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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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):
SEPTEMBER 19, 2000
TOREADOR RESOURCES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-2517 75-0991164
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
4809 COLE AVENUE, SUITE 108
DALLAS, TEXAS 75205
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 559-3933
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
THE MERGER
On September 19, 2000, Toreador Acquisition Corporation ("TAC"), a
wholly owned subsidiary of Toreador Resources Corporation ("Toreador"),
completed a merger with Texona Petroleum Corporation ("Texona"), pursuant to a
Merger Agreement dated as of September 11, 2000. The terms of the Merger
Agreement call for Texona to be merged with TAC in a forward triangular merger,
thus leaving TAC as the surviving entity. The outstanding stock of Texona was
exchanged for a total of 1,115,000 common shares of Toreador, of which 1,025,000
will be issued to the Texona shareholders currently and the remaining shares
("Deferred Shares") will be issued no later then June 1, 2001, subject to
Toreador shareholder approval. The Deferred Shares are subject to a price
protection clause in the Merger Agreement that will result in the issuance of no
more than 180,000 shares and no less than 90,000 shares based upon the formula
defined in the Merger Agreement. The issuance of Toreador shares for the Texona
shares is hereinafter referred to as the "Merger".
Immediately prior to the Merger, Texona owned an interest in close to
1,000 wells located in 12 states, primarily Oklahoma, Texas and Louisiana. The
estimated proved reserves for Texona totaled 6,126 MMCF and 479 MBBL for a total
of 9,000 MMCFE (equivalent MMCF on six MCF per one barrel of oil basis). The
combined estimated proved reserves of the companies immediately prior to the
Merger totaled 14,671 MMCF and 2,629 MBBL for a total of 30,445 MMCFE.
Immediately after the Merger closing, TAC extinguished Texona's
outstanding bank debt of $2,449,223 utilizing its line from Compass Bank,
Dallas. In connection with the borrowing, Toreador, TAC, Toreador Exploration
& Production Inc., a wholly-owned subsidiary of Toreador and Tormin, Inc., a
wholly-owned subsidiary of Toreador, entered into an amendment to their existing
Credit Agreement with Compass Bank, which Credit Agreement was effective
September 30, 1999. The amendment to the Credit Agreement increased the
borrowing base to $17,000,000 from the previous borrowing base of $14,500,000.
FINANCIAL EFFECTS OF THE MERGER
The Merger is being accounted for under the purchase method of
accounting for business combinations. Under the purchase method, the combination
is recorded at cost, which in this case is based upon the fair market value of
Toreador common stock. Acquired assets are recorded at their fair market value
up to the purchase price. Item 7 of this report includes a pro forma balance
sheet as of June 30, 2000, and pro forma statements of operations for the six
month period ended June 30, 2000, and for the year ended December 31, 1999. The
pro forma financial statements combine the accounts of Toreador and Texona. Item
7 also includes the historical financial statements of Texona for the year ended
December 31, 1999 and the six months ended June 30, 2000.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Financial Statements of Texona Petroleum Corporation for the Year Ended
December 31, 1999 and the Six Months Ended June 30, 2000 (unaudited):
Report of Independent Auditors
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
Supplementary Oil and Gas Information (unaudited).
(b) Pro Forma financial information (unaudited).
Pro Forma Consolidated Balance Sheet (unaudited) of Toreador - Texona
as of June 30, 2000.
Pro Forma Consolidated Statements of Operations (unaudited) of Toreador
- Texona for the six months ended June 30, 2000, and for the year ended
December 31, 1999.
(c) Exhibits
10.1 Merger Agreement, effective September 11, 2000, between
Texona Petroleum Corporation, Toreador Resources Corporation
and Toreador Acquisition Corporation.
10.2 Fourth Amendment To Credit Agreement, effective September
19, 2000, between Compass Bank, as Lender, and Toreador
Resources Corporation, Toreador Exploration & Production
Inc., and Tormin, Inc., as Borrowers, and Toreador
Acquisition Corporation, as Guarantor.
