================================================================================ FORM 8-K/A-2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: July 13, 1999 Commission file number 1-12579 OGE ENERGY CORP. (Exact name of registrant as specified in its charter) Oklahoma 73-1481638 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 321 North Harvey P. O. Box 321 Oklahoma City, Oklahoma 73101-0321 (Address of principal executive offices) (Zip Code) 405-553-3000 (Registrant's telephone number, including area code) ================================================================================
On September 13, 1999 the Registrant filed Amendment No. 1 to its July 13, 1999 Form 8-K. Amendment No. 1 included financial and pro forma financial information. This Amendment No. 1 contained errors in the pro forma financial information. Therefore, Registrant is filing this Amendment No. 2 to Form 8-K to amend and modify Item 7 of the Form 8-K to read in its entirety as follows: ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS - ------------------------------------------ ENOGEX INC. COMPLETES ACQUISITION OF TEJAS TRANSOK HOLDING, L.L.C. As previously reported on it's Form 8-K dated July 13, 1999, OGE Energy Corp. (the "Company") announced, that its subsidiary, Enogex Inc. ("Enogex"), had completed its acquisition of Tejas Transok Holding, L.L.C. ("Transok"), a gatherer, processor, and transporter of natural gas in Oklahoma and Texas on July 1, 1999. Transok's principal assets include approximately 4,900 miles of natural gas pipelines in Oklahoma and Texas with a capacity of approximately 1.2 billion cubic feet per day and 18 billion cubic feet of underground gas storage. Transok also owns 9 gas processing plants, which produced approximately 25,000 barrels per day of natural gas liquids in 1998. Enogex purchased Transok from Tejas Energy L.L.C. of Houston, an affiliate of Shell Oil Company, for approximately $710.3 million, which includes assumption of $173 million of long-term debt. The purchase of Transok was temporarily funded through a new revolving credit agreement with a consortium of banks with The First National Bank of Chicago serving as agent. The Company expects that this financing will be replaced with permanent financing. Enogex, a subsidiary of the Company, is a non-regulated natural gas gathering, processing, transportation, production, and energy services company with principal pipeline operations in Oklahoma, Arkansas, and Texas. The transaction will be treated as a purchase for accounting purposes. Some of the matters discussed in this Form 8-K may contain forward-looking statements of the Company that are subject to certain risks, uncertainties, and assumptions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including their impact on capital expenditures; business conditions in the energy industry; competitive factors; unusual weather; regulatory decisions and other risk factors listed in the Company's Form 10-K for the year ended December 31, 1998 and other factors described from time to time in the Company's reports to the Securities and Exchange Commission. (a) Financial Statements of Business Acquired
TEJAS TRANSOK HOLDING, L.L.C. CONSOLIDATED BALANCE SHEETS (In thousands) December 31 June 30 --------------------------- ------------ 1998 1997 1999 ------------ ------------ ------------ (Unaudited) ASSETS CURRENT ASSETS: Cash............................................................... $ 27 $ 1,015 $ 29 Accounts receivable, net of allowance for doubtful accounts of $2,139 and $3,584 at December 31, 1998 and 1997, respectively.... 51,952 65,662 42,313 Pipeline imbalances receivable..................................... 11,781 13,623 10,852 Due from affiliate................................................. 10,192 7,640 32,822 Due from parent.................................................... - 52,923 - Inventories- Natural gas held in storage...................................... 37,521 23,675 - Materials and supplies........................................... 2,875 2,840 3,324 Natural gas liquids.............................................. - 96 - Prepaids and other................................................. 416 865 443 Deferred taxes..................................................... - 4,552 - ------------ ------------ ------------ Total current assets........................................... 114,764 172,891 89,783 ------------ ------------ ------------ PROPERTY, PLANT AND EQUIPMENT: Gathering and transmission assets.................................. 727,148 699,064 737,694 Gas processing assets.............................................. 182,117 131,233 183,034 Other property and equipment....................................... 25,015 30,483 20,721 Natural gas storage facility....................................... 43,910 20,637 43,778 Construction work in progress...................................... 5,218 26,165 26,247 ------------ ------------ ------------ 983,408 907,582 1,011,474 Less-Accumulated depreciation and amortization.................... 34,263 48,368 66,860 ------------ ------------ ------------ Total property, plant and equipment, net....................... 949,145 859,214 944,614 ------------ ------------ ------------ OTHER ASSETS: Investment in unconsolidated entity................................ 10,890 7,045 - Goodwill, net of amortization...................................... 382,156 - 372,100 Assets held for sale............................................... 19,652 - - Other assets and deferred charges.................................. 182 4,600 - ------------ ------------ ------------ Total other assets............................................. 412,880 11,645 372,100 ------------ ------------ ------------ TOTAL ASSETS......................................................... $ 1,476,789 $ 1,043,750 $ 1,406,497 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 2TEJAS TRANSOK HOLDING, L.L.C. CONSOLIDATED BALANCE SHEETS (In thousands except share information) December 31 June 30 --------------------------- ------------ 1998 1997 1999 ------------ ------------ ------------ (Unaudited) LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable................................................... $ 46,825 $ 67,716 $ 46,855 Pipeline imbalances payable........................................ 10,613 12,068 8,265 Accrued liabilities- Interest......................................................... 6,180 7,926 6,180 Ad valorem taxes and other....................................... 14,380 10,718 5,617 Due to parent...................................................... 11,564 - 4,160 Current portion of long-term debt - parent......................... 585,878 36,148 571,144 Current portion of long-term debt.................................. 23,000 279,000 15,000 ------------ ------------ ------------ Total current liabilities...................................... 698,440 413,576 657,221 ------------ ------------ ------------ OBLIGATIONS DUE AFTER ONE YEAR: Long-term debt..................................................... 173,000 196,000 173,000 Long-term capital lease obligation................................. - 125,000 - ------------ ------------ ------------ Total obligations due after one year........................... 173,000 321,000 173,000 ------------ ------------ ------------ DEFERRED INCOME TAXES................................................ - 13,423 - ------------ ------------ ------------ Total liabilities.............................................. 