SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): May 1, 1996
COMSTOCK RESOURCES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-16741 94-1667468
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
5005 LBJ Freeway, Suite 1000, Dallas, Texas 75244
(Address of principal executive offices)
(214) 701 - 2000
(Registrant's Telephone No.)
Item 2. Acquisition or Disposition of Assets
On May 1 and May 2, 1996, Comstock Resources, Inc. (the "Company")
acquired 100% of the capital stock of Black Stone Oil Company and additional
interests held by other working interest owners in certain producing oil and gas
properties as well as interests in undeveloped oil and gas leases located in
East Texas for total cash consideration of approximately $104 million. Black
Stone Oil Company is the operator of the producing oil and gas properties which
are located in the Double A Wells field in Polk County, Texas. The estimated net
proved oil and gas reserves acquired are estimated at 98.5 billion cubic feet of
natural gas and 5.3 million barrels of oil as of January 1, 1996, the effective
date of the acquisition. Such reserves have estimated pretax future net cash
flows of $249 million and estimated pretax discounted future net cash flows of
$149 million.
The acquisition was financed under a new $176 million bank credit
facility provided by The First National Bank of Chicago and Bank One Texas,
N.A., consisting of a $166 million revolving credit facility and a $10 million
bridge loan. The Company financed the $104 million acquisition and refinanced
$58.7 million outstanding under its existing revolving credit facility and an
existing $10 million bridge loan which was to mature on July 31, 1996 with
borrowings under the new bank credit facility. Amounts outstanding under the new
revolving credit facility presently bear interest at the agent bank's base rate
plus 1/2% and are subject to a borrowing base determined semiannually by the
banks. Upon repayment of the new $10 million bridge loan, the Company may elect
to have borrowings bear interest at LIBOR plus up to 2%. The new revolving
credit facility converts to a two year term loan on May 1, 1999. Amounts
outstanding under the new bridge loan bear interest at the agent bank's base
rate plus 3% and are payable in full on December 31, 1996.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Page in
This Report
(a)Financial Statements.
Black Stone Acquisition:
Report of Independent Public Accountants .......................... F-1
Statements of Revenues and Direct Operating Expenses
for the Years ended December 31, 1993, 1994 and 1995
and Three Months Ended March 31, 1995 and 1996................ F-2
Notes to Statements of Revenues and Direct Operating Expenses...... F-3
(b)Pro Forma Financial Information.
Comstock Resources, Inc.:
Pro Forma Consolidated Financial Statements (Unaudited)............ P-1
Pro Forma Consolidated Balance Sheet as of March 31, 1996.......... P-2
Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1995.......................... P-3
Pro Forma Consolidated Statement of Operations
for the Three Months Ended March 31, 1996..................... P-4
Notes to Pro Forma Consolidated Financial Statements............... P-5
2
(c) Exhibits.
2(a) Agreement For Purchase and Sale - Black Stone Holdings
Partnership et. al. as Seller and Comstock Oil & Gas, Inc.
as Buyer and Comstock Resources, Inc. as Guarantor.
99(c) Credit Agreement dated as of May 1, 1996 between Comstock
Resources, Inc., Comstock Oil & Gas, Inc., Comstock Oil &
Gas -- Louisiana, Inc., Comstock Offshore Energy, Inc., the
Banks and The First National Bank of Chicago, as Agent and
Bank One, Texas N.A., as Co-agent.
3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Comstock Resources, Inc.:
We have audited the accompanying statements of revenues and direct
operating expenses of the Black Stone Acquisition (see Note 1) for the years
ended December 31, 1993, 1994 and 1995. These financial statements are the
responsibility of the management of Comstock Resources, Inc. 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 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, such statements present fairly, in all material respects,
the revenues and direct operating expenses of the Black Stone Acquisition
described in Note 1 for the years ended December 31, 1993, 1994 and 1995 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 3, 1996
F-1
BLACK STONE ACQUISITION
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
For the Years Ended December 31, 1993, 1994 and 1995
and for the Three Months Ended March 31, 1995 and 1996
Three Months
Year Ended December 31, Ended March 31,
----------------------------------- ----------- -----------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(Unaudited)
REVENUES
Oil and gas sales $ 2,909,854 $ 6,738,087 $17,991,527 $ 2,923,944 $7,825,741
DIRECT OPERATING EXPENSES
Oil and gas operating 474,757 990,723 2,453,204 375,231 863,461
----------- ----------- ----------- ----------- -----------
EXCESS OF REVENUES OVER
DIRECT OPERATING EXPENSES $ 2,435,097 $ 5,747,364 $15,538,323 $ 2,548,713 $6,962,280
=========== =========== =========== =========== ===========
See Notes to Statements of Revenues and Direct Operating Expenses.
