SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report
March 31, 1997
Rio Grande, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-8287 74-1973357
(Commission File Number) (I.R.S. Employer Identification Number)
10101 Reunion Place, Suite 210
San Antonio, Texas 78216-4156
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(210) 308-8000
Item 2. Acquisition or Disposition of Assets
On January 16, 1997, Rio Grande Offshore, Ltd., a wholly-owned
affiliate of Rio Grande, Inc. (the "Company") acquired producing oil and gas
properties in the Righthand Creek Field ("Righthand Creek Properties") located
in Allen Parish, Louisiana from Brechtel Energy Corporation for approximately
$15.3 million.
This information was previously filed on Form 8-K dated January 31,
1997.
Item 7. Financial Statements and Exhibits
The following information was not included in the previously filed Form
8-K dated January 31, 1997.
(a) Financial Statements
Statements of Revenues and Direct Operating Expenses for the
Righthand Creek Properties.
(b) Pro Forma Financial Information
Pro Forma Condensed Combined Statements of Operations
Pro Forma Condensed Combined Balance Sheet
(c) Exhibits - None.
2
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIO GRANDE, INC.
By: /s/
Guy Bob Buschman, President
Dated: March 31, 1997
3
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF CERTAIN OIL AND GAS PROPERTIES
OF BRECHTEL ENERGY CORPORATION
DECEMBER 31, 1996 AND 1995
4
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Rio Grande, Inc.:
We have audited the accompanying statements of revenues and direct operating
expenses of the oil and gas property interests acquired from Brechtel Energy
Corporation (collectively, the "Righthand Creek Properties") for the years ended
December 31, 1996 and 1995. These statements of revenues and direct operating
expenses are the responsibility of the Company's management. Our responsibility
is to express an opinion on these statements of revenues and direct operating
expenses 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 statements of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements 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 financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying statements were prepared as described in Note 1 for the purpose
of complying with certain rules and regulations of the Securities and Exchange
Commission ("SEC") for inclusion in certain SEC regulatory reports and filings
and are not intended to be a complete financial presentation.
In our opinion, the accompanying statements of revenues and direct operating
expenses present fairly, the revenues and direct operating expenses of the
Righthand Creek Properties for the years ended December 31, 1996 and 1995, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
March 31, 1997
5
STATEMENTS OF REVENUES AND DIRECT OPERATING
EXPENSES OF CERTAIN OIL AND GAS PROPERTIES OF
BRECHTEL ENERGY CORPORATION
Nine Months Ended
Year Ended December 31, October 31,
---------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
Revenues $5,143,400 2,079,679 3,777,278 1,474,131
Direct operating expenses 1,396,943 467,211 1,108,706 325,109
---------- ---------- ---------- ----------
Excess of revenues over
direct operating expenses $3,746,457 1,612,468 2,668,572 1,149,022
========== ========== ========== ==========
See accompanying notes to statements of revenues and direct operating expenses.
6
NOTES TO STATEMENTS OF REVENUES AND DIRECT
OPERATING EXPENSES OF CERTAIN OIL AND GAS PROPERTIES OF
BRECHTEL ENERGY CORPORATION
(1) Basis of Presentation
On January 16, 1997, Rio Grande Offshore, Ltd. ("Offshore") completed
the acquisition of producing oil and gas properties from Brechtel Energy
Corporation ("Brechtel") in the Righthand Creek Field ("Righthand Creek")
located in Allen Parish, Louisiana. The effective date of the Righthand Creek
acquisition was November 1, 1996. The acquisition price for Righthand Creek was
approximately $15.3 million for total proved reserves of approximately 2 million
barrels of oil and 2.7 Bcf natural gas net to Offshore's interest. The Righthand
Creek acquisition was funded by approximately $9 million borrowed from Comerica
Bank - Texas and approximately $6 million of the proceeds of a $10 million
private placement of preferred stock to Koch Exploration Company ("Koch"), an
affiliate of Koch Industries, Inc. Rio Grande Drilling Company is the operator
for the seven existing wells in the Righthand Creek properties.
