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
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Date of Report (Date of earliest event reported)
November 4, 1998
VECTOR ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Texas
(State or other jurisdiction of incorporation)
0-22661
(Commission File Number)
76-0582614
(IRS Employer Identification No.)
5599 San Felipe, Suite 620
Houston, Texas
(Address of principal executive offices)
77056
(Zip Code)
Registrant's telephone number, including area code: (713) 850-9993
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ITEN 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The following financial
statements are filed herewith:
Independent Auditors' Report F-1
Statements of Revenue and Direct Expenses of the
Assets Acquired from Texas Energy and
Environmental, Inc. and Cougar Oil and Gas, Inc.
For the years ended April 30, 1998 and 1997
And for the four months ended August 31, 1998 F-2
Notes to Statements of Revenue and Direct Expenses
Of the Assets Acquired from Texas Energy and
Environmental, Inc. and Cougar Oil and Gas, Inc.
For the years ended April 30, 1998 and 1997
And for the four months ended August 31, 1998 F-3 to F-8
(b) EXHIBITS
Exhibit 2.01 Purchase and Sale Agreement Between Texas Energy and
Environmental, Inc. and Cougar Oil and Gas, Inc., as
Sellers and Vector Energy Corporation, as Buyer. *
* Previously Filed
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 hereto duly authorized.
Dated: January 29, 1999
By: /s/ Stephen F. Noser .
----------------------------------
Stephen F. Noser, President
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Vector Energy Corporation
Houston, TX
We have audited the accompanying statements of revenue and direct expenses of
the assets acquired by Vector Energy Corporation from Texas Energy and
Environmental, Inc. and Cougar Oil and Gas, Inc. for the years ended
April 30, 1998 and 1997 and for the four month period ended August 31, 1998.
This financial statement is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement 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 statement referred to above presents fairly, in
all material respects, the revenues and direct expenses of the assets
acquired by Vector Energy Corporation from Texas Energy and Environmental,
Inc. and Cougar Oil and Gas, Inc. for the years ended April 30, 1998, and
1997, and for the four month period ended August 31, 1998, in conformity with
generally accepted accounting principles.
Denver, Colorado
January 21, 1999
/s/ Comiskey & Company
PROFESSIONAL CORPORATION
F-1
Vector Energy Corporation
Statements of Revenue and Direct Expenses of the
Assets Acquired from Texas Energy and Environmental, Inc.
for the years ended April 30, 1998 and 1997 and
for the four months ended August 31, 1998
Four Months
Ended Years Ended
August 31, April 30,
1998 1998 1997
--------- --------- ---------
REVENUES
Oil Revenues $ 35,422 $ 53,579 $ 12,111
Gas Revenues 372,113 722,238 337,257
P - Biproduct Revenues 0 1,244 0
--------- --------- ---------
Total Revenues 407,535 777,061 349,368
--------- --------- ---------
DIRECT OPERATING EXPENSES
Lease Operating Expense 179,225 570,056 192,617
Production Taxes 10,429 39,070 25,492
Transportation, Treatment, Marketing 0 0 0
Other Direct Expenses 0 0 0
--------- --------- ---------
Total Direct Operating Expenses 189,654 609,126 218,109
--------- --------- ---------
Excess of Revenue over
Direct Expenses $ 217,881 $ 167,935 $ 131,259
--------- --------- ---------
The accompanying notes are an integral part of the financial statement.
F-2
Vector Energy Corporation
Notes to Statements of Revenue and Direct Expenses
of the Assets Acquired from Texas Energy and Environmental, Inc.
and Cougar Oil and Gas, Inc. for the years ended April 30, 1998 and 1997
and for the four months ended August 31, 1998
Note 1 - Summary of Significant Accounting Policies
Purchase transaction
Effective November 4, 1998, Vector Energy Corporation ("the Company")
acquired the right, title and interest in certain oil, gas, and mineral
leases and working interests in approximately fifteen producing oil and gas
wells located in Oklahoma, Louisiana and Texas from Texas Energy and
Environmental, Inc. and Cougar Oil and Gas, Inc. ("the sellers").