23.1 Consent of Ernst & Young LLP.
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Report of Independent Auditors
To the Board of Directors of
Toreador Resources Corporation
We have audited the balance sheet of Texona Petroleum Corporation (the Company)
as of December 31, 1999, and the related statements of operations, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at December 31,
1999, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States.
Dallas, Texas Ernst & Young LLP
July 21, 2000
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Texona Petroleum Corporation
Balance Sheets
DECEMBER 31, JUNE 30,
------------ -----------
1999 2000
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(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 19,579 $ 201,383
Crude oil and natural gas sales receivable 495,410 626,376
Other accounts receivable 13,703 5,993
Other current assets 4,781 1,117
----------- -----------
Total current assets 533,473 834,869
Property, plant, and equipment:
Crude oil and natural gas properties at cost, using the full
cost method of accounting 6,017,379 6,658,886
Other property, plant, and equipment 45,884 45,884
Less accumulated depletion, depreciation and amortization
(1,775,809) (2,102,223)
----------- -----------
Net property and equipment 4,287,454 4,602,547
Other assets, net 4,833 3,383
----------- -----------
Total assets $ 4,825,760 $ 5,440,799
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 134,517 $ 154,195
Note payable, current portion 483,336 270,000
----------- -----------
Total current liabilities 617,853 424,195
----------- -----------
Note payable, net of current maturities 1,953,884 2,295,000
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Total liabilities 2,571,737 2,719,195
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock 3,483 3,483
Paid-in capital 2,048,497 2,048,497
Retained earnings 202,043 669,624
----------- -----------
Total stockholders' equity 2,254,023 2,721,604
----------- -----------
Total liabilities and stockholders' equity $ 4,825,760 $ 5,440,799
=========== ===========
See accompanying notes.
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Texona Petroleum Corporation
Statements of Operations
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------ --------------
1999 2000
------------ --------------
(unaudited)
Revenues:
Crude oil and natural gas sales $ 2,498,204 $ 1,714,439
Other revenues 173,154 67,407
------------ --------------
2,671,358 1,781,846
Costs and expenses:
Lease operating expenses and production taxes 1,205,631 648,671
Depletion, depreciation and amortization 637,012 327,864
General and administrative expenses 599,495 250,321
------------ --------------
2,442,138 1,226,856
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Income from operations 229,220 554,990
Other income and (expense):
Interest expense (218,017) (114,254)
Other income 59,151 26,845
------------ --------------
(158,866) (87,409)
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Income before tax provision 70,354 467,581
Income tax provision -- --
------------ --------------
Net income $ 70,354 $ 467,581
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See accompanying notes.
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Texona Petroleum Corporation
Statements of Stockholders' Equity
COMMON CAPITAL IN TOTAL
STOCK EXCESS OF RETAINED STOCKHOLDER'S
ISSUED PAR VALUE EARNINGS EQUITY
-------- ----------- ---------- -------------
Balance at January 1, 1999 $ 3,483 $ 2,048,497 $ 131,689 $ 2,183,669
Net income -- -- 70,354 70,354
-------- ----------- ---------- -------------
Balance at December 31, 1999 3,483 2,048,497 202,043 2,254,023
Net income (unaudited) -- -- 467,581 467,581
-------- ----------- ---------- -------------
Balance at June 30, 2000 (unaudited) $ 3,483 $ 2,048,497 $ 669,624 $ 2,721,604
======== =========== ========== =============
See accompanying notes.
