U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 1O-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ___________
Commission file number 1-9933
AMERAC ENERGY CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 75-2181442
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1201 LOUISIANA, SUITE 3350
HOUSTON, TEXAS 77002-5609
(Address of Principal Executive Offices)
(713) 308-5250
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- ------
The number of shares of Common Stock, $0.05 par value, outstanding on April
15, 1997 was 3,886,243.
Traditional Small Business Disclosure Format (check one):
Yes X No
------ ------
AMERAC ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents......................................... $ 740,000 $ 712,000
Receivables
Trade and other, net of allowance for bad debts of $41,000...... 108,000 473,000
Gas and oil receivable.......................................... 801,000 1,451,000
------------- -------------
Total current assets.......................................... 1,649,000 2,636,000
-------------- -------------
PROPERTY AND EQUIPMENT
Oil and gas properties at cost.................................... 33,214,000 32,290,000
Less accumulated depreciation, depletion and amortization......... (13,656,000) (12,949,000)
------------- -------------
Net property and equipment...................................... 19,558,000 19,341,000
OTHER ASSETS....................................................... 362,000 395,000
------------- -------------
TOTAL ASSETS....................................................... $ 21,569,000 $ 22,372,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables.................................................... $ 401,000 $ 199,000
Accrued liabilities............................................... 373,000 527,000
Obligation under gas contract..................................... 359,000 370,000
------------- -------------
Total current liabilities..................................... 1,133,000 1,096,000
------------- -------------
LONG-TERM LIABILITIES
Notes payable banks............................................... 6,354,000 7,704,000
Other long-term liabilities....................................... 141,000 140,000
------------- -------------
Total long-term liabilities................................... 6,495,000 7,844,000
------------- -------------
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 3)
STOCKHOLDERS' EQUITY
Common stock, $0.05 par value; authorized-20,000,000 shares;
outstanding-3,885,588 shares at March 31, 1997
and 3,883,526 at December 31, 1996............................. 194,000 194,000
Additional paid-in capital........................................ 151,094,000 151,104,000
Accumulated deficit............................................... (137,347,000 (137,866,000)
------------- -------------
Total stockholders' equity.................................... 13,941,000 13,432,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................... $ 21,569,000 $ 22,372,000
============= =============
(The accompanying notes are an integral part of these consolidated financial statements.)
1
AMERAC ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------------
1997 1996
--------- ---------
REVENUES
Oil, gas and related product sales................................... $ 2,986,000 $ 2,254,000
Other income......................................................... 24,000 27,000
----------- -----------
Total revenues..................................................... 3,010,000 2,281,000
----------- -----------
EXPENSES
Lease operating...................................................... 693,000 480,000
Exploration expenses, including dry hole costs and impairments....... 204,000 2,000
Depreciation, depletion and amortization............................. 721,000 515,000
General and administrative........................................... 671,000 423,000
Gain on sale of oil and gas properties............................... ---- (45,000)
Interest............................................................. 160,000 200,000
----------- -----------
Total expenses..................................................... 2,449,000 1,575,000
----------- -----------
Income before income taxes............................................ 561,000 706,000
Provision for federal income taxes.................................... 42,000 ----
----------- -----------
NET INCOME............................................................ 519,000 706,000
Preferred dividends................................................... ---- (215,000)
----------- -----------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS.......................... $ 519,000 $ 491,000
=========== ===========
NET INCOME PER COMMON SHARE (AS ADJUSTED, SEE NOTE 1)................. $ 0.13 $ 0.31
=========== ===========
Average common shares and equivalents outstanding
(as adjusted, see Note 1)........................................... 3,977,000 1,597,000
=========== ===========
(The accompanying notes are an integral part of these consolidated financial
statements.)
