8-K/A 1 d03614a3e8vkza.txt AMENDMENT NO. 3 TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- Amendment No. 3 to Form 8-K on FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): FEBRUARY 25, 2003 WESTPORT RESOURCES CORPORATION (Exact Name of Registrant as Specified in Charter) NEVADA 001-14256 13-3869719 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.)
1670 BROADWAY STREET SUITE 2800 DENVER, COLORADO 80202 (Address and Zip Code of Principal Executive Offices) (303) 573-5404 (Registrant's telephone number, including area code) ITEM 5. OTHER EVENTS. On November 6, 2002, Westport Resources Corporation, a Nevada corporation, entered into an agreement to purchase natural gas properties and midstream gathering and compression assets located in Uinta County, Utah, also referred to as the Acquired Properties, from certain affiliates of El Paso Corporation. Westport completed the purchase of the Acquired Properties on December 17, 2002. On December 2, 2002, Westport filed its Current Report on Form 8-K with the Securities and Exchange Commission, as amended by the Current Report on Form 8-K/A filed on December 12, 2002, as further amended by the Current Report on Form 8-K/A filed on December 27, 2002, collectively referred to as the Report, to include certain historical and pro forma financial statements related to the Acquired Properties. In the Report, Westport inadvertently understated the standardized measure of discounted future net cash flows for the Acquired Properties for the year ended December 31, 2001 by mistakenly overstating the liability for future income taxes for the Acquired Properties for the referenced period. The liability for future income taxes for the Acquired Properties for the year ended December 31, 2001 was $9,577,000, rather than $119,237,000 as disclosed in the Report. As a result of this correction, the standardized measure of discounted future net cash flows for the Acquired Properties for such period was adjusted from $55,482,000, as disclosed in the Report, to $95,444,000. Westport hereby amends and restates in its entirety Item 7 of the Report entitled "Financial Statements and Exhibits" to make these and related adjustments to the Combined Statements of Revenues and Direct Operating Expenses for the Acquired Properties and Notes thereto for the year ended December 31, 2001 and the nine months ended September 30, 2002. Westport has also attached as Exhibit 23.1 to this Current Report on Form 8-K/A the consent of KPMG LLP, its independent auditor, consenting to the incorporation by reference of its audit report into Westport's registration statements referenced in the consent. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of business acquired. Combined Statements of Revenues and Direct Operating Expenses for the Acquired Properties and the Notes thereto. (b) Pro Forma Financial Information. Certain unaudited pro forma condensed combined financial statements relating to the Acquired Properties. (c) Exhibits. The following exhibit is filed herewith: EXHIBIT NUMBER EXHIBIT ------- ------- 23.1 Consent of KPMG LLP. INDEPENDENT AUDITORS' REPORT To Westport Resources Corporation: We have audited the accompanying combined statements of revenues and direct operating expenses (the "Statements") for certain oil and natural gas properties and gathering and compression assets of certain affiliates of El Paso Corporation to be acquired by Westport Resources Corporation ("Westport") (the "Acquired Properties") for the nine months ended September 30, 2002 and the years ended December 31, 2001 and 2000. The Statements are the responsibility of Westport's management. Our responsibility is to express an opinion on the Statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statements. We believe that our audits provide a reasonable basis for our opinion. The accompanying Statements were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 1. The presentation is not intended to be a complete presentation of revenues and expenses for the Acquired Properties. In our opinion, the Statements referred to above present fairly, in all material respects, the revenues and direct operating expenses described in Note 1 for the nine months ended September 30, 2002 and the years ended December 31, 2001 and 2000, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Denver, Colorado November 27, 2002 COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES FOR THE ACQUIRED PROPERTIES
