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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
=========
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9041
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MESA INC.
=========
(Exact name of registrant as specified in its charter)
Texas 75-2394500
----- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5205 North O'Connor Boulevard
Suite 1400
Irving, Texas 75039-3746
- ---------------------------- ----------
(Address of Principal (Zip Code)
Executive Offices)
(214) 444-9001
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(Registrant's telephone number)
(No changes)
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(Former name, former address, and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
-------- -------
Number of shares outstanding as of the close of business on May 12,
1995: 64,050,009.
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PART I - FINANCIAL INFORMATION
==============================
Item 1. Financial Statements
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MESA INC.
=========
Consolidated Statements of Operations
-------------------------------------
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31
-------------------
1995 1994
-------- --------
REVENUES:
Natural gas...................................... $ 35,856 $ 40,706
Natural gas liquids.............................. 18,206 16,272
Oil and condensate............................... 5,393 1,611
Other............................................ 2,792 2,495
-------- --------
62,247 61,084
-------- --------
COSTS AND EXPENSES:
Lease operating.................................. 12,574 13,648
Production and other taxes....................... 4,745 5,222
Exploration charges.............................. 1,304 772
General and administrative....................... 6,644 5,954
Depreciation, depletion and amortization......... 21,006 25,312
-------- --------
46,273 50,908
-------- --------
OPERATING INCOME...................................... 15,974 10,176
-------- --------
OTHER INCOME (EXPENSE):
Interest income.................................. 3,909 2,422
Interest expense................................. (36,663) (36,166)
Gains (losses) on futures and
securities investments......................... 4,553 (919)
Gain from collection of interest from
Bicoastal Corporation.......................... 4,653 7,341
Other............................................ (320) (620)
-------- --------
(23,868) (27,942)
-------- --------
NET LOSS.............................................. $ (7,894) $(17,766)
======== ========
NET LOSS PER COMMON SHARE............................. $ (.12) $ (.37)
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING............ 64,050 47,449
======== ========
(See accompanying notes to consolidated financial statements.)
MESA INC.
=========
Consolidated Balance Sheets
---------------------------
(in thousands, except share data)
March 31, December 31,
ASSETS 1995 1994
----------- ------------
(unaudited)
CURRENT ASSETS:
Cash and cash investments.................... $ 164,496 $ 143,422
Marketable securities and futures contracts.. 7,896 19,112
Accounts and notes receivable................ 31,942 38,938
Other........................................ 4,818 3,372
---------- ----------
Total current assets.................... 209,152 204,844
---------- ----------
PROPERTY, PLANT AND EQUIPMENT:
Oil and gas properties, wells and
equipment using the successful
efforts method of accounting............... 1,872,152 1,867,842
Office and other............................. 44,635 43,836
Accumulated depreciation, depletion
and amortization........................... (802,215) (781,230)
---------- ----------
1,114,572 1,130,448
---------- ----------
OTHER ASSETS:
Restricted cash of subsidiary partnership.... 59,069 61,299
Gas balancing receivable..................... 56,203 54,971
Other........................................ 33,505 32,397
---------- ----------
148,777 148,667
---------- ----------
$1,472,501 $1,483,959
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities on long-term debt......... $ 53,041 $ 30,537
Accounts payable and accrued liabilities..... 32,697 40,468
Interest payable............................. 5,437 18,184
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Total current liabilities............... 91,175 89,189
---------- ----------
LONG-TERM DEBT.................................... 1,189,837 1,192,756
---------- ----------
DEFERRED REVENUE.................................. 20,241 21,900
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OTHER LIABILITIES................................. 54,570 55,542
---------- ----------
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized
10,000,000 shares; no shares issued and
outstanding................................ -- --
Common stock, $.01 par value, authorized
100,000,000 shares; outstanding 64,050,009
and 64,050,009 shares, respectively........ 640 640
Additional paid-in capital................... 398,965 398,965
Accumulated deficit.......................... (282,927) (275,033)
---------- ----------
116,678 124,572
---------- ----------
$1,472,501 $1,483,959
========== ==========
(See accompanying notes to consolidated financial statements.)
MESA INC.
=========
Consolidated Statements of Cash Flows
-------------------------------------
(in thousands)
(unaudited)
Three Months Ended
March 31
-------------------
1995 1994
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $ (7,894) $(17,766)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization..... 21,006 25,312
Accreted interest on discount notes.......... 19,585 20,174
Litigation settlement........................ -- (42,750)
(Gains) losses from futures and
securities investments..................... (4,553) 919
Changes in operating receivables and payables (16,875) (14,141)
Changes in marketable securities and
futures contracts, net..................... 16,038 3,129
Other........................................ 1,886 1,214
-------- --------
Cash provided by (used in)
operating activities....................... 29,193 (23,909)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................. (7,039) (2,635)
Other............................................. (3,230) (3,308)
-------- --------
Cash used in investing activities............ (10,269) (5,943)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings.............................. -- 42,750
Repayments of long-term debt...................... -- (27,755)
Other............................................. 2,150 1,501
-------- --------
Cash provided by financing activities........ 2,150 16,496
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NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS... 21,074 (13,356)
CASH AND CASH INVESTMENTS AT BEGINNING OF PERIOD....... 143,422 138,709
-------- --------
CASH AND CASH INVESTMENTS AT END OF PERIOD............. $164,496 $125,353
======== ========
(See accompanying notes to consolidated financial statements.)
MESA INC.
=========
Consolidated Statement of Changes in Stockholders' Equity
---------------------------------------------------------
(in thousands)
(unaudited)
Common Stock Additional
--------------- Paid-in Accumulated
Shares Amount Capital Deficit
------ ------ ---------- -----------
BALANCE, December 31, 1994..... 64,050 $640 $398,965 $(275,033)
Net loss.................. -- -- -- (7,894)
------ ---- -------- ---------
BALANCE, March 31, 1995........ 64,050 $640 $398,965 $(282,927)
====== ==== ======== =========
(See accompanying notes to consolidated financial statements.)
MESA INC.
=========
Notes to Consolidated Financial Statements
------------------------------------------
March 31, 1995
(unaudited)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
===========================================================
MESA Inc., a Texas corporation, was formed in connection with a
transaction (the "Corporate Conversion") which reorganized the business of
Mesa Limited Partnership (the "Partnership"). The Partnership was formed in
1985 to succeed to the business of Mesa Petroleum Co. ("Original Mesa").
Unless the context otherwise requires, as used herein the term "Company"
refers to MESA Inc. and its subsidiaries taken as a whole and includes its
predecessors.
The consolidated financial statements of the Company for the three-month
periods ended March 31, 1995 and 1994, are unaudited but reflect, in
the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to fairly present the results for such
periods. The accompanying financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
Principles of Consolidation
- ---------------------------
The Company owns and operates its oil and gas properties and other
assets through its direct and indirect subsidiaries. The accompanying
consolidated financial statements reflect the consolidated accounts of the
Company and its subsidiaries after elimination of intercompany transactions.
Certain reclassifications have been made to amounts reported in the
previous year to conform to 1995 presentation.
Statements of Cash Flows
- ------------------------
For purposes of the statements of cash flows, the Company classifies
all cash investments with original maturities of three months or less as
cash and cash investments.
Investments
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The Company invests from time to time in marketable equity and other
securities which are classified as "trading securities" and reported at fair
value, with unrealized gains and losses included in net income (loss) for
the current period. The cost of securities sold is determined on the
first-in, first-out basis.
The Company also enters into various futures contracts which are not
intended to be a hedge of future natural gas or crude oil production.
Investments in such contracts are periodically adjusted to market prices and
gains and losses are included in gains (losses) from futures and securities
investments in the statements of operations.
Oil and Gas Properties
- ----------------------
Under the successful efforts method of accounting, all costs of
acquiring unproved oil and gas properties and drilling and equipping
exploratory wells are capitalized pending determination of whether the
properties have proved reserves. If an exploratory well is determined to be
nonproductive, the drilling and equipment costs of the well are expensed at
that time. All development drilling and equipment costs are capitalized.
Capitalized costs of proved properties and estimated future dismantlement
and abandonment costs are amortized on a property-by-property basis using
the unit-of-production method. Geological and geophysical costs and delay
rentals are expensed as incurred.
Unproved properties are periodically assessed for impairment of value
and a loss is recognized at the time of impairment. The aggregate carrying
value of proved properties is periodically compared with the undiscounted
future net cash flows from proved reserves, determined in accordance with
Securities and Exchange Commission regulations, and a loss is recognized if
permanent impairment of value is determined to exist. A loss is recognized
on proved properties expected to be sold in the event that carrying value
exceeds expected sales proceeds.
In March 1995 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill. SFAS No. 121
requires a review for impairment wherever circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company would
estimate future cash flows (undiscounted and without interest changes)
expected to result from use of an asset. Impairment is only recognized if
the carrying amount of an asset is less than the expected future cash flows
and the amount of impairment is based on the fair value of the asset. SFAS
No. 121 is effective for fiscal years beginning after December 15, 1995.
The Company has not yet determined whether it will adopt the provisions of
SFAS No. 121 in 1995 or what amount of impairment, if any, may result from
adoption of this standard.
Net Loss Per Common Share
- -------------------------
The computations of net loss per common share are based on the weighted
average number of common shares outstanding during each period.