To effect the transaction, the Company issued 1,226,667 shares of common
stock and a $120,000 non-interest bearing note payable to the Sellers. In
addition, the Company assumed approximately $750,000 in bank debt and another
approximately $750,000 of other liabilities of the sellers. The purchase and
sale agreement provides that the Sellers may receive up to 500,000 additional
common shares based on the value of the proved developed producing reserves
attributable to the properties acquired, as determined by an independent
engineering evaluation on September 30, 1999. The purchase and sale
agreement also requires the registrant to expend a minimum of $500,000 in
capital investment on the properties acquired within nine months. If such
capital investment is not made, the sellers will be entitled to an
additional 500,000 shares of common
stock.
Periods included
For purposes of the accompanying statement of Revenues and Direct Expenses,
the revenues and expenses of the acquired properties have been presented at
the historical cost of the sellers. Activity for certain properties prior to
their acquisition by the sellers has been excluded from this presentation.
Vector Energy management has estimated that the amount of revenues and direct
expenses for properties which have been excluded from this financial
statement because the activity was for a period prior to the acquisition by
the seller is immaterial to the accompanying financial statement. The
following is a summary of properties included in the accompanying financial
statement, the dates from which the activities are included in the
accompanying financial statement, and management's estimate of net revenues
(revenues less production taxes) which have been excluded from the
accompanying statement.
EC Wilson, various Nueces, TX May 1, 1996 $ 0
Dunn McCampbell Kleberg, TX February 1, 1997 $ 41,800
Carter, various McClain, OK April 18, 1997 $ 105
State lease (Bateman), various Bateman Lake, LA February 4, 199 none
Emerson, various McClain, OK April 18, 1997 $ 1,325
LC Giles, various McClain, OK April 18, 1997 $ 1,906
Giles, various McClain, OK April 18, 1997 $ 2,251
Harriett, various McClain, OK April 18, 1997 $ 5,196
Amounts included
This statement includes all revenues and associated direct expenses of
operation of the acquired properties during the periods that they were owned
by the sellers. It does not include depreciation, amortization or depletion.
It also does not include an allocation of corporate overhead costs or any
other indirect expenses including interest or income taxes. This statement
should be read in conjunction with the Company's Form 8K filed with the
Securities and Exchange Commission and dated November 4, 1998.
F-3
Vector Energy Corporation
Notes to Statements of Revenue and Direct Expenses
of the Assets Acquired from Texas Energy and Environmental, Inc.
and Cougar Oil and Gas, Inc. for the years ended April 30, 1998 and 1997
and for the four months ended August 31, 1998
Note 2 Unaudited Oil and Gas Reserve Quantities
This section provides information required by Statement of Financial
Accounting Standards No. 69, "Disclosures about Oil and Gas Producing
Activities."
The following unaudited reserve estimates presented as of August 31, 1998 and
April 30, 1998 and 1997, relating to the properties acquired from Texas
Energy and Environmental, Inc. and Cougar Oil and Gas, Inc., were prepared
internally by the Company. There are many uncertainties inherent in
estimated proved reserve quantities and in projecting future production rates
and the timing of development expenditures. In addition, reserve estimates
of new discoveries that have little production history are more imprecise
than those of properties with more production history. Accordingly these
estimates are expected to change as future information becomes available.
Proved oil and gas reserves are the estimated quantities of crude oil,
condensate, natural gas, and natural gas liquids 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 oil and gas reserves are those reserves expected to be
recovered through existing wells with existing equipment and operating
methods.
Unaudited net quantities of proved and proved developed reserves of crude oil
(including condensate) and natural gas, all of which are located within the
continental United States, are summarized below:
Changes in Proved Reserves:
(MCF) (BBLS)
-------- ------
(In thousands)
Estimated quantity, April 30, 1996 0 0
Production (127) (1)
Acquisitions 12,630 9
-------- ---
Estimated quantity, April 30, 1997 12,503 8
Production (349) (4)
Acquisitions 0 0
-------- ---
Estimated quantity, April 30, 1998 12,154 4
Production (209) (3)
Acquisitions 0 0
-------- ---
Estimated quantity. August 31, 1998 11,945 1
-------- ---
F-4
Vector Energy Corporation
Notes to Statements of Revenue and Direct Expenses
of the Assets Acquired from Texas Energy and Environmental, Inc.
