1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10753
WRTGULFPORT ENERGY CORPORATION
(Exact name of IssuerRegistrant as specified in its charter)
DELAWAREDelaware 73-1521290
(State or other jurisdiction of (IRS(I.R.S. Employer
incorporation or organization) Identification No.)
1601 NW EXPRESSWAY, SUITE 700
OKLAHOMA CITY, OKLAHOMA 73118-14016307 Waterford Blvd.
Building D, Suite 100
Oklahoma City, Oklahoma 73118
(405) 848-8808848-8807
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
Indicate by check mark whether the IssuerRegistrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Issuer was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes[ ] No [ XX] No[ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDINGPRECEEDING FIVE YEARS.
IndicatedIndicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities and
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No____.
State the[X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock,Registrant's Common Stock, $0.01 par value,
outstanding as of the latest practicable date:
1May 15, 1998 was 22,076,315.
2
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
Prior to Effective Date of Plan of Reorganization:
Common Stock, $0.01 Par Value **
9% Convertible Preferred Stock, $0.01 par value **
Effective Date of Plan of Reorganization forward:
New Common Stock, $0.01 par value **
New 9% Convertible Preferred Stock $0.01 par value **
Effective July 11, 1997, all outstanding shares of common stock were
cancelled as part of WRT Energy Corporation's Plan of Reorganization under
Chapter 11 of the Federal Bankruptcy Code.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
** THE REGISTRANT'S COMMON STOCK AND 9% CONVERTIBLE PREFERRED STOCK WERE
QUOTED ON THE NASDAQ NATIONAL MARKET UNTIL FEBRUARY 29, 1996, AT WHICH TIME
NASDAQ TERMINATED ITS QUOTATION OF BOTH CLASSES OF SECURITIES DUE TO THE
FAILURE OF THE REGISTRANT TO MEET CERTAIN FINANCIAL AND OTHER CRITERIA FOR
CONTINUED QUOTATION. THE COMPANY'S NEW COMMON STOCK IS EXPECTED TO BE LISTED
ON THE NASDAQ NATIONAL MARKET AFTER THE COMPANY FILES CERTAIN DOCUMENTS WITH
NASDAQ AND THE SECURITIES AND EXCHANGE COMMISSION.
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WRTGULFPORT ENERGY CORPORATION
TABLE OF CONTENTS
FORM 10-Q QUARTERLY REPORT
--------------------------
PART I.I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet
September 30, 1997 (Unaudited) and December 31, 1996 5
Consolidated Statements of Operations (Unaudited)
For the Three and Nine Months Ended
September 30, 1997 and 1996 6
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 1997 and 1996 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 21
Disclosure Regarding Forward-Looking Statements 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 30
Signatures 32
PAGE
Item 1 Financial Statements
Consolidated Balance Sheet at March 31, 1998 (unaudited)
and December 31, 1997........................................ 4
Consolidated Statement of Operations for the Three Months
Ended March 31, 1998 and 1997 (unaudited).................... 5
Consolidated Statement of Cash Flow for the Three Months
Ended March 31, 1998 and 1997 (unaudited).................... 6
Notes to Consolidated Financial Statements................... 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 20
PART II OTHER INFORMATION
Item 1 Legal Proceedings............................................ 24
Item 6 Exhibits and Reports on Form 8-K............................. 25
Signatures................................................... 26
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WRTGULFPORT ENERGY CORPORATION
PART I. Financial Information
Item 1. Consolidated Financial Statements
September 30,March 31, 1998 and 1997 and 1996
Forming a part of Form 10-Q Quarterly Report to the
Securities and Exchange Commission
This quarterly report on Form 10-Q should be read in conjunction with
WRTGulfport Energy Corporation's Annual Report on Form 10-K for the year
ended December 31, 19961997
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5
WRT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETGulfport Energy Corporation
Consolidated Balance Sheet
(Reorganized (Predecessor
Company) Company)
ASSETS September 30, 1997March 31, December 31,
1996
- ------------------------------------------------------------------------------------------------------------------------1998 1997
Current assets: (Unaudited)
------------ ------------
Current assets:
Cash and cash equivalents $ 6,730,0001,902,000 $ 5,679,0001,203,000
Cash, restricted 1,781,000 2,060,000
Accounts receivable, net of allowance for
doubtful accounts of $4,696,000$4,996,000 for September 30, 1997March 31,
1998 and $4,716,000 for December 31, 1996 3,611,000 3,667,0001997, respectively 3,019,000 4,364,000
Prepaid expenses and other 514,000 633,000
------------- -------------
10,855,000 9,979,000
Cash held in escrow 861,000 831,000121,000 192,000
------------ ------------
Total current assets 6,823,000 7,819,000
Property and equipment:
Properties subject to depletion 77,793,000 77,541,000
Properties not subject to depletion 5,014,000 --Oil and natural gas properties 84,670,000 84,466,000
Other property plant and equipment 3,062,000 5,118,000
------------- -------------
85,869,000 82,659,0001,589,000 1,577,000
Accumulated depletion, depreciation depletion and
amortization (2,530,000) (25,760,000)
------------- -------------
83,339,000 56,899,000(6,421,000) (4,542,000)
------------ ------------
Property and equipment, net 79,838,000 81,501,000
Other assets 286,000 367,000
------------- -------------3,457,000 3,026,000
------------ ------------
Total assets $ 95,341,00090,118,000 $ 68,076,000
============= =============92,346,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 6,852,0006,267,000 $ 5,529,000
Due to affiliate 2,191,000 --
Pre-petition6,346,000
Current maturities of long-term debt 2,192,000 2,192,000
------------ ------------
Total current liabilities not subject to compromise -- 16,752,000
Pre-petition liabilities subject to compromise -- 136,346,000
------------- -------------
9,043,000 158,627,0008,459,000 8,538,000
Long term liabilities:
Other non-currentdebt 13,506,000 13,528,000
------------ ------------
Total liabilities 351,000 --
Notes payable 15,209,000 --
------------- -------------
15,560,000 --21,965,000 22,066,000
Shareholders' equity (deficit):
Preferred stock - $.01 par value, 1,000,000 authorized, none issued
and outstanding at September 30, 1997; 2,000,000 authorized,
1,265,000 issued and outstanding at December 31, 1996 -- 27,677,000equity:
Common stock - $.01 par value, 50,000,000
authorized, 22,076,315 issued and outstanding
at September 30, 1997; 221,000 95,000
50,000,000 authorized, 9,539,207 issuedMarch 31, 1998 and outstanding at December 31, 19961997,
respectively 221,000 221,000
Paid-in capital 71,772,000 39,571,00071,772,000
Accumulated deficit (1,255,000) (157,562,000)
Treasury stock (35,100 shares at December 31, 1996;
none at September 30, 1997) -- (332,000)
------------- -------------(3,840,000) (1,713,000)
------------ ------------
Total shareholders' equity (deficit) 70,738,000 (90,551,000)
------------- -------------68,153,000 70,280,000
------------ ------------
Commitments and contingencies
- -
------------ ------------
Total liabilities and shareholders' equity $ 95,341,00090,118,000 $ 68,076,000
============= =============92,346,000
============ ============
- See accompanying notes to consolidated financial statements -
- -------------------------------------------------------------------------------- 5
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WRT ENERGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)Gulfport Energy Corporation
Consolidated Statement Of Operations
(Unaudited)
Three months Ended March 31,
1998 1997
(Reorganized Company) (Predecessor
Company) Eighty-two Days Eleven Days Three Months Ended
Ended September 30, Ended July 11, September 30,
1997 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------Company)
------------ ------------
Revenues:
Revenues:
Gas sales $ 1,399,0001,019,000 $ 211,000 $ 1,966,0002,508,000
Oil and condensate sales 2,931,000 271,000 3,858,0002,303,000 2,873,000
Other income 75,000 6,000 208,000200,000 50,000
------------ ------------
-----------
Total revenues 4,405,000 488,000 6,032,0003,522,000 5,431,000
Expenses:
Lease operating 1,762,000 232,000 1,529,000
Gross production taxes 400,000 43,000 488,0002,720,000 2,144,000
Depreciation, depletion and amortization 2,530,000 190,000 2,014,0001,878,000 1,451,000
General and administrative expenses 642,000 113,000 990,000662,000 919,000
Provision for doubtful accounts -- -- --
Minimum production guarantee obligation -- -- --- 91,000
------------ ------------
-----------
5,334,000 578,000 5,021,000
------------ ------------ -----------
Income (loss) from operations (929,000) (90,000) 1,011,000
------------ ------------ -----------
Interest expense 326,000 74,000 593,000
------------ ------------ -----------
Income (loss) before reorganization costs,
income taxes and extraordinary item (1,255,000) (164,000) 418,000
Reorganization costs -- 1,044,000 1,182,000
------------ ------------ -----------
Loss before income taxes and extraordinary item (1,255,000) (1,208,000) (764,000)
Income tax expense -- -- --
------------ ------------ -----------
Loss before extraordinary item (1,255,000) (1,208,000) (764,000)
Extraordinary item - gain on debt discharge -- (88,723,000) --
------------ ------------ -----------
Net income (loss) (1,255,000) 87,515,000 (764,000)
Dividends on preferred stock (undeclared on Predecessor Company) -- (87,000) (712,000)
------------ ------------ -----------
Net income (loss) available to common shareholders $ (1,255,000) $ 87,428,000 $(1,476,000)
============ ============ ===========
Per common share:
Income (loss) per common and common equivalent share $ (0.06) * *
============ ============ ===========
Average common and common equivalent
shares outstanding 22,076,000 * *
============ ============ ===========
* Amounts not meaningful as a result of the reorganization
- See accompanying notes to consolidated financial statements -
- --------------------------------------------------------------------------------
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WRT ENERGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(Reorganized Company) (Predecessor Company)
Eighty-two Days Six Months and 11 Nine Months Ended
Ended September 30, Days Ended July 11, September 30,
1997 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues:
Gas sales $ 1,399,000 $ 4,706,000 $ 7,665,000
Oil and condensate sales 2,931,000 5,432,000 10,571,000
Other income 75,000 126,000 262,000
------------ ------------ ------------
Total revenues 4,405,000 10,264,000 18,498,000
Expenses:
Lease operating 1,762,000 4,466,000 6,862,000
Gross production taxes 400,000 677,000 1,403,000
Depreciation, depletion and amortization 2,530,000 3,314,000 6,271,000
General and administrative expenses 642,000 2,474,000 3,157,000
Provision for doubtful accounts -- 71,000 4,278,000
Minimum production guarantee obligation -- -- 2,778,000
------------ ------------ ------------
5,334,000 11,002,000 24,749,000
------------5,260,000 4,605,000
------------ ------------
Income (loss) from operations (929,000) (738,000) (6,251,000)
------------(1,738,000) 826,000
------------ ------------
Interest expense 326,000 1,106,000 4,930,000
------------386,000 615,000
------------ ------------
Income (loss) before reorganization costs and
income taxes and extraordinary item (1,255,000) (1,844,000) (11,181,000)(2,124,000) 211,000
Reorganization costs -- 4,771,000 6,040,000
------------- 1,026,000
------------ ------------
Loss before income taxes and extraordinary item (1,255,000) (6,615,000) (17,221,000)(2,124,000) (815,000)
Income tax expense -- -- --
------------- -
------------ ------------
Net loss before extraordinary item (1,255,000) (6,615,000) (17,221,000)
Extraordinary item(2,124,000) (815,000)
Undeclared dividends on preferred stock - gain on debt discharge -- (88,723,000) --
------------712,000
------------ ------------
Net income (loss) (1,255,000) 82,108,000 (17,221,000)
Dividends on preferred stock (undeclared on Predecessor Company) -- (1,510,000) (2,135,000)
------------ ------------ ------------
Net income (loss)loss available to common shareholders $ (1,255,000)(2,124,000) $ 80,598,000 $(19,356,000)
============(1,527,000)
============ ============
Per common share:
Income (loss) per common and common equivalent
share $ (0.06)(0.10) * *
============
============ ============
Average common and common equivalent
shares outstanding 22,076,000 * *
============
============ ============
* Amounts not meaningful as a result of the
reorganization
- See accompanying notes to consolidated financial statements -
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WRT ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)6
Gulfport Energy Corporation
Consolidated Statement Of Cash Flows
(Unaudited)
Three months Ended March 31,
1998 1997
(Reorganized Company) (Predecessor
Company) Eighty-two Days Six Months and 11 Nine Months Ended
Ended September 30, Days Ended July 11, September 30,
1997 1997 1996
Company)
------------ ------------
Cash flow from operating activities:
Net income (loss) $(1,255,000) $ 82,108,000 $(17,221,000)(2,124,000) $ (815,000)
Adjustments to reconcile net income (loss)loss to
net cash provided by operating activities:
Extraordinary item - gain on debt discharge -- (88,723,000) --
Depreciation, depletion, and amortization 2,530,000 3,314,000 6,271,0001,878,000 1,451,000
Provision for doubtful accounts and notes
receivable -- 71,000 4,278,000- 91,000
Amortization of debt issuance costs -- (12,000) 681,000
Write-off of debt issuance costs and Senior Notes discount -- -- 5,605,00032,000 41,000
Changes in operating assets and liabilities:
(Increase) decreaseDecrease in accounts receivable (324,000) 307,000 (3,676,000)1,346,000 1,668,000
(Increase) decrease in prepaid expenses and
other 244,000 (331,000) (110,000)71,000 (526,000)
Increase (decrease) in accounts payable distribution payables and
accrued liabilities 3,075,000 301,000 (17,392,000)(97,000) 725,000
Pre-petition liabilities subject to
compromise -- (268,000) 24,476,000
Pre-petition liabilities not subject to compromise -- -- 1,505,000
Minimum production guarantee obligation -- -- 2,778,000
Discharge of pre-petition liabilities -- (7,837,000) --
------------ (267,000)
------------ ------------
Net cash provided (used) by operating
activities 4,270,000 (11,070,000) 7,195,0001,106,000 2,368,000
Cash flow from investing activities:
(Additions to) distributions fromAdditions to cash held in escrow 5,000 (22,000) (112,000)- (10,000)
Additions to property and equipment (2,888,000) (2,562,000) (3,548,000)
Proceeds from sale of oil and gas properties 35,000 -- --
-----------(679,000) (250,000)
------------ ------------
Net cash used in investing activities (2,848,000) (2,583,000) (3,660,000)(679,000) (260,000)
Cash flow from financing activities:
Proceeds from rights offering -- 13,300,000 --
Principal payments on borrowings (4,000) (15,014,000) (448,000)
Proceeds on borrowings -- 15,000,000 --
-----------(7,000) (11,000)
------------ ------------
Net cash (used in) provided byused in financing activities (4,000) 13,286,000) (448,000)(7,000) (11,000)
Net increase (decrease) in cash and cash equivalents 1,419,000 (367,000) 3,087,000420,000 2,097,000
Cash and cash equivalents - beginning of period 5,311,0003,263,000 5,679,000 1,608,000
-----------
------------ ------------
Cash and cash equivalents - end of period $ 6,730,0003,683,000 $ 5,311,000 $ 4,695,000
===========7,776,000
============ ============
Supplemental Disclosures Of Cash Flow Information
Interest paid $ 66,000 $ 28,000339,000 $ 28,000
Income taxes paid -- -- --- -
Supplemental Information Of Non-Cash Investing And
Financing Activities
Accrued dividends on preferred stock
(Undeclared on Predecessor Company) -- (1,510,000) (2,135,000)- (712,000)
- See accompanying notes to consolidated financial statements -
- --------------------------------------------------------------------------------
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Gulfport Energy Corporation
Notes to Consolidated Financial Statements
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Reorganization Proceedings
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this document. Unless otherwise stated, the term "Company" means
Gulfport Energy Corporation, formerly known as WRT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) DESCRIPTION OF BUSINESSEnergy Corporation, and its
subsidiaries taken as a whole, either prior to or after the Effective Date (as
defined herein), as the context requires and the term "WRT" or "Debtor" means
WRT Energy Corporation and its subsidiaries taken as a whole prior to the
Effective Date.
