-----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, RJftU/9EzLekrVdTvz1v23uUDfmOBrdfFVeLgIjeQhpl3GewVxo25f7CSCark6pC Qw/Q6QKVUeZjU1Kn1tG9Dg== 0000945764-98-000009.txt : 19980121 0000945764-98-000009.hdr.sgml : 19980121 ACCESSION NUMBER: 0000945764-98-000009 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980120 ITEM INFORMATION: FILED AS OF DATE: 19980120 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DENBURY RESOURCES INC CENTRAL INDEX KEY: 0000945764 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-12935 FILM NUMBER: 98509146 BUSINESS ADDRESS: STREET 1: 17304 PRESTON RD STREET 2: STE 200 CITY: DALLAS STATE: TX ZIP: 75252 BUSINESS PHONE: 2147133000 MAIL ADDRESS: STREET 1: 17304 PRESTON RD STREET 2: STE 200 CITY: DALLAS STATE: TX ZIP: 75252 FORMER COMPANY: FORMER CONFORMED NAME: NEWSCOPE RESOURCES LTD DATE OF NAME CHANGE: 19950627 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 1 to FORM 8-K Filed on December 8, 1997 Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event December 8, 1997 DENBURY RESOURCES INC. (Exact name of Registrant as specified in its charter) Canada (State or other jurisdiction of incorporation or organization) 33-93722 Not applicable (Commission File (I.R.S. Employer Number) Identification No.) 17304 Preston Road Suite 200 Dallas, TX 75252 (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code: (972)713-3000 Denbury Resources Inc. filed an 8-K on December 8, 1997 to report the agreement to acquire oil and gas properties from Chevron U.S.A. Inc. (the "Chevron Acquisition"). Audited statements of revenues and direct operating expenses attributable to the Chevron Acquisition and pro forma results of operations of Denbury Resources Inc. adjusted for this acquisition were not available at that time and are filed herewith. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Audited statements of revenues and direct operating expenses attributable to the Chevron Acquisition for the years ending December 31, 1995 and December 31, 1996 and the nine months ended September 30, 1997. (b) Pro forma results of operations of Denbury Resources Inc. for the year ended December 31, 1996 and nine months ended September 30, 1997 as if the acquisition had occurred at the beginning of each respective period and a pro forma balance sheet as of September 30, 1997. (c) Exhibits: Exhibit No. (23) Consent of Price Waterhouse LLP 2 Item 7 (a) Statement of Revenues and Direct Operating Expenses of Chevron Properties 3 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Denbury Resources Inc. We have audited the accompanying statement of revenues and direct operating expenses of Chevron U.S.A. Inc.'s working interest in the Heidelberg Fields (the "Properties") acquired by Denbury Resources Inc. (the "Company") for each of the two years in the period ended December 31, 1996 and for the nine months ended September 30, 1997. This statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this 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 statement of revenues and direct operating expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and direct operating expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and direct operating expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and direct operating expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the registration statement on Form S-3 of Denbury Resources Inc.) as described in Note 1 and is not intended to be a complete presentation of the Properties' revenues and expenses. In our opinion, the statement of revenues and direct operating expenses referred to above presents fairly, in all material respects, the revenues and direct operating expenses of the Properties described in Note 1 for each of the two years in the period ended December 31, 1996 and for the nine months ended September 30, 1997, in conformity with generally accepted accounting principles. /s/ Price Waterhouse LLP San Francisco, California December 19, 1997 4 Statement of Revenues and Direct Operating Expenses of Properties
Nine Months Year Ended Ended December 31, September 30, ------------------- 1995 1996 1997 ------- --------- -------- (Amounts in thousands) Revenues: Oil, natural gas and related product sales..................... $17,460 $ 23,662 $14,034 Direct operating expenses: Lease operating expense........... 5,825 6,650 5,237 ------- --------- -------- Excess of revenues over direct operating expense.................... $11,635 $ 17,012 $ 8,797 ======= ========= ========