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED SEPTEMBER 30, DECEMBER 31, 2002 2001 2000 -------------- -------------- -------------- Revenues: Oil and gas sales .................................. $ 43,086,769 $ 99,071,187 $ 94,710,381 Gathering .......................................... 1,438,153 2,309,087 2,195,382 -------------- -------------- -------------- 44,524,922 101,380,274 96,905,763 -------------- -------------- -------------- Direct operating expenses: Oil and gas production ............................. 13,154,779 18,661,830 11,637,683 Gathering .......................................... 1,088,072 1,151,591 1,028,731 -------------- -------------- -------------- 14,242,851 19,813,421 12,666,414 -------------- -------------- -------------- Revenues in excess of direct operating expenses ...... $ 30,282,071 $ 81,566,853 $ 84,239,349 ============== ============== ==============
The accompanying notes are an integral part of these statements. NOTES TO COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES FOR THE ACQUIRED PROPERTIES 1. BASIS OF PRESENTATION On November 6, 2002 Westport Resources Corporation ("Westport") entered into an agreement with certain affiliates of El Paso Corporation ("El Paso") to purchase certain oil and natural gas properties and mid-stream gathering and compression assets located in Utah (the "Acquired Properties"). The transaction is expected to close in December 2002. The accompanying combined statements of revenues and direct operating expenses were derived from the historical accounting records of El Paso and reflect the revenues and direct operating expenses of the Acquired Properties. The statements do not include depreciation, depletion and amortization, general and administrative expenses, income taxes or interest expense as these costs may not be comparable to the expenses expected to be incurred by Westport on a prospective basis. During the periods presented in the accompanying combined statements of revenues and direct operating expenses, all of the natural gas production from the Acquired Properties was purchased by a subsidiary of El Paso. The price paid by the El Paso subsidiary was based on monthly index, primarily "Inside FERC's CIG Rockies" index. If the sale of the Acquired Properties to Westport is consummated, future natural gas production from the Acquired Properties will not be sold to the El Paso affiliate. 2. SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED) Supplemental oil and natural gas reserve information related to the Acquired Properties is reported in compliance with FASB Statement No. 69, "Disclosures about Oil and Gas Producing Activities." Net proved oil and natural gas reserves of the Acquired Properties and the discounted future net cash flows related to those reserves were prepared by Westport's petroleum engineers as of and for each period presented and audited by Ryder Scott Company, L.P. at September 30, 2002. Because information related to oil and natural gas reserves of the Acquired Properties prior to September 30, 2002 was not readily available, Westport's petroleum engineers made certain assumptions in the preparation of the proved oil and natural gas reserves and the discounted future net cash flows related to those reserves for periods prior to September 30, 2002. The following tables set forth information for the nine months ended September 30, 2002 and the years ended December 31, 2001 and 2000, with respect to changes in the proved reserves for the Acquired Properties.
NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 2000 ------------------------ ------------------------ ------------------------ OIL GAS OIL GAS OIL GAS (Mbbls) (MMCF) (Mbbls) (MMCF) (Mbbls) (MMCF) ---------- ---------- ---------- ---------- ---------- ---------- Total Proved Reserves Beginning of period .......... 1,523 511,391 1,747 647,634 1,728 633,270 Production ................... (49) (20,172) (84) (25,881) (70) (27,674) Revision of previous estimates .................... 123 102,049 (140) (110,362) 89 42,038 Extensions, discoveries and other additions .................. -- -- -- -- -- -- Purchases of reserves in place ........................ -- -- -- -- -- -- Sale of reserves in place .... -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- End of period ................ 1,597 593,268 1,523 511,391 1,747 647,634 ========== ========== ========== ========== ========== ========== Proved developed reserves .... 1,143 275,964 1,131 280,112 1,284 325,555 ========== ========== ========== ========== ========== ==========
NOTES TO COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES FOR THE ACQUIRED PROPERTIES -- (CONTINUED) Information with respect to the estimated discounted future net cash flows for the Acquired Properties for the nine months ended September 30, 2002 and the years ended December 31, 2001 and 2000, is as follows:
NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 2002 2001 2000 ------------ ------------ ------------ (DOLLARS IN THOUSANDS) Future cash flows ................................ $ 1,929,525 $ 1,054,984 $ 3,480,094 Future production costs .......................... (609,640) (463,916) (749,743) Future development costs ......................... (268,928) (265,503) (439,716) ------------ ------------ ------------ Future net cash flows before tax ................. 1,050,957 325,565 2,290,635 Future income taxes .............................. (211,810) (9,577) (728,356) ------------ ------------ ------------ Future net cash flows after tax .................. 839,147 315,988 1,562,279 Annual discount at 10% ........................... (484,997) (220,544) (892,857) ------------ ------------ ------------ Standardized measure of discounted future net cash flows ..................................... $ 354,150 $ 95,444 $ 669,422 ============ ============ ============
Prices utilized for the purposes of estimating the proved reserves and future net revenue of the Acquired Properties were $4.14 per Mmbtu of natural gas and $30.45 per barrel of oil at September 30, 2002, $2.72 per Mmbtu of natural gas and $19.78 per barrel of oil at December 31, 2001 and $9.52 per Mmbtu of natural gas and $26.83 per barrel of oil at December 31, 2000. Principal changes in the estimated discounted future net cash flows for the Acquired Properties for the nine months ended September 30, 2002 and the years ended December 31, 2001 and 2000, are as follows:
NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 2002 2001 2000 ------------ ------------ ------------ (DOLLARS IN THOUSANDS) Beginning of period .............................. $ 95,444 $ 669,422 $ 18,206 Oil and natural gas sales, net of production costs ................................. (25,380) (74,596) (76,963) Net changes in anticipated prices and production costs ............................ 234,131 (968,914) 848,128 Extensions and discoveries, less related costs ....................................... -- -- -- Changes in estimated future development costs ....................................... 929 63,248 -- Previously estimated development costs incurred .................................... 75,213 95,574 99,559 Revision of quantity estimates ................. 126,166 (52,592) 24,025 Purchase of minerals in place .................. -- -- -- Sales of minerals in place ..................... -- -- -- Accretion of discount .......................... 10,162 95,404 3,669 Net change in income taxes ..................... (81,891) 278,452 (266,135) Change in production rates and other ........... (80,624) (10,554) 18,933 ------------ ------------ ------------ End of period .................................... $ 354,150 $ 95,444 $ 669,422 ============ ============ ============
NOTES TO COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES FOR THE ACQUIRED PROPERTIES -- (CONTINUED) 3. SUPPLEMENTAL CASH FLOW INFORMATION (UNAUDITED) Cash flow investing activities for the nine months ended September 30, 2002 and the years ended December 31, 2001 and 2000 consisted of capital expenditures for property and equipment of $75.2 million, $95.6 million and $99.6 million, respectively. UNAUDITED PRO FORMA FINANCIAL DATA The merger of Westport Resources Corporation, Westport or we, with and into Belco Oil and Gas Corp., or Belco, on August 21, 2001 was accounted for as a purchase transaction for financial accounting purposes. We began consolidating our results with the results of Belco as of August 21, 2001. The following unaudited pro forma condensed combined balance sheet as of September 30, 2002 gives effect to the following events as if each had occurred on September 30, 2002: - our Asset Purchase Agreement to purchase certain oil and natural gas properties and mid-stream gathering and compression assets located in Utah, also referred to as the Acquired Properties, from certain affiliates of El Paso Corporation, or the Acquisition; - the application of the actual and estimated net proceeds of (i) a private equity offering, or Private Equity Offering, of 3.125 million shares of our common stock to certain qualified institutional buyers at a net price of $16.00 per share for aggregate proceeds of $50 million, (ii) an offering of $300 million of our 8 -1/4% Senior Subordinated Notes Due 2011, referred to as the Debt Offering, and (iii) an offering of 10.0 million shares of our