e8vkza
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 30, 2004

NEWFIELD EXPLORATION COMPANY

(Exact name of registrant as specified in its charter)
         
Delaware   1-12534   72-1133047
(State or other jurisdiction   (Commission File Number)   (I.R.S. Employer
of incorporation)       Identification No.)
     
363 N. Sam Houston Parkway E., Suite 2020    
Houston, Texas   77060
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (281) 847-6000

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

TABLE OF CONTENTS

Item 9.01 Financial Statements and Exhibits
SIGNATURES
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA COMBINED SUPPLEMENTARY OIL AND GAS DISCLOSURES
EXHIBIT INDEX
Consent of Hein & Associates LLP
Inland Resources Inc. Consolidated Financial Statements as of December 31, 2003
Inland Resources Inc. Consolidated Financial Statements as of June 30, 2004

Table of Contents

     On August 27, 2004, Newfield Exploration Company acquired Inland Resources Inc. (“Inland”) for $575 million. The purchase was funded through concurrent offerings of Newfield common stock and debt. Newfield issued 5.4 million shares of its common stock at a price to the public of $52.85 per share and $325 million of its 6⅝% senior subordinated notes due 2014.

     On August 30, 2004, Newfield filed a Current Report on Form 8-K (the “Report”) providing the foregoing information under Item 2.01 of the Report and stating under Item 9.01 of the Report that the required historical financial statements and other financial information with respect to Inland and the required pro forma financial information with respect to the acquisition and offerings of common stock and debt would be filed by an amendment to the Report. The Report is hereby amended to replace Item 9.01 of the Report with the following:

Item 9.01 Financial Statements and Exhibits

(a)   Financial statements of businesses acquired.
 
    The following information is filed with this report:

  1.   Inland’s audited consolidated financial statements as of December 31, 2003 and for the calendar year then ended and related notes included therein; and
 
  2.   Inland’s consolidated financial statements as of June 30, 2004 and 2003 and for each of the six month periods then ended.

(b)   Pro forma financial information.

     The unaudited pro forma combined condensed financial statements as of June 30, 2004 and for the six months then ended and for the calendar year ended December 31, 2003 that give effect to the acquisition and the issuance of the common stock and notes described therein begin on page F-1 of this report.

(c)   Exhibits.

  23.1   Consent of Hein & Associates LLP
 
  99.1   Inland Resources Inc. Consolidated Financial Statements as of December 31, 2003 and for the year then ended
 
  99.2   Inland Resources Inc. Consolidated Financial Statements as of June 30, 2004 and for the six month periods ended June 30, 2004 and June 30, 2003

EXPERTS

     The consolidated financial statements of Inland filed herewith as of December 31, 2003 and for the year then ended have been audited by Hein & Associates LLP, as set forth in their report thereon filed herewith. Such consolidated financial statements are filed herewith in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

1

Table of Contents

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
    NEWFIELD EXPLORATION COMPANY
 
        
Date: November 12, 2004
  By:   /s/ TERRY W. RATHERT
     
 
      Terry W. Rathert
Senior Vice President and Chief Financial Officer
(Authorized Officer and Principal Financial Officer)

2

Table of Contents

NEWFIELD EXPLORATION COMPANY

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

     On August 27, 2004, Newfield Exploration Company acquired Inland Resources Inc. for $575 million. The purchase was funded through concurrent offerings of Newfield common stock and debt. Newfield issued 5.4 million shares of its common stock at a price to the public of $52.85 per share and $325 million of its 6⅝% senior subordinated notes due 2014.

     The following summary unaudited pro forma combined condensed financial information combines the historical consolidated balance sheets and income statements of Newfield and Inland and gives effect to the issuance of the common stock and the notes and to the acquisition using the purchase method of accounting.

     The unaudited pro forma combined condensed financial information is based on the following assumptions and adjustments:

  •   the income statement data assume that the issuance of the common stock and the notes and the acquisition were effected on January 1, 2003;

  •   the balance sheet data assume that the issuance of the common stock and the notes and the acquisition were effected on June 30, 2004;

  •   the balance sheet and income statement data reflect Newfield’s use of the net proceeds from the issuance of the common stock and the notes to acquire Inland and to pay transaction costs; and

  •   the historical financial statements of Inland have been adjusted to conform to the accounting policies of Newfield.