Fair Value of Financial Instruments
- -----------------------------------
The Company's financial instruments consist of cash, marketable
securities, short-term trade receivables and payables, restricted cash,
notes receivable, and long-term debt. The carrying values of cash,
marketable securities, short-term trade receivables and payables, restricted
cash, and notes receivable approximate fair value. The fair value of
long-term debt is estimated based on the market prices for the Company's
publicly traded debt and on current rates available for similar debt with
similar maturities and security for the Company's remaining debt (see Note
4).
Gas Revenues
- ------------
The Company recognizes its ownership interest in natural gas production
as revenue. Actual production quantities sold by the Company may be
different than its ownership share of production in a given period. If the
Company's sales exceed its ownership share of production, the differences
are recorded as deferred revenue. Gas balancing receivables are recorded
when the Company's ownership share of production exceeds sales. The Company
also accrues production expenses related to its ownership share of
production. At March 31, 1995, the Company had produced and sold a net 20.5
billion cubic feet ("Bcf") of natural gas less than its ownership share of
production and had recorded gas balancing receivables, net of deferred
revenues, of approximately $39.0 million. Substantially all of the
Company's gas balancing receivables and deferred revenue are classified as
long-term.
The Company periodically enters into natural gas futures contracts as a
hedge against natural gas price fluctuations. Gains or losses on such
futures contracts are deferred and recognized as natural gas revenue when
the hedged production occurs. The Company recognized a net gain of $4.9
million in the first quarter of 1995 related to hedging activities. The
Company had no hedge gains or losses in the first quarter of 1994. At March
31, 1995, the Company had deferred gains of $7.3 million resulting from
hedging a substantial portion of the Company's anticipated natural gas
production for the remainder of 1995. These deferred gains and any
increases or decreases after March 31, 1995, in the value of open hedge
contracts related to such production periods will be recognized as natural
gas revenues when the hedged production occurs.
Taxes
- -----
The Company provides for income taxes using the asset and liability
method under which deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and
liabilities. The effect on deferred taxes of a change in tax laws or tax
rates is recognized in income in the period that includes the enactment
date.
(2) RESOURCES AND LIQUIDITY
=======================
The Company is highly leveraged with over $1.2 billion of long-term
debt and current maturities. Hugoton Capital Limited Partnership ("HCLP")
is the obligor on approximately 44% of the Company's consolidated long-term
debt. HCLP, an indirect, wholly owned subsidiary of the Company, was formed
in 1991 to issue long-term debt which is secured by the Company's Hugoton
field properties, which represent approximately 65% of the Company's total
proved oil and gas reserves. The assets and cash flows of HCLP that are
subject to the mortgage securing HCLP's debt are dedicated to service such
debt and are not available to pay creditors of the Company or its
subsidiaries other than HCLP. Approximately 88% of the Company's non-HCLP
debt does not require cash interest payments until December 31, 1995. On
that date, and until the debt is repaid, the Company is required to make
semiannual cash interest payments at a 12-3/4% annual rate. Such cash
interest payments are expected to total $41.9 million on December 31, 1995,
and $81.3 million in 1996. The Company also has significant debt principal
payments due in 1996 through 1998. See Note 4 for a description of the
Company's long-term debt.
The Company's cash flows from operating activities are substantially
dependent on the amount of oil and gas produced and the price received for
such production. The Company expects that cash generated by its 1995
production, together with available cash and securities balances, will be
sufficient to cover its debt principal and interest obligations and capital
expenditures through December 31, 1995.
The Company's current financial forecasts indicate that it will be
unable to fund its principal and interest obligations in 1996 with cash
flows from operating activities and available cash and securities balances.
To address this situation and to position the Company for expansion through
exploration and development, in December 1994 the Company announced its
intent to sell all or a portion of its interests in the Hugoton field. In
the first quarter of 1995 the Company began an auction process to sell such
properties. Proceeds from such a sale would be used to retire long-term
debt. If the Company does not sell its Hugoton properties, it would attempt
to strengthen its financial condition by other means, including the sale of
additional equity or refinancing of its long-term debt. There can be no
assurance that the Company will sell its Hugoton properties or that, in the
absence of such a sale, the Company will be able to issue equity or
refinance its debt.
Excluding the Hugoton properties, the Company had approximately 648
billion cubic feet of proved equivalent natural gas reserves ("Bcfe") at
December 31, 1994, and had approximately 55 Bcfe of oil and gas production
in 1994. Excluding Hugoton, the Company generated approximately $40 million
of cash flows from sales of oil and gas production, net of operating and
administrative expenses, in 1994. The Company expects to record a gain from
the sale.
See Note 5 for information regarding the status of certain pending
litigation.
(3) MARKETABLE SECURITIES
=====================
The value of marketable securities and futures contracts are as follows
(in thousands):
March 31, December 31,
1995 1994
--------- ------------
Equity Securities:
Cost...................................... $ 1,473 $ 9,489
Unrealized loss........................... (123) (1,381)
Futures Contracts:
Margin cash............................... 8,790 1,337
Unrealized gain (loss) in hedge contracts. (2,446) 6,823
Unrealized gain in investment contracts... 202 2,844
------- -------
Total market value........................ $ 7,896 $19,112
======= =======
For the three months ended March 31, 1995, the Company recognized a net
gain of $4.6 million from its investments in securities and futures
contracts compared with a net loss for the same period in 1994 of $.9
million. The net securities gains do not include gains or losses from
natural gas futures contracts accounted for as a hedge of natural gas
production. Hedge gains or losses are included in natural gas revenue in
the period in which the hedged production occurs (see Note 1).
The net securities and futures contracts gains and losses recognized
during a period include both realized and unrealized gains and losses.
During the three month period ended March 31, 1995, the Company realized net
gains of $5.9 million from securities transactions and futures contracts.
The Company realized net gains from securities transactions and futures
contracts of $.6 million during the three month period ended March 31, 1994.
(4) LONG-TERM DEBT
==============
Long-term debt and current maturities are as follows (in thousands):
March 31, December 31,
1995 1994
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HCLP Secured Notes........................... $ 520,180 $ 520,180
Credit Agreement............................. 71,131 71,131
12-3/4% secured discount notes............... 600,337 581,942
12-3/4% unsecured discount notes............. 38,535 37,345
13-1/2% subordinated notes................... 7,390 7,390
Other........................................ 5,305 5,305
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1,242,878 1,223,293
Current maturities........................... (53,041) (30,537)
---------- ----------
Long-term debt............................... $1,189,837 $1,192,756
========== ==========
HCLP Secured Notes
- ------------------
In 1991 HCLP issued $616 million of secured notes (the "HCLP Secured
Notes") in a private placement with a group of institutional lenders. The
issuance funded a $66 million restricted cash balance within HCLP, which is
available to supplement cash flows from the HCLP properties in the event
such cash flows are not sufficient to fund principal and interest payments
on the HCLP Secured Notes when due. As the HCLP Secured Notes are repaid,
the required restricted cash balance is reduced. HCLP holds substantially
all of the Company's Hugoton field natural gas properties.
The HCLP Secured Notes were issued in 15 series and have final stated
maturities extending through 2012 but can be retired earlier. The HCLP
Secured Notes outstanding at March 31, 1995, bear interest at fixed rates
ranging from 8.8% to 11.3% per annum (weighted average 10.27%). Principal
payments, if required, and interest payments are made semiannually.
Provisions in the HCLP Secured Note agreements require interest rate
premiums to be paid to the noteholders in the event that the HCLP Secured
Notes are repaid more rapidly or slowly than under the initial scheduled
amortization. Beginning in August 1994, HCLP elected to make principal
payments on the HCLP Secured Notes based on actual production, rather than
according to the initial scheduled amortization. As a result, interest rate
premiums at a rate of 1.5% per annum will be applied to those principal
amounts not paid according to the initial scheduled amortization. Such
premiums have increased the effective weighted average interest rate payable
on the remaining HCLP Secured Notes outstanding to 10.37% per annum at March
31, 1995. According to current expectations, principal payments based on
actual production and prices could reduce principal payments from the
initial scheduled amortization by approximately $50 million from August 1994
through 1996.
The HCLP Secured Note agreements contain various covenants which, among
other things, limit HCLP's ability to sell or acquire oil and gas property
interests, incur additional indebtedness, make unscheduled capital
expenditures, make distributions of property or funds subject to the
mortgage, or enter into certain types of long-term contracts or forward
sales of production. The agreements also require HCLP to maintain separate
existence from the Company and its other subsidiaries. The assets of HCLP
that are subject to the mortgage securing the HCLP Secured Notes are
dedicated to service HCLP's debt and are not available to pay creditors of
the Company or its subsidiaries other than HCLP. Any cash not subject to
the mortgage is available for distribution to the Company's subsidiaries
which own HCLP's equity.
Revenues received from production from HCLP's Hugoton properties are
deposited in a collection account maintained by a collateral agent (the
"Collateral Agent"). The Collateral Agent releases or reserves funds, as
appropriate, for the payment of royalties, taxes, operating costs, capital
expenditures and principal and interest on the HCLP Secured Notes. Only
after all required payments have been made may any remaining funds held by
the Collateral Agent be released from the mortgage.
The restricted cash balance and cash held by the Collateral Agent for
payment of interest and principal on the HCLP Secured Notes are invested by
the Collateral Agent under the terms of a guaranteed investment contract
(the "GIC") with Morgan Guaranty Trust Co. of New York ("Morgan"). Morgan
was paid $13.9 million at the date of issuance of the HCLP Secured Notes to
guarantee that funds invested under the GIC would earn an interest rate
equivalent to the weighted average coupon rate on the outstanding principal
balance of the HCLP Secured Notes (10.27% at March 31, 1995). A portion of
this amount may be refunded if the HCLP Secured Notes are repaid earlier
than if HCLP had produced according to its scheduled production, depending
primarily on prevailing interest rates at that time.
