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
June 28, 1996
Commission File Number 0-20872
ST. MARY LAND & EXPLORATION COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 41-0518430
(State or other Jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1776 Lincoln Street, Suite 1100, Denver, Colorado 80203
(Address of principal executive offices) (Zip Code)
(303) 861-8140
(Registrant's telephone number, including area code)
ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
INDEX
ITEM 2. Acquisition or Disposition of Assets..................................3
ITEM 7. Financial Statements and Exhibits
(a) Financial Statements
Report of Independent Accountants.....................................4
Statement of Revenues and Direct Operating Expenses of
Certain Oil and Gas Properties Acquired from Siete Oil &
Gas Corporation for the Year Ended December 31, 1995, and
for the Six Months Ended June 30, 1996 (unaudited)....................5
(b) Pro Forma Financial Information
Introduction to Pro Forma Financial Information ......................9
Pro Forma Consolidated Statement of Income from Continuing
Operations for the Six Months Ended June 30, 1996.....................10
Pro Forma Consolidated Statement of Income from Continuing
Operations for the Year Ended December 31, 1995.......................11
(c) Exhibits
10.42 Purchase and Sale Agreement between the Registrant
and Siete Oil & Gas Corporation dated April 2, 1996 *
24.2 Consent of Coopers & Lybrand L.L.P. **
* Previously filed.
** Filed herewith.
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 28, 1996, St. Mary Land & Exploration Company and Subsidiaries (the
"Registrant") purchased a 90 percent interest in certain of the assets of Siete
Oil and Gas Corporation for a net price of approximately $9.8 million. The
acquisition includes approximately 150 wells in southeast New Mexico and west
Texas producing from the Yates / Queen and Delaware sands at depths of between
3,500 to 5,000 feet. The acquired reserves are approximately 80 percent oil and
have a reserve life of about 15 years. St. Mary's 90 percent interest equates to
current production of approximately 770 MCFD and 345 BOPD. This acquisition was
financed by available credit under the Registrant's revolving bank credit
agreement with NationsBank.
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders,
St. Mary Land & Exploration Company and Subsidiaries:
We have audited the accompanying Statement of Revenues and Direct Operating
Expenses of Certain Oil and Gas Properties (the "Properties") Acquired from
Siete Oil & Gas Corporation (the "Statement of Revenues and Direct Operating
Expenses") for the year ended December 31, 1995. The Statement of Revenues and
Direct Operating Expenses is the responsibility of St. Mary Land & Exploration
Company's management. Our responsibility is to express an opinion on the
Statement of Revenues and Direct Operating Expenses 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 Statement of Revenues and Direct Operating Expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statement 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 Statement of Revenues and Direct
Operating Expenses. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying Statement of Revenues and Direct Operating Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission as described in Note 1 and is not intended to
be a complete presentation of the revenues and expenses of the Properties.
In our opinion, the Statement of Revenues and Direct Operating Expenses presents
fairly, in all material respects, the revenues and direct operating expenses of
the Properties as described in Note 1, for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
September 11, 1996
4
ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
OF CERTAIN OIL AND GAS PROPERTIES ACQUIRED FROM
SIETE OIL & GAS CORPORATION
(In thousands)
For the Six
Months Ended For the Year Ended
June 30, 1996 December 31, 1995
------------- -----------------
(Unaudited)
Operating revenues
Oil and gas revenues $ 1,514 $ 3,045
Other income 124 320
---------------- --------------
Total operating revenues 1,638 3,365
---------------- --------------
Direct operating expenses
Lease operating expenses 317 616
Production taxes 94 194
Other expenses 13 38
---------------- --------------
Total direct operating expenses 424 848
---------------- --------------
Revenues in excess of direct operating expenses $ 1,214 $ 2,517
================ ==============
The accompanying notes are an integral part
of this financial statement
5
ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
OF CERTAIN OIL AND GAS PROPERTIES ACQUIRED FROM
SIETE OIL & GAS CORPORATION
Note 1 - Basis of Presentation
The accompanying financial statement presents the revenues and direct operating
expenses relating to certain working and overriding royalty interests and salt
water disposal facilities located in New Mexico and Texas (collectively, the
"Properties"). These properties were acquired by St. Mary Land & Exploration
Company (the "Company") from Siete Oil & Gas Corporation ("Siete") on June 28,
1996. This financial statement is included to provide historical information on
the revenues and direct operating expenses of the Properties for purposes of
complying with the rules and regulations of the Securities and Exchange
Commission and may not be representative of future operations.
A provision for depletion, depreciation and amortization has not been included
since the Company's basis in the Properties is different from that of Siete.