Gulfport Energy Corporation owns and operates natural oil and gas
properties in the Louisiana Gulf Coast area. Currently, the Company is seeking
to diversify its asset base through merger, acquisitions, or trades. The
Company's business strategy is to increase its reserves, production and cash
flow through exploration and development activities as well as opportunistic
acquisitions. In July 11, 1997, WRT's subsidiaries were merged into the Company.
On the effective date of the reorganization, the state of incorporation of the
reorganized Company was changed from the State of Texas to the State of
Delaware. Prior to July 11, 1997, the financial statements represented the
consolidated financial statements of WRT and its subsidiaries.
As discussed in Note 3, on February 14, 1996, ("Petition(the "Petition Date"), WRT
Energy Corporation,filed a Texas
corporation and the predecessor of the Company ("Debtor") filed avoluntary petition with the Bankruptcy Courtcourt for the Western District of
Louisiana ("Bankruptcy(the "Bankruptcy Court") for protection under Chapter 11 of the
Federal Bankruptcy Code. Such case is
referred to herein as the "Reorganization Case". Upon filing of the voluntary
petition for relief, the Debtor, as debtor-in-possession, was authorized to
operate its business for the benefit of claim holders and interest holders, and
continued to do so, without objection or request for appointment of a trustee.
All debts of the Debtor as of the Petition Date were stayed by the bankruptcy
petition and were subject to compromise pursuant to such proceedings. The
Debtor operated its business and managed its assets in the ordinary course as
debtor-in-possession, and obtained court approval for transactions outside the
ordinary course of business. Based on these actions, all liabilities of the
Debtor outstanding at February 14, 1996 were reclassified to estimated
pre-petition liabilities.
By order datedOn May 2,5, 1997, the Bankruptcy Court confirmed the Jointan Amended Plan
of Reorganization (the "Plan") for WRT and on the effective date an order of
WRT Energy Corporationsubstantial consummation regarding the Plan became final and co-proponents
DLB Oil and Gas, Inc. ("DLB") and Wexford Management LLC ("Wexford," and
together with DLB "DLBW"). The Plan was consummated and became effective on July
11, 1997 (the "Effective Date").nonappealable. On
the Effective Date, the Debtor was merged with and into a newly formed Delaware
corporation named "WRT Energy Corporation"
("New WRT"). OnEffective July 11, 1997 (the
"Election Date"), the Effective Date, New WRT allocated the actual reorganization
value to the entity's assetsCompany implemented fresh start reporting, as defined by
the Accounting Standards Division of the American Institute of Certified Public
Accountants Statement of Position Number 90-7, "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). As used herein, "Debtor" refersEffective March 30,
1998, WRT Energy Corporation underwent a name change to the registrant prior to the
Effective Date"Gulfport Energy
Corporation".
Principles of the Plan, "New WRT" refers to the registrant following the
Effective Date of the Plan, and the "Company" or "WRT" refers to the registrant
prior to or after the Effective Date of the Plan, as the context requires.
Prior to bankruptcy, the Company was engaged in acquiring mature oil
and gas properties in the Louisiana Gulf Coast area and increasing both the
production and total oil and gas recovery through the use of advanced
technologies, including sophisticated radioactive logging equipment owned by the
Company and specialized fluid separation technologies. The Company also sought
to acquire properties that were developed prior to the invention of cased-hole
logging equipment in the 1970's and to reevaluate such properties with its own
radioactive logging equipment. This new cased-hole data was then analyzed by
experienced Company personnel to identify previously overlooked or deliberately
untested formations that may have yielded new commercial oil and gas production.
Previously produced formations were also studied to determine whether they could
have been restored to commercial production through the use of modern
completion, stimulation and production practices or the application of the
Company's fluid separation technologies. Subsequent to bankruptcy, the Company
seeks to exploit its existing properties and acquire additional Louisiana Gulf
Coast properties with exploitation and exploration potential.
The consolidated financial statements include the accounts of WRT and
its wholly owned subsidiary,
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WRT ENERGY CORPORATION
(A DEBTOR-IN-POSSESSION AS OF FEBRUARY 14, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
WRT Technologies, Inc. Until December 31, 1995, WRT owned 100% of the stock of
two subsidiaries, Tesla Resources, Inc. ("Tesla") and Southern Petroleum, Inc.
("Southern Petroleum"). On that date, both Tesla and Southern Petroleum were
merged into WRT with WRT emerging as the sole surviving corporation.Consolidation
In November 1995, WRT formed a wholly owned subsidiary, WRT Technologies,
Inc., which was established to own and operate WRT's proprietary, radioactive,
cased-hole logging technology. As partPrior to July 11, 1997, the financial statements
were consolidated and include the accounts of the Plan,WRT and its wholly owned
subsidiary, WRT Technologies, Inc., which was dissolved
with the assets contributed to the New WRT. See Note 2 for a description of the
Plan.merged into WRT on that date. All
significant intercompany transactions have been eliminated.were eliminated during the consolidation
periods.
Cash and Cash Equivalents
The accompanying consolidatedCompany considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents for purposes of the
statement of cash flows.
Fair Value of Financial Instruments
At March 31, 1998 and December 31, 1997, the carrying amounts of all
financial statementsinstruments approximate their fair market values.
8
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
Oil and notes thereto
have been prepared pursuantNatural Gas Properties
Before July 11, 1997, WRT used the successful efforts method for reporting
oil and gas operations. Commencing with the reorganization, the Company
converted to the rulesfull cost pool method of accounting to be in conformity with
the method used by its principal shareholder, DLB Oil & Gas, Inc. ("DLB").
COMMENCING JULY 11, 1997
In connection with the implementation of fresh start reporting, as
described in Note 3, the Company implemented the full cost pool method of
accounting for oil and regulationsgas operations. Accordingly, all costs including
nonproductive costs and certain general and administrative costs associated with
acquisition, exploration and development of oil and natural gas properties are
capitalized. Net capitalized costs are limited to the estimated future net
revenues, after income taxes, discounted at 10% per year, from proved oil and
natural gas reserves and the cost of the Securitiesproperties not subject to amortization.
Such capitalized costs, including the estimated future development costs and
Exchange Commission. Accordingly, certain footnote disclosures normallysite remediation costs, if any, are depleted by an equivalent
units-of-production method, converting natural gas to barrels at the ratio of
six Mcf of natural gas to one barrel of oil. No gain or loss is recognized upon
the disposal of oil and gas properties, unless such dispositions significantly
alter the relationship between capitalized costs and proved oil and natural gas
reserves.
Oil and natural gas properties not subject to amortization consist of the
cost of undeveloped leaseholds. These costs are reviewed periodically by
management for impairment, with the impairment provision included in financial statements preparedthe cost of
oil and natural gas properties subject to amortization. Factors considered by
management in accordanceits impairment assessment include drilling results by the Company
and other operators, the terms of oil and gas leases not held by production, and
available funds for exploration and development.
PRIOR TO JULY 11, 1997
Prior to July 11, 1997, WRT followed the successful efforts method of
accounting for its oil and gas operations. Under the successful efforts method,
costs of productive wells, development dry holes and productive leases are
capitalized and amortized on a unit-of-production basis over the life of the
remaining proved reserves as estimated by WRT's independent engineers. WRT's
estimate of future dismantlement and abandonment costs was considered in
computing the aforementioned amortization.
Cost centers for amortization purposes were determined based on a
reasonable aggregation of properties with generally accepted
accounting principles have been omitted pursuantcommon geological structures or
stratigraphic conditions, such as a reservoir or field. WRT performed a review
for impairment of proved oil and gas properties on a depletable unit basis when
circumstances suggest the need for such a review. For each depletable unit
determined to such rules and regulations.
The accompanying consolidated financial statements and note thereto should be read in conjunction with the consolidated financial statements and notes
included in WRT's 1996 annual report on Form 10-K.
Certain reclassifications have been madeimpaired, an impairment loss equal to the 1996difference between
the carrying value and 1997
pre-effective date financial statementsthe fair value of the depletable unit was recognized.
Fair value, on a depletable unit basis, was estimated to conformbe the present value of
expected future net cash flows computed by applying estimated future oil and gas
prices, as determined by management, to estimated future production of oil and
gas reserves over the economic lives of the reserves.
Exploration expenses, including geological, geophysical and costs of
carrying and retaining undeveloped properties were charged to expense as
incurred.
9
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
Unproved properties were assessed periodically and a loss was recognized to
the 1997 post-effective
date presentation.
Inextent, if any, that the opinioncost of WRT's management, all adjustments (allthe property had been impaired. If proved
reserves were not discovered within one year after drilling was completed, costs
were charged to expense.
Other Property and Equipment
Depreciation of other property and equipment is provided on a straight-line
basis over estimated useful lives of the related assets, which are
normal and recurring) have been maderange from 7 to
30 years.
Implementation of Statement of Accounting Standards No. 121
Effective December 31, 1995, WRT adopted the provisions of Financial
Accounting Standards No 121 ("SFAS No. 121") which are necessary to fairly staterequires that an impairment
loss be recognized whenever the consolidated financial positioncarrying amount of WRT and its subsidiaries asa long-lived asset exceeds
the sum of September 30,
1997, and the results of their operations, and theirestimated future cash flows for the three
and nine month periods ended September 30, 1997 and 1996.
Management(undiscounted) of the assets.
Earnings (Loss) per Share
Earnings (loss) per share computations are calculated on the
weighted-average of common shares and common share equivalents outstanding
during the year. Common stock options and warrants are considered to be common
share equivalents and are used to calculate earnings per common and common share
equivalents except when they are anti-dilutive.
Income Taxes
The Company has made a numberuses the asset and liability method of estimatesaccounting for income
taxes. Under the asset and assumptions relating to the reporting ofliability method, deferred tax assets and liabilities
are recognized for the disclosurefuture tax consequences attributable to differences
between the financial statement carrying amounts and the tax basis of contingentexisting
assets and liabilities and operating loss and tax credit carryforwards. Deferred
income tax assets and liabilities are based on enacted tax rates applicable to
the reported amountsfuture period when those temporary differences are expected to be recovered
or settled. The effect of revenuesa change in tax rates on deferred tax assets and
expensesliabilities is recognized in income during the reporting periods,period the rate change is
enacted. Deferred tax assets are recognized as income in the year in which
realization becomes determinable.
Revenue Recognition
Natural gas revenues are recorded in the month produced using the
entitlement method, whereby any production volumes received in excess of the
Company's ownership percentage in the property are recorded as a liability. If
less than the Company's entitlement is received, the underproduction is recorded
as a receivable. Oil revenues are recognized in the month produced.
Concentration of Credit Risk
The Company operates in the oil and natural gas industry principally in the
state of Louisiana with sales to preparerefineries, re-sellers such as pipeline
companies, and local distribution companies. While certain of these consolidatedcustomers
are affected by periodic downturns in the economy in general or in their
specific segment of the natural gas industry, the Company believes that its
level of credit-related losses due to such economic fluctuations has been
immaterial and will continue to be immaterial to the Company's results of
operations in the long term. Unrelated to economic fluctuations, during 1996,
WRT incurred a bad debt in the amount of $4,278,000 related to marketing of its
oil and gas by Tri-Deck Oil & Gas Company ("Tri-Deck").
10
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
The Company maintains cash balances at several banks. Accounts at each bank
are insured by the Federal Deposit Insurance Corporation up to $100,000. Cash
balances in excess of insured limits total $3,684,000 and $3,163,000 at March
31, 1998 and December 31, 1997, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles.principles requires management to make estimates, judgements
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and revenues and expenses during the
reporting period. The financial statements are highly dependent on oil and gas
reserve estimates, which are inherently imprecise. Actual results could differ
materially from those estimates.
(2) CHAPTERStock Options and Warrant Agreements
Effective at the date of reorganization, all previously issued stock option
plans of WRT were terminated and all outstanding options were cancelled. At that
date a Warrant Agreement went into effect. These warrants are exercisable at $10
per share and will expire on July 11, BANKRUPTCY FILING2002. The Plan authorized the issuance of
up to 1,104,000 warrants. As of March 31, 1998 and December 31, 1997, there were
221,000 warrants issued and outstanding.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments,
litigation or other sources are recorded when it is probable that a liability
has been incurred and the amount can be reasonably estimated.
2. REORGANIZATION PROCEEDING
On February 14, 1996, ("Petition Date"), WRT Energy Corporation, a Texas
corporation and the predecessor of the Company ("Debtor") filed a voluntary petition within the United States
Bankruptcy Court for the Western District of Louisiana ("Bankruptcy(the "Bankruptcy Court")
for protection underreorganization pursuant to Chapter 11 of the Federal Bankruptcy Code. Such case is
referred to hereinCode (the
"Reorganization Proceeding"). During the balance of 1996 and a portion of 1997,
WRT operated as a debtor-in-possession, continuing in possession of its estate
and the "Reorganization Case". Upon filingoperation of the voluntary
petition for relief, Debtor, as debtor-in-possession, was authorized to operate
its business for the benefit of claim holders and interest holders, and
continued to do so, without objection or request for appointment of a trustee.
All debts of the Debtor as of the Petition Date were stayed by the bankruptcy
petition and were subject to compromise pursuant to such proceedings. The
Debtor operated its business and managedmanagement of its property. On May 5,
1997, the Bankruptcy Court confirmed an Amended Plan of Reorganization (the
"Plan") for WRT. On July 11, 1997, the Bankruptcy Court determined that the Plan
had been substantially consummated, and the Bankruptcy Court's order of
substantial consummation became final and nonappealable on July 11, 1997 (the
"Effective Date").
As a result of the consummation of the Plan and due to (1) the reallocation
of the voting rights of equity interest owners and (2) the reorganization value
of WRT's assets being less than the total of all post-petition liabilities and
allowed claims, the effects of the Reorganization Proceeding were accounted for
in accordance with fresh start reporting standards promulgated under SOP 90-7.
