United States
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): April 16, 1998
MIDDLE BAY OIL COMPANY, INC.
(Exact name of registrant as specified in charter)
Alabama 0-21702 63-1081013
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
1221 Lamar Street, Suite 1020, Houston, TX 77010
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 759-6808
Former name or former address, if changed since last report: N/A
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION, AND EXHIBITS
(B) PRO FORMA FINANCIAL INFORMATION
MIDDLE BAY OIL COMPANY, INC.
Unaudited Condensed Pro Forma Financial Statements
As discussed in Item 2 of Form 8-K filed with the commission on May 5, 1998,
Middle Bay Oil Company, Inc, ("Middle Bay") closed an Asset Purchase Agreement
(the "Agreement") on April 16, 1998, with Service Drilling Co., L.L.C. ("Service
Drilling") and certain of its affiliates , whereby Middle Bay acquired all of
the assets of Service Drilling and its affiliates in exchange for Middle Bay
common stock and cash.
Service Drilling and its affiliates are privately-owned domestic oil and gas
development and production companies with assets located primarily in Oklahoma
and the Texas Panhandle. Pursuant to the Agreement, Middle Bay issued 666,000
shares of its common stock and paid an aggregate cash consideration of
$6,500,000, subject to post-closing adjustments, in exchange for the assets. The
economic effective date of this transaction is March 1, 1998. Asset values were
determined by estimating the discounted reserve value of the acquired properties
and through negotiation. The cash portion of the consideration is being financed
through Middle Bay's credit facility with Compass Bank and from cash on hand.
The following pro forma data presents the results of the Company for the year
ended December 31, 1997 and for the three months ended March 31, 1998, as if the
Service Drilling acquisition had occurred on January 1, 1997. The pro forma
financial statements are also based, in part, on the historical financial
statements of Enex Resources Corporation ("Enex"), Shore Oil Company ("Shore")
and Bison Energy Corp. ("Bison"). Middle Bay acquired 79.2% of Enex effective
March 27, 1998, 100% of Shore effective June 30, 1997 and 100% of Bison
effective February 28, 1997. Such historical financial statements for the Enex
merger are included in the Form 8-K filed by Middle Bay on May 6, 1998 and such
historical financial statements for the Shore merger are included in the Form
8-K/A filed by Middle Bay on September 3. 1997 and such historical financial
statements for the Bison merger are included in the Form 8-K/A filed by Middle
Bay on April 25, 1997.
The Pro Forma Condensed Statements of Operations for the three months ended
March 31, 1998 and for the year ended December 31, 1997 have been prepared
assuming the merger had been consummated on January 1, 1997. The Pro Forma
Consolidated Balance Sheet has been prepared assuming the merger had been
consummated on March 31, 1998.
The proforma results are presented for comparative purposes only and are not
necessarily indicative of the results which would have been obtained had the
acquisition been consummated as presented. The following data reflects pro forma
adjustments for oil and gas revenues, production costs, depreciation and
depletion related to the properties and business acquired, and the related
income tax effects. The unaudited condensed pro forma financial statements
should be read in conjunction with the notes thereto.
Middle Bay Oil Company, Inc.