Exploration and development costs relating to the Properties during 1995 were de
minimus. General and administrative expenses of Siete were not available and,
accordingly, could not be allocated to the property level and would not be
comparable to the amounts expected to be incurred by the Company as a
non-operator. This financial statement does not include federal and state income
taxes or interest. Accordingly, the accompanying financial statement is not
intended to be a complete presentation of the revenues and expenses of the
Properties.
The preparation of this financial statement requires management to make
estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
Note 2 - Oil and Gas Producing Activities
Oil and Gas Reserve Quantities (Unaudited):
The following reserve information for the year ended December 31, 1995 was
prepared by the Company. The Company emphasizes that reserve estimates are
inherently imprecise and accordingly, these estimates are expected to change as
future information becomes available.
Proved oil and gas reserves are the estimated quantities of crude oil, 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 expected to be recovered through existing wells
with existing equipment and operating methods.
6
Presented below is a summary of the changes in estimated reserves attributed to
the Properties for the year ended December 31, 1995:
Oil or
Condensate Gas
---------------------------
(MBBL) (MMCF)
Total proved reserves-
Developed and undeveloped:
Beginning of year 2,396 3,288
Revisions of previous estimates 84 135
Production (149) (320)
---------------------------
End of year 2,331 3,103
===========================
Proved developed reserves -
Beginning of year 1,323 3,128
===========================
End of year 1,258 2,944
===========================
Standardized Measure of Discounted Future Net Cash Flows (Unaudited):
Statement of Financial Accounting Standards No. 69 ("SFAS No. 69") prescribes
guidelines for computing a standardized measure of future net cash flows and
changes therein relating to estimated proved reserves. The Company has followed
these guidelines which are briefly discussed below.
Future cash inflows and future production and development costs are determined
by applying year-end prices and costs to the estimated quantities of oil and gas
to be produced. Estimated future income taxes are computed using current
statutory income tax rates, including consideration for estimated future
statutory depletion and alternative fuels tax credits. The resulting future net
cash flows are reduced to present value amounts by applying a 10% annual
discount factor.
The assumptions used to compute the standardized measure are those prescribed by
the Financial Accounting Standards Board and, as such, do not necessarily
reflect the Company's expectations of actual revenues to be derived from those
reserves nor their present worth. The limitations inherent in the reserve
quantity estimation process, as discussed previously, are equally applicable to
the standardized measure computations since these estimates are the basis for
the valuation process.
7
The following summary sets forth the Properties' future net cash flows relating
to proved oil and gas reserves based on the standardized measure prescribed in
SFAS No. 69 as of December 31, 1995:
(In thousands)
Future cash inflows $ 44,168
Future production and
development costs (12,874)
Future income tax (10,640)
------------
Future net cash flows 20,654
10% annual discount rate (11,379)
------------
Standardized measure of
discounted future cash flow $ 9,275
============
The following are the principal sources of change in the Properties'
standardized measure of discounted net cash flows for the year ended
December 31, 1995:
(In thousands)
Standardized measure, beginning of year $ 9,680
Sales of oil and gas produced (2,235)
Net changes in prices and production costs 1,220
Revision of estimated quantities 602
Accretion of discount 1,467
Net change in income taxes 208
Changes in production rates (timing) and other (1,667)
------------
Standardized measure, end of year $ 9,275
============
8
ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited Pro Forma Consolidated Statements of Income from
Continuing Operations For the Six Months Ended June 30, 1996 and For the Year
Ended December 31, 1995 are presented to illustrate the effect of the Properties
on the Company's results of operations as if the transaction had occurred as of
January 1, 1995.
The pro forma adjustments included in the accompanying Pro Forma Statements of
Income from Continuing Operations are based on assumptions and estimates and are
not necessarily indicative of the results of operations of the Company as they
may be in the future or as they might have been had the transaction actually
occurred as of January 1, 1995.
The pro forma adjustments reflect estimated depletion, depreciation and
amortization, estimated interest and income taxes relating to the Properties for
the six month period ended June 30, 1996 and for the year ended December 31,
1995.