The accompanying notes are an integral part of these statements. 5 NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF PROPERTIES 1. Basis of Presentation Denbury Resources Inc. (the "Company") agreed on November 25, 1997 to acquire Chevron U.S.A. Inc.'s working interest in the Heidelberg Fields for approximately $202 million. The Properties are located in the state of Mississippi. The acquisition closed on December 30, 1997. These acquired Properties will be consolidated in the Company's financial statements effective January 1, 1998. Other owners of working interests in the Properties covered by the acquisition agreement have the preferential right to acquire the Properties, which if exercised could reduce the interest acquired by the Company. 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 Properties acquired because the entire acquisition cost is being assigned to oil and natural gas properties. Accordingly, the statement of revenues and direct operating expenses is presented in lieu of the financial statements required under Rule 3-05 of Securities and Exchange Commission Regulation S-X. The accompanying statement of revenues and direct operating expenses (the "Statement") relates only to the working interest in the Properties acquired and may not be representative of future operations. The Statement includes revenues from natural gas sales and direct operating expenses for each of the periods presented. The Statement does not include federal and state income taxes, interest, depletion, depreciation and amortization or general and administrative expenses because such amounts would not be indicative of those expenses which would be incurred by the Company. Revenues in the Statement are recognized on the entitlement method. The accompanying Statement has been prepared on the accrual basis in accordance with generally accepted accounting principles. Preparation of the Statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Statement and accompanying notes. Actual results could differ from those estimates. 2. Commitments and Contingencies Chevron U.S.A. Inc. is a defendant in numerous lawsuits, including, along with other oil companies, actions challenging oil royalty and severance tax payments based on posted prices. Plaintiffs may seek to recover large and sometimes unspecified amounts, and some matters may remain unresolved for several years. The amount of such future cost is indeterminable. Such liability for events occurring prior to the effective date of the acquisition shall be retained by Chevron U.S.A. Inc. and Chevron U.S.A. Inc. has indemnified the Company for any costs incurred by it in conjunction with these suits. Given the nature of the Properties acquired and as stipulated in the purchase agreement, the Company is subject to loss contingencies, if any, pursuant to existing or expected environmental laws, regulations, and leases covering the acquired Properties. Management does not believe such matters will have a material impact on the Statement. 3. Concentration of Customers During the year ended December 31, 1996 and the nine months ended September 30, 1997, approximately 67% and 31% of the Properties' production was sold to Hunt Refining Company and Southland Oil Company, respectively. During the year ended December 31, 1995, approximately 88% and 10% of the Properties' production was sold to Amerada Hess Corporation and Hunt Refining Company, respectively. While management believes that its relationships with these purchasers is good, any loss of revenue from these purchasers due to nonpayment or late payment by the purchaser would have an adverse effect on the Statement. 6 NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF PROPERTIES -(Continued) 4. Oil and Natural Gas Reserves Information (Unaudited) The Properties' proved oil and natural gas reserves at December 31, 1997, 1996 and 1995 have been estimated by the Company's petroleum consultants, Netherland & Sewell, in accordance with guidelines established by the Securities and Exchange Commission ("SEC"). The December 31, 1997 reserves have been adjusted by production from the Properties to estimate the September 30, 1997 reserves.
