-----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, MiDpAcRXTd1t9FO8DVNQcZeMy4dFok2UMWjlHm80EaDn1CXcT5GFzGwEcXTYl0QK 4ZfWGPNjL+cNMLBMSPMgDA== 0000950134-97-003930.txt : 19970520 0000950134-97-003930.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950134-97-003930 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DLB OIL & GAS INC CENTRAL INDEX KEY: 0000945982 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731358299 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26484 FILM NUMBER: 97606184 BUSINESS ADDRESS: STREET 1: 1601 NORTHWEST EXPRESSWAY STREET 2: STE 700 CITY: OKLAHOMA CITY STATE: OK ZIP: 73118 BUSINESS PHONE: 4058488808 MAIL ADDRESS: STREET 1: 100 N BROADWAY STREET 2: 20TH FLOOR CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q - --- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES X EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 - --- OR - --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 - --- Commission File No 0-26484 DLB OIL & GAS, INC. (Exact name of registrant as specified in its charter) OKLAHOMA 73-1358299 (State or other jurisdiction of (IRS Employer Identification No.) incorporation of organization) 1601 NORTHWEST EXPRESSWAY, SUITE 700 OKLAHOMA CITY, OKLAHOMA 73118-1401 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (405) 848-8808 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of Registrant's common stock, $.001 par value, as of April 30, 1997 was 12,975,000. 2 DLB OIL & GAS, INC. TABLE OF CONTENTS FORM 10-Q QUARTERLY REPORT PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: Consolidated Balance Sheets March 31, 1997 (Unaudited) and December 31, 1996 4 Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31, 1997 and 1996 5 Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 21 Signatures 23
2 3 DLB OIL & GAS, INC PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 AND 1996 FORMING A PART OF FORM 10-Q QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION 3 4 DLB OIL & GAS, INC. CONSOLIDATED BALANCE SHEETS ASSETS
MARCH 31, DECEMBER 31, ---------------- ---------------- 1997 1996 ---------------- ---------------- (UNAUDITED) (AUDITED) Current assets: Cash and cash equivalents $ 2,585,000 $ 4,060,000 Accounts receivable 13,424,000 8,998,000 Prepaid expenses 1,531,000 337,000 ---------------- ---------------- Total current assets 17,540,000 13,395,000 ---------------- ---------------- Property and equipment - at cost, based on the full cost method of accounting for oil and natural gas properties: Oil and natural gas properties subject to amortization 124,436,000 109,325,000 Oil and natural gas properties not subject to amortization 25,255,000 18,570,000 Natural gas processing plants and gathering systems 2,105,000 1,728,000 Saltwater disposal system 1,119,000 1,119,000 Drilling equipment 16,713,000 -- Other property and equipment 1,991,000 1,223,000 ---------------- ---------------- 171,619,000 131,965,000 Accumulated depreciation, depletion and amortization (30,391,000) (27,007,000) ---------------- ---------------- 141,228,000 104,958,000 ---------------- ---------------- Investments in Waggoner (Barbados) Ltd. 3,230,000 3,186,000 Other assets 16,305,000 7,902,000 ---------------- ---------------- Total assets $ 178,303,000 $ 129,441,000 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 6,418,000 $ 8,119,000 Revenue and royalty distributions payable 3,322,000 3,125,000 Accrued liabilities 1,973,000 872,000 Notes payable 975,000 -- Drilling advances and other liabilities 292,000 42,000 ---------------- ---------------- Total current liabilities 12,980,000 12,158,000 ---------------- ---------------- Long term debt 78,579,000 37,200,000 Deferred income taxes 19,278,000 15,851,000 Shareholders' equity: Preferred stock, 5,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, 130,000,000 shares authorized; 13,000,000 shares issued; 12,975,000 outstanding at March 31, 1997 and December 31, 1996 13,000 13,000 Treasury stock (25,000 shares at March 31, 1997 and December 31, 1996, at cost) (181,000) (181,000) Additional paid in capital 57,910,000 57,910,000 Retained earnings 9,724,000 6,490,000 ---------------- ---------------- Total shareholders' equity 67,466,000 64,232,000 Commitments and contingencies Total liabilities and shareholders' equity $ 178,303,000 $ 129,441,000 ================ ================
See accompanying notes to consolidated financial statements. 4 5 DLB OIL & GAS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, ---------------------------- 1997 1996 ------------ ------------ (UNAUDITED) Revenues: Oil and natural gas sales $ 12,136,000 $ 4,481,000 Contract drilling 2,413,000 -- Natural gas gathering, processing and transportation, net 399,000 77,000 Interest and other 55,000 196,000 ------------ ------------ 15,003,000 4,754,000 Expenses: Lease operating 2,062,000 877,000 Gross production taxes 735,000 334,000 Contract drilling 1,619,000 -- Depreciation, depletion, and amortization 3,390,000 1,794,000 General and administrative 893,000 727,000 Interest 1,110,000 -- Loss on sale of assets -- 208,000 ------------ ------------ 9,809,000 3,940,000 ------------ ------------ Income before income taxes 5,194,000 814,000 Income taxes 1,960,000 309,000 ------------ ------------ Net income $ 3,234,000 $ 505,000 ============ ============ Net income per common share $ 0.24 $ 0.04 ============ ============ Weighted average common and common equivalent shares 13,463,000 12,987,500 ============ ============
