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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
JUNE 30, 1999
(DATE OF REPORT) (DATE OF EARLIEST EVENT REPORTED)
VENUS EXPLORATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-14334 13-3299127
(COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
1250 N.E. LOOP 410
SUITE 1000
SAN ANTONIO, TEXAS 78209
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (210) 930-4900
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The undersigned registrant hereby amends the following Item 7.
Financial Statements and Exhibits of its Form 8-K filed on July 15, 1999, dated
June 30, 1999 to include the following:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
Audited Statements of Operating Revenues and Direct Operating
Expenses for Venus' share of the Jackson Parish Properties for
the years ended December 31, 1996, 1997, and 1998, and
Unaudited Statements of Operating Revenues and Direct
Operating Expenses for the six months ended June 30, 1999 and
1998, together with report of independent auditors Ernst &
Young LLP.
(b) Pro Forma Financial Information.
Pro Forma Combined Financial Statements of Venus Exploration,
Inc. for the year ended December 31, 1998 and the six months
ended June 30, 1999.
(c) Exhibits.
Number Document
------ --------
10.1 Purchase and Sale Agreement between Apache
Corporation as seller, and Venus Exploration, Inc.,
buyer, dated May 13, 1999, previously filed as an
exhibit to Venus' Form 8-K filed July 15, 1999 and
incorporated by reference herein.
10.2 Credit Agreement among EXUS Energy, LLC, as borrower,
NationsBank, N.A., as administrative agent, and
financial institutions listed on Schedule I, dated
June 30, 1999, previously filed as an exhibit to
Venus' Form 8-K filed July 15, 1999 and incorporated
by reference herein.
10.3 Limited Liability Company Agreement of EXUS Energy,
LLC, dated June 30, 1999, previously filed as an
exhibit to Venus' Form 8-K filed July 15, 1999 and
incorporated by reference herein.
10.4 Convertible Promissory Note made by Venus
Exploration, Inc. in favor of EXCO Resources, Inc.,
dated June 30, 1999, previously filed as an exhibit
to Venus' Form 8-K filed July 15, 1999 and
incorporated by reference herein.
10.5 Pledge Agreement made by Venus Exploration, Inc. for
the benefit of EXCO Resources, Inc., dated June 30,
1999, previously filed as an exhibit to Venus' Form
8-K filed July 15, 1999 and incorporated by reference
herein.
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Number Document
------ --------
10.6 Registration Rights Agreement between EXCO Resources,
Inc. and Venus Exploration, Inc., dated June 30,
1999, previously filed as an exhibit to Venus' Form
8-K filed July 15, 1999 and incorporated by reference
herein.
10.7 Agreement Among Members between EXCO Resources, Inc.
and Venus Exploration, Inc., dated June 30, 1999,
previously filed as an exhibit to Venus' Form 8-K
filed July 15, 1999 and incorporated by reference
herein.
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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.
VENUS EXPLORATION, INC.
By: /s/ PATRICK A. GARCIA
----------------------------------
Patrick A. Garcia
Chief Financial Officer
Dated: September 7, 1999
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Item 7(a)
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Venus Exploration, Inc.
We have audited the accompanying statements of operating revenues and direct
operating expenses of the Jackson Parish Properties (as defined in Note 1 to the
accompanying statements) acquired by Venus Exploration, Inc. for the years ended
December 31, 1996, 1997 and 1998. These statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the statements of operating revenues and
direct operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of operating revenues and direct operating expenses. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement presentation. We
believe our audits provide a reasonable basis for our opinion.
The accompanying statements of operating revenues and direct operating expenses
were prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and are not intended to be a complete
presentation of revenues and expenses of the Jackson Parish Properties.
In our opinion, the statements of operating revenues and direct operating
expenses referred to above present fairly, in all material respects, the results
of operations of the Jackson Parish Properties acquired by Venus Exploration,
Inc. for the years ended December 31, 1996, 1997, and 1998 in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Dallas, Texas
August 17, 1999
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JACKSON PARISH PROPERTIES
STATEMENTS OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
(In thousands)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- -----------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
(Unaudited)
Oil and natural gas sales ............... $3,624 $3,655 $2,812 $1,542 $1,081
Direct operating expenses ............... 291 465 522 223 196
------ ------ ------ ------ ------
Excess of revenues over direct operating
expenses ................................ $3,333 $3,190 $2,290 $1,319 $ 885
====== ====== ====== ====== ======
See accompanying notes.