Oil Gas Estimated Quantities of Proved Reserves (MBbl) (MMCF) ---------- --------- January 1, 1995 31,331.1 3,303.7 Production....................... 1,321.5 290.6 ---------- --------- December 31, 1995........................ 30,009.6 3,013.1 Production....................... 1,252.0 245.1 ---------- --------- December 31, 1996........................ 28,757.6 2,768.0 Production....................... 793.6 160.1 ---------- --------- September 30, 1997....................... 27,964.0 2,607.9 ========== ========= Proved Developed Reserves: As of January 1, 1995.................... 17,230.8 3,303.7 As of December 31, 1995.................. 15,909.3 3,013.1 As of December 31, 1996.................. 14,657.3 2,768.0 As of September 30, 1997................. 13,863.7 2,607.9
Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Related to Oil and Natural Gas Reserves The standardized measure of discounted future net cash flows ("Standardized Measure") relating to oil and natural gas reserves acquired is calculated in accordance with regulations prescribed by the SEC. The Standardized Measure has been prepared assuming year-end selling prices adjusted for future fixed and determinable price changes, year-end development and production costs and a 10% annual discount rate. The reserves and the related Standardized Measure at September 30, 1997 were adjusted for production during the nine-months ended September 30, 1997 and the years ended December 31, 1996 and 1995, and in addition, the Standardized Measure was also adjusted for price changes to derive reserves and the Standardized Measure as of September 30, 1997, December 31, 1996 and December 31, 1995. The Standardized Measure is not a fair market value of the mineral interests purchased and the Standardized Measure presented for the proved oil and natural gas reserves does not purport to present the fair market value of the oil and natural gas properties. An estimate of such value should consider, among other factors, anticipated future prices of oil and natural gas, the probability of recoveries of existing proved reserves, the value of probable reserves and acreage prospects, and perhaps different discount rates. It should be noted that estimates of reserve quantities are inherently imprecise and subject to substantial revision.
December 31, ------------------ September 30, 1995 1996 1997 --------- ------- ---------- (Amounts in thousands) Future cash inflows......................... $470,689 $613,780 $ 426,489 Future production and development costs...... (201,520) (204,876) (189,243) --------- --------- ---------- Future net cash flows undiscounted........... 269,169 408,904 237,246 10% annual discount for estimated timing of cash flows................................... (142,503) (203,206) (113,931) --------- --------- ---------- Standardized measure of discounted future net cash flows................................... $126,666 $205,698 $ 123,315 ========= ========= ==========
7 NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES OF PROPERTIES -(Continued) The following are principal sources of changes in the standardized measure of discounted future net cash flows:
Nine Months Year Ended Ended December 31, September 30, ----------------- 1995 1996 1997 ------- ------- ----------- (Amounts in thousands) Standardized measure of discounted future net cash flows at beginning of period............. $ 97,753 $126,666 $ 205,698 Changes resulting from: Net change in prices .................. 30,772 83,377 (89,014) Sales of oil and natural gas produced . (11,635) (17,012) (8,797) Accretion of discount ................. 9,776 12,667 15,428 --------- --------- ---------- Standardized measure of discounted future net cash flows at end of period.................. $ 126,666 $205,698 $ 123,315 ========= ========= ==========
8 Item 7(b) Unaudited Pro Forma Consolidated Statements of Income and Balance Sheet 9 DENBURY RESOURCES INC. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma consolidated statements of income for the year ended December 31, 1996 and the nine months ended September 30, 1997 and the unaudited pro forma consolidated balance sheet as of September 30, 1997 (collectively, the "Pro Forma Financial Statements") are based on the historical consolidated financial statements of the Company and the historical financial statements of the properties acquired by the Company ("Chevron Properties") in the Chevron Acquisition which closed on December 30, 1997. The Unaudited Pro Forma Consolidated Statement of Income for the year ended December 31, 1996 gives effect to the Chevron Acquisition as if it had occurred as of January 1, 1996, and the Unaudited Pro Forma Consolidated Statement of Income for the nine months ended September 30, 1997 gives effect to the Chevron Acquisition as if it had occurred as of January 1, 1997. The Unaudited Pro Forma Consolidated Balance Sheet gives effect to the Chevron Acquisition as if it had occurred as of September 30, 1997. The pro forma adjustments are described in the accompanying notes and are based upon available information and certain assumptions that management believes are reasonable. The Pro Forma Financial Statements do not purport to represent what the Company's results of operations or financial condition would actually have been had the Chevron Acquisition in fact occurred on such dates or to project the Company's results of operations or financial condition for any future date or period. The Pro Forma Financial Statements should be read in conjunction with the historical consolidated financial statements of the Company and the historical statements of revenues and direct operating expenses of the Chevron Properties. 10 DENBURY RESOURCES INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Nine Months Ended September 30, 1997 ---------------------------------------- Historical ----------------- Chevron Company Chevron Acquisition Pro Historical Properties Adjustments Forma -------- ------- --------- -------- (in thousands, except per share amounts) Revenues: Oil, natural gas and related product sales.. $60,083 $14,034 $ - $ 74,117 Interest and other....... 986 - - 986 -------- ------- --------- -------- Total revenues...... 61,069 14,034 - 75,103 -------- ------- --------- -------- Expenses: Production............... 15,737 5,237 - 20,974 General and administrative......... 4,535 - 514 (b) 5,049 Interest................. 387 - 10,289 (c) 10,676 Depletion and depreciation........... 23,224 - 3,942 (d) 27,166 Franchise taxes.......... 308 - - 308 -------- ------- --------- -------- Total expenses.. 44,191 5,237 14,745 64,173 -------- ------- --------- -------- Income before income taxes.. 16,878 8,797 (14,745) 10,930 Provision for income taxes.. (6,245) (3,255)(a) 5,456(a) (4,044) -------- -------- --------- -------- Net income.................. $10,633 $ 5,542 $ (9,289) $ 6,886 ======== ======== ========= ======== Net income per common share Primary.................. $ 0.53 $ 0.34 Fully diluted............ 0.50 0.33 Average common shares outstanding............. 20,175 20,175
See Notes to Unaudited Pro Forma Consolidated Financial Information 11 DENBURY RESOURCES INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1996 ---------------------------------------- Historical ----------------- Chevron Company Chevron Acquisition Pro Historical Properties Adjustments Forma -------- ------- --------- -------- (in thousands, except per share amounts) Revenues: Oil, natural gas and related product Sales.. $52,880 $23,662 - $ 76,542 Interest and other....... 769 - - 769 -------- -------- --------- --------- Total revenues.. 53,649 23,662 77,311 -------- -------- --------- --------- Expenses: Production............... 13,495 6,650 - 20,145 General and administrative......... 4,267 - 687 (b) 4,954 Interest................. 1,993 - 15,716 (c) 17,709 Imputed preferred 1,281 - - 1,281 dividend.................... Loss on early 440 - - 440 extinguishment of debt...... Depletion and depreciation......... 17,904 - 6,697 (d) 24,601 Franchise taxes.......... 213 - - 213 -------- -------- --------- --------- Total expenses.. 39,593 6,650 23,100 69,343 -------- -------- --------- --------- Income before income taxes.. 14,056 17,012 (23,100) 7,968 Provision for income taxes . (5,312) (6,294)(a) 8,547(a) (3,059) -------- -------- --------- --------- Net income.................. $ 8,744 $10,718 $ (14,553) $ 4,909 ======== ======== ========= ========= Net income per common share Primary.................. $ 0.67 $ 0.37 Fully diluted............ 0.62 0.37 Average common shares outstanding.............. 13,104 13,104