HCLP's cash balances were as follows (in thousands):
March 31, December 31,
1995 1994
--------- ------------
Subject to the mortgage....................... $23,592 $48,087
Not subject to the mortgage................... 24,038 1,551
------- -------
Cash included in current assets............... $47,630 $49,638
======= =======
Restricted cash included in noncurrent assets. $59,069 $61,299
======= =======
Refundable GIC fee included in
noncurrent assets........................... $ 9,991 $10,295
======= =======
Mesa Operating Co. ("MOC"), a Company subsidiary which owns
substantially all of the limited partnership interests of HCLP, is party to
a services agreement with HCLP. MOC provides services necessary to operate
the Hugoton field properties and market production therefrom, process
remittances of production revenues and perform certain other administrative
functions in exchange for a services fee. The fee totaled approximately
$5.1 million for the first quarter of 1995 and $4.8 million for the same
period in 1994.
See "Proposed Hugoton Properties Sale" below and Note 2 for discussion
of a possible sale of the Hugoton properties.
Credit Agreement
- ----------------
In the fourth quarter of 1994 the Company negotiated an amendment to
its bank credit agreement (the "Credit Agreement") which extended its final
maturity date from June 1995 until June 1997 and increased the amount that
may be borrowed from the then outstanding $47.5 million to $82.5 million,
including letters of credit. The amended Credit Agreement currently
requires principal payments of $10 million in December 1995, $22.5 million
in 1996, and the remainder in June 1997 (including cash collateralization of
letters of credit outstanding at that time). As of March 31, 1995, the
Company had outstanding borrowings of approximately $71.1 million and letter
of credit obligations of $11.4 million under the amended Credit Agreement.
The rate of interest payable on borrowings under the amended Credit
Agreement is the Eurodollar rate plus 2-1/2% or the prime rate plus 1/2%.
Obligations under the amended Credit Agreement are secured by a first lien
on the Company's West Panhandle field properties, the Company's equity
interest in MOC and a 76% limited partner interest in HCLP.
The amended Credit Agreement requires the Company to maintain tangible
adjusted equity, as defined, of $50 million and available cash, as defined,
of $32.5 million. At March 31, 1995, the Company's tangible adjusted
equity, as defined, was approximately $116.7 million and available cash, as
defined, was $151.0 million.
The amended Credit Agreement also restricts, among other things, the
Company's ability to incur additional indebtedness, create liens, pay
dividends, acquire stock or make investments, loans and advances.
Discount Notes
- --------------
In conjunction with a debt exchange transaction consummated on August
26, 1993, (the "Debt Exchange"), the Company issued approximately $435.5
million initial accreted value, as defined, of 12-3/4% secured discount
notes due June 30, 1998 and $136.9 million initial accreted value, as
defined, of 12-3/4% unsecured discount notes due June 30, 1996 (together,
the "Discount Notes") in exchange for $293.7 million aggregate principal
amount of 12% subordinated notes and $292.6 million aggregate principal
amount of 13-1/2% subordinated notes (together with the $28.6 million of
accrued interest claims thereon). The Company also issued $29.3 million
principal amount of 0% convertible notes due June 30, 1998, which were
converted into approximately 7.5 million shares of common stock by the end
of 1993. The Discount Notes, which rank pari passu with each other, are
senior in right of payment to the remaining 13-1/2% subordinated notes due
1999 and subordinate to all permitted first lien debt, as defined, including
obligations under the amended Credit Agreement.
On March 2, 1994, the Company issued $48.2 million face amount of
additional 12-3/4% secured discount notes due June 30, 1998. The proceeds
of $42.8 million were used to pay the settlement amount arising from the
early 1994 settlement of a lawsuit with Unocal Corporation ("Unocal"). The
additional indebtedness incurred to settle the Unocal lawsuit was
specifically permitted under the terms of the indentures governing the
Discount Notes and under the Credit Agreement.
The Discount Notes will not accrue interest through June 30, 1995;
however, the accreted value, as defined, of both series increases at a rate
of 12-3/4% per year, compounded semiannually, until June 30, 1995. After
June 30, 1995, each series will accrue interest at an annual rate of
12-3/4%, payable in cash semiannually in arrears, with the first payment due
December 31, 1995.
In the second quarter of 1994 the Company completed a public offering
in which 16.3 million shares of the Company's common stock were sold for net
proceeds of $93 million ($6 per share). The Company used approximately $87
million of the proceeds to redeem or repurchase $87 million accreted value
($99.1 million face amount at maturity) of 12-3/4% unsecured discount notes
which were due in 1996.
In the fourth quarter of 1994 the Company used proceeds from increased
borrowings under its amended Credit Agreement to redeem $37.6 million
accreted value ($40.0 million face amount at maturity) of 12-3/4% unsecured
discount notes which were due in 1996.
The 12-3/4% secured discount notes are secured by second liens on the
Company's West Panhandle field properties and a 76% limited partner interest
in HCLP, both of which also secure obligations under the Credit Agreement.
The Company's right to maintain first lien debt, as defined, is limited by
the terms of the Discount Notes to $82.5 million.
The indentures governing the Discount Notes restrict, among other
things, the Company's ability to incur additional indebtedness, pay
dividends, acquire stock or make investments, loans and advances.
Subordinated Notes
- ------------------
The 13-1/2% subordinated notes are unsecured and mature in 1999.
Interest on these notes is payable semiannually in cash.
Interest and Maturities
- -----------------------
The aggregate interest payments made during the three months ended
March 31, 1995 and 1994, were $29.0 million and $28.8 million, respectively.
In addition, payment of approximately $19.7 million and $20.2 million of
interest expense incurred during the first quarters of 1995 and 1994,
respectively, has been deferred under the terms of the Discount Notes until
maturity. Such interest is included in interest expense in the consolidated
statements of operations for the first quarters of 1995 and 1994.
The scheduled principal repayments on long-term debt for the remainder
of 1995 and for the four succeeding years are as follows (in millions):
1995 1996 1997 1998 1999
------ ------ ------ ------ ------
HCLP Secured Notes................. $ 15.3 $ 32.2 $ 35.8 $ 37.0 $ 39.8
Credit Agreement(a)................ 10.0 22.5 38.6 -- --
12-3/4% secured discount notes..... -- -- -- 617.4 --
12-3/4% unsecured discount notes... -- 39.7 -- -- --
13-1/2% subordinated notes......... -- -- -- -- 7.4
Other.............................. 5.3 -- -- -- --
------ ------ ------ ------ ------
Total......................... $ 30.6 $ 94.4 $ 74.4 $654.4 $ 47.2
====== ====== ====== ====== ======
- ----------
(a) Excludes approximately $11.4 million in letter of credit obliga-
tions currently outstanding and required to be cash collateralized
in June 1997.
Fair Value of Long-term Debt
- ----------------------------
The following is a summary of estimated fair value of the Company's
long-term debt (in thousands):
March 31, 1995 December 31, 1994
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
HCLP Secured Notes.............. $520,180 $550,741 $520,180 $535,135
Credit Agreement................ 71,131 71,131 71,131 71,131
12-3/4% secured discount notes.. 600,337 592,362 581,942 528,688
12-3/4% unsecured discount notes 38,535 37,497 37,345 37,591
13-1/2% subordinated notes...... 7,390 7,390 7,390 7,390
The fair value of long-term debt is estimated based on the market
prices for the Company's publicly traded debt and on current rates available
for similar debt with similar maturities and security for the Company's
remaining debt. Based on the current financial condition of the Company,
there is no assurance that the Company could obtain borrowings under long-
term debt agreements with terms similar to those described above and receive
proceeds approximating the estimated fair values.
Proposed Hugoton Properties Sale
- --------------------------------
In the first quarter of 1995 the Company began an auction process to
sell its interests in the Hugoton field by approaching a select group of
prospective buyers which have the financial means to complete a purchase of
the Company's entire interest. The Company hopes to complete a sale during
the third quarter of 1995.
The Company will use proceeds from a sale to retire debt. Any sales
proceeds must first be applied against the outstanding balances related to
the HCLP Secured Notes, which are secured by the Hugoton properties. Such
balances include note principal, accrued interest and any premiums due,
including premiums for early retirement of the HCLP Secured Notes. As of
March 31, 1995, such premiums for early retirement of the notes would have
totaled approximately $54.7 million. The actual premiums due in the event
of a redemption of the HCLP Secured Notes will depend upon the prevailing
interest rates at the date of redemption. The restricted cash held at HCLP
would be available to repay obligations under the HCLP Secured Notes. Sales
proceeds remaining after satisfying the HCLP Secured Note obligations would
be applied to the amounts outstanding under the amended Credit Agreement,
including cash collateralization of outstanding letters of credit, and the
Discount Notes.
(5) CONTINGENCIES
=============
Masterson
- ---------
In February 1992 the current lessors of an oil and gas lease (the "Gas
Lease") dated April 30, 1955, between R. B. Masterson, et al., as lessor,
and Colorado Interstate Gas Company ("CIG"), as lessee, sued CIG in Federal
District Court in Amarillo, Texas, claiming that CIG had underpaid royalties
due under the Gas Lease. The Company owns an interest in the Gas Lease. In
August 1992 CIG filed a third-party complaint against the Company for any
such royalty underpayments which may be allocable to the Company's interest
in the Gas Lease. The plaintiffs allege that the underpayment was the
result of CIG's use of an improper gas sales price upon which to calculate
royalties and that the proper price should have been determined pursuant to
a "favored-nations" clause in a July 1, 1967 amendment to the Gas Lease (the
"Gas Lease Amendment"). The plaintiffs also sought a declaration by the
court as to the proper price to be used for calculating future royalties.
