FORM 8-K/A
Current Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): December 18, 1998
CEC RESOURCES LTD.
(Exact Name of Registrant as Specified in Charter)
Alberta 1-13630 98-0018241
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1605, 700 6th Avenue S.W., Calgary, Alberta, T2P 0T8, Canada
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (403) 265-7605
Not Applicable
Former Name or Former Address if Changed Since Last Report
Item 7 FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
On December 18, 1998, CEC Resources Ltd. ("Resources" or the "Company")
completed its acquisition of certain assets of Neutrino ("Neutrino") Resources
Inc. for a purchase price of approximately, CDN $2.3 million. A Current Report
on Form 8-K was filed on December 31, 1998 to report this transaction. This
report amends the Company's current report filed December 31, 1998 by adding an
audited statement of revenue and direct operating expenses and unaudited pro
forma financial information as set forth in the table of contents below.
CEC Resources Ltd.
Table of Contents
Independent Auditors' Report 2
Statement of Revenues and Direct Operating Expenses 3
Notes to Statement of Revenues and Direct Operating Expenses 3
Pro Forma Financial Statements 6
Pro Forma Balance Sheet 7
Pro Forma Statement of Income for the Year Ending November 30, 1998 8
Notes to Pro Forma Financial Statements 9
Exhibit 10
Signature Page 11
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INDEPENDENT AUDITORS' REPORT TO THE DIRECTORS OF
CEC RESOURCES LTD.
At the request of CEC Resources Ltd., we have audited the accompanying statement
of revenues and direct operating expenses attributable to the Wayne-Rosedale
Field ("the Property"), acquired by CEC Resources Ltd. from Neutrino Resources
Inc. ("Neutrino"), for the year ended November 30, 1998. This statement is the
responsibility of CEC Resources Ltd.'s management. Our responsibility is to
express an opinion on the financial statement based on our audit.
The accompanying statement was prepared for the purpose of complying with
certain rules and regulations of the Securities and Exchange Commission (for
inclusion in the report on Form 8-K of CEC Resources Ltd.) and is not intended
to be a complete financial presentation of CEC Resources Ltd.'s interest in the
Property.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, the financial statement referred to above presents fairly, in
all material respects the revenues and direct operating expenses attributable to
the Wayne-Rosedale Field, acquired by CEC Resources Ltd. from Neutrino, for the
year ended November 30, 1998, in accordance with generally accepted accounting
principles.
KPMG LLP
Chartered Accountants
Calgary, Canada
February 26, 1999
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WAYNE-ROSEDALE FIELD
Acquired by CEC Resources Ltd. from Neutrino Resources Inc.
Statement of Revenues and Direct Operating Expenses
Year ended November 30, 1998
Revenues:
Oil and natural gas liquids $ 94,724
Gas 648,249
-----------
742,973
Direct Operating expenses 272,674
-----------
Excess of revenues over direct operating expenses $ 470,299
===========
BASIS OF PRESENTATION
On December 18, 1998, CEC Resources Ltd. ("Resources" or the "Company")
consummated an acquisition of certain oil and gas properties from Neutrino
Resources Inc. ("Neutrino"). The principal assets acquired were working
interests in 16 producing natural gas wells and associated leaseholds in the
Wayne-Rosedale Field, Alberta, Canada for a cash consideration of approximately
CDN $2.3 million.
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 Property. Historically,
complete allocation of administrative overhead was not made to the Property and
depreciation, depletion and amortization expense was based on Neutrino's
interest in the Property. Accordingly, the accompanying statement is presented
in lieu of the financial statements required under Rule 3-05 of Securities and
Exchange Commission Regulation S-X.
The accompanying statement of revenue and direct operating expenses was derived
from the historical accounting records and other applicable source documents of
the Property and is presented on the accrual basis of accounting. Certain other
costs, such as depreciation, depletion and amortization, allocated general and
administrative, interest or income tax expenses, have been excluded. Revenues
and direct operating expenses included above are not necessarily representative
of future operations. The amounts in this financial statement are in Canadian
dollars.
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WAYNE-ROSEDALE FIELD
Acquired by CEC Resources Ltd. from Neutrino Resources Inc.
SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
Estimated Quantities of Proved Oil and Gas Reserves
The proved reserve information as of November 30, 1998 presented below has
been estimated by Sproule Associates Limited, independent geological and
petroleum engineering consultants. Proved reserves are the estimated quantities
of crude oil, natural gas, and natural gas liquids 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 oil and gas reserves are those which can be
expected to be recovered through existing wells with existing equipment and
operating methods.
Proved Oil and Gas Reserves at November 30, 1998:
Oil and Liquids Natural Gas
(Thousands of Barrels) (Millions of Cubic Feet)
---------------------- ------------------------
Proved reserves 51 2,287
====================== ========================
Proved developed reserves 30 1,434
====================== ========================
Since reserve evaluations for earlier dates had not been prepared it is not
practical to include any information as to changes in reserve quantities, nor
any changes, in present value disclosures.
Standardized Measure
The schedule of Standardized Measure of Discounted Future Net Cash Flows
(the "Standardized Measure") is presented below pursuant to the disclosure
requirements of the United States Securities and Exchange Commission ("SEC") and
Statement of Financial Accounting Standards No. 69, "Disclosures About Oil and
Gas Producing Activities" (SFAS 69). Future cash flows are calculated using
year-end oil and gas prices and operating expenses, and are discounted using a
10% discount factor.
The standard measure is intended to provide a standard of comparable
measurement of estimated proved oil and gas reserves based on economic and
operating conditions existing as of November 30, 1998. The sales price utilized
for purposes of
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estimating the acquired properties' proved reserves and future net revenue is
$16.94 per barrel of oil, $12.67 per barrel of natural gas liquids and $2.61
per Mcf of natural gas.
The standardized measure of discounted future net cash flows as of November 30,
1998, related to the estimated proved reserves is as follows:
Future net revenue $ 6,617
Future cost:
Production cost (1,113)
Crown royalty (443)
Development cost (167)
----------
Future net cash flows 4,894
Discount @ 10% (1,135)
----------
Standardized measure of discounted
future net cash flows before income taxes $ 3,759
==========
Since reserve evaluations for earlier dates had not been prepared it is not
practical to include any information as to changes in the standardized measure.
Average Sales Prices
During the twelve months ended November 30, 1998, the weighted average sales
prices for the Wayne-Rosedale Field are $2.04 per Mcf of gas, $18.11 per barrel
of oil and $14.18 per barrel of liquids.
Development, Acquisition and Exploration
During the twelve months ended November 30, 1998, there were no expenditures for
capital improvements to the properties.
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CEC Resources Ltd.
(b) Pro Forma Financial Statements (UNAUDITED)
The accompanying pro forma balance sheet and pro forma consolidated
statement of income give effect to the Company's acquisition of the oil and gas
properties from Neutrino and are based upon assumptions set forth in the notes
to such statements.
The pro forma financial statements comprise historical data which have been
retroactively adjusted or combined to reflect the effects of the above mentioned
transaction on the historical financial statements. The historical information
assumes that the transaction for which the pro forma effects are shown was
consummated on November 30, 1998 for the pro forma balance sheet and December 1,
1997 for the pro forma statement of income. The pro forma information should be
read in conjunction with the Company's audited financial statements and the
related notes for the year ended November 30, 1998 included in the Company's
Form 10-K and the Statement of Revenues and Direct Operating Expenses of the
acquisition of the oil and gas properties from Neutrino.
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CEC RESOURCES LTD.