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JACKSON PARISH PROPERTIES
NOTES TO STATEMENTS OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
1. BASIS OF PRESENTATION
On June 30, 1999, EXUS Energy, LLC, a Delaware limited liability company
(EXUS), owned 50% by Venus Exploration, Inc. (Venus), and 50% by EXCO Resources,
Inc. (EXCO) completed the acquisition from Apache Corporation of certain oil and
natural gas properties located in Jackson Parish, Louisiana (the Jackson Parish
Properties). The Jackson Parish Properties include 17 gross (14.25 net)
producing wells. EXCO is the named operator of the Jackson Parish Properties and
assumed operations of all 17 wells acquired in the transaction. The Jackson
Parish Properties include 6,411 gross (5,672 net) developed acres and 1,532
gross (1,148 net) undeveloped acres. The purchase price, before closing
adjustments, was approximately $28.5 million, and after adjustments was $27.6
million cash.
The acquisition was funded with $14 million drawn under a new credit
facility established by EXUS with NationsBank, N.A., and $14 million of EXUS
equity capital which consisted of $7 million cash contributions each by Venus
and EXCO. Venus' capital was funded by a $7 million Convertible Promissory Note
in favor of EXCO dated June 30, 1999.
Venus will include in its accounts its 50% proportionate interest in the
assets, liabilities, revenues and expenses of the Jackson Parish Properties.
Accordingly, the accompanying statements present the interest acquired by Venus
in the operating revenues and direct operating expenses of the Jackson Parish
Properties. The operating revenues and direct operating expenses presented
herein relate only to the interests in the producing oil and natural gas
properties acquired and do not represent all of the oil and natural gas
operations of Apache nor the interest acquired by EXCO. Direct operating
expenses include the actual costs of maintaining the producing properties and
their production, but do not include charges for depletion, depreciation, and
amortization; federal and state income taxes, interest; or general and
administrative expenses. Presentation of complete historical financial
statements for the years ended December 31, 1996, 1997, and 1998 is not
practicable because the Jackson Parish Properties were not accounted for as a
separate entity by Apache; and therefore, such statements are not available. The
operating revenues and direct operating expenses for the periods presented may
not be representative of future operations.
Revenues in the accompanying statements of operating revenues and direct
operating expenses are recognized on the entitlement method. Direct operating
expenses are recognized on an accrual basis.
In management's opinion, the accompanying interim statements contain all
adjustments (consisting solely of normal recurring accruals) necessary to
present fairly the consolidated interest acquired by Venus in the operating
revenues and direct operating expenses of the Jackson Parish Properties for the
six month periods ended June 30, 1998 and 1999.
The results of operations for the six months ended June 30, 1999, are not
necessarily indicative of the results expected for the full year.
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2. SUPPLEMENTAL OIL AND NATURAL GAS RESERVE AND STANDARDIZED MEASURE
INFORMATION (UNAUDITED)
OIL AND NATURAL GAS OPERATIONS
During the years ended December 31, 1996, 1997, and 1998 Venus' share of
the development costs incurred for the interest acquired by Venus were $2.0
million, $2.4 million and $25,000, respectively. No exploration or incremental
general and administrative costs were incurred.
RESERVE QUANTITY INFORMATION
The following table presents Venus' estimate of the proved oil and
natural gas reserves of the Jackson Parish Properties, all of which are located
in the United States, as of December 31, 1998. Venus and EXCO have used
different petroleum reservoir engineers to prepare these estimates. As a result,
the reserve quantity estimate and the Standardized Measure of Discounted Future
Net Cash Flows below differ from those estimates presented by EXCO in its public
disclosures. Venus emphasizes that reserve estimates are inherently imprecise
and that estimates of new discoveries are more imprecise than those of producing
oil and natural gas properties. Accordingly, the estimates are expected to
change as future information becomes available.
OIL (MBBLS) GAS(MMCF) MBOE*
----------- --------- ------
Proved reserves ......... 1 31,929 5,323
====== ====== ======
Proved developed reserves 1 17,873 2,980
====== ====== ======
- ------------------
* Mboe - Thousand barrels of oil equivalent calculated 6 Mmcf of natural
gas to 1 Mbbl of oil.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves ("Standardized Measure") is a disclosure requirement
under Statement of Financial Accounting Standards No. 69. The Standardized
Measure does not purport to be, nor should it be interpreted to present, the
fair value of the oil and natural gas reserves of the Jackson Parish Properties.