Unaudited Pro Forma Statement of Operations
For The Three Months Ended March 31, 1998
(In Thousands, Except Per Share Data)
Service
Enex Acquisition Drilling
Middle Bay Acquisition Pro Forma of Service Pro Forma
REVENUES Historical of Enex Adjustments Notes Drilling Adjustments Notes Pro Forma
Oil and Gas production
and plant income $ 2,632 $ 2,122 $ - $ 516 $ - $ 5,270
Other revenue 125 682 - - - 807
----------- --------- --------- --------- ---------- ---------
Total Revenue 2,757 2,804 - 516 - 6,077
----------- --------- --------- --------- ---------- ---------
COSTS AND EXPENSES
Well operating 1,184 1,003 - 323 - 2,510
Geological and geophysical 746 - - - - 746
Dryhole costs 469 - - - - 469
Depreciation, depletion
and amortization 1,118 548 269 (1) 169 80 (8) 2,184
Interest 255 - 210 (3) - 106 (9) 571
General and administrative 1,127 1,416 - - - 2,543
----------- --------- -------- -------------- ------------- ---------
Total Expenses 4,899 2,967 479 492 186 9,023
----------- --------- -------- -------------- ------------- ---------
INCOME (LOSS) FROM OPERATIONS (2,142) (163) (479) 24 (186) (2,946)
MINORITY INTEREST - (348) 88 (7) - - (260)
----------- ---------- -------- -------------- ------------ ---------
Income (loss) before income taxes
and investee earnings (2,142) (511) (391) 24 (186) (3,206)
Income Tax Expense (Benefit) (728) (87) (163) (4) 8 (63) (10) (1,033)
----------- ---------- ------- -------------- ------------ ---------
NET INCOME (LOSS) (1,414) (424) (228) 16 (123) (2,173)
DIVIDENDS TO PREFERRED STOCKHOLDERS 68 - - - - 68
----------- ---------- ------- -------------- ------------ ---------
NET LOSS AVAILABLE TO STOCKHOLDERS $ (1,482) $ (424) $ (228) $ 16 $ (123) $ (2,241)
=========== ========== ======= ============== ============ =========
Weighted Average
Common Shares Outstanding
Basic 6,720 7,386
=========== =========
Diluted 6,720 7,386
=========== =========
NET LOSS PER COMMON SHARE
Basic $ (0.22) $ (0.30)
=========== =========
Diluted $ (0.22) $ (0.30)
=========== =========
See Accompanying Notes.
Middle Bay Oil Company, Inc.
Unaudited Pro Forma Statement of Operations
For The Year Ended December 31, 1997
(In Thousands, Except Per Share Data)
Acquisition
of Bison Acquisition
Middle Bay Shore Pro Forma of Service Pro Forma
REVENUES Historical & Enex Adjustments Notes Drilling Adjustments Notes Pro Forma
Oil and gas production
and plant income $ 10,213 $ 12,615 $ - $ 3,174 $ - $ 26,002
Other revenue 1,220 2,193 (26) (5) - - 3,387
---------- ---------- ---------- --------- --------- -----------
Total Revenue 11,433 14,808 (26) 3,174 - 29,389
---------- ---------- ---------- --------- --------- -----------
COSTS AND EXPENSES
Well operating 3,849 5,707 - 1,242 - 10,798
Geological and geophysical 223 - - - - 223
Abandonment costs 1,119 2 - - - 1,121
Impairments 21,148 - - - - 21,148
Depreciation, depletion
and amortization 4,567 2,216 1,913 (1) 676 424 (8) 9,796
Interest 671 160 927 (3) - 424 (9) 2,182
General and administrative 2,880 2,664 (21) (5) - - 5,523
--------- ---------- ----------- --------- ---------- -----------
Total Expenses 34,457 10,749 2,819 1,918 848 50,791
--------- ---------- ----------- --------- ---------- -----------
INCOME (LOSS) FROM OPERATIONS (23,024) 4,059 (2,845) 1,256 (848) (21,402)
MINORITY INTEREST - (1,013) (409) (7) - - (1,422)
--------- ---------- ----------- --------- ---------- -----------
Income (loss) before income taxes
and investee earnings (23,024) 3,046 (3,254) 1,256 (848) (22,824)
Equity in net earnings
of equity investees - 37 (37) (6) - - -
INCOME TAX EXPENSE (BENEFIT) (7,445) 318 (907) (4) 427 (288) (10) (7,895)
--------- ---------- ----------- --------- ---------- -----------
NET INCOME (LOSS) (15,579) 2,765 (2,384) 829 (560) (14,929)
DIVIDENDS TO PREFERRED STOCKHOLDERS 605 - 173 (2) - - 778
--------- ---------- ----------- --------- ---------- -----------
NET LOSS AVAILABLE TO STKHLDERS $(16,184) $ 2,765 $ (2,557) $ 829 $ (560) $ (15,707)
========= ========== =========== ========= ========== ===========
Weighted Average
Common Shares Outstanding
Basic 3,397 5,070
========= ===========
Diluted 3,397 5,070
========= ===========
NET LOSS PER COMMON SHARE
Basic $ (4.76) $ (3.10)
========= ===========
Diluted $ (4.76) $ (3.10)
========= ===========
See Accompanying Notes.