See accompanying notes to consolidated financial statements. 5 6 DLB OIL & GAS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------------------- 1997 1996 -------------- -------------- Cash flows from operating activities: Net income $ 3,234,000 $ 505,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization 3,390,000 1,794,000 Deferred income taxes 1,960,000 309,000 Loss on sale of assets -- 208,000 (Increase) decrease in accounts receivable (1,625,000) 1,638,000 (Increase) decrease in prepaid expenses (997,000) 125,000 Decrease in accounts payable, distributions payable and accrued liabilities (2,997,000) (2,082,000) Increase in drilling advances and other liabilities 250,000 321,000 -------------- -------------- Net cash provided by operating activities 3,215,000 2,818,000 -------------- -------------- Cash flows from investing activities: Expenditures for property and equipment (24,953,000) (5,303,000) Purchase of investments and other assets (7,332,000) (3,683,000) Proceeds from sales of assets -- 1,380,000 Purchase of Bonray Drilling Corporation net of cash acquired (12,824,000) -- -------------- -------------- Net cash used in investing activities (45,109,000) (7,606,000) -------------- -------------- Cash flows from financing activities Proceeds of long-term debt 96,465,000 -- Payments of long-term debt (54,900,000) -- Payments of debt issuance costs (1,146,000) -- Purchase of treasury stock -- (181,000) -------------- -------------- Net cash provided by (used in) financing activities 40,419,000 (181,000) -------------- -------------- Net decrease in cash and cash equivalents: (1,475,000) (4,969,000) Cash and cash equivalents beginning of period 4,060,000 14,313,000 -------------- -------------- Cash and cash equivalents end of period $ 2,585,000 $ 9,344,000 ============== ============== Supplemental cash flow information: Cash payments for interest $ 776,000 $ -- ============== ============== Supplemental schedule of noncash investing activities: Property and equipment received from settlement of contingency $ -- $ 231,000 ============== ==============
See accompanying notes to consolidated financial statements. 6 7 DLB OIL & GAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 AND 1996 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION, DESCRIPTION OF BUSINESS AND PRINCIPALS OF CONSOLIDATION DLB Oil & Gas, Inc., ("DLB" or the "Company") is an independent energy company engaged primarily in the exploration, development, production and acquisition of oil and gas properties in the Mid-Continent region and the coastal and shallow onshore regions of south Louisiana, two of the most prolific oil and gas producing regions in the United States. The Company's principal producing fields are presently concentrated in Oklahoma. In addition, through its wholly owned subsidiaries, Bonray Drilling Corporation ("Bonray"), which was acquired in February 1997, and Gathering Energy Marketing Company, LLC ("GEMCO"), the Company is engaged in the land contract drilling of oil and gas wells and in the gathering, processing, transportation and marketing of hydrocarbons, respectively. The accompanying consolidated financial statements include the consolidated accounts of the Company and its wholly owned subsidiaries. The Company accounts for its investment in Waggoner (Barbados) Ltd. using the equity method of accounting. All significant intercompany transactions and balances have been eliminated in consolidation. BASIS OF PRESENTATION The accompanying consolidated financial statements and notes thereto have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes included in DLB's 1996 annual report on Form 10-K. USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods, to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. 7 8 DLB OIL & GAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (2) ACQUISITIONS AMERADA HESS PROPERTIES On May 31, 1996, the Company acquired certain Oklahoma oil and natural gas properties from Amerada Hess Corporation ("Amerada Hess") for approximately $32,100,000, with $25,500,000 allocated to producing properties and $6,600,000 allocated to undeveloped leasehold and to nonproducing minerals. The Company funded the purchase through use of cash funds and borrowings of $30,000,000 from its credit facilities. Total estimated proved reserves attributable to the acquired Amerada Hess properties as of May 31, 1996, net to the Company, were 6.8 Mmboe. Proved reserves attributable to such acquired properties were divided approximately 43% oil and 57% natural gas. (The quantities of proved reserves in this paragraph were prepared by the Company's internal engineers and based on an independent reserve study prepared as of January 1, 1996 by DeGolyer and MacNaughton and are unaudited.) Results prior to May 31, 1996 are not included in DLB's consolidated financial statements. BONRAY DRILLING CORPORATION On February 10, 1997, the Company purchased approximately 98% of the outstanding common stock of Bonray Drilling Corporation ("Bonray") through a tender offer. DLB paid $30.00 per share, or approximately $12,700,000. As a result of the completed tender offer and subsequent merger, Bonray Drilling Corporation became a subsidiary of DLB. Bonray owns a total of 15 rigs, including six rigs capable of drilling wells over 20,000 feet and nine rigs capable of drilling wells from 7,500 to 15,000 feet. Two of the six deep drilling rigs are presently being remobilized. These rigs are expected to be in operation by the second quarter of 1997. Ten rigs were in service or available for service at the time of acquisition with three in stacked status. This acquisition was accounted for under the rules of purchase accounting. As a result, DLB's consolidated financial statements only include the results of operations from February 10, 1997. WEST COTE BLANCHE BAY FIELD On March 11, 1997, the Company purchased Texaco Exploration and Production, Inc.'s 50% interest in the shallow rights in the West Cote Blanche Bay Field ("WCBB") located in Saint Mary's Parish, Louisiana. The purchase includes the right to operate existing and future wells completed above the Robb "C" (a geologic marker located at approximately 10,500 feet) and the right to operate the related production facilities which include oil and gas pipelines, salt water disposal wells, compression facilities and related equipment. The purchase price was $12,300,000. Proved reserves 8 9 DLB OIL & GAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED attributable to the acquisition were estimated at approximately 12.2 Mmboe (million barrels of oil equivalent) as of January 1, 1997, and are essentially 100% oil. (The quantities of proved reserves in this paragraph were prepared by the Company's internal engineers and based on an independent reserve study prepared as of January 1, 1997 by Netherland, Sewell and Associates, Inc. and are unaudited.) The remaining 50% working interest in the shallow rights to the WCBB property is owned by WRT Energy. As part of the WRT Energy reorganization plan, DLB expects to contribute the acquired