SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
October 15, 1996
Abraxas Petroleum Corporation
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-19118 74-2584033
(Commission File Number) (I.R.S. Employer Identification Number)
500 N. Loop 1604 East, Suite 100
San Antonio, Texas78232
(Address of principal executive offices)
Registrant's telephone number, including area code:
(210) 490-4788
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a)On September 30, 1996, Abraxas Petroleum Corporation, a Nevada
corporation (the "Company"), acquired oil and gas producing properties ("the
Properties") located in Sweetwater and Carbon Counties, Wyoming from Enserch
Exploration, Inc. The Properties include 27 gross (23.3 net) productive wells,
of which 22 gross wells will be operated by the Company. The Company also
acquired overriding royalty interests in four wells. The purchase price for the
Properties was $47,500,000 in cash, before adjustment for accrual of net revenue
and interest from April 1, 1996 to September 30, 1996. Funding for the purchase
price was provided by a loan from Bankers Trust Company and ING Capital.
The following exhibits are filed as part of this report:
NUMBER DOCUMENT
10.1 Credit Agreement dated September 30,
1996 between Abraxas Petroleum
Corporation and Bankers Trust
Company
10.2 Purchase and Sale Agreement dated
May 22, 1996 between Abraxas
Petroleum Corporation and Enserch
Exploration, Inc.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
Please see the Financial Statements attached hereto as Schedule A and the
notes thereto relating to the Properties included in this report together
with the Report of Deloitte & Touche LLP concerning the Financial
Statements and the notes thereto.
(b) PRO FORMA FINANCIAL INFORMATION
Abraxas Petroleum Corporation & Subsidiaries
Unaudited Pro Forma Balance Sheet
The following unaudited pro forma balance sheet has been prepared giving
effect to the purchase of the Properties as described elsewhere herein. The pro
forma balance sheet adds the properties as if the purchase occurred at the
beginning of the year. This statement should be read in conjunction with the pro
forma statement of operations and other financial information.
ABRAXAS PURCHASE OF PRO FORMA
AT WAMSUTTER AT
ASSETS JUNE 30, 1996 PROPERTIES JUNE 30, 1996
- ------ ------------- --------------- -------------
In Thousands
-----------------------------------------------
Current Assets ............ $ 5,648,529 $ - $ 5,648,529
Property & Equipment
Oil & Gas Properties..... 61,709,380 45,856,000 107,565,380
Other ................... 835,504 - 835,504
Other Assets ............... 9,329,177 (3,800,000) 5,529,177
------------ ------------- -------------
Total Assets ...............$ 77,522,590 $ 42,056,000 $ 119,578,590
============= ============= =============
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities ........$ 5,733,701 $ - $ 5,733,701
Long Term Debt:
Financing Agreement ..... 32,456,651 42,056,000 74,512,651
Other ................... 2,377,888 2,377,888
Shareholder Equity ......... 36,954,350 - 36,954,350
------------- ------------- -------------
Total Liabilities and
Shareholders' Equity ....$ 77,522,590 $ 42,056,000 $ 119,578,590
============= ============= =============
See adjustments to unaudited pro forma financial statements
The following unaudited pro forma statement of operations shows the
results of operations of Abraxas for the six months ended June 30, 1996 had the
financial results from the operations of the Wamsutter Properties been added to
the 1996 results. This pro forma statement of operations assumes the purchase of
the Properties described elsewhere herein was effective at the beginning of
1996. Pro forma earnings are not necessarily indicative of what actual earnings
will be in the future. This statement should be read in conjunction with the pro
forma balance sheet and other financial information included elsewhere herein.