In conjunction with implementing fresh start reporting, management
determined a reorganized value of the WRT's assets and liabilities in the
ordinary course as
debtor-in-possession,following manner:
The reorganized value of proved oil and obtained court approval for transactions outsidenatural gas properties was
determined based on future net revenues discounted to present value utilizing a
rate of approximately twenty five percent (25%). For the ordinary coursepurpose of business. Based on these actions, all liabilitiescalculating
future revenues of the
Debtor outstandingoil and natural gas properties, oil and gas prices in effect
at February 14,December 31, 1996, were reclassifiedused. The reorganized value of oil and gas properties
also included $5,000,000 allocated to estimated
pre-petition liabilities.
On October 22, 1996, the Company accepted and signed the proposal
("DLBW Proposal") submitted bynonproducing properties.
11
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
DLB Oil & Gas, Inc. ("DLB") and Wexford
Management LLC, on behalf of its affiliated investment funds ("Wexford"),
providing the terms of a proposed capital investment in a plan of reorganization
for the
10
11
WRT ENERGY CORPORATION
(A DEBTOR-IN-POSSESSION AS OF FEBRUARY 14, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Company. DLB and Wexford are collectively referred to herein as DLBW. The
Company subsequently obtained Bankruptcy Court approval of the expense
reimbursement provisions of the DLBW Proposal.
Subsequent to the Company's execution of the DLBW Proposal, DLB commenced
negotiations withcontributed certain interests previously owned
by Texaco Exploration and Production,Production. Inc. ("TEPI") regarding,
(i) the claim asserted by TEPI against the Company and its affiliates ("Texaco
Claim"), (ii) the purchase of certain interests owned by TEPI in the West Cote Blanche Bay
Field ("WCBB Assets") along with a $1,000,000 deposit to a plugging and
(iii)abandonment trust in exchange for 5,616,300 shares of the Contract Area Operating
Agreement related toreorganized Company's
common stock. This transaction was recorded at DLB's net basis in the WCBB
Assets and various other agreements relating
thereto. As a result of $15,144,000. In connection with this acquisition, the negotiations, TEPI and DLB reached an agreement
pursuantReorganized
Company assumed the obligation to which DLB (i) agreedcontribute approximately $18,000 per month
through March 2004 to purchase the Texaco Claim, (ii) as required
by TEPI, agreed to purchase the WCBB Assets from TEPI, and (iii) agreed to
guarantee ("P&A Guarantee") the performance of allthis plugging and abandonment obligations related to both the WCBB Assetstrust and the obligation to
plug a minimum of 20 wells per year for 20 years commencing March 11, 1997. TEPI
retained a security interest in production from these properties and the
plugging and abandonment trust until such time the Company's interestsobligations for
plugging and abandonment to TEPI have been fulfilled. Once the plugging and
abandonment trust is fully funded, the Company can access it for use in West
Cote Blanche Bay Field ("WCBB")plugging
and abandonment charges associated with the property.
In accordance with the Plan, $3,000,000 was set aside by WRT to form a
Litigation Entity. The Company owns a 12% interest in order to implementthis Litigation Entity.
The entire $3,000,000 was included in reorganization expense on the P&A Guarantee,
paid into a trust ("P&A Trust") establishedfinancial
statements for the benefitsix months and ten day period ended July 10, 1997. No value
was assigned to the Company's interest in the Litigation Entity on the
reorganized balance sheet as management was not able to determine with any
certainty the amount, if any, that the Company might recover from this
investment.
Current assets and liabilities were recorded at book value which
approximates their fair market value. Long-term liabilities were recorded at
present values of amounts to be paid and the pre-consummation stockholders'
deficit was adjusted to reflect the par value of pre-consummation equity
interests and the recognition of $88,723,000 in debt forgiveness income. On the
Effective Date, the shareholders' deficit was closed into paid in capital and
the Company started with no deficit or retained earnings.
It should be noted that the reorganized value was determined by management
on the basis of its best judgement of what it considers to be current fair
market value of the StateCompany's assets and liabilities after reviewing relevant
facts concerning the price at which similar assets are being sold between
willing buyers and sellers. However, there can be no assurances that the
reorganized value and the fair market value are comparable and the difference
between the Company's calculated reorganized value and the fair market value
may, in fact, be material.
12
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
As of
Louisiana, $1,000,000 on the July 11, 1997, the effect on the Company's balance sheet of
consummating the Plan and implementing the fresh start reporting was:
July 11,
1997 Substantial Fresh Start Reorganized
Prior to Consummation Reporting Balance
Consummation Adjustments Adjustments Sheet
------------ ------------ ------------ ------------
ASSETS
Current assets:
Cash and cash
equivalents $ 3,714,000 $ 1,598,000 $ $ 5,312,000
Accounts receivable,
net 3,287,000 3,287,000
Prepaid expenses and
other 870,000 870,000
------------ ------------ ------------ ------------
Total current assets 7,871,000 1,598,000 9,469,000
------------ ------------ ------------ ------------
Property and equipment:
Properties subject
to depletion 80,120,000 15,144,000 (20,187,000) 75,077,000
Properties not subject
to depletion 5,000,000 5,000,000
Other property, plant,
and equipment 5,300,000 (2,362,000) 2,938,000
------------ ------------ ------------ ------------
85,420,000 15,144,000 (17,549,000) 83,015,000
Less accumulated
depreciation,
depletion and -
amortization (29,274,000) 29,274,000
------------ ------------ ------------ ------------
56,146,000 15,144,000 11,725,000 83,015,000
------------ ------------ ------------ ------------
Other assets 1,231,000 94,000 (285,000) 1,040,000
------------ ------------ ------------ ------------
$ 65,248,000 $ 16,836,000 $ 11,440,000 $ 93,524,000
============ ============ ============ ============
13
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $ 9,545,000 $ (3,771,000) $ $ 5,774,000
Pre-petition secured
debt 16,915,000 (16,915,000) -
------------ ------------ ------------ ------------
Total current
liabilities 26,460,000 (20,686,000) 5,774,000
------------ ------------ ------------ ------------
Pre-petition current
liabilities
Subject to compromise:
Unsecured debt 136,818,000 (7,012,000) (129,806,000) -
------------ ------------ ------------ ------------
Long-term liabilities:
Other non-current
liabilities - 757,000 757,000
Notes payable - 15,000,000 15,000,000
------------ ------------ ------------ ------------
- 15,757,000 15,757,000
------------ ------------ ------------ ------------
Stockholders' equity
(deficit):
Common stock 95,000 104,000 22,000 221,000
Preferred stock 27,677,000 (27,677,000) -
Additional paid in
capital 39,570,000 31,673,000 529,000 71,772,000
Treasury stock (333,000) 333,000 -
Retained earnings (165,039,000) (3,000,000) 168,039,000 -
------------ ------------ ------------ ------------
(98,030,000) 28,777,000 141,246,000 71,993,000
------------ ------------ ------------ ------------
$ 65,248,000 $ 16,836,000 $ 11,440,000 $ 93,524,000
============ ============ ============ ============
Substantial consummation adjustments are those involving cash transactions
occurring on the Effective DateDate. Fresh start reporting adjustments are those
involving non-cash transactions occurring on the Effective Date.
In accordance with the provisions of the Plan.
By order dated May 2, 1997,Plan, the Bankruptcy Court approved WRT's and DLBW's
Joint Plan of Reorganization (the "Plan"). The Plan involved (i) the issuanceCompany:
Issued to WRT'sits unsecured creditors, on account of their allowed claims, an
aggregate of 10 million shares of New WRT Common Stock, (ii)the Reorganized Company's common stock. At the
effective date, 1,412,144 of the above-described shares were held in escrow to
cover the settlement of disputed unsecured claims in the amount of $18,338,807.
Through March 31, 1998, $10,422,253 of these claims have been settled for
$7,102,032 resulting in the issuance to WRT's
unsecured creditors, onfrom the escrow account, of their allowed claims,547,053 shares
of the right to
purchase an additional three million eight hundred thousandReorganized Company's common stock.
Issued 3,800,000 shares (3,800,000)
of New WRT Common Stock at a purchase price of $3.50 per share ("Rights
Offering"), (iii) the issuance to DLBW and affiliates of the number ofReorganized Company's common stock for
$13,300,000 in cash in connection with a stock rights offering to it's unsecured
creditors.
Issued 952,000 shares of New WRT Common Stock obtained by dividing DLBW's Allowed Secured Claim
("Secured Claim") amount by a purchase pricethe Reorganized Company's common stock in payment
of $3.50 per share, (iv) the
purchase by DLBW of all$3,332,000 in secured claims.
14
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
Issued 1,703,100 shares of New WRT Common Stock not otherwisethe Reorganized Company's common stock in
payment of a $5,961,00 claim purchased
pursuant to the Rights Offering, (v) the transfer by DLB from TEPI.
Issued 5,000,000 shares of the Reorganized Company's common stock in
exchange for the WCBB Assets to
the Companyacquired by DLB from TEPI along with the associated
P&A trust fund and associated funding obligationand plugging obligations. In connection
with this transaction WRT transferred to TEPI certain assets and non-producing
acreage.
The Company paid $1,671,801 in exchange for five million shares (5,000,000)administrative and priority claims,
$1,144,687 in secured claims, and $143,336 convenience claims. At March 31,
1998, $1,492,096 was being held in escrow to cover settlement of New WRT Common
Stock,disputed
priority, administrative and (vi) the funding by WRT ofsecured claims.
The Company transferred $3,000,000 to an entity (the "Litigation
Entity")a Litigation Trust along with the
Company's rights to which WRT will transfer any and all causes of action, claims, rights of actions,
suits or proceedings which have been or could be asserted by WRTit except for (a)
the action to recover unpaid production proceeds payable to WRTthe Company by
Tri-Deck Oil & Gas Company and (b) the foreclosure action to recover title to
certain assets. Pursuantassets (See Note 17 regarding the subsequent transfer of these claims to
the Plan, New WRTLitigation Entity). This transfer was treated as a pre-reorganization
expense on the financial statements for the six months and ten day period ended
July 10, 1997. The Reorganized Company owns a 12% economic interest in the
Litigation Entity and the remainder of the economic interests in the Litigation
Entity will bewas allocated to former unsecured creditors based on their ownership
percentage of the thirteen13.8 million eight hundred thousand
(13,800,000) shares issued as described above.
On January 20, 1998, the Company and the Litigation Trust entered into a
Clarification Agreement whereby the rights to pursue various claims reserved by
the Company in (i) and (ii) above. Thethe Plan became
effective on July 11, 1997 (the "Effective Date").
Uponof Reorganization were assigned to the July 11, 1997Litigation Trust.
In connection with this agreement, the Litigation Trust agreed to reimburse the
Company $100,000 for legal fees the Company had incurred in connection with
these claims. As additional consideration for the contribution of this claim to
the Litigation Trust, the Company is entitled to 20% to 80% of the net proceeds
from these claims.
3. RELATED PARTY TRANSACTIONS
Subsequent to the Effective Date of the Plan Newof Reorganization,
substantially all of the Company's former unsecured creditors became
shareholders. The Company still conducts business on an arms length basis with a
substantial number of these shareholders.
DLB Oil & Gas, Inc. ("DLB") and Wexford Management LLC ("Wexford") were,
along with the Company, co-proponents in the Plan of Reorganization. As of March
31, 1998 and December 31, 1997, DLB and Wexford owned approximately 49% and 8%,
respectively, of the Company's outstanding common stock.
DLB paid $1,515,000 in reorganization costs incurred on WRT's behalf, which
amount was repaid to DLB on the Effective Date. These costs were included in
reorganization cost incurred during the six months and 10 days ended July 10,
1997. In addition, DLB charged WRT $465,000 for management services provided to
it during the period July 11, 1997 through December 31, 1997. During the period
May 1, 1997 through July 10, 1997, DLB was the operator of the WCBB properties
in which WRT had a 50% working interest at that time. Subsequent to July 10,
1997, the WCBB properties were contributed to the Company for common stock, as
described above, and WRT became the owneroperator of these properties. As of March
31, 1998, the Company owed DLB $1,557,251. As of December 31, 1997, the Company
owed DLB $1,728,000.
15
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
Pursuant to the terms and conditions of an Administrative Services
Agreement dated as of July 10, 1997, by and between the Company and DLB (the
"Services Agreement"), DLB agreed to make available to the Company such
personnel, services, facilities, supplies, and equipment as the Company may need
including executive and managerial, accounting, auditing and tax, engineering,
geological and geophysical, legal, land, and administrative and clerical
services. The initial term (the "Initial Term") is one hundred percent (100%)year beginning on the
date of the working interest in the shallow
contract area at WCBB.Services Agreement. The proceeds from the Rights Offering were utilized to
provide the cash necessary to satisfy Administrative and Priority Claims
("APC"), fund the Litigation Entity with $3,000,000 and provide New WRT with
working capital. New WRTServices Agreement will continue for
subsequent one-year periods unless terminated by either party by written notice
no less than 60 days prior to conduct businessthe anniversary date of the Services Agreement. In
return for the services rendered, the Company agreed to pay DLB a monthly
service charge based on the pro rata proportion of the Company's use of DLB
services, personnel, facilities, supplies, and ownequipment as determined by DLB in
a good-faith, reasonable manner. The service charge is calculated as the sum of
(1) DLB's fully allocated internal costs of providing personnel and/or
performing services, (2) the actual costs to DLB of any third-party services
required, (3) the equipment, occupancy, rental, usage, or depreciation and
operateinterest charges, and (4) the oilactual cost to DLB for supplies. During the year
ended December 31, 1997, the services of Gary C. Hanna and gas properties. The Litigation Entity will pursue CausesRonald D. Youtsey,
the Company's President and Secretary respectively, were provided under this
agreement. On April 28, 1998, the rights and obligations of Action
("Causes of Action")DLB under the
Service Agreement were assigned to it underDLB Equities, L.L.C. As of March 31, 1998,
Gulfport owed DLB approximately $1,557,000 for services rendered in connection
with this Service Agreement (and for invoices paid by DLB on Gulfport's behalf).
During the Plan.
In accounting for the effects of emergence from Chapter 11,three months ended March 31, 1998, the Company implemented Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by
Entitiessold $877,128 in
Reorganization Underoil to a DLB subsidiary. During the Bankruptcy Code", issued by the American
Institute of Certified Public Accountants. Accordingly, the Company adopted
11
12
WRT ENERGY CORPORATION
(A DEBTOR-IN-POSSESSION AS OF FEBRUARY 14, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
"fresh start" reporting in which the Company's assets and liabilities were
adjusted to reflect their estimated fair values and the accumulated deficit of
Old WRT was eliminated.
Theperiod July 11, 1997 effective date was used asthrough December 31,
1997, the dateCompany sold $4,335,000 in oil to a DLB subsidiary. These sales
occurred at prices which the Company could be expected to obtain from an
unrelated third party.