interest in WCBB (described above) to WRT Energy in exchange for 5.0 million common shares in the reorganized WRT Energy. (See Note 3.) Additionally, the Company purchased approximately $6,000,000 of obligations of WRT Energy that relate to the West Cote Blanche Bay Field properties. Such obligations are expected to be converted into common shares of the new WRT Energy and are included in the equity percentages disclosed in Note 3. (3) INVESTMENT IN OTHER ASSETS During 1996 and 1997, the Company acquired senior unsecured notes and other credit obligations of WRT Energy Corporation ("WRT Energy"), an oil and gas company operating under the provisions of Chapter 11 of the United States Bankruptcy Code since February of 1996. These notes and other credit obligations are being accounted for using the cost method. At March 31, 1997, the Company's cost of these notes and other credit obligations was approximately $15,159,000. On November 29, 1996 as amended on January 20, 1997, and March 11, 1997, the Company and Wexford Management LLC ("Wexford"), an entity affiliated with the Chairman of the board of directors of the Company, filed a joint plan of reorganization with WRT Energy. No competing reorganization plans were filed. This plan was confirmed on April 28, 1997 and will go into effect on June 28, 1997. Under the plan, a new WRT Energy will be created with approximately 21.3 million shares of common stock outstanding. The Company will exchange its WRT Energy notes, the Company's interest in the West Cote Blanche Bay Field acquired in March of 1997 (described in Note 2) and other assets for an equity interest in the new WRT Energy. In addition, the Company and Wexford have committed to funding a rights offering associated with the reorganization plan of WRT Energy. The rights to purchase new common stock of WRT Energy are being offered to all unsecured creditors of WRT Energy. Pursuant to provisions of the plan, the Company and Wexford have committed to purchase the rights not exercised by other creditors. Based upon the notes and other credit obligations, the Company's pro rata portion of the rights offering, as contemplated by the plan, ranges from a minimum of $2,400,000 to a maximum of $9,300,000. The Company would own approximately 9.9 million to 11.8 million shares or between 46.2 % and 55.4 % of WRT Energy's equity. 9 10 DLB OIL & GAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (4) LONG-TERM DEBT On March 5, 1997, the Company established a new revolving credit facility with a group of financial institutions in the amount of $85,000,000, with an underlying borrowing base of $80,000,000. This facility was used to refinance indebtedness under the 1995 facility with the remainder to be used for funding of acquisitions and general corporate purposes. The maturity of the 1997 facility is March 2002. Under the terms of the 1997 facility, the Company elects to be charged at the bank's prime rate plus 1/2 of 1% plus the applicable margin or the rate at which Eurodollar deposits for one, two, three, six or twelve months are offered to the bank in the Interbank Eurodollar market plus the applicable margin. Loans made under the 1997 facility are payable in full on the maturity date. The revolving loan agreement contains restrictive covenants requiring, among other things, maintenance at specific levels of tangible net worth, working capital, and specific financial ratios, as well as limiting the payment of dividends. (5) SHAREHOLDERS' EQUITY On February 7, 1996, the Company adopted a common stock repurchase plan. Under the terms of the plan, up to $5,000,000 of common stock could have been repurchased from time to time. Pursuant to the plan, 25,000 shares were repurchased for $181,000. The Company holds repurchased stock as treasury stock. The repurchase plan expired August 5, 1996. In 1995, the Company adopted a stock option plan ("the Plan") pursuant to which the Company's Board of Directors may grant stock options to officers and key employees. The Plan authorizes grants of options to purchase up to 1,625,000 shares of authorized but unissued common stock. Stock options are granted with an exercise price equal to the stock's fair market value at the date of grant. All stock options have ten year terms and vest ratably over a five year term. On February 9, 1997, the Company approved 325,000 additional shares available for granting to employees under the Plan. (6) COMMITMENTS AND CONTINGENCIES In 1996, the Company settled claims submitted to arbitration against a joint venture partner alleging breach of contract and tortuous conduct. The claims arose under the terms of the Carmen Field Joint Venture Agreement ("CFJV") dated May 26, 1993, between the Company and Magic Circle Acquisition Corporation ("Magic Circle"). The Company settled its claims by agreement dated February 7, 1996. The settlement agreement provided for mutual release of all claims arising out of the CFJV, dissolution of the CFJV, distribution to the Company of its interest in the CFJV oil and gas properties, the payment of $3,349,000 to the Company and transfer to the Company of its share of a gathering system in Stephens County, Oklahoma, and 10 11 DLB OIL & GAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED transfer to Magic Circle gathering, processing and compression facilities in Alfalfa and Woodward Counties, Oklahoma. As a result of the settlement, the Company recognized a $208,000 loss, including $212,000 of related legal fees. 11 12 DLB OIL & GAS, INC PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS FORMING A PART OF FORM 10-Q QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION 12 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion is intended to assist in an understanding of the Company's financial position as of March 31, 1997, and its results of operations for the three month periods ended March 31, 1997 and 1996. The Consolidated Financial Statements and Notes included in this report contain additional information and should be referred to in conjunction with this discussion. It is presumed that the readers have read or have access to DLB's 1996 annual report on Form 10-K. 13 14 RESULTS OF OPERATIONS The following table sets forth certain financial and production information of the Company.