871,440 747,999 830,221 ------------ ------------ ------------ COMMITMENTS AND CONTINGENCIES (Notes 9 and 10) MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES....................... - 9,402 - STOCKHOLDER'S EQUITY: Common stock, $1 par value, 1,000 shares authorized, 1,000 shares issued and outstanding.................................... 1 1 1 Capital in excess of par value..................................... 685,655 289,326 685,655 Retained deficit................................................... (80,307) (2,978) (109,380) ------------ ------------ ------------ Total stockholder's equity..................................... 605,349 286,349 576,276 ------------ ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY........................... $ 1,476,789 $ 1,043,750 $ 1,406,497 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 3TEJAS TRANSOK HOLDING, L.L.C. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands) Years ended Six months ended December 31 June 30 --------------------------- --------------------------- 1998 1997 1999 1998 ------------ ------------ ------------ ------------ (Unaudited) REVENUES: Natural gas sales - marketing.................. $ 327,570 $ 389,165 $ 160,865 $ 172,881 Natural gas products sales - marketing......... 85,499 142,883 56,675 47,936 Gathering and transmission fees and services... 40,760 61,965 20,465 23,672 Interest and other............................. 22,384 29,509 13,812 9,219 ------------ ------------ ------------ ------------ Total revenues............................. 476,213 623,522 251,817 253,708 ------------ ------------ ------------ ------------ COSTS AND EXPENSES: Natural gas and gas products purchased for resale....................................... 332,869 387,081 156,090 181,860 Operating expenses- Gathering and transmission................... 25,312 24,389 10,012 8,108 Natural gas processing....................... 79,903 123,777 48,851 43,210 General and administrative................... 19,333 23,673 12,746 9,880 Depreciation and amortization.................. 55,661 31,866 28,593 26,704 Interest and debt amortization................. 20,738 39,166 7,439 9,334 Interest, parent............................... 24,447 812 13,174 10,520 Taxes, other than income taxes................. 7,284 6,864 4,039 3,510 ------------ ------------ ------------ ------------ Total costs and expenses................... 565,547 637,628 280,944 293,126 ------------ ------------ ------------ ------------ LOSS BEFORE EQUITY EARNINGS OF UNCONSOLIDATED ENTITY, PROVISION (BENEFIT) FOR INCOME TAXES AND MINORITY INTEREST.................... (89,334) (14,106) (29,127) (39,418) EQUITY EARNINGS IN UNCONSOLIDATED ENTITY......... 407 778 54 396 PROVISION (BENEFIT) FOR INCOME TAXES: Current........................................ - 19 - - Deferred....................................... (8,871) (5,098) - (8,871) ------------ ------------ ------------ ------------ Total benefit for income taxes............. (8,871) (5,079) - (8,871) ------------ ------------ ------------ ------------ MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARIES...................... (251) (1,568) - - ------------ ------------ ------------ ------------ NET LOSS......................................... $ (80,307) $ (9,817) $ (29,073) $ (30,151) ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4TEJAS TRANSOK HOLDING, L.L.C. CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) (In thousands except share information) Capital in Retained Total Common Stock Excess of Par Earnings Stockholder's ------------------ Shares Amount Value (Deficit) Equity ------ ------- ------------- ---------- ------------- BALANCE, December 31, 1996................ 1,000 $ 1 $ 289,326 $ 6,839 $ 296,166 Net loss................................ - - - (9,817) (9,817) ------ ------- ------------- ---------- ------------- BALANCE, December 31, 1997................ 1,000 1 289,326 (2,978) 286,349 Push down of purchase price............. - - 396,329 2,978 399,307 Net loss................................ - - - (80,307) (80,307) ------ ------- ------------- ---------- ------------- BALANCE, December 31, 1998................ 1,000 1 685,655 (80,307) 605,349 Net loss (unaudited)................... - - - (29,073) (29,073) ------ ------- ------------- ---------- ------------- BALANCE, June 30, 1999 (unaudited)........ 1,000 $ 1 $ 685,655 $(109,380) $ 576,276 ====== ======= ============= ========== =============
The accompanying notes are an integral part of these consolidated financial statements. 5TEJAS TRANSOK HOLDING, L.L.C. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years ended Six months ended December 31 June 30 --------------------------- --------------------------- 1998 1997 1999 1998 ------------ ------------ ------------ ------------ (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss....................................... $ (80,307) $ (9,817) $ (29,073) $ (30,151) Adjustments to reconcile net loss to net cash provided by (used in) operating activities- Depreciation and amortization.............. 55,661 31,866 28,593 26,704 Deferred income tax provision.............. 8,871 5,098 - 8,871 Equity earnings in unconsolidated entity... (407) (778) (54) (396) Minority interest in net income of consolidated subsidiaries................ 251 1,568 - - Changes in current assets and liabilities: Accounts receivable...................... 13,710 45,115 9,639 15,845 Pipeline imbalances receivable........... 1,842 (3,282) 929 (8) Due from affiliate....................... (2,552) (4,961) (22,630) 15,867 Due from parent.......................... 52,923 (37,072) (7,404) 52,923 Inventories.............................. (13,785) (8,423) 37,072 (2,475) Prepaids and other....................... 449 21,542 (27) (3,554) Accounts payable......................... (20,891) (40,942) 30 (8,002) Pipeline imbalances payable.............. (1,455) 8,971 (2,348) (2,923) Accrued liabilities...................... 1,916 (23,993) (8,763) (2,687) Due to parent............................ 11,564 - - - Other assets and deferred charges.......... 4,418 4,557 182 (2,841) ------------ ------------ ------------ ------------ Net cash provided by (used in) operating activities................. 32,208 (10,551) 6,146 67,173 ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to gathering and transmission assets........................................ (81,506) (69,445) (13,136) (33,224) Additions to gas processing assets............. (44,249) (7,201) (602) (3,988) Additions to other property and equipment...... (2,794) (9,076) (321) (1,317) Additions to natural gas storage facility...... (21,024) (9,683) (221) (21,024) Additions to assets held for sale.............. (19,652) - - (19,652) Proceeds from sale of fixed assets............. - 11,598 328 4,405 Proceeds from sale of assets held for sale..... - - 19,652 - Distributions to minority interest owners...... (9,701) (175) - (385) ------------ ------------ ------------ ------------ Net cash provided by (used in) investing activities.................. (178,926) (83,982) 5,700 (75,185) ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these consolidated financial statements. 6TEJAS TRANSOK HOLDING, L.L.C. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years ended Six months ended December 31 June 30 --------------------------- --------------------------- 1998 1997 1999 1998 ------------ ------------ ------------ ------------ (Unaudited) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (payment of) note payable to parent..................................... $ 549,730 $ - $ (3,844) $ 411,357 Proceeds from (payment of) line of credit...... (275,000) 79,220 - (275,000) Payment of capital lease obligation............ (125,000) - - (125,000) Payment of long-term debt...................... (4,000) - (8,000) (4,000) ------------ ------------ ------------ ------------ Net cash provided by (used in) financing activities.................................. 145,730 79,220 (11,844) 7,357 ------------ ------------ ------------ ------------ NET (DECREASE) INCREASE IN CASH.................. (988) (15,313) 2 (655) CASH, beginning of period........................ 1,015 16,328 27 1,015 ------------ ------------ ------------ ------------ CASH, end of period.............................. $ 27 $ 1,015 $ 29 $ 360 ============ ============ ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for- Interest..................................... $ 22,727 $ 29,857 $ 8,817 $ 13,961