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
RESULTS FROM ADJUSTMENTS
WAMSUTTER TO WAMSUTTER
ABRAXAS HISTORICAL PROPERTIES PROPERTIES PRO FORMA
SIX MONTHS ENDED INCREASE INCREASE SIX MONTHS ENDED
JUNE 30, 1996 (DECREASE) (DECREASE) JUNE 30, 1996
----------------- ------------ ------------ ---------------
Revenue:
Oil and gas Production sales........... $ 8,014,000 $ 4,883,000 $ $ 12,897,000
Rig revenues .......................... 78,000 78,000
Other ................................. 3,000 3,000
------------ ------------ ----------- ------------
8,095,000 4,883,000 12,978,000
Operating costs and expenses:
Lease operating & production taxes .... 2,181,000 1,268,000 3,449,000
Depreciation, depletion and
amortization ........................ 2,871,000 2,144,000 5,015,000
General and administrative ............ 810,000 810,000
Hedging Loss .......................... 312,000 312,000
Rig Operations ........................ 70,000 70,000
------------ ----------- ----------- ------------
6,244,000 1,268,000 2,144,000 9,656,000
------------ ----------- ----------- ------------
1,851,000 3,615,000 (2,144,000) 3,322,000
Other (income) expense:
Interest expense ..................... 1,444,000 1,829,215 3,273,215
Amortization of deferred
financing fees ...................... 128,000 128,000
Minority interest ..................... 35,000 35,000
Interest income ....................... (115,000) (115,000)
------------ ----------- ----------- ------------
1,492,000 1,829,215 3,321,215
------------ ----------- ----------- ------------
Income (loss) from continuing ............ 359,000 3,615,000 (3,973,215) 785
operations
Less dividend requirement on
cumulative preferred stock ............ (183,000) (183,000)
Net income (loss) applicable
to common stock ....................... $ 176,000 $ 3,615,000 $ (3,973,215) $ (182,215)
============ ============ ============ =============
Net income (loss) per common share ....... $ .03 $ (.03)
============ =============
Weighted average shares
outstanding ........................... $ 6,521,910 6,521,910
============ ============
See adjustments to unaudited pro forma financial statements
The following unaudited pro forma statement of operations shows the results
of operations of Abraxas for the year ended December 31, 1995 had the financial
results from the operations of the Wamsutter Properties been added to the 1995
results. This pro forma statement of operations assumes the sale of the
Properties described elsewhere herein was effective at the beginning of the
1995. Pro forma earnings are not necessarily indicative of what actual earnings
will be in the future. This statement should be read in conjunction with the pro
forma balance sheet and other financial information included elsewhere herein.
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
RESULTS FROM ADJUSTMENT TO
WAMSUTTER WAMSUTTER
ABRAXAS HISTORICAL PROPERTIES PROPERTIES PRO FORMA
YEAR ENDED INCREASE INCREASE YEAR ENDED
DEC. 31, 1995 (DECREASE) (DECREASE) DEC. 31, 1995
----------------- ------------ ---------- --------------
Revenue:
Oil and gas Production sales .......... $ 13,659,556 $ 7,542,000 $ 21,201,556
Rig revenues .......................... 108,400 108,400
Other ................................. 48,559 48,559
------------- ----------- ---------- -----------
13,816,515 7,542,000 21,358,515
Operating costs and expenses:
Lease operating & production taxes .... 4,333,240 2,142,000 6,475,240
Depreciation, depletion and
amortization ........................ 5,433,531 3,665,000 9,098,531
General and administrative ............ 1,041,740 1,041,740
Rig Operations ........................ 125,353 125,353
------------- ------------ ----------- -----------
10,933,864 2,142,000 3,665,000 16,740,864
------------- ------------ ----------- -----------
2,882,651 5,400,000 (3,665,000) 4,617,651
Other (income) expense:
Interest expense ..................... 3,910,669 3,666,480 7,577,149
Amortization of deferred
financing fees ...................... 214,231 214,231
Interest income ....................... (33,749) (33,749)
------------- ------------ ----------- -----------
4,091,151 3,666,480 7,757,631
------------- ------------ ----------- -----------
Income (loss) from continuing
operations ............................ (1,208,500) 5,400,000 (7,331,480) (3,139,980)
Less dividend requirement on
cumulative preferred stock ............ (365,928) (365,928)
Net income (loss) applicable
to common stock ....................... $ (1,574,428) $ 5,400,000 $(7,331,480) $(3,505,908)
============ ============ =========== ===========
Net income (loss) per common share ....... $ (.34) $ (.76)
============ ===========
Weighted average shares
outstanding ........................... 4,635,412 $ 4,635,412
============ ===========
See adjustments to unaudited pro forma financial statements
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
AND CERTAIN COMBINED OIL AND GAS PRODUCING PROPERTIES
ACQUIRED - WYOMING PROPERTIES
ADJUSTMENTS TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND YEAR ENDED DECEMBER 31, 1995
A. On September 30, 1996, Abraxas Petroleum Corporation (Abraxas), completed
the acquisition of certain oil and gas producing properties located in
Wyoming from Enserch Exploration, Inc. (the Wyoming Properties). The
interests were purchased by Abraxas for net cash consideration of
approximately $45,856,000.
Funding for the purchase was provided by a credit facility negotiated between
Bankers Trust Company and ING Capital. The financing agreement is secured by
first priority liens in the properties acquired and second priority liens in
the producing properties acquired by the use of proceeds under the initial
financing agreement.