     The historical income statement information for the year ended December 31, 2003 is derived from the audited financial statements of Inland and Newfield. The historical income statement information for the six-month period ended June 30, 2004 and the historical balance sheet information as of June 30, 2004 are derived from the unaudited financial statements of Inland and Newfield. The unaudited pro forma combined condensed financial information should be read together with the historical financial statements and related notes of Newfield and Inland.

     The unaudited pro forma combined condensed financial information is presented for illustrative purposes only. The financial results may have been different if the companies had always been combined or if the transactions had occurred as of the dates indicated above. They do not purport to indicate the future results that Newfield will experience. Further, the unaudited pro forma combined condensed financial information does not reflect the effect of restructuring charges that will be incurred to fully integrate and operate the combined organization more efficiently or anticipated synergies resulting from the acquisition. The restructuring activities to integrate the companies may result in asset rationalization and other activities.

F-1

Table of Contents

NEWFIELD EXPLORATION COMPANY

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME

(In thousands, except per share data)
                                     
    Six Months Ended June 30, 2004
    Historical   Historical            
    Newfield   Inland   Pro forma   Pro forma
    Exploration
   Resources
   Adjustments
   Combined
Oil and gas revenues
   $ 588,092     $ 32,450     $ —         $ 620,542  
 
    
 		      
 		      
 		          
 		  
Operating expenses:
                                    
Lease operating
     62,212       6,255       —           68,467  
Production and other taxes
     17,453       570       —           18,023  
Exploration
     —       48       (48 ) (a )     —  
Gain on lease sales
     —       (310 )     310   (b )     —  
Depreciation, depletion and amortization
     211,077       8,557       (8,395 ) (c )     226,947  
 
                     15,708   (d )        
General and administrative
     37,621       17,800       —           55,421  
 
    
 		      
 		      
 		          
 		  
Total operating expenses
     328,363       32,920       7,575           368,858  
 
    
 		      
 		      
 		          
 		  
Income (loss) from operations
     259,729       (470 )     (7,575 )         251,684  
Other income (expenses):
                                    
Interest expense, net
     (16,144 )     (3,064 )     (59 ) (e )     (14,741 )
 
                     12,292   (f )        
 
                     3,132   (g )        
 
                     (10,898 ) (h )        
Commodity derivative expense
     (17,835 )     —       —           (17,835 )
Other
     1,000       237       —           1,237  
 
    
 		      
 		      
 		          
 		  
Total other income (expenses)
     (32,979 )     (2,827 )     4,467           (31,339 )
 
    
 		      
 		      
 		          
 		  
Income (loss) before income taxes
     226,750       (3,297 )     (3,108 )         220,345  
Income tax provision (benefit)
     81,428       —       (2,242 ) (i )     79,186  
 
    
 		      
 		      
 		          
 		  
Net income (loss)
   $ 145,322     $ (3,297 )   $ (866 )       $ 141,159  
 
    
 		      
 		      
 		          
 		  
Basic earnings per common share
   $ 2.59                         $ 2.30  
 
    
 		                          
 		  
Diluted earnings per common share
   $ 2.55                         $ 2.27  
 
    
 		                          
 		  
Weighted average number of shares outstanding for basic earnings per share
     56,019               5,405   (j )     61,424  
 
    
 		                          
 		  
Weighted average number of shares outstanding for diluted earnings per share
     56,884               5,405   (j )     62,289  
 
    
 		                          
 		  

See accompanying Notes to Unaudited Pro forma Combined Condensed Financial Statements.