The accompanying notes are an integral part of these consolidated financial statements. 7TEJAS TRANSOK HOLDING, L.L.C. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 1. ORGANIZATION: Tejas Transok Holding, L.L.C. ("Transok") is a natural gas pipeline company engaged in the business of purchasing, gathering, processing, storing, transporting and marketing natural gas and natural gas products. Transok's operations are situated primarily in the major gas producing areas in Oklahoma. Transok conducts operations through Transok, L.L.C. Transok L.L.C. owns 100 percent of Transok Gas, L.L.C., Transok Gas Processing, L.L.C., and Transok Properties, L.L.C. Transok, through Transok Properties, L.L.C., owned an undivided one-half interest in Downtown Plaza II, an Oklahoma partnership, which owned the office building Transok occupies in Tulsa, Oklahoma. During November 1998, the building was sold to a third party, see Note 7. Transok also owns three gas gathering systems (East Caddo Gas Gathering System, Mistletoe Gas Gathering System and West Caddo Gas Gathering System). Prior to June 1998, Transok was the majority owner of these systems and consolidated their activities while recognizing the obligation for the minority interest. In June 1998, Transok purchased the remaining interest in the partnerships for approximately $11 million. In June 1996, Transok, Inc. became an indirect wholly-owned subsidiary of Tejas Gas Corporation ("Tejas") when the common stock of Transok, Inc. was acquired from Central South West Corporation ("CSW"). Tejas acquired Transok, Inc. from CSW through a merger of Tejas Transok Holding, L.L.C., a wholly-owned subsidiary of Tejas. This acquisition was accounted for using the purchase method of accounting. Effective January 12, 1998, Tejas became a wholly-owned subsidiary of Shell Oil Company ("Shell"). As a result of this acquisition, which was accounted for using the purchase method of accounting, Transok was allocated goodwill of approximately $402.3 million due to the push down of basis resulting from the purchase price paid by Shell for the acquisition of Tejas. The operations of Transok from January 1, 1998 to January 12, 1998 are not material to the results of operations of Transok for 1998. Thus, the accompanying consolidated financial statements present the activities of Transok as if the Shell acquisition occurred on January 1, 1998. Transok conducts its business within one industry segment. INTERIM CONSOLIDATED FINANCIAL INFORMATION The interim consolidated financial statements as of June 30, 1999, and for the six months ended June 30, 1999 and 1998, are unaudited, and certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included. 8
2. SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts and operations of Transok and its subsidiaries. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTING PRINCIPLES In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and for Hedging Activities." The implementation of SFAS No. 133 was delayed under SFAS No. 137 to fiscal years beginning after June 15, 2000. Transok will adopt this new standard effective January 1, 2001. Management has not yet determined whether the adoption of this new standard will have a material impact on its consolidated financial position or results of operations. In December 1998, the FASB Emerging Issues Task Force reached consensus on Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities" ("EITF 98-10"). EITF 98-10 is effective for fiscal years beginning after December 15, 1998. EITF 98-10 requires energy trading contracts to be recorded at fair value on the balance sheet, with changes in fair value included in earnings. Transok adopted EITF 98-10 effective January 1, 1999. The effect of adopting this EITF was not material to its consolidated financial position or results of operations. PIPELINE IMBALANCES In the normal course of operations, Transok occasionally overdelivers or underdelivers gas to customers. These pipeline imbalance receivables and pipeline imbalance payables are recorded using current average spot market gas prices. ACCOUNTS RECEIVABLE Transok is engaged in the business of buying, selling and transporting natural gas and natural gas liquids. Thus, principally all accounts receivable are from entities in the same industry. Transok maintains an allowance for doubtful accounts based upon the estimated collectibility of all accounts receivable. 9
INVENTORIES Inventories, consisting of natural gas held in storage, materials and supplies and natural gas liquids are valued at the lower of cost or market. DERIVATIVES Realized gains and losses on hedges of existing assets or liabilities are deferred and are ultimately recognized in income as part of the carrying amounts of the related assets or liabilities. Gains and losses related to qualifying hedges of firm commitments or anticipated transactions also are deferred and are recognized in income or as adjustments of carrying amounts when the hedged transaction occurs. All commodity futures and swap contracts are entered into at Tejas and accounted for upon settlement through the payable to parent. As a result, Transok does not record any deferred assets or liabilities on its balance sheet for unrealized and unrecognized hedges. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost. Additions, improvements and major renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. The cost of property sold or retired is credited to the asset account, and the related depreciation is charged to the accumulated depreciation account. Profit or loss resulting from sale or retirement is included in earnings. Depreciation of property, plant and equipment is provided on a straight-line basis over the estimated useful lives of the assets as follows: Gathering and transmission assets 30 years Gas processing assets 20 years Other property and equipment 10 years Natural gas storage facility 33 years GOODWILL Effective January 12, 1998, in connection with the Shell acquisition of Tejas, Transok recorded goodwill of approximately $402.3 million. The goodwill is being amortized over 20 years. At December 31, 1998, goodwill totaled approximately $382.2 million, net of accumulated amortization of approximately $20.1 million. CAPITALIZED INTEREST Interest on funds used to finance construction of assets is capitalized and amortized over the productive lives of the related assets. All other interest is charged to expense as incurred. For the years ended December 31, 1998 and 1997, Transok capitalized interest of $0 and approximately $2.5 million, respectively. 10