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Texona Petroleum Corporation
Statements of Cash Flows
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1999 2000
------------ --------------
(unaudited)
OPERATING ACTIVITIES
Net income $ 70,354 $ 467,581
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion, depreciation, and amortization 637,012 327,864
Deferred income taxes -- --
Changes in operating assets and liabilities:
Changes in accrued oil and natural gas receivable (245,509) (133,079)
Changes in accounts receivable - other (7,698) 9,823
Changes in other current assets (4,781) 3,664
Changes in accounts payable and accrued liabilities 20,605 19,678
---------- ----------
Net cash provided by operating activities 469,983 695,531
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (218,931) (641,507)
Proceeds from crude oil and natural gas property sales 80,302 --
---------- ----------
Net cash used in investing activities (138,629) (641,507)
FINANCING ACTIVITIES
Proceeds from borrowings -- 355,000
Repayments on note payable (311,775) (227,220)
---------- ----------
Net cash provided by financing activities (311,775) 127,780
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Net change in cash 19,579 181,804
Cash and cash equivalents at beginning of period -- 19,579
---------- ----------
Cash and cash equivalents at end of period $ 19,579 $ 201,383
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Supplemental disclosures of cash flow information:
Cash paid for:
---------- ----------
Interest $ 218,017 $ 114,254
========== ==========
See accompanying notes
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Texona Petroleum Corporation
Notes to Financial Statements
December 31, 1999
1. SUMMARY OF BUSINESS
ORGANIZATION
Texona Petroleum Corporation (the Company) was incorporated as a C-corporation
in the State of Delaware effective July 1, 1997. Texona Acquisition Company was
incorporated as a subchapter S corporation in the State of Texas effective July
21, 1995. Under terms of an Agreement and Plan of Merger (the Agreement of
Merger) dated October 22, 1997, Texona Acquisition Company, was merged with and
into Texona Petroleum Corporation, the surviving corporation. The Agreement of
Merger is intended to qualify as a plan of reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
The Company is a domestic independent energy company engaged in the exploration
and production of oil and natural gas. The Company's production operations are
focused onshore in Alabama, Arkansas, Colorado, Kansas, Louisiana, Mississippi,
Montana, New Mexico, North Dakota, Oklahoma, Texas, and Wyoming.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CRUDE OIL AND NATURAL GAS PROPERTIES
The Company follows the full cost method of accounting for crude oil and natural
gas properties. Under this method, all costs incurred in the acquisition,
exploration and development of oil and natural gas reserves, including directly
related geological and geophysical costs are capitalized. Sales, dispositions
and other crude oil and natural gas property retirements are accounted for as
adjustments to the full cost pool, with no recognition of gain or loss unless
the disposition would significantly alter the amortization rate.
Maintenance and repairs are charged to expense; betterments of property are
capitalized and depreciated as described below.
All capitalized costs of oil and natural gas properties, including the estimated
future costs to develop proved reserves, are depleted and depreciated on the
units-of-production method using estimates of proved reserves. Investments in
unproved properties and major development projects are not depleted or
depreciated until proved reserves associated with the projects can be determined
or until impairment occurs. If the results of an
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Texona Petroleum Corporation
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
assessment indicate that the unproved properties are impaired, the amount of the
impairment is added to the capitalized costs to be depreciated and depleted.
Capitalized costs of crude oil and natural gas properties are subject to a
"ceiling test", which limits such costs to the aggregate of the "estimated
present value discounted at a 10% interest rate of future net revenues from
proved reserves, based on current economic and operating conditions, plus the
lower of cost or fair market value of unproved properties, if any; less related
income tax effects".
Sales of proved and unproved properties are accounted for as adjustments of
capitalized costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves of oil and natural gas, in which case the gain or loss is recognized in
the Company's results from operations.
OTHER PROPERTY, PLANT AND EQUIPMENT
Other property, plant and equipment is stated at cost, with depreciation
provided on the straight-line method over the estimated useful lives of the
related assets ranging from 3 to 10 years. Other property, plant and equipment
is evaluated for impairment based on analysis of future net cash flows in
accordance with Statement of Financial Accounting Standard No. 121, "Accounting
for the Impairment of Long-Lived Assets to be Disposed of".
REVENUE RECOGNITION
The Company uses the sales method of accounting for oil and natural gas
revenues. Under the sales method, revenues are recognized based on actual
volumes of oil and natural gas sold to purchasers.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the anticipated future
tax effects of temporary differences between the financial statement basis and
the tax basis of the Company's assets and liabilities using enacted tax rates in
effect at year end. A valuation allowance for deferred tax assets is recorded
when it is more likely than not that the benefit from the deferred tax asset
will not be realized.