4. RESTRUCTURING CHARGES AND REORGANIZATION COSTS
WRT incurred certain restructuring costs in connection with its change in
strategy and corporate structure. These costs consisted primarily of the
write-off of approximately $1,000,000 in leasehold improvements related to the
relocation of WRT's operations from The Woodlands, Texas, approximately $300,000
in severance costs related to staff reductions and changes in senior management
and $100,000 in legal fees and other costs directly related to the WRT's
Reorganization Case.
During 1996, WRT incurred $7,345,000 in reorganization costs, primarily
consisting of professional fees totaling $2,594,000 and the write-off of
previously capitalized debt issuance costs on the Senior Notes (herein defined)
in the amount of $3,834,000.
During 1997, WRT incurred $7,771,000 in reorganization costs, consisting of
$3,000,000 contributed to the Litigation Trust (See Note 9 for recordingfurther details),
$1,515,000 in reimbursements to DLB for restructuring costs it incurred on the
fresh start reporting adjustments. Adjustments to reflect the fair valueWRT's behalf, professional fees totaling $2,213,000, and an accrual of
individual assets and liabilities were based on independent reviews and
valuations and discounted present value of$1,044,000 for estimated future net cash flows.
Outside financial advisors assistedcosts to be incurred in connection with the
Company and the Bankruptcy Court in
determining the reorganization value and the resulting beginning equity value in
compliance with SOP 90-7.
The adjustmentsreorganization.
16
Gulfport Energy Corporation
Notes to reflect the consummation of the Joint Plan,
including the $88,723,000 million gain on debt discharge of prepetition and
other liabilities and the adjustment for $11,260,000 million to record assets
at their estimated fair values, are reflected in the Company's Consolidated Financial Statements as(continued)
(Unaudited)
5. LONG-TERM LIABILITIES
As of March 31, 1998 and forDecember 31, 1997, long term liabilities include
the eighty-two day period ended September
30, 1997. The Company's emergence from Chapter 11 proceedings resulted in a new
reporting entity. Accordingly, the Company's Consolidated Financial Statements
for periods prior to July 11, 1997, are not comparable to the Consolidated
Financial Statements presented subsequent to July 11, 1997. Black lines on the
accompanying financial statements distinguish between pre-reorganization and
post-reorganization activity.
The effect of the Plan on the Company's Consolidated Balance Sheet as
of July 11, 1997, is as follows (in thousands):
12
13
WRT ENERGY CORPORATION
PRO FORMA BALANCE SHEET
(UNAUDITED)following:
Predecessor Reorganized Reorganized
ASSETS Historical Adjustments Amounts
-------------------------------------------------------------------1998 1997
------------- -------------
Current assets:
Cash and cash equivalentsLong-term debt:
Credit facility $ 3,714,00015,000,000 $ (18,154,000)(c) $ 5,311,000
-- 14,906,000 (d) --
-- 13,300,000 (e) --
-- (3,000,000)(f) --
-- (2,963,000)(h) --
-- (2,492,000)(i) --
Accounts receivable 3,287,000 -- 3,287,000
Prepaid expenses and other 870,000 -- 870,00015,000,000
Priority tax claims 527,000 527,000
Building loan 171,000 193,000
------------- -------------
-------------
7,871,000 1,597,000 9,468,000
Cash held in escrow 852,000 -- 852,000
Property and equipment, net 56,147,000 11,726,000 (a) 83,017,000
15,144,000 (b) --
Debt issuance costs, net 379,000 (285,000)(c) 188,000
94,000 (d) --
------------- ------------- -------------
$ 65,249,000 $ 28,276,000 $ 93,525,00015,698,000 15,720,000
Less current portion 2,192,000 2,192,000
============= =============
=============
LIABILITIES AND SHAREHOLDERS' EARNINGS (DEFICIT)
-----------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 9,601,00013,506,000 $ (2,059,000)(c) $ 5,830,000
(1,712,000)(i) --
Pre-petition liabilities not subject to compromise 16,734,000 (15,330,000)(c) 702,000
(272,000)(h)
(430,000)(i) --
Pre-petition liabilities subject to compromise 136,078,000 (765,000)(c) --
(123,106,000)(g)
(11,857,000)(h) --
(350,000)(i) --
------------- ------------- -------------
162,413,000 (155,881,000) 6,532,000
Long term debt -- 15,000,000 (d) 15,000,000
Shareholders' earnings (deficit):
Preferred stock 27,677,000 (27,677,000)(j) --
Common stock 95,000 56,000 (b) 221,000
38,000 (e) --
100,000 (g) --
27,000 (h) --
(95,000)(j)
Paid-in capital 39,570,000 15,088,000 (b) 71,772,000
13,262,000 (e) --
34,283,000 (g) --
9,139,000 (h)
(39,570,000)(j) --
Accumulated deficit (164,174,000) 11,726,000 (a) --
(285,000)(c) --
(3,000,000)(f)
88,723,000 (g) --
67,010,000 (j) --
Treasury stock (332,000) 332,000 (j) --
------------- ------------- -------------
Total shareholders' earnings (deficit) (97,164,000) 169,157,000 71,993,000
------------- ------------- -------------
Commitments and contingencies
$ 65,249,000 $ 13,276,000 $ 78,525,000
=============13,528,000
============= =============
13
14
WRT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Adjustments used in the preparation of the reorganized balance sheet are as
follows:
(a) To adjust oil and gas properties and other property and equipment to fair
market value in accordance with SOP 90-7.
(b) The Company issued 5,600,000 shares of New WRT stock in exchange for oil
and gas properties valued at $15,144,000.
(c) The INCC note of $15,000,000 was paid in full, including unpaid interest
accrued through July 11, 1997 of $3,154,000. Additionally, $285,000 of debt
issuance costs related to the INCC note were written-off.
(d) Financing was recorded from ING in the amount of $15,000,000 less $94,000
in loan fees which were deducted from the loan proceeds.
(e) The Stock Rights Offering in the amount of $13,300,000 was recorded
reflecting the issuance of 3,800,000 additional shares of New WRT stock at
$3.50 per share.
(f) Establishment of the Litigation Trust in the amount of $3,000,000.
(g) Unsecured claims in the amount of $123,106,000 were exchanged for
10,000,000 shares of New WRT stock and $2,963,000 in cash.
(h) Priority and secured claims in the amount of $12,129,000 were exchanged for
2,700,000 shares of New WRT stock.
(i) Payment of Administrative claims in the amount of $2,492,000.
(j) All of the currently outstanding preferred stock, common stock,
paid-in-capital and treasury stock were canceled, resulting in a decrease
in equity of $67,010,000.
Subsequent to the July 11, 1997 effective date, WRT adopted the same
accounting principles utilized by DLB, including the use of the full cost pool
method of accounting for oil and gas costs. Under the full cost method of
accounting, all costs of acquisition, exploration and development of oil and gas
reserves are capitalized into a "full cost pool" as incurred, and properties in
the pool are depleted and charged to operations using the units-of-production
method based on the ratio of current production to total proved oil and gas
reserves. To the extent that such capitalized costs, net of depreciation,
depletion and amortization, exceed the present value of estimated future net
revenues, discounted at 10%, from proved oil and gas reserves, after income tax
effects, such excess costs are charged to operations. Once incurred, a write
down of oil and gas properties is not reversible at a later date even if oil or
gas prices subsequently increase.
14
15
WRT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
(3) SENIOR NOTE OFFERING AND CREDIT FACILITYCredit Facility
In December 1994, the CompanyWRT entered into a $40,000,000 credit facility (the "'Credit Facility") with
International Nederlanden (U. S.(U.S.) Capital Corporation ("INCC") ("Credit
Facility") that was secured by substantially all of the Company'sWRT's assets. The Company borrowed $15,000,000 thereunder to purchase the Initial LLOG
Property ("LLOG"). In March 1995, $12,000,000At December
31, 1996, WRT had borrowings outstanding of the outstanding borrowings
under the Credit Facility was repaid from the proceeds of the Offering. During
1995, the Company borrowed an additional $12,000,000 under the Credit Facility,
bringing the outstanding borrowings to $15,000,000, the maximum amount of
borrowings available under the Credit Facility. OnAt December 31, 1995, the
Credit
Facilityrevolving loan borrowings were converted to a term loan whereby quarterly
principal payments of one-sixteenth of the outstanding indebtedness becamewere due and
payable. In February 1995, the Company offered 100,000 Units consisting of
$100,000,000 aggregate principal amount of 13 7/8% Senior Notes Due 2002 (the
"Senior Notes") and warrants to purchase an aggregate of 800,000 shares of the
Company's Common Stock (the "Offering"'). The net proceeds from the Offering
were used to acquire a second group of oil and gas properties owned by LLOG (the
"Remaining LLOG Group"), to repay both the $7,500,000 bridge loan and
substantially all borrowingsAmounts outstanding under the Credit Facility (defined herein)bore interest at an
annual rate selected by WRT of either (i) the London Inter-Bank offered rate
("LIBOR") plus 3%, to
acquire an additional working interest inor (ii) the West Cote Blanche Bay Field and
for general corporate purposes.Lender's prime lending rate plus 1.25%.
At July 10, 1997 and December 31, 1996, the CompanyWRT was in default under certain financial covenants
of the Credit Facility. In addition, due toAccordingly, WRT classified the bankruptcy filing, the Company was in default under the Indenture ("Indenture")
pursuant to which the Senior Notes were issued. Accordingly, all such debt has
been classified as current in the Company'sat
December 31, 1996 financial
statements.1996. While in bankruptcy, INCC and holders of the Senior Notes werewas stayed from enforcing certain
remedies provided for in the Credit Facilitycredit agreement and the Indenture, respectively. The Company did not make the March 1, 1996 or
subsequent interest payments on the Senior Notes and pursuant to an order of the
Bankruptcy Court did not make the scheduled interest payment of $381,000 to INCC
on February 28, 1996 or any other subsequent interest payments.indenture. On the
Effective Date, this loan was repaid in full along with $3,154,000 in accrued
interest and legal fees.
On the Company entered into a new loan agreement withEffective Date, ING (U.S.) Capital Corporation (successor to INCC)("ING"), entered into a new $15,000,000 loan agreement with the termsCompany. Initial
loan fees of which required$188,000 were paid on or prior to the payoffEffective Date, an additional
loan fee of $100,000 was made on December 31, 1997 and a final loan fee of
$100,000 is due on or before December 31, 1998. The loan matures on July 11,
1999, with interest to be paid quarterly and with three interim principal
payments of $1,000,000 each to be made in September 1998, December 1998, and
March 1999. This loan bears interest at the option of the $15,000,000Company at either (1)
LIBOR plus 3% or (2) ING's fluctuating "reference rate" plus 1.25%. This loan is
collateralized by substantially all of the Company's assets. At March 31, 1998,
this rate was 8.625%.
At December 31, 1997, the Company held $2,060,000 in cash representing the
proceeds from the sale of its field equipment. As of March 31, 1998, the Company
held $1,781,000 in restricted cash. As of the date of this report, ING has not
released these funds for general use by the Company.
Priority Tax Claims
In accordance with the Plan of Reorganization, priority taxes totaling
$703,000 are to be paid in four annual installments without interest. The first
annual installment of $176,000 was made on the Effective Date.
17
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
Building Loan
During early 1996, WRT entered into a loan agreement with M C Bank and
Trust Company to finance the acquisition of land and a building located in
Lafayette, Louisiana. The original loan balance was $215,000 and called for
monthly principal and interest payments totaling $3,000 per month through 2005
with the unpaid balance due at that time. The loan bears interest at 9.5% per
annum and is collateralized by the land and building.
6. COMMON STOCK OPTIONS AND WARRANTS
All outstanding on the old
credit agreementstock options and warrants issued prior to July 11, 1997,
were cancelled in connection with proceeds of the new loan. Also pursuant to the Plan the
Senior Notes were cancelled.of Reorganization.
On July 10, 1997, WRT entered into a New Credit Facility ("New Credit
Facility")an employment agreement with ING (U.S.) Capital Corporation. The maturity dateMr. Ray
Landry, WRT's former president, to perform certain services for the Company. In
connection with this employment agreement, Mr. Landry was granted Incentive
Stock Options to acquire 60,000 shares of the New
Credit Facility is July 10, 1999. Under the terms of the New Credit Facility,
the Company may elect to be charged at the bank's fluctuating reference rate
plus 1.25% or the rate plus 3.0% at which Eurodollar depositsCompany's common stock for one, two,
three or six months are offered to the bank in the Interbank Eurodollar.$3.50
per share. The New
Credit Facility contains restrictive covenants requiring, among other things,
specific financial ratios and restrictions on general and administrative
expenses.
(4) LOSS PER SHARE
Loss per share computations are calculated on the weighted average of
common shares and common share equivalents. Common stock options and warrants
are considered to be common share equivalents and are used to calculate loss per
common and common equivalent share except when they are anti-dilutive. Loss per
common and common equivalent share for the period ended September 30, 1997employment agreement does not reflectspecify the exerciselife of these options.
In connection with the options andPlan of Reorganization, new warrants as the effect is
anti-dilutive.
15
16
WRT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
(5) REORGANIZATION COSTS
During the eleven days ended July 11, 1997 of the Predecessor Company and the
three months ended September 30, 1996, the Company incurred $1,044,000 and
$1,182,000 in reorganization costs. During the six months and eleven days
ended July 11, 1997 of the Predecessor Company and the nine months ended
September 30, 1996for 221,000
shares of the Reorganized Company the Company incurred $4,771,000
and $6,040,000 in reorganization costs. Reorganization costs primarily consist
of legal and professional fee.
(6) JOINT VENTURE AGREEMENT
By a Joint Venture Agreement dated October 18, 1991 (the "Joint Venture
Agreement"), the Company entered into a joint venture to develop certain oil and
gas properties with Tricore Energy Venture, L.P., a Texas limited partnership
("Tricore"), and Stag Energy Corporation ("Stag").
Under the terms of the Tricore agreements, Tricore is to contribute the
capitalization required to complete the development of selected prospects, and
Stag and the Company are to contribute, or arrange for the contribution of, the
prospects to be developed.
The allocation of the net income, profits, credits, gains and losses of the
joint venture are distributed as follows:
Initial Ongoing
Party Allocation Allocation
----- ---------- ----------
Tricore 70% 55%
WRT 25% 35%
Stag 5% 10%
The distributions convert from the initialcommon stock were issued to the ongoing allocation upon
Tricore receiving aggregate distributions equal to 125% of its initial
contributions to the joint venture.former
preferred shareholders. In March 1995, the Company contributed the K.G. Wilbert No. 1 well, located
in Iberville Parish, Louisiana, the Atkinson No. 2 well, located in Hayes Field
in Jefferson Davis Parish, Louisiana, and State Lease 8396 #1 and #2 wells,
located in South Atchafalaya Bay Field in St. Mary Parish, Louisiana, to the
joint venture and received $867,850 as compensation for the recompletion and
field services rendered. The cash received was a recovery of costs incurred, and
no field service revenues were recognized.
In July 1994, the Company contributed a portion of its interest in the
Exxon Fee #23 well, located in Lac Blanc Field in Vermilion Parish, to the
joint venture and received $1,200,000 as compensation for the recompletion of
the well. The cash received was a recovery of costs incurred and no field
service revenues were recognized.
