SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Commission
Date of Report (Date of earliest event reported)
December 18, 1997
HOWELL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-8704 74-1223027
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1111 Fannin, Suite 1500, Houston, Texas 77002
(Address of principal office) (Zip Code)
Registrant's telephone number, including area code: (713) 658-4000
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Historical Statement of Revenues and Direct Operating Expenses for
the Nine Months Ended September 30, 1997 and 1996 (unaudited) and
for the Years Ended December 31, 1996, 1995 and 1994.
Supplementary Financial Information for Oil and Gas Producing
Activities (unaudited).
(b) Pro forma financial information.
Pro Forma Condensed Consolidated Balance Sheet (unaudited) of Howell
Corporation as of September 30, 1997.
Pro Forma Condensed Consolidated Statements of Earnings (unaudited)
of Howell Corporation for the nine months ended September 30, 1997
and for the fiscal year ended December 31, 1996.
(c) Exhibits.
2 Purchase and Sale Agreement dated November 20, 1997 between
Howell Petroleum Corporation and Amoco Production Company
(previously filed).
23 Consent of Independent Accountants concerning incorporation by
reference in Howell's Registration Statement on Form S-8
(filed herewith).
99.1 Credit Agreement dated December 17, 1997 between Howell
Petroleum Corporation and Bank of Montreal (previously filed).
99.2 Guaranty Agreement dated December 17, 1997 between Howell
Corporation and Bank of Montreal (previously filed).
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.
HOWELL CORPORATION
Date: March 3, 1998 By:/s/ ROBERT T. MOFFETT
-------------------------
Robert T. Moffett
Vice President
Report of Independent Accountants
February 27, 1998
To the Board of Directors of
Howell Corporation
We have audited the accompanying historical statement of revenues
and direct operating expenses of the Oil and Gas Properties
Acquisition for the years ended December 31, 1996, 1995 and 1994.
This statement is the responsibility of the management of the owner
of the Properties. Our responsibility is to express an opinion on
this statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the
statement. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying statement, as described in Note 1, was prepared for
the purpose of complying with certain rules and regulations of the
Securities and Exchange Commission for inclusion in Form 8-K which
will be filed by Howell Corporation. It is not intended to be a
complete presentation of the financial condition, operations and
cash flows of the Properties.
In our opinion, the statement referred to in the first paragraph of
this report presents fairly, in all material respects, the revenues
and direct operating expenses of the Properties as described in
Note 1 for the years ended December 31, 1996, 1995 and 1994, in
conformity with generally accepted accounting principles.
As described in Note 2 to the statement, these properties had
significant transactions with related parties.
PRICE WATERHOUSE LLP
Chicago, Illinois
Oil and Gas Properties Acquisition
Historical Statement of Revenues and Direct Operating Expenses
Years Ended December 31, 1996, 1995 and 1994 and
Unaudited Nine Months Ended September 30, 1997 and 1996
- --------------------------------------------------------------------------------
(in thousands) For the nine
months ended For the years ended
September 30, December 31,
-------------------- ------------------------------
1997 1996 1996 1995 1994
(unaudited)(unaudited)
Revenues:
Crude oil and condensate $ 33,691 $ 37,906 $ 52,498 $ 44,353 $ 43,042
Natural gas liquids 636 528 761 833 1,171
Natural gas 1,736 999 2,484 1,834 2,759
Plant and gathering income 4,235 3,598 5,435 4,076 6,409
--------- --------- --------- -------- ---------
Total 40,298 43,031 61,178 51,096 53,381
--------- --------- --------- -------- ---------
Direct operating expenses:
Well operating expense 11,037 11,505 15,834 17,058 16,094
Production taxes 3,647 5,593 6,445 5,675 7,297
Facility and plant expense 1,792 2,042 2,591 2,642 5,393
Repair well expense 240 543 816 1,049 949
Other expense 33 56 68 42 178
--------- --------- --------- -------- ---------
Total 16,749 19,739 25,754 26,466 29,911
--------- --------- --------- -------- ---------
Revenues in excess of direct
operating expenses $ 23,549 $ 23,292 $ 35,424 24,630 $ 23,470
--------- --------- --------- -------- ---------
The accompanying notes are an integral part of this financial statement.