F-2

Table of Contents

NEWFIELD EXPLORATION COMPANY

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME

(In thousands, except per share data)
                                     
    Year Ended December 31, 2003
    Historical                
    Newfield   Historical   Pro forma   Pro forma
    Exploration
   Inland Resources
   Adjustments
   Combined
Oil and gas revenues
   $ 1,016,986     $ 38,918     $ —         $ 1,055,904  
 
    
 		      
 		      
 		          
 		  
Operating expenses:
                                    
Lease operating
     125,649       10,253       —           135,902  
Production and other taxes
     31,737       520       —           32,257  
Exploration
     —       126       (126 ) (a )     —  
Gain on lease sales
     —       (4,227 )     4,227   (b )     —  
Depreciation, depletion and amortization
     394,701       11,406       (11,142 ) (c )     422,460  
 
                     27,495   (d )        
General and administrative
     61,636       1,579       —           63,215  
Gas sales obligation and redemption of securities
     20,475       —       —           20,475  
 
    
 		      
 		      
 		          
 		  
Total operating expenses
     634,198       19,657       20,454           674,309  
 
    
 		      
 		      
 		          
 		  
Income (loss) from operations
     382,788       19,261       (20,454 )         381,595  
Other income (expenses):
                                    
Interest expense, net
     (41,860 )     (11,108 )     (74 ) (e )     (39,352 )
 
                     24,652   (f )        
 
                     10,833   (g )        
 
                     (21,795 ) (h )        
Commodity derivative income (expense)
     (6,102 )     231       —           (5,871 )
Dividends on convertible preferred securities of Newfield Financial Trust I
     (4,581 )     —       —           (4,581 )
Other
     1,374       273       —           1,647  
 
    
 		      
 		      
 		          
 		  
Total other income (expenses)
     (51,169 )     (10,604 )     13,616           (48,157 )
 
    
 		      
 		      
 		          
 		  
Income (loss) from continuing operations before income taxes
     331,619       8,657       (6,838 )         333,438  
Income tax provision
     120,713       —       637   (i )     121,350  
 
    
 		      
 		      
 		          
 		  
Income (loss) from continuing operations
   $ 210,906     $ 8,657     $ (7,475 )       $ 212,088  
 
    
 		      
 		      
 		          
 		  
Earnings per share:
                                    
Basic:
                                    
Income from continuing operations
   $ 3.88                         $ 3.55  
 
    
 		                          
 		  
Diluted:
                                    
Income from continuing operations
   $ 3.77                         $ 3.46  
 
    
 		                          
 		  
Weighted average number of shares outstanding for basic earnings per share
     54,347               5,405   (j )     59,752  
 
    
 		                          
 		  
Weighted average number of shares outstanding for diluted earnings per share
     56,744               5,405   (j )     62,149  
 
    
 		                          
 		  

See accompanying Notes to Unaudited Pro forma Combined Condensed Financial Statements.

F-3

Table of Contents

NEWFIELD EXPLORATION COMPANY

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

(In thousands, except per share data)
                                                 
    As of June 30, 2004
                    Notes and              
                    Common Stock     Inland      
    Historical   Historical   Offering     Acquisition      
    Newfield   Inland   Pro forma     Pro forma     Pro forma
    Exploration
   Resources
   Adjustments
     Adjustments
     Combined
ASSETS
                                                
Current assets
   $ 296,709     $ 15,714     $ 325,000   (k )   $ (651 ) (m )   $ 911,019  
 
                     (2,638 ) (k )                    
 
                     276,885   (j )                    
Oil and gas properties
     4,466,684       297,156       —           (297,156 ) (l )     5,189,346  
 
                                 722,662   (m )        
Other property and equipment, net
     —       9,957       —           (9,957 ) (n )     —  
Less – accumulated depreciation, depletion and amortization
     (1,864,889 )     (71,174 )     —           71,174   (l )     (1,864,889 )
 
    
 		      
 		      
 		          
 		          
 		  
Net property, plant and equipment
     2,601,795       235,939       —           486,723           3,324,457  
 
    
 		      
 		      
 		          
 		          
 		  
Floating production system and pipelines
     35,000       —       —           —           35,000  
Other assets
     26,241       3,117       2,638   (k )     (2,200 ) (o )     39,867  
 
                                 10,071   (m )        
Goodwill
     16,378       —       —           49,612   (m )     65,990  
 
    
 		      
 		      
 		          
 		          
 		  
Total assets
   $ 2,976,123     $ 254,770     $ 601,885         $ 543,555         $ 4,376,333  
 
    
 		      
 		      
 		          