The plaintiffs alleged royalty underpayments of approximately $500
million (including interest at 10%) covering the period from July 1, 1967,
to the present. In March 1995 the court made certain pretrial rulings that
eliminated approximately $400 million of the plaintiffs' claims (which
related to periods prior to October 1, 1989), but which also reduced a
number of the Company's defenses. The Company and CIG filed stipulations
with the court whereby the Company which have been liable for between 50%
and 60%, depending on the time period covered, of an adverse judgment
against CIG for post-February 1988 underpayments of royalties. On March 22,
1995, a jury trial began and on May 4, 1995, the jury returned its verdict.
Among its findings, the jury determined that CIG had underpaid royalties for
the period after September 30, 1989, in the amount of approximately
$140,000. The court is expected to enter a judgment in the case in June.
Although the plaintiffs argued that the "favored-nations" clause entitled
them to be paid for all of their gas at the highest price voluntarily paid
by CIG to any other lessor, the jury determined that the plaintiffs were
estopped from claiming that the "favored-nations" clause provides for other
than a pricing-scheme to pricing-scheme comparison. In light of this
determination, and the plaintiffs' stipulation that a pricing-scheme to
pricing-scheme comparison would not result in any "trigger prices" or
damages, defendants will ask the court for a judgment that plaintiffs take
nothing. The Company cannot predict whether the plaintiffs will appeal.
However, based on the jury verdict and the defenses the Company could assert
on appeal, the Company does not expect the ultimate resolution of this
lawsuit to have a material adverse effect on its financial position or
results of operation.
Reference is made to Item 3 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, as well as Notes 2 and 9 to the
Company's financial statements included in such Form 10-K, for additional
information regarding this lawsuit.
Preference Unitholders
- ----------------------
The Company is a defendant in lawsuits related to the Corporate
Conversion filed in the U.S. District Court for the Northern District of
Texas--Dallas Division. The plaintiffs allege, among other things, that (i)
the proxy materials delivered to unitholders in connection with the
Corporate Conversion contained material misstatements and omissions, (ii)
the General Partner of the Partnership breached fiduciary duties to the
preference unitholders in structuring the transaction and allocating the
common stock of the Company and (iii) the Corporate Conversion was
implemented in breach of the partnership agreement of the Partnership
because defendants allegedly did not obtain the requisite opinion of
independent counsel regarding certain tax effects of the transaction. The
Company and the other defendants have denied the allegations and believe
they are without merit. The plaintiffs seek a declaration declaring the
Corporate Conversion void and rescinding it, an order requiring payment of
$164 million to the former preference unitholders in respect of the
preferential distribution rights of their units, unspecified compensatory
and punitive damages and other relief.
On August 12, 1994, the Court entered an order denying plaintiff's
motion for a summary judgment and granted the Company's motion for a summary
judgment. A final judgment was entered dismissing the case. A notice of
appeal was filed August 19, 1994, by the plaintiffs. Oral argument in the
case was held before the Fifth Circuit Court of Appeals in May 1995.
The Company does not expect the resolution of this lawsuit to have a
material adverse effect on its financial position or results of operations.
Other
- -----
The Company is also a defendant in other lawsuits and has assumed
liabilities relating to Original Mesa and the Partnership. The Company does
not expect the resolution of these other matters to have a material adverse
effect on its financial position or results of operations.
(6) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
============================================
The Company conducts its operations through various direct and indirect
subsidiaries. On March 31, 1995, the Company's direct subsidiaries were
MOC, Mesa Holding Co. ("MHC") and Hugoton Management Co. ("HMC"). MOC owns
all of the Company's interest in the West Panhandle field of Texas, the Gulf
Coast and the Rocky Mountain areas, as well as an approximate 99% limited
partnership interest in HCLP. MHC owns cash, an approximate 1% limited
partnership interest in HCLP, and 100% of MESA Environmental Ventures Co.
("Mesa Environmental"), a Company established to compete in the natural gas
vehicle market. HMC owns the general partner interest of HCLP. HCLP owns
substantially all of the Company's Hugoton field natural gas properties and
is liable for the HCLP Secured Notes (see Note 4). The assets and cash
flows of HCLP that are subject to the mortgage securing the HCLP Secured
Notes are dedicated to service the HCLP Secured Notes and are not available
to pay creditors of the Company or its subsidiaries other than HCLP. MOC
and the Company are liable for the amounts outstanding under the amended
Credit Agreement, the 13-1/2% subordinated notes and the Discount Notes.
Mesa Capital Corp. ("Mesa Capital"), a wholly owned financing subsidiary of
MOC, is also an obligor under the 13-1/2% subordinated notes and the
Discount Notes. Mesa Capital, which has insignificant assets and results of
operations, is included with MOC in the condensed consolidating financial
statements. Other Company Subsidiaries in the condensed consolidating
financial statements include MHC, HMC, and Mesa Environmental.
The following are condensed consolidating financial statements of MESA
Inc., HCLP, MOC, and the Company's other direct and indirect subsidiaries
combined (in millions):
Condensed Consolidating Balance Sheets
- --------------------------------------
Other Consol. The
MESA Company and Company
March 31, 1995 Inc. HCLP MOC Subs. Elimin. Consol'd
- -------------- ------ ------ ------ -------- -------- --------
Assets:
Cash and cash
investments....... $ - $ 48 $ 44 $ 72 $ - $ 164
Other current
assets............ - 10 30 5 - 45
------ ------ ------ ------ ------ ------
Total current
assets.......... - 58 74 77 - 209
------ ------ ------ ------ ------ ------
Property, plant
and equipment,
net............... - 618 494 3 - 1,115
Investment in
subsidiaries...... 126 - 121 9 (256) -
Intercompany
receivables....... - - 9 - (9) -
Other noncurrent
assets............ - 85 59 5 - 149
------ ------ ------ ------ ------ ------
$ 126 $ 761 $ 757 $ 94 $ (265) $1,473
====== ====== ====== ====== ====== ======
Liabilities and
Equity:
Current
liabilities....... $ - $ 46 $ 44 $ 1 $ - $ 91
Long-term debt..... - 493 697 - - 1,190
Intercompany
payables.......... 9 - - - (9) -
Other noncurrent
liabilities....... - - 71 4 - 75
Partners'/Stock-
holders' equity
(deficit)......... 117 222 (55) 89 (256) 117
------ ------ ------ ------ ------ ------
$ 126 $ 761 $ 757 $ 94 $ (265) $1,473
====== ====== ====== ====== ====== ======
Other Consol. The
MESA Company and Company
December 31, 1994 Inc. HCLP MOC Subs. Elimin. Consol'd
- ----------------- ------ ------ ------ -------- -------- --------
Assets:
Cash and cash
investments....... $ - $ 50 $ 24 $ 70 $ - $ 144
Other current
assets............ - 16 39 6 - 61
------ ------ ------ ------ ------ ------
Total current
assets.......... - 66 63 76 - 205
------ ------ ------ ------ ------ ------
Property, plant
and equipment,
net............... - 626 503 1 - 1,130
Investment in
subsidiaries...... 134 - 126 10 (270) -
Intercompany
receivables....... - - 9 - (9) -
Other noncurrent
assets............ - 88 58 3 - 149
------ ------ ------ ------ ------ ------
$ 134 $ 780 $ 759 $ 90 $ (279) $1,484
====== ====== ====== ====== ====== ======
Liabilities and
Equity:
Current
liabilities....... $ - $ 47 $ 41 $ 1 $ - $ 89
Long-term debt..... - 505 688 - - 1,193
Intercompany
payables.......... 9 - - - (9) -
Other noncurrent
liabilities....... - - 73 4 - 77
Partners'/Stock-
holders' equity
(deficit)......... 125 228 (43) 85 (270) 125
------ ------ ------ ------ ------ ------
$ 134 $ 780 $ 759 $ 90 $ (279) $1,484
====== ====== ====== ====== ====== ======
Condensed Consolidating Statements of Operations
- ------------------------------------------------
Three Months Ended:
- ------------------
Other Consol. The
MESA Company and Company
March 31, 1995 Inc. HCLP MOC Subs. Elimin. Consol'd
- -------------- ------ ------ ------ -------- -------- --------
Revenues............. $ - $ 25 $ 37 $ - $ - $ 62
------ ------ ------ ------ ------ ------
Costs and Expenses:
Operating,
exploration and
taxes............. - 9 9 - - 18
General and
administrative.... - - 6 1 - 7
Depreciation,
depletion and
amortization...... - 9 12 - - 21
------ ------ ------ ------ ------ ------
- 18 27 1 - 46
------ ------ ------ ------ ------ ------
Operating Income
(Loss).............. - 7 10 (1) - 16
------ ------ ------ ------ ------ ------
Interest expense, net
of interest income.. - (12) (22) 1 - (33)
Equity in loss of
subsidiaries........ (8) - (5) - 13 -
Other................ - - 4 5 - 9
------ ------ ------ ------ ------ ------
Net Income (Loss)... $ (8) $ (5) $ (13) $ 5 $ 13 $ (8)
====== ====== ====== ====== ====== ======
Other Consol. The
MESA Company and Company
March 31, 1994 Inc. HCLP MOC Subs. Elimin. Consol'd
- -------------- ------ ------ ------ -------- -------- --------
Revenues............. $ - $ 33 $ 28 $ - $ - $ 61
------ ------ ------ ------ ------ ------
Costs and Expenses:
Operating,
exploration and
taxes............. - 10 10 - - 20
General and
administrative.... - - 6 - - 6
Depreciation,
depletion and
amortization...... - 10 15 - - 25
------ ------ ------ ------ ------ ------
- 20 31 - - 51