Oil and Gas Properties Acquisition
Notes to Historical Financial Statement of Revenues and
Direct Operating Expenses
December 31, 1996, 1995 and 1994 and
Unaudited September 30, 1997 and 1996
- --------------------------------------------------------------------------------
1. Basis of Presentation and Significant Accounting Policies
On November 20, 1997, Howell Petroleum Corporation, a wholly-owned
subsidiary of Howell Corporation ("Howell"), entered into a Purchase
and Sale Agreement (the "Agreement") with a major oil company (the "Oil
Company") to acquire the interests in certain producing oil and gas
properties (the "Properties") which are located in Wyoming, Montana,
Colorado and North Dakota as described in Exhibit A to the Agreement.
The accompanying statement of revenues and direct operating expenses
("Statement") was prepared from the historical accounting records of
the Oil Company which are prepared on the accrual basis and the
successful efforts method of accounting for oil and gas activities, in
accordance with generally accepted accounting principles.
Complete financial statements, including a balance sheet, are not
presented as the Properties were not maintained as a separate business
unit and assets, liabilities or indirect operating costs applicable to
the Properties were not segregated. It is not practicable to identify
all assets, liabilities or indirect operating costs applicable to the
Properties.
Oil revenues and associated direct operating expenses relate to the
net revenue interest and net working interest, respectively, in the
Properties. With respect to gas sales, the sales method is used for
recording revenues. Under this approach, each party recognizes revenue
based on sales actually made regardless of its proportionate share of
the related production. Gas imbalances related to production on the
Properties do not have a material impact on the Statement. The
Statement does not include general and administrative expenses,
interest, or provisions for depreciation, depletion and amortization
and dismantlement costs, or for taxes on income.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and direct
operating expenses during the reporting period. Actual results could
differ from those estimates.
2. Related Party Transactions
The Oil Company was the operator of and purchased a significant
portion of production from the Properties based on the Oil Company's
posted prices which represent the published prices that the Oil Company
will pay for production at the point of delivery.
3. Commitments and Contingencies
In the course of its business affairs and operations, the owner of the
Properties is subject to possible loss contingencies arising from
government, environmental and health and safety laws and regulations
and third-party litigation. There are no matters which, in the opinion
of management, will have a material adverse effect on the financial
results of the Properties.
Oil and Gas Properties Acquisition
Supplementary Financial Information for Oil and Gas
Producing Activities (Unaudited)
December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Estimated Quantities of Proved Oil and Gas Reserves
In the absence of relevant detailed information from the Oil Company, reserve
information presented below is based on Howell management's estimate of
proved reserves at December 31, 1997, adjusted for historical production from
January 1, 1994 to December 31, 1997.
Proved reserves are estimated quantities of crude oil, including natural gas
liquids, and natural gas which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Proved
developed reserves are those which are expected to be recovered through
existing wells with existing equipment and operating methods. Below are the
net quantities of proved reserves and proved developed reserves for the
Properties:
Oil Gas
(Mbbls) (Mmcf)
Proved reserves at December 31, 1993 46,151 28,358
Production 3,115 1,822
--------- ---------
Proved reserves at December 31, 1994 43,036 26,536
Production 2,936 1,553
--------- ---------
Proved reserves at December 31, 1995 40,100 24,983
Production 2,711 1,834
--------- ---------
Proved reserves at December 31, 1996 37,389 23,149
--------- ---------
Proved developed reserves at:
December 31, 1994 42,542 26,536
--------- ---------
December 31, 1995 39,606 24,983
--------- ---------
December 31, 1996 36,895 23,149
--------- ---------
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves
The "Standardized Measure of Discounted Future Net Cash Flows Relating to the
Proved Oil and Gas Reserves" (Standardized Measure) has been prepared in
accordance with Statement of Financial Accounting Standards No. 69. The
Standardized Measure does not purport to present the fair market value of the
proved oil and gas reserves. This would require consideration of expected
future economic and operating conditions, which are not taken into account in
calculating the Standardized Measure.
The amounts shown are based on prices and costs at the end of each period and
a ten percent annual discount factor. No deduction has been made for
depletion, depreciation or any indirect costs such as general corporate
overhead or interest expense.