FINANCIAL DATA (in thousands) THREE MONTHS ENDED MARCH 31, --------------------------- 1997 1996 ------------ ------------ (UNAUDITED) Revenues Oil $ 4,721 $ 2,671 Natural gas 7,415 1,810 ------------ ------------ 12,136 4,481 Contract drilling 2,413 -- Natural gas gathering, processing & trans. 399 77 Interest & other income 55 196 ------------ ------------ 15,003 4,754 ------------ ------------ Expenses Lease operating (1) 2,062 877 Gross production taxes 735 334 Contract drilling 1,619 -- General & administrative (2) 893 727 Loss on sale of assets -- 208 ------------ ------------ 5,309 2,146 EBITDA (3) 9,694 2,608 Depreciation, depletion & amortization (4) 3,390 1,794 Earnings before interest and taxes 6,304 814 Interest expense 1,110 -- Earnings before income taxes 5,194 814 Income taxes - deferred 1,960 309 ------------ ------------ Net income $ 3,234 $ 505 ============ ============ PER SHARE DATA Net income $ 0.24 $ 0.04 ============ ============ Weighted average common and common equivalent shares 13,463 12,988 PRODUCTION DATA (in thousands except prices) Oil (Mbbl) 207 143 Natural gas (Mmcf) 2,166 883 Barrel oil equivalent (MBOE) 568 290 Oil ($/Bbl) $ 22.81 $ 18.68 Gas ($/Mcf) 3.42 2.05 $/BOE 21.37 15.45 EXPENSE DATA ($/BOE) Lease operating $ 3.63 $ 3.02 Gross production taxes 1.29 1.15 Depreciation, depletion and amortization (4) 5.16 5.76 General and administrative (2) 1.31 2.50
_________________________ 14 15 (1) The components of lease operating expense may vary substantially among wells depending on the methods of recovery employed and other factors, but generally include administrative overhead, maintenance and repairs and labor and utilities. (2) General and administrative expense relating to oil and gas operations was $0.7 million and general and administrative expenses associated with contract drilling operations was $0.2 million. (Only general and administrative expenses relating to oil and gas operations was used in the general and administrative expense per Boe calculation.) (3) EBITDA is defined as earnings before interest, taxes, depreciation, depletion and amortization. EBITDA is an analytical measure frequently used by securities analysts and is presented to provide additional information about the Company's ability to meet its future debt service, capital expenditure and working capital requirements. EBITDA should not be considered as a better measure of the Company's operating performance than net income or as a better measure of liquidity than cash flow from operations. (4) DD&A related to oil and gas operations was $2.9 million and $1.7 million for the three months ended March 31, 1997 and 1996 respectively. DD&A related to contract drilling operations was $0.3 million with the remaining $0.1 million and $0.1 million for the three months ended March 31, 1997 and 1996 respectively of DD&A related to gas processing, gathering and disposal assets and other non-oil and gas property equipment. (Only DD&A related to oil and gas operations was used in the DD&A per Boe calculations.) 15 16 THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 1996 REVENUES - Total revenues for the three months ended March 31, 1997 were $15.0 million, an increase of $10.2 million from the comparable period in 1996. The increase in revenues was primarily related to the inclusion of revenues from the production of the Amerada Hess properties and operations of Bonray Drilling Corporation in the first quarter of 1997, which were not included in the first quarter of 1996. In addition, a 38% increase in product prices contributed to increased revenues during the three months ended March 31, 1997 compared to the same period in 1996. Revenues attributable to Bonray Drilling Corporation for the period ended March 31, 1997 and subsequent to the acquisition on February 10, 1997 were $2.4 million. Production of oil and gas was 207 Mbbl and 2,166 Mmcf, respectively, in the three months ended March 31, 1997 as compared to 143 Mbbl and 883 Mmcf, respectively in the same period of 1996. The increase in production and increased product prices caused oil and gas sales revenues to increase $7.6 million to $12.1 million for the three months ended March 31, 1997 as compared to $4.5 million during the same period in 1996. The average price received for oil increased 22% to $22.81 per barrel in the three months ended March 31, 1997 from $18.68 for the three months ended March 31, 1996. The average price received for natural gas increased 67% to $3.42 per Mcf in the three months ended March 31, 1997 from $2.05 per Mcf for the same period of 1996. LEASE OPERATING EXPENSE - Lease operating expense increased to $2.1 million for the three months ended March 31, 1997 from $0.9 million for the same period of 1996. On a Boe basis, lease operating expenses were $3.63 per Boe for the three months ended March 31, 1997 as compared to $3.02 per Boe in the comparable period of 1996. This increase per Boe was primarily due to an increase in workovers on DLB properties in the three months ended March 31, 1997 as compared to the same period in 1996. GROSS PRODUCTION TAXES - Gross production taxes increased 120% to $0.7 million during the three months ended March 31, 1997 from $0.3 million in the same period of 1996. This increase was due to increased oil and gas sales revenues. CONTRACT DRILLING EXPENSE - Contract drilling expense was $1.6 million for the three months ended March 31, 1997. This expense relates to the operation of the drilling rigs acquired in the acquisition of Bonray Drilling Corporation in February 1997. (See Note 2 to the consolidated financial statements.) DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE - Depreciation, depletion and amortization (DD&A) expense was $3.4 million and $1.8 million for the three months ended March 31, 1997 and 1996, respectively. The increase in DD&A is primarily a result of the increased production due to the Amerada Hess properties acquisition in May 1996. The DD&A rate per Boe related to oil and gas properties decreased to $5.16 from $5.76 for the three months ended March 31, 1997 and 1996 respectively, resulting primarily from the increase in reserves due to the Amerada Hess properties acquisition. GENERAL AND ADMINISTRATIVE EXPENSE - General and administrative expense increased 23% to $0.9 million for the three months ended March 31, 1997 from $0.7 million in the same period of 1996. The 16 17 increase was primarily attributable to the $0.2 million of general and administrative expenses in connection with drilling rig operations. INTEREST EXPENSE - Interest expense for the three months ended March 31, 1997 was $1.1 million. There was no debt outstanding for three months ended March 31, 1996 compared to $53.6 million average debt outstanding for the three months ended March 31, 1997. The average amount of debt outstanding increased due to the acquisitions of the Amerada Hess properties, Bonray Drilling Corporation, West Cote Blanche Bay and investments in obligations of WRT Energy. (See Note 2 to the consolidated financial statements.) NET LOSS ON SALE OF ASSETS - The Company recognized a net loss of $0.2 million on the sale of assets for the three months ended March 31, 1996 as a result of the dissolution of the CFJV and the related sale of gathering, processing and compression facilities. (See Note 6 to the consolidated financial statements.) INCOME BEFORE INCOME TAXES - Income before income taxes increased to $5.2 million for the three months ended March 31, 1997 from $0.8 million for the same period of 1996 primarily due to the factors described above, including increased oil and gas revenues due to the acquisition of the Amerada Hess properties and increase product prices. This increase in revenues was partially offset by increased lease operating expenses, depreciation and interest expense. Net income - Net income increased to $3.2 million for the three months ended March 31, 1997 from $0.5 million the same period in 1996 as a result of the items described above. The effective income tax rate remained constant at 38%. 17 18 CAPITAL EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY The following table presents comparative cash flows of the Company for the three months ended March 31, 1997 and 1996.