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Texona Petroleum Corporation
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, ("SFAS 123") "Accounting
for Stock-Based Compensation," encourages, but does not require, the adoption of
a fair value-based method of accounting for employee stock-based compensation
transactions. The Company has elected to apply the provisions of Accounting
Principles Board Opinion No. 25 ("Opinion 25"), "Accounting for Stock Issued to
Employees," and related interpretations, in accounting for its employee
stock-based compensation plans. Under Opinion 25, compensation cost is measured
as the excess, if any, of the quoted market price of the Company's stock at the
date of the grant above the amount an employee must pay to acquire the stock.
SIGNIFICANT RISKS AND UNCERTAINTIES
The Company's operations are subject to all of the operational and environmental
risks normally associated with the crude oil and natural gas industry. As of
December 31, 1999 there had been no claims made against the Company.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a concentration of
credit risk consist principally of cash and trade receivables. The Company
places its cash with high credit quality financial institutions. The Company
sells crude oil and natural gas to various customers. In addition, the Company
participates with other parties in the drilling, completion, and operation of
crude oil and natural gas wells. Substantially all of the Company's accounts
receivable are due from either purchasers of crude oil or natural gas or
participants in crude oil and natural gas wells for which the Company serves as
the operator. Generally, operators of oil and natural gas properties have the
right to offset future revenues against unpaid charges related to operated
wells. Crude oil and natural gas sales are generally unsecured.
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Texona Petroleum Corporation
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, amounts due from banks and all
highly liquid investments with original maturities of three months or less. The
Company maintains its cash in bank deposit accounts, which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant risk on cash.
FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities and
notes payable approximate fair value, unless otherwise stated, as of December
31, 1999.
COMPREHENSIVE INCOME
For the year ended December 31, 1999, the Company had no components of
comprehensive income other than those included in net income.
INTERIM FINANCIALS
In the opinion of the Company's management, the information furnished herein
reflects all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the results of the interim periods reported
herein. Operating results for the six months ended June 30, 2000 may not
necessarily be indicative of the results for the year ending December 31, 2000.
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Texona Petroleum Corporation
Notes to Financial Statements (continued)
3. NOTE PAYABLE
The Company's note payable at December 31 consists of the following:
1999
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Borrowings under a line of credit agreement with a bank, due
August 2002 $ 2,437,220
Less: current portion 483,336
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$ 1,953,884
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Maturities of the note payable at December 31, 1999 are as follows:
2000 $ 483,336
2001 483,336
2002 1,470,548
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Total $ 2,437,220
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At December 31, 1999, the Company had a $10 million revolving credit facility
with a bank. The credit facility, which matures August 1, 2002, bears interest
at prime plus .25% (8.5% at December 31, 1999) and is collateralized by specific
crude oil and natural gas properties. Under the terms of the credit facility,
beginning June 10, 1999 the Company is required to make monthly principal
payments of $40,278 plus interest with any unpaid principal and interest due
August 1, 2002. The credit facility requires the maintenance of certain ratios
relating to tangible net worth and working capital. The Company was in
compliance of all financial covenants under the terms of the credit facility at
December 31, 1999.
The carrying value of the Company's note payable approximates its fair value.
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Texona Petroleum Corporation
Notes to Financial Statements (continued)
4. INCOME TAXES
The following is a reconciliation of the provision for income taxes computed at
the statutory rate to the reported provision for income taxes:
1999
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Tax at statutory rate of 34% $ 23,920
Adjustments to the valuation allowance (23,920)
-----------
Provision for income taxes $ --
===========
Deferred tax assets (liabilities) at December 31, consisted of the following:
1999
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Non-current deferred tax assets :
Net operating loss carryforward $ 315,450
Crude oil and natural gas properties due to differences in depreciation
methods and intangible drilling costs (315,450)
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Non-current deferred tax assets $ --
===========
At December 31, 1999, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $936,000, which will be available
to offset future taxable income and income tax through 2018 and 2019.