F-2
BLACK STONE ACQUISITION
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
(1) BASIS OF PRESENTATION -
On May 1, 1996, the Company acquired 100% of the capital stock of Black
Stone Oil Company and additional interests held by other working interest owners
in the Double A Wells field in East Texas as well as interests in certain
undeveloped oil and gas leases (the "Black Stone Acquisition") for total cash
consideration of approximately $104 million. The acquisition includes interests
in 19 producing wells (7.74 net wells).
The Company financed the $104 million acquisition and refinanced $58.7
million outstanding under its existing revolving credit facility and an existing
$10 million bridge loan which was to mature on July 31, 1996 with borrowings
under the new bank credit facility consisting of a $166 million revolving credit
facility and a $10 million bridge loan. Amounts outstanding under the new
revolving credit facility bear interest at the agent bank's base rate plus 1/2%
and are subject to a borrowing base determined semiannually by the banks. The
new revolving credit facility converts to a two year term loan on May 1, 1999.
Amounts outstanding under the new bridge loan bear interest at the agent bank's
base rate plus 3% and are payable in full on December 31, 1996.
The accompanying statements of revenues and direct operating expenses do
not include general and administrative expense, interest income or expense, a
provision for depreciation, depletion and amortization or any provision for
income taxes because the property interests acquired represent only a portion of
a business and the costs incurred by the sellers of the properties are not
necessarily indicative of the costs to be incurred by the Company.
Historical financial information reflecting financial position, results of
operations and cash flows of the Black Stone Acquisition is not presented
because all of the acquisition cost was assigned to the oil and gas property
interests. Accordingly, the historical statements of revenues and direct
operating expenses have been presented in lieu of the financial statements
required under Rule 3-05 of Securities and Exchange Commission Regulation S-X.
(2) SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED) -
Estimated Quantities of Proved Oil and Gas Reserves
The estimates of proved oil and gas reserves utilized in the preparation of
the financial statements were estimated by independent petroleum engineers in
accordance with guidelines established by the Securities and Exchange Commission
and the Financial Accounting Standards Board, which require that reserve reports
be prepared under existing economic and operating conditions. The Company
emphasizes that reserve estimates of new discoveries or undeveloped properties
are more imprecise than those of producing oil and gas properties. Accordingly,
these estimates are expected to change as future information becomes available.
F-3
BLACK STONE ACQUISITION
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES (Continued)
PROVED OIL AND GAS RESERVES AS OF DECEMBER 31, 1995:
Oil (Bbls) Gas (Mcf)
------------ ------------
Proved Reserves 5,302,000 98,549,000
============ ============
Proved Developed Reserves 3,794,000 70,831,000
============ ============
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil
and Gas Reserves
The standardized measure of discounted future net cash flows (the
"Standardized Measure") is prepared using assumptions required by the Financial
Accounting Standards Board. Such assumptions include the use of December 31,
1995 oil and gas prices and current costs for estimated future production and
development expenditures with no provision for escalation except as provided for
by contractual agreements. Discounted future net cash flows are calculated using
a 10% discount rate.
The Standardized Measure does not represent the Company's estimate of
future net cash flows or the value of proved oil and gas reserves. Probable and
possible reserves, which may become proved in the future, are excluded from the
calculations. Furthermore, the December 31, 1995 prices, used to determine the
standardized measure of discounted cash flows, are influenced by seasonal demand
and other factors and may not be the most representative in estimating future
revenues or reserve data.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS BEFORE INCOME
TAXES AT DECEMBER 31, 1995:
Future Cash Inflows $ 292,795,000
Future Costs:
Production (40,582,000)
Development (3,601,000)
Future Net Cash Flows 248,612,000
10% Discount Factor (100,024,000)
--------------
Standardized Measure of Discounted Future
Net Cash Flows before Income Taxes $ 148,588,000
==============
F-4
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The accompanying Pro Forma Consolidated Financial Statements have been
prepared by recording pro forma adjustments to the historical consolidated
financial statements of Comstock Resources, Inc. and subsidiaries (the
"Company"). The Pro Forma Consolidated Balance Sheet as of March 31, 1996 has
been prepared as if the Black Stone Acquisition was consummated on March 31,
1996. The Pro Forma Consolidated Statements of Operations for the year ended
December 31, 1995 and for the three months ended March 31, 1996 have been
prepared as if the Black Stone Acquisition and the 1995 Acquisitions, as
described in Note 1, were consummated immediately prior to January 1, 1995 and
January 1, 1996, respectively.