Three Months Ended March 31, ---------------------------- 1997 1996 -------------- ------------ (in thousands) Ne cash provided by operating activities $ 3,215 $ 2,818 Net cash used in investing activities (45,109) (7,606) Net cash provided by (used in) financing activities 40,419 (181)
Net cash provided from operating activities increased $0.4 million to $3.2 million in the three months ended March 31, 1997 from $2.8 million in the same period of 1996, relating primarily to an increase in net income partially offset by other working capital components. Net cash used in investing activities was $45.1 million for the three months ended March 31, 1997, as compared to $7.6 million in the same period of 1996. The increase of $37.5 million is primarily attributable to acquisitions of Bonray Drilling Corporation and West Cote Blanche Bay field, investments in senior unsecured notes of WRT Energy and expenditures for the exploration, development and acquisitions of other property and equipment. (See Note 2 to the consolidated financial statements.) As of March 31, 1997, the Company had cash balances of $2.6 million and working capital of $4.6 million. The increase in working capital of $3.4 million as of March 31, 1997, from $1.2 million as of December 31, 1996, is a result of an increase in accounts receivable. Capital expenditures ~ The following table sets forth the Company's expenditures for exploration, development, property acquisition, drilling equipment, gas plant and gathering facilities and other property and equipment for the three months ended March 31, 1997 and 1996.
Thee Months Ended March 31, --------------------------- 1997 1996 ---------- --------- Exploration costs $ 3,408 $3,957 Development costs 4,942 945 Property acquisition costs 13,446 34 Drilling equipment 15,359 -- Gas plant and gathering facilities 377 294 Other property and equipment 245 73 ------- ------ $37,777 $5,303 ======= ======
The Company intends to finance its capital expenditures with its cash flows provided by operations and borrowings under the credit facility. The Company expects to spend a total of $66.0 million on capital expenditures in 1997. It is currently anticipated that up to $45.9 million of such amount will be used as 18 19 follows: (i) $19.3 million in connection with the WCBB Acquisition, consisting of $12.3 million for the acquisition of an interest in the WCBB field and certain related assets, $6.0 million for the purchase of certain claims held by Texaco against WRT Energy and $1.0 million for plugging and abandonment obligations; (ii) $12.7 million for the Bonray Acquisition; (iii) $3.8 million for the workover and enhancement of certain rigs acquired in the Bonray Acquisition (iv) from $2.4 million to $9.3 million will be used to purchase shares of common stock of the new WRT Energy in a rights offering, pursuant to the Company's commitment in the WRT Plan, if approved, (v) and $0.8 million for the purchase of additional claims against WRT Energy. As of March 31, 1997, the Company had expended approximately $35.3 million in connection with the foregoing activities. Also included in the Company's budget is up to $27.0 million for oil and gas exploration activities of which $13.0 million is for exploratory wells and $14.0 million is for development wells. The aggregate level of capital expenditures in 1997 for drilling activities and the allocation thereof is highly dependent upon the Company's success rate on exploration drilling and prevailing conditions in the oil and gas industry as well as the amount of common stock of WRT Energy that the Company is required to purchase in a rights offering. Accordingly, the actual level of capital expenditures and the allocation of such expenditures may vary materially from the above estimates. CAPITAL RESOURCES ~ Prior to the July 1995 equity offering, the Company's cash requirements had been met primarily through capital contributions from shareholders, cash generated from operations and borrowings under credit facilities. Subsequently, the Company has relied on cash flows and primarily borrowings under its credit facilities for additional capital resources. On March 5, 1997, the Company established a new revolving credit facility with a group of financial institutions, which, as amended, provides for aggregate borrowings of up to $80.0 million (the "1997 Credit Facility"). Borrowings under the 1997 Credit Facility were used to refinance indebtedness under a prior credit facility and to fund the Texaco Acquisition. Under the terms of the 1997 credit facility, the Company elects to be charged at the bank's prime rate plus 50 basis points plus the applicable margin or the rate at which Eurodollar deposits for one, two, three, six or twelve months are offered to the bank in the Interbank Eurodollar market plus the applicable margin. Loans made under the 1997 Credit Facility are payable in full on March 2002, the maturity date. The 1997 Credit Facility is secured by substantially all of the Company's assets and contains various restrictive covenants. As of March 31, 1997, outstanding borrowings under the 1997 credit facility were $78.5 million. LIQUIDITY - The Company intends to meet the remainder of its 1997 capital requirements and its other obligations primarily from existing cash balances, cash flow from operations and borrowings under the 1997 Credit Facility. The Company's cash flow from operations will be dependent upon its future performance, which will be subject to prevailing economic conditions and to financial and business conditions and other factors, many of which are beyond its control. In addition, as a result of borrowings under the 1997 Credit Facility to fund the Texaco Acquisition, the Company has $1.5 million of available borrowing capacity under such facility at March 31, 1997. Management believes that additional financing will be required to fully implement its proposed 1997 capital budget and has commenced discussions with the lenders under the 1997 credit facility to increase the Company's borrowing capacity thereunder to address it near-term liquidity requirements. The Company may also seek additional capital through offerings of debt and/or equity securities. There can be no assurance, however, that the lenders will increase the borrowing limits under the 1997 credit facility or that such offerings can be successfully completed. Should sufficient financing not be available from these or other 19 20 sources, implementation of the Company's 1997 capital program would be delayed and, accordingly, the Company's growth strategy could be adversely affected. The Company does not intend to pay dividends on its common stock in the near future. The Company will redeploy earnings generated as it continues its growth strategies. In future periods, the Company expects to recognize deferred income taxes of approximately 37% to 39% of income before income taxes. The majority of the Company's income tax expense is expected to be recognized as deferred income tax expense