In March 1993, the Company contributed the Delcambre No. 1 well, located
in Tigre Lagoon Field in Vermilion Parish, Louisiana and the Summers No. 1 well
located in North Rowan Field in Brazoria County, Texas, to the joint venture
and received $2,000,000 as compensation for recompletion and wireline services
rendered. The cash received was a recovery of costs incurred, and not field
service revenues related to the recompletion and wireline services rendered
were recognized.
In March 1992, Tricore paid the Company $1,300,000 for the turnkey
development of the Delcambre A-2 well located in Tigre Lagoon Field in
Vermilion Parish, Louisiana. The Company used the funds to recover the costs
of drilling the well and as compensation for wireline services rendered. The
Company recognized field service revenuesaddition, to the extent that cash received
exceeded its costsany securities
litigation claims based on preferred or common stock ownership are allowed as a
"Class Proof of Claim", the Company has the obligation to issue this class an
additional 221,000 in warrants to purchase common stock in the property, however, no field service revenue was
recorded related toReorganized
Company. These warrants are each exercisable for one share of common stock at an
exercise price of $10 per share. The warrants will expire on July 11, 2007. In
accordance with the initial 25% joint venture interest received.
ThePlan of Reorganization, the Company has provided Tricore with a limited production guaranteethe right to issue
up to 1,104,000 warrants.
7. EARNINGS (LOSS) PER SHARE
Earnings per share for all periods were computed based on the minimum production schedule attached to the Tricore joint venture
agreement. The minimum production schedule assumescommon stock
equivalents outstanding on that Tricore's cumulative
share of the future gross production from jointly-owned properties will average
4,250 Mcf per daydate during the period between October 1, 1996 and September 30,
1997, 2,350 Mcf per day during the period October 1, 1997 and September 30,
1998, and 699 Mcf per day during the period October 1, 1998 and September 30,
1999. The minimum production also assumes that all future gas production
allocated to Tricore will be sold at a price of $1.50 per Mcf. As long as either
the actual volume of natural gas delivered or the gross revenue allocated to
Tricore exceeds the cumulative values
16
17
WRT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSapplicable periods.
8. CONTINGENCIES
Tri-Deck/Perry Gas Litigation
- CONTINUED
(UNAUDITED)
reflected in the minimum production schedule, the Company will have no current
liability to Tricore under the production guarantee. Pursuant to the Joint
Venture Agreement, if the production during any annual period, commencing
October 1 through September 30, is less than the minimum production levels
required by the Joint Venture Agreement, the Company is required to eliminate
the annual production deficit by delivering sufficient quantities of gas from
other properties in twelve equal monthly installments, commencing the following
December 1, or by the issuance to the venture of registered debt or equity
securities which have a fair market value equal to the required payment. As
collateral for the Company's obligations under the production guarantee, Tricore
holds a partial assignment of an interest in the West Cote Blanche Bay Field.
This 4.68% working interest (3.72% net revenue interest) assignment was made
subject to the terms and provisions of the Joint Venture Agreement. Upon
satisfaction of the production guarantee, Tricore is required to execute and
deliver a release of the partial assignment.
As a result of significant production declines from jointly owned
properties, notably the Exxon Fee #23 well, production did not exceed the
minimum required under the guarantee for the period commencing October 1, 1995
to September 30, 1996. In addition, due to the substantial reserve losses
incurred during 1996 and 1995, the estimated future gross revenues from the
joint venture wells are not adequate over the remaining term of the guarantee.
As a result, the Company recorded in 1996 and 1995, minimum production guarantee
charges of $5,555,000 and $3,591,000, respectively. The $9,146,000 liability
recognized at December 31, 1996 represents the Company's estimated ultimate
obligation to the joint venture, including the disallowance of certain tax
credits as discussed below.
Pursuant to the terms of the production guarantee, if any of the gas
production from joint venture properties qualifies for the nonconventional fuels
tax credit provided for by Internal Revenue Code Section 29, then 150% of that
tax credit shall be included in the calculation of gross revenues for purposes
of the guarantee. Based upon a certification by the Louisiana Department of
Natural Resources ("DNR"), a significant amount of the production attributable
to the joint venture qualified under Section 107(c)(2) of the Natural Gas Policy
Act of 1978 (the "NGPA") as gas produced from geopressured brine. As required
under the NGPA, the DNR's determination was forwarded to the Federal Energy
Regulatory Commission ("FERC") for review. In April 1995, the FERC reversed the
position of the DNR, rejecting the qualification of the wells under Section
107(c)(2) of the NGPA. The Company appealed the FERC determination to the United
States Court of Appeals for the Fifth Circuit, located in New Orleans,
Louisiana. In February 1997, the United States Court of Appeals for the Fifth
Circuit affirmed the FERC's determination.
On January 14, 1997, the Company initiated an adversary proceeding to
obtain a declaration of the invalidity of the security interests or liens
securing Tricore's asserted secured claim of "up to $9,224,000" or alternatively
for avoidance of such security interests or liens pursuant to Sections 544 and
547 of the Bankruptcy Code. Such suit is pending as of the date of this report.
On March 7, 1997, the Company also filed an objection to the asserted claim of
Tricore (i) under Section 502(d) of the Bankruptcy Code seeking to disallow such
asserted claim in full on the grounds that Tricore is the transferee of a
transfer available under Sections 544 and 547 of the Bankruptcy Code, and (ii)
under Section 502(c) of the Bankruptcy Code seeking to estimate such asserted
claim on the grounds that it is a contingent claim the liquidation of which
would unduly delay the administration of the Reorganization Case. On June 19,
1997, Tricore filed an amendment to reduce their proof of claim to $9,064,000
from $9,224,000.
17
18
WRT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Nevertheless, to the extent that Tricore is determined to be a secured claim,
the Plan provides for the claim to be paid in full. The Company is currently
negotiating a settlement with Tricore pursuant to their claim. See Part II,
Item 1 for further discussion.
(7) CONTINGENCIES
During 1996, WRT received notice from a third party claiming that WRT's
title has failed as to approximately 43 acres in the Bayou Pigeon Field. Some or
all of the acreage in dispute is considered to be productive in three separate
production units. Assuming that WRT's title is flawed, WRT's working interest in
three units would be reduced from 100% of each unit to approximately 7% (5%
NRI), 75% (63% NRI), and 95% (72% NRI), respectively. The financial statements
as of September 30, 1997 and for the year ended December 31, 1996 and for the
nine months ended September 30, 1997 and 1996, reflect operating results and
proved reserves discounted for this possible title failure. As the title failure
predates its ownership of the field, WRT is currently evaluating its recourse
against the predecessors-in-title relative to this issue.-----------------------------
During 1995, the CompanyWRT entered into a marketing agreement with Tri-Deck Oil and
Gas Company ("Tri-Deck") pursuant to which Tri-Deck would market all of WRT's
oil and gas production. Subsequent to the agreement, Tri-Deck's principal and
the WRT's Director of Marketing, James Florence, 18
19
WRT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
assigned to Plains Marketing
Tri-Deck'sits right to market WRT's oil production and assigned to Perry Oil & Gas ("Perry Gas:) Tri-Deck'sits
right to market WRT's gas production. During early 1996, Tri-Deck failed to make
payments to WRT attributable to several months of WRT'sits gas production.
Consequently, WRT responded in two ways. First, on May 20, 1996, the CompanyWRT filed a
Motion to Reject the Tri-Deck Marketing Agreement andAgreement. Second, on May 29, 1996, the CompanyWRT
initiated an adversary proceeding against Tri-Deck and Perry Gas.Oil and Gas ("Perry
Gas"). Perry Gas was the party, which ultimately purchased the Company'sWRT's gas production
for the months in question.
With respect to the Motion to Reject, the Bankruptcy Court authorized the
rejection and directed Tri-Deck and WRT to determine the amount of production
proceeds attributable to WRT's June 1996 gas production which arewere payable to WRT.
Thereafter,Consequently, Perry Gas thereafter made payment to WRT of the June gas proceeds
less $75,000 for a set-off claim by Perry Gas, which is subject to further
consideration by the Bankruptcy Court.
Perry Gas subsequently filed an administrative claim in the Chapter 11
case, seeking recovery for damages allegedly arising out of WRT's conduct in
connection 18
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
Next, with its rejection of the Tri-Deck contract and related negotiations
with Perry Gas. By decision dated July 3, 1997, the Bankruptcy Court allowed,
in part, Perry Gas, administrative claim, in the aggregate amount of
approximately $64,000, and directed Perry Gas to obtain payment of such amount
from the Perry Setoff Escrow, which as result of this payment currently has a
balance of approximately $10,000.
With respect to the adversary proceeding, WRT sought recovery fromturnover by
Tri-Deck and/or Perry Gas of all unpaid production proceeds payable to WRT under
the marketing agreement and the issuance of a temporary restraining order and
preliminary injunction against both parties to prevent further disposition of
such proceeds pending the outcome of the proceedings. On May 31, 1996, the
Bankruptcy Court entered a consensual temporary restraining order against both
Tri-Deck and Perry Gas. On June 18, 1996, a preliminary injunctionPreliminary Injunction was entered
by the Bankruptcy Court which required Perry Gas to segregate into a separate depository
account the funds due for the purchase of WRT's April and May 1996 gas
production from Tri-Deck. Subsequently, upon motion by WRT the Bankruptcy
Court ordered
such funds to be placed into the Bankruptcy Court's registry, as Perry Gas had
made certain withdrawals from the separate depository account without
authorization by the Bankruptcy Court. As of October 1, 1997,Currently, funds in the amount of approximately
$1,700,000 remain in the registry of the Bankruptcy
Court. On April 1, 1997,Additionally, a dispute exists
between WRT moved for partial summary judgement with respect toand Perry Gas seeking release of the escrow funds, as well asto additional funds from
Perry Gas attributable to previous miscalculations of the amounts owed by Perry Gas. At a hearing held onGas for the
purchase of WRT's April and May 27, 1997,1996 gas production. Currently, the Bankruptcy Court denied WRT's
motionadversary
proceeding remains pending as to the extentultimate issue of ownership of proceeds.
Tri-Deck has also filed an answer and counterclaim in which Tri-Deck is
asserting, among other items, damages for tortoise interference of its
contractual relationships with others. Recovery of the $1,700,000 receivable is
dependent on the court rendering a favorable ruling on the issue. As of the date
of the report, the court has not ruled on this issue. Although management
believes that it sought additional payments by Perry Gas to WRT and
reserved decision with respectTri-Deck's claim to the disbursement to WRTfunds in the registry of the funds currentlycourt is
invalid, and the aforementioned counterclaim is without merit, for financial
reporting purposes the receivable from Tri-Deck was fully reserved for as of
March 31, 1998.
On January 20, 1998, the Company and the Litigation Trust entered into a
Clarification Agreement whereby the rights to pursue the Tri-Deck claim were
assigned to the Litigation Trust. In connection with this agreement, the
Litigation Trust agreed to reimburse the Company $100,000 for legal fees the
Company had incurred in connection with this and other related claims. As
additional consideration for the Court's registry. On July 9, 1997, Perry Gas filed its own summary
judgement motion with respectcontribution of this claim to its assertion that itthe Litigation
Trust, the Company is entitled to certain
adjustments for prior overpayments85% of the net proceeds from this claim.
Title to Oil and Gas Properties
During 1996, WRT received notice from a third party claiming that WRT's
title had failed as to approximately 43 acres in the amountBayou Pigeon Field. Some or
all of approximately $120,000. At
oral argument on August 26, 1997, Perry requested permissionthe acreage in dispute is considered to amend its motion
and subsequently filed an amended affidavit reducingbe productive in three separate
production units. Under the amount claimedassumption that WRT's title is flawed, it's working
interest in three units may be reduced to approximately $51,000.
(8) EXAMINER'S REPORT7% (5% Net Revenue
Interest, ("NRI")) 75% (63% NRI), and 95% (72% NRI). The financial statements as
of and for periods ending March 31, 1998 and December 31, 1997, reflect
operating results and proved reserves discounted for of this possible title
failure. As the title failure predates its ownership of the field, the Company
is currently evaluating its recourse against the predecessors-in-title relative
to this issue. The Company is currently negotiating a settlement with the Third
Party, pursuant to their claim.
Other litigation
The Company has been named as a defendant on various other litigation
matters. The ultimate resolution of these matters is not expected to have a
material adverse effect on the Company's financial condition or results of
operations for the periods presented in the financial statements.
19
Gulfport Energy Corporation
Notes to Financial Statements (continued)
(Unaudited)
9. LITIGATION TRUST ENTITY
On August 13, 1996, the Bankruptcy Court executed and entered its Order"Order
Appointing ExaminerExaminer" directing the United States Trustee to appoint a
disinterested person as examiner in the Company'sWRT's bankruptcy case.
The Court ordered the appointed examiner ("Examiner") to file a report "ofof
the investigation conducted, including any fact ascertained by the examinerExaminer
pertaining to fraud, dishonesty, incompetence, misconduct, mismanagement or
irregularity in the management of the affairs of the Company".
Additionally, the Examiner investigated insider transactions involving
current and former officers of the Company, the Company's purchase of oil and
gas properties in the Napoleonville Field, the purchase of leases in the South
Hackberry and East Hackberry Fields, transactions related to the purchase and
sale of certain workover rigs and marine equipment and related contracts, the
marketing of the Company's oil and gas production, claims acquisition by an
investment company and transactions with a certain joint venture partner.WRT.
The Examiner's final report dated April 2, 1997, recommendsrecommended numerous
actions for recovery of property or damages for the Company'sWRT's estate which appear to
exist and should be pursued. Management does not believe the resolution of the
matters referred to in the Examiner's report will have a material impact on
the
Company'sWRT's consolidated financial statements or results of operations.
19
20
WRT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Pursuant to the Plan of Reorganization, all of the Company'sWRT's possible causes of
action against third parties (with the exception of certain litigation related
to recovery of marine and rig equipment assets and claims against Tri-Deck),
existing as of the Effective Dateeffective date of the Plan, were transferred into a
"Litigation Trust" controlled by an independent party for the benefit of most of
the Company'sWRT's existing unsecured creditors. The litigation related to recovery of marine
and rig equipment and the Tri-Deck claims were subsequently transferred to the
litigation trust as described below.
The Litigation Trust was funded by a $3,000,000 cash payment from the
Company, retainswhich was made on the Effective Date. The Company owns a 12% interest
in the trust, netLitigation Trust with the other 88% being owned by the former general
unsecured creditors of Trustee fees
and expenses. Currently, management is aggressively pursuing those claims and
causes of action against Tri-Deck and Perry Gas relating toWRT. For financial statement reporting purposes, the recovery of
revenues for the sale of oil and gas production. See Note 7 above for additional
information concerning these claims. In addition, the Company has instituted
legal action to recover the aforementioned marine and rig equipment assets. The
Company has not recognized the potential value of recoveries which may
ultimately be obtained, if any, as a result of such causesthe actions of action, or
possible future actions,the Litigation
Trust, treating the entire $3,000,000 payment as a reorganization cost incurred
during the period commencing January 1, 1997 and ending on July 10, 1997.