Oil and Gas Properties Acquisition
Supplementary Financial Information for Oil and Gas
Producing Activities (Unaudited)
December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Set forth below is the Standardized Measure (before income taxes) relating to
proved oil and gas reserves at:
(in thousands) December 31,
------------------------------
1996 1995 1994
Future cash inflows $ 879,146 $ 659,435 $ 611,957
Future production and development costs 330,278 328,157 310,372
--------- --------- ---------
Future net cash inflows 548,868 331,278 301,585
Ten percent annual discount 252,080 152,147 138,510
--------- --------- ---------
Standardized Measure (before income taxes)
of discounted future net cash flows $ 296,788 $ 179,131 $ 163,075
--------- --------- ---------
The Standardized Measure of discounted future net cash flows is based on the
following oil and gas prices at:
December 31,
-------------------------
1996 1995 1994
Oil (per Bbl) $ 21.59 $ 15.53 $ 13.67
Gas (per Mcf) 3.10 1.47 0.89
In the absence of relevant detailed information on realizations from the Oil
Company, these prices represent year-end spot prices for WTI crude oil and
pipeline nomination prices for gas delivered at Henry Hub, both adjusted for
estimated differentials to reflect realizations in the areas of production.
The following is an analysis of the changes in the Standardized Measure
(before income taxes):
(in thousands) 1996 1995 1994
Balance at January 1 $ 179,131 $ 163,075 $ 133,254
Changes resulting from:
Sales, net of production costs (32,580) (23,196) (22,454)
Net changes in prices and costs 132,324 22,945 38,950
Accretion of discount 17,913 16,307 13,325
----------- ----------- ----------
Balance at December 31 $ 296,788 $ 179,131 $ 163,075
----------- ----------- ----------
The prices of crude oil and natural gas have fluctuated over the past several
years, which effects the computed cash flows over the period shown. The
prices of crude oil and natural gas increased significantly towards the end
of 1996 and have decreased significantly since that time. Prices comparable
to those used in the standardized measure were $14.95 for crude oil and $1.76
for natural gas at December 31, 1997. Because the price of crude oil and
natural gas is likely to remain volatile in the future, price changes can be
expected to continue to significantly affect the standardized measure of
discounted future net cash flows.
HOWELL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated balance sheet as of
September 30, 1997 and the unaudited pro forma condensed consolidated
statements of earnings for the year ended December 31, 1996 and the nine
months ended September 30, 1997 gives effect to the acquisition of oil and gas
Properties ( the "Oil and Gas Properties") as if it occurred on September 30,
1997 and January 1, 1996, respectively.
The unaudited pro forma financial data presented are based upon the
historical consolidated financial statements of the Company and the
historical statements of revenues and direct operating expenses of the Oil
and Gas Properties and should be read in conjunction with such financial
statements and related notes thereto which are contained in the Company's
1996 Annual Report on Form 10-K, the Company's Quarterly Report on Form 10-Q
for the nine months ended September 30, 1997 and this Current Report on Form
8-K, as amended.
The pro forma financial data are based on assumptions and include adjustments
as explained in the notes to the unaudited pro forma condensed consolidated
financial statements, and the actual recording of the acquisition could
differ. The unaudited pro forma financial data are not necessarily
indicative of financial results that would have occurred had the acquisition
of the Oil and Gas Properties been effective on September 30, 1997 or January
1, 1996 and should not be viewed as indicative of operations of future
periods.
HOWELL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - UNAUDITED
As of September 30, 1997
-----------------------------------------------
Pro Forma
Howell Adjustments for the
Historical For Acquisition Acquisition
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents .................... $ 52 $ $ 52
Trade accounts receivable, less allowance
for doubtful accounts of $141 ............. 4,018 4,018
Other ........................................ 604 604
--------- --------- ---------
Total current assets ....................... 4,674 4,674
--------- --------- ---------
Property, plant and equipment:
Oil and gas properties (full cost method) 287,624 74,442 (a) 362,066
Fee mineral properties ....................... 18,184 18,184
Unproven ..................................... 41,017 (a) 41,017
Other ........................................ 2,665 2,665
--------- --------- ---------
308,473 115,459 423,932
Accumulated depreciation, depletion and
amortization .................................. (204,871) (204,871)
--------- --------- ---------
103,602 115,459 219,061
Investment in investees .......................... 18,602 18,602
Other ............................................ 2,335 658 (b) 2,993
--------- --------- ---------
Total assets ............................... $ 129,213 $ 116,117 $ 245,330
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long term debt ............ $ $ 20,000 (b) $ 20,000
