March 24, 2005
via facsimile and U.S. mail
Mr. Randal B. McDonald, Jr.
Director, Chief Financial Officer, Treasurer, Assistant Secretary
Vtex Energy, Inc.
8303 Southwest Freeway, Suite 950
Houston, TX 77074
Re: Vtex Energy, Inc.
10-K for the fiscal year ended April 30, 2004
File No. 0-22661
Dear Mr. McDonald:
We have reviewed the above filing and have the following
engineering comments. Our review has been limited to the specific
issues identified in this letter. Other than comment number 8,
you
may comply with these comments in future filings. Where
indicated,
we think you should revise your document in response to these
comments. If you disagree, we will consider your explanation as
to
why our comment is inapplicable or a revision is unnecessary.
Please
be as detailed as necessary in your explanation. In comment
number
8, we ask you to provide us with supplemental information so we
may
better understand your disclosure. After reviewing this
information,
we may or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
10-K for the fiscal year ended April 30, 2004
filed on September 22, 2004
Description of Business, page 2
Business Strategy, page 3
1. You state that the Gulf Coast region is characterized by long-
lived reserves with predictable and low production depletion
rates.
Our experience is that the Gulf Coast is characterized by short-
lived
reserves with predictable but high production depletion rates.
Please revise your document or provide further support for your
statement.
Description of Properties, page 8
Bateman Lake, page 8
2. You should limit the use of industry jargon. Terms such as
productive horizons, production mechanism, water and depletion
drive
and pay zones have little meaning for the average investor.
Either
revise the document to eliminate these terms or provide a
definition
of each one so the average investor will understand them.
3. You state that the Bateman Lake acreage has significant
potential
reserves in addition to its proved reserves. Only proved reserves
may be disclosed in SEC filings. The term "significant potential
reserves" should be removed.
4. Concerning State Lease No. 1337 you state that "there is great
potential that large reserves are trapped in sands deeper than the
X
Series sands. The 3D seismic data will allow the Company to
determine if a deep structure exists." Please clarify that
seismic
data alone does not guarantee the existence of hydrocarbons or the
existence of hydrocarbons in economic quantities. Only through
the
drilling and testing of a well can the existence of hydrocarbons
be
determined.
Mustang Island 818-L, page 9
5. You state that you currently estimate at least 6 billion cubic
feet of remaining recoverable reserves. Only proved reserves can
be
disclosed in an SEC filing. Please revise your document to only
disclose proved reserves.
6. You indicate that you are seeking an investor to provide $3
million for the reworking of three wells which will allow the
conversion of approximately 4 billion cubic feet of reserves from
proved developed non-producing to proved developed producing.
Given
that you have significant capital expenditures remaining to bring
these reserves on production, it would appear that the correct
classification of these reserves would be proved undeveloped.
Revise
your document accordingly.
Reserve Information, page 11
7. Revise your document to not state that proved reserve estimates
are uncertain. This is in conflict with the definition of proved
reserves found in Rule 4-10(a) of Regulation S-X which requires
that
reserves be reasonably certain of being recovered.
Changes in Proved Reserves, page 12
8. In 2003 you increased gas reserves by a change of estimate by
9,405 MCF while in 2004 you decreased gas reserves by a change of
9,396 MCF. Supplementally, please describe to us the nature of
these
changes. We may have additional comments.
Notes to Consolidated Financial Statements, page F-11
Note 14 Oil and Gas Reserve Information , page F-23
9. Clarify the apparent discrepancy in this note regarding who
prepares your estimates of proved oil and gas reserves. The first
paragraph cites Raymond Perry, Jr. while the second paragraph
references "internal petroleum engineers." Also, if you employ
both,
address any material differences in their estimates.
10. Please revise your document to not imply that reserve
estimates
of other engineers might differ materially. We believe that if
different engineers are provided with the same data their
estimates
of proved reserves will not be materially different. If they are
then the incremental estimates of the engineer with the materially
higher estimate probably do not represent proved reserves as they
are
not reasonably certain to be recovered.
Closing Comments
As appropriate, please amend your filings in response to
these
comments within 10 business days. You may also wish to provide us
with marked copies of any amendment to expedite our review.
Please
furnish a cover letter with your amendment that keys your
responses
to our comments and provides any requested supplemental
information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
Direct questions related to engineering issues to James
Murphy,
Petroleum Engineer, at (202) 942-2939. Direct questions related
to
all other disclosure issues to the undersigned at (202) 942-1870.
Direct all correspondence to the following ZIP code: 20549-0405.
Sincerely,
H. Roger Schwall
Assistant Director
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Mr. Randal B. McDonald, Jr.
Vtex Energy, Inc.
March 24, 2005
Page 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0405
DIVISION OF
CORPORATION FINANCE