due to the current tax treatment of oil and gas exploration costs. The Company may from time to time enter into certain swap or hedge transactions in an attempt to mitigate price volatility on production that is subject to market sensitive pricing. To the extent the Company is unable to effect such transactions, continued fluctuations in oil and gas prices could have an effect on the Company's operating results. The Company has entered into futures contracts to fix the sales price of certain of its oil and gas production during 1997. The Company has entered into oil futures contracts for the months of April through August, with volumes ranging from 50,000 to 53,000 barrels per month, and prices ranging from $23.41 per barrel in April to $21.37 per barrel in August. The Company has also entered into gas futures contracts for the months of April through September, with volumes ranging from 250,000 to 680,000 MCF of gas per month and prices ranging from $2.42 per Mcf in April to $1.95 per Mcf in August. These futures contracts are designed to mitigate the effect of anticipated lower product prices in the second quarter of 1997 as compared to the first quarter of 1997. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED - In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, and restatement of prior-period earnings per share data is required. The new standard will not apply to DLB's financial statements until the fourth quarter of 1997. SFAS No. 128 revises the current calculation methods and presentation of primary and fully diluted earnings per share. The company has reviewed the requirements of SFAS No. 128, and has concluded that they will increase DLB's historical primary earnings per share amounts to $0.25 per share for the first quarter of 1997 and be consistent for the diluted earnings per share amount ($0.24). 20 21 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by item 601 of Regulation S-K are as follows: 2.0 Agreement for Purchase and Sale dated April 16, 1996, between Amerada Hess Corporation and DLB Oil & Gas, Inc. (the "Agreement for Purchase and Sale"). (4) 2.1 Letter agreement amending Agreement for Purchase and Sale dated May 7, 1996.(3) 2.2 Letter agreement amending Agreement for Purchase and Sale dated May 31, 1996.(3) 3.1 Amended and Restated Certificate of Incorporation (1) 3.2 Amended and Restated Bylaws (1) 10.1 Lease of office space, Oklahoma City, Oklahoma (1) 10.2 Credit Agreement dated December 28, 1995, between Registrant and First Union National Bank of North Carolina (2) 10.3 Stock Option Agreement by and between Registrant and Mike Liddell (1) 10.4 Stock Option Agreement by and between Registrant and Mark Liddell (1) 10.5 Employment Agreement by and between Registrant and Mike Liddell (1) 10.6 Employment Agreement by and between Registrant and Mark Liddell (1) 10.7 DLB Oil & Gas Stock Option Plan (1) 10.8 DLB Oil & Gas Omnibus Equity Compensation Plan (1) 10.9 Shareholder's Agreement by and among Charles E. Davidson, Mike Liddell and Mark Liddell dated May 25, 1995 (1) 10.10 Agreement for Dissolution of Joint Venture dated February 9, 1996, between DLB Oil & Gas, Inc., Magic Circle Acquisition Corporation and Magic Circle Energy Corporation, Carmen Field Limited Partnership, and Carmen Field Joint Venture (2) 10.11 First Amendment to the Credit Agreement dated June 30, 1996, between Registrant and First Union National Bank of North Carolina (4) 10.12 Credit Agreement Dated as March 5, 1997 between Registrant and Chase Manhattan Bank (5) 10.13 Second Amended Disclosure Statement Under 11 U.S.C. Section 1125 in Support of Debtor and DLBW's Second Amended Joint Plan of Reorganization Under Chapter 22 of the United States Bankruptcy Code (5) 10.14 Texaco Agreements (5) 10.15 First Amendment to Credit Agreement dated March 12, 1997, between the Registrant and Chase Manhattan Bank (7) 21.0 Subsidiaries of the Company (1) 27.0 Financial Data Schedule (7) ----------------- (1) Previously filed as an exhibit to Registration No. 33-92786 on Form S-1 and incorporated herein by reference. (2) Previously filed as an exhibit to Form 10-K for the year ended December 31, 1995, and incorporated herein by reference. (3) Previously filed as an exhibit to Form 8-K on May 12, 1996, and incorporated herein by reference. (4) Previously filed as an exhibit to Form 10-Q filed on August 14, 1996. 21 22 (5) Previously filed as an exhibit to Form 10-K for the year ended December 31, 1996 and incorporated herein by reference. (6) Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and schedules to Exhibit 2.0 are omitted. Exhibit 2.0 contains a list identifying the contents of its exhibits and schedules, and registrant agrees to furnish supplemental copies of such exhibits and schedules to the Securities and Exchange Commission upon request. (7) Filed herein. Copies of the foregoing exhibits filed with this report or incorporated by reference are available from the Company upon written request and payment of a reasonable copying fee. (b) Registrant filed the following reports on Form 8-K's filed the quarter ended March 31, 1997: Form 8-K filed February 7, 1997, disclosing Registrant's acquisition of Bonray Drilling. 22 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. DLB OIL & GAS, INC. Date May 15, 1997 /s/ Mark Liddell --------------- ------------------------- Mark Liddell, President Date May 15, 1997 /s/ Ronald D. Youtsey --------------- ------------------------- Ronald D. Youtsey, Chief Financial Officer 23 24 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.0 Agreement for Purchase and Sale dated April 16, 1996, between Amerada Hess Corporation and DLB Oil & Gas, Inc. (the "Agreement for Purchase and Sale"). (4) 2.1 Letter agreement amending Agreement for Purchase and Sale dated May 7, 1996.(3) 2.2 Letter agreement amending Agreement for Purchase and Sale dated May 31, 1996.(3) 3.1 Amended and Restated Certificate of Incorporation (1) 3.2 Amended and Restated Bylaws (1) 10.1 Lease of office space, Oklahoma City, Oklahoma (1) 10.2 Credit Agreement dated December 28, 1995, between Registrant and First Union National Bank of North Carolina (2) 10.3 Stock Option Agreement by and between Registrant and Mike Liddell (1) 10.4 Stock Option Agreement by and between Registrant and Mark Liddell (1) 10.5 Employment Agreement by and between Registrant and Mike Liddell (1) 10.6 Employment Agreement by and between Registrant and Mark Liddell (1) 10.7 DLB Oil & Gas Stock Option Plan (1) 10.8 DLB Oil & Gas Omnibus Equity Compensation Plan (1) 10.9 Shareholder's Agreement by and among Charles E. Davidson, Mike Liddell and Mark Liddell dated May 25, 1995 (1) 10.10 Agreement for Dissolution of Joint Venture dated February 9, 1996, between DLB Oil & Gas, Inc., Magic Circle Acquisition Corporation and Magic Circle Energy Corporation, Carmen Field Limited Partnership, and Carmen Field Joint Venture (2) 10.11 First Amendment to the Credit Agreement dated June 30, 1996, between Registrant and First Union National Bank of North Carolina (4) 10.12 Credit Agreement Dated as March 5, 1997 between Registrant and Chase Manhattan Bank (5) 10.13 Second Amended Disclosure Statement Under 11 U.S.C. Section 1125 in Support of Debtor and DLBW's Second Amended Joint Plan of Reorganization Under Chapter 22 of the United States Bankruptcy Code (5) 10.14 Texaco Agreements (5) 10.15 First Amendment to Credit Agreement dated March 12, 1997, between the Registrant and Chase Manhattan Bank. (7) 21.0 Subsidiaries of the Company (1) 27.0 Financial Data Schedule (7) ----------------- (1) Previously filed as an exhibit to Registration No. 33-92786 on Form S-1 and incorporated herein by reference. (2) Previously filed as an exhibit to Form 10-K for the year ended December 31, 1995, and incorporated herein by reference. (3) Previously filed as an exhibit to Form 8-K on May 12, 1996, and incorporated herein by reference. (4) Previously filed as an exhibit to Form 10-Q filed on August 14, 1996. 