Basis of Presentation In management's opinion, the accompanying financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position of the Company as of September 30, 1996 and the results of operations and cash flows for the nine months ended September 30, 1996 and 1995. The accompanying financial statements have not been audited by an independent accountant. Certain information and disclosures normally included in annual audited financial statements prepared in accordance with generally accepted accounting principles have been omitted, although the Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's Annual Report for the year ended December 31, 1995. PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS The accompanying pro forma combined condensed financial statements (the "pro forma financial statements")assume the merger is accounted for using the purchase method of accounting. The pro forma financial statements are based on the historical financial statements of Middle Bay Oil Company, Inc. (MBOC) and NPC Energy Corp. (NPC). The Pro Forma Combined Condensed Balance Sheet as of September 30, 1996 assumes the merger had been consummated on that date. The Pro Forma Combined Condensed Statements of Operations for the nine months ended September 30, 1996 and the year ended December 31, 1995 have been prepared assuming the merger had been consummated on January 1, 1995. The pro forma adjustments are based upon available financial information and assumptions that management of MBOC believe are reasonable. The pro forma financial statements do not purport to represent the financial position or results of operations which would have occurred had such transactions been consummated on the dates indicated or MBOC's financial position or results of operations for any future date or period. These pro forma financial statements and note thereto should be read in conjunction with the historical financial statements and notes thereto described above. MIDDLE BAY OIL COMPANY, INC. PRO FORMA COMBINED CONDENSED BALANCE SHEET September 30, 1996 (Unaudited) Pro Forma MBOC NPC Adjustments Pro Forma Historical Historical for the Merger Combined ---------- ---------- -------------- ----------- ASSETS Current assets: Cash $ 327,007 $ 706,287 $ (226,400) (5)(6) $ 806,894 (706,287) (7) 706,287 Notes and accounts receivable trade 829,723 225,182 (225,182) (7) 1,054,905 225,182 Other current assets 8,100 - 8,100 --------- --------- --------- --------- Total current assets 1,164,830 931,469 (226,400) 1,869,899 Non-current assets 137,518 - 137,518 Investment in NPC Energy Corp. (3,228,400) (7) - 3,228,400 (6) Property and equipment (at cost): Oil and gas properties 12,399,339 6,762,331 (6,762,331) (7) 16,428,833 4,029,494 Other properties 361,461 - 361,461 Accumulated depletion and deprec. (4,773,665) (4,925,113) 4,925,113 (4,773,665) ---------- --------- --------- --------- Property and equipment, net 7,987,135 1,837,218 2,192,276 12,016,629 Other assets 2,956 2,363 (2,363) (7) 3,586 630 Total assets $9,292,439 $2,771,050 $1,964,143 $14,027,632 ========= ========= ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 435,600 $ 331,080 $ (331,080) (7) $ 766,680 331,080 Accounts payable and accrued expenses 278,552 182,204 (182,204) (7) 147,204 35,000 (6) 460,756 --------- --------- --------- ---------- Total current liabilities 714,152 513,284 - 1,227,436 Long-term debt 4,848,310 136,779 (136,779) (7) 4,985,089 136,779 Deferred income taxes 496 432,000 (432,000) (7) 1,118,626 1,118,130 Redeemable common stock 528,183 - 528,183 Stockholders' Equity Preferred stock - - 3,333 (5)(6) 3,333 Common stock 26,378 8,000 11,240 (5)(6) 37,618 (8,000) (6) Paid-in capital 3,565,499 1,544,292 2,952,427 (5)(6) 6,517,926 (1,544,292) (6) Treasury stock (68,040) - (68,040) Retained earnings (deficit) (322,539) 136,695 (136,695) (7) (322,539) --------- --------- --------- ---------- Total stockholders' equity 3,201,298 1,688,987 1,278,013 6,168,298 Total liabilities and stockholders' equity $9,292,439 $2,771,050 $1,964,143 $14,027,632 ========= ========= ========= ========== 562,000 (5) Shares of common stock outstanding 1,297,144 800,000 (800,000) (5) 1,859,144 ========= ======= ======= =========