5. STOCKHOLDERS' EQUITY
STOCK OPTION PLAN
On October 22, 1997 the Board of Directors of the Company approved a stock
option plan and approved 50,000 shares to be available for employees to purchase
under the plan and exercisable for a period of ten years. Any shares purchased
under this plan cannot be sold without first offering the right to purchase the
shares to the Company.
During 1999, the Company granted 19,300 options to its employees and
shareholders with option prices of $10.00 per share. The options vest in three
equal portions on the
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Texona Petroleum Corporation
Notes to Financial Statements (continued)
anniversaries of the respective grant dates and expire ten years from the grant
date. The Company granted no options during 1998.
The Company accounts for stock options issued to employees in accordance with
APB Opinion 25. "Accounting for Stock Issued to Employees." No compensation
expense was recorded for the 1997 grants since the exercise price equaled or
exceeded the market price per share at date of grant.
SFAS 123 requires the Company to provide pro forma information regarding net
income (loss) applicable to common stockholders as if compensation cost for the
Company's stock options granted to employees had been determined in accordance
with SFAS 123. The Company estimates the fair value of each stock option at the
grant date by using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants issued in 1999, a dividend yield of
0%, a risk free interest rate of 6.0%, and an expected life of 3 years.
Had compensation cost been determined on the basis of fair value pursuant to
SFAS 123 for stock options issued to employees, net income for the year ended
December 31, 1999 would have been reduced as follows:
1999
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Net income:
As reported $ 70,354
Pro forma 38,476
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Texona Petroleum Corporation
Notes to Financial Statements (continued)
5. STOCKHOLDERS' EQUITY (CONTINUED)
A summary of the status of the Company's stock options to employees and
directors as of December 31, 1999, and the changes during the year ending on
this date is presented below:
1999
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WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- ----------
Outstanding at beginning of year 25,400 $ 10.00
Granted 19,300 10.00
Exercised -- --
Forfeited -- --
---------- ----------
Outstanding end of year 44,700 10.00
========== ==========
Options exercisable at year-end 23,600 $ 10.00
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6. COMMITMENTS AND CONTINGENCIES
Various federal, state and local laws and regulations covering discharge of
materials into the environment, or otherwise relating to the protection of the
environment, may affect the Company's operations and the costs of its crude oil
and natural gas exploitation, development and production operations. The Company
does not anticipate that it will be required in the near future to expend
amounts material in relation to the financial statements taken as a whole by
reason of environmental laws and regulations. Because these laws and regulations
are constantly being changed, the Company is unable to predict the conditions
and other factors, over which it does not exercise control, that may give rise
to environment liabilities affecting the Company.
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Texona Petroleum Corporation
Notes to Financial Statements (continued)
7. MAJOR CUSTOMERS
The Company had revenues from a single customer that represented 29% in 1999, of
the Company's crude oil and natural gas sales revenues. At December 31, 1999,
crude oil and natural gas sales receivable from this customer amounted to
$121,606.
8. SUBSEQUENT EVENTS
On July 5, 2000, the Company entered into an agreement in principle to sell all
of its outstanding common stock to Toreador Resources Corporation (a publicly
traded Dallas-based oil and gas exploration & production company) in exchange
for approximately 1.1 million shares of Toreador Resources Corporation.
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Toreador - Texona Merger
SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED)
Oil and Gas Operations
During the year ended December 31,1999, no exploration or incremental general
and administrative costs were incurred.
The following information is presented pursuant to Statement of Financial
Accounting Standards No. 69, Disclosures about Oil and Gas Producing Activities:
Oil and Gas Reserves
The following table identifies Texona's net interest in estimated quantities of
proved oil and gas reserves associated with the oil and gas properties
("Properties") and changes in such estimated quantities. Reserve information
presented below is based upon estimates of proved reserves prepared by
independent petroleum engineers as of December 31, 1999.
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.