common stock pursuant to a "shelf" registration statement in an underwritten offering, or the Shelf Offering (assuming the gross proceeds from the Debt Offering are $300.0 million and the Shelf Offering are $199.0 million); and - borrowings under a new credit facility providing for a maximum committed amount of $600.0 million and an initial borrowing base of $470.0 million (assuming the consummation of the Debt Offering), or the Replacement Credit Facility and repayment of all outstanding indebtedness under our existing credit agreement dated as of August 21, 2001, as amended, the Revolving Credit Facility. The Private Equity Offering, Debt Offering and Shelf Offering are collectively referred to as the Offerings. The Acquisition, the Offerings and the Replacement Credit Facility are collectively referred to as the Transactions. The following unaudited pro forma condensed combined statements of operations for the year ended December 31, 2001 and the nine months ended September 30, 2001 give effect to the merger with and into Belco. In addition, the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2001 and the nine months ended September 30, 2001 and 2002 give effect to the following events as if each had occurred on January 1, 2001: - the Acquisition; - the application of the actual and estimated net proceeds of the Offerings (assuming the gross proceeds from the Debt Offering are $300.0 million and the Shelf Offering are $199.0 million); and - borrowings under the Replacement Credit Facility and repayment of all outstanding indebtedness under the Revolving Credit Facility. The pro forma adjustments are based on estimates and assumptions explained in further detail in the accompanying notes to unaudited pro forma condensed combined financial statements. The Acquisition will be accounted for using the purchase method of accounting. The unaudited pro forma financial statements should be read in conjunction with the accompanying notes to unaudited pro forma condensed combined financial statements, the historical consolidated financial statements and related notes of Westport, the Combined Statements of Revenues and Direct Operating Expenses for the Acquired Properties and the historical consolidated financial statements of Belco. The pro forma information presented does not purport to be indicative of the financial position or results of operations that would have actually occurred had the Transactions and the application of the actual and estimated net proceeds of the Offerings and borrowings under the Replacement Credit Facility occurred on the dates indicated or which may occur in the future. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 2002
ADJUSTMENTS FOR THE DEBT OFFERING ADJUSTMENTS ADJUSTMENTS AND THE FOR THE ADJUSTMENTS FOR THE REPLACEMENT WESTPORT PRIVATE EQUITY FOR THE SHELF CREDIT HISTORICAL OFFERING(A) ACQUISITION(B) OFFERING(A) FACILITY PRO FORMA ---------- -------------- -------------- ------------ ------------ ---------- (DOLLARS IN THOUSANDS) ASSETS: Cash....................... $ 35,273 $ 50,000 $ (519,639) $ 187,850 $ 250,062 $ 3,546 Other current assets....... 63,077 63,077 Oil and natural gas properties and equipment, net........... 1,337,980 519,639 1,857,619 Goodwill................... 246,712 246,712 Other assets, net.......... 18,083 13,787(c) 31,870 ---------- --------- ---------- --------- --------- ---------- Total assets........... $1,701,125 $ 50,000 $ 0 $ 187,850 $ 263,849 $2,202,824 ========== ========= ========== ========= ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Liabilities from commodity price risk management activities............... 21,652 21,652 Other current liabilities.............. 86,810 86,810 Total debt................. 556,331 263,849(d) 820,180 Deferred income taxes...... 141,090 141,090 Other liabilities.......... 4,840 4,840 ---------- --------- ---------- --------- --------- ---------- Total liabilities...... 810,723 263,849 1,074,572 Stockholders' equity....... 890,402 50,000 187,850 1,128,252 ---------- --------- ---------- --------- --------- ---------- Total liabilities and stockholders' equity............... $1,701,125 $ 50,000 $ 0 $ 187,850 $ 263,849 $2,202,824 ========== ========= ========== ========= ========= ==========
The accompanying notes to the unaudited pro forma condensed combined financial statements are an integral part of this balance sheet. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