REVENUES Customers are invoiced and the related revenue is recorded as natural gas deliveries are made. INCOME TAXES Transok accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred income taxes are recorded for the effects of temporary differences between financial and taxable income. Through December 31, 1997, Transok filed a consolidated federal income tax return with Tejas. Transok's income tax losses utilized by Tejas were reflected as a current benefit for Transok's financial reporting purposes by increasing the receivable from Tejas. Concurrent with the acquisition of Tejas by Shell, Transok Inc. was converted to a Limited Liability Corporation ("L.L.C.") under the Internal Revenue Code. In connection with the conversion to a L.L.C., Shell elected to treat Transok as a pass-through entity for income tax purposes. As a result, income taxes attributable to Federal taxable income of Transok after January 12, 1998, if any, are payable by Shell. The effect of eliminating the deferred tax assets and liabilities was recognized in the results of operations for the year ended December 31, 1998, the year of adoption. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of the financial instruments on the consolidated balance sheets not otherwise discussed in these notes approximates fair value. 3. ASSETS HELD FOR SALE: In June 1998, Transok purchased a processing plant and two pipelines from ANR Production Company for approximately $75 million. As part of the purchase, Transok agreed with the Federal Energy Regulatory Commission to divest a portion of the assets acquired. These assets are presented as assets held for sale in the accompanying consolidated balance sheets. In March 1999, Transok divested these assets for approximately $20 million. No gain or loss was reflected on the sale of these assets. 4. OBLIGATIONS DUE AFTER ONE YEAR: Long-term debt consisted of the following at December 31, (in thousands): 11
1998 1997 ----------- ----------- Revolving credit agreements $ - $ 275,000 Medium term notes 196,000 200,000 Note payable to parent 585,878 36,148 ----------- ----------- Total 781,878 511,148 Current portion of long-term debt 23,000 279,000 Current portion of long-term debt - parent 585,878 36,148 ----------- ----------- Long-term debt $ 173,000 $ 196,000 =========== =========== REVOLVING CREDIT AGREEMENTS In connection with the Transok acquisition by Tejas, Transok entered into a $245 million revolving credit agreement. During the fourth quarter of 1996, this agreement was amended (the "Amended Transok Credit Facility") to extend the maturity date from December 31, 1997 to December 31, 2004, lower the interest rate margins over LIBOR, subject to a minimum margin for a limited period of time, and set the commitment amount at $275 million. This amended agreement bears interest, at Transok's option, based upon either the prime rate or LIBOR. Depending upon Transok's funded debt to capitalization ratio, the margins over LIBOR that Transok must pay vary from a minimum of 0.5 percent to a maximum of 1.25 percent. During 1997, Transok borrowed the remaining balance under this credit agreement. In January 1998, Transok repaid the balance under the credit agreement. As a result, Transok wrote off approximately $4.6 million of capitalized debt issuance cost included in other assets and deferred charges in the accompanying December 31, 1997 consolidated balance sheet. Funding for this repayment was primarily obtained through borrowings from Tejas. MEDIUM TERM NOTES In connection with the Transok acquisition by Tejas, Transok retained $200 million in Medium Term Notes ("MTN's"). The MTN's bear interest at fixed rates which, on a weighted average basis, currently approximates 7.7 percent. The maturity dates of the MTN's vary with the longest dated MTN's due to mature in 2023. The interest rates range from 6.60 percent to 8.96 percent. In January 1998, Transok made principal payments of $4 million. Additionally, principal payments are scheduled to begin in 1999 with $23 million required during that year. No additional principal payments are due until the year 2002. The MTN's are subject to certain covenants. NOTE PAYABLE TO PARENT In June 1996, Transok entered into a floating rate promissory note payable to Tejas with a maturity date of December 31, 2026. At December 31, 1998 and 1997, the balance under this promissory note, including accrued interest thereon, was approximately $585.9 million and $36.1 million, respectively. This note bears interest at the same rate as the Amended Transok Credit Facility previously described. 12
SCHEDULED MATURITIES OF LONG-TERM DEBT Scheduled maturities of long-term debt at December 31, 1998, are as follows (in thousands): 1999 $ 608,878 2000 - 2001 - 2002 50,000 2003 19,000 2004 and thereafter 104,000 ----------- Total $ 781,878 =========== CAPITAL LEASE OBLIGATION In connection with the Tejas acquisition of Transok from CSW, Transok sold seven natural gas processing plants (the "Transok Plants") to a third party lessor (the "Lessor"), which in turn leased these facilities to Transok (the "Lessee"). The lease agreement was for a period of five years with lease payments adjusted quarterly based upon the Lessor's financing costs. As part of the agreement Transok had the option to extend the lease for two additional two-year periods and to purchase the plants at any time from the Lessor for $125 million. Accordingly, the lease was accounted for as a capital lease with the Transok Plants remaining on the books of Transok and a liability of $125 million was reflected in long-term debt in the accompanying consolidated balance sheets. Lease payments of approximately $10 million paid to the Lessor during 1997 are reflected in interest expense in the accompanying consolidated statements of operations. In February 1998, Transok repurchased the plants for $125 million. Funding for this repayment was primarily obtained through borrowings from Tejas. 5. INCOME TAXES: Transok follows SFAS No. 109. As mentioned in Note 2, effective January 12, 1998, Transok Inc. converted to a L.L.C. resulting in the taxable income or loss of Transok from that date being reported to Shell and included in its Federal and state income tax returns. Accordingly, the deferred income tax assets and liabilities at January 12, 1998 were eliminated through recording a benefit for income taxes. The components of income tax expense (benefit) are as follows (in thousands): 1998 1997 ----------- ---------- Current provision $ - $ 19 Deferred benefit (8,871) (5,098) ----------- ---------- Income tax benefit $ (8,871) $ (5,079) =========== ========== The benefit for income taxes differs from an amount computed at the statutory rates of 0 percent and 35 percent at December 31, as follows (in thousands): 13