Oil Gas
(Bbls) (Mcf)
-------- ----------
Proved reserves at December 31, 1998 438,059 6,305,410
Production 55,226 757,110
Proved reserves at December 31, 1999 382,833 5,548,300
Proved developed reserves at:
December 31, 1998 396,069 6,211,410
December 31, 1999 340,843 5,454,300
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Toreador - Texona Merger
STANDARDIZED MEASURES OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES
Texona has developed the Standardized Measure of Discounted Future Net Cash
Flows Relating to Proved Oil and Gas Quantities (Standardized Measure), assuming
year-end selling prices adjusted for future fixed and determinable contractual
price changes, year-end development and production costs, and a 10% annual
discount rate. The Standard Measure does not consider the effects of income
taxes as it is not feasible to identify all assets, liabilities or indirect
operating costs applicable to the Properties because they were not maintained as
a separate business unit.
The Standardized Measure does not purport to be an estimate of the fair market
value of Texona's reserves. An estimate of fair value would also have taken into
account, among other things, the expected recovery of reserves in excess of
proved reserves, anticipated changes in future prices and costs and a discount
factor representative of the time value of money and risks inherent in producing
oil and gas.
December 31,
1999
------------
Future cash inflows $ 22,905,580
Future production costs 8,803,967
Future development costs 61,621
------------
Future net cash inflows before income taxes 14,039,992
Future income tax expense 4,352,398
------------
Future net cash inflows 9,687,594
Ten percent annual discount 3,846,421
Standardized Measure of discounted future net cash flows
future net cash flows $ 5,841,173
============
The oil and gas prices used to calculate future net cash inflows at December 31,
1999 were $24.04 per barrel and $2.17 per Mcf. The oil price is based on the New
York Mercantile Exchange ("NYMEX") historical crude pricing as of December 31,
1999, less $1.98 for quality and transportation differentials. The gas price is
based on December NYMEX - Henry Hub pricing as of December 31, 1999, less $.26
for quality and transportation differentials. The prices of crude oil and
natural gas have fluctuated over the past several years, which affects the
computed cash flows over the period shown. 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.
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Toreador - Texona Merger
Changes in the Standardized Measure
The following are the principal sources of change in the standardized measure:
1999
-----------
Balance at January 1, $ 3,860,862
-----------
Changes resulting from:
Sales, net of production costs (1,292,573)
Net changes in prices and costs 4,365,378
Net changes in income taxes (1,478,580)
Accretion of discount 386,086
-----------
Balance at December 31, $ 5,841,173
===========
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TOREADOR - TEXONA
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
As of June 30, 2000
Toreador Texona Adjustments Pro Forma for
Historical Historical for Merger the Merger
------------ ------------ ------------ -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 253,438 $ 201,383 $ -- $ 454,821
Accounts receivable 1,518,811 632,369 -- 2,151,180
Other current assets 362,475 1,117 -- 363,592
------------ ------------ ------------ ------------
Total current assets 2,134,724 834,869 -- 2,969,593
------------ ------------ ------------ ------------
Properties and equipment, less accumulated
depreciation, depletion and amortization 23,708,042 4,602,547 3,545,881 (a) 31,856,470
Other Assets 301,002 3,383 -- 304,385
Deferred tax benefit 107,855 -- -- 107,855
------------ ------------ ------------ ------------
Total assets $ 26,251,623 $ 5,440,799 $ 3,545,881 $ 35,238,303
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 363,006 $ 154,195 $ 424,985 (a) $ 942,186
Federal income tax payable 469,847 -- -- 469,847
Current portion of long term debt 387,877 270,000 -- 657,877
------------ ------------ ------------ ------------
Total current liabilities 1,220,730 424,195 424,985 2,069,910
------------ ------------ ------------ ------------
Long term debt 13,760,000 2,295,000 -- 16,055,000
Total liabilities 14,980,730 2,719,195 424,985 18,124,910
------------ ------------ ------------ ------------
Stockholders' equity:
Preferred stock, $1.00 par value, 4,000,000
shares authorized; 160,000 issued 160,000 -- -- 160,000
Common stock, $0.15625 par value, 20,000,000 shares
authorized; 6,676,571 shares issued 883,058 3,483 156,673 (b) 1,043,214
Capital in excess of par value 8,234,380 2,048,497 3,633,847 (b) 13,916,724
Retained earnings 3,410,348 669,624 (669,624)(b) 3,410,348
------------ ------------ ------------ ------------
12,687,786 2,721,604 3,120,896 18,530,286
Treasury stock at cost: 503,200 shares (1,416,893) -- -- (1,416,893)
------------ ------------ ------------ ------------
Total stockholders' equity 11,270,893 2,721,604 3,120,896 17,113,393
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 26,251,623 $ 5,440,799 $ 3,545,881 $ 35,238,303
============ ============ ============ ============
The Company uses the successful efforts method of accounting for its
oil and gas producing activities.