The Pro Forma Consolidated Financial Statements are not necessarily
indicative of the financial position or results of operations that would have
occurred had the transactions been effected on the assumed dates. Additionally,
future results may vary significantly from the results reflected in the Pro
Forma Consolidated Statements of Operations due to normal production declines,
changes in oil and gas prices, future transactions and other factors. These
statements should be read in conjunction with the Company's audited consolidated
financial statements and the related notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 and the Company's
consolidated financial statements and the related notes included in the
Company's quarterly report on Form 10-Q for the three months ended March 31,
1996.
P-1
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (Unaudited)
MARCH 31, 1996
ASSETS
Pro Forma
Adjustments
(Note 2)
Black Stone
Historical Acquisition(a) Pro Forma
------------- ------------- -------------
Cash and Cash Equivalents $ 657,816 $ 5,206,600 $ 5,864,416
Accounts Receivable:
Oil and gas sales 6,780,000 - 6,780,000
Gas marketing sales 11,325,600 - 11,325,600
Joint interest operations 1,448,177 - 1,448,177
Prepaid Expenses and Other 615,980 - 615,980
Inventory 91,005 - 91,005
------------- ------------- -------------
Total current assets 20,918,578 5,206,600 26,125,178
------------- ------------- -------------
Property and Equipment:
Oil and gas properties 156,918,688 100,300,000 257,218,688
Other 2,776,143 - 2,776,143
Accumulated depreciation,
depletion and amortization (58,025,109) - (58,025,109)
------------- ------------- -------------
Net property and equipment 101,669,722 100,300,000 201,969,722
------------- ------------- -------------
Other Assets 933,768 (240,579) 693,189
------------- ------------- -------------
$123,522,068 $105,266,021 $228,788,089
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Portion of Long-term Debt $ 10,260,566 $ - $ 10,260,566
Accounts Payable and Accrued Expenses 18,958,008 1,966,021 20,924,029
------------- ------------- -------------
Total current liabilities 29,218,574 1,966,021 31,184,595
------------- ------------- -------------
Long-term Debt, less Current Portion 59,505,625 103,300,000 162,805,625
Deferred Revenue 322,501 - 322,501
Other Noncurrent Liabilities 1,185,071 - 1,185,071
Stockholders' Equity:
Preferred stock -
$10.00 par, 3,100,000 shares outstanding 31,000,000 - 31,000,000
Common stock -
$.50 par, 13,120,242 shares outstanding 6,560,122 - 6,560,122
Additional paid-in capital 38,861,759 - 38,861,759
Retained deficit (43,067,990) - (43,067,990)
Less: Deferred compensation -
restricted stock (63,594) - (63,594)
------------- ------------- -------------
Total stockholders' equity 33,290,297 - 33,290,297
------------- ------------- -------------
$123,522,068 $105,266,021 $228,788,089
============= ============= =============
See Notes to Pro Forma Consolidated Financial Statements.