On January 20, 1998, the Company and the Litigation Trust entered into a
Clarification Agreement whereby the rights to pursue various claims reserved by
the Company in the accompanying consolidated financial statements.Plan of Reorganization were assigned to the Litigation Trust.
In connection with this agreement, the Litigation Trust agreed to reimburse the
Company $100,000 for legal fees the Company had incurred in connection with
these claims. As additional consideration for the contribution of this claim to
the Litigation Trust, the Company is entitled to 20% to 80% of the net proceeds
from these claims.
20 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONPOSITION AND RESULTS OF OPERATIONS
DISCLOSURE REGARDING FORWARD - LOOKINGFORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A21E of the Securities Exchange Act of 1934 (the "Exchange Act"). All
statements, other than statements of historical facts, included in thethis Form
10-Q that address activities, events or developments that Gulfport Energy
Corporation ("Gulfport" or the Company"Company"), a Delaware corporation formerly named
WRT Energy Corporation, expects or anticipates will or may occur in the future,
including such things as estimated future net revenues from oil and gas reserves
and the present value thereof, future capital expenditureexpenditures (including the amount
and nature thereof), business strategy and measures to implement strategy,
competitive strengths, goals, expansion and growth of the Company'sGulfport's business and
operations, plans, references to future success, references to intentions as to
future matters and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the CompanyGulfport in
light of its experience and its perception of historical trends, current
conditions and expected future developments as well as to other factors it believes
are appropriate in the circumstances. However, whether actual results and
developments will conform with the Company'sGulfport's expectations and predictions is
subject to a number of risks orand uncertainties; general economic, market or
business conditions; the opportunities (or lack thereof) that may be presented
to anand pursued by the
Company;Gulfport; competitive actions by other oil and gas companies;
changes in laws or regulations; and other factors, many of which are beyond the
control of the
Company.Gulfport. Consequently, all of the forward-looking statements made in
thethis Form 10-Q are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the CompanyGulfport will
be realized, or even if realized, that they will have the expected consequences
to or effects on the CompanyGulfport or its business or operations.
The following discussion is intended to assist in an understanding of the
Company's financial position as of September 30, 1997,March 31, 1998, and its results of operations
for the three month and the nine month periods ended September 30,
1997March 31, 1998 and 1996.1997. The Consolidated
Financial Statements and Notes included in this report contain additional
information and should be referred to in conjunction with this discussion. It is
presumed that the readers have read or have access to WRT's 1996Gulfport Energy
Corporation's 1997 annual report on Form 10-K.
21
22FINANCIAL DATA
(Unaudited)
FINANCIAL DATA (IN THOUSANDS)
(UNAUDITED) (Reorganized Company) (Predecessor Company)
Eighty-two Days Eleven Days
Three Months Ended Ended September 30, Ended July 11, September 30,March 31,
1998 1997
1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------- -------------
Revenues:
Gas sales $ 1,019,000 $ 2,508,000
Oil and condensate sales $ 2,931 $ 271 $ 3,858
Gas sales 1,399 211 1,9662,303,000 2,873,000
Other income 75 6 208
-------- --------- --------
Total revenues 4,405 488 6,032200,000 50,000
------------- -------------
3,522,000 5,431,000
Expenses: Lease operating 1,762 232 1,529
Gross production taxes 400 43 488------------- -------------
Production costs (1) 2,720,000 2,144,000
General and administrative expenses 642 113 990
-------- --------- --------
2,804 388 3,007662,000 919,000
Provision for doubtful accounts - 91,000
------------- -------------
3,382,000 3,154,000
------------- -------------
EBITDA 1,601 100 3,025(2) 140,000 2,277,000
Depreciation, depletion and amortization 2,530 190 2,014
Income (loss)1,878,000 1,451,000
------------- -------------
Earnings before interest and taxes (929) (90) 1,011(1,738,000) 826,000
Interest expense 326 74 593386,000 615,000
Reorganization costs -- 1,044 1,182
Loss before income taxes and extraordinary item (1,255) (1,208) (764)
Income taxes deferred -- -- --- 1,026,000
------------- -------------
Net loss before extraordinary item (1,255) (1,208) (764)
Extraordinary item - gain on debt discharge -- 88,723 --
-------- --------- --------
Net income (loss) (1,255) 87,515 (764)(2,124,000) (815,000)
Dividends on preferred stock (undeclared on Predecessor Company) -- 87 712
-------- --------- --------- 712,000
------------- -------------
Net income (loss)loss available to common shareholders (1,255) 87,428 (1,476)
======== ========= ========$ (2,124,000) $ (1,527,000)
============= -------------
PER SHARE DATA
Net loss $ (0.06)(0.10) $ (3)
(3)
======== ========= ===================== =============
Weighted average common and
common equivalent shares (000's) 22,07622,076,000 (3)
(3)
======== ========= ===================== =============
(1) The components of production costs may vary substantially among wells
depending on the methods of recovery employed and other factors, but
generally include administrative overhead, maintenance, and repairs, and labor and utilities.
(2) EBITDA is defined as earnings before interest, taxes, depreciation,
depletion and amortization. EBITDA is an analytical measure frequently
used by securities analysts and is presented to provide additional
information about the Company's ability to meet its future debt service,
capital expenditure and working capital requirements. EBITDA should not be
considered as a better measure of the Company's operating performance than
net income or as a better measure of liquidity than cash flow from
operations.
(3) Amounts are not meaningful as a result of the reorganization.
22
23
FINANCIAL DATA (IN THOUSANDS)
(UNAUDITED) (Reorganized Company) (Predecessor Company)
Eighty-two Days SixResults of Operations
Comparison of Three Months Ended March 31, 1998 and 11 Nine Months Ended
Ended September 30, Days Ended July 11, September 30, 1997 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues:
Oil and condensate sales $ 2,931 $ 5,432 $ 10,571
Gas sales 1,399 4,706 7,665
Other income 75 126 262
-------- -------- --------
Total revenues 4,405 10,264 18,498
Expenses:
Lease operating 1,762 4,466 6,862
Gross production taxes 400 677 1,403
General and administrative expenses 642 2,474 3,157
Provision for doubtful accounts -- 71 4,278
Minimum production guarantee obligation -- -- 2,778
-------- -------- --------
2,804 7,688 18,478
-------- -------- --------
EBITDA 1,601 2,576 20
Depreciation, depletion and amortization 2,530 3,314 6,271
Income (loss) before interest and taxes (929) (738) (6,251)
Interest expense 326 1,106 4,930
Reorganization costs -- 4,771 6,040
-------- -------- --------
Loss before income taxes and extraordinary item (1,255) (6,615) (17,221)
Income taxes -- -- --
-------- -------- --------
Net loss before extraordinary item (1,255) (6,615) (17,221)
Extraordinary item - gain on debt discharge -- 88,723 --
-------- -------- --------
Net income (loss) (1,255) 82,108 (17,221)
Dividends on preferred stock (undeclared on Predecessor Company) -- 1,510 2,135
-------- -------- --------
Net income (loss) available to common shareholders (1,255) 80,598 (19,356)
======== ======== ========
PER SHARE DATA
Net loss $ (0.06) (3) (3)
======== ======== ========
Weighted average common and common
equivalent shares (000's) 22,076 (3) (3)
======== ======== ========
(1) The components of production costs may vary substantially among wells
depending on the methods of recovery employed and other factors, but
generally include administrative overhead, maintenance and repairs and
labor and utilities.
(2) EBITDA is defined as earnings before interest, taxes, depreciation,
depletion and amortization. EBITDA is an analytical measure frequently used
by securities analysts and is presented to provide additional information
about the Company's ability to meet its future debt service, capital
expenditure and working capital requirements. EBITDA should not be
considered as a better measure of the Company's operating performance than
net income or as a better measure of liquidity than cash flow from
operations.
(3) Amounts are not meaningful as a result of the reorganization.
23
24
COMPARISON OF THE EIGHTY-TWO DAYS ENDED SEPTEMBER 30, 1997 OF THE REORGANIZED
COMPANY AND THE ELEVEN DAYS ENDED JULY 11, 1997 OF THE PREDECESSOR COMPANY TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1996
The following is a table which combines the operating results of the
eleven days ended July 11, 1997 of the Predecessor Company, herein after
referred to as "Old WRT", and the eighty-two days ended September 30, 1997 of
the Reorganized Company, herein after referred to as "New WRT". These combined
results are compared to the three months ended September 30, 1996 of Old WRT.
New WRT Old WRT Combined Results Old WRT
------------------ ----------------- ----------------- ------------------
Eighty-two days Eleven days Three Months Ended Three Months Ended
Ended September 30, Ended July 11, September 30, September 30,
1997 1997 1997 1996
------------------ ----------------- ----------------- ------------------
Revenues:
Gas sales $ 1,399,000 $ 211,000 $ 1,610,000 $ 1,966,000
Oil and condensate sales 2,931,000 271,000 3,202,000 3,858,000
Other income 75,000 6,000 81,000 208,000
------------------ ----------------- ----------------- ------------------
Total revenues 4,405,000 488,000 4,893,000 6,032,000
Expenses:
Lease operating 1,762,000 232,000 1,994,000 1,529,000
Gross production taxes 400,000 43,000 443,000 488,000
Depreciation, depletion and
amortization 2,530,000 190,000 2,720,000 2,014,000
General and administrative 642,000 113,000 755,000 990,000
------------------ ----------------- ----------------- ------------------
5,334,000 578,000 5,912,000 5,021,000
------------------ ----------------- ----------------- ------------------
Income (loss) from operations (929,000) (90,000) (1,019,000) 1,011,000
------------------ ----------------- ----------------- ------------------
Interest expense 326,000 74,000 400,000 593,000
------------------ ----------------- ----------------- ------------------
Income loss before reorgan-
ization costs, income taxes
and extraordinary item (1,255,000) (164,000) (1,419,000) 418,000
Reorganization costs -- 1,044,000 1,044,000 1,182,000
------------------ ----------------- ----------------- ------------------
Loss before income tax and
Extraordinary item (1,255,000) (1,208,000) (2,463,000) (764,000)
Income tax expense -- -- -- --
------------------ ----------------- ----------------- ------------------
Loss before extraordinary item (1,255,000) (1,208,000) (2,463,000) (764,000)
Extraordinary item-gain on debt
discharge - (88,723,000) (88,723,000) --
------------------ ----------------- ----------------- ------------------
Net income (loss) (1,255,000) 87,515,000 86,260,000 (764,000)
Dividends on preferred stock
(undeclared on Old WRT) - (87,000) (87,000) (712,000)
------------------ ----------------- ----------------- ------------------
Net income (loss) available
to common shareholders $ (1,255,000) $ 87,428,000 $ 86,173,000 $ (1,476,000)
================== ================= ================= ==================
Per common share:
Income (loss) per common and
common equivalent share $ (0.06) * * *
================== ================= ================= ==================
Average common share and common
equivalent shares outstanding 22,076,000 * * *
================== ================= ================= ==================
* Per share amounts are not meaningful due to reorganization.
24
25
During the three months ended September 30, 1997, Old and New WRT's
combined results reportMarch 31, 1998, the Company reported a net loss before extraordinary item, before undeclared
dividends on preferred stock on Old WRT, of
$2.5 million. This is$2.1 million, a 222%161% increase from a net loss before undeclared dividends on
preferred stock of $.8$0.8 million for the corresponding period in 1996.1997. The
increase in net loss before
extraordinary item iswas due primarily to the following factors:
OIL AND GAS REVENUES.Oil and Gas Revenues. During the three months ended September 30, 1997,March 31, 1998, the Company's combined results reportCompany
reported oil and gas revenuerevenues of $4.8$3.2 million, a 17%41% decrease over $5.8from oil and gas
revenues of $5.4 million for the comparable period in 1996. The decreased oil
and gas sales revenue1997. This decrease in
revenues during the combined period in 1997 is1998 was attributable primarily to a combination of ordinary production declines,
unexpected decreasesa shutdown at the Abbeville and Golden Meadow Fields, and a significant
reduction in production from several wells, and delays in expanding the Company's field
infrastructure to support its increased level of operations related to the West
Cote Blanche Bay properties.oil prices. The following table summarizes the combined results
of the Company's oil and
gas production and related pricing for the three months ended September 30, 1997March 31, 1998 and
1996:1997:
Three months ended September 30,March 31,
1998 1997 1996
------ ------
Oil production volumes (Mbbls) 168 179(MBbls) 157 127
Gas production volumes (Mmcf) 676 921(MMcf) 383 833
Average oil price (per Bbl) $19.06 $21.55$14.63 $22.62
Average gas price (per Mcf) $2.38 $2.13$2.66 $3.01
PRODUCTION COSTS.COSTS
- ----------------
Production costs, (leaseincluding lease operating expensescosts and gross
production taxes)taxes, increased $0.4$0.6 million, or 21%26%, from $2.0$2.1 million for the
three months ended September 30, 1996March 31, 1997 to $2.4$2.7 million for the comparable period in
1997.1998. This increase iswas due primarily to the Company's acquiringacquisition on the
Effective Date of an additional 50% working interest in the WCBB Field in depths
above the Rob "C" marker, located at
approximately 10,500 feet, of which the Company is the operator.
DEPRECIATION, DEPLETION AND AMORTIZATION.AMORTIZATION
- ----------------------------------------
Depreciation depletion and amortization increased $.7$0.4 million, or 35%27%, from
$2.0$1.5 million for the three months ended September 30, 1996March 31, 1997 to $2.7$1.9 million for the
comparable period in 1997.1998. As a result of the fresh start accounting prescribed for
companies exiting bankruptcy, a new cost basis in assets is recognized based
upon fair market value of the assets. Additionally,However, due to the Company, effective July 11, 1997, adoptedrestating of property
values to comply with fresh start accounting and the conversion from the
successful efforts method to the full cost pool method offor reporting property, plant and equipment (see Notes to
Consolidated Financial Statements for further discussion). These two factors do
not allow for a meaningful comparison to be made between the 1997 and 1996
periods. The increase in the cost of the oil and gas
properties is offset
somewhat by a 3 Bcfe, or 16% decrease in oilon the Effective Date, comparisons of the 1998 and gas production.1997 periods are
not meaningful for comparison.
GENERAL AND ADMINISTRATIVE EXPENSES.EXPENSES
- -----------------------------------
General and administrative expenses decreased $0.2 million , or 24%28% from $1.0 million$919,000 for the three
months ended September 30, 1996March 31, 1997 to $0.8 million$662,000 for the three months ended September 30, 1997comparable period in 1998
primarily as a result of the Company's change in strategy resulting in a
reduction in personnel and general and administrative costs.costs
OTHER INCOME
- ------------
Other income increased 300% from $50,000 for the three months ended March 31,
1997 to $200,000 for the comparable period in 1998. This increase resulted from
the Company's increased cash holdings in accounts bearing interest and due to an
increase in overhead income, during the first quarter of 1998.
