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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 30, 1997
CASTLE ENERGY CORPORATION
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(Exact Name of Registrant as Specified in Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation or Organization)
0-10990 76-0035225
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(Commission File Number) (I.R.S. Employer Identification No.)
One Radnor Corporate Center, Suite 250, 100 Matsonford Road, Radnor, PA 19087
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(Address of Principal Executive Offices) (Zip Code)
(610) 995-9400
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report)
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Castle Energy Corporation ("Company") submits the following
information:
ITEM 2. Acquisition or Disposition of Assets
On May 30, 1997, the Company consummated the sale of its Rusk
County, Texas oil and gas properties and pipeline to Union Pacific Resources
Company ("UPRC") and Union Pacific Interstate Pipeline Company ("UPIPC"),
respectively. The assets sold include approximately 8150 net acres, 115
producing oil and gas wells and a 74 mile pipeline which gathers gas from the
producing wells and delivers to a pipeline owned by Lone Star Gas Company. The
reserves associated with the oil and gas properties that were sold comprise
approximately 84% of the Company's proved reserves. The Company still owns its
non-Texas oil and gas properties and its gas sales contract with Lone Star Gas
Company. That contract expires on May 31, 1999.
The purchase price received by the Company was $54,758,531 and
consisted of $50,183,531 cash, $1,575,000 of liabilities assumed by UPRC and
$3,000,000 of prepaid gas transportation. The gas transportation prepayment
relates to natural gas that the Company is required to supply to Lone Star Gas
Company through May 31, 1999. Although the purchase price will be increased or
decreased through post closing adjustments within the next 160 days, the net
amount of such post closing adjustments is not expected to be significant.
ITEM 7. Financial Statements and Exhibits
b. Pro forma Financial Information
See attached Pro Forma Consolidated Financial Statements of the
Company
c. Exhibits:
10a. Purchase and Sale Agreement by and among Castle Energy
Corporation, Castle Texas Production Limited Partnership and
Union Pacific Resources Company, dated May 16, 1997.
10b. Purchase and Sale Agreement by and among Castle Energy
Corporation, Castle Texas Pipeline Limited Partnership and
Union Pacific Intrastate Pipeline Company, dated May 16, 1997.
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SIGNATURE
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 thereunto duly authorized.
CASTLE ENERGY CORPORATION
Date: June 10, 1997 By: /s/ Richard E. Staedtler
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Richard E. Staedtler
Chief Financial Officer
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PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY
The following pro forma consolidated balance sheet and statements of
operations of the Company illustrate the estimated effects of the sale (the
"Asset Sale") of the Company's Rusk County, Texas oil and gas properties and
pipeline to Union Pacific Resources Company ("UPRC") and Union Pacific
Intrastate Pipeline Company ("UPIPC"), respectively, as if the Asset Sale had
occurred on (i) March 31, 1997 for balance sheet purposes, (ii) October 1, 1996
for purposes of the statement of operations for the six months ended March 31,
1997, and (iii) October 1, 1995 for purposes of the statement of operations for
the year ended September 30, 1996. The pro forma consolidated financial
statements assume that the post closing adjustments to the purchase price will
not be significant.
THE PRO FORMA CONSOLIDATED STATEMENTS OF THE COMPANY DO NOT PURPORT TO
REPRESENT WHAT THE COMPANY'S FINANCIAL POSITION OR RESULTS OF OPERATIONS WOULD
ACTUALLY HAVE BEEN IF THE ASSET SALE IN FACT HAD OCCURRED ON SUCH DATES OR TO
PROJECT THE COMPANY'S FINANCIAL CONDITION OR RESULTS OF OPERATIONS AS OF ANY
FUTURE DATE OR FOR ANY FUTURE PERIOD. The pro forma adjustments are based upon
available information and upon certain assumptions that the Company believes are
reasonable under the circumstances. The pro forma consolidated financial
statements and accompanying notes should be read in conjunction with the
historical consolidated financial statements of the Company and notes thereto
and the other financial information regarding the Company included in filings
with the Securities and Exchange Commission made by the Company.