An estimate of fair value would also take into account, among other things, the
recovery of reserves not presently classified as proved, the value of unproved
properties, and consideration of expected future economic and operating
conditions.
Under the Standardized Measure, future cash flows are estimated by
applying year-end prices, adjusted for fixed and determinable escalations, to
the estimated future production of year-end proved reserves. Future cash flows
are reduced by estimated future production costs, based on period-end costs, and
projected future development costs to determine net cash inflows. The Jackson
Parish Properties are not a separate tax paying entity. Accordingly, the
Standardized Measure for the Jackson Parish Properties is presented before
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deduction of income taxes. Future net cash flows are discounted using a 10%
annual discount rate to arrive at the Standardized Measure.
The Standardized Measure of discounted future net cash flows relating to
proved oil and natural gas reserves of the interest acquired by Venus in the
Jackson Parish Properties at December 31, 1998 follows (in thousands):
Future cash inflows ................................ $62,593
Future production costs ............................ 17,041
Future development costs ........................... 7,925
-------
Future net cash flows .............................. 37,627
Discount of future net cash flows at 10% per annum . 24,793
-------
Discounted future net cash flows before income taxes $12,834
=======
The future cash flows shown above include amounts attributable to
non-producing reserves requiring approximately $7.9 million of future
development costs. If these reserves are not developed, the Standard Measure of
discounted future net cash flows as of December 31, 1998, shown above would be
reduced significantly.
Estimates of economically recoverable oil and natural gas reserves and of
future net revenues are based upon a number of variable factors and assumptions,
all of which are to some degree speculative and may vary considerably from
actual results. Therefore, actual production, revenues, taxes, development and
operating expenditures may not occur as estimated. The reserve data are
estimates only, are subject to many uncertainties and are based on data gained
from production histories and on assumptions as to geologic formations and other
matters. Actual quantities of natural gas and oil may differ materially from the
amounts estimated.
The weighted average prices of oil and natural gas at December 31, 1998
used in the calculation of the Standardized Measure were $9.75 per barrel and
$1.96 per Mcf, respectively.
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Item 7(b)
VENUS EXPLORATION, INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
As discussed in Item 2. Acquisition or Disposition of Assets, of Venus'
Form 8-K filed on July 15, 1999 dated June 30, 1999, EXUS Energy, LLC (EXUS), a
Delaware limited liability company, owned 50% by Venus Exploration, Inc. (Venus)
and 50% by EXCO Resources, Inc. (EXCO) completed the acquisition of the Jackson
Parish Properties on June 30, 1999. The acquisition was funded through
borrowings made under the EXUS credit facility with NationsBank, N.A. (the
Borrowings), and cash from working capital.
The accompanying pro forma combined financial statements are based on the
historical financial statements of Venus for the year ended December 31, 1998,
and the six months ended June 30, 1999. The pro forma combined financial
statements are also based, in part, on Venus' share of the historical operating
revenues and direct operating expenses of the Jackson Parish Properties acquired
by Venus on June 30, 1999, reduced by the operating revenues and direct
operating expenses of properties sold by Venus in early 1999. On January 27,
1999, Venus sold its interests in oil and gas properties located in the state of
West Virginia (West Virginia Properties) and on February 12, 1999, Venus sold
its interests in oil and gas properties located in Freeestone County, Texas (H.
E. White Unit). The statements of operating revenues and direct operating
expenses of the Jackson Parish Properties are included elsewhere herein.
The Pro Forma Combined Statement of Operations for the year ended
December 31, 1998, and the six months ended June 30, 1999, have been prepared
assuming the acquisition of the Jackson Parish Properties and the related
borrowings, and the sale of the West Virginia Properties and the H. E. White
Unit had been consummated on January 1, 1998.
The pro forma adjustments are based upon available information and
assumptions that management of Venus believes are reasonable. The pro forma
combined condensed financial statements do not purport to represent the
financial position or results of operations of Venus which would have occurred
had such transactions been consummated on the dates indicated or Venus'
financial position or results of operations for any future date or period.