2
AMERAC ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
------------------------------
1997 1996
--------- ----------
CASH FLOW FROM OPERATING ACTIVITIES
Net income................................................... $ 519,000 $ 706,000
Adjustments needed to reconcile net income to net cash flow
provided by operating activities
Depreciation, depletion and amortization................... 721,000 515,000
Exploration expenses, including dry holes and impairments.. 204,000 ----
Gain on sale of properties................................. ---- (53,000)
Recognition of deferred revenue............................ (11,000) (23,000)
Other...................................................... (14,000) 15,000
Changes in operating assets and liabilities:
Oil and gas receivables and other........................ 1,014,000 (398,000)
Trade payables........................................... 202,000 (260,000)
Accrued and other long-term liabilities.................. (154,000) (251,000)
Other assets............................................. (2,000) (63,000)
------------ -----------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES................ 2,479,000 188,000
------------ -----------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of assets................................. ---- 1,050,000
Oil and gas acquisitions and expenditures.................... (1,128,000) (7,694,000)
Other........................................................ 20,000 2,000
------------ -----------
NET CASH USED FOR INVESTING ACTIVITIES........................ (1,108,000) (6,642,000)
------------ -----------
CASH FLOW FROM FINANCING ACTIVITIES
Bank borrowings (repayments), net............................ (1,350,000) 6,283,000
Other........................................................ 7,000 ----
------------ -----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES.......... (1,343,000) 6,283,000
------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... 28,000 (171,000)
Cash and cash equivalents at beginning of period............. 712,000 269,000
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................... $ 740,000 $ 98,000
============ ===========
(The accompanying notes are an integral part of these consolidated financial
statements.)
3
AMERAC ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
DECEMBER 31, 1996 TO MARCH 31, 1997
(UNAUDITED)
COMMON SHARES
($0.05 PAR VALUE) ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- -------- ------------ ------------- -----------
BALANCE DECEMBER 31, 1996.......... 3,883,526 $194,000 $151,104,000 $(137,866,000) $13,432,000
Stock issued for director's fees.. 2,017 ---- 14,000 ---- 14,000
Options exercised................. 2,667 ---- 7,000 ---- 7,000
Net income........................ ---- ---- ---- 519,000 519,000
Other............................. (2,622) ---- (31,000) ---- (31,000)
--------- -------- ------------ ------------- -----------
BALANCE MARCH 31, 1997............ 3,885,588 $194,000 $151,094,000 $(137,347,000) $13,941,000
========= ======== ============ ============= ===========
(The accompanying notes are an integral part of these consolidated financial
statements.)
4
AMERAC ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of the Securities
and Exchange Commission. In the opinion of management, all normal and recurring
adjustments necessary for a fair presentation of results of operations and
financial position for the interim periods have been included. The results of
operations for the interim periods shown in this report are not necessarily
indicative of results to be expected for the year or any other interim period.
These financial statements and notes should be read in conjunction with Amerac
Energy Corporation's ("Amerac" or the "Company") annual report for the year
ended December 31, 1996.
Earnings per share and weighted average common shares outstanding for the
three months ended March 31, 1996, have been retroactively restated to reflect
the one for fifteen reverse Common Stock split approved by the Company's
stockholders in November 1996.
2. SUPPLEMENTAL CASH FLOW INFORMATION
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
--------- --------
Cash payments for:
Interest.............................................. $ 160,000 $ 200,000
Income taxes.......................................... 25,000 ----
Non-cash investing and financing activities:
Senior Preferred Stock dividends...................... ---- 215,000
Compensation paid in Common Stock..................... 14,000 53,000
Approximate value of Common Stock issued for Fremont
acquisition......................................... ---- 640,000
3. CONTINGENCIES
The Company is subject to various possible contingencies which arise primarily
from interpretation of federal and state laws and regulations affecting the oil
and gas industry. Such contingencies include differing interpretations as to
the prices at which oil and gas sales may be made, the prices at which royalty
owners may be paid for production from their leases and other matters. Although
management believes it has complied with the various laws and regulations,
administrative rulings and interpretations thereof, adjustment could be required
as new interpretations and regulations are issued. In addition, production
rates, marketing and environmental matters are subject to regulation by various
federal and state agencies.
The Company is not currently a party to any litigation which would have a
material impact on its financial statements. However, due to the nature of its
business, certain legal or administrative proceedings may arise in the ordinary
course of its business.
5
AMERAC ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared With Three Months Ended March 31,
1996
Oil and gas revenues increased from $2.3 million in the first three months of
1996 to $3.0 million in the comparable period of 1997. Approximately 66% of the
revenue increase is due to higher realized prices for both oil and natural gas.
During the first quarter of 1997, the Company's average realized price for oil
was $23.36 per barrel ("Bbl") and for natural gas was $2.85 per thousand cubic
feet ("Mcf"). Product prices were highest at the beginning of the first quarter
of 1997 and declined during the quarter. During the first three months of 1996,
the average realized prices for oil and natural gas were $17.73 per Bbl and
$2.43 per Mcf, respectively. Higher production of oil and natural gas,
primarily as a result of acquisitions during 1996, accounted for approximately
34% of the increase in revenue from 1996 to 1997.