See accompanying notes to unaudited pro forma consolidated financial statements.
21
22
TOREADOR - TEXONA
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Six Months Ended June 30, 2000
Toreador Texona Pro Forma
Historical Historical Adjustments for the
Amounts Amounts for Acquisition Acquisition
----------- ----------- --------------- -----------
Revenues:
Oil and gas sales $ 4,778,381 $ 1,714,439 -- $ 6,492,820
Lease bonuses and rentals 246,879 -- -- 246,879
Interest and other income 14,833 94,252 -- 109,085
Loss on sale of marketable securities (54,076) -- -- (54,076)
Gain on sale of properties and other assets 58,913 -- -- 58,913
----------- ----------- --------------- -----------
Total revenues 5,044,930 1,808,691 -- 6,853,621
----------- ----------- --------------- -----------
Costs and expenses:
Lease operating expense 841,214 648,671 -- 1,489,885
Depreciation, depletion and amortization 982,794 327,864 168,535(c) 1,479,193
Geological and geophysical 103,641 -- -- 103,641
General and administrative 986,096 250,321 -- 1,236,417
Interest expense 664,914 114,254 -- 779,168
----------- ----------- --------------- -----------
Total costs and expenses 3,578,659 1,341,110 168,535 5,088,304
----------- ----------- --------------- -----------
Income (loss) before federal income taxes 1,466,271 467,581 (168,535) 1,765,317
Provision (benefit) for federal income taxes 501,530 -- 101,676(d) 603,206
----------- ----------- --------------- -----------
Net income (loss) $ 964,741 $ 467,581 $ (270,211) $ 1,162,111
=========== =========== =============== ===========
Dividends on preferred and common shares 231,775 231,775
Net Income applicable to common shares 732,966 930,336
=========== ===========
Basic and diluted income per share $ 0.14 $ 0.15
Weighted average shares outstanding:
Basic 5,162,771 6,187,771
Diluted 5,304,428 6,329,428
See accompanying notes to unaudited pro forma consolidated financial statements
22
23
TOREADOR - TEXONA
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 1999
Toreador Texona Pro Forma
Historical Historical Adjustments for the
Amounts Amounts for Acquisition Acquisition
----------- ----------- --------------- -----------
Revenues:
Oil and gas sales $ 4,259,040 2,498,204 -- $ 6,757,244
Lease bonuses and rentals 463,083 -- -- 463,083
Interest and other income 109,035 232,305 -- 341,340
Gain on sale of properties 851,726 -- -- 851,726
Loss on sale of marketable securities (79,615) -- -- (79,615)
----------- ----------- --------------- -----------
Total revenues 5,603,269 2,730,509 -- 8,333,778
Costs and expenses:
Lease operating 699,278 1,205,631 -- 1,904,909
Dry holes and abandonments 9,933 -- -- 9,933
Depreciation, depletion and amortization 1,276,268 637,012 355,781(c) 2,269,061
Geological and geophysical 394,496 -- -- 394,496
General and administrative 1,583,729 599,495 -- 2,183,224
Interest 794,627 218,017 -- 1,012,644
----------- ----------- --------------- -----------
Total costs and expenses 4,758,331 2,660,155 355,781 7,774,267
----------- ----------- --------------- -----------
Income (loss) before federal income taxes 844,938 70,354 (355,781) 559,511
Provision (benefit) for federal income taxes 336,927 -- (97,045)(d) 239,882
----------- ----------- ---------------
Net income (loss) $ 508,011 $ 70,354 $ (258,736) $ 319,629
=========== =========== =============== ===========
Dividends on preferred shares 360,000 360,000
-----------
Net income (loss) applicable to common shares 148,011 (40,371)
=========== ===========
Basic and diluted income (loss) per share $ 0.03 $ (0.01)
Weighted average shares outstanding:
Basic 5,185,588 6,210,588
Diluted 5,250,862 6,275,862
See accompanying notes to unaudited pro forma consolidated financial statements.