Middle Bay Oil Company, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of March 31, 1998
(In Thousands)
Acquisition
ASSETS Middle Bay of Service Pro Forma
Historical Drilling Combined
Current Assets:
Cash and Cash Equivalents $ 5,947 $ (1,000) $ 4,947
Notes and Accounts Receivable - Trade 2,950 - 2,950
Other Current Assets 471 - 471
Assets Held for Resale 206 - 206
--------- ---------- ---------
Total Current Assets 9,574 (1,000) 8,574
--------- ---------- ---------
Notes Receivable - Stockholder 168 - 168
Property, Plant and Equipment, at cost:
(Successful Efforts Method)
Oil and Gas Properties 82,708 11,578 94,286
Furniture, Fixtures and Other 835 - 835
--------- ---------- ---------
Total Property 83,543 11,578 95,121
--------- ---------- ---------
Accumulated Depreciation and Depletion (31,754) - (31,754)
--------- ---------- ---------
Net Property 51,789 11,578 63,367
Other Assets 207 - 207
======== ========== =========
TOTAL ASSETS $61,738 $ 10,578 $ 72,316
======== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturity of Long-term Liabilities $ 2,603 $ - $ 2,603
Accounts Payable and accrued expenses 3,392 - 3,392
Oil and Gas Revenue Payable 196 - 196
Other Current Liabilities 908 - 908
-------------- -------------- ----------------
Total Current Liabilities 7,099 - 7,099
-------------- -------------- ----------------
Long-term Debt 24,500 5,500 30,000
Deferred Income Taxes 4,052 - 4,052
Minority Interest 7,668 - 7,668
-------------- -------------- ----------------
TOTAL LIABILITIES 43,319 5,500 48,819
-------------- -------------- ----------------
STOCKHOLDERS' EQUITY
Preferred Stock 3,627 - 3,627
Common Stock 157 13 170
Additional Paid-in Capital 32,963 5,065 38,028
Unearned Stock Compensation (34) - (34)
Accumulated Deficit (18,227) - (18,227)
Less Cost of Treasury Stock; 21,773 shares (68) - (68)
-------------- -------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 18,418 5,078 23,496
-------------- -------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 61,737 $ 10,578 $ 72,315
============== ============== ================
See accompanying notes to unaudited pro forma consolidated financial statements.
MIDDLE BAY OIL COMPANY, INC.
Notes to Unaudited Condensed Pro Forma Financial Statements
Note A - Pro Forma Adjustments for Bison and Shore Mergers
On February 10, 1997, Middle Bay and Bison entered into a Merger Agreement
whereby Bison was merged into Middle Bay, effective February 28, 1997. The
merger was accounted for using the purchase method of accounting. In completing
the merger, Middle Bay issued 605,556 shares of Middle Bay common stock and paid
$6,654,114 in cash in exchange for all of the issued and outstanding Bison
common stock.
On June 20, 1997, Middle Bay and Shore entered into a Merger Agreement
whereby Shore was merged into Middle Bay effective June 30, 1997. The merger was
accounted for using the purchase method of accounting. In completing the merger
Middle Bay issued 1,883,333 shares of Middle Bay common stock, 266,667 shares of
Middle Bay Series B convertible preferred stock and paid $200,000 in cash in
exchange for all of the issued and outstanding Shore common stock. Middle Bay
also paid Shore's indebtedness to its shareholders of $2,333,303 and assumed
bank debt of Shore amounting to $2,105,000.
The mergers were accounted for as purchases of Bison and Shore by Middle
Bay and as a result of the purchase method of accounting, Middle Bay's cost of
acquiring Bison and Shore were allocated to assets and liabilities acquired
based on estimated fair values.