23
INTEREST EXPENSE. The decrease in interestEXPENSE
- ----------------
Interest expense of $.2 million,decreased from $.6$0.6 million for the three months ended September 30, 1996March
31, 1997 to $.4$0.4 million for the
comparable period in 1997, is primarily1998 due to the Company having remained
currentCompany's discontinuing the
recording of interest expense during periods after February 14, 1996, on miscellaneouscertain
notes payable during 1997.
25
26
REORGANIZATION COSTS. Reorganization costs decreased 12% from $1.2 million
for the three months ended September 30, 1996 to $1.0 million for the comparable
period in 1997. This decrease is primarily the result of the consummation of the
Company's Plan of Reorganization occurring on July 11, 1997 and a corresponding
decrease in bankruptcy related costs subsequent to that date.
26
27
COMPARISON OF THE EIGHTY-TWO DAYS ENDED SEPTEMBER 30, 1997 OF THE REORGANIZED
COMPANY AND THE SIX MONTHS AND ELEVEN DAYS ENDED JULY 11, 1997 OF THE
PREDECESSOR COMPANY TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996
The following is a table which combines the operating results of the
six months and eleven days ended July 11, 1997 of the Predecessor Company,
herein after referred topayables as "Old WRT", and the eighty-two days ended September
30, 1997 of the Reorganized Company, herein after referred to as "New WRT".
These combined results are compared to the nine months ended September 30, 1996
of Old WRT.
New WRT Old WRT Combined Results Old WRT
------------------ ----------------- ----------------- ------------------
Eighty-two days Six Months Eleven Nine Months Ended Nine Months Ended
Ended September 30, days Ended July 11, September 30, September 30,
1997 1997 1997 1996
------------------ ----------------- ----------------- ------------------
Revenues:
Gas sales $ 1,399,000 $ 4,706,000 $ 6,105,000 $ 7,665,000
Oil and condensate sales 2,931,000 5,432,000 8,363,000 10,571,000
Other income 75,000 126,000 201,000 262,000
------------------ ----------------- ----------------- ------------------
Total revenues 4,405,000 10,264,000 14,669,000 18,498,000
Expenses:
Lease operating 1,762,000 4,466,000 6,228,000 6,862,000
Gross production taxes 400,000 677,000 1,077,000 1,403,000
Depreciation, depletion and
amortization 2,530,000 3,314,000 5,844,000 6,271,000
General and administrative 642,000 2,474,000 3,116,000 3,157,000
Provision for doubtful accounts -- 71,000 71,000 4,278,000
Minimum production
guarantee obligation -- -- -- 2,778,000
------------------ ----------------- ----------------- ------------------
5,334,000 11,002,000 16,336,000 24,749,000
------------------ ----------------- ----------------- ------------------
Income (loss) from
operations (929,000) (738,000) (1,667,000) (6,251,000)
Interest expense 326,000 1,106,000 1,432,000 4,930,000
Loss before reorganization
costs, income taxes and
extraordinary item (1,255,000) (1,844,000) (3,099,000) (11,181,000)
Reorganization costs -- 4,771,000 4,771,000 6,040,000
------------------ ----------------- ----------------- ------------------
Loss before income tax
and extraordinary item (1,255,000) (6,615,000) (7,870,000) (17,221,000)
Income tax expense -- -- -- --
------------------ ----------------- ----------------- ------------------
Loss before extraordinary
item (1,255,000) (6,615,000) (7,870,000) (17,221,000)
Extraordinary item-gain on
debt discharge -- (88,723,000) (88,723,000) --
------------------ ----------------- ----------------- ------------------
Net income (loss) (1,255,000) 82,108,000 80,853,000 (17,221,000)
Dividends on preferred stock
(undeclared on Old WRT) -- (1,510,000) (1,510,000) (2,135,000)
------------------ ----------------- ----------------- ------------------
Net loss available to
common shareholders $ (1,255,000) $ 80,598,000 $ 79,343,000 $ (19,356,000)
================== ================= ================= ==================
Per common share:
Loss per common and
common equivalent share $ (0.06) * * *
================== ================= ================= ==================
Average common share and
common equivalent shares
outstanding 22,076,000 * * *
================== ================= ================= ==================
* Per share amounts are not meaningful due to reorganization
During the nine months ended September 30, 1997, the combined results
report a loss before extraordinary item before undeclared dividends on Preferred
Stock on Old WRT of $7.9 million. This is a 54% decrease from a net loss before
extraordinary item and undeclared dividends on preferred stock of $17.2 million
for the corresponding period in 1996. The decrease in loss is due to the
following factors:
OIL AND GAS REVENUES. During the nine months ended September 30, 1997, the
Company's combined results report oil and gas revenue of $14.5 million, a 21%
decrease over
27
28
$18.2 million for the comparable period in 1996. The decreased oil and gas sales
revenue during the combined period in 1997 is attributable primarily to a
combination of ordinary production declines, unexpected decreases in production
from several wells, and delays in expanding the Company's field infrastructure
to support its increased level of operations related to the West Cote Blanche
Bay field. The following table summarizes the combined results of the Company's
oil and gas production and related pricing for the nine months ended September
30, 1997 and 1996:
Nine months ended September 30,
1997 1996
------ -------
Oil production volumes (Mbbls) 414 531
Gas production volumes (Mmcf) 2,388 3,103
Average oil price (per Bbl) $20.20 $19.91
Average gas price (per Mcf) $2.56 $2.47
PRODUCTION COSTS. Production costs (lease operating expenses and gross
production taxes) decreased $1.0 million, or 12%, from $8.3 million for the nine
months ended September 30, 1996 to $7.3 million for the comparable period in
1997 due to decreases in production.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization decreased $.5 million, or 7%, from $6.3 million for the nine months
ended September 30, 1996 to $5.8 million for the comparable period in 1997. This
decrease is due primarily to a 1.4 Bcfe, or 23% decrease in oil and gas
production. As a result of the fresh start accounting prescribed for companies
exiting bankruptcy, a new cost basis in assets is recognized based upon fair
value of the assets. Additionally, the Company, effective July 11, 1997,
adopted the full cost method of reporting property, plant and equipment (see
Notes to Consolidated Financial Statements for further discussion). These two
factors do not allow for a meaningful comparison to be made between the 1997
and 1996 periods.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses of
$3.2 million for the nine months ended September 30, 1996 remained consistent at
$3.1 million for the nine months ended September 30, 1997.
PROVISION FOR DOUBTFUL ACCOUNTS. Provision for doubtful receivables for the
nine months ended September 30, 1996, consists of an allowance of a receivable
in the amount of $4.3 million relating to the Tri-Deck legal proceeding (see
"Legal Proceedings"). During the nine months ended September 30, 1997, the
Company reserved $0.1 million of receivables.
MINIMUM PRODUCTION GUARANTEE OBLIGATION. The Company has provided Tricore
with a limited production guarantee based on the minimum production schedule
attached to the Tricore Joint Venture Agreement (see "Joint Venture Agreement").
Pursuant to the Joint Venture Agreement, if the production during any annual
period, commencing October 1 through September 30, is less that the minimum
production guarantee levels required by the Joint Venture Agreement, the Company
is required to eliminate the annual production deficit by delivering sufficient
quantities of gas from other properties in twelve equal monthly installments,
commencing the following December 1, or by the issuance to the venture of
registered debt or equity securities which have a full market value equal to the
required payment. As collateral for the Company's obligations under the
production guarantee, Tricore holds a partial assignment of an interest in the
WCBB Field. This 4.68% working interest (3.72% net revenue interest) assignment,
was made subject to the terms and provisions of the Joint Venture Agreement.
Upon satisfaction of the production guarantee, Tricore is required to execute
and deliver a release of the partial assignment. As a result, the Company
accrued $2.8 million during the nine months ended September 30, 1996 related to
its anticipated minimum production guarantee obligation.
INTEREST EXPENSE. The decrease in interest expense of $3.5 million from
$4.9 million during the nine months ended September 30, 1996 to $1.4 million for
the comparable period in
28
29
1997 is primarily due to the termination of the interest accrual on the $100
million in Senior Notes as of February 14, 1996 (the filing date of the Chapter
11 proceedings)
REORGANIZATION COSTS. Reorganization costs decreased 21% from $6.0 million
for the nine months ended September 30, 1996 to $4.8 million for the comparable
period in 1997. This decrease is primarily the result of the consummation of The
Company's Plan of Reorganization occurring on July 11, 1997 and a corresponding
decrease in bankruptcy related costs subsequent to that date.reorganization.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
- --------------------
Net cash flow provided by operating activities for the ninethree months ended September 30, 1997March
31, 1998 was $6.8$1.1 million, as compared to net cash flow provided by operating
activities of $7.2$2.4 million for the comparable period in 1996. This
increase is primarily due to the discharge of Pre-Petition liabilities in the
amount of $7,837,000 at the effective date of the Plan.
During the first nine months of 1997, the Company invested $5.5 million in
property acquisition and development, as compared to $3.5 million during the
comparable period in 1996.
Net cash provided in financing activities was $13.3 million for the nine
months ended September 30, 1997 as compared to net cash used of $0.5 million
during the same period in 1996.1997. This decrease is
due to changes in current assets and liabilities and the significant difference
in the net loss during the three months ended March 31, 1998 and to ordinary
production declines, a direct resultshut down at the Abbeville and Golden Meadow Fields, and
a significant reduction in oil prices.
Financing Activities
- --------------------
On the Effective Date, ING (U.S.) Capital Corporation (successor to INCC)
("ING") entered into a new $15,000,000 loan agreement with the Company. Initial
loan fees of $188,000 were paid on or prior to the Effective Date, an additional
loan fee of $100,000 was made on December 31, 1997 and a final loan fee of
$100,000 is due on or before December 31, 1998. The loan matures on July 11,
1999, with interest to be paid quarterly and with three interim principal
payments of $1,000,000 each to be made in September 1998, December 1998, and
March 1999. This loan bears interest at the option of the Company at either (1)
LIBOR plus 3% or (2) ING's fluctuating "reference rate" plus 1.25%. This loan is
collateralized by substantially all of the Company's Chapter 11 Bankruptcy filing in February 1996assets. At March 31, 1998,
this rate was 8.625%.
Capital Requirements and a resulting lack of
financing activity during 1996.
CAPITAL REQUIREMENTS AND RESOURCESResources
- ----------------------------------
The Company continued the suspension of its property acquisition,
development and workover activities while remaining a debtor in possession,
performing only those workovers approved under court supervision. Commencing
with the Effective Date of the Plan, the Company commenced itsCompany's program to increase production rates, lengthen the productive life
of wells and increase total proved reserves consists primarily throughof sidetracks out of and
recompletions ofin shut-in wells and installation of hydrocyclones on gas wells
producing large volumes of formation water. In addition, certain sidetrack and
development drilling locations have been identified as improvingto improve reservoir
drainage and increasingincrease the ultimate recovery of reserves.
Pursuant to this strategy, the
Company will be required to make substantial capital expendituresThe company is actively pursuing strategic alliances with companies possessing
South Louisiana expertise and who utilize advanced technology, to fully develop
itsthe existing properties through exploration and exploitation. In selecting such
allies, the Company seeks partners who have demonstrated their ability to
resolve the geological complexities found in South Louisiana, who possess
adequate capital to conduct aggressive exploration programs on the properties,
and who maintain a reputation in the oil and gas sector as successful
performers.
The Company has entered into a definitive Farmout Agreement with Tri-C Resources
("Tri-C") of Houston, Texas. Tri-C specializes in utilizing advanced technology
to optimize, explore and develop new oil and gas reserves. The Company's capital budget for 1997Farmout Agreement
covers the WCBB field and is approximately $9,132,000. Funding for this capital budget is anticipateddivided into three phases over a twenty-four month
period. In Phase I, Tri-C commits to come
primarily from cash flows form operations, includingdrill three exploratory wells and three PUD
wells. If Tri-C elects to proceed to Phase II, Tri-C will drill an additional
three exploratory wells and three PUD wells. In Phase III, Tri-C shall drill
either five exploratory wells and five PUD wells or conduct a geological and
geophysical program on the property. If Tri-C elects to complete all three
phases, it will earn a 50% interest in the West
Cote Blanche Bay properties acquired as partWCBB fields. The Company will earn a
carried interest throughout the program.
24
Commitments and Contingencies
- -----------------------------
Lac Blanc Escrow Account. In connection with its purchase of a 91% working
interest in the Lac Blanc Field, the Company deposited $170,000 in a segregated
trust account and agreed to make additional deposits of $20,000 per month until
the accumulated balance of the Reorganization Plan, along
with available net proceedstrust account is $1.7 million. These funds will
be held in a segregated account for the benefit of the State of Louisiana to
insure that the wells in the Lac Blanc Field are properly plugged upon cessation
of production. In return for this financial commitment, the State has granted
the sellers an unconditional release from their contingent liability to plug and
abandon the stock rights offering of approximately
$1,597,000.
Onwells. When all existing wells in the Effective Date,Lac Blanc Field have been
properly plugged and abandoned, the funds in the trust account will revert to
the Company. At March 31, 1998, the Company received gross proceeds from a stock
rights offeringhad deposited $881,643 in this
account.
Plugging and Abandonment Funds. The Company is contractually committed in its
purchase contracts for the Initial LLOG Property and Remaining LLOG Properties
to establish plugging and abandonment funds as allowed by Louisiana's Orphaned
Well Act. The amount of $13,300,000. Proceedsand terms of this offering were usedpayment into each fund will be established
by the State of Louisiana upon completion of an independent study commissioned
by the state. The necessary state sponsored studies are not yet completed.
Accordingly, the Company is unable to paydetermine the interestamount and loan fees in connection withpayment towards
the INCC loan of $3,248,000, fundfuture obligation related to these commitments. For financial accounting
purposes, the litigation trust calledestimated aggregate future plugging and abandonment cost for the
Initial LLOG Property and the Remaining LLOG Properties will be included in the
Plan of $3,000,000, pay pre-petition claims
of $2,963,000 and pay administrative claims of $2,492,000 leaving $1,597,000
which provided additional working capitalCompany's amortization rates for the Company.
In addition, on the effective date, the Company exchanged $123,845,000 in
unsecured debt for 10,000,000 common shares of New WRT stock and DLBW and Dublin
Acquisitions exchanged $9,293,000 of secured debt for 2,655,000 shares of New
WRT Stock.properties.
II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 10, 1992,There have been no material changes in the Company, onevarious legal proceedings to which
the Registrant is a party since the filing of its executives, a former
executive and others instituted a lawsuit against Bear, Stearns & Co. Inc.
("Bear Stearns"), Drake Capital Securities, Inc. ("Drake"), Steven Antebi
("Antebi") and Jerry Friedman ("Friedman")Annual Report on Form 10-K.