Page F-1
CASTLE ENERGY CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(UNAUDITED)
("000's" Omitted)
Historical
-----------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents.......................................................... $ 5,298
Restricted cash.................................................................... 816
Accounts receivable................................................................ 9,793
Prepaid expenses and other current assets.......................................... 161
Deferred income taxes.............................................................. 2,373
Estimated realizable value of discontinued net refining assets..................... 6,288
--------
Total current assets............................................................. 24,729
Property, plant and equipment, net:
Natural gas transmission........................................................... 20,024
Furniture, fixtures and equipment.................................................. 199
Oil and gas properties, net............................................................ 14,381
Gas contracts, net..................................................................... 20,455
Deferred income taxes.................................................................. 2,609
Prepaid expense........................................................................
Other assets, net...................................................................... 479
Note receivable........................................................................ 10,000
--------
Total assets..................................................................... $92,876
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................................. $ 6,000
Accounts payable................................................................... 4,189
Accrued expenses................................................................... 1,517
Other liabilities.................................................................. 3,829
Net refining liabilities retained.................................................. 9,220
--------
Total current liabilities........................................................ 24,755
Long-term debt......................................................................... 10,157
Other long-term liabilities............................................................ 83
--------
Total liabilities................................................................ 34,995
--------
Commitments and contingencies
Stockholders' equity:
Common stock; par value - $0.50; 25,000,000 shares authorized;
6,703,646 shares issued and outstanding.......................................... 3,352
Additional paid-in capital............................................................. 66,398
Retained earnings (deficit)............................................................ 2,194
--------
71,944
Treasury stock at cost - 1,264,100 shares........................................ (14,063)
--------
57,881
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Total liabilities and stockholders' equity....................................... $92,876
========
Pro Forma Adjustments
------------------------------------------------
Repayment
Asset Sale (a) of Debt (b) Tax Effects (c) Pro Forma
ASSETS --------------- ----------- --------------- ---------
Current assets:
Cash and cash equivalents........................................ $50,184 ($16,157) $39,325
Restricted cash.................................................. 816
Accounts receivable.............................................. 9,793
Prepaid expenses and other current assets........................ 1,500 1,661
Deferred income taxes............................................ 2,373
Estimated realizable value of discontinued net refining assets... 6,288
-------- --------- -------
Total current assets........................................... 51,684 (16,157) 60,256
Property, plant and equipment, net:
Natural gas transmission......................................... (20,024)
Furniture, fixtures and equipment................................ 199
Oil and gas properties, net.......................................... (12,080) 2,301
Gas contracts, net................................................... 20,455
Deferred income taxes................................................ 2,609
Prepaid expense...................................................... 1,500 1,500
Other assets, net.................................................... 479
Note receivable...................................................... 10,000
-------- --------- -------
Total assets................................................... $21,080 ($16,157) $97,799
======== ========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................ ($ 6,000)
Accounts payable................................................. $ 4,189
Accrued expenses................................................. $704 2,221
Other liabilities................................................ ($ 1,575) 2,254
Net refining liabilities retained................................ 9,220
-------- --------- ------ -------
Total current liabilities...................................... (1,575) (6,000) 704 17,884
Long-term debt....................................................... (10,157)
Other long-term liabilities.......................................... 83
-------- --------- ------ -------
Total liabilities.............................................. (1,575) (16,157) 704 17,967
-------- --------- ------ -------
Commitments and contingencies
Stockholders' equity:
Common stock; par value - $0.50; 25,000,000 shares authorized;
6,703,646 shares issued and outstanding........................ 3,352
Additional paid-in capital........................................... 66,398
Retained earnings (deficit).......................................... 22,655 (704) 24,145
-------- ------ -------
22,655 (704) 93,895
Treasury stock at cost - 1,264,100 shares...................... (14,063)
-------- ------ -------
22,655 (704) 79,832
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Total liabilities and stockholders' equity..................... $21,080 ($16,157) $ - $97,799
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Page F-2
CASTLE ENERGY CORPORATION
NOTES TO THE PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
UNAUDITED
("000's" Omitted)
General
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Gives effect to the Asset Sale as though it occurred March 31, 1997.