and Cougar Oil and Gas, Inc. for the years ended April 30, 1998 and 1997
and for the four months ended August 31, 1998
Note 2 Unaudited Oil and Gas Reserve Quantities (Continued)
Proved reserves at year end:
Developed Undeveloped Total
--------- ----------- -------
Oil (BBLS) (In thousands)
April 30, 1997 8 0 8
April 30, 1998 4 0 4
August 31, 199 1 0 1
Gas (MCF) (In thousands)
April 30, 1997 5,905 6,598 12,503
April 30, 1998 5,556 6,598 12,154
August 31, 199 5,347 6,598 11,945
The following table presents a standardized measure of the discounted future
net cash flows attributable to the proved reserves associated with the
properties acquired from Texas Energy and Environmental and Cougar Oil and
Gas, Inc. Future cash inflows were computed by applying year-end prices of
oil and gas to the estimated future production of proved oil and gas
reserves. The future production and development costs represent the
estimated future expenditures (based on current costs) to be incurred in
developing and producing the proved reserves, assuming continuation of
existing economic conditions.
A discount factor of 10% was used to reflect the timing of future net cash
flows. The standardized measure of discounted future net cash flows is not
intended to represent the replacement cost or fair market value of the oil
and gas properties.
8/31/98 4/30/98 4/30/97
-------- -------- --------
(In thousands)
Future cash inflows $16,248 $16,656 $17,433
Future production costs (3,716) (3,904) (4,513)
Future development costs (490) (490) (820)
-------- -------- --------
Future net cash flows 12,042 12,262 12,100
10% annual discount for estimated
timing of cash flows (4,069) (4,326) (5,047)
Standardized measure of discounted -------- -------- --------
Cash flows $ 7,973 $ 7,936 $ 7,053
-------- -------- --------
F-5
Vector Energy Corporation
Notes to Statements of Revenue and Direct Expenses
of the Assets Acquired from Texas Energy and Environmental, Inc.
and Cougar Oil and Gas, Inc. for the years ended April 30, 1998 and 1997
and for the four months ended August 31, 1998
Note 2 Unaudited Oil and Gas Reserve Quantities (Continued)
Four months ended Year ended Year ended:
8/31/98 4/30/98 4/30/97
-------- -------- --------
(In thousands)
Standardized measure of discounted
Future net cash flows, beginning $ 7,936 $ 7,053 $ 0
Changes due to operations:
Production (408) (777) (349)
Production costs 190 609 218
Development costs 0 330 0
Acquisitions 0 0 7,007
Other (10) 16 (13)
Accretion of discount 265 705 190
------- ------- -------
Standardized measure of discounted
Future net cash flows, ending $7,973 $7,936 $7,053
------- ------- -------
Note 3 Unaudited Pro Forma Financial Data
The following unaudited pro forma condensed financial information has been
prepared by management utilizing the unaudited financial statements of the
Company through October 31, 1998 and the audited statements of revenue and
direct expenses of the assets acquired from Texas Energy and Environmental,
Inc. and Cougar Oil and Gas, Inc. through August 31, 1998. Adjustments have
been made to reflect the impact of purchase accounting and other items had
the acquisitions taken place on May 1, 1998 with respect to operating data
and October 31, 1998 respect to balance sheet data. The pro forma
adjustments are described in the accompanying notes and are based upon
preliminary estimates and certain assumptions that management of the Company
believes reasonable under the circumstances.
The unaudited pro forma condensed financial information is for comparative
purposes only and does not purport to be indicative of the results which
would actually have been obtained had the acquisitions been effected on
the pro forma dates, or of the results which may be obtained in the future.
The unaudited pro forma condensed financial information, in the opinion of
management, reflects all adjustments necessary to present fairly the data for
such periods.
