FORM 8
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934
ISRAMCO, INC.
Amendment No. 1
The undersigned registrant hereby amends Form 8-K filed for the month of
February 1997 and dated February 14, 1997 on Form 8 as set forth in the pages
attached hereto:
To provide financial statements of Jay Petroleum LLC with regard to the
acquisition by Jay Petroleum LLC of oil and gas of assets.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
ISRAMCO, INC.
(Registrant)
By: /S/ HAIM TSUFF
-----------------------------
HAIM TSUFF
Chairman of the Board
Date: April 17, 1997
JAY PETROLEUM, L.L.C.
(A Limited Liability Company)
Houston, Texas
FINANCIAL REPORT
December 31, 1996
TABLE OF CONTENTS
Page Number
-----------
Independent Auditors' Report 1
Balance Sheet 2
Statement of Income 4
Statement of Members' Equity 5
Statement of Cash Flows 6
Notes to Financial Statements 7
Pro Forma Condensed Consolidated Balance Sheet 10
Pro Forma Condensed Consolidated Statement of Operations 11
Independent Auditors' Report
Members
Jay Petroleum, L.L.C.
Houston, Texas
We have audited the accompanying Balance Sheet of Jay Petroleum, L.L.C. (a
limited liability company) as of December 31, 1996, and the related Statements
of Income, Members' Equity and Cash Flows for the period from March 1, 1996
(date operations commenced) to December 31, 1996. 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial 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 Jay Petroleum, L.L.C. as of
December 31, 1996, and the results of its operations and its cash flows for the
period from March 1, 1996 (date operations commenced) to December 31, 1996, in
conformity with generally accepted accounting principles.
/S/ WEINSTEIN SPIRA & COMPANY, P.C.
- ------------------------------------
WEINSTEIN SPIRA & COMPANY, P.C.
Houston, Texas
February 12, 1997
-1-
JAY PETROLEUM, L.L.C.
(A LIMITED LIABILITY COMPANY)
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Current Assets
Cash and cash equivalents $ 5,587
Accounts receivable:
Oil and gas sales $ 160,934
Related party 69,754 230,688
---------- ----------
Total Current Assets 236,275
Property and Equipment
Oil and gas property 1,671,568
Deposit on oil and gas property 155,000
Furniture and equipment 13,610
----------
1,840,178
Less: Accumulated depreciation, depletion
and amortization 81,273 1,758,905
----------
Other Assets
Loan costs (net of $6,312 amortization) 22,095
Organization costs (net of $1,890 amortization) 10,722
Deposits 2,785 35,602
---------- ----------
$2,030,782
==========
-2-
LIABILITIES
Current Liabilities
Accounts payable:
Trade $ 62,378
Related parties 17,132 $ 79,510
----------
Accrued expenses 9,450
Current portion of long-term debt 52,500
----------
Total Current Liabilities 141,460
Long-Term Debt 1,030,000
----------
1,171,460
MEMBERS' EQUITY
Jay Resources Corporation 214,831
N.I.R. Resources, Inc. 429,661
Stonewall Resources L.L.C 214,830 859,322
---------- ----------
$2,030,782
==========
See accompanying notes.
-3-
JAY PETROLEUM, L.L.C.
(A Limited Liability Company)
STATEMENT OF INCOME
Period From March 1, 1996 (Date Operations Commenced) to December 31, 1996
Revenues
Oil $364,766
Gas 419,428 $784,194
--------
Expenses
Lease operating 381,426
Depreciation, depletion and amortization 89,475
General and administrative 67,293
Interest 66,273
Workover 16,179 620,646
-------- --------
Net Income $163,548
========
See accompanying notes.
-4-
JAY PETROLEUM, L.L.C.
(A Limited Liability Company)
STATEMENT OF MEMBERS' EQUITY
Period From March 1, 1996 (Date Operations Commenced) to December 31, 1996
Jay N.I.R. Stonewall
Resources Resources, Resources
Corporation Inc. L.L.C. Total
----------- ---------- ---------- ---------
Initial Contribution $ 275,387 $ 275,387 $ 550,774
Additional contributions 72,500 72,500 145,000
--------- --------- --------- ---------
Initial Payout 347,887 347,887 695,774
Transfer of member interest (173,943) $ 173,943
Net income 40,887 81,774 40,887 163,548
--------- --------- --------- ---------
Balance, December 31, 1996 $ 214,831 $ 429,661 $ 214,830 $ 859,322
========= ========= ========= =========
See accompanying notes.