9
ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FROM CONTINUING OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
For the Six Months Ended
June 30, 1996
---------------------------------------------------------
Acquired
Historical Properties Adjustments Pro Forma
-------------------------------------- -------------
Operating revenues:
Oil and gas production $ 24,745 $ 1,514 $ - $ 26,259
Gas contract settlements and other revenues 285 124 - 409
-------------------------------------- -------------
Total operating revenues 25,030 1,638 - 26,668
-------------------------------------- -------------
Operating expenses:
Oil and gas production 5,926 411 - 6,337
Depletion, depreciation and amortization 5,874 - 288 (1) 6,162
Exploration 4,329 - - 4,329
Abandonment and impairment of unproved properties 549 - - 549
General and administrative 3,680 - - 3,680
Gas contract disputes and other 93 13 - 106
Loss in equity investees 1 - - 1
-------------------------------------- -------------
Total operating expenses 20,452 424 288 21,164
-------------------------------------- -------------
Income from operations 4,578 1,214 (288) 5,504
Nonoperating income and (expense):
Interest income 167 - - 167
Interest expense (840) - (328) (2) (1,168)
-------------------------------------- -------------
Income from continuing operations before income taxes 3,905 1,214 (616) 4,503
Income tax benefit (expense) (1,217) (413) 209 (3) (1,421)
-------------------------------------- -------------
Income from continuing operations $ 2,688 $ 801 $ (407) $ 3,082
====================================== =============
Income per common share from continuing operations $ .31 $ .09 $ (.05) $ .35
====================================== =============
Weighted average common shares outstanding 8,759 8,759 8,759 8,759
====================================== =============
Pro forma adjustments
- ---------------------
(1) To reflect estimated depletion, depreciation and amortization related to the acquired properties
for the six month period ended June 30, 1996.
(2) To reflect estimated interest expense related to the acquired properties for the six month period
ended June 30, 1996 since the acquisition was financed by available credit under the Company's
revolving bank credit agreement.
(3) To reflect estimated income taxes related to the acquired properties at the statutory rate
for the six month period ended June 30, 1996. The acquisition does not create differences that
would cause income tax expense to differ from the amount that would be provided by
applying the statutory income tax rate.
10
ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FROM CONTINUING OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
For the Year Ended
December 31, 1995
-------------------------------------------------------
Acquired
Historical Properties Adjustments Pro Forma
------------------------------------- ------------
Operating revenues:
Oil and gas production $ 36,569 $ 3,045 $ - $ 39,614
Gain on sale of proved properties 1,292 - - 1,292
Gas contract settlements and other revenues 789 320 - 1,109
------------------------------------- ------------
Total operating revenues 38,650 3,365 - 42,015
------------------------------------- ------------
Operating expenses:
Oil and gas production 10,646 810 - 11,456
Depletion, depreciation and amortization 10,227 - 709 (1) 10,936
Impairment of proved properties 2,676 - - 2,676
Exploration 5,073 - - 5,073
Abandonment and impairment of unproved properties 2,359 - - 2,359
General and administrative 5,328 - - 5,328
Gas contract disputes and other 152 38 - 190
Loss in equity investees 579 - - 579
------------------------------------- ------------
Total operating expenses 37,040 848 709 38,597
------------------------------------- ------------
Income from operations 1,610 2,517 (709) 3,418
Nonoperating income and (expense):
Interest income 287 - - 287
Interest expense (1,183) - (739) (2) (1,922)
------------------------------------- ------------
Income from continuing operations before income taxes 714 2,517 (1,448) 1,783
Income tax benefit (expense) 723 (856) 492 (3) 359
------------------------------------- ------------
Income from continuing operations $ 1,437 $ 1,661 $ (956) $ 2,142
===================================== ============
Income per common share from continuing operations $ .17 $ .19 $ (.11) $ .25
===================================== ============
Weighted average common shares outstanding 8,760 8,760 8,760 8,760
===================================== ============
Pro forma adjustments
- ---------------------
(1) To reflect estimated depletion, depreciation and amortization related to the acquired properties
for the twelve month period ended December 31, 1995.
(2) To reflect estimated interest expense related to the acquired properties for the twelve month period
ended December 31, 1995 since the acquisition was financed by available credit under the Company's
revolving bank credit agreement.
(3) To reflect estimated income taxes related to the acquired properties at the statutory rate
for the twelve month period ended December 31, 1995. The acquisition does not create differences that
would cause income tax expense to differ from the amount that would be provided by applying
the statutory income tax rate.
11
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.
St. Mary Land & Exploration Company
September 12, 1996 By /s/ MARK A. HELLERSTEIN
-----------------------
Mark A. Hellerstein
President and Chief Executive Officer
September 12, 1996 By /s/ RICHARD C. NORRIS
---------------------
Richard C. Norris
Vice President - Accounting and
Administration and Chief Accounting
Officer
12
EXHIBIT 24.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
St. Mary Land & Exploration Company and Subsidiaries on Form 8-K/A of our report
dated September 11, 1996, on our audit of the Statement of Revenues and Direct
Operating Expenses of Certain Oil and Gas Properties Acquired from Siete Oil &
Gas Corporation for the year ended December 31, 1995, which report is included
in this report on Form 8-K/A.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
September 12, 1996