(a) Reflects sale of Rusk County, Texas oil and gas properties and pipeline
for purchase price of $54,759 as follows:
Cash.................................................... $50,184
Prepaid transportation for natural gas contracts........ 3,000
Assumption of liabilities by purchaser.................. 1,575
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$54,759
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(b) Reflects assumed liquidation of bank debt from a portion of proceeds
from the Asset Sale.
(c) Reflects estimated additional tax provision, after application of the
Company's tax carryforwards, resulting from the Asset Sale. Consists
primarily of Federal Alternative Minimum Taxes.
As a result of the Asset Sale, the Company expects to realize a $21,951
gain net of taxes for book purposes. For regular tax purposes, the gain will
approximate $40,000. For alternative minimum taxes it will approximate $35,200.
Page F-3
CASTLE ENERGY CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
("000's" Omitted)
Historical
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Revenues:
Natural gas marketing and transmission:
Gas sales........................................................................ $ 38,792
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38,792
------------
Exploration and production:
Oil and gas sales................................................................ 4,776
Well operations.................................................................. 235
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5,011
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43,803
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Expenses:
Natural gas marketing and transmission:
Gas purchases.................................................................... 24,075
Operating costs.................................................................. 368
General and administrative....................................................... 677
Depreciation and amortization.................................................... 5,684
Transportation...................................................................
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30,804
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Exploration and production:
Oil and gas production........................................................... 1,294
General and administrative....................................................... 615
Depreciation, depletion and amortization......................................... 899
------------
2,808
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Corporate general and administrative expenses...................................... 1,782
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35,394
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Operating income....................................................................... 8,409
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Other income (expense):
Interest income.................................................................... 435
Other income (expense)............................................................. (51)
Interest expense................................................................... (753)
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(369)
------------
Net income before provision for (benefit of) income taxes.............................. 8,040
------------
Provision for income taxes:
State.......................................................................... 80
Federal........................................................................ 2,814
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2,894
------------
Net income............................................................................. $ 5,146
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Net income per share:
Primary........................................................................ $ .80
============
Fully diluted.................................................................. $ .80
============
Weighted average number of common and common equivalent shares outstanding:
Primary........................................................................ 6,429,848
============
Fully diluted.................................................................. 6,436,081
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Pro Forma Adjustments
---------------------------------------------------
Oil and Gas
Depreciation and Interest
Operations (1) Depletion (2) Expense (3) Pro Forma
-------------- ------------------- ------------ ---------
Revenues:
Natural gas marketing and transmission:
Gas sales................................................. $ 3,190 (a) $ 41,982
---------- ----------
3,190 41,982
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Exploration and production:
Oil and gas sales.......................................... (3,344)(e) 1,432
Well operations............................................ (65)(b) 170
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(3,409) 1,602
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(219) 43,584
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Expenses:
Natural gas marketing and transmission:
Gas purchases.............................................. 3,190 (a) 27,265
Operating costs............................................ (368)(c)
General and administrative................................. (343)(c) 334
Depreciation and amortization.............................. ($ 937) 4,747
Transportation............................................. 750(d) 750
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3,229 (937) 33,096
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Exploration and production:
Oil and gas production..................................... (932)(c) 362
General and administrative................................. (324)(c) 291
Depreciation, depletion and amortization................... (663) 236
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(1,256) (663) 889
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Corporate general and administrative expenses................ 1,782
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1,973 (1,600) 35,767
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Operating income................................................. (2,192) 1,600 7,817
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Other income (expense):
Interest income.............................................. 435
Other income (expense)....................................... (51)
Interest expense............................................. $ 753
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753 384
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Net income before provision for (benefit of) income taxes........ (2,192) 1,600 753 8,201
---------- ---------- ---------- ----------
Provision for income taxes:
State.................................................... (22) 16 8 82
Federal.................................................. (767) 560 263 2,870
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(789) 576 271 2,952
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Net income.......................................................($ 1,403) $ 1,024 $ 482 $ 5,249
========== ========== ========== ==========
Net income per share:
Primary..................................................($ .22) $ .16 $ .08 $ .82
========== ========== ========== ==========
Fully diluted............................................($ .22) $ .16 $ .08 $ .82
========== ========== ========== ==========
Weighted average number of common and common
equivalent shares outstanding:
Primary.................................................. 6,429,848 6,429,848 6,429,848 6,429,848
========== ========== ========== ==========
Fully diluted............................................ 6,436,081 6,436,081 6,436,081 6,436,081
========== ========== ========== ==========
Page F-4
CASTLE ENERGY CORPORATION
NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997
UNAUDITED
("000's" Omitted)
General
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Gives effect to the Asset Sale as though it occurred October 1, 1996.