------ ------ ------ ------ ------ ------
Operating Income
(Loss).............. - 13 (3) - - 10
------ ------ ------ ------ ------ ------
Interest expense, net
of interest income.. - (12) (22) - - (34)
Losses on
dispositions of oil
and gas properties.. - - - (91)(d) 91 -
Equity in income
(loss) of
subsidiaries........ (18) - 1 - 17 -
Other................ - - 18 6 (18) 6
------ ------ ------ ------ ------ ------
Net Income (Loss).... $ (18) $ 1 $ (6) $ (85) $ 90 $ (18)
====== ====== ====== ====== ====== ======
Condensed Consolidating Statements of Cash Flows
- ------------------------------------------------
Three Months Ended:
- -------------------
Other Consol. The
MESA Company and Company
March 31, 1995 Inc. HCLP MOC Subs. Elimin. Consol'd
- -------------- ------ ------ ------ -------- -------- --------
Cash Flows from
Operating Activities $ - $ (3) $ 26 $ 6 $ - $ 29
------ ------ ------ ------ ------ ------
Cash Flows from
Investing Activities:
Capital
expenditures...... - (1) (5) (1) - (7)
Other.............. - - - (3) - (3)
------ ------ ------ ------ ------ ------
- (1) (5) (4) - (10)
------ ------ ------ ------ ------ ------
Cash Flows from
Financing Activities:
Other.............. - 2 - - - 2
------ ------ ------ ------ ------ ------
- 2 - - - 2
------ ------ ------ ------ ------ ------
Net Increase (Decrease)
in Cash and Cash
Investments......... $ - $ (2) $ 21 $ 2 $ - $ 21
====== ====== ====== ====== ====== ======
Other Consol. The
MESA Company and Company
March 31, 1994 Inc. HCLP MOC Subs. Elimin. Consol'd
- -------------- ------ ------ ------ -------- -------- --------
Cash Flows from
Operating Activities $ - $ 4 $ (43) $ 15 $ - $ (24)
------ ------ ------ ------ ------ ------
Cash Flows from
Investing Activities:
Capital
expenditures...... - (1) (2) - - (3)
Contributions to
subsidiaries...... - - (5) (1) 6 -
Other.............. - - 25 - (28) (3)
------ ------ ------ ------ ------ ------
- (1) 18 (1) (22) (6)
------ ------ ------ ------ ------ ------
Cash Flows from
Financing Activities:
Repayments of
long-term debt.... - (22) (6) - - (28)
Long-term
borrowings........ - - 43 - - 43
Contributions from
equity holders.... - 6 - - (6) -
Other.............. - 2 - (28) 28 2
------ ------ ------ ------ ------ ------
- (14) 37 (28) 22 17
------ ------ ------ ------ ------ ------
Net Increase (Decrease)
in Cash and Cash
Investments......... $ - $ (11) $ 12 $ (14) $ - $ (13)
====== ====== ====== ====== ====== ======
Notes to Condensed Consolidating Financial Statements
- -----------------------------------------------------
(a) These condensed consolidating financial statements should be read
in conjunction with the consolidated financial statements of the
Company and notes thereto of which this note is an integral part.
(b) As of March 31, 1995, the Company owns 100% interest in each of
MOC, MHC, and HMC. These condensed consolidating financial
statements present the Company's investment in its subsidiaries
and MOC's and MHC's investments in HCLP using the equity method.
Under this method, investments are recorded at cost and adjusted
for the parent Company's ownership share of the subsidiary's
cumulative results of operations. In addition, investments
increase in the amount of contributions to subsidiaries and
decrease in the amount of distributions from subsidiaries.
(c) The consolidation and elimination entries (i) eliminate the equity
method investment in subsidiaries and equity in income (loss) of
subsidiaries, (ii) eliminate the intercompany payables and
receivables, and (iii) eliminate other transactions between
subsidiaries including contributions and distributions.
(d) The condensed consolidating statement of operations of Other
Company Subsidiaries for the three months ended March 31, 1994,
reflects a $91 million loss from MHC's disposition of an 18%
equity interest in HCLP. The HCLP interest was used to repay a
portion of MHC's intercompany payable to MOC and was valued, in
accordance with the provisions of the Discount Note indentures, at
$5 million for each one percent of interest assigned. A loss was
recognized for the difference between the carrying value of the
HCLP interest assigned to MOC and the $90 million value attributed
to such interests which reduced the intercompany payable. The
loss recognized by MHC is eliminated in consolidation.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
=====================
MESA Inc. ("Mesa") incurred a net loss of $7.9 million in the first
quarter of 1995 compared with a net loss of $17.8 million in the first
quarter of 1994.
The following table presents a summary of the results of operations of
Mesa for the three months ended March 31, 1995 and 1994:
1995 1994
------- -------
(in thousands)
Revenues......................................... $62,247 $61,084
Operating and administrative costs............... (25,267) (25,596)
Depreciation, depletion and amortization......... (21,006) (25,312)
------- -------
Operating income................................. 15,974 10,176
Interest expense, net of interest income......... (32,754) (33,744)
Other............................................ 8,886 5,802
------- --------
Net loss......................................... $(7,894) $(17,766)
======= ========
Revenues
--------
The table below presents, for the three months ended March 31, 1995
and 1994, the revenues, production and average prices received from sales of
natural gas, natural gas liquids and oil and condensate.
1995 1994
-------- --------
Revenues (in thousands):
Natural gas.................................. $ 35,856 $ 40,706
Natural gas liquids.......................... 18,206 16,272
Oil and condensate........................... 5,393 1,611
-------- --------
Total................................... $ 59,455 $ 58,589
======== ========
Natural Gas Production (million cubic feet):
Hugoton...................................... 12,699 12,822
West Panhandle............................... 4,927 5,217
Other........................................ 2,249 1,820
-------- --------
Total................................... 19,875 19,859
======== ========
Natural Gas Liquids Production (thousand barrels):
Hugoton...................................... 930 880
West Panhandle............................... 696 826
Other........................................ 14 15
-------- --------
Total................................... 1,640 1,721
======== ========
Oil and Condensate Production (thousand barrels):
Hugoton...................................... -- --
West Panhandle............................... 16 33
Other........................................ 306 103
-------- --------
Total................................... 322 136
======== ========
Average Prices:
Natural gas (per thousand cubic feet)........ $ 1.71 $ 2.08
Natural gas liquids (per barrel)............. $ 11.18 $ 9.55
Oil and condensate (per barrel).............. $ 16.51 $ 12.39
Mesa's total equivalent natural gas production was slightly higher in
the first quarter of 1995 than in the same period of 1994. Hugoton field
production was unchanged from the previous year. West Panhandle field
production was 11 percent lower in the first quarter of 1995 reflecting the
decreased demand resulting from warm winter weather in the market area
served by this production. Gulf Coast production increased 65 percent in
the first quarter of 1995 reflecting the success of Mesa's offshore drilling
in 1994. The increase in oil and condensate production is attributable to
the Gulf Coast.
Mesa's average prices received for natural gas production decreased
while prices for natural gas liquids and oil and condensate production
increased in the first quarter of 1995 compared with the same period in
1994. First quarter natural gas prices are particularly sensitive to
weather. In 1994 the northeastern United States experienced a much colder
than normal winter; in 1995, the winter was one of the warmest on record.
Natural Gas Prices
------------------
Substantially all of Mesa's natural gas production is sold under short-
or long-term sales contracts. Approximately 80% of Mesa's annual natural
gas sales, whether or not such sales are governed by a contract, are at
market prices. The following table shows Mesa's natural gas production sold
under fixed-price contracts and production sold at market prices for the
three months ended March 31, 1995 and 1994:
1995 1994
------ ------
Natural Gas Production (million cubic feet):
Sold under fixed-price contracts................. 3,116 3,727
Sold at market prices............................ 16,759 16,132
------ ------
Total production............................ 19,875 19,859
====== ======
Percent sold at market prices.................... 84% 81%
====== ======
In addition to its fixed-price contracts, Mesa will, when circumstances
warrant, hedge the price received for its market-sensitive production
through natural gas futures contracts traded on the New York Mercantile
Exchange. The following table shows the effects of Mesa's fixed-price
contracts and hedging activities on its natural gas prices for the three
months ended March 31, 1995 and 1994:
1995 1994
----- -----
Average Natural Gas Prices (per thousand cubic feet):
Fixed-price contracts.............................. $2.64 $2.41
===== =====
Market prices received............................. $1.25 $2.01
Hedge gains........................................ .29 --
----- -----
Total market prices........................... $1.54 $2.01
===== =====
Total average prices............................... $1.71 $2.08
===== =====
Gains and losses from hedging activities are included in natural gas
revenues when the hedged production occurs. Mesa recognized gains from
hedging activities of $4.9 million in the first three months of 1995. Mesa
did not hedge any production in the first quarter of 1994. Mesa has hedged
a significant portion of its market-sensitive production for the remainder
of 1995.