1998 1997 ----------- ---------- Federal income tax at statutory rates $ - $ (4,665) State income taxes - (514) Conversion to L.L.C. (8,871) - Other - 100 ----------- ---------- Income tax benefit $ (8,871) $ (5,079) =========== ========== Deferred income taxes typically reflect (a) the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) alternative minimum tax, net operating loss and tax credit carryforwards. Significant components of Transok's net deferred income tax liability at December 31 are as follows (in thousands): 1998 1997 ----------- ---------- Deferred income tax liabilities: Tax over book depreciation $ - $(109,436) Other - (794) ----------- ---------- - (110,230) ----------- ---------- Deferred income tax assets: Net operating loss carryforwards - 96,681 Accrued liabilities not deductible in the current year - 3,156 Allowance for doubtful accounts - 1,085 Other - 437 ----------- ---------- - 101,359 ----------- ---------- Net deferred income tax liability $ - $ (8,871) =========== ========== No valuation allowances were required for deferred income tax assets at December 31, 1997. Transok made no income tax payments for the years ended December 31, 1998 and 1997. 6. FINANCIAL INSTRUMENTS: The estimated fair value amounts of Transok's financial instruments have been determined by Transok using available market data and valuation methodologies. Fair value represents the amount at which the instrument could be exchanged in a current transaction between willing parties. Judgment is required in interpreting market data, and the use of different market assumptions or estimation methodologies may affect the estimated fair value. Fair value amounts at December 31, 1998 and 1997 are as follows (in thousands): 14
DECEMBER 31, 1998 Carrying Estimated Amount Fair Value Balance sheet financial instruments: --------- ---------- Long-term debt (excluding current installments)- Medium term notes $ 173,000 $ 194,170 Other financial instruments- Interest rate derivative agreements - (558) Commodity swap agreements (Note 11) - (826) Commodity futures (Note 11) - 13,662 DECEMBER 31, 1997 Carrying Estimated Amount Fair Value Balance sheet financial instruments: --------- ---------- Long-term debt (excluding current installments)- Medium term notes $ 196,000 $ 210,308 Other financial instruments- Interest rate derivative agreements - (617) Commodity swap agreements (Note 11) - (4,765) Commodity futures (Note 11) - 2,294 LONG-TERM DEBT Transok's revolving credit agreement and note payable to parent bear floating interest rates at current market levels and therefore carrying values in the consolidated financial statements approximate fair value. The estimated value of the MTN's was determined by calculating the net present value of future expected cash flows relating to the risks using a discount rate of 5.73 percent and 6.38 percent at December 31, 1998 and 1997, respectively. INTEREST RATE DERIVATIVE AGREEMENTS At December 31, 1998, Transok had interest rate derivative agreements with a notional amount of $225 million, as a means of hedging floating interest rate exposure related to its revolving credit facility and an operating lease obligation. The fair value of interest rate derivative agreements is based upon approximated termination values obtained from third parties. The negative fair value at December 31, 1998, is the estimated amount Transok would pay if it canceled the contracts or transferred them to other parties. CREDIT RISK While notional contract amounts are used to express the magnitude of interest rate derivative or commodity swap agreements, the amounts potentially subject to credit risk, in the event of nonperformance by third parties, are substantially smaller. Transok does not anticipate any material impact to its results of operations as a result of nonperformance by third parties as these agreements are with established exchanges, energy companies, and major financial institutions. Under certain circumstances, commodity swap agreements may require the parties 15
to post letters of credit issued by financial institutions acceptable to the counterparty to satisfy margin requirements. 7. UNCONSOLIDATED ENTITY: Transok owns an interest in an entity that is accounted for under the equity method of accounting. Transok's investment at December 31, is detailed as follows (in thousands): 1998 1997 --------- --------- Downtown Plaza II $ 10,890 $ 7,045 In 1993, Transok formed Transok Properties, Inc. for the purpose of owning a 50 percent undivided interest in the Downtown Plaza II partnership. This partnership owned a twenty-eight story office building in downtown Tulsa, Oklahoma. Transok occupies a portion of the building. Downtown Plaza II generates cash flow from two major lessees, including Transok. During 1998 and 1997, Transok recognized approximately $407,000 and $778,000, respectively, in equity earnings for Downtown Plaza II activity. In November 1998, this building was sold for approximately $29 million. In April 1999, the partnership was transferred to Tejas. SUMMARIZED FINANCIAL INFORMATION (UNAUDITED) Summarized balance sheet information for Downtown Plaza II is shown below. The summarized statement of earnings includes information for the years ended December 31, (in thousands). Balance sheet: 1998 1997 --------- --------- Current assets $ 23,265 $ 728 Property, plant and equipment, net - 1,294 Other noncurrent assets - 11,990 Current liabilities 494 2,324 Noncurrent liabilities - 3,751 Owners equity 22,771 7,937 Statement of earnings: Revenues $ 3,102 $ 4,699 Gross profit 2,288 3,142 --------- --------- Net earnings 814 1,557 --------- --------- Transok's share of net earnings $ 407 $ 778 ========= ========= All noncurrent liabilities of the unconsolidated entity are nonrecourse to Transok. The difference in Transok's investment in unconsolidated entity and their 50 percent ownership equity shown on the partnership books above is due to the purchase price being allocated to the Transok books from both the Tejas and Shell acquisitions described in Note 1. 16
8. RELATED PARTY TRANSACTIONS: In 1998 and 1997, Transok had natural gas sales and natural gas purchases of approximately $7.5 million and $31.5 million, and approximately $5.5 million and $17.4 million, respectively, to affiliates of Tejas. At December 31, 1998, Transok had current receivables and current payables of approximately $12.5 million and $2.3 million, respectively, and at December 31, 1997 $13.4 million and $5.7 million, respectively, to affiliates of Tejas. These amounts are included as a net amount in due from affiliate in the accompanying consolidated balance sheets. 9. COMMITMENTS AND CONTINGENCIES: Various suits and claims arising in the ordinary course of business, some of which involve substantial amounts, are pending against Transok. While the ultimate effect of such actions cannot be ascertained at this time, in the opinion of management of Transok, after consultation with legal counsel, the liabilities which may arise from such actions would not result in losses which would materially affect the consolidated financial position of Transok or its results of operations. 10. LEASES: Transok leases certain property, facilities and equipment under various operating leases. These leases are noncancelable and expire on various dates. The leases are subject to renewal under essentially the same terms and conditions as the original leases. During 1993, Transok entered into a long-term operating lease arrangement to lease all the pipeline facilities of a third-party pipeline company. The agreement, which includes provisions to purchase the leased pipeline assets, provides for an initial term of five years with several options to extend the lease for up to an additional seventeen years. Transok has subsequently exercised their options to extend these lease agreements. Future noncancelable minimum lease payments under all leases, as of December 31, 1998, are as follows (in thousands): 1999 $ 2,727 2000 2,669 2001 2,689 2002 2,706 2003 2,183 2004 and thereafter 4,363 --------- Total $ 17,337 ========= Rental expense for all operating leases totaled approximately $3.2 million during both 1998 and 1997. 17