ACQUIRED ADJUSTMENTS WESTPORT PROPERTIES FOR THE HISTORICAL HISTORICAL TRANSACTIONS PRO FORMA ----------- ---------- ------------ ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Operating revenues: Oil and natural gas sales....................... $ 295,442 $ 43,087 $ $ 338,529 Hedge settlements............................... 1,509 1,509 Gathering income................................ 1,438 1,438 Commodity price risk management activities: Non-hedge cash settlements................... 822 822 Non-hedge non-cash change in fair value of derivatives............................. (8,885) (8,885) Gain (loss) on sale of operating assets, net.......................................... (1,731) (1,731) ----------- --------- ---------- ----------- Net revenues............................... 287,157 44,525 331,682 ----------- --------- ---------- ----------- Operating costs and expenses: Lease operating expenses........................ 67,381 11,636 79,017 Production taxes................................ 16,845 1,519 18,364 Transportation costs............................ 6,782 6,782 Gathering expenses.............................. 1,088 1,088 Exploration..................................... 21,638 21,638 Depletion, depreciation and amortization........ 147,066 16,929(e) 163,995 Impairment of unproved properties............... 9,078 9,078 Stock compensation expense...................... 1,954 1,954 General and administrative...................... 17,079 17,079 ----------- --------- ---------- ----------- Total operating expenses................... 287,823 14,243 16,929 318,995 ----------- --------- ---------- ----------- Operating income (loss).................... (666) 30,282 (16,929) 12,687 Other income (expense): Interest expense................................ (23,891) (17,396)(f) (41,287) Interest income................................. 373 373 Change in fair value of interest rate swap......................................... 226 226 Other........................................... 497 497 ----------- --------- ---------- ----------- Income (loss) before income taxes................. (23,461) 30,282 (34,325) (27,504) Benefit (provision) for income taxes.............. 8,563 1,476(g) 10,039 ----------- --------- ---------- ----------- Net income (loss)................................. (14,898) 30,282 (32,849) (17,465) Preferred stock dividends......................... 3,572 3,572 ----------- --------- ---------- ----------- Net income (loss) available to common stock....... $ (18,470) $ 30,282 $ (32,849) $ (21,037) =========== ========= ========== =========== Earnings per share: Basic........................................... $ (0.35) $ (0.32) Diluted......................................... (0.35) (0.32) Weighted average common shares outstanding (000s): Basic........................................... 52,118 13,125(a) 65,243 Diluted......................................... 52,118 13,125(a) 65,243 EBITDAX........................................... $ 220,838(h)
The accompanying notes to the unaudited pro forma condensed combined financial statements are an integral part of these statements. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
ACQUIRED ADJUSTMENTS ADJUSTMENTS WESTPORT BELCO PROPERTIES FOR BELCO FOR THE HISTORICAL HISTORICAL HISTORICAL MERGER TRANSACTIONS PRO FORMA ---------- ---------- ---------- ----------- ------------ --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Operating revenues: Oil and natural gas sales..... $ 234,405 $ 183,002 $ 87,093 $ $ $ 504,500 Hedge settlements............. (1,824) (27,274) (29,098) Gathering income.............. 1,698 1,698 Commodity price risk management activities: Non-hedge cash settlements............ (558) (52,091) (52,649) Non-hedge non-cash change in fair value of derivatives............ 24,486 91,836 116,322 ---------- ---------- -------- -------- --------- --------- Net revenues........... 256,509 195,473 88,791 540,773 ---------- ---------- -------- -------- --------- --------- Operating costs and expenses: Lease operating expenses...... 34,770 26,326 8,375 69,471 Production taxes.............. 8,942 13,472 3,645 26,059 Transportation costs.......... 3,921 3,921 Gathering expense............. 868 868 Exploration................... 24,333 2,798 (i) 27,131 Depreciation, depletion and amortization................ 72,251 38,632 3,968 (j) 16,563 (e) 131,414 Impairment of unproved properties.................. 3,114 3,114 Stock compensation expense.... (1,060) (1,060) General and administrative.... 10,832 6,016 2,609 (k) 19,457 ---------- ---------- -------- -------- --------- --------- Total operating expenses............. 157,103 84,446 12,888 9,375 16,563 280,375 ---------- ---------- -------- -------- --------- --------- Operating income (loss)............... 