B. The pro forma combined balance sheet assumes that the purchase occurred as of
June 30, 1996 and the Wyoming Properties were recorded at Abraxas' net cost
of $45,856,000. Abraxas has allocated the purchase price between the
producing properties based on a preliminary estimate of the fair values of
the producing properties based on a preliminary adjustment for accrual of net
revenue and interest from April 1, 1996 to September 30, 1996. Abraxas
allocated approximately $8,028,000 of the purchase price to unproved
properties with the remainder to the depletable pool. The following is a
summary of the adjustments required to reflect the acquisition and related
financing:
1.To reflect the purchase of certain oil and gas properties acquired - the
Wyoming Properties for net cash consideration of $45,856,000 and the
related financing.
C. The pro forma combined statements of operations give effect to the
following adjustments:
1.To adjust the interest expense associated with the borrowings used to fund
the acquisition of the Wyoming Properties. Interest has been calculated at
8% in connection with the acquisition.
2.To adjust depreciation, depletion, and amortization for the six months
ended June 30, 1996, and the year ended December 31, 1995, to reflect the
related effects of the acquisition. Depreciation, depletion, and
amortization of oil and gas producing properties is computed based on the
units-of-production method over the estimated proved reserves.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Enserch Exploration, Inc.:
We have audited the accompanying statements of revenues and direct operating
expenses of Enserch Exploration, Inc.'s Wamsutter Area Package (the "Package")
(see Note 1) to be sold to Abraxas Petroleum Corporation for the years ended
December 31, 1995, 1994, and 1993. These financial statements are the
responsibility of the management of Enserch Exploration, Inc., as operator of
the properties. Our responsibility of the management of Enserch Exploration,
Inc., as operator of the properties. 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 financial 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.
The accompanying statements of revenues and direct operating expenses reflect
the revenues and direct operating expenses attributable to the Package as
described in Note 1 to the financial statements and are not intended to be a
complete presentation of the revenues and expenses of the Package.
In our opinion, the accompanying financial statements present fairly, in all
material respects, the revenues and direct operating expenses of the Package as
described in Note 1 for the years ended December 31,1995, 1994, and 1993, in
accordance with generally accepted accounting principles.
Deloitte & Touche LLP
Dallas, Texas
June 26, 1996
STATEMENTS OF REVENUES AND DIRECT
OPERATING EXPENSES OF ENSERCH
- ------------------------------------------------------------------------------------
EXPLORATION, INC'S WAMSUTTER AREA PACKAGE
For the six months
ended June 30,
(unaudited) For the years ended December 31,
1996 1995 1995 1994 1993
-------- ------- ------- ------- -------
Revenues: (in Thousands)
Oil, gas and related product sales.... $ 4,883 $ 3,701 $ 7,542 $10,171 $10,655
Direct operating expenes:
Lease operating expense .............. 677 458 1,029 640 431
Severance and property taxes ......... 591 541 1,113 1,291 1,108
----- ----- ------ ------ ------
1,268 999 2,142 1,931 1,539
------ ------ ------ ------ ------
Excess of revenues over direct
operating expenses ................... $ 3,615 $2,702 $5,400 $8,240 $9,116
------- ------ ------ ------ ------
NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES OF ENSERCH
- --------------------------------------------------------------------------------
EXPLORATION INC'S WAMSUTTER AREA PACKAGE
1. THE PROPERTIES
The accompanying statements represent the revenues and direct operating
expenses attributable to the net interest in Enserch Exploration, Inc's
("EEX") Wamsutter Area Package producing wells and certain non-producing
leases to be sold to Abraxas Petroleum Corporation ("Abraxas"). The
properties are located in Sweetwater and Carbon County, Wyoming. EEX acquired
the properties on June 8, 1995 when it purchased all of the capital stock of
Dalon Corporation. Effective January 1, 1996, Dalon Corporation was merged
into EEX.
Historical financial statements reflecting financial position, results of
operations and cash flows required by generally accepted accounting
principles are not presented, as such information is neither readily
available on an individual property basis nor meaningful for the properties
acquired because the entire acquisition cost is being assigned to oil and gas
properties. Accordingly, these statements of revenues and direct operating
expenses are presented in lieu of the financial statements required under
Rule 3-05 of Securities and Exchange Commission Regulation S-X.
