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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
December 15, 1998
December 30, 1998
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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)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 15, 1998, St. Mary Land & Exploration Company (the
"Company") closed the sale of a package of non-strategic producing properties to
Oneok Resources Company for a purchase price of $22.2 million. The Company
received $22.1 million in cash proceeds, net of transaction costs and customary
closing adjustments made to reflect post-effective date revenues and expenses.
The transaction was consummated pursuant to a Purchase and Sale Agreement dated
November 12, 1998, effective as of September 1, 1998. The assets sold consist of
producing oil and gas wells and undeveloped leasehold acreage within eight
fields located in Beckham and Roger Mills Counties, Oklahoma.
The majority of the proceeds from this property sale were used to
reduce the Company's outstanding bank debt in anticipation of re-deploying this
capital in the Company's drilling, exploration and acquisition programs in 1999.
$6.8 million of the proceeds were deposited into an escrow account to be used to
purchase other producing properties in a tax-free exchange.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro forma financial information (unaudited).
The following unaudited pro forma consolidated statements of income for
the nine months ended September 30, 1998 and for the twelve months ended
December 31, 1997, and the unaudited pro forma consolidated balance sheet as of
September 30, 1998, adjust the historical financial information of the Company
for the sale of properties to Oneok Resources Company. The unaudited pro forma
consolidated statements of income for the nine months ended September 30, 1998
and for the twelve months ended December 31, 1997 were prepared as if the sale
transaction was consummated on January 1, 1998 and January 1, 1997,
respectively. The unaudited pro forma consolidated balance sheet as of September
30, 1998 was prepared as if the sale was consummated on September 30, 1998. The
pro forma adjustments are based on estimates and assumptions explained in the
accompanying notes to the pro forma consolidated financial statements.
The unaudited pro forma consolidated financial statements should be
read in conjunction with the related historical financial statements and related
notes, which are included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, and in the Company's Quarterly Report on Form 10-Q
for the nine months ended September 30, 1998.
The pro forma information presented is not necessarily indicative of
the results that would have actually occurred had the transaction been
consummated on the dates or for the periods indicated, or which may occur in the
future.
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ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(In thousands, except share amounts)
Pro Forma
Historical Adjustments Pro Forma
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ASSETS
Current assets:
Cash and cash equivalents $ 3,109 $ 3,109
Accounts receivable 18,492 18,492
Prepaid expenses and other 1,123 1,123
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Total current assets 22,724 22,724
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Property and equipment (successful efforts method), at cost:
Proved oil and gas properties 275,911 $ (32,269) (A) 243,642
Restricted cash - 6,760 (A) 6,760
Unproved oil and gas properties, net of impairment
allowance of $5,168 25,825 (526) (A) 25,299
Other 3,735 3,735
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305,471 (26,035) 279,436
Less accumulated depletion, depreciation, amortization and impairment (138,540) 17,445 (A) (121,095)
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166,931 (8,590) 158,341
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Other assets:
Khanty Mansiysk Oil Corporation receivable and stock 6,839 6,839
Summo Minerals Corporation investment and receivable 6,781 6,781
Other assets 3,449 (388) (A) 3,061
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17,069 (388) 16,681
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$ 206,724 $ (8,978) $ 197,746
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 17,371 $ 17,371
Current portion of stock appreciation rights 358 358
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Total current liabilities 17,729 17,729
Long-term liabilities:
Long-term debt 32,615 (15,357) (A) 17,258
Deferred income taxes 14,496 2,424 (A) 16,920
Stock appreciation rights 696 696
Other noncurrent liabilities 1,093 1,093
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48,900 (12,933) 35,967
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Stockholders' equity:
Common stock, $.01 par value: authorized - 50,000,000 shares;
issued and outstanding - 10,992,447 shares 110 110
Additional paid-in capital 67,761 67,761
Treasury stock - 147,800, at cost (2,469) (2,469)
Retained earnings 74,693 3,955 (A) 78,648
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Total stockholders' equity 140,095 3,955 144,050
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$ 206,724 $ (8,978) $ 197,746
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The accompanying notes are an integral part of these unaudited pro forma
consolidated financial statements.
3
ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(In thousands, except per share amounts)
Pro Forma
Historical Adjustments Pro Forma
------------ ------------ ------------
Operating revenues:
Oil and gas production $ 55,903 $ (4,680) (B) $ 51,223
Gain (loss) on sale of proved properties (14) (14)
Other revenues 271 271
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Total operating revenues 56,160 (4,680) 51,480
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Operating expenses:
Oil and gas production 12,579 (710) (B) 11,869
Depletion, depreciation and amortization 17,507 (2,080) (B) 15,427
Impairment of proved properties 8,217 8,217
Exploration 9,397 9,397
Abandonment and impairment of unproved properties 3,077 3,077
General and administrative 5,669 5,669
Writedown of Russian convertible receivable 4,553 4,553
Loss in equity investees 612 612
Other 105 105
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Total operating expenses 61,716 (2,790) 58,926
Income from operations (5,556) (1,890) (7,446)
Nonoperating income and (expense):
Interest income 576 139 (C) 715
Interest expense (1,129) 653 (C) (476)
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Loss before income taxes (6,109) (1,098) (7,207)
Income tax benefit (2,088) (417) (D) (2,505)
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Loss from continuing operations (4,021) (681) (4,702)
Gain on sale of discontinued operations, net of taxes 34 34
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Net loss $ (3,987) $ (681) $ (4,668)
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Basic earnings per common share:
Loss from continuing operations $ (0.37) $ (0.43)
Gain on sale of discontinued operations - -
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Basic net loss per common share $ (0.37) $ (0.43)
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Diluted earnings per common share:
Loss from continuing operations $ (0.37) $ (0.43)
Gain on sale of discontinued operations - -
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Diluted net loss per common share $ (0.37) $ (0.43)
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Basic weighted average common shares outstanding 10,968 10,968
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Diluted weighted average common shares outstanding 10,968 10,968
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The accompanying notes are an integral part of these unaudited pro forma
consolidated financial statements.