The accompanying statements of revenues and direct operating expenses
were derived from the historical accounting records of Brechtel. Direct
operating expenses include payroll, lease and well repairs, maintenance, and
other direct operating expenses.
Full historical financial statements, including exploration expenses,
general and administrative expenses, interest expense and income tax expense
have not been presented because they have not historically been allocated at
this level. Historical depletion expense has not been included in such
statements as the Company will adjust the basis in its purchase price allocation
and the historical depletion will no longer be relevant.
The information presented for the nine months ended October 31, 1996
and 1995 is unaudited, but in the opinion of Management includes all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
the results of operations. Results of operations for the nine months ended
October 31, 1996 and 1995 are not necessarily indicative of the results to be
expected for the full year.
7
NOTES TO STATEMENTS OF REVENUES AND DIRECT
OPERATING EXPENSES OF CERTAIN OIL AND GAS
PROPERTIES OF BRECHTEL ENERGY CORPORATION
(2) Supplemental Oil and Gas Reserve Information (Unaudited)
Total proved and proved developed oil and gas reserves of the Righthand
Creek Properties at December 31, 1996 have been estimated based on
reserve estimates prepared as of December 31, 1996. No comparable
estimates were available for prior periods. Therefore, reserves for
1995 have been calculated by adjusting the December 31, 1996 amounts
for prior period producing activities and, consequently, no revisions
of previous estimates have been reflected. All reserve estimates are
based on economic and operating conditions existing at December 31,
1996. The future net cash flows from production of these proved reserve
quantities were computed by applying current prices of oil and gas
(with consideration of price changes only to the extent provided by
contractual arrangements) as of December 31, 1996 to estimated future
production of proved oil and gas reserves less the estimated future
expenditures (based on current costs) as of December 31, 1996, to be
incurred in developing and producing the proved reserves. Income taxes
were calculated at statutory rates without consideration of any
remaining historical tax basis of the Righthand Creek Properties. The
Righthand Creek Properties are located in Louisiana. Exploration and
development costs incurred during 1996 and 1995 are not available.
Estimated Quantities of Oil and Gas Reserves:
Year Ended December 31,
-------------------------------------
1996 1995
----------------- ----------------
Oil Gas Oil Gas
(Mbbl) (Mmcf) (Mbbl) (Mmcf)
----- ------ ----- -----
Proved Reserves:
Beginning of year 2,204 2,916 2,322 2,916
Production 223 182 118 -0-
----- ----- ----- -----
End of year 1,981 2,734 2,204 2,916
===== ===== ===== =====
Proved Developed Reserves:
Beginning of year 1,873 2,458 1,991 2,458
===== ===== ===== =====
End of year 1,650 2,276 1,873 2,458
===== ===== ===== =====
8
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil
and Gas Reserves (in $000s):
As of December 31,
1996 1995
---- ----
Future cash inflows $ 60,803 65,946
Future production costs (13,553) (14,950)
Future development costs (1,245) (1,245)
-------- --------
Future cash flows before income taxes 46,005 49,751
Income taxes (15,642) (16,915)
-------- --------
Future net cash flows 30,363 32,836
10% discount factor (7,869) (8,510)
-------- --------
Standardized measure of discounted future net
cash flows $ 22,494 24,326
======== ========
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves (in $000s):
As of December 31,
1996 1995
---- ----
Standardized measure, beginning of year $ 24,326 25,114
Sales, net of production costs (3,746) (1,612)
Net change in income taxes 1,273 548
Accretion of discount 641 276
-------- --------
Standardized measure, end of year $ 22,494 24,326
======== ========
9
RIO GRANDE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The accompanying pro forma condensed combined balance sheet as of
October 31, 1996 has been prepared as if the acquisition of producing oil and
gas properties from Brechtel Energy Corporation was consummated on that date.