F-6
Vector Energy Corporation
Notes to Statements of Revenue and Direct Expenses
of the Assets Acquired from Texas Energy and Environmental, Inc.
and Cougar Oil and Gas, Inc. for the years ended April 30, 1998 and 1997
and for the four months ended August 31, 1998
Note 3 Unaudited Pro Forma Financial Data (Continued)
VECTOR ENERGY CORPORATION
UNAUDITED CONDENSED BALANCE SHEET
Six Months
Ended
10/31/98 Pro-Forma Pro-Forma
(Unaudited) Adjustments (Unaudited)
----------- ----------- -----------
Current Assets, $ 527,500 $ 500,000 (3) $ 1,027,500
Oil and Gas Properties, Net 10,607,300 3,460,001 (1) 14,067,301
Other Assets 49,400 49,400
----------- ----------- -----------
Total Assets $11,184,200 $ 3,960,001 $15,144,201
----------- ----------- -----------
Current Liabilities $ 1,904,400 $ 1,320,000 (1)(2)(3) $ 3,224,400
Long-term Debt 5,060,000 800,000 (2) 5,860,000
Other Liabilities 700 700
----------- ----------- -----------
Total Liabilities $ 6,965,100 $ 2,120,000 $ 9,085,100
----------- ----------- -----------
Common Stock $ 1,652,100 $ 1,840,001 (1) $ 3,492,101
Preferred Stock 3,095,000 3,095,000
Additional Paid in Capital 600 600
Retained Earnings (528,000) (528,000)
----------- ----------- -----------
Total Stockholders' Equity $ 4,219,100 $ 1,840,001 $ 6,059,101
----------- ----------- -----------
Total Liabilities and Equity $11,184,200 $ 3,960,001 $15,144,201
----------- ----------- -----------
VECTOR ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED STATEMENT OF EARNINGS
10/31/98 Acquisition Pro Forma Pro Forma
(Unaudited) Historical(4) Adjustments (Unaudited)
--------- ----------- ----------- ----------
Revenues $ 479,100 $ 611,300 $1,090,400
--------- ---------- ----------
Direct Operating Expense $ 219,000 $ 284,500 $ 503,500
General and Administrative 172,100 0 $ 30,000(6) 202,100
Interest Expense 254,500 0 33,000(5) 287,500
Depreciation and Depletion 352,800 0 64,200(7) 417,000
--------- ---------- ---------- ----------
Total Expenses $ 998,400 $ 284,500 $ 127,200 $1,410,100
--------- ---------- ---------- ----------
Net Income (Loss) $(519,300 $ 326,800 $(127,200) $ (319,700)
--------- ---------- ---------- ----------
<FN>
(1) To reflect the purchase price adjustments related to the acquisition of
the Texas Energy and Environmental, Inc. Properties. The purchase price
is the sum of $1,840,001 in common stock, the issuance of a $120,000 note
payable, the assumption of $750,000 in debt, and the assumption of
$750,000 in other liabilities.
F-7
Vector Energy Corporation
Notes to Statements of Revenue and Direct Expenses
of the Assets Acquired from Texas Energy and Environmental, Inc.
and Cougar Oil and Gas, Inc. for the years ended April 30, 1998 and 1997
and for the four months ended August 31, 1998
Note 3 Unaudited Pro Forma Financial Data (Continued)
(2) To reflect additional borrowing of $800,000 under the Company's revolving
credit note and the utilization of the funds to pay off the bank debt and
certain other liabilities assumed in the acquisition of properties from
Texas Energy and Environmental, Inc.
(3) To reflect the borrowing of $500,000 from a stockholder under a six-month
promissory note.
(4) These amounts represent the historical revenues and direct expenses of
the properties acquired from Texas Energy and Environmental, Inc. for the
period ended August 31, 1998, as reflected in Item 7 in the Company's
Form 8-K/A, and as pro rata adjusted to reflect a six month period in
order to conform to the Company's unaudited condensed statement of
earnings for the six months ended October 31, 1998.
(5) To record interest expense in the amount of $33,000 relating to the
additional borrowing under the Company's revolving credit note.
(6) To record increased general and administrative expense estimated to be
$30,000.
(7) To record depletion expense in the amount of $64,200 relating to the oil
and gas properties acquired.
F-8