During the first quarter of 1997, the Company produced approximately 45,000
Bbls of oil and 675,000 Mcf of natural gas. In the first three months of 1996,
the Company produced approximately 40,000 Bbls of oil and 633,000 Mcf of natural
gas. The primary well at the Company's significant offshore property, South
Timbalier 198, was producing gas at a rate of 588 million cubic feet ("MMcf")
per month (113 MMcf per month net to the Company's interest) with essentially no
water at the end of the first quarter of 1996. During December of 1996, the well
began to produce water. At the end of the first quarter of 1997 the well's gas
production had declined to a rate of 425 MMcf per month (82 MMcf per month net
to the Company's interest) with approximately 700 Bbls of water per day. The
influx of water accompanied by a decline in gas production is a normal
occurrence in water drive reservoirs, however, once water production commences,
the remaining life of the well becomes more uncertain. The Company expects the
well to deplete in 1997.
Lease operating expense increased from $480,000 in the first quarter of 1996
to $693,000 in the comparable period of 1997. The increase is attributable to
properties acquired subsequent to the first quarter of 1996 and workovers of
approximately $83,000 in the first quarter of 1997.
Exploration expense of $204,000 in the first quarter of 1997 primarily
relates to a dry exploratory well, and geological and geophysical expenditures.
Depreciation, depletion and amortization expense of $721,000 in the first
three months of 1997 exceeds the 1996 reported amount of $515,000, primarily as
a result of a higher per unit rate resulting from downward reserve estimates for
the Company's offshore property, South Timbalier 198, and higher investments in
oil and gas properties due to acquisitions subsequent to the first quarter of
1996.
General and administrative expense increased from $423,000 in the first
quarter of 1996 to $671,000 in the first quarter of 1997 as a result of higher
salaries and benefits expense due to the hiring of additional employees
subsequent to the first quarter of 1996 and costs incurred in regards to listing
on the American Stock Exchange and preparation of a registration statement.
DRILLING AND DEVELOPMENT ACTIVITIES
During the first quarter of 1997, the Company drilled seven wells in
conjunction with its development and exploitation program. Four of the wells
were completed as producing wells, one was abandoned prior to reaching its
objective due to mechanical difficulties and two were dry holes.
In Rooks County, Kansas, the Company drilled two in-fill development wells in
the Riffe Field. Both wells were completed in the Arbuckle zone with initial
potentials of 12 and 15 barrels of oil per day ("BOPD").
6
AMERAC ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONCLUDED)
In Jones County, Texas, the Company drilled and completed the Whitlock #1
development well in the Strawn zone at a depth of 4,600 feet. This Truby Field
well tested at an initial rate of 88 BOPD and 141 thousand cubic feet of natural
gas per day ("MCFD"). One additional development well is budgeted to be drilled
in this field during 1997.
In Nolan County, Texas, the exploratory Patterson 244 #1 well, the Company's
initial well in its South Antelope Creek project, was completed in the
Ellenburger zone at a depth of 6,800 feet. The well tested natural at an
initial flowing rate of 66 BOPD and 105 MCFD. The well was subsequently
acidized and will be put on pump and retested. The Company currently plans to
drill at least one additional development well in this new field during 1997.
The McLeod 213 #1, an unrelated exploratory well with a Strawn formation target,
was unsuccessful.
In the North Blackwell Field in Nolan County, Texas, the Coda Whiteaker #8
development well encountered drilling difficulties and was abandoned prior to
reaching the objective zone. The Burwick #3 development well reached the
objective Ellenburger section and was abandoned as a dry hole.
The disappointing drilling results in the North Blackwell field and marginal
production from previously completed wells in the field have caused the Company
to reassess its geologic model and exploitation strategy in this field. While
there is current production from the North Blackwell Field, no further
development activity is planned for the North Blackwell field at this time.
In the second quarter of 1996, the Company participated in a pilot waterflood
project in the Sacatosa field in Maverick County, Texas. The Company installed
two five-well pilot patterns to evaluate the economic feasibility of the
program. To-date, there has been no response to the injection activities. The
Company believes that an additional six months is required to properly evaluate
the program. Capitalized costs related to the Sacatosa project are
approximately $515,000.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1997, the Company generated cash flow from
operations of $2.5 million, which was used to fund its exploration and
development drilling activities and to pay down debt by $1.4 million. At the
end of the first quarter of 1997, the Company had outstanding debt of $6.4
million and available borrowing capacity of $3.6 million under its bank credit
facility.
The Company anticipates that it must seek additional sources of financing to
fund its acquisition activities. Amerac may finance additional acquisitions
through a combination of working capital, bank borrowings, mezzanine financing,
production payments and equity. However, there is no assurance that the Company
will be successful in obtaining such additional financing.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accountings Standards No. 128, "Earnings Per Share" ("SFAS 128").