-5-
JAY PETROLEUM, L.L.C.
(A Limited Liability Company)
STATEMENT OF CASH FLOWS
Period From March 1, 1996 (Date Operations Commenced) to December 31, 1996
Cash Flows From Operating Activities
Net income $ 163,548
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 89,475
(Increase) in:
Accounts receivable (160,934)
Other assets (2,785)
Increase in:
Accounts payable 62,378
Related party payable 17,132
Accrued expenses 9,450
-----------
Net Cash Provided by Operating Activities 178,264
Cash Flows From Investing Activities
Purchase of oil and gas property (1,671,568)
Deposit on oil and gas property (155,000)
Purchase of furniture and equipment (13,610)
Payment of organization costs (12,612)
-----------
Net Cash Used in Investing Activities (1,852,790)
-----------
Cash Flows From Financing Activities
Proceeds from members' contributions 626,020
Proceeds from long-term debt 1,205,000
Payments on long-term debt (122,500)
Payment of loan costs (28,407)
-----------
Net Cash Provided by Financing Activities 1,680,113
-----------
Net Increase and Ending Balance - Cash and
Cash Equivalents $ 5,587
===========
Supplemental Disclosure of Cash Flow Information
Interest paid $ 66,273
===========
See accompanying notes.
-6-
JAY PETROLEUM, L.L.C.
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
Note 1 - Significant Accounting Policies
Jay Petroleum, L.L.C. (the Company) maintains its accounts on the accrual basis
of accounting in accordance with generally accepted accounting principles.
Accounting principles followed by the Company and the methods of applying those
principles which materially affect the determination of financial position,
results of operations and cash flows are summarized below:
Description of Business
The Company was formed as a Texas limited liability company on April 17,
1996, to purchase and operate oil and gas properties in the United States.
Revenue Recognition
Oil and gas revenue is recognized when the oil and natural gas is delivered.
Operations are charged with a provision for doubtful accounts based on a
current review of the collectibility of accounts. Accounts deemed
uncollectible are applied against the allowance for doubtful accounts.
Property and Equipment
Oil and Gas Property
The Company utilizes the full cost method of accounting for oil and gas
producing activities. Under this method, all costs associated with property
acquisition, exploration and development activities are capitalized.
Amortization is computed on a consolidated basis using the unit-of-production
method based on proved oil and gas reserves as estimated by the Company's
engineers. All costs related to production activities, including costs to
maintain or increase levels of production, are charged to expenses as
incurred.
Furniture and Equipment
Furniture and equipment are stated at cost. The cost of ordinary maintenance
is charged to operations, while renewals and replacements are capitalized.
Depreciation is computed on the straight-line method over the following
estimated useful lives:
Computer equipment 3 years
Furniture 7 years
Federal Income Taxes
Federal income taxes are not reflected in the financial statements, as the
members report their share of taxable income or loss on their own returns.
-7-
JAY PETROLEUM, L.L.C.
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996
Loan Costs
Loan costs are capitalized and amortized over the three-year life of the
loan.
Organization Costs
Organization costs are capitalized and amortized over 5 years.
Cash and Cash Equivalents
The Company considers all highly-liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
Note 2 - Limited Liability Agreement
Jay Petroleum, L.L.C. was formed April 17, 1996, for a period of 20 years, with
the initial members being Jay Resources Corporation and N.I.R. Resources, Inc.
On July 9, 1996, the members voted to admit Stonewall Resources L.L.C. as a
member, effective March 1, 1996 (see Note 3). The membership interests are the
following:
After
Payout
(as Defined)
------------
Jay Resources Corporation 25% 43.75%
N.I.R. Resources, Inc. 50% 37.50%
Stonewall Resources L.L.C. 25% 18.75%
-8-
JAY PETROLEUM, L.L.C.