 		          
 		  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                            
Current liabilities
   $ 430,977     $ 38,720     $ —         $ (21,224 ) (m )   $ 476,457  
 
                                 30,575   (m )        
 
                                 (2,591 ) (q )        
Long-term debt
     579,559       124,479       325,000   (k )     2,644   (m )     904,559  
 
                                 2,100   (p )        
 
                                 (129,223 ) (q )        
Asset retirement obligation
     158,283       3,805       —           —           162,088  
Deferred taxes
     267,994       —       —           171,140   (m )     439,134  
Other liabilities
     26,230       —       —           —           26,230  
 
    
 		      
 		      
 		          
 		          
 		  
Total long-term liabilities
     1,032,066       128,284       325,000           46,661           1,532,011  
 
    
 		      
 		      
 		          
 		          
 		  
Stockholders’ equity
     1,513,080       87,766       276,885   (j )     490,134   (m )     2,367,865  
 
    
 		      
 		      
 		          
 		          
 		  
Total liabilities and stockholders’ equity
   $ 2,976,123     $ 254,770     $ 601,885         $ 543,555         $ 4,376,333  
 
    
 		      
 		      
 		          
 		          
 		  

See accompanying Notes to Unaudited Pro forma Combined Condensed Financial Statements.

F-4

Table of Contents

NEWFIELD EXPLORATION COMPANY

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

(a)   To record the reversal of historical Inland exploration expense recorded in accordance with the successful efforts method of accounting for oil and gas activities. No such expense is recorded under the full cost method of accounting for oil and gas activities, which method is utilized by Newfield.
 
(b)   To record the reversal of the historical Inland gain on lease sales recorded in accordance with the successful efforts method of accounting for oil and gas activities. No such gain is recorded under the full cost method of accounting for oil and gas activities, which is utilized by Newfield.
 
(c)   To record the reversal of historical Inland depreciation, depletion and amortization expense recorded in accordance with the successful efforts method of accounting for oil and gas activities.
 
(d)   To record pro forma depreciation, depletion and amortization expense in accordance with the full cost method of accounting for oil and gas activities based on the purchase price allocation to depreciable and depletable assets.
 
(e)   To reverse historical Inland capitalized interest.
 
(f)   To record the capitalization of interest based on the allocation of the purchase price to unproved oil and gas properties.
 
(g)   To eliminate the historical Inland interest expense (including amortization of debt issuance costs) of $3.1 million and $10.8 million for the six months ended June 30, 2004 and the year ended December 31, 2003, respectively, related to Inland’s debt.
 
(h)   To reflect the interest expense that results from the issuance of the notes with a stated interest rate of 6⅝%. The notes were issued at par. Pro forma interest expense, which includes amortization of debt issuance costs, is calculated as follows:
                 
    For the six months ended   For the year ended
    June 30, 2004
   December 31, 2003
    (In thousands)
Interest expense – $325 million senior subordinated notes due 2014
   $ 10,766     $ 21,531  
Amortization of debt issuance costs – senior subordinated notes due 2014
     132       264  
 
    
 		      
 		  
 
   $ 10,898     $ 21,795  
 
    
 		      
 		  

(i)   To record pro forma income tax expense adjustments based on the applicable statutory tax rate of 35%.
 
(j)   To record the issuance of 5.4 million shares of Newfield common stock.
 
(k)   To reflect the issuance of the notes and the associated debt issuance costs related to the notes.
 
(l)   To reverse Inland’s historical oil and gas property balances and the related accumulated depreciation, depletion and amortization recorded in accordance with the successful efforts method of accounting for oil and gas activities.

F-5

Table of Contents

NEWFIELD EXPLORATION COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS—(Continued)

(m)   To record the preliminary pro forma allocation of the purchase price of the acquisition of Inland using the purchase method of accounting. The following is a calculation and allocation of purchase price to the acquired assets and liabilities based on their relative fair values:
         
Calculation of purchase price (in millions):
        
Purchase price
   $ 575.0  
Working capital
     2.2  
Accrued expenses
     0.7  
 
    
 		  
Total purchase price
   $ 577.9  
 
    
 		  
Allocation of purchase price (in millions):
        