99,406 111,027 75,903 (9,375) (16,563) 260,398 Other income (expense): Interest expense.............. (4,483) (19,406) (18,544)(f) (42,433) Interest income............... 1,522 163 1,685 Change in fair value of interest rate swap.......... 1,877 1,877 Other......................... 20 20 ---------- ---------- -------- -------- --------- --------- Income (loss) before income taxes......................... 98,342 91,784 75,903 (9,375) (35,107) 221,547 Benefit (provision) for income taxes......................... (35,895) (32,124) 3,281 (l) (14,891)(g) (79,629) ---------- ---------- -------- -------- --------- --------- Net income (loss)............... 62,447 59,660 75,903 (6,094) (49,998) 141,918 Preferred stock dividends....... 397 397 ---------- ---------- -------- -------- --------- --------- Net income (loss) available to common stock.................. $ 62,050 $ 59,660 $ 75,903 $ (6,094) $ (49,998) $ 141,521 ========== ========== ======== ======== ========= ========= Earnings per share: Basic......................... $ 1.53 $ 2.17 Diluted....................... 1.50 2.14 Weighted average common shares outstanding (000s): Basic......................... 40,496 11,547(m) 13,125(a) 65,168 Diluted....................... 41,329 11,547(m) 13,125(a) 66,001 EBITDAX......................... $ 306,380(h)
The accompanying notes to the unaudited pro forma condensed combined financial statements are an integral part of these statements. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001
ACQUIRED ADJUSTMENTS ADJUSTMENTS WESTPORT BELCO PROPERTIES FOR BELCO FOR THE HISTORICAL HISTORICAL HISTORICAL MERGER TRANSACTIONS PRO FORMA ---------- ---------- ---------- ----------- ------------ --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Operating revenues: Oil and natural gas sales.. $ 317,278 $ 183,002 $ 99,071 $ $ $ 599,351 Hedge settlements.......... 2,091 (27,274) (25,183) Gathering income........... 2,309 2,309 Commodity price risk management activities: Non-hedge cash settlements 15,300 (52,091) (36,791) Non-hedge non-cash change in fair value of derivatives............ 14,323 91,836 106,159 Gain (loss) on sale of operating assets, net.... (132) (132) ---------- ---------- ---------- -------- --------- --------- Net revenues........... 348,860 195,473 101,380 645,713 ---------- ---------- ---------- -------- --------- --------- Operating costs and expenses: Lease operating expenses... 55,315 26,326 12,334 93,975 Production taxes........... 13,407 13,472 6,328 33,207 Transportation costs....... 5,157 5,157 Gathering expense.......... 1,151 1,151 Exploration................ 31,313 2,798(i) 34,111 Depreciation, depletion and amortization......... 124,059 38,632 3,968(j) 21,913(e) 188,572 Impairment of proved properties............... 9,423 9,423 Impairment of unproved properties............... 6,974 6,974 Stock compensation expense 719 719 General and administrative. 17,678 6,016 2,609(k) 26,303 ---------- ---------- ---------- -------- --------- --------- Total operating expenses............ 264,045 84,446 19,813 9,375 21,913 399,592 ---------- ---------- ---------- -------- --------- --------- Operating income (loss).............. 84,815 111,027 81,567 (9,375) (21,913) 246,121 Other income (expense): Interest expense........... (13,196) (19,406) (24,552)(f) (57,154) Interest income............ 1,668 163 1,831 Change in fair value of interest rate swap....... 4,960 4,960 Other...................... 211 211 ---------- ---------- ---------- -------- --------- --------- Income (loss) before income taxes...................... 78,458 91,784 81,567 (9,375) (46,465) 195,969 Benefit (provision) for income taxes...................... (28,637) (32,124) 3,281(l) (12,812)(g) (70,292) ---------- ---------- ---------- -------- --------- --------- Net income (loss)............ 49,821 59,660 81,567 (6,094) (59,277) 125,677 Preferred stock dividends.... 1,587 1,587 ---------- ---------- ---------- -------- --------- --------- Net income (loss) available to common stock............... $ 48,234 $ 59,660 $ 81,567 $ (6,094) $ (59,277) $ 124,090 ========== ========== ========== ======== ========= ========= Earnings per share: Basic...................... $ 1.11 $ 1.82 Diluted.................... 1.09 1.80 Weighted average common shares outstanding (000s): Basic:..................... 43,408 11,547(m) 13,125(a) 68,080 Diluted.................... 44,168 11,547(m) 13,125(a) 68,840 EBITDAX...................... $ 381,935(h)