Middle Bay incurred approximately $35,000 and $38,000 in legal and
accounting expenses related to the Bison and Shore mergers, respectively, which
were included as a cost of the merger.
The accompanying Pro Forma Combined Condensed Statements of Operations for
the year ended December 31, 1997 and for the three months ended March 31, 1998
have been prepared as if the Bison and Shore mergers had occurred on January 1,
1997 and reflect the following adjustments:
(1) To adjust depletion, depreciation and amortization expense to reflect
Middle Bay's purchase price allocated to property and equipment using the unit
of production method utilized by Middle Bay.
(2) To record the preferred stock dividends paid on the preferred stock
issued for the cash portion of the Bison purchase price and issuded in the Shore
purchase price.
(3) To record the reduction in interest expense on the debt retired.
(4) To adjust the provision for income taxes for the change in financial
taxable income as a result of the mergers.
(5) To reflect the impact on the weighted average common shares outstanding
for the issuance of 2,488,889 shares of Middle Bay common stock in conjunction
with the Bison and Shore mergers.
(6) To remove management income for accounting and administrative functions
performed by Bison for other entities. Subsequent to the merger, Bison no longer
performed such functions.
(7) To remove equity in net earnings of equity investees that were not
purchased.
(8) To reflect the issuance of 388,884 shares of Series A Preferred Stock,
266,667 Shares of Series B Preferred Stock and, 2,488,889 shares of Middle Bay
common stock in conjunction with the Bison and Shore mergers. Pro Forma basic
net income (loss) per common share information is computed by dividing net
income (loss), adjusted for the preferred stock dividend requirement of $93,332
for the six months ended June 30, 1997 by the Pro Forma weighted average common
shares outstanding. Shares issuable upon exercise of options and upon conversion
of preferred stock are included in the computations of the pro forma dilutive
income per common and common equivalent shares if the effect is dilutive.
Note B - Pro Forma Adjustments for Purchase of Enex
Middle Bay Oil Company, Inc, acquired on March 27, 1998, 1,064,432 shares
of the common stock of Enex Resources Corporation, a Delaware corporation, for
$15,966,480 or $15 per share pursuant to Middle Bay's tender offer (the "tender
offer") which began on February 19, 1998. The Enex shares acquired by Middle Bay
represent 79.2% of the total outstanding Enex common shares. Enex is the general
partner of Enex Consolidated Partners, L.P., a New Jersey Limited Partnership
whose principal business is oil and gas production. Enex's general partner
interest is 4.1%. Enex also owns an approximate 55% interest in the partnership
as a limited partner.
The cost of allocating the purchase of Enex was allocated using the
purchase method of accounting based upon the fair value of the consolidating
assets and liabilities of Enex with the remaining purchase price allocated to
oil and gas properties. The allocation of the purchase price is summarized as
follows: (in thousands)
Working capital........................... $ 4,812
Oil and gas properties.................. 18,821
Minority Interest.......................... (7,667)
--------
$ 15,966
The total cost of the purchase was $15.966 million. The cash portion of the
cost was $1.5 million with the remaining $14.466 million derived from Middle
Bay's line of credit, which has a stated interest rate of LIBOR plus 2%.
The accompanying Pro Forma Combined Condensed Statements of Operations for
the year ended December 31, 1997 and for the three months ended March 31, 1998
have been prepared as if the Enex purchase had occurred on January 1, 1997 and
reflect the following adjustments:
(9) To adjust depletion, depreciation, and amortization to reflect Middle
Bay's purchase price allocated to property and equipment using the production
method utilized by Middle Bay.
(10) To recognize the additional interest expense resulting from a $15.012
million loan against Middle Bay's line of credit at LIBOR plus 2%.
(11) Middle Bay's 79.2% ownership of Enex will not permit consolidation of
Enex with MIddle Bay for tax reporting purposes.
(12) To recognize the portion of Enex's income/loss attributable to the
minority interest shareholders in Enex.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MIDDLE BAY OIL COMPANY, INC.
(Registrant)
June 10, 1998 By: /s/ Frank C. Turner II
Frank C. Turner II
Vice President and
Chief Financial Officer