See Notes to Unaudited Pro Forma Consolidated Financial Information 12 DENBURY RESOURCES INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of September 30, 1997 --------------------------------- Chevron Company Acquisition Pro Historical Adjustments Forma --------- ---------- --------- (in thousands, except share amounts) Assets: Current assets Cash and cash equivalents..... $ 2,236 $ - $ 2,236 Accrued production receivable 7,097 - 7,097 Trade and other receivables... 14,507 - 14,507 --------- ---------- --------- Total current assets....... 23,840 - 23,840 --------- ---------- --------- Property and equipment (using full cost accounting) Oil and gas properties........ 230,521 127,000 (e) 357,521 Unevaluated oil and gas properties................. 6,389 75,000 (e) 81,389 Less accumulated depreciation and depletion................. (53,527) - (53,527) ---------- --------- Net property and equipment. 183,383 202,000 385,383 --------- ---------- --------- Other assets.................... 3,201 - 3,201 --------- ---------- --------- Total assets............ $210,424 $ 202,000 $412,424 ========= ========== ========= Liabilities and Shareholders'Equity: Current liabilities Accounts payable and accrued liabilities.................... $ 16,858 $ - $ 16,858 Oil and gas production payable. 4,060 - 4,060 Current portion of long-term debt....................... 23 47,000 (f) 47,023 ---------- ---------- --------- Total current liabilities......... 20,941 47,000 67,941 --------- ---------- --------- Long-term liabilities Long-term debt................. 20,005 155,000 (g) 175,005 Provision for site reclamation costs...................... 938 - 938 Deferred income taxes and other...................... 12,982 - 12,982 --------- ---------- --------- Total long-term liabilities......... 33,925 155,000 188,925 --------- ---------- --------- Shareholders' equity Common shares, no par value; unlimited shares authorized; 20,364,799 outstanding........ 132,744 - 132,744 Retained earnings............. 22,814 - 22,814 --------- ---------- --------- Total shareholders' equity............... 155,558 - 155,558 --------- ---------- --------- Total liabilities and shareholders' equity....... $210,424 $ 202,000 $412,424 ========= ========== =========
See Notes to Unaudited Pro Forma Consolidated Financial Information 13 DENBURY RESOURCES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION 1. Pro Forma Adjustments (a) Income taxes were computed using the federal statutory rate of 35% plus a 2% provision for state income taxes. (b) Reflects an increase of $687,000 and $514,000 for the year ended December 31, 1996 and the nine months ended September 30, 1997, respectively, in general and administrative expense for additional personnel and associated costs relating to the properties acquired in the Chevron Acquisition, net of anticipated allocations to operations and capitalization of exploration costs. (c) Reflects an increase in interest expense for the period presented to reflect the $202 million of borrowing under the Credit Facility (at an assumed annual interest rate of 7.8% and 6.8% for the year ended December 31, 1996 and the nine months ended September 30, 1997, respectively) that would have been required to fund the Chevron Acquisition had it occurred as of the beginning of each respective period. (d) Depreciation, depletion and amortization ("DD&A") and site reclamation expenses have been computed using the unit of production method and reflects the Company's increased investment in oil and natural gas properties, which investment excludes $75 million of the Chevron Acquisition purchase price as the Company intends to classify this amount as unevaluated properties at December 31, 1997. The December 31, 1997 estimated proved reserves prepared by Netherland & Sewell were used in the DD&A computation for the Chevron Acquisition. (e) Reflects the purchase price paid in the Chevron Acquisition of which the Company intends to classify $75 million as unevaluated properties. (f) Reflects the incurrence of indebtedness under the acquisition tranche of the Credit Facility to finance a portion of the Chevron Acquisition. (g) Reflects the incurrence of indebtedness under the revolving portion of the Credit Facility to finance a portion of the Chevron Acquisition. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on it behalf by the undersigned thereunto duly authorized. Denbury Resources Inc. (Registrant) DATE: January 20, 1998 By: /s/ Bobby J. Bishop ------------------------------------ Bobby J. Bishop Chief Accounting Officer 15 EX-23 2 CONSENT OF PRICE WATERHOUSE LLP Item 7(c) Exhibit (23) Consent of Price Waterhouse LLP 16 CONSENT OF PRICE WATERHOUSE LLP We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-1006) of Denbury Resources Inc. of our report dated December 19, 1997 apprearing on page 4 of this Current Report on Form 8-K/A. /s/ PRICE WATERHOUSE LLP San Francisco, California January 20, 1998 17 -----END PRIVACY-ENHANCED MESSAGE-----