SFAS 128 requires presentation of "basic earnings per share" and "diluted
earnings per share". Under SFAS 128, the Company's basic earnings per share and
diluted earnings per share would be consistent with the income statement
presentation for the three months ended March 31, 1997 and 1996. SFAS 128 is
effective for interim and annual periods ending after December 15, 1997, and
early adoption is not permitted.
7
PART III
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
See Exhibit Index following this page.
On March 4, 1997 the Company filed a Form 8-K dated February 28, 1997
regarding the execution of an Exploitation Agreement between the Company and
certain investors.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERAC ENERGY CORPORATION
(Registrant)
/s/ Richard B. Hallett
------------------------------------------
Date: April 30,1997 Richard B. Hallett
Vice President and Chief Financial Officer
8
EXHIBIT INDEX
3-(1) Certificate of Incorporation of Wolverine Exploration Company
(incorporated by reference as Exhibit 3-(1) to the Company's Registration
Statement No. 33-21824 filed May 13, 1988).
3-(2) Amendment to Certificate of Incorporation of Wolverine Exploration
Company dated September 12, 1988 (incorporated by reference as Exhibit 3-
(1 )(a) to the Company's Registration Statement No. 33-24429 filed
September 28, 1988).
3-(3) Amendment to Certificate of Incorporation of Wolverine Exploration
Company dated March 28, 1995 (incorporated by reference to Annex IV to
Exhibit (a)(1) to Schedule 13E-4, dated November 15, 1994).
3-(4) Amendment to Certificate of Incorporation of Amerac Energy Corporation
dated July 12, 1996 (incorporated by reference to Exhibit 4(i).4 to the
Company's Current Report on Form 8-K dated February 28, 1997).
3-(5) Amendment to Certificate of Incorporation of Amerac Energy Corporation
dated July 12, 1996 (incorporated by reference to Exhibit 4(i).5 to the
Company's Current Report on Form 8-K dated February 28, 1997).
3-(6) Amendment to Certificate of Incorporation of Amerac Energy Corporation
dated November 21, 1996 (incorporated by reference to Exhibit 4(i).6 to
the Company's Current Report on Form 8-K dated February 28, 1997).
3-(7) Corporate Bylaws (incorporated by reference to Exhibit 3C to the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1987, File No. 0-5003).
4-(1) Warrant Agreement, dated November 18, 1996, between Amerac Energy
Corporation and Petroleum Financial, Inc. (incorporated by reference as
Exhibit 4(I).8 to the Company's Registration Statement No. 333-24643
filed April 4, 1997).
4-(2) Form of Warrant (included as Exhibit I to the Warrant Agreement referred
to in Exhibit 4-(1)).
4-(3) Registration Rights Agreement, dated November 18, 1996, between Amerac
Energy Corporation and the party identified therein. A document identical
to this document, except for the name of the Holder and the Holder's
address for notices, was entered into by the Company with each purchaser
of Common Stock in the Company's private sale of Common Stock completed
on November 18, 1996 (incorporated by reference as Exhibit 4(I).10 to the
Company's Registration Statement No. 333-24643 filed April 4, 1997).
4-(4) Form of Warrant Agreement (included as Exhibit VI to the Exploitation
Agreement referred to in Exhibit 10-(11)).
4-(5) Form of Warrant (included as Exhibit I to the Form of Warrant Agreement
referred to in Exhibit 4-(4)).
4-(6) Form of Registration Rights Agreement, (included as Exhibit VII to the
Exploitation Agreement referred to in Exhibit 10-(11)).
4-(7) Registration Rights Agreement, dated January 16, 1996 among Amerac Energy
Corporation, Powell Resources, Inc., The Langestroth Family Limited I,
Thomas O. Goldsworthy and James B. Tollerton. Related to acquisition of
Fremont Energy Corporation Properties (incorporated by reference, as
Exhibit 10-(10) to Form 10K for year ended December 31, 1995).
10-(1) Third Amendment to Amended and Restated Credit Agreement dated February
3, 1997 (incorporated by reference as Exhibit 10-(10) to the Company's
Annual Report on Form 10-K for the fiscal year ending December 31, 1996).
10-(2) Exploitation Agreement, dated effective January 1, 1997, between Amerac
Energy Corporation and the parties identified therein (incorporated by
reference to Exhibit 4(i).8 to the Company's Current Report on Form 8-K
dated February 28, 1997).
27 Financial Data Schedule
9