See accompanying notes to pro forma combined condensed financial statements. MIDDLE BAY OIL COMPANY, INC. PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS Twelve months ended December 31, 1995 (Unaudited) Pro Forma MBOC NPC Adjustments Pro Forma Historical Historical for the Merger Combined ---------- ---------- -------------- ----------- Revenues: Oil and gas sales $3,238,280 $1,532,813 $ - $4,771,093 Gain on sale of properties 125,550 629,165 754,715 Other income 174,816 18,697 193,513 --------- --------- --------- --------- 3,538,646 2,180,675 - 5,719,321 Costs and expenses: Lease operating and production taxes 1,436,869 1,003,785 2,440,654 Depletion, depreciation and amortization 1,221,263 276,952 160,225 (1) 1,658,440 Abandonment expense 83,107 - 83,107 Interest expense 520,419 100,216 620,635 General and administrative 698,194 239,580 937,774 --------- --------- --------- --------- 3,959,852 1,620,533 160,225 5,740,610 Income (loss) before income taxes (421,206) 560,142 (160,225) (21,289) Provision for income taxes (benefit) (90,153) 155,225 (66,069) (3) (997) --------- --------- --------- --------- Net income (loss) (331,053) 404,917 (94,156) (20,292) Preferred stock dividend - - 80,000 (2) 80,000 --------- --------- --------- --------- Net income (loss) applicable to common stock $ (331,053) $ 404,917 $ (174,157) $ (100,293) ========= ========= ========= ========= Income (loss) per share $ (0.25) $ 0.51 $ (0.05) ========= ========= ========= Weighted average number of common and (800,000) common equivalent shares outstanding 1,318,917 800,000 562,000 (4) 1,880,917 ========= ========= ========= =========
See accompanying notes to pro forma combined condensed financial statements. MIDDLE BAY OIL COMPANY, INC. PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS Nine months ended September 30, 1996 (Unaudited) Pro Forma MBOC NPC Adjustments Pro Forma Historical Historical for the Merger Combined ---------- ---------- -------------- ----------- Revenues: Oil and gas sales $3,186,255 $1,066,973 $ - $4,253,228 Gain on sale of properties 37,814 103,995 141,809 Other income 362,069 22,165 384,234 --------- --------- --------- --------- 3,586,138 1,193,133 - 4,779,271 Costs and expenses: Lease operating and production taxes 1,104,066 638,523 1,742,589 Depletion, depreciation and amortization 901,995 121,282 138,869 (1) 1,162,146 Abandonment expense 249,568 - 249,568 Interest expense 375,799 43,814 419,613 General and administrative 511,048 137,824 648,872 --------- --------- --------- --------- 3,142,476 941,443 138,869 4,222,788 Income (loss) before income taxes 443,662 251,690 (138,869) 556,483 Provision for income taxes - 53,888 (60,453) (3) (6,565) --------- --------- --------- --------- Net income (loss) 443,662 197,802 (78,416) 563,048 Preferred stock dividend - - 60,000 (2) 60,000 --------- --------- --------- --------- Net income (loss)applicable to common stock $ 443,662 $ 197,802 $ (138,416) $ 503,048 ========= ========= ========= ========= Income (loss) per share $ 0.34 $ 0.25 $ 0.27 ========= ========= ========= Weighted average number of common and (800,000) common equivalent shares outstanding 1,308,768 800,000 562,000 (4) 1,870,768 ========= ========= ========= =========
See accompanying notes to pro forma combined condensed financial statements. MIDDLE BAY OIL COMPANY, INC. NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited) Note A - Pro Forma Adjustments for the Merger On December 18, 1996, MBOC and NPC entered into the Merger Agreement whereby NPC will merge into MBOC. The merger will be accounted for using the purchase method of accounting. In completing the merger, MBOC will issue 562,000 shares of MBOC common stock and $1,226,400 in cash in exchange for all of the issued and outstanding NPC common stock. The merger will be accounted for as a purchase of NPC by MBOC and as a result of the purchase method of accounting, MBOC's cost of acquiring NPC will be allocated to the assets and liabilities acquired based on estimated fair values. MBOC has incurred approximately $35,000 in legal and accounting expenses related to the merger. The direct costs of the merger will be accrued and included as a cost of the merger. The accompanying Pro Forma Combined Condensed Statements of Operations reflect the following adjustments for the merger: (1) To adjust depletion, depreciation and amortization to reflect MBOC's purchase price allocated to the property and equipment using the unit of production method utilized by MBOC. (2) To record the preferred stock dividends paid on the preferred stock issued for the cash portion of the purchase price. (3) To adjust the provision for income taxes for the change in financial taxable income as a result of the entries (1) and (2). (4) To reflect the issuance of 166,667 shares of Series A Preferred Stock and 562,000 shares of MBOC Common Stock. Pro forma net income (loss) per common share information is computed by dividing net income (loss), adjusted for the preferred stock dividend requirement of $80,000 for the year ended December 31, 1995 and $60,000 for the nine months ended September 30, 1996 by the pro forma weighted average common and common equivalent shares outstanding. Shares issuable upon exercise of options and upon the conversion of preferred stock are included in the computations of the pro forma income per common