11. DERIVATIVES: In the normal course of business, Transok utilizes derivative financial instruments, such as natural gas futures and swaps, to hedge price risk exposure, including location and pricing basis, of its storage and exchange gas inventories, and specifically identified purchase contracts, sales contracts, commitments and certain anticipated transactions. At December 31, 1998 and 1997, Transok had unrealized and unrecognized gains of approximately $13.4 million and $2.2 million, respectively, associated with natural gas futures extending out less than one year and approximately $227,000 and $0, respectively, relating to natural gas futures contracts extending out more than one year. At December 31, 1998 and 1997, Transok had unrealized and unrecognized losses of approximately $826,000 and $3.8 million, respectively, associated with basis swaps extending out less than one year and approximately $0 and $928,000, respectively, associated with basis swaps extending out more than one year. Transok has entered into various interest rate derivative agreements as a means of hedging interest rates on its floating rate debt and floating rate capital lease obligations. As of December 31, 1998, Transok had outstanding interest rate derivative agreements in a notional amount of $225 million. These agreements convert a like amount of Transok's debt to a maximum effective fixed interest rate ranging from 6.8 percent to 7.0 percent and expire in 2001. The remaining $100 million converts a like amount of Transok's debt to a maximum effective fixed interest rate of 6.9 percent and expires in January 2002. Additionally, in 1996, Transok entered into a delayed start interest rate derivative agreement in a notional amount of $50 million. This agreement, which converts a like amount of Transok's debt to an effective fixed interest rate of 6.8 percent, became effective in January 1997 and expires in January 2002. Although the Amended Transok Credit Facility was repaid in January 1998, Transok left these agreements in effect to hedge the effects of interest rate movement on their borrowings with Tejas. 12. MAJOR CUSTOMERS: Transok's natural gas pipeline operations customers are in the electric and natural gas utility and natural gas supply industries. Historically, Transok has not incurred any significant credit losses related to receivables from its customers. Receivables are generally not collateralized. For the years ended December 31, 1998 and 1997, no single customer accounted for 10 percent or more of Transok's revenue. 13. EMPLOYEE BENEFITS: PENSION PLAN During 1998 and 1997, all qualifying employees of Transok were included in the noncontributory, defined benefit pension plan of Tejas. Pension benefits are based on years of service and the employee's average monthly compensation. During 1998 and 1997, Transok was charged approximately $985,000 and $1.1 million, respectively, for pension costs. Pension costs 18
are included in general and administrative expenses in the accompanying consolidated statements of operations. Assets of Tejas' pension plan are not segregated or restricted by its participating subsidiaries, and pension obligations for Transok employees would remain the obligation of Tejas if Transok were to withdraw. THRIFT PLAN Tejas' contributory, trusteed thrift plan covers all qualifying employees of Transok. Transok matches 100 percent of the employee contributions to the plan, up to a maximum of 3 percent of the annual salary paid to each participant. Transok's share of contributions recognized for the years ended December 31, 1998 and 1997, was approximately $470,000 and $578,000, respectively. These contributions are included in general and administrative expenses in the accompanying consolidated statements of operations. 14. SUBSEQUENT EVENTS: Effective July 1, 1999, Enogex, a subsidiary of the Company, purchased Transok from Tejas, an affiliate of Shell, for approximately $710.3 million, which includes the assumption of $173 million of long-term debt, the purchase of 19 million MMBTU's of natural gas from an affiliate of Tejas, net working capital and post closing adjustments. 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholder of Tejas Transok Holding, L.L.C.: We have audited the accompanying consolidated balance sheets of Tejas Transok Holding, L.L.C. (a Delaware limited liability corporation) and its subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholder's equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tejas Transok Holding, L.L.C. and its subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. Oklahoma City, Oklahoma, August 27, 1999 20
(b) Unaudited Pro Forma Financial Statements The following unaudited pro forma financial information presents the historical consolidated balance sheet and statements of income and ratios of earnings to fixed charges of OGE Energy Corp. (the "Company") after giving effect to the acquisition of Tejas Transok Holding, L.L.C. ("Transok") and its subsidiaries by Enogex. The unaudited pro forma balance sheet at June 30, 1999, gives effect to the acquisition as if it had occurred at June 30, 1999. The unaudited pro forma statement of income for the year ended December 31, 1998 gives effect to the acquisition as if it had occurred at January 1, 1998. The unaudited pro forma statement of income for the six months ended June 30, 1999 gives effect to the acquisition as if it had occurred at January 1, 1999. The unaudited pro forma ratios of earnings to fixed charges for the year ended December 31, 1998 gives effect to the acquisition as if it had occurred at January 1, 1998. The unaudited pro forma ratio of earnings to fixed charges for the six months ended June 30, 1999, gives effect to the acquisition as if it had occurred at January 1, 1999. The following unaudited pro forma financial information has been prepared from, and should be read in conjunction with, the historical consolidated financial statements and related notes thereto of the Company and Transok. The following information is not necessarily indicative of the financial position or operating results that would have occurred had the transaction been consummated on the date, or at the beginning of the periods, for which the transaction is being given effect nor is it necessarily indicative of future operating results or financial position. OGE ENERGY CORP. UNAUDITED PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES Six Months Ended Year Ended June 30, 1999 December 31, 1998 --------------- ------------------- Unaudited Pro Forma Ratio of Earnings to Fixed Charges 2.08 3.17 For purposes of this ratio, "Earnings" consist of the aggregate of net income, taxes on income, investment tax credits (net) and "fixed charges." "Fixed charges" consist of interest on long-term debt, related amortization, interest on short-term borrowings and a calculated portion of rents considered to be interest. See Notes to Unaudited Pro Forma Financial Statements for a description of the assumptions used to prepare the pro forma ratios of earnings to fixed charges. 21