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VENUS EXPLORATION, INC
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
DISPOSITION OF
PROPERTIES
---------------
WEST VIRGINIA
AND JACKSON
VENUS H.E. WHITE UNIT PARISH PRO FORMA PRO FORMA
HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- --------------- ---------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OIL AND GAS REVENUES $ 2,805 $ (431) $ 2,812 $ -- $ 5,186
COST OF OPERATIONS:
Production expense 1,610 (218) 522 -- 1,914
Exploration expense,
including dry holes 1,261 -- -- -- 1,261
Impairment of oil and
gas properties 3,543 (374) -- -- 3,169
Depletion, depreciation and
amortization 1,775 (164) -- 918 (6) 2,529
General and administrative 3,174 -- -- -- 3,174
-------- -------- -------- -------- --------
Total expenses 11,363 (756) 522 918 12,047
-------- -------- -------- -------- --------
Operating profit (loss) (8,558) 325 2,290 (918) (6,861)
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (568) -- -- (1,180)(2)(3)(4)(5) (1,748)
Gain on sale of properties 30 -- -- -- 30
Interest income and other 32 -- -- -- 32
-------- -------- -------- -------- --------
(506) -- -- (1,180) (1,686)
-------- -------- -------- -------- --------
Income (loss) before
extraordinary item (9,064) 325 2,290 (2,098) (8,547)
Extraordinary loss 346 -- -- -- 346
-------- -------- -------- -------- --------
Net Income (loss) $ (9,410) $ 325 $ 2,290 $ (2,098) $ (8,893)
======== ======== ======== ======== ========
Basic and diluted earnings per share:
Loss before extraordinary
item $ (0.91) $ (0.86)
Extraordinary loss (0.04) (0.04)
-------- --------
Net Income (loss) $ (0.95) $ (0.90)
======== ========
Common shares and equivalents
outstanding, basic and diluted 9,934 9,934
======== ========
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VENUS EXPLORATION, INC
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
DISPOSITION OF
PROPERTIES
---------------
WEST VIRGINIA PRO FORMA
AND JACKSON ADJUSTMENTS
VENUS H.E. WHITE UNIT PARISH FOR THE PRO FORMA
HISTORICAL HISTORICAL HISTORICAL ACQUISITIONS COMBINED
---------- --------------- ---------- ------------ ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OIL AND GAS REVENUES $ 819 $ (37) $ 1,081 $ -- $ 1,863
COST OF OPERATIONS:
Production expense 413 1 196 -- 610
Exploration expense,
including dry holes 361 -- -- -- 361
Impairment of oil and
gas properties -- -- -- -- --
Depletion, depreciation and
amortization 236 -- -- 380 (6) 616
General and administrative 1,069 -- -- -- 1,069
------- ------- ------- ------- -------
Total expenses 2,079 1 196 380 2,656
------- ------- ------- ------- -------
Operating profit (loss) (1,260) (38) 885 (380) (793)
------- ------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense (220) -- -- (651)(2)(3)(4)(5) (871)
Gain on sale of properties 804 -- -- (785)(1) 19
Interest income and other 8 -- -- -- 8
------- ------- ------- ------- -------
592 -- -- (1,436) (844)
------- ------- ------- ------- -------
Net Income (loss) $ (668) $ (38) $ 885 $(1,816) $(1,637)
======= ======= ======= ======= =======
Basic and diluted loss per share $ (0.06) $ (0.15)
======= =======
Common shares and equivalents
outstanding, basic and diluted 10,982 10,982
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VENUS EXPLORATION, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
A. PRO FORMA ADJUSTMENTS FOR THE SALE OF WEST VIRGINIA PROPERTIES AND
H. E. WHITE UNIT
The accompanying unaudited Pro Forma Combined Statement of Operations for
the year ended December 31, 1998 has been prepared as if the sale of the West
Virginia Properties and H. E. White Unit had been consummated on January 1, 1998
and reflects the following adjustments:
(1) To eliminate gain on sale of the West Virginia Properties and
H. E. White Unit.
(2) To reduce interest expense due to the reduction in the note retired
by the sale of the West Virginia Properties and H. E. White Unit.
B. PRO FORMA ADJUSTMENTS FOR THE JACKSON PARISH PROPERTIES
The accompanying unaudited Pro Forma Combined Statement of Operations for
the year ended December 31, 1998 and the six months ended June 30, 1999 have
been prepared as if Venus' share of the acquisition of the Jackson Parish
Properties and the related borrowings had been consummated on January 1, 1998
and reflects the following adjustments:
(3) To record interest expense on the borrowing of $7.0 million, based
on a 6.8% per annum interest rate.
(4) To record interest expense on the borrowing of $7.0 million, based
on a 12% per annum interest rate.