and common equivalent share if the effect is dilutive. The accompanying Pro Forma Combined Condensed Balance Sheet as of September 30, 1996 has been prepared as if the merger had occurred on that date and includes the following adjustments: (5) To record the issuance of the 166,667 shares of Series A Preferred Stock, 562,000 shares of MBOC Common Stock and $226,400 in cash for an aggregate consideration of $3,193,400. On a pro forma basis, there would be 1,859,144 shares of MBOC Common Stock and 166,667 shares of Series A Preferred Stock outstanding as of September 30, 1996. (6) To record MBOC's cost of acquiring NPC (in thousands): Estimated fair value of 562,000 shares of MBOC Common Stock issued $1,967 Estimated fair value of 166,667 shares of MBOC Series A Preferred Stock 1,000 Cash on hand 226 Other legal and accounting expenses 35 ----- $3,228 ===== The fair value of the securities to be issued in connection with the merger has been calculated assuming the price of MBOC common stock is $3.50 per share. (7) To adjusts the assets and liabilities under the purchase method of accounting based on MBOC's purchase price. MBOC's purchase price has been allocated to the assets and liabilities of NPC based on the preliminary estimates of fair values with the remaining purchase price allocated the proved oil and gas properties. No goodwill has been recorded in this transaction. The information presented herein may differ from the actual purchase price allocation. The preliminary allocation of the purchase price included in the pro forma balance sheet is summarized as follows: (in thousands) Working capital assumed, excluding current portion of long-term debt $ 785 Oil and gas properties: Proved 3,804 Unproved 225 Long-term debt assumed (468) Deferred income taxes (1,118) ----- $3,228 ===== Note C - Pro Forma Combined Supplemental Oil and Gas Reserve and Standardized Measure Information The following is a summary of the pro forma combined quantities of proved reserves prepared by combining the historical information of MBOC and NPC, derived from estimates prepared by MBOC's and NPC's respective independent engineers. See the historical financial statements of NPC contained elsewhere herein. Oil Gas (Mbbl) (Mmcf) ---- ---- December 31, 1994 1,057 9,373 Purchases of reserves in place 411 2,340 Sales of reserves in place (101) (1,003) Extension and discoveries - - Revisions of previous estimates 40 512 Production (163) (1,268) ----- ----- December 31, 1995 1,244 9,954 ===== ===== Proved developed reserves: December 31, 1994 912 8,126 December 31, 1995 1,122 8,955 The following is a summary of the pro forma combined standardized measure of discounted net cash flows related to the proved crude oil and natural gas reserves of MBOC and NPC. For these calculations estimated cash flows from the estimated future production of proved reserves were computed using crude oil and natural gas prices as of the end of each period presented. Future development and production costs attributable to the proved reserves were estimated assuming that existing conditions would continue over the economic lives of the individual leases and costs were not escalated for the future. Estimated future income tax expenses were calculated by applying future statutory tax rates to the estimated future pretax net cash flows related to the proved crude oil and natural gas reserves, less the tax basis of the properties involved. The pro forma combined standardized measure of discounted future net cash flows relating to proved crude oil and natural gas reserves is summarized as follows (in thousands): December 31 1995 -------- Future cash inflows $ 41,605 Future production and development costs (18,897) Future income tax expense (3,524) ------- Future net cash flows 19,184 10% annual discount for timing (6,637) ------- Standardized measure of discounted future net cash flows $ 12,547 ======= The following are the principal sources of change in the pro forma combined standardized measure of discounted future net cash flows (in thousands): Year ended December 31, 1995 -------- Balance at beginning of year $ 9,492 Sales of oil and gas produced, net of costs (2,346) Net changes in prices and production costs 2,056 Net change in estimated development costs 175 Purchases of reserves in place 3,252 Extensions and discoveries, net of costs - Revisions of previous quantity estimates 520 Sales of reserves in place (1,193) Accretion of discount 1,120 Net change in income taxes (529) ------- Balance at end of year $ 12,547 ======= SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MIDDLE BAY OIL COMPANY, INC. (Registrant) Date: January 14, 1997 By: /s/ Frank C. Turner, II ------------------------------- Frank C. Turner II Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----