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996
As of February 5, 1997, Isramco, Inc. acquired the membership interests of
N.I.R. Resources, Inc., Stonewall Resources L.L.C., and a portion of the
membership interest held by Jay Resources Corporation. A second company, Jay
Natural Resources, Inc., also acquired a portion of Jay Resources' membership
interest. The resulting membership interests are as follows:
After
Payout
(as Defined)
------------
Jay Resources Corporation 10.65% 18.64%
Isramco, Inc. 82.90% 70.06%
Jay Natural Resources, Inc. 6.45% 11.30%
Note 3 - Long-Term Debt
Effective March 1, 1996, the Company purchased certain oil and gas properties
for $1,671,568, including acquisition costs of $70,794. The acquisition was
partially financed by a bank loan of $1,050,000 under a bank loan facility of
$10 million. The loan bears interest at the base rate of the bank plus 1.5% and
matures in April, 1999. The loan is secured by the oil and gas properties and
shall never exceed the "Borrowing Base", as defined, which is subject to an
annual redetermination. Principal repayments of $17,500 per month are required
until the April 1, 1997, redetermination date.
Note 4 - Subsequent Event
On February 13, 1997, the Company acquired additional oil and gas interests in
Texas, Louisiana and Wyoming for $3.1 million, including the deposit outstanding
at December 31. The acquisition was financed by an additional $2,945,000 loan
from the bank using the facility mentioned in Note 3. Total property
acquisitions since inception approximate $4.8 million.
-9-
ISRAMCO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(Unaudited)
(in thousands)
The following pro forma condensed consolidated balance sheet gives effect to the
acquisition of 82.9% of Jay Petroleum, L.L.C. ("Jay") by Isramco as if it had
occurred on December 31, 1996.
Assets Isramco Jay Combined Adjustments Eliminations Consolidated
------ ------- --- -------- ----------- ------------ ------------
Current assets $22,815 $ 236 $23,051 $(1,174) (1) $21,877
Oil and gas property
and equipment 163 1,840 2,003 $ 462 (2) 2,465
Less: accumulated depreciation,
depletion and amortization (98) (81) (179) (179)
Covenant's not to compete 383 383 383
Investment in Jay Petroleum,L.L.C. 1,174 (1) (1,174) (2)
Other assets 36 36 36
------- ------ ------ -------
T O T A L $23,263 $2,031 $25,294 $24,582
======= ====== ======= =======
LIABILITIES AND EQUITY
----------------------
Current liabilities $ 334 $ 141 $ 475 $ 475
Long-term debt 1,030 1,030 1,030
Minority interest 148 (2) 148
Jay's members' equity 860 860 (860)(2)
Shareholders' equity 22,929 22,929 22,929
------ ------ ------ -------
T O T A L $23,263 $2,031 $25,294 $24,582
======= ====== ======= =======
(1) To record the purchase of 82.9% of Jay for $1,173,900 and to allocate the
purchase to the assets and liabilities acquired in accordance with their
relative fair values.
(2) To eliminate Jay's equity and record the minority interest.
10
ISRAMCO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1996
(in thousands except for share data)
The following pro forma condensed consolidated statement of income of Isramco,
Inc. gives effect to the acquisition of 82.9% of Jay Petroleum, L.L.C. ("Jay")
as if it had occurred on March 1, 1996.
Consolidating
Isramco Jay Combined Entries Consolidated
------- --- -------- ------------- ------------
Revenue $2,813 $ 784 $3,597 $3,597
------ ----- ------ ------
Lease operating expense 34 397 431 431
Interest 2 66 68 68
Depreciation, depletion and
amortization 37 125 162 $ 84 (1) 246
Operator expense 656 656 656
General and administrative 1,254 67 1,321 1,321
----- ----- ------ ------
Total expenses 1,983 655 2,638 2,722
----- ----- ------ ------
Income before tax and
minority interest 830 129 959 875
Provision for income tax
Minority interest 22 (2) 22
----- ----- ------ ------
NET INCOME $ 830 $ 129 $ 959 $ 853
====== ===== ====== ======
Earnings per share $ .03 $ .03
====== ======
(1) To record depreciation, depletion and amortization of the excess of
purchase price over book value of the net assets which was allocated to oil
and gas properties.
(2) To record the minority interest in Jay's net income.
11