P-2
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
For the Year Ended December 31, 1995
Pro Forma Adjustments (Note 2)
-----------------------------------------
Black Stone The 1995
Historical Acquisition (b)Acquisitions Other Pro Forma
------------- ------------- ------------ ------------- -------------
Revenues:
Oil and gas sales $ 22,090,894 $ 17,991,527 $ 8,041,986 $ - $ 48,124,407
Gas marketing sales 50,078,366 - 506,957 - 50,585,323
Gas gathering and processing 600,212 - 62,418 - 662,630
Gain on sales of property 2,608,088 - - - 2,608,088
Other income 290,115 - 70,219 - 360,334
------------- ------------- ------------ ------------- -------------
Total revenues 75,667,675 17,991,527 8,681,580 - 102,340,782
------------- ------------- ------------ ------------- -------------
Expenses:
Oil and gas operating 7,426,626 2,453,204 3,214,250 - 13,094,080
Natural gas purchases 48,908,969 - 478,288 - 49,387,257
Gas gathering and processing 209,535 - 39,599 - 249,134
Depreciation, depletion
and amortization 8,613,042 - - 9,560,945 18,173,987
General and administive, net 1,979,283 - - (561,850) 1,417,433
Interest 5,541,680 - - 13,081,463 18,623,143
Impariment of oil and gas
properties 29,150,000 - - - 29,150,000
------------- ------------- ------------ ------------- -------------
Total expenses 101,829,135 2,453,204 3,732,137 22,080,558 130,095,034
------------- ------------- ------------ ------------- -------------
Income (loss) before income
taxes (26,161,460) 15,538,323 4,949,443 (22,080,558) (27,754,252)
Provision for income taxes - - - - -
------------- ------------- ------------ ------------- -------------
Income (loss) (26,161,460) 15,538,323 4,949,443 (22,080,558) (27,754,252)
------------- ------------- ------------ ------------- -------------
Preferred stock dividends (1,907,500) - - - (1,907,500)
------------- ------------- ------------ ------------- -------------
Net income (loss) attributable
to common stock $(28,068,960) $ 15,538,323 $ 4,949,443 $(22,080,558) $(29,661,752)
============= ============= ============ ============= =============
Net income (loss) per $ (2.24) $ (2.36)
============= =============
Weighted average common
shares outstanding 12,545,752 12,545,752
============= =============
See Notes to Pro Forma Consolidated Financial Statements.
P-3
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
For the Three Months Ended March 31, 1996
Pro Forma Adjustments (Note 2)
------------------------------
Black Stone
Historical Acquisition (b) Other Pro Forma
------------ ------------- ------------ ------------
Revenues:
Oil and gas sales $ 9,555,141 $ 7,825,741 $ - $17,380,882
Gas marketing sales 25,425,901 - - 25,425,901
Gas gathering and processing 153,611 - - 153,611
Other income 129,945 - - 129,945
------------ ------------- ------------ ------------
Total revenues 35,264,598 7,825,741 - 43,090,339
------------ ------------- ------------ ------------
Expenses:
Oil and gas operating 2,523,187 863,461 - 3,386,648
Natural gas purchases 24,793,593 - - 24,793,593
Gas gathering and processing 56,946 - 56,946
Depreciation, depletion
and amortization 2,621,358 - 2,453,244 (d) 5,074,602
General and administrative, net 411,833 - (42,799)(f) 369,034
Interest 1,848,470 - 2,143,475 (g) 3,991,945
------------ ------------- ------------ ------------
Total expenses 32,255,387 863,461 4,553,920 37,672,768
------------ ------------- ------------ ------------
Income before income taxes 3,009,211 6,962,280 (4,553,920) 5,417,571
Provision for income taxes - - - -
------------ ------------- ------------ ------------
Income 3,009,211 6,962,280 (4,553,920) 5,417,571
Preferred stock dividends (633,146) - - (633,146)
------------ ------------- ------------ ------------
Net income attributable
to common stock $ 2,376,065 $ 6,962,280 $(4,553,920) $ 4,784,425
============ ============= ============ ============
Net income attributable to common stock per share -
Primary $ 0.18 $ 0.35
============ ============
Fully diluted $ 0.15 $ 0.27
============ ============
Weighted average number of common and common
stock equivalent shares outstanding -
Primary 13,522,330 13,522,330
============ ============
Fully diluted 19,928,710 19,928,710
============ ============
See Notes to Pro Forma Consolidated Financial Statements.
P-4
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) BASIS OF PRESENTATION -
On May 1 and May 2, 1996, the Company acquired 100% of the capital stock of
Black Stone Oil Company and additional interests held by other working interest
owners in the Double A Wells field in East Texas as well as interests in certain
undeveloped oil and gas leases (the "Black Stone Acquisition") for total cash
consideration of approximately $104 million. Black Stone Oil Company is the
operator of the oil and gas properties which were acquired. The acquisition
includes interests in 19 producing wells (7.74 net wells).