1. Reflects changes in operating income items other than depletion and
depreciation as a result of the Asset Sale as follows:
(a) Reflects replacement of equity gas (sold in Asset Sale) with
purchased gas, i.e., the gas that was previously owned is now being
purchased from the buyer.
(b) Reflects loss of operating fees attributable to oil and gas
properties sold in Asset Sale.
(c) Reflects reduction in operating and general and administrative
costs attributable to assets sold.
(d) Reflects amortization of two years of prepaid gas transportation
received as part of the purchase price.
(e) Reflects loss of oil and gas sales from oil and gas properties
sold.
2. Reflects reduction in depletion for oil and gas properties and in
depreciation for pipeline as a result of the Asset Sale.
3. Reflects elimination of interest expense since a portion of the
proceeds from the Asset Sale were assumed used to liquidate the
Company's bank debt.
In accordance with the guidelines of the Securities and Exchange
Commission, interest or other income has not been imputed on the remaining cash
proceeds received by the Company in the Asset Sale nor have such cash proceeds
been assumed to have been spent for other purposes such as repurchasing shares
of the Company's stock or additional investments.
Page F-5
CASTLE ENERGY CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
(UNAUDITED)
("000's" Omitted)
Historical
----------
Revenues:
Natural gas marketing and transmission:
Gas sales........................................................................ $ 59,471
----------
59,471
----------
Exploration and production:
Oil and gas sales................................................................ 8,782
Well operations.................................................................. 442
----------
9,224
----------
68,695
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Expenses:
Natural gas marketing and transmission:
Gas purchases.................................................................... 34,233
Operating costs.................................................................. 845
General and administrative....................................................... 1,231
Depreciation and amortization.................................................... 11,393
Transportation...................................................................
