1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 11, 1995
FORTUNE PETROLEUM CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware 1-12334 95-4114732
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
30101 Agoura Court, Suite 110 Agoura Hills, California 91301
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (818) 991-0526
N/A
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
- -------------------------------------------------------------------------------
Registrant hereby amends its Current Report on Form 8-K, filed
December 26, 1995, as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. Financial
information regarding Registrant's acquisition of an interest
in the South Timbalier Block 76 from PetroFina S.A. appears on
pages 2 through 6, below.
2
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Fortune Petroleum Corporation
We have audited the accompanying statements of revenues and direct operating
expenses of the oil and gas property interests acquired from PetroFina S.A.
(the PetroFina Properties) for each of the years in the three-year period ended
December 31, 1994. These statements of revenues and direct operating expenses
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these statements of revenues and direct operating
expenses based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of 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 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 presentation of the
statements of revenues and direct operating expenses. We believe that our
audits of the statements of revenues and direct operating expenses provide a
reasonable basis for our opinion.
The accompanying statements were prepared as described in Note 1 for the
purpose of complying with certain rules and regulations of the Securities and
Exchange Commission (SEC) for inclusion in certain SEC regulatory reports and
filings and are not intended to be a complete financial presentation.
In our opinion, the accompanying statements of revenues and direct operating
expenses present fairly the revenues and direct operating expenses of the
PetroFina Properties for each of the years in the three-year period ended
December 31, 1994, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
December 20, 1995
2
3
FORTUNE PETROLEUM CORPORATION
STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES
ACQUIRED FROM PETROFINA S.A. (NOTE 1) FOR THE
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995 (UNAUDITED)
Nine Months Ended
Year Ended December 31, September 30
----------------------------------------- ------------------------
(unaudited)
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
REVENUES
Sales of oil and gas, net of
royalties $2,101,807 $2,005,626 $1,599,418 $1,350,770 $1,508,258
DIRECT OPERATING EXPENSES 304,171 229,199 700,031 117,232 252,073
---------- ---------- ---------- ---------- ----------
REVENUES IN EXCESS OF DIRECT
OPERATING EXPENSES $1,797,636 $1,776,427 $ 899,387 $1,233,538 $1,256,185
========== ========== ========== ========== ==========
See Notes to Statements of Revenues and Direct Operating Expenses for Assets
Acquired.
3
4
FORTUNE PETROLEUM CORPORATION
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
ACQUIRED FROM PETROFINA S.A. FOR THE YEARS ENDED
DECEMBER 31, 1992, 1993 AND 1994 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statements present the revenues and direct operating
expenses of the working interests in certain oil and gas properties (the
PetroFina Properties) purchased by Fortune Petroleum Corporation (the Company)
from PetroFina S.A. (PetroFina) during December 1995 for $2.9 million. The
PetroFina Properties are located in federal waters in the Gulf of Mexico.
The accompanying statements of revenues and direct operating expenses
were derived from the historical accounting records of PetroFina. Direct
operating expenses include payroll, lease and well repairs, maintenance and
other direct operating expenses.
The unaudited statements of revenues and direct operating expenses for
the nine months ended September 30, 1994 and 1995 include all material
adjustments, which consist only of normal recurring adjustments necessary for a
fair presentation, and are not necessarily indicative of results for an entire
year.
OMITTED HISTORICAL FINANCIAL INFORMATION
Full historical financial statements, including exploration expense,
general and administrative expenses, interest expense and income tax expense,
have not been presented because they have not historically been allocated at
this level. Historical depletion expense has not been included in such
statements as the Company will adjust the basis in its purchase price allocation
and the historical depletion will no longer be relevant.
ACCRUAL BASIS STATEMENTS
Memorandum adjustments have been made to the financial information
derived from the predecessor owner in order to present the accompanying
statements of revenues and direct operating expenses in accordance with
generally accepted accounting principles.
RELATED PARTY TRANSACTIONS
All of the production from the PetroFina Properties was sold to a
subsidiary of PetroFina. Gas production was sold for average prices of $1.73,
$2.27 and $2.10 per Mcf during 1992, 1993 and 1994, respectively. Oil
production was sold for average price of $17.71, $15.56 and $14.15 during 1992,
1993 and 1994, respectively.
(2) GAS BALANCING POSITIONS
The PetroFina Properties have an immaterial imbalance position as of
December 31, 1995. The entitlements method is used; therefore, production
imbalances are recorded at the sales price in effect at the time of production.
Substantially all of the imbalance position is anticipated to be settled with
production in future periods.