The accompanying notes to the unaudited pro forma condensed combined financial statements are an integral part of these statements. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (1) Basis of Presentation Westport will account for the Acquisition using the purchase method of accounting. The accompanying unaudited pro forma condensed combined balance sheet is presented as if the Transactions had occurred as of September 30, 2002, with pro forma adjustments to give effect to the purchase accounting for the Acquisition, the application of the actual and estimated net proceeds of the Offerings, borrowings under the Replacement Credit Facility and estimated costs incurred related to the Transactions. The accompanying unaudited pro forma condensed combined statements of operations for the year ended December 31, 2001 and the nine months ended September 30, 2001 give effect to the merger with and into Belco. In addition, the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2001 and the nine months ended September 30, 2001 and 2002 give effect to the Acquisition, the application of the actual and estimated net proceeds of the Offerings (assuming the gross proceeds from the Debt Offering are $300.0 million and the Shelf Offering are $187.9 million), and borrowings under the Replacement Credit Facility and repayment of all outstanding indebtedness under the Revolving Credit Facility. The pro forma financial statements do not purport to be indicative either of the results that actually would have been achieved if the transactions reflected therein had been effective during the periods presented or of results which may be obtained in the future. The pro forma financial statements should be read in conjunction with the description of the Transactions contained in Westport's Preliminary Supplemental Prospectus, the historical financial statements and related notes of Westport and the Combined Statements of Revenues and Direct Operating Expenses for the Acquired Properties contained in Westport's Preliminary Supplemental Prospectus or incorporated in Westport's Preliminary Supplemental Prospectus by reference and with the historical consolidated financial statements of Belco. (2) The following notes discuss the pro forma adjustments related to the Acquisition and, for the 2001 unaudited pro forma condensed consolidated statement of operations, Westport's merger with Belco on August 21, 2001. (a) Adjustment to reflect the issuance of 3,125,000 shares in the Private Equity Offering (at $16.00 per share) and 10,000,000 shares in the Shelf Offering (at $19.90 per share). (b) The total purchase price of $519.6 million was calculated and allocated as follows (in thousands): Purchase Price Calculations: Purchase price under Asset Purchase Agreement...... $ 502,000 Purchase price adjustments......................... 17,639 ----------- Total acquisition costs......................... $ 519,639 =========== Allocation of purchase price: Oil and natural gas properties -- proved........... $ 472,522 Oil and natural gas properties -- unproved......... 3,500 Gathering assets................................... 40,851 Assets held for sale............................... 2,766 ----------- Total allocation.............................. $ 519,639 ===========
The purchase price allocation above is subject to change resulting from net cash flows between November 6, 2002 and the closing date of the Acquisition, for the following items: - the actual Acquisition costs incurred and - estimated Acquisition costs including estimated financial advisory, legal and accounting fees. (c) This amount is comprised of $5.8 million of capitalized financing costs relating to the Replacement Credit Facility and $8.0 million of capitalized financing costs relating to the Debt Offering. (d) This amount is the net result of repaying $145 million under the existing Credit Facility, the initial borrowing of $109 million under the Replacement Credit Facility and the new debt of $300 million relating to the Debt Offering. (e) Adjustment to reflect depletion, depreciation and amortization expense is based on the portion of the purchase price allocated to proved properties using the units of production depletion method and is based on estimates of proved reserves of the Acquired Properties as of the beginning of each period presented. The gathering asset depletion, depreciation and amortization expense is based on a 15-year straight line. (f) Interest expense adjustments reflect (i) interest expense associated with borrowings under the Replacement Credit Facility and the notes issued pursuant to the Debt Offering, and (ii) the elimination of historical interest expense related to our Revolving Credit Facility.