OGE ENERGY CORP. UNAUDITED PRO FORMA BALANCE SHEET JUNE 30, 1999 OGE TEJAS TRANSOK PRO FORMA ENERGY CORP. HOLDING, L.L.C. PRO FORMA OGE (AS REPORTED) (AS REPORTED) ADJUSTMENTS ENERGY CORP. ------------- --------------- ------------ --------------- (dollars in thousands) ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 1,962 $ 29 $ (15) (1) $ 1,976 Accounts receivable - customers, less reserve of $3,101... 144,809 75,135 (32,822) (2) 187,122 Accrued unbilled revenues................................. 59,000 - - 59,000 Accounts receivable - other............................... 13,306 10,852 - 24,158 Fuel inventories, at LIFO cost............................ 85,321 - 41,507 (3) 126,828 Materials and supplies, at average cost................... 36,171 3,324 - 39,495 Prepayments and other..................................... 19,758 443 1,419 (4) 21,620 Accumulated deferred tax assets........................... 8,609 - - 8,609 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total current assets.................................... 368,936 89,783 10,089 468,808 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- OTHER PROPERTY AND INVESTMENTS, at cost..................... 61,010 - - 61,010 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- PROPERTY, PLANT AND EQUIPMENT: In service................................................ 4,479,118 985,227 (287,721) (5) 5,176,624 Construction work in progress............................. 36,948 26,247 (14,409) (5) 48,786 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total property, plant and equipment..................... 4,516,066 1,011,474 (302,130) 5,225,410 Less accumulated depreciation......................... 1,979,001 66,860 (66,860) (6) 1,979,001 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Net property, plant and equipment......................... 2,537,065 944,614 (235,270) 3,246,409 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- DEFERRED CHARGES: Advance payments for gas.................................. 14,900 - - 14,900 Income taxes recoverable through future rates............. 40,211 - - 40,211 Other..................................................... 66,539 372,100 (372,100) (7) 66,539 - ------------------------------------------------------------ ------------ --------------- ------------ --------------- Total deferred charges.................................. 121,650 372,100 (372,100) 121,650 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- TOTAL ASSETS................................................ $ 3,088,661 $ 1,406,497 $ (597,281) $ 3,897,877 ============================================================ ============= =============== ============ =============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt........................................... $ 298,800 $ 575,304 $ (38,005) (8) $ 836,099 Accounts payable.......................................... 99,456 55,120 154,576 Dividends payable......................................... 25,869 - - 25,869 Customers' deposits....................................... 23,880 - - 23,880 Accrued taxes............................................. 45,132 5,617 - 50,749 Accrued interest.......................................... 21,611 6,180 - 27,791 Long-term debt due within one year........................ 2,000 15,000 - 17,000 Other..................................................... 33,510 - - 33,510 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total current liabilities............................... 550,258 657,221 (38,005) 1,169,474 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- LONG-TERM DEBT.............................................. 934,650 173,000 - 1,107,650 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- DEFERRED CREDITS AND OTHER LIABILITIES: Accrued pension and benefit obligation.................... 21,925 - - 21,925 Accumulated deferred income taxes......................... 523,925 - - 523,925 Accumulated deferred investment tax credits............... 65,153 - - 65,153 Other..................................................... 30,190 - 17,000 (9) 47,190 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total deferred credits and other liabilities............ 641,193 - 17,000 658,193 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- STOCKHOLDERS' EQUITY: Common stockholders' equity............................... 435,654 685,656 (685,656) (10) 435,654 Retained earnings......................................... 526,906 (109,380) 109,380 (10) 526,906 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total stockholders' equity.............................. 962,560 576,276 (576,276) 962,560 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $ 3,088,661 $ 1,406,497 $ (597,281) $ 3,897,877 ============================================================ ============= =============== ============ ===============
See accompanying notes to unaudited pro forma financial statements. 22OGE ENERGY CORP. UNAUDITED PRO FORMA STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1999 OGE TEJAS TRANSOK PRO FORMA ENERGY CORP. HOLDING, L.L.C. PRO FORMA OGE (AS REPORTED) (AS REPORTED) ADJUSTMENTS ENERGY CORP. ------------- --------------- ------------ --------------- (DOLLARS IN THOUSANDS) OPERATING REVENUES: Electric utility.......................................... $ 564,246 $ - $ - $ 564,246 Non-utility............................................... 264,820 251,817 (581) (11) 516,056 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total operating revenues................................ 829,066 251,817 (581) 1,080,302 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- OPERATING EXPENSES: Fuel...................................................... 132,966 - - 132,966 Purchased power........................................... 121,390 - - 121,390 Gas and electricity purchased for resale.................. 212,356 156,090 (581) (11) 367,865 Other operation and maintenance........................... 153,734 71,609 (6,019) (12) 219,324 Depreciation and amortization............................. 75,586 28,593 (17,665) (13) 86,514 Taxes other than income................................... 25,812 4,039 - 29,851 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total operating expenses................................ 721,844 260,331 (24,265) 957,910 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- OPERATING INCOME............................................ 107,222 (8,514) 23,684 122,392 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- OTHER INCOME (EXPENSES): Interest charges.......................................... (37,572) (20,613) (1,677) (14) (59,862) Other, net................................................ 2,546 54 - 2,600 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total other income (expenses)........................... (35,026) (20,559) (1,677) (57,262) - ------------------------------------------------------------ ------------- --------------- ------------ --------------- EARNINGS BEFORE INCOME TAXES................................ 72,196 (29,073) 22,007 65,130 PROVISION FOR INCOME TAXES.................................. 23,320 - (2,798) (15) 20,522 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- NET (LOSS) INCOME........................................... 48,876 (29,073) 24,805 44,608 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- EARNINGS AVAILABLE FOR COMMON............................... $ 48,876 $ (29,073) $ 24,805 $ 44,608 ============================================================ ============= =============== ============ =============== AVERAGE COMMON SHARES OUTSTANDING........................... 77,801 - - 77,801 EARNINGS PER AVERAGE COMMON SHARE........................... $ 0.63 $ - $ - $ 0.57 ============================================================ ============= =============== ============ ===============