Costs and Expenses
------------------
Mesa's costs and expenses decreased from $50.9 million in the first
quarter of 1994 to $46.3 million for the same period in 1995. Lease
operating expense decreased due to a one-time insurance adjustment reflected
in the first quarter of 1994. Production and other taxes are lower in the
first quarter of 1995 than in the first quarter of 1994 due to lower Kansas
production tax rates implemented beginning in the last half of 1994 in the
Hugoton field. Exploration charges are greater in the first quarter of 1995
compared to the first quarter of 1994 reflecting Mesa's increased
exploration activities in the Gulf of Mexico, primarily the purchase of
three-dimensional seismic data. Depreciation, depletion and amortization
expense, which is calculated on a unit-of-production basis, decreased
primarily due to increases in the year end estimated reserves in the Hugoton
and West Panhandle fields and reserve discoveries in the Gulf Coast.
Other Income (Expense)
----------------------
Interest expense in the first quarter of 1995 was not materially
different from the same period in 1994 as average aggregate debt outstanding
did not materially change.
Interest income increased from $2.4 million in the first quarter of
1994 to $3.9 million in the same period for 1995 as a result of higher
average cash balances and higher average interest rates earned on these cash
balances in 1995.
Results of operations for the first quarters of 1995 and 1994 include
certain items which are either non-recurring or are not directly associated
with Mesa's oil and gas producing operations. The following table sets
forth the amounts of such items for the three months ended March 31, 1995
and 1994 (in thousands):
1995 1994
------ ------
Gains (losses) from futures and securities investments. $4,553 $ (919)
Gains from collections from Bicoastal Corporation...... 4,653 7,341
Other.................................................. (320) (620)
------ ------
$8,886 $5,802
====== ======
The gains from futures and securities investments relate to Mesa's
investments in marketable securities and futures contracts that are not
accounted for as a hedge of future production. The gains from collection of
interest from Bicoastal Corporation relate to a note receivable from such
company, which was in bankruptcy. Mesa's claims in the bankruptcy exceeded
its recorded receivable. As of March 31, 1995, Mesa had collected the full
amount of its allowed claims plus a portion of the interest due on such
claims. Mesa does not expect to receive substantial additional amounts from
Bicoastal.
Capital Resources and Liquidity
- -------------------------------
Mesa is primarily in the business of exploring for, developing,
producing, and processing oil and natural gas. At December 31, 1994, Mesa
owned over 1.8 trillion cubic feet of estimated proved equivalent natural
gas reserves. Mesa is also highly leveraged with over $1.2 billion of
long-term debt and current maturities. Hugoton Capital Limited Partnership
("HCLP"), an indirect, wholly owned subsidiary of Mesa, is the obligor on
approximately 44% of Mesa's consolidated long-term debt. The HCLP debt is
secured by Mesa's Hugoton field properties, which represent approximately
65% of Mesa's oil and gas reserves. The assets and cash flows of HCLP that
are subject to the mortgage securing the HCLP debt are dedicated to service
HCLP's debt and are not available to pay creditors of Mesa or its
subsidiaries other than HCLP. However, any "excess cash," as defined in the
HCLP debt agreements, may be distributed by HCLP to its equity owners, Mesa
Operating Co. ("MOC"), Mesa Holding Co. ("MHC"), and Hugoton Management Co.
("HMC"), which are direct subsidiaries of Mesa, to be used for general
corporate purposes. MOC owns all of Mesa's interest in the West Panhandle
field of Texas and the Gulf Coast and the Rocky Mountain areas and an
approximate 99% limited partnership interest in HCLP. Mesa and MOC are
liable for all of Mesa's consolidated long-term debt other than the HCLP
debt. MHC owns cash, an approximate 1% limited partnership interest in
HCLP, and 100% of Mesa Environmental Ventures Co., a company established to
compete in the natural gas vehicle market. HMC owns the general partner
interest in HCLP.
Approximately 88% of Mesa's non-HCLP debt does not require cash
interest payments until December 31, 1995. Beginning on this date, and
until the debt is repaid, Mesa is required to make semiannual interest
payments in cash at a 12-3/4% annual rate. Such cash interest payments are
expected to total $41.9 million on December 31, 1995, and $81.3 million in
1996. Mesa also has significant principal payments due in 1996 and 1998.
Following is a discussion of Mesa's debt, resources and alternatives:
Long-term Debt
--------------
The following table provides additional information as to Mesa's long-
term debt at March 31, 1995 (in thousands):
Obligors
-----------------
Mesa
and MOC HCLP Total
-------- -------- ----------
Debt:
HCLP Secured Notes(a)............... $ -- $520,180 $ 520,180
Credit Agreement(b)................. 71,131 -- 71,131
12-3/4% secured discount notes(c)(e) 600,337 -- 600,337
12-3/4% unsecured discount
notes(d)(e)....................... 38,535 -- 38,535
Other............................... 12,695 -- 12,695
-------- -------- ----------
722,698 520,180 1,242,878
Current maturities....................... (25,305) (27,736) (53,041)
-------- -------- ----------
Long-term debt........................... $697,393 $492,444 $1,189,837
======== ======== ==========
- ----------
(a) These notes are secured by the Hugoton field properties and are
due in semiannual installments through August 2012, but may be
repaid earlier depending on the rate of production from the
properties.
(b) The bank credit facility (the "Credit Agreement") is secured by a
first lien on MOC's West Panhandle properties, Mesa's equity
interest in MOC and a 76% limited partnership interest in HCLP
and is due in various installments through June 1997. At March
31, 1995, the Credit Agreement also supported letters of credit
totaling $11.4 million.
(c) These notes are due in June 1998 and are secured by second liens
on MOC's West Panhandle properties and a 76% limited partnership
interest in HCLP.
(d) These notes are unsecured and are due in June 1996.
(e) The secured and unsecured discount notes (together, the
"Discount Notes") do not require cash interest payments until
December 31, 1995, but the accreted value of such Discount Notes
increases at 12-3/4% per annum through June 30, 1995.
The following tables summarize Mesa's 1994 actual and 1995 through 1998
forecast cash requirements, assuming no changes in capital structure, for
interest, debt principal and capital expenditures (in thousands):
Actual Forecast
-------- -----------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
HCLP:
Interest payments,
net(a)............... $ 46,815 $ 45,400 $ 45,400 $ 41,800 $ 37,000
Principal repayments... 21,420 15,300 32,200 35,800 37,000
Capital expenditures(b) 6,957 11,100 5,000 1,000 --
-------- -------- -------- -------- --------
$ 75,192 $ 71,800 $ 82,600 $ 78,600 $ 74,000
======== ======== ======== ======== ========
Other Mesa subsidiaries:
Interest payments,
net(a)............... $ 1,945 $ 46,500 $ 93,300 $ 98,400 $101,100
Principal repayments(c) 153,687 15,300 62,200 38,600 617,400
Capital expenditures(b) 25,633 29,500 16,500 15,500 2,400
-------- -------- -------- -------- --------
$181,265 $ 91,300 $172,000 $152,500 $720,900
======== ======== ======== ======== ========
- ----------
(a) Cash interest payments, net of interest income. MOC is required
to begin making semiannual cash interest payments on the Discount
Notes on December 31, 1995.
(b) Forecast capital expenditures represent Mesa's best estimate of
drilling and facilities expenditures required to attain projected
levels of production from its existing properties during the
forecast period and to fund its current exploration and
development program. Capital expenditures include $14.9 million
of committed capital expenditures for 1995, which is included in
the amount set forth in the table. Mesa may incur capital
expenditures in addition to those reflected in the table.
(c) Includes approximately $93 million of principal repayments made in
1994 with proceeds from a $93 million equity offering completed in
the second quarter of 1994. Such principal was scheduled to
mature in 1996.
The Credit Agreement contains restrictive covenants which require Mesa
to maintain a tangible adjusted equity, as defined, of at least $50 million
and available cash, as defined, of $32.5 million. At March 31, 1995,
tangible adjusted equity was $116.7 million and available cash was $151.0
million.
The indentures governing the Discount Notes restrict, among other
things, Mesa's ability to incur additional indebtedness, pay dividends,
acquire stock or make investments, loans and advances. The Credit Agreement
also restricts, among other things, Mesa's ability to incur additional
indebtedness, create liens, pay dividends, acquire stock or make
investments, loans and advances.
Company Resources
-----------------
The following table sets forth certain of Mesa's near-term resources as
of or for the three months ended March 31, 1995 (in thousands):
Other
Subsidiaries
MOC HCLP Combined Total
------- ------- ------------ --------
Cash and securities(a)......... $52,461 $47,630 $72,301 $172,392
Working capital................ 39,310 12,523 76,144 127,977
Restricted cash(b)............. -- 59,069 -- 59,069
Cash flows from
operating activities:
Oil and gas sales, net
of production and
administrative costs..... $18,204 $21,214 $ -- $ 39,418
Interest payments, net(c). (1,496) (24,726) 1,134 (25,088)
Other..................... 9,842 34 4,987 14,863
------- ------- ------- --------
$26,550 $(3,478) $ 6,121 $ 29,193
======= ======= ======= ========
- ----------
(a) Included in working capital.
(b) Non-current asset in balance sheet.
(c) Cash interest payments, net of interest income.
Mesa's cash flows from operating activities are substantially dependent
on the amount of oil and gas produced and the price received for such
production. Production and prices received from Mesa's properties, together
with available cash and securities balances, are expected, under Mesa's
current operating plan, to generate sufficient cash flow to meet Mesa's
required principal, interest and capital obligations through December 31,
1995.