25 (5) Previously filed as an exhibit to Form 10-K for the year ended December 31, 1996 and incorporated herein by reference. (6) Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and schedules to Exhibit 2.0 are omitted. Exhibit 2.0 contains a list identifying the contents of its exhibits and schedules, and registrant agrees to furnish supplemental copies of such exhibits and schedules to the Securities and Exchange Commission upon request. (7) Filed herein Copies of the foregoing exhibits filed with this report or incorporated by reference are available from the Company upon written request and payment of a reasonable copying fee. (b) Registrant filed the following reports on Form 8-K's filed the quarter ended March 31, 1997: Form 8-K filed February 7, 1997, disclosing Registrant's acquisition of Bonray Drilling. EX-10.15 2 1ST AMENDMENT TO CREDIT STATEMENT DATED 3/12/97 1 EXHIBIT 10.15 FIRST AMENDMENT TO CREDIT AGREEMENT This FIRST AMENDMENT TO CREDIT AGREEMENT is made and entered into effective as of the 12th day of March, 1997 (this "Amendment") among DLB OIL & GAS, INC., a corporation formed under the laws of the State of Oklahoma (the "Borrower"); each of the lenders that is or become a party to the Credit Agreement (defined below) (individually, together with its successors and assigns, a "Lender" and, collectively, the "Lenders"); and THE CHASE MANHATTAN BANK, a New York banking corporation (in its individual capacity, "Chase"), as agent for the Lenders (in such capacity, together with its successors in such capacity, the "Agent"). R E C I T A L S A. The Borrower, the Agent and the Lenders have entered into that certain Credit Agreement dated as of March 5, 1997 (The "Credit Agreement"), pursuant to which the Lenders agreed to make certain loans to and extensions of credit on behalf of the Borrower upon the terms and conditions as provided therein. B. The Borrower and the Lenders now desire to make certain amendments and supplements to the Credit Agreement. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration and the mutual benefits, covenants and agreements herein expressed, the parties hereto now agree as follows: Section 1. All capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. Section 1.02 of the Credit Agreement is hereby supplemented, where alphabetically appropriate, with the addition of the following definitions: "Escrow Obligation" shall mean all of Borrower's obligations under that certain Escrow Agreement dated March 12, 1997 among Borrower, Texaco and The Chase Manhattan Bank as escrow agent. "Texaco Plugging and Abandonment Obligation" shall mean all obligations of Borrower with respect to plugging, replugging and abandonment the oil and gas wells and injection and disposal wells owned or operated by Borrower and related to the West Cote Blanche Bay property purchased from Texaco, (i) encompassed within the definition of "Assumed Obligations" in the Texaco Purchase Agreement, and (ii) encompassed within Section 2.7 (b) of the Texaco Purchase Agreement. "WRT Plan" shall mean that certain Second Amended Joint Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code regarding WRT Energy Corporation, as debtor, under Case No. 96BK50212. 2 Section 2. Clause (b) of the definition of the term "Excess Cash Flow" is amended in its entirety to hereafter read as follows: "(b) the sum of (i) the greater of (x) one quarter of the scheduled Capital Expenditures (excluding capitalized interest and general and administrative expenses) for the current fiscal year as set forth in the most recently delivered Reserve Report and (y) the amount of cash actually expended by the Borrower and its Subsidiaries in such period with respect to such Capital Expenditures; provided, however that the total amount of Capital Expenditures deducted pursuant to this clause (i) for any fiscal year of the Borrower and its Subsidiaries shall not exceed the total amount of Capital Expenditures as set forth on such Reserve Report; and (ii) the aggregate amount of Debt Service for such period." Section 3. Subsection 2.09(a) is amended by deleting "$85,000,000" in the second line thereof and inserting in lieu thereof the figure $80,000,000. Section 4. Subsection 6.04(b) is hereby amended in its entirety to hereafter read as follows: "(b) Simultaneously with such funding the Borrower shall have purchased the Texaco Property." Section 5. Section 7.07 is hereby amended in its entirety to hereafter read as follows: "Section 7.07. Use of Loans. Until such time as the Borrowing Base is reduced to the Threshold Amount, the proceeds of the Loans shall be used solely to purchase the Texaco Properties, refinancing of assets acquired prior to the Closing Date, Capital Expenditures permitted under Section 9.23 and for the Borrower's general working capital. After the Borrowing Base has been reduced to the Threshold Amount the proceeds of the Loans may be used for the Borrower's general corporate purposes, including, without limitation, the exploration, acquisition and development of direct oil and gas interest and the acquisition of Persons owning direct oil and gas interests. The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation U or X of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan hereunder will be used to buy or carry any margin stock (except the WRT Energy Corporation 13 7/8% Senior Notes listed in Schedule 9.03 hereof)." Section 6. Subsection 7.10(f) is hereby amended in its entirety to hereafter read as follows: 2 3 "(f) Following the Borrower's acquisition of the Texaco Property or Other Acquisition, the representations contained in this Section 7.10 shall be true and correct with respect to such Texaco Property or Properties acquired pursuant to the Other Acquisition except as follows: (i) The Borrower may have the Texaco Plugging and Abandonment Obligation. (ii) The Borrower may grant a security interest and assignment of the production proceeds from the West Cote Blanche Bay property purchased from Texaco in favor of Texaco to secure an aggregate