Accounts payable ............................. 2,740 2,740
Accrued liabilities .......................... 6,832 6,832
Income tax payable ........................... 1,383 1,383
--------- --------- ---------
Total current liabilities .................. 10,955 20,000 30,955
--------- --------- ---------
Existing credit facility ......................... 3,500 (3,500)(b)
New credit facility .............................. 99,617 (b) 99,617
Senior Subordinated Notes
Deferred income taxes ............................ 21,950 21,950
Other liabilities ................................ 352 352
Shareholders' Equity ............................. 92,456 92,456
--------- --------- ---------
Total liabilities and Shareholders' equity $ 129,213 $ 116,117 $ 245,330
========= ========= =========
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
HOWELL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS - UNAUDITED
For the Nine Months Ended September 30, 1997
-------------------------------------------------------
Adjustments Pro Forma
Howell Acquisition for for the
Historical Historical Acquisition Acquisition
(In thousands, except per share amounts)
Revenues:
Oil and Gas ....................... $ 24,493 $ 40,298 (h) $ $ 64,791
-------- -------- -------- --------
Total revenues .................. 24,493 40,298 64,791
-------- -------- -------- --------
Costs and Expenses:
Lease operating expenses
including taxes - Oil & Gas .... 10,585 16,749 (h) 27,334
Depreciation, depletion, and
amortization ................... 6,774 3,459 (i) 10,233
Selling, general and administrative
expenses - Oil & Gas ........... 3,656 3,656
-------- -------- -------- --------
21,015 16,749 3,459 41,223
-------- -------- -------- --------
Other income (expense):
Interest expense .................. (1,064) (6,691)(f) (7,755)
Interest income ................... 75 75
Net earnings of investees ......... 736 736
Other-net ......................... 128 128
-------- -------- -------- --------
(125) (6,691) (6,816)
-------- -------- -------- --------
Earnings before income taxes .......... 3,353 23,549 (10,150) 16,752
Provision for income taxes ............ 1,062 8,478 (e) (3,654)(g) 5,886
-------- -------- -------- --------
Net earnings from continuing
operations ......................... $ 2,291 $ 15,071 $ (6,496) $ 10,866
======== ======== ======== ========
Basic earnings per common share -
continuing operations .............. $ 0.10 $ 1.80
======== ========
Weighted average common
shares outstanding (basic) ........ 5,034 5,034
======== ========
Diluted earnings per common share -
continuing operations .............. $ 0.09 $ 1.49
======== ========
Weighted average common
shares outstanding (diluted) ...... 5,220 7,311 (j)
======== ========
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
HOWELL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS - UNAUDITED
For the Fiscal Year Ended December 31, 1996
------------------------------------------------------
Pro Forma
Howell Acquisition Adjustments for the
Historical Historical For Acquisition Acquisition
(In thousands, except per share amounts)
Revenues:
Oil and Gas ....................... $ 33,868 $ 61,178 (c) $ $ 95,046
Other (1) ......................... 650,648 650,648
--------- --------- --------- ---------
Total revenues .................. 684,516 61,178 745,694
--------- --------- --------- ---------
Costs and Expenses:
Lease operating expenses
including taxes - Oil & Gas .... 13,773 25,754 (c) 39,527
Depreciation, depletion, and
amortization ................... 9,694 3,823 (d) 13,517
Selling, general and administrative
expenses - Oil & Gas ........... 5,313 5,313
Other (1) ......................... 641,037 641,037
--------- --------- --------- ---------
669,817 25,754 3,823 699,394
--------- --------- --------- ---------
Other income (expense):
Interest expense .................. (6,988) (9,251)(f) (16,239)
Interest income ................... 110 110
Net earnings of investees ......... 181 181
Gain on conveyance of assets ...... 13,841 13,841
Other-net ......................... (69) (69)
--------- --------- --------- ---------
7,075 (9,251) (2,176)
--------- --------- --------- ---------
Earnings before income taxes .......... 21,774 35,424 (13,074) 44,124
Provision for income taxes ............ 7,995 12,753 (e) (4,707)(g) 16,041
--------- --------- --------- ---------
Net earnings from continuing
operations ......................... $ 13,779 $ 22,671 $ (8,367) $ 28,083
========= ========= ========= =========
Basic earnings per common share -
continuing operations .............. $ 2.30 $ 5.20
========= =========
Weighted average common
shares outstanding (basic) ......... 4,937 4,937
========= =========
Diluted earnings per common share -
continuing operations .............. $ 1.93 $ 3.94
========= =========
Weighted average common
shares outstanding (diluted) ...... 7,129 7,129
========= =========
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
(1) On December 1, 1996 Genesis Crude Oil, L.P., a Delaware limited partnership ("Buyer"), Genesis Energy, L.P., a Delaware
limited partnership, and Genesis Energy, L.L.C., a Delaware limited liability company, entered into a
Purchase & Sale and Contribution & Conveyance Agreement ("Agreement") with Howell Corporation and certain of
its subsidiaries ("Howell") and Basis Petroleum, Inc.