4
5
(3) SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)
Total proved and proved developed oil and gas reserves of the PetroFina
Properties at December 31, 1994, have been estimated based on reserve estimates
prepared by Huddleston & Co., Inc. as of November 1, 1995, adjusted for
production from Janaury 1, 1995 throught October 31, 1995. No comparable
estimates were available for prior periods. Therefore, reserves for 1992, 1993
and 1994 have been calculated by adjusting the November 1, 1995 amounts for
prior period producing activities and, consequently, no revisions of previous
estimates have been reflected. All reserve estimates are based on economic and
operating conditions existing at November 1, 1995. The future net cash flows
from production of these proved reserve quantities were computed by applying
current prices of oil and gas (with consideration of price changes only to the
extent provided by contractual arrangements) as of November 1, 1995 to
estimated future production of proved oil and gas reserves less the estimated
future expenditures (based on current costs) as of November 1, 1995, to be
incurred in developing and producing the proved reserves. Income taxes were
calculated without consideration of any remaining historical cost basis of the
PetroFina Properties. The PetroFina Properties are located in federal waters
in the Gulf of Mexico.
Estimated Quantities of Oil and Gas Reserves:
Year Ended December 31,
-----------------------------------------------------------------
1992 1993 1994
---------------- ---------------- ----------------
Oil Gas Oil Gas Oil Gas
(Mbbl) (Mmcf) (Mbbl) (Mmcf) (Mbbl) (Mmcf)
------ ------ ------ ------ ------ ------
Proved reserves:
Beginning of year 346 5,493 291 4,751 251 4,159
Production (55) (742) (40) (592) (34) (533)
--- ----- --- ----- --- -----
End of year 291 4,751 251 4,159 217 3,626
=== ===== === ===== === =====
Proved developed reserves:
Beginning of year 346 5,493 291 4,751 251 4,159
End of year 291 4,751 251 4,159 217 3,626
=== ===== === ===== === =====
Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves (in 000s):
As of December 31,
------------------------------------------
1992 1993 1994
------- ------- -------
Future cash inflows $15,017 $13,011 $11,412
Future production costs (2,597) (2,368) (1,668)
Future development costs (200) (200) (200)
------- ------- -------
Future net inflows before
income taxes 12,220 10,443 9,544
Income taxes (4,277) (3,655) (3,340)
------- ------- -------
Future net cash flows 7,943 6,788 6,204
10% discount factor (2,264) (1,935) (1,766)
------- ------- -------
Standardized measure of
discounted net cash flows $5,679 $4,853 $4,438
======= ======= =======
5
6
Changes in Standardized Measure of Discounted Future Net Cash Flows from
Proved Oil and Gas Reserves (in 000s)
Year Ended December 31,
----------------------------------------
1992 1993 1994
------ ------ ------
Standardized measure, beginning of year $6,515 5,679 4,853
Sales, net of production costs (1,798) (1,776) (899)
Net change in income taxes 450 445 225
Accretion of discount 512 505 259
------ ------ ------
Standardized measure, end of year $5,679 $4,853 $4,438
====== ====== ======
6
7
(b) PRO FORMA FINANCIAL INFORMATION. Pro forma financial
information regarding Registrant's acquisition of an interest
in the South Timbalier Block 76 from PetroFina S.A. appears on
pages 7 through 11, below.
FORTUNE PETROLEUM CORPORATION
PRO FORMA COMBINED FINANCIAL INFORMATION
DECEMBER 31, 1994 AND SEPTEMBER 30, 1995
The pro forma combined statements of operations reflect the results of
operations for the year ended December 31, 1994 and period ended
September 30, 1995 as if the PetroFina acquisition of the South Timbalier Block
76 leasehold interests and this financing occurred as of January of each
period.
The acquisitions are reflected in the pro forma combined financial
information using the purchase method of accounting. Accordingly, the carrying
value of the properties acquired have been adjusted to reflect fair values
assigned to assets and liabilities and are included in the Company's combined
financial statements commencing on the date of such acquisition.
The pro forma combined financial information should be read in
conjunction with the Company's historical financial statements and related
notes. The pro forma results of operations are not necessarily indicative of
the results of operations had the acquisition occurred at the beginning of the
periods presented, nor are they necessarily indicative of the results of future
operations.