The accompanying pro forma condensed combined statement of operations
for the year ended January 31, 1996 has been prepared as if the acquisitions
from Fortune Petroleum Corporation, Belle Oil, Inc. and Brechtel Energy
Corporation had occurred at the beginning of the respective periods. The
historical amounts for Fortune Petroleum Corporation, Belle Oil, Inc., and
Brechtel Energy Corporation are for the year ended December 31, 1995. The
acquisition from Fortune Petroleum Corporation occurred on March 11, 1996 and
was previously reported on Form 8-K on March 26, 1996 and Form 8-K/A on May 24,
1996. The acquisition from Belle Oil, Inc. occurred on April 12, 1996 and was
previously reported on Form 8-K on April 29, 1996 and Form 8-K/A on June 26,
1996.
The accompanying pro forma condensed combined statement of operations
for the nine months ended October 31, 1996 reflect the acquisition from Brechtel
Energy Corporation. The pro forma adjustments for the nine months ended October
31, 1996 do not include the pro forma affects of the acquisitions from Fortune
Petroleum Corporation and Belle Oil, Inc. as these amounts are not significant.
The pro forma financial information may not be indicative of the
results that would have occurred if the acquisition had been effective on the
dates indicated or of the results that may be obtained in the future. The pro
forma financial information should be read in conjunction with the financial
statements and notes thereto of the Company.
10
RIO GRANDE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(Unaudited)
Fiscal Year Ended January 31, 1996 ($000's)
---------------------------------------------------------
Historical
-----------------------------------
Rio Fortune Belle Brechtel
Grande, Petroleum Oil, Energy Pro Forma Pro Forma
Inc. Corp. Inc. Corp. Adjustments Balances
Net revenues $ 3,632 511 1,277 2,080 -0- 7,500
----- ----- ------ ------ ---- ------
Costs and expenses
Operating expense 2,278 38 561 467 -0- 3,344
Depreciation,
depletion and
amortization 1,171 -0- -0- -0- 1,376 (c) 2,547
Provision for
abandonment 180 -0- -0- -0- -0- 180
General and
administrative 1,336 -0- -0- -0- 57 (h) 1,393
----- ------ ------ ------ ----- ------
Total costs and
expenses 4,965 38 561 467 1,433 7,464
----- ------ ------ ------ ----- ------
Earnings (loss)
from operations (1,333) 473 716 1,613 (1,433) 36
Interest expense (318) -0- -0- -0- (1,318) (d) (1,636)
Interest income 59 -0- -0- -0- -0- 59
Gain on sale of
assets 1,259 -0- -0- -0- -0- 1,259
Minority interest
of limited partners (129) -0- -0- -0- -0- (129)
------ ------ ------ ------ ------ -------
Earnings (loss) before
income taxes (462) 473 716 1,613 (2,751) (411)
Income taxes 3 -0- -0- -0- -0- (j) 3
----- ------ ------ ------ ------- -------
Net earnings (loss) (465) 473 716 1,613 (2,751) (414)
Dividends -0- -0- -0- -0- (1,487) (1,487)
----- ------ ------ ------ ------- -------
Net earnings (loss)
applicable to
common stock $ (465) 473 716 1,613 (4,238) (1,901)
===== ====== ====== ======= ======= =======
Net loss per common
share $ (0.08) $ (0.34)
===== =======
Weighted average
common shares
outstanding 5,552,760 (i) 5,552,760
========= ==========
See Notes to the Pro Forma Condensed Combined Financial Statements.