The accompanying statements of revenues and direct operating expenses
represent EEX's net working interest in the properties to be acquired by
Abraxas and are presented on the full cost accrual basis of accounting.
Depreciation, depletion and amortization, allocated general and
administrative expenses, interest expenses and income, and income taxes have
been excluded because the property interests acquired represent only a
portion of a business and the expenses incurred are not necessarily
indicative of the expenses to be incurred by Abraxas.
2. CONTINGENT LIABILITIES
Given the nature of the properties acquired and as stipulated in the
purchase agreement, Abraxas is subject to loss contingencies pursuant to
existing or expected environmental laws, regulations and losses covering the
acquired properties.
NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES OF ENSERCH
- --------------------------------------------------------------------------------
EXPLORATION, INC'S WAMSUTTER AREA PACKAGE
3. OIL AND GAS RESERVES (UNAUDITED)
The following table of estimated proved and proved developed reserves of
oil and gas related to the Wamsutter Area Package properties has been
prepared utilizing estimates of period-end reserve quantities provided by
independent petroleum consultants.
Oil Gas
(Bbl) (a) (Mcf)
----------- ----------
At January 1, 1993 ............. 547,125 43,339,881
Production ................... (65,283)
Other charges, net ........... 28,903 553,355
---------- ----------
At January 1, 1994 ............. 510,745 39,395,043
Production ................... (288,763)
Other charges, net ........... 1,915,650 1,298,888
---------- ----------
At January 1, 1995 ............. 2,137,632 35,981,248
Production ................... (303,076)
Other charges, net ........... 1,390,493 8,838,026
At January 1, 1996 ............. 3,225,049 40,533,540
---------- ----------
PROVED DEVELOPED RESERVES:
At January 1, 1993 ............. 547,125 43,339,881
At January 1, 1994 ............. 510,745 39,395,043
At January 1, 1995 ............. 2,137,632 35,981,248
At January 1, 1996 ............. 2,942,115 36,559,004
(a) Includes condensate and natural gas liquids attributable to leasehold
interests of 2,655,476 Bbls for January 1, 1996 and 1,669,664 Bbls for
January 1, 1995. Prior to 1994, gas was not processed to extract natural gas
liquids.
NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES OF ENSERCH
- --------------------------------------------------------------------------------
EXPLORATION, INC'S WAMSUTTER AREA PACKAGE
4. STANDARDIZED MEASURE (UNAUDITED)
Discounted future net cash flows relating to proved gas and oil reserve
quantities (unaudited) has been prepared using estimated future production
rates and associated production and development costs. Continuation of
economic conditions existing at the balance sheet date was assumed.
Accordingly, estimated future net cash flows were computed by applying
prices and contracts in effect at period and to estimated future production
of proved gas and oil reserves, estimating future expenditures to develop
proved reserves and estimating costs to produce the proved reserves based on
average costs for the period. Average prices used in the computation were:
Gas (per Mcf) $2.08 in 1995, $1.45 in 1994 and $2.40 in 1993; Oil (per
barrel) $11.17 in 1995, $7.22 in 1994 and $13.52 in 1993.
Because reserve estimates are imprecise and changes in the other variables
are unpredictable, the standarized measure should be interpreted as
indicative of the order of magnitude only and not as precise amounts.
1995 1994 1993
---- ---- ----
Standardized Measure (in thousands):
Future cash inflows .................... $120,278 $ 67,597 $101,445
Future production and development costs. (25,971) (17,121) (19,710)
Future income tax expense .............. (16,137) (14,873) (25,525)
------- ------- -------
Future net cash flows .................. 78,170 35,603 56,210
Less 10% annual discount ............... 35,565 14,095 23,727
------- ------- -------
Standardized measure of
discounted future net cash flows ...... $ 42,605 $ 21,508 $ 32,483
------- ------- -------
Change in Standardized Measure (in thousands):
Sales and transfers of gas and oil
produced net of production costs ..... $ (5,400) $ (8,240) $(9,116)
Changes in prices, net of production
and future development costs ........ 14,280 (21,828) 4,903
Accretion of discount ................. 2,151 3,248 3,326
Net change in income taxes ............ 190 5,765 240
Additions, revisions and other changes. 9,876 10,080 (125)
------- ------- -------
Total ................................. $ 21,097 $(10,975) $ (772)
------- ------- -------
1
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 hereunto duly authorized.
ABRAXAS PETROLEUM CORPORATION
By: /s/Chris Williford
-----------------------------
Chris Williford
Executive Vice President/
Chief Financial Officer
Dated: October 15, 1996