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ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(In thousands, except per share amounts)
Pro Forma
Historical Adjustments Pro Forma
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Operating revenues:
Oil and gas production $ 75,764 $ (9,002) (E) $ 66,762
Gain on sale of Russian joint venture 9,671 9,671
Gain (loss) on sale of proved properties 4,220 4,220
Other revenues 1,391 1,391
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Total operating revenues 91,046 (9,002) 82,044
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Operating expenses:
Oil and gas production 15,258 (1,149) (E) 14,109
Depletion, depreciation and amortization 18,366 (2,603) (E) 15,763
Impairment of proved properties 5,202 (146) (E) 5,056
Exploration 6,847 6,847
Abandonment and impairment of unproved properties 2,077 2,077
General and administrative 7,645 7,645
Loss in equity investees 325 325
Other 281 281
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Total operating expenses 56,001 (3,898) 52,103
Income from operations 35,045 (5,104) 29,941
Nonoperating income and (expense):
Interest income 1,043 505 (F) 1,548
Interest expense (1,142) 334 (F) (808)
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Income before income taxes 34,946 (4,265) 30,681
Income tax expense (benefit) 12,325 (1,663) (G) 10,662
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Income from continuing operations 22,621 (2,602) 20,019
Gain on sale of discontinued operations, net of taxes 488 488
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Net income $ 23,109 $ (2,602) $ 20,507
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Basic earnings per common share:
Income from continuing operations $ 2.13 $ 1.89
Gain on sale of discontinued operations 0.05 0.05
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Basic net income per common share $ 2.18 $ 1.94
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Diluted earnings per common share:
Income from continuing operations $ 2.10 $ 1.86
Gain on sale of discontinued operations 0.05 0.05
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Diluted net income per common share $ 2.15 $ 1.91
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Basic weighted average common shares outstanding 10,620 10,620
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Diluted weighted average common shares outstanding 10,753 10,753
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The accompanying notes are an integral part of these unaudited pro forma
consolidated financial statements.
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EXHIBIT 10.56
ST. MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The pro forma consolidated financial statements reflect the adjustments
described below:
Consolidated balance sheet
(A) To reflect the sale of the producing oil and gas wells and
undeveloped leasehold acreage properties and the application of the cash
proceeds. $6.8 million of sale proceeds were deposited into an escrow account to
be used to purchase producing oil and gas properties in a tax-free exchange.
These proceeds are reflected as restricted cash in property and equipment in the
accompanying unaudited pro forma consolidated balance sheet. The remainder of
the sale proceeds is reflected as a reduction of long-term debt. A pre-tax gain
on the sale of $6.4 million is recognized, as well as a $2.4 million provision
for deferred income taxes.
Consolidated income statements
The pro forma adjustments to the unaudited consolidated statements of
income for the nine months ended September 30, 1998 and for the twelve months
ended December 31, 1997 eliminate revenues, production expenses, accumulated
depletion, depreciation and amortization ("DD&A") and impairment associated with
the properties sold for the respective periods. Pro forma adjustments to
interest expense and interest income reflect the estimated effect of reduction
of the Company's long-term debt and the investment of residual cash until
utilized.
(B) Eliminates oil and gas revenues, related production expenses and
DD&A directly attributable to the properties sold for the nine months ended
September 30, 1998.
(C) Adjusts interest expense for the nine months ended September 30,
1998 to reflect elimination of long-term debt using a portion of the sale
proceeds at the beginning of the period. Adjusts interest income to reflect
estimated interest earned on residual cash, after elimination of long-term debt,
using an estimated US Treasury interest rate.
(D) Reflects adjustment of the provision for income taxes for the nine
months ended September 30, 1998, resulting from the pro forma adjustments to
loss before income taxes for such period.
(E) Eliminates oil and gas revenues, related production expenses, DD&A
and impairment directly attributable to the properties sold for the twelve
months ended December 31, 1997.
(F) Adjusts interest expense for the twelve months ended December 31,
1997 to reflect reduction of long-term debt using all of the sale proceeds at
the beginning of the period. Adjusts interest income to reflect estimated
interest earned on residual cash, after reduction of long-term debt, using an
estimated US Treasury interest rate.
(G) Reflects adjustment of the provision for income taxes for the
twelve months ended December 31, 1997, resulting from the pro forma adjustments
to income before income taxes for such period.
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(c) Exhibits.
Exhibit 10.53 - Purchase and Sale Agreement dated November 12, 1998
between Oneok Resources Company (buyer) and Kent J. Harrell, Ralph H.
Smith, Ronald D. Boone, Ronald E. Hornig, England Resources
Corporation and the Registrant (collectively, the sellers).
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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
December 30, 1998 By /s/ MARK A. HELLERSTEIN
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Mark A. Hellerstein
President and Chief Executive Officer
December 30, 1998 By /s/ DAVID L. HENRY
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David L. Henry
Vice President - Finance and
Chief Financial Officer