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 2001 2001 2002 ------------ ------------ ------------ (DOLLARS IN THOUSANDS) Historical interest expense (Westport and Belco) ...... $ 32,602 $ 23,889 $ 23,891 Elimination of interest expense on debt being repaid .............................................. (2,578) (939) (3,231) Interest expense on new debt(1) ....................... 27,130 19,483 20,627 ------------ ------------ ------------ Total pro forma interest expense ...................... $ 57,154 $ 42,433 $ 41,287 ============ ============ ============ ---------- (1) At assumed average rates of 3.6%, 4.2% and 1.9% for the year ended December 31, 2001 and the nine months ended September 30, 2001 and 2002, respectively (three month London Interbank Offering Rate ("LIBOR"), plus a 1.875% spread) for the Replacement Credit Facility and 8 -1/4% for the Senior Subordinated Notes.
(g) Adjustment to reflect provision for income taxes resulting from pro forma income before income taxes, assuming an effective tax rate of 36.5%. (h) EBITDAX (as used herein) is defined as net income (loss) before interest expense, income taxes, depletion, depreciation and amortization, impairment of unproved properties, impairment of proved properties, exploration expense, non-cash stock compensation expense, non-cash derivative gain (loss), gain (loss) on sale of operating assets and change in fair value of interest rate swap. While EBITDAX should not be considered in isolation or as a substitute for net income (loss), operating income (loss), cash flow provided by operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles or as an indicator of a company's financial performance, we believe that it provides additional information with respect to our ability to meet our future debt service, capital expenditure commitments and working capital requirements. When evaluating EBITDAX, investors should consider, among other factors, (i) increasing or decreasing trends in EBITDAX, (ii) whether EBITDAX has remained at positive levels historically and (iii) how EBITDAX compares to levels of interest expense. Because EBITDAX excludes some, but not all, items that affect net income and is defined differently among companies in our industry, the measure of EBITDAX presented above may not be comparable to similarly titled measures of other companies. (i) Adjustments to expense exploration costs capitalized by Belco (under the full cost method of accounting) to conform to the successful efforts method of accounting utilized by Westport. (j) Adjustment to reflect additional depletion, depreciation and amortization expense resulting from the additional basis of oil and natural gas properties recorded in connection with purchase accounting. The additional pro forma depletion, depreciation and amortization expense was computed based on the portion of the purchase price allocated to proved properties using the units of production depletion method (under the successful efforts method of accounting) based on estimates of proved reserves of the Belco properties as of the beginning of each period presented. (k) Adjustments to expense general and administrative expenses capitalized by Belco (under the full cost method of accounting) to conform to the successful efforts method of accounting utilized by Westport. (l) Adjustment to reflect provision for income taxes resulting from pro forma income before income taxes, assuming an effective tax rate of 35.8%. (m) Adjustment to reflect the elimination of Belco's historical shares outstanding and the issuance of 13,587,425 shares of Westport common stock in connection with the merger of Westport into Belco and the impact of Belco's common stock equivalents. [SIGNATURE PAGE FOLLOWS] SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WESTPORT RESOURCES CORPORATION Date: February 25, 2003 By: /s/ LON MCCAIN Name: Lon McCain Title: Vice President, Chief Financial Officer and Treasurer EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------ ----------- 23.1* Consent of KPMG LLP.
*Filed herewith.