Current assets
   $ 15.0  
Oil and gas properties
     722.7  
Other property and equipment, net
     10.1  
Goodwill
     49.6  
Other assets
     0.9  
 
    
 		  
Total assets acquired
     798.3  
 
    
 		  
Current liabilities
     14.9  
Derivative liabilities
     30.6  
Asset retirement obligation
     3.8  
Deferred tax liability
     171.1  
 
    
 		  
Total liabilities acquired
     220.4  
 
    
 		  
Net assets acquired
   $ 577.9  
 
    
 		  

(n)   To reclassify historical Inland furniture, fixtures and equipment and associated accumulated depreciation, depletion and amortization balances to conform to Newfield’s presentation.
 
(o)   To record the reversal of historical Inland capitalized debt issuance costs related to long-term debt.
 
(p)   To record early termination fees related to Inland’s outstanding debt.
 
(q)   To record repayment of Inland’s outstanding debt.

F-6

Table of Contents

NEWFIELD EXPLORATION COMPANY

UNAUDITED PRO FORMA COMBINED SUPPLEMENTARY OIL AND GAS DISCLOSURES

     The following pro forma estimated reserve quantities show the effect of the acquisition as if it had occurred on December 31, 2003.

                                 
    Historical   Historical        
    Newfield   Inland   Pro forma   Pro forma
    Exploration
   Resources
   Adjustments (a)
   Combined
Proved:
                                
Oil and condensate (MBbls)
     37,774       53,099       (4,558 )     86,315  
Gas (MMcf)
     1,090,140       74,531       (31,886 )     1,132,785  
Total (MMcfe)
     1,316,786       393,125       (59,234 )     1,650,677  
Proved developed:
                                
Oil and condensate (MBbls)
     30,714       19,591       (2,358 )     47,947  
Gas (MMcf)
     958,232       18,475       2,072       978,779  
Total (MMcfe)
     1,142,521       136,021       (12,076 )     1,266,466  

(a)   Represents adjustments to Inland’s reserves based on Newfield’s estimate of Inland’s reserves as of December 31, 2003.

F-7

Table of Contents

NEWFIELD EXPLORATION COMPANY

UNAUDITED PRO FORMA COMBINED SUPPLEMENTARY OIL AND GAS DISCLOSURES

     The following pro forma estimated standardized measure of discounted future net cash flows shows the effect of the acquisition as if it had occurred on December 31, 2003.

                                 
    Historical   Historical        
    Newfield   Inland   Pro forma   Pro forma
    Exploration
   Resources
   Adjustments (a)
   Combined
Future cash inflows
   $ 7,629,474     $ 1,923,536     $ (421,160 )   $ 9,131,850  
Less related future:
                                
Production costs
     (1,379,869 )     (443,892 )     (26,591 )     (1,850,352 )
Development and abandonment costs
     (451,135 )     (207,299 )     (48,192 )     (706,626 )
 
    
 		      
 		      
 		      
 		  
Future net cash flows before income taxes
     5,798,470       1,272,345       (495,943 )     6,574,872  
Future income tax expense
     (1,462,881 )     (433,346 )     232,943       (1,663,284 )
 
    
 		      
 		      
 		      
 		  
Future net cash flows before 10% discount
     4,335,589       838,999       (263,000 )     4,911,588  
10% annual discount for estimating timing of cash flows
     (1,400,150 )     (458,846 )     210,246       (1,648,750 )
 
    
 		      
 		      
 		      
 		  
Standardized measure of discounted future net cash flows
   $ 2,935,439     $ 380,153     $ (52,754 )   $ 3,262,838  
 
    
 		      
 		      
 		      
 		  

(a)   Represents adjustments attributable to Inland’s reserves based on Newfield’s estimate of Inland’s reserves as of December 31, 2003.

F-8

Table of Contents

EXHIBIT INDEX

     
Exhibit Number
   Description
23.1
  Consent of Hein & Associates LLP
 
    
99.1
  Inland Resources Inc. Consolidated Financial Statements as of December 31, 2003 and for the year then ended
 
    
99.2
  Inland Resources Inc. Consolidated Financial Statements as of June 30, 2004 and for each of the six month periods ended June 30, 2004 and June 30, 2003