PRO-FORMA COMBINED SUMMARY BALANCE SHEET
SEPTEMBER 30, 1995
ASSETS
PetroFina
Leasehold
Historical Interest Pro forma
Fortune Acquisition Adjustments Pro Forma Combined
---------- ----------- ----------- ------------------
Total Current Assets $ 3,431,000 $1,087,000 -- $ 4,518,000
Property & Equipment
Oil & Gas properties, accounted for
using the successful efforts method 22,264,000 2,450,000 -- 24,714,000
Automotive, office & other 336,000 -- -- 336,000
Less-accumulated depreciation,
depreciation & amortization (9,100,000) -- -- (9,100,000)
Other Assets 3,114,000 -- -- 3,114,000
----------- -----------
$20,045,000 $3,537,000 -- $23,582,000
=========== ========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Total Current Liabilities $ 4,639,000 -- -- $ 4,639,000
Total Long Term Liabilities 1,687,000 -- -- 1,687,000
Total Net Stockholder's Equity 13,719,000 3,537,000 -- 17,256,000
----------- --------- -----------
Total Liabilities and Stockholder's Equity $20,045,000 $3,537,000 -- $23,582,000
=========== ========== ===========
7
8
FORTUNE PETROLEUM CORPORATION
PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
Petrofina
Leasehold
Historical Interest Pro forma Pro forma
Fortune Acquisition Adjustments Combined
----------- ----------- ----------- -----------
Revenues:
Oil and gas sales $ 3,339,000 $1,599,000 - $4,938,000
Other 58,000 - - 58,000
----------- ---------- --------- -----------
3,397,000 1,599,000 - 4,996,000
Costs and expenses:(a)
Oil and gas production costs 1,090,000 700,000 - 1,790,000
General and administrative 1,020,000 - - 1,020,000
Abandoned leasehold costs 249,000 - - 249,000
Dry hole expense 195,000 195,000
Impairment to oil & gas properties 1,031,000 1,031,000
Depreciation, depletion and
amortization 2,070,000 - 380,000(1) 2,450,000
Executive severance expense 225,000 225,000
Interest expense 460,000 - - 460,000
----------- ---------- --------- -----------
6,340,000 700,000 380,000 7,420,000
----------- ---------- --------- -----------
Income (loss) before income
taxes (2,943,000) 899,000 (380,000) (2.424,000)
Income tax expense - - - -
----------- ---------- --------- -----------
Net Income (loss) $(2,943,000) $ 899,000 ($380,000) ($1,840,000)
=========== ========== ========= ===========
Average number of common
shares outstanding(b) 2,638,672 1,321,117 - 3,959,789
=========== ========== ========= ===========
Net income (loss) per common
share $ (1.12)
===========
Pro forma net income per common
share $ (0.61)
===========
(a) It is anticipated that there will be no indirect expense as a result of
the asset acquisition.
(b) Acquisition shares computed using the private offering price of $3.22 per
share for 1,321,117 shares.
8
9
FORTUNE PETROLEUM CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Petrofina
Leasehold
Historical Interest Pro forma Pro forma
Fortune Acquisition Adjustments Combined
----------- ----------- ----------- ----------
Revenues:
Oil and gas sales $ 2,030,000 1,508,000 $3,538,000
Other 153,000 - - 153,000
----------- ---------- --------- ----------
2,183,000 1,508,000 3,691,000
Costs and expenses:(a)
Oil and gas production costs 1,037,000 252,000 - 1,289,000
General and administrative 855,000 - - 855,000
Geological and geophysical costs 355,000 355,000
Abandoned leasehold costs 28,000 - - 28,000
Depreciation, depletion and
amortization 989,000 - 586,000(1) 1,515,000
Interest expense 533,000 - - 533,000
----------- ---------- --------- ----------
3,797,000 252,000 586,000 4,635,000
----------- ---------- --------- ----------
Income (loss) before income
taxes (1,614,000) 1,256,000 (586,000) (944,000)
Income tax expense - - - -
----------- ---------- --------- ----------
Net Income (loss) $(1,614,000) $1,256,000 ($586,000) $ (944,000)
=========== ========== ========= ==========
Average number of common
shares outstanding(b) 5,432,712 1,321,117 - 6,753,829
=========== ========== ========= ==========
Net income (loss) per common
share $ (0.32)
===========
Pro forma net income per common
share $ (0.14)
==========
(a) It is anticipated that there will be no indirect expense as a result of
the asset acquisition.
(b) Acquisition shares computed using the private offering price of $3.22 per
share for 1,321,117 shares.
9
10
FORTUNE PETROLEUM CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND SEPTEMBER 30, 1995
An explanation of the pro forma adjustments is as follows:
(1) Adjustment to reflect the depreciation, depletion and
amortization of the acquired assets of $351,000, $380,000 and
$586,000 for the year ended December 31, 1994 and the nine
months ended September 30, 1995, respectively, using an
estimated adjusted acquisition cost to the Company of
$2,120,000 at September 30, 1995 for the proved developed
producing oil and gas properties (using units-of-production
method).
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FORTUNE PETROLEUM CORPORATION
Date: January 5, 1996 By: s/s TYRONE J. FAIRBANKS
---------------------------------
Tyrone J. Fairbanks, President,
Chief Executive Officer,
Chief Accounting Officer
and Chief Financial Officer
10