----------
47,702
----------
Exploration and production:
Oil and gas production........................................................... 2,045
General and administrative....................................................... 1,235
Depreciation, depletion and amortization......................................... 2,324
----------
5,604
----------
Corporate general and administrative expenses...................................... 3,499
----------
56,805
----------
Operating income....................................................................... 11,890
----------
Other income (expense):
Interest income.................................................................... 961
Other income ...................................................................... 2,923
Interest expense................................................................... (1,959)
----------
1,925
----------
Net income (loss) before provision for benefit of income taxes......................... 13,815
----------
Provision for (benefit of) income taxes:
State.......................................................................... (309)
Federal........................................................................ (10,950)
----------
(11,259)
----------
Net income............................................................................. $ 25,074
==========
Net income per share:
Primary........................................................................ $ 3.73
==========
Fully diluted.................................................................. $ 3.73
==========
Weighted average number of common and common equivalent shares outstanding:
Primary........................................................................ 6,719,000
==========
Fully diluted.................................................................. 6,719,000
==========
Pro Forma Adjustments
-------------------------------------------------
Oil and Gas
Depreciation and Interest
Operations (1) Depletion (2) Expense (3) Pro Forma
-------------- ------------------- ----------- ---------
Revenues:
Natural gas marketing and transmission:
Gas sales...................................................... $ 5,294 (a) $ 64,765
---------- ---------
5,294 64,765
---------- ---------
Exploration and production:
Oil and gas sales.............................................. (5,570) (e) 3,212
Well operations................................................ (125) (b) 317
---------- ---------
(5,695) 3,529
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(401) 68,294
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Expenses:
Natural gas marketing and transmission:
Gas purchases.................................................. 5,294 (a) 39,527
Operating costs................................................ (845) (c)
General and administrative..................................... (723) (c) 508
Depreciation and amortization.................................. ($ 1,872) 9,521
Transportation................................................. 1,500 (d) 1,500
---------- ---------- ---------
5,226 (1,872) 51,056
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Exploration and production:
Oil and gas production......................................... (1,453) (c) 592
General and administrative..................................... (457) (c) 778
Depreciation, depletion and amortization....................... (1,949) 375
---------- ---------- ---------
(1,910) (1,949) 1,745
---------- ---------- ---------
Corporate general and administrative expenses.................... 3,499
---------- ---------- ---------
3,316 (3,821) 56,300
---------- ---------- ----------
Operating income..................................................... (3,717) 3,821 11,994
---------- ---------- ----------
Other income (expense):
Interest income.................................................. 961
Other income .................................................... 2,923
Interest expense................................................. $ 1,959 -
--------- ---------
1,959 3,884
---------- ---------- --------- ---------
Net income (loss) before provision for benefit of income taxes....... (3,717) 3,821 1,959 15,878
---------- ---------- --------- ---------
Provision for (benefit of) income taxes:
State........................................................ (37) 38 20 (288)
Federal...................................................... (1,301) 1,337 686 (10,228)
---------- ---------- --------- ---------
(1,338) 1,375 706 (10,516)
---------- ---------- --------- ---------
Net income........................................................... ($ 2,379) $ 2,446 $ 1,253 $ 26,394
========== ========== ========= =========
Net income per share:
Primary...................................................... ($ .35) $ .36 $ .19 $ 3.93
========== ========== ========= =========
Fully diluted................................................ ($ .35) $ .36 $ .19 $ 3.93
Weighted average number of common and common ========== ========== ========= =========
equivalent shares outstanding:
Primary...................................................... 6,719,000 6,719,000 6,719,000 6,719,000
========== ========== ========= =========
Fully diluted................................................ 6,719,000 6,719,000 6,719,000 6,719,000
========== ========== ========= =========
Page F-6
CASTLE ENERGY CORPORATION
NOTES TO THE PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
UNAUDITED
("000's" Omitted)
General
- ---------
Gives effect to the Asset Sale as though it occurred October 1, 1995.
1. Reflects changes in operating income items other than depletion and
depreciation as a result of the Asset Sale as follows:
(a) Reflects replacement of equity gas (sold in Asset Sale) with
purchased gas, i.e., the gas that was previously owned is now being
purchased from the buyer.
(b) Reflects loss of operating fees attributable to oil and gas
properties sold in Asset Sale.
(c) Reflects reduction in operating and general and administrative
costs attributable to assets sold.
(d) Reflects amortization of two years of prepaid gas transportation
received as part of the purchase price.
(e) Reflects loss of oil and gas sales from oil and gas properties
sold.
2. Reflects reduction in depletion for oil and gas properties and in
depreciation for pipeline as a result of the Asset Sale.
3. Reflects elimination of interest expense since a portion of the
proceeds from the Asset Sale were used to liquidate the Company's bank
debt.
In accordance with the guidelines of the Securities and Exchange
Commission, interest or other income has not been imputed on the remaining cash
proceeds received by the Company in the Asset Sale nor have such cash proceeds
been assumed to have been spent for other purposes such as repurchasing shares
of the Company's stock or additional investments.
Page F-7