amount of up to $15,000,000 incurred in connection with the Texaco Plugging and Abandonment Obligation and the Escrow Obligation." Section 7. Section 7.21 is hereby amended by adding the words "other than the Texaco Purchase Agreement" at the end of that paragraph. Section 8. A new Section 7.24 is hereby added to hereafter read as follows: "Section 7.24 Certain representations regarding the Texaco Property. Upon the Borrower's acquisition of the Texaco Property the Borrower represents that it shall have obtained all Governmental and other approvals other than approval from the Louisiana State Mineral Board (which approval should be obtained within 30 days from date of acquisition), the Texaco Properties will be free and clear of all encumbrances other than the lien in favor of Texaco described in Section 7.10(f)(ii) and the obligation to contribute the Texaco Property to WRT Energy Corporation pursuant to the WRT Plan. Further Borrower represents that following the acquisition of the Texaco Property the Borrower will have no material continuing obligations to Texaco other that the Plugging and Abandonment Obligations, the Escrow Obligations and obligations referred to in the Global Settlement referred to in the Texaco Purchase Agreement." Section 9. Subsection 8.07(a) is hereby amended by adding the words "other than the West Cote Blanche Bay property purchased from Texaco," in the second line thereof following the figures $100,000," Section 10. Section 8.07 is amended by adding the following additional clauses (c) and (d) to hereafter read as follows: "(c) Within 10 Business Day following confirmation of the WRT Plan, the Borrower will grant a first and prior security interest to the Agent as security for the Indebtedness in all common stock and other securities of WRT Energy Corporation or its 3 4 successors received and to be received by the Borrower pursuant to the WRT Plan, such security interest to be in a form and substance satisfactory to the Agent." "(d) Upon the earlier to occur of (i) the conversion of the WRT Chapter 11 bankruptcy proceeding to a Chapter 7 proceeding, (ii) the Borrower withdrawing from the WRT Plan, and (iii) the passing of one (1) year from the Closing Date without confirmation of the WRT Plan, Borrower will grant a security interest, mortgage or other appropriate Lien in a form and substance satisfactory to the Agent, as security for the Indebtedness, in the following: (i) the Texaco Property, such Lien to be subject to the Lien in favor of Texaco described in Section 7.10(f)(ii) and to the consent of Texaco called for in the Texaco Purchase Agreement, which consent Borrower agrees to use its best efforts to obtain; (ii) all of the 13-7/8% Senior Notes of WRT Energy Corporation due 2002 owned by the Borrower including, without limitation, those described in Schedule 9.03 hereof." Section 11. Section 9.01 is hereby amended by adding a new clause (i) to hereafter read as follows: "(i) the Texaco Plugging and Abandonment Obligation." Section 12. Section 9.02 is hereby amended by adding a new clause (e) to hereafter read as follows: "(e) A security interest and assignment of the production proceeds from the West Cote Blanche Bay property purchased from Texaco to secure the Texaco Plugging and Abandonment Obligation and the Escrow Obligation." Section 13. Section 9.16 is hereby amended by deleting the word "and" immediately prior to clause (iii) in the fifth line thereof and adding the following after the word "aggregate" at the end of the paragraph "and (iv) transfer of the Texaco Property, the 13-7/8% Senior Notes of WRT Energy Corporation due 2002 described in Schedule 9.03 hereto and the mechanics and materialman liens described in Schedule 9.03 hereto to WRT Energy Corporation upon confirmation of WRT Plan." Section 14. Section 9.19 is amended by adding the following words at the beginning of the sentence "Except for stock of WRT Energy Corporation acquired pursuant to the WRT Plan,". Section 15. Section 9.20 is hereby amended by adding the following words at the beginning of the sentence "Except as provided in the Texaco Purchase Agreement,". Section 16. Section 9.23 is amended by deleting the words "sum of (i)" in the third line and also deleting the words "and (ii) $5,000,000" at the end of the paragraph. 4 5 Section 17. This Amendment shall become binding when the Agent shall have received the following: (a) counterparts of this Amendment executed by the Borrower and the Lenders; (b) any fees due the Agent and Bank of Oklahoma as provided in the amendment of even date herewith to the Fee Letter; and (c) such other documents as the Agent or its counsel may reasonably request. Section 18. The parties hereto hereby acknowledge and agree that, except as specifically supplemented and amended, changed or modified hereby, the Credit Agreement shall remain in full force and effect in accordance with its terms. Section 19. The Borrower hereby reaffirms that as of the date of this Amendment, the representations and warranties made by the Borrower in Article VII of the Credit Agreement as hereby amended are true and correct on the date hereof as though made on and as of the date of this Amendment. Section 20. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Section 21. Reference o and Effect on Credit Agreement. (a) On or after the date first written above, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or works of like import, and each reference to the Credit Agreement in any certificate or other document or instrument delivered in connection therewith, shall mean and be a reference to the Credit Agreement as amended hereby. (b) Except as specifically amended above, the Credit Agreement is and shall continue to be in full force and effect and is hereby rarified and confirmed. Section 22. This Amendment may be executed in two or more counterparts, and it shall not be necessary that the signatures of all parties hereto be contained on any one counterpart hereof; each counterpart shall be deemed an original, but all of which together shall constitute one and the same instrument. A facsimile signature shall be effective as a counterpart. Section 23. THE CREDIT AGREEMENT, THIS AMENDMENT, THE NOTES THE FEE LETTER AND THE SECURITY INSTRUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES. 5 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed effective as of the date first above written. BORROWER: DLB OIL & GAS, INC. By: /s/ RONALD D. YOUTSEY ---------------------------------- Name: Ronald D. Youtsey Title: Chief Financial Officer AGENT AND LENDER: THE CHASE MANHATTAN BANK By: ---------------------------------- Name: Title: BANK OF OKLAHOMA, N.A. By: ---------------------------------- Name: Title: 6 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1997 MAR-31-1997 2,585 0 13,424 0 0 17,540 171,619 30,391 178,303 12,980 0 0 0 13 67,453 178,303 12,136 15,003 2,797 2,797 3,390 0 1,110 5,194 1,960 3,234 0 0 0 3,234 0.24 0.24
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