Mesa's current financial forecasts indicate that Mesa will be unable to
fund its principal and interest obligations on MOC debt in 1996 with cash
flows from operating activities and available cash and securities balances.
To address this situation and to position Mesa for expansion through
exploration and development, in December 1994 Mesa announced its intent to
sell all or a portion of its interests in the Hugoton field, and in the
first quarter of 1995 began an auction process to sell such properties.
(See "Proposed Hugoton Properties Sale" below.) Proceeds from such a sale
would be used to retire long-term debt. If Mesa does not sell its Hugoton
properties, it would attempt to strengthen its financial condition by other
means, including the sale of additional equity or refinancing of its long-
term debt. There can be no assurance that Mesa will sell its Hugoton
properties or that, in the absence of such a sale, Mesa will be able to
issue equity or refinance its debt.
Proposed Hugoton Properties Sale
--------------------------------
In the first quarter of 1995 Mesa began an auction process to sell its
interests in the Hugoton field by approaching a select group of prospective
buyers which have the financial means to complete a purchase of Mesa's
entire interest. Mesa hopes to complete a sale during the third quarter of
1995.
Mesa intends to use proceeds from a sale to retire debt. Any sales
proceeds must first be applied against the outstanding balances related to
the HCLP Secured Notes, which are secured by the Hugoton properties. Such
balances include note principal, accrued interest and any premiums due,
including premiums for early retirement of the HCLP Secured Notes. As of
March 31, 1995, such premiums for early retirement of the notes would have
totaled approximately $54.7 million. The actual premiums due in the event
of a redemption of the HCLP Secured Notes will depend upon the prevailing
interest rates at the date of redemption. The restricted cash held at HCLP
would be available to repay obligations under the HCLP Secured Notes. Sales
proceeds remaining after satisfying the HCLP Secured Note obligations would
be applied to the amounts outstanding under the Credit Agreement, including
cash collateralization of outstanding letters of credit, and the Discount
Notes. Mesa expects to record a gain from the sale.
Excluding the Hugoton properties, Mesa had approximately 645 Bcfe of
estimated proved reserves at December 31, 1994, and had approximately 55
Bcfe of oil and gas production in 1994. Excluding Hugoton, Mesa generated
approximately $40 million of cash flows from sales of oil and gas
production, net of operating and administrative expenses, in 1994.
Other
- -----
See Note 5 to the financial statements set forth in Part I, Item 1 of
this Form 10-Q for information regarding the status of certain pending
litigation.
In March 1995 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill. SFAS No. 121
requires a review for impairment wherever circumstances indicate that the
carrying amount of an asset may not be recoverable. Mesa would estimate
future cash flows (undiscounted and without interest changes) expected to
result from use of an asset. Impairment is only recognized if the carrying
amount of an asset is less than the expected future cash flows and the
amount of impairment is based on the fair value of the asset. SFAS No. 121
is effective for fiscal years beginning after December 15, 1995. Mesa has
not yet determined whether it will adopt the provisions of SFAS No. 121 in
1995 or what amount of impairment, if any, may result from adoption of this
standard.
Mesa recognizes its ownership interest in natural gas production as
revenue. Actual production quantities sold may be different from Mesa's
ownership share of production in a given period. Mesa records these
differences as gas balancing receivables or as deferred revenue. Net gas
balancing underproduction represented approximately 2.6% of total equivalent
production in the first quarter of 1995 compared with 1.3% during the same
period in 1994. The gas balancing receivable or deferred revenue component
of natural gas and natural gas liquids revenues in future periods is
dependent on future rates of production, field allowables and the amount of
production taken by Mesa or by its joint interest partners.
Mesa invests from time to time in marketable equity and other
securities, as well as in commodity futures contracts primarily related to
crude oil and natural gas. Mesa also enters into natural gas futures
contracts as a hedge against natural gas price fluctuations.
Management does not anticipate that inflation will have a significant
effect on Mesa's operations.
PART II - OTHER INFORMATION
===========================
Item 1. Legal Proceedings
- --------------------------
Reference is made to Part I, Item 1, Note 5 of this Form 10-Q for
information regarding legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits (Asterisk indicates incorporated by reference herein)
*3.1 - Amended and Restated Articles of Incorporation of MESA Inc.
dated December 31, 1991 (Exhibit 3[a] to the Company's Form
10-K dated December 31, 1991).
*3.2 - Amended and Restated Bylaws of MESA Inc. (Exhibit 3[c] to
the Company's Registration Statement on Form S-4,
Registration No. 33-42102).
*4.1 - Indenture dated as of May 1, 1993, among MESA Inc., Mesa
Operating Limited Partnership, Mesa Capital Corporation and
Harris Trust and Savings Bank, as Trustee, relating to the
secured discount notes and including (a) a form of Secured
Notes, (b) a form of Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement,
dated as of May 1, 1993, between Mesa Operating Limited
Partnership and Harris Trust and Savings Bank, as trustee,
securing the Secured Notes, and (c) a form of Security
Agreement, Pledge and Financing Statement dated as of May 1,
1993, between Mesa Operating Limited Partnership and Harris
Trust and Savings Bank, as trustee, securing the Secured
Notes (Exhibit 4[f] to the Company's Form 10-Q/A dated June
30, 1993).
*4.2 - First Supplemental Indenture dated as of January 5, 1994,
among MESA Inc., Mesa Operating Co., Mesa Capital Corporation
and Harris Trust and Savings Bank, as Trustee (Exhibit 4.2 to
the Company's Registration Statement on Form S-1,
Registration No. 33-51909).
*4.3 - First Supplement to Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement dated as of March
2, 1994, between Mesa Operating Co. as Mortgagor and Debtor,
and Harris Trust and Savings Bank, as mortgagee and Secured
Party (Exhibit 4.8 to the Company's Form 10-Q dated March 31,
1994).
*4.4 - First Supplement to Security Agreement, Pledge and Financing
Statement dated as of March 2, 1994, by Mesa Operating Co. in
favor of Harris Trust and Savings Bank, as Trustee for the
pro rata benefit of the Noteholders under the Indenture
(Exhibit 4.9 to the Company's Form 10-Q dated March 31,
1994).
*4.5 - Indenture dated as of May 1, 1993, among MESA Inc., Mesa
Operating Limited Partnership, Mesa Capital Corporation and
American Stock Transfer & Trust Company, as Trustee, relating
to the unsecured discount notes (Exhibit 4[g] to the
Company's Form 10-Q/A dated June 30, 1993).
*4.6 - First Supplemental Indenture dated as of January 5, 1994,
among MESA Inc., Mesa Operating Co., Mesa Capital Corporation
and American Stock Transfer & Trust Company, as Trustee
(Exhibit 4.4 to the Company's Registration Statement on Form
S-1, Registration No. 33-51909).
*4.7 - Third Amended and Restated Credit Agreement dated as of
November 29, 1994, among the Company, Mesa Operating Co., and
the Banks named in this Credit Agreement and Societe
Generale, Southwest Agency, as Agent (Exhibit 4.7 to the
Company's Form 10-K dated December 31, 1994).
*4.8 - Indenture dated May 1, 1989, among Mesa Capital Corporation,
Mesa Limited Partnership, Mesa Operating Limited Partnership,
and Texas Commerce Bank National Association, as Trustee
(Exhibit 4[c] to the Partnership's Form 10-Q dated March 31,
1989).
*4.9 - First Supplemental Indenture dated as of December 31, 1991,
among Mesa Capital Corporation, MESA Inc., Mesa Operating
Limited Partnership, as Issuers, and Texas Commerce Bank
National Association, as Trustee (Exhibit 4[e] to the
Company's Form 10-K dated December 31, 1991).
*4.10 - Second Supplemental Indenture dated as of April 30, 1992,
among Mesa Capital Corporation, MESA Inc., Mesa Operating
Limited Partnership and Texas Commerce Bank National
Association, as Trustee (Exhibit 4[k] to the Company's Form
10-Q dated June 30, 1992).
*4.11 - Third Supplemental Indenture dated as of August 26, 1993,
among Mesa Capital Corporation, MESA Inc., Mesa Operating
Limited Partnership and Texas Commerce Bank National
Association, as Trustee (Exhibit 4[l] to the Company's Form
10-Q/A dated June 30, 1993).
*4.12 - Fourth Supplemental Indenture dated as of January 5, 1994,
among MESA Inc., Mesa Operating Co., Mesa Capital Corporation
and Texas Commerce Bank National Association, as Trustee
(Exhibit 4.16 to the Company's Registration Statement on Form
S-1, Registration No. 33-51909).
*4.13 - Indenture dated as of May 30, 1991, among Hugoton Capital
Limited Partnership, Hugoton Capital Corporation and Bankers
Trust Company (Exhibit 4[e] to the Partnership's Form 10-Q
dated June 30, 1991).
*4.14 - First Supplemental Indenture dated September 1, 1991, among
Hugoton Capital Limited Partnership, Hugoton Capital
Corporation and Bankers Trust Company, as Trustee (Exhibit
4[h] to the Company's Registration Statement on Form S-4,
Registration No. 33-42102).
*4.15 - Amended and Restated Mortgage, Assignment, Security Agreement
and Financing Statement dated June 12, 1991, from Hugoton
Capital Limited Partnership to Bankers Trust Company, as
Collateral Agent (Exhibit 4[f] to the Partnership's Form 10-Q
dated June 30, 1991).