The Company financed the $104 million acquisition and refinanced $58.7
million outstanding under its existing revolving credit facility and an existing
$10 million bridge loan which was to mature on July 31, 1996 with borrowings
under the new bank credit facility consisting of a $166 million revolving credit
facility and a $10 million bridge loan. Amounts outstanding under the new
revolving credit facility bear interest at the agent bank's base rate plus 1/2%
and are subject to a borrowing base determined semiannually by the banks. The
new revolving credit facility converts to a two year term loan on May 1, 1999.
Amounts outstanding under the new bridge loan bear interest at the agent bank's
base rate plus 3% and are payable in full on December 31, 1996.
On July 31, 1995, the Company closed an acquisition of producing oil and
gas properties and natural gas gathering systems located in East Texas and North
Louisiana from Sonat Exploration Company, a wholly owned subsidiary of Sonat
Inc. ("Sonat") for total cash consideration of $50.6 million. The Company
acquired interests in 319 (188 net) oil and gas wells from Sonat for $49.1
million. The interests were acquired with an effective date of March 1, 1995. In
addition, the Company acquired the managing general partner interest of and a
20.31% limited partner interest in Crosstex Pipeline Partners, Ltd.
("Crosstex"), as well as certain other gas gathering systems primarily located
in Harrison County, Texas from Sonat for cash consideration of $1.5 million. On
May 15, 1995, the Company closed an acquisition of producing offshore oil and
gas properties located in Louisiana State waters in the Gulf of Mexico. The
Company acquired interests in 14 oil and gas wells (3.5 net wells) for
$8,199,000. The effective date of the acquisition was November 1, 1994. During
1995, the Company acquired interests in the Lake LaRose field in South Louisiana
for approximately $1 million. The three acquisitions closed in 1995 are
hereafter referred to as the "1995 Acquisitions."
The accompanying Pro Forma Consolidated Balance Sheet at March 31, 1996 and
the Pro Forma Consolidated Statements of Operations for the year ended December
31, 1995 and the three months ended March 31, 1996, have been prepared assuming
the Company consummated, immediately prior to each of the periods presented, the
Black Stone Acquisition and the 1995 Acquisitions, funded by borrowings under
the Company's bank credit facility (see Note 2).
No adjustment has been made to reflect income taxes related to the Black
Stone Acquisition or the 1995 Acquisitions due to the Company's net operating
loss carryforwards which would offset any current or deferred tax liabilities.
The Pro Forma Consolidated Statements of Operations are not necessarily
indicative of the results of operations had the above described transactions
occurred on the assumed dates.
P-5
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
(2) PRO FORMA ADJUSTMENTS -
Pro forma adjustments necessary to adjust the Consolidated Balance Sheet
and Statements of Operations are as follows:
(a) To record the Black Stone Acquisition funded by borrowings under the
Company's new bank credit facility.
(b) To record revenue and direct operating expenses of the Black Stone
Acquisition, based on the statements of revenue and direct operating
expenses for the year ended December 31, 1995 and for the three months
ended March 31, 1996.
(c) To record revenue and direct operating expenses of the 1995
Acquisitions.
(d) To record estimated depreciation and depletion expense attributable to
the Black Stone Acquisition and 1995 Acquisitions using the
unit-of-production method applied to the net cost of the properties
acquired.
(e) To record the increase in general and administrative expense of
$164,025 less the operating fee income of $725,875 attributable to
Black Stone and the 1995 Acquisitions for the year ended December 31,
1995.
(f) To record operating fee income of $42,799 attributable to the Black
Stone Acquisition for the three months ended March 31, 1996.
(g) To record interest expense attributable to the increase in debt to
finance the purchase of the Black Stone Acquisition and the 1995
Acquisitions. Interest expense is based upon the weighted average
interest rate incurred by the Company under its new bank credit
facility in the case of the Black Stone Acquisition or under the
existing credit facility in the case of the 1995 Acquisitions, assuming
the entire cost of the acquisitions had been funded with bank
borrowings at January 1 of each period.
P-6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMSTOCK RESOURCES, INC.
Dated: May 7, 1996 By:/s/ROLAND O. BURNS
------------------
Roland O. Burns
Senior Vice President, Chief Financial Officer,
Secretary, and Treasurer (Principal Financial
and Accounting Officer)