PRO FORMA BALANCE SHEET
NOVEMBER 30, 1998
(Unaudited, in Canadian dollars, in thousands)
Neutrino
Historical Acquisition ProForma
------------ ------------- -----------
ASSETS
Current Assets:
Cash and equivalents $1,666 ($1,200) (a) $466
Accounts receivable 807 0 807
------------ ------------- -----------
2,473 (1,200) 1,273
Property and Equipment
Oil and gas assets, full cost method 16,192 2,300 (a) 18,492
Liquid extraction plant 1,477 0 1,477
Other property and equipment 108 0 108
------------ ------------- -----------
17,777 2,300 20,077
Less: Accumulated depreciation, depletion and
amortization (9,015) 0 (9,015)
------------ ------------- -----------
Net property and equipment 8,762 2,300 11,062
------------ ------------- -----------
$11,235 $1,100 $12,335
============ ============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $237 $0 $ 237
Income taxes payable 3 0 3
Undistributed oil and gas production receipts 113 0 113
------------ ------------- -----------
353 0 353
Future site restoration costs 165 0 165
Deferred income taxes 1,995 0 1,995
Long-term debt 0 1,100 (a) 1,100
Stockholders' equity:
Share capital 1,534 0 1,534
Retained earnings 7,188 0 7,188
------------ ------------- -----------
Total stockholders' equity 8,722 0 8,722
------------ ------------- -----------
$11,235 $1,100 $12,335
============ ============= ===========
The accompanying notes are an integral part of these financial statements.
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CEC RESOURCES LTD.
PRO FORMA STATEMENT OF INCOME
YEAR ENDED NOVEMBER 30, 1998
(Unaudited, in Canadian dollars, in thousands)
Neutrino
Historical Acquisition Adjustments Pro Forma
------------ ------------- ------------- -----------
REVENUES:
Oil and gas sales $3,235 $919 $0 $4,154
Royalties, net (277) (176) 122 (b) (331)
Field services 246 0 0 246
Other 49 0 (27) (c) 22
------------ ------------- ------------- -----------
Total Revenues 3,253 743 95 4,091
EXPENSES:
Lease Operating Expense 710 273 0 (d) 983
Field services 148 0 0 148
General and administrative 984 0 0 (e) 984
Interest and other 4 0 82 (c) 86
Depreciation, depletion and amortization 1,087 0 385 (f) 1,472
------------ ------------- ------------- -----------
Total expenses 2,933 273 467 3,673
Earnings before income tax 320 470 (372) 418
Provision for income tax 80 0 44 (g) 124
------------ ------------- ------------- -----------
NET INCOME $240 $470 ($416) $294
============ ============= ============= ===========
The accompanying notes are an integral part of these financial statements.
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CEC RESOURCES LTD.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(a) To reflect Resources' acquisition of oil and gas properties from Neutrino
and the related utilization of cash and increase in long-term debt.
(b) Assumes Alberta Royalty Tax Credits at the Company's fiscal 1998 rate.
(c) Represents the approximate estimated decrease in estimated interest income
and increase in interest expense as a result of funding the Neutrino
acquisition with cash and the Company's financing commitment.
(d) Although the Company estimates that savings in lease operating expenses are
expected to be realized with Resources as the operator of the properties,
no adjustment has been shown as such cost saving procedures have only
recently been effected and exact results are not know.
(e) The Company does not expect an increase in general and administrative costs
as a result of the Neutrino acquisition.
(f) Represents the estimated increase in depreciation, depletion and
amortization expense resulting from the inclusion of the Neutrino
acquisition in the Company's full cost pool computed on the unit of
production method.
(g) To record estimated federal and provincial income tax at a statutory rate
of 44.62% related to the net pro forma adjustment.
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(c) EXHIBIT 99(c)
(SPROULE ASSOCIATES LIMITED LETTERHEAD)
February 26, 1999
CEC Resources, Ltd.
1700 Broadway, Suite 1150
Denver, CO 80290
Sproule Associates Limited consents to the use of its name and its reports
dated February 26, 1999 entitled "Evaluation of the P&NG Reserves of CEC
Resources Ltd. in the East Carbon Area of Alberta, Constant (SEC) Price Case-
Neutrino's Interest (As of November 30, 1998)" in whole or in part, by CEC
Resources Ltd. in Resources' Form 8-K Report to the Securities and Exchange
Commission regarding the acquisition of certain assets from Neutrino Resources,
Inc. on December 18, 1998.
For and on behalf of
Sproule Associates Limited
s/Paul B. Jung
Paul B. Jung
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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.
CEC RESOURCES LTD.
(Registrant)
Date: March 1, 1999 By: /s/ Kevin D. Struzeski
-------------------------------
Kevin D. Struzeski - Treasurer
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