Pursuant to the Agreement, Howell agreed to sell and convey certain of its assets to Buyer. These assets consisted of
the crude oil gathering and marketing operations and pipeline operations of Howell.
On December 31, 1996, the Company sold 100% of the outstanding common stock of Howell Transportation Services, Inc.
following the transfer of all assets and liabilities associated with crude oil gathering to Genesis.
These revenues, costs and expenses (Operating, depreciation, selling, general and administrative expenses of the assets sold)
represent the financial activity associated with the Company's assets prior to the aforementioned transactions.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) To record the purchase price of the acquisition of the Oil and Gas
Properties. The allocation of the pro forma purchase price under the purchase
method of accounting is presented below:
Purchase Price ..................................... $ 115,449
Estimated purchase price adjustments, including
distributions of cash flows from the Acquisition
from the effective date, December 1, 1997 to
the closing date, December 17, 1997 ............ (500)
Legal and other acquisition costs .................. 510
---------
Total Purchase Price ....................... $ 115,459
=========
Purchase Allocation:
Proved oil and gas properties ....................... $ 74,442
Unproved oil and gas properties ..................... 41,017
---------
$ 115,459
=========
The purchase price was allocated to proved and unproved properties based
upon engineering estimates of remaining proved, probable, and possible reserves
considering the appropriate risk.
(b) To record the borrowings under the new credit facility to finance the
acquisition of the Oil and Gas Properties and repay indebtedness under the
existing credit facility, including capitalized loan fees of $658,000. Please
refer to the Company's Form 8-K filed December 18, 1998.
(c ) To reflect the historical consolidated operations of the properties
acquired in the Acquisition for the fiscal year ended December 31, 1996. See
"Statements of Revenues and Direct Operating Expenses" included elsewhere in
this Form 8-K/A.
(d) To adjust depreciation, depletion and amortization to give effect to
the acquisition of the Oil and Gas Properties under the full cost method of
accounting. The pro forma adjustment assumes a depreciation, depletion and
amortization rate per BOE of $2.77 for the year ended December 31, 1996 based
upon depletable costs of $174.7 million and proved reserves of 63.0 MMBOE at
January 1, 1996.
(e) To adjust federal and state income taxes for the acquisition of the Oil
and Gas Properties at an effective rate of 36%.
(f) To record interest expense attributable to the increase in long-term
debt to finance the acquisition of the Oil and Gas Properties. Interest expense
is based upon the weighted average interest rate incurred by the Company under
its revolving credit facilities, including amortization of bank fees, assuming
the entire cost of the acquisition was funded with bank borrowings at January 1,
1996. The interest rates and amortized fees were 7.60% and $427,000 for the year
ended December 31, 1996 and 7.57% and $99,000 for the nine months ended
September 30, 1997, respectively.
(g) To reflect the decrease in income taxes resulting from additional
interest and depreciation incurred as a result of the acquisition of the Oil and
Gas Properties.
(h) To reflect the historical consolidated operations of the properties
acquired in the Acquisition for the nine months ended September 30, 1997. See
"Statements of Revenues and Direct Operating Expenses" included elsewhere in
this Form 8-K/A.
(i) To adjust depreciation, depletion and amortization to give effect to
the acquisition of the Oil and Gas Properties under the full cost method of
accounting. The pro forma adjustment assumes a depreciation, depletion and
amortization rate per BOE of $2.86 for the nine months ended September 30, 1997
based upon depletable costs of $169.7 million and proved reserves of 59.2 MMBOE
at January 1, 1997.
(j) Pro Forma weighted average common shares outstanding (diluted)
increased by 2,091 shares over the historical amount due to inclusion of the
convertible preferred stock under the "if converted method". The convertible
preferred stock was excluded from the historical shares as it would have created
an antidilutive effect on earnings per share.
EXHIBIT INDEX
Exhibit
Number Description
23 Consent of Independent Accountants concerning incorporation by
reference in Howell's Registration Statement on Form S-8