improvement costs to existing equipment and machinery. Capital expenditures are
expected to decrease from fiscal 1995 levels due to less capital improvements
for the WellTech West Texas operations acquired during fiscal 1995. Financing of
capital expenditures is expected to come from the operating cash flows of Yale
E. Key. Working capital requirements for WellTech West Texas were met through
the additional cash flows generated from the additional equipment, the acquired
WellTech West Texas accounts receivable and the additional borrowings. Capital
expenditures were approximately $4.4 million in fiscal 1994.
Odessa Exploration is forecasting approximately $3.0 million in oil and
gas property acquisitions for fiscal 1996 compared to $2.8 million during fiscal
1995, and $6.0 million in development costs for fiscal 1996 as compared to $3.7
million during fiscal 1995. Oil and gas acquisitions aggregated $2,150,000 for
the six months ended December 31, 1995. Financing of oil and gas acquisitions is
expected to come from borrowings and/or private investors.
Clint Hurt has forecast approximately $500,000 for oil and gas drilling
capital expenditures for fiscal 1996 primarily for improvements to existing
equipment and machinery. Such outlays are treated as capital costs. Financing is
expected to come from existing cash flow.
In January 1995, Key received $2.5 million in term note proceeds from
its principal lender. The term note is collateralized by the additional
equipment Key received from the WellTech West Texas acquisition and was used for
working capital purposes. The term note, requires monthly principal payments of
approximately $42,000 plus interest, with the unpaid balance of the note due
December 31, 1996. The interest rate is 2 1/2% above the stated prime rate, 9.0%
at June 30, 1995. A portion of the note has been classified as current in the
accompanying balance sheet.
During March 1995, Odessa Exploration refinanced its debt
(approximately $2.8 million at March 31, 1995) with Norwest Bank Texas, Midland,
N.A. ("Norwest"). The refinanced debt consists of a $7.5 million reducing
revolver with a current borrowing base of $5.3 million. As of September 30,
1995, $5.5 million principal amount of debt was outstanding under this
arrangement. The revolver requires the borrowing base to be reduced by
approximately $60,000 per month. The revolver has an interest rate of Norwest
prime rate (9.0% at June 30, 1995), plus 1/2 of one percent, payable monthly.
The note matures on October 15, 1997. The revolver is secured by substantially
all of the oil and gas properties of Odessa Exploration and is guaranteed by
Key. In addition, the revolver has cross-default provisions and
cross-collateralization provisions with Clint Hurt.
As a result of the purchase of the Clint Hurt drilling equipment, Clint
Hurt borrowed $1.0 million from Norwest. The loan requires monthly principal
payments of approximately $28,000 until maturity in April 1998. The loan bears
interest at the Norwest prime rate (9.0% at June 30, 1995), plus 3/4 of one
percent, is secured by all of the equipment of Clint Hurt and is guaranteed by
Key. In addition, Clint Hurt obtained a working capital line of credit with
Norwest in the amount of $200,000. The line of credit requires monthly principal
and interest payments of $20,000, bears interest at the Norwest prime rate (9.0%
at June 30, 1995), plus 3/4 of one percent, is secured by all of the equipment
of Clint Hurt and is guaranteed by Key.