23
24
Pro Forma Information (unaudited)
Toreador - Texona Merger
The accompanying unaudited pro forma consolidated financial information gives
effect to the Merger. The unaudited pro forma balance sheet adjusts the June 30,
2000 historical balance sheet as though the acquisition occurred on June 30,
2000. The unaudited pro forma statements of operations for the six month period
ended June 30, 2000 and the year ended December 31, 1999 are adjusted to reflect
the acquisition as though it occurred on January 1, 1999. The pro forma results
exclude any nonrecurring charges or credits directly attributable to the
acquisition.
The unaudited pro forma financial information is based on assumptions and
includes adjustments as explained in the notes to the unaudited pro forma
consolidated financial information. The actual recording of the Merger could
differ. The unaudited pro forma financial information is not necessarily
indicative of Toreador's financial position or results of operations that might
have occurred had the transaction occurred on the dates indicated above.
The unaudited pro forma financial information should be read in conjunction with
the historical financial statements and related notes thereto which are
contained in the Company's 1999 Annual Report on Form 10-K for the year ended
December 31, 1999, Toreador's Quarterly Report on Form 10-Q for the six months
ended June 30, 2000 and the historical financial statements and the related
notes thereto included in this Current Report on Form 8-K.
24
25
Pro Forma Information (unaudited)
Toreador - Texona Merger
NOTES
1. Pro forma adjustments are made to reflect the following:
(a) The allocation of the pro forma purchase price under the purchase
method of accounting is presented below:
Excess of purchase price over net assets and liabilities... 3,120,896
Other acquisition costs................................. 424,985
-----------
Total purchase price allocated to Properties and equipment $ 3,545,881
===========
(b) To record the funding of the Merger by issuing common stock. Such
funding came from the issuance of 1,025,000 shares of Toreador common
stock. The stock is valued at $5.70 per the terms of the Merger
Agreement. Additional recording adjustments will be made upon the
issuance of the contingent Deferred Shares.
(c) The increase in depreciation, depletion and amortization associated
with the properties acquired. The pro forma adjustment assumes a
depreciation, depletion and amortization rate per BOE of $5.47 for the
year ended December 31, 1999 and the six months ended June 30, 2000
based upon depletable costs of $8,148,428 and $7,155,635 at December
31, 1999 and June 30, 2000, respectively and proved reserves of
1,488,945 BOE and 1,307,534 BOE at January 1, 1999 and January 1, 2000,
respectively.
(d) The change in federal and state income taxes associated with the income
and expenses generated by the Properties.
25
26
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.
TOREADOR RESOURCES CORPORATION
Date: October 2, 2000 /s/ G. Thomas Graves III
----------------------------------------
G. Thomas Graves III
President and Chief Executive Officer
27
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Merger Agreement, effective September 11, 2000, between Texona
Petroleum Corporation, Toreador Resources Corporation and Toreador
Acquisition Corporation.
10.2 Fourth Amendment To Credit Agreement, effective September 19, 2000,
between Compass Bank, as Lender, and Toreador Resources Corporation,
Toreador Exploration & Production Inc., and Tormin, Inc., as Borrowers,
and Toreador Acquisition Corporation, as Guarantor.
23.1 Consent of Ernst & Young LLP.