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RIO GRANDE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(Unaudited)
Nine Months Ended October 31, 1996
--------------------------------------------------------
Historical
--------------------------
Brechtel
Rio Grande Energy Pro Forma Pro Forma
Inc. Corp. Adjustments Balances
------------ --------- ----------- ----------
Net revenues $ 3,732,930 3,777,278 -0- 7,510,208
--------- --------- --------- ----------
Costs and expenses:
Operating expense 2,020,071 1,108,706 -0- 3,128,777
Depreciation, depletion
and amortization 857,073 -0- 1,175,974 (c) 2,033,047
Provision for abandonment 60,000 -0- -0- 60,000
General and administrative 934,900 -0- -0- 934,900
--------- --------- ---------- ----------
Total costs and
expenses 3,872,044 1,108,706 1,175,974 6,156,724
--------- --------- ---------- ----------
Earnings (loss) from
operations (139,114) 2,668,572 (1,175,974) 1,353,484
Interest expense (488,624) -0- (387,959)(d) (876,583)
Interest income 56,579 -0- -0- 56,579
Gain on sale of assets 361,128 -0- -0- 361,128
Minority interest of
limited partners (64,944) -0- -0- (64,944)
---------- ---------- ---------- ----------
Earnings (loss) before
income taxes (274,975) 2,668,572 (1,563,933) 829,664
Income taxes 5,648 -0- -0- (j) 5,648
---------- ---------- ---------- ----------
Net earnings (loss) (280,623) 2,668,572 (1,563,933) 824,016
Dividends -0- -0- (1,105,875)(f) (1,105,875)
---------- ---------- ---------- -----------
Net earnings (loss)
applicable to common
stock $ (280,623) 2,668,572 (2,669,808) (281,859)
========== =========== ========== ===========
Net loss per common
share $ (0.05) $ (0.05)
========== ===========
Weighted average common
shares outstanding 5,552,760 (i) 5,552,760
========== ===========
See Notes to the Pro Forma Condensed Combined Statements of Operations.
12
RIO GRANDE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
OCTOBER 31, 1996
(Unaudited)
Rio Grande Pro Forma Pro Forma
Inc. Adjustments Balances
ASSETS
Current assets $ 1,361,997 1,958,580 (a)(b)(g) 3,320,577
Property & equipment, net 8,031,186 14,534,924 (g) 22,566,110
Abandonment escrow fund 1,002,294 -0- 1,002,294
Other assets, net 300,547 506,496 (a)(b) 807,043
--------- ---------- -----------
Total Assets $10,696,024 17,000,000 27,696,024
========== ========== ===========
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities 2,443,535 2,223,909 (a)(e) 4,667,444
Accrued platform
abandonment expense 984,391 -0- 984,391
Minority interest 102,523 -0- 102,523
Long-term debt, excluding
current installments 5,589,769 4,776,091 (a)(e) 10,365,860
Redeemable preferred stock -0- 10,000,000 (b) 10,000,000
Stockholders' equity 1,575,806 -0- 1,575,806
--------- ---------- -----------
Total Liabilities and
Stockholders' Equity $10,696,024 17,000,000 27,696,024
========== ========== ===========
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RIO GRANDE, INC. AND SUBSIDIARIES
NOTES TO THE PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(a) To record loan proceeds received from Comerica Bank - Texas.
(b) To record Redeemable Preferred Stock issued to Koch Exploration
Company.
(c) To provide for depreciation, depletion and amortization of the oil and
gas properties and other assets acquired based on their production
during the respective periods after giving effect to the purchase
price.
(d) To provide for the additional interest expense for the debt incurred in
the acquisitions.
(e) To adjust current and long-term portion of long-term debt.
(f) To record the stock and cash dividends on Redeemable Preferred Stock.
(g) To record the acquisition of Righthand Creek properties.
(h) To provide for additional personnel resulting from the acquisition of
Belle properties.
(i) Net loss per common share is computed using the weighted average shares
of common stock outstanding applied to net earnings (loss) after giving
affect to dividends on Redeemable Preferred Stock.
(j) Due to significant tax carryforwards available to reduce the Company's
future tax liability, there is no tax effect as a result of the
acquisitions.
14