(5) To record amortization of deferred financing costs.
(6) To adjust depreciation, depletion and amortization of the oil and
gas properties to reflect the effect of the acquisition of the
Jackson Parish Properties, using the successful efforts method of
accounting on total pro forma proved oil and natural gas reserves.
C. INCOME TAXES
No adjustment to income tax expense or benefit has been reflected in the
unaudited pro forma statements of operations due to the net operating losses and
the uncertainty of realizing deferred tax benefits.
D. PRO FORMA COMBINED SUPPLEMENTAL OIL AND NATURAL GAS RESERVE AND
STANDARDIZED MEASURE INFORMATION
RESERVE QUANTITY INFORMATION
The following table presents Venus' estimate of the pro forma combined
proved oil and natural gas reserves of Venus after giving effect to the
acquisition of Venus' share of the Jackson Parish Properties as of December 31,
1998 and the sale of the West Virginia Properties and the H. E. White Unit. All
reserves are located in the United States. Venus and EXCO have used different
petroleum reservoir engineers to prepare these estimates. As a result, the
reserve quantity estimate and the Standardized Measure of Discounted Future Net
Cash Flows below differ, with respect to the Jackson Parish Properties, from
those estimates presented by EXCO in its public disclosures. Venus emphasizes
that reserve estimates are inherently imprecise
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and that estimates of new discoveries are more imprecise than those of producing
oil and natural gas properties. Accordingly, the estimates are expected to
change as future information becomes available.
OIL (MBBLS) GAS (MMCF) MBOE*
----------- ---------- -------
Proved reserves ......... 708 37,087 6,890
====== ====== ======
Proved developed reserves 468 21,554 4,060
====== ====== ======
- -----------------
* Mboe - Thousand barrels of oil equivalent by converting 6 Mmcf of natural
gas to 1 Mbbl of oil.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND NATURAL GAS RESERVES
The Standardized Measure of Discounted Future Net Cash Flows Relating
to Proved Oil and Natural Gas Reserves ("Standardized Measure") is a disclosure
requirement under Statement of Financial Accounting Standards No. 69. The
Standardized Measure does not purport to be, nor should it be interpreted to
present, the fair value of Venus' oil and natural gas reserves. An estimate of
fair value would also take into account, among other things, the recovery of
reserves not presently classified as proved, the value of unproved properties,
and consideration of expected future economic and operating conditions.
Under the Standardized Measure, future cash flows are estimated by
applying year-end prices, adjusted for fixed and determinable escalations, to
the estimated future production of year-end proved reserves. Future cash inflows
are reduced by estimated future production costs, based on period-end costs, and
projected future development costs to determine pre-tax cash inflows. Future
income taxes are computed by applying the statutory rate (based on the current
tax law adjusted for permanent differences and tax credits) to the excess of
pre-tax net cash flows over Venus' income tax basis of its oil and natural gas
properties and giving effect to net operating loss carryforwards, tax credits
and allowances relating to such properties. Future net cash flows are discounted
using a 10% annual discount rate to arrive at the Standardized Measure.
The pro forma Standardized Measure of discounted future net cash flows
relating to Venus' proved oil and natural gas reserves at December 31, 1998,
follows (in thousands):
Future cash inflows ................................... $81,535
Future production costs ............................... 24,126
Future development costs .............................. 9,431
Future income taxes ................................... 4,780
-------
Future net cash flows ................................. 43,198
Discount of future net cash flows at 10% per annum .... 26,577
-------
Pro forma Standardized Measure of discounted future net
cash flows ............................................ $16,621
=======
The future cash flows shown above include amounts attributable to
non-producing reserves requiring approximately $9.4 million of future
development costs. If these reserves are not developed, the Standardized Measure
of discounted future net cash flows as of December 31, 1998, shown above would
be reduced significantly.
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Estimates of economically recoverable oil and natural gas reserves and of
future net reserves are based upon a number of variable factors and assumptions,
all of which are to some degree speculative and may vary considerably from
actual results. Therefore, actual production, revenues, taxes, development and
operating expenditures may not occur as estimated. The reserve data are
estimates only, are subject to many uncertainties and are based on data gained
from production histories and on assumptions as to geologic formations and other
matters. Actual quantities of oil and natural gas may differ materially from the
amounts estimated.
The weighted average prices of oil and natural gas at December 31, 1998
used in the calculation of the Standardized Measure were $10.31 per barrel and
$2.00 per Mcf, respectively.
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