*4.16 - Second Amended and Restated Credit Agreement dated as of May
1, 1993, among the Company, Mesa Operating Limited
Partnership, the Banks, and Societe Generale, Southwest
Agency, as Agent (Exhibit 4.17 to the Company's Registration
Statement on Form S-4, Registration No. 33-53706).
*4.17 - Assignment and Assumption Agreement dated as of January 5,
1994, among Mesa Inc., Mesa Operating Co., Mesa Operating
Limited Partnership, Pickens Operating Co., the Banks party
to the Credit Agreement and the Agent with respect to the
Credit Agreement (Exhibit 4.21 to the Company's Registration
Statement on Form S-4, Registration No. 33-53706).
*4.18 - Intercreditor Agreement dated as of August 26, 1993, among
Societe Generale, Southwest Agency, as agent for the Banks
under the Company's Credit Agreement, Harris Trust and
Savings Bank, as trustee with respect to the Secured Notes,
and American Stock Transfer & Trust Company, as trustee with
respect to the Unsecured Notes and the Convertible Notes
(Exhibit 4.18 to the Company's Registration Statement on Form
S-4, Registration No. 33-53706).
*4.19 - Amended and Restated Pledge Agreement dated as of March 2,
1994, by Mesa Operating Co., in favor of Societe Generale,
Southwest Agency, as Agent for the pro rata benefit of the
banks parties to the Credit Agreement (Exhibit 4.31 to the
Company's Form 10-Q dated March 31, 1994).
The Registrant agrees to furnish to the Securities and
Exchange Commission upon request any instruments defining the
right of holders of long-term debt with respect to which the
total amount outstanding does not exceed 10% of the total
assets of the Registrant and its subsidiaries on a
consolidated basis.
*10.1 - Form of First Amendment to Deferred Compensation Agreement
and Life Insurance Agreement between Mesa Petroleum Co. and
certain officers and key employees (Exhibit 10[i] to the
Company's Form 10-K dated December 31, 1980).
*10.2 - Hugoton (MTR) Gas Purchase Contract between The Kansas Power
and Light Company, buyer, and Mesa Operating Limited
Partnership, seller, dated effective January 1, 1990
(Exhibit 19[a] to the Partnership's Form 10-Q dated June 30,
1989).
*10.3 - Supplemental Gas Purchase Contract between The Kansas Power
and Light Company, buyer, and Mesa Operating Limited
Partnership, seller, dated effective January 1, 1990
(Exhibit 19[b] to the Partnership's Form 10-Q dated June 30,
1989).
*10.4 - Contract dated January 3, 1928, between Colorado Interstate
Gas Company and Amarillo Oil Company (the B Contract)
(Exhibit 10.1 to Pioneer Corporation's Form 10-K dated
December 31, 1985).
*10.5 - Amendments to the "B" Contract (Exhibit 10.2 to Pioneer
Corporation's Form 10-K dated December 31, 1985).
*10.6 - Gathering Charge Agreement dated January 20, 1985, as
amended, with respect to the "B" Contract (Exhibit 10.3 to
Pioneer Corporation's Form 10-K dated December 31, 1985).
*10.7 - Agreement of Compromise and Settlement dated May 29, 1987,
between the Partnership and Colorado Interstate Gas Company
(Confidential Treatment Requested) (Exhibit 10[s] to the
Partnership's Form 10-K dated December 31, 1987).
*10.8 - Agreement of Sale between Pioneer Corporation and Cabot
Corporation dated August 29, 1984 (Exhibit 10.5 to Pioneer
Corporation's Form 10-K dated December 31, 1985).
*10.9 - Gas Purchase Contract dated June 27, 1949, as amended through
October 3, 1985, between Amarillo Oil Company and Energas
Company (Exhibit 10.6 to Pioneer Corporation's Form 10-K
dated December 31, 1985).
*10.10 - Settlement Agreement dated March 15, 1989, by and among Mesa
Operating Limited Partnership and Mesa Limited Partnership,
et al, Energas Company and the City of Amarillo (Exhibit
10[k] to the Partnership's Form 10-K dated December 31,
1990).
*10.11 - Gas Purchase Agreement dated December 1, 1989, between
Williams Natural Gas Company and Mesa Operating Limited
Partnership acting on behalf of itself and as agent for Mesa
Midcontinent Limited Partnership (Exhibit 10.1 to
Registration Statement of the Partnership on Form S-3,
Registration No. 33-32978).
*10.12 - Third Amendment dated December 19, 1991, to the Hugoton
(MTR) Gas Purchase Contract between The Kansas Power and
Light Company, buyer, and Mesa Operating Limited
Partnership, seller, dated effective January 1, 1990
(Exhibit 10[q] to the Company's Form 10-K dated December 31,
1991).
*10.13 - "B" Contract Production Allocation Agreement dated July 29,
1991, and effective as of January 1, 1991, between Colorado
Interstate Gas Company and Mesa Operating Limited
Partnership (Exhibit 10[r] to the Company's Form 10-K dated
December 31, 1991).
*10.14 - Amendment to "B" Contract Production Allocation Agreement
effective as of January 1, 1993, between Colorado Interstate
Gas Company and Mesa Operating Limited Partnership (Exhibit
10.24 to the Company's Registration Statement on Form S-1,
Registration No. 033-51909).
*10.15 - Amended Supplemental Stipulation and Agreement between
Colorado Interstate Gas Company and Mesa Operating Limited
Partnership dated June 19, 1991 (Exhibit 10[w] to the
Company's Registration Statement on Form S-4, Registration
No. 33-42102).
*10.16 - Amended Peak Day Gas Purchase Agreement dated effective June
19, 1991, between Colorado Interstate Gas Company and Mesa
Operating Limited Partnership (Exhibit 10[t] to the
Company's Form 10-K dated December 31, 1991).
*10.17 - Omnibus Amendment to Collateral Instruments to Supplemental
Stipulation and Agreement dated June 19, 1991, between
Colorado Interstate Gas Company and Mesa Operating Limited
Partnership (Exhibit 10[u] to the Company's Form 10-K dated
December 31, 1991).
*10.18 - First Amendment to Settlement and Interim Release Agreement
between Hugoton Capital Limited Partnership, Mesa Operating
Limited Partnership and The Kansas Power and Light Company
dated December 19, 1991, (Exhibit 10[w] to the Company's Form
10-K dated December 31, 1991).
*10.19 - Engagement Agreement dated as of July 1, 1991, between Mesa
Limited Partnership, Mesa Operating Limited Partnership,
Mesa Holding Limited Partnership, Mesa Midcontinent Limited
Partnership, Mesa Acquisition Limited Partnership, and BTC
Partners, Inc. (Exhibit 10[v] to the Company's Registration
Statement on Form S-4, Registration No. 33-42102).
*10.20 - Conversion Agreement dated as of December 31, 1991, between
Mesa, Boone Pickens and Pickens Operating Co. (Exhibit 10[y]
to the Company's Form 10-K dated December 31, 1991).
*10.21 - Amendment to the Gas Purchase Contract dated June 27, 1949,
as amended, between Amarillo Oil Company and Energas Company
dated June 4, 1992 (Exhibit 10[z] to the Company's Form 10-K
dated December 31, 1992).
*10.22 - Agreement of Compromise and Settlement dated January 11,
1994, among Unocal Corporation, David Colan, MESA Inc. and
certain other parties (Exhibit 10.25 to the Company's
Registration Statement on Form S-1, Registration No.
033-51909).
*10.23 - Agreement of merger, dated as of January 5, 1994, entered
into by and among the Company, Boone Pickens and certain
other parties (Exhibit 10.27 to the Company's Form 10-K
dated December 31, 1993).
*10.24 - Gas Transportation Agreement dated June 14, 1994, between
Western Resources, Inc. and Mesa Operating Co., acting on
behalf of itself and as agent for Hugoton Capital Limited
Partnership (Exhibit 10.24 to the Company's Form 10-K dated
December 31, 1994.)
*10.25 - Incentive Bonus Plan of Mesa Operating Limited Partnership,
as amended, dated effective January 1, 1986 (Exhibit 10[s]
to the Partnership's Form 10-K dated December 31, 1990).
*10.26 - Performance Bonus Plan of Mesa Operating Limited Partnership
dated effective January 1, 1990 (Exhibit 10[t] to the
Partnership's Form 10-K dated December 31, 1990).
*10.27 - 1991 Stock Option Plan of Mesa (Exhibit 10[v] to the
Company's Form 10-K dated December 31, 1991).
*10.28 - Split-Dollar Insurance Agreements dated June 29, 1992, by and
between Mesa Operating Limited Partnership and Boone Pickens
and Paul Cain, respectively, and Collateral Assignments
dated as of June 29, 1992, by Boone Pickens and Paul Cain,
respectively (Exhibit 10[aa] to the Company's Form 10-K
dated December 31, 1992).
27 - Article 5 of Regulation S-X Financial Data Schedule
for the First Quarter 1995 Form 10-Q.
(b) Reports on Form 8-K
None.
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.
MESA INC.
(Registrant)
/s/ William D. Ballew
---------------------
William D. Ballew
Controller
(Principal accounting
officer duly
authorized to sign on
behalf of the Registrant)
Date: May 15, 1995
------------
INDEX TO EXHIBITS
-----------------
Exhibit No. Description
- ----------- -----------
27 Article 5 of Regulation S-X Financial Data Schedule
for the First Quarter 1995 Form 10-Q.