Accordingly, the information set forth in the District Court of Harris
County, Texas 133rd Judicial District. After settling with Drake and Friedman,Registrants Annual Report on Form
10-K under the plaintiffs commenced trial on February 28, 1995. On March 21, 1995, the jury
returned a verdict in favorcaption "Legal Proceedings" is incorporated herein by this
reference. A copy of the Company and five ofRegistrant's Annual Report on Form 10-K will be
provided without charge to any person upon written request directed to the
Secretary at the Company's shareholders against Antebi for approximately $1,100,000. Pursuant to the jury
verdict, advice of outside counsel and management's belief that recovery of its
legal fees was probable, the Company recorded as a receivable approximately
$1,100,000 of costs incurred in connection with the litigation. The Company,
however, considered the jury verdict to be insufficient. Accordingly, the
Company requested, and on August 4, 1995 was granted a new trial. Absent the
jury verdict from the original trial, and considering the uncertainty regarding
the timing of possible recovery in a new trial, the Company and its outside
counsel concluded that they could no longer consider the recovery of the
receivable to be probable. Therefore, the Company recorded a provision for this
receivable in the third quarter of 1995. Prior to commencement of the new
trial, the case went to mediation and was settled on February 16, 1996 for
$600,000 plus court costs of approximately $69,000,subject to the approval of
the Bankruptcy Court. Consequently on April 22, 1996, WRT filed a Motion for
Authority to Compromise the litigation, requesting that the settlement be
approved and that the distribution of proceeds generated therefrom be authorized
to the respective parties to the litigation pursuant to the settlement agreement
reached. Due to objections raised as to the distribution of the litigation
proceeds, the Bankruptcy Court approved the settlement agreement but instructed
that a subsequent Motion be provided to resolve the issue of disposition of the
proceeds. As a result, on August 27, 1996, WRT filed a Motion for Authorization
to finally settle distribution of the litigation proceeds. On September 10,
1996, the Bankruptcy Court approved such motion and the proceeds have since been
distributed accordingly, including the distribution of approximately $145,000 to
WRT, which was recorded as Other Income for the year ended December 31, 1996,
Settlement funds of $154,000 attributable to one of the Company's former
executives have been held in escrow, pending final resolution of claims of the
WRT's bankruptcy estate if any, against the former executive.
In 1994, the Company received a certification from the DNR qualifying
certain gas production under Section 107(c)(2) of the Natural Gas Policy Act of
1978 the NGPA as gas produced from geopressured brine. As required under the
NGPA, the DNR's determination was forwarded to the FERC for review. In April
1995, the FERC reversed the position of the DNR, rejecting the qualification of
the wells under Section 17(c)(2) of the NGPA. The Company appealed the FERC
determination to the United States Court of Appeals for the Fifth Circuit,
located in New Orleans, Louisiana. In February 1997, the United States Court
of appeals for the Fifth Circuit affirmed the FERC's determination.
On December 18 and 19, 1995, two class-action shareholders' suits were
filed in the United States District Court for the Southern District of
California, seeking damages on behalf of a purported class of persons who
purchased the publicly-traded securities of the Company between October 20, 1993
and October 27, 1995. In these complaints, the plaintiffs have sued the
Company, certain members of its Board of Directors, and others alleging joint
and several liability for violations of Section 12(2) and Section 15 of the
Securities Act of 1933. The plaintiffs also complain that all defendants
violated Section 10(b) of the Securities Exchange Act of 1934 and Rule l0b-5 of
the Securities Exchange Commission. The individual defendants are alleged to be
liable under Section 20(a) of the Securities Exchange Act of 1934. On February
23, 1996, a Notice of Stay by reason of the Company's bankruptcy was filed in
both actions. On March 21, 1996, all parties entered into a Stipulation whereby
plaintiffs agreed to consolidate the two actions under an amended and
consolidated complaint. On June 1, 1996, by agreement of all parties, the case
was transferred to the Southern District of New York. By order dated May 2,
1997, the Bankruptcy Court disallowed this lawsuit in full as it relates to the
Company. As a result of the Bankruptcy Court's disallowance of this lawsuit,
the litigation will not have an effect on the Company's financial condition or
results of operations.
On September 28, 1995, a lawsuit was served against the Company, Arnoult
Equipment and Construction, Inc., Steven S. McGuire, Donald J. Arnoult and
others in the 24th Judicial District Court for the Parish of Jefferson, State of
Louisiana. The plaintiff, the former president, chiefprincipal executive officer and
stockholder in certain oilfield service companies used by the Company in its
field development activities, alleged that the Company and others interfered
with his employment, ultimately resulting in his forced resignation from such
companies. The plaintiff further alleged the Company and others acted in a
manner that resulted in the devaluing of the services company's assets and
plaintiff's corresponding equity holdings in the companies. On November 9, 1995,
the Company, et al filed with the Court exceptions of no cause of action, no
right of action and vagueness. On June 6, 1997, the Bankruptcy Court disallowed
this lawsuit in full.
During 1996, WRT received notice from a third party claiming that WRT's
title has failed as to approximately 43 acres in the Bayou Pigeon Field. Some
or all of the acreage in the dispute is considered to be productive in three
separate production units. Assuming that WRT's title is flawed, WRT's working
interest in three units may be reduced from 100% of each unit to approximately
7% (5% NRI), 75% (63% NRI), and 95% (72% NRI), respectively. The financial
statements as of June 30, 1997 and December 31, 1996 and for the six month
periods ended June 30, 1997 and 1996, reflect operating results and proved
reserves discounted for this possible title failure. As the title failure
predates its ownership of the field, WRT is currently evaluating its recourse
against the predecessors-in-title relative to this issue.
During 1995, the Company entered into a marketing agreement with Tri-Deck
Oil and Gas Company ("Tri-Deck") pursuant to which Tri-Deck would market all of
WRT's oil and gas production. Subsequent to the agreement, Tri-Deck's principal
and WRT's Director of Marketing, James Florence, assigned to Plains Marketing
Tri-Deck's right to market WRT's oil production and assigned to Perry Oil & Gas
("Perry Gas") Tri-Deck's right to market WRT's gas production. During early
1996, Tri-Deck failed to make payments to WRT attributable to several months of
WRT's gas production. Consequently, on May 20, 1996, the Company filed a Motion
to Reject the Tri-Deck Marketing Agreement, and on May 29, 1996, the Company
initiated an adversary proceeding against Tri-Deck and Perry Gas. Perry Gas was
the party which ultimately purchased the Company's gas production for the months
in question.
With respect to the Motion to Reject, the Bankruptcy Court authorized the
rejection and directed Tri-Deck and WRT to determine the amount of production
proceeds attributable to WRT's June 1995 gas production which are payable to
WRT. Thereafter, Perry Gas made payment to WRT of the June 1995 gas proceeds
less $75,000 for a set-off claim by Perry Gas, which is subject to further
consideration by the Bankruptcy Court. Perry Gas subsequently filed an
administrative claim in the Chapter 11 case, seeking recovery for damages
allegedly arising out of WRT's conduct in connection with its rejection of the
Tri-Deck contract and related negotiations with Perry. By decision dated July
3, 1997, the Bankruptcy Court allowed, in part, Perry Gas' administrative claim,
in the aggregate amount of approximately $64,000, and directed Perry Gas to
obtain payment of such amount from the Perry Setoff Escrow, which as result of
this payment, currently has a balance of approximately $10,000.
With respect to the adversary proceeding, WRT sought recovery from Tri-Deck
and/or Perry Gas of all unpaid production proceeds payable to WRT under the
marketing agreement and the issuance of a temporary restraining order and
preliminary injunction against both parties to prevent further disposition of
such proceeds pending the outcome of the proceedings. On May 31, 1996, the
Bankruptcy Court entered a consensual temporary restraining order against both
Tri-Deck and Perry Gas. On June 18, 1996, a preliminary injunction was entered
by the Bankruptcy Court which required Perry Gas to segregate in to a separate
depository account the funds due for the purchase of WRT's April and May 1996
gas production from Tri-Deck. Subsequently, upon motion by WRT the Bankruptcy
Court ordered such funds to be placed into the Bankruptcy Court's registry, as
Perry Gas had made certain withdrawals from the separate depository account
without authorization by the Bankruptcy Court. As of October 1, 1997, funds in
the amount of approximately $1,700,000 remained in the registry of the
Bankruptcy Court. On April 1, 1997, WRT moved for partial summary judgement
with respect to Perry Gas seeking release of the escrow funds, as well as
additional funds from Perry Gas attributable to previous miscalculations of the
amounts owed by Perry Gas. At a hearing held on May 27, 1997, the Bankruptcy
Court denied WRT's motion to extent that it sought additional payments by Perry
Gas to WRT and reserved decision with respect to the disbursement to WRT of the
funds currently in the Court's registry. On July 9, 1997, Perry Gas filed its
own summary judgement motion with respect to its assertion that it is entitled
to certain adjustments for prior overpayments in the amount of approximately
$120,000. On August 26, 1997, Perry requested permission to amend its motion
and subsequently filed an amended affidavit reducing the amount claimed to
approximately $51,000.
On August 21, 1997, WRT filed a motion for leave to amend the adversary
complaint, which amended would, among other things, name as defendants, in
addition to Tri-Deck and Perry Gas, James Florence, Beth Perry Sewell, Steve
McGuire, Ronald Hale and Mark Miller, and included several additional causes of
action against both the original and these additional defendants. Oral argument
with respect to WRT's motion for leave to amend was heard on September 16, 1997,
and the motion is currently under review. In light of the pendency of WRT's
motion to amend, by Order dated September 5, 1997, the Court denied WRT's motion
for partial summary judgement, which had been under advisement since May, 1997.
Ultimate resolution of the WRT - Tri-Deck - Perry Gas dispute, and thus
recovery by WRT of all amounts owed by Tri-Deck or Perry Gas, will also entail
Bankruptcy Court disposition of a counterclaim by Tri-Deck seeking, among other
things, damages for alleged tortious interference by WRT with Tri-Decks'
contractual relations with other Tri-Deck customers. Although management
believes that Tri-Deck's claim to the funds in the registry of the Bankruptcy
Court is invalid, and the aforementioned counterclaim is without merit, for
financial reporting purposes the receivable from Tri-Deck was fully reserved for
as of June 30, 1997.
On January 14, 1997, WRT initiated an adversary proceeding, WRT Energy
Corp. v Tri-Core Energy, L.P., (Adv. Pro. No 97AP-5003), in United States
Bankruptcy Court, Western District of Louisiana, Lafayette Opelousas Division,
to obtain a declaration of the invalidity of the security interest or liens
allegedly securing Tricore Energy Venture, LP's ("Tricore") asserted secured
claim of "up to $9,064,000" (as amended) or alternatively for avoidance of such
security interest or liens pursuant to Section 544 and 547 of the Bankruptcy
Code. Such suit is pending as of the date of this report. On March 7, 1997,
the Company also filed an objection to both the allowance and amount of
Tricore's claim. The objection has been consolidated with the adversary
proceeding. On August 6, 1997, the Bankruptcy Court issued an opinion holding
that Tricore's asserted security interest and liens were invalid under Louisiana
law. See further explanation regarding Tricore at Note 16, "Joint Venture
Agreement" to the Company's Consolidated Financial Statements. The Company is
currently negotiating a settlement with Tricore pursuant to their claim.
29offices.
30
Item25
ITEM 6. Exhibits and Reports on FormEXHIBITS AND REPORTS ON FORM 8-K
(a)a) Exhibits required by itemItem 601 of Regulation S-K are as follows:
10.03.1 Certificate of Incorporation filed with Form 8-K dated March
13, 1997.
3.2 Certificate of Amendment to Certificated of Incorporation (5)
3.3 Bylaws filed with Form 8-K dated March 3, 1997.
10.1 Final Order Authorizing Use of Proceeds from Oil and Gas
Operations.(1)
10.110.2 Letter agreement by and among WRT Energy Corporation, DLB Oil &
Gas, Inc. and Wexford Management, LLC dated October 22, 1996.(2)
10.210.3 Debtor's and DLBW's First Amended Joint Plan of Reorganization
Under Chapter 11 of the United States Bankruptcy Code dated
January 20, 1997.(3)
10.310.4 First Amended Disclosure Statement Under 11 U.S.C. 1125 In
Support of Debtor's and DLBW's First Amended Joint Plan of
Reorganization Under Chapter 11 of the United States
Bankruptcy Code dated January 20, 1997. (3)
10.4 Second Amended Joint10.5 Agreement and Plan of Reorganization.Merger (4)
10.5 Second Amended Disclosure Statement.27 Financial Data Schedule
(1)Filed with Form 10K dated March 14, 1997
(2)Filed with Form 10K dated November 6, 1996
(3)Filed with Form 10K dated March 3, 1997
(4)
3.1 Articles of Incorporation
3.2 Bylaws
4.2 Credit Agreement
4.3 Employment Agreement
(b)Filed with Form 10K dated July 22, 1997
(5)Filed herewith
b) The Registrant filed the following reports on Form 8-K's8-K
Form 8-K filed on July 22,December 23, 1997 announcing consummationreporting changes in
registrants certified accountants.
Form 8-KA filed on February 17, 1998 reporting letter to
the SEC from KPMG Peat Marwick, LLP regarding termination
of their client - auditor relationship.
26
SIGNATURES
Pursuant to the requirements of the Second
Amended Joint PlanSecurities and Exchange Act of Reorganization.
30
31
Reorganization as amended.
(1) Filed with Form 8-K dated March 14, 1997.
(2) Filed with Form 8-K dated November 6, 1996
(3) Filed with Form 8-K dated March 3, 1997.
(4) Filed with Form 8-K dated July 22, 1997.
31
32
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.
WRTthe
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GULFPORT ENERGY CORPORATION
Date: December 1, 1997May 15, 1998
/s/ Gary C. Hanna
--------------------------------
Gary C. HannaMark Liddell
----------------------------
Mark Liddell
President
/s/ Ronald D. Youtsey
------------------------------------------------------------
Ronald D. Youtsey
Secretary and Treasurer
32
33
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.0 Final Order Authorizing Use of Proceeds from Oil and Gas Operations.
(1)
10.1 Letter agreement by and among WRT Energy Corporation, DLB Oil & Gas,
Inc. and Wexford Management, LLC dated October 22, 1996.(2)
10.2 Debtor's and DLBW's First Amended Joint Plan of Reorganization Under
Chapter 11 of the United States Bankruptcy Code dated January 20,
1997. (3)
10.3 First Amended Disclosure Statement Under 11 U.S.C. 1125 In Support of
Debtor's and DLBW's First Amended Joint Plan of Reorganization Under
Chapter 11 of the United States Bankruptcy Code dated January 20,
1997. (3)
10.4 Second Amended Joint Plan of Reorganization. (4)
10.5 Second Amended Disclosure Statement. (4)
3.1 Articles of Incorporation
3.2 Bylaws
4.2 Credit Agreement
4.3 Employment Agreement
27 FDS
(1) Filed with Form 8-K dated March 14, 1997.
(2) Filed with Form 8-K dated November 6, 1996
(3) Filed with Form 8-K dated March 3, 1997.
(4) Filed with Form 8-K dated July 22, 1997.