See accompanying notes to unaudited pro forma financial statements. 23OGE ENERGY CORP. UNAUDITED PRO FORMA STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 OGE TEJAS TRANSOK PRO FORMA ENERGY CORP. HOLDING, L.L.C. PRO FORMA OGE (AS REPORTED) (AS REPORTED) ADJUSTMENTS ENERGY CORP. ------------- --------------- ------------ --------------- (dollars in thousands) OPERATING REVENUES: Electric utility.......................................... $ 1,312,078 $ - $ - $ 1,312,078 Non-utility............................................... 305,659 476,213 (5,453) (11) 776,419 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total operating revenues................................ 1,617,737 476,213 (5,453) 2,088,497 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- OPERATING EXPENSES: Fuel...................................................... 315,194 - - 315,194 Purchased power........................................... 240,542 - - 240,542 Gas and electricity purchased for resale.................. 216,432 332,869 (5,453) (11) 543,848 Other operation and maintenance........................... 305,106 124,548 - 429,654 Depreciation and amortization............................. 149,818 55,661 (33,801) (13) 171,678 Taxes other than income................................... 51,188 7,284 - 58,472 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total operating expenses................................ 1,278,280 520,362 (39,254) 1,759,388 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- OPERATING INCOME............................................ 339,457 (44,149) 33,801 329,109 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- OTHER INCOME (EXPENSES): Interest charges.......................................... (70,699) (45,185) 502 (14) (115,382) Other, net................................................ 5,758 156 - 5,914 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- Total other income (expenses)........................... (64,941) (45,029) 502 (109,468) - ------------------------------------------------------------ ------------- --------------- ------------ --------------- EARNINGS BEFORE INCOME TAXES................................ 274,516 (89,178) 34,303 219,641 PROVISION FOR INCOME TAXES.................................. 108,644 (8,871) (12,860) (15) 86,913 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- NET (LOSS) INCOME........................................... 165,872 (80,307) 47,163 132,728 PREFERRED DIVIDEND REQUIREMENTS............................. 733 - - 733 - ------------------------------------------------------------ ------------- --------------- ------------ --------------- EARNINGS AVAILABLE FOR COMMON............................... $ 165,139 $ (80,307) $ 47,163 $ 131,995 ============================================================ ============= =============== ============ =============== AVERAGE COMMON SHARES OUTSTANDING........................... 80,772 - - 80,772 EARNINGS PER AVERAGE COMMON SHARE........................... $ 2.04 $ - $ - $ 1.63 ============================================================ ============= =============== ============ ===============
See accompanying notes to unaudited pro forma financial statements. 24OGE ENERGY CORP. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS 1. At June 30, 1999, Transok had approximately $15,000 cash held in a Tejas account. At closing the cash was applied against the due to parent balance and thus not included in the cash acquired by the Company. This adjustment reduces cash to reflect the actual amount of cash acquired. 2. Accounts receivables due from Tejas Gas L.L.C. and its affiliates were not included in the assets acquired by the Company. This adjustment reflect the elimination of those balances not acquired. 3. As part of the purchase agreement for the acquisition of Transok, the Company purchased approximately 19 million MMBTU of natural gas held in storage from an affiliate of Tejas. This adjustment reflects the allocated purchase price of the acquired natural gas held in storage based upon its fair market value at June 30, 1999. 4. This adjustment reflects debt issuance costs incurred by the Company relating to its financing of the purchase of Transok. 5. The Company allocated purchase price of approximately $697.5 million to in service property and $11.8 million to construction work in progress. This adjustment reduces Transok's historical cost of property, plant and equipment to the Company's purchase price basis. 6. This adjustment eliminates the accumulated depreciation recorded prior to the acquisition by the Company. 7. At June 30, 1999, Transok had approximately $372.1 million of unamortized goodwill on its books relating to the January 1998 acquisition of Tejas Gas L.L.C. by Shell Oil Company. This entry eliminates the unamortized goodwill associated with Shell Oil Company acquisition. 8. In connection with the acquisition of Transok, the Company did not assume any of the short-term debt or current portion of long-term debt due to Tejas. To finance the acquisition, the Company borrowed $537.3 million through a 364 day bridge loan agreement. 9. To record the Company's acquisition reserves relating to the Company's acquisition costs, broker fees, severance, relocation costs, professional services and environmental and legal contingencies. 25
10. Total stockholder's equity was adjusted $576.3 million to reflect the Company's purchase price and its subsequent elimination for consolidation purposes. 11. To show elimination of activity between Transok and the Company entities for consolidation purposes. 12. During the six months ended June 30, 1999, Tejas Gas L.L.C. allocated an additional $6.0 million to Transok for costs incurred as part of Tejas Gas L.L.C.'s efforts to sell Transok. This adjustment eliminates the additional allocation relating to costs incurred to sell Transok. 13. This adjustment reduces depreciation and amortization to reflect estimated pro forma depreciation based upon the Company's allocated purchase price basis in the fixed assets and to reflect estimated pro forma amortization of the $1.4 million of the Company's debt issuance costs. 14. To adjust interest expense to reflect estimated pro forma interest expense on the $537.3 million borrowed by the Company to finance the acquisition of Transok. 15. This adjustment records the estimated pro forma provision for (benefit from) income taxes associated with Transok's results of operation using the Company's effective tax rate of 39.6 percent. (c) Exhibits 2.01 Purchase Agreement, dated as of May 14, 1999 between Tejas Gas L.L.C. and Enogex (Filed as Exhibit 2.01 to Registrant's Form 10-Q for the Quarter Ended June 30, 1999 and incorporated by reference.) 23.01 Consent of Independent Public Accountants 26
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 thereunto duly authorized. OGE ENERGY CORP. (Registrant) By /s/ Donald R. Rowlett -------------------------------------------- Donald R. Rowlett Controller Corporate Accounting (On behalf of the registrant and in his capacity as Controller Corporate Accounting) September 14, 1999 27
EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.01 Purchase Agreement, dated as of May 14, 1999 between Tejas Gas L.L.C. and Enogex (Filed as Exhibit 2.01 to Registrant's Form 10-Q for the Quarter Ended June 30, 1999 and incorporated by reference.) 23.01 Consent of Independent Public Accountants 28
EXHIBIT 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated August 27, 1999, on the consolidated financial statements of
Tejas Transok Holding, L.L.C. for the years ended December 31, 1998 and 1997,
included in the OGE Energy Corp. Form 8-K/A into the previously filed
Post-Effective Amendment No. 1-B to Registration Statement No. 33-61699 and
Post-Effective amendment No. 2-B to Registration Statement No. 33-61699 and Form
S-8 Registration Statement No. 333-71327.
/ s / Arthur Andersen LLP
Arthur Andersen LLP
Oklahoma City, Oklahoma
September 13, 1999
29