UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _______________
Commission file number: 1-10671
THE MERIDIAN RESOURCE CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0319553
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15995 N. BARKERS LANDING, SUITE 300, HOUSTON, TEXAS 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 281-558-8080
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 and 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 of common stock outstanding at August 12, 1997
14,393.311
Page 1 of 17
THE MERIDIAN RESOURCE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations (unaudited) for the
Three Months and Six Months Ended June 30, 1997 and 1996 3
Consolidated Balance Sheets as of June 30, 1997 (unaudited)
and December 31, 1996 4
Consolidated Statements of Cash Flows (unaudited) for the
Six Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
(in thousands, except for per share information)
REVENUES:
Oil and natural gas $ 6,814 $ 5,270 $ 14,945 $ 9,896
Interest and other 104 358 302 811
-------- -------- --------- -------
6,918 5,628 15,247 10,707
-------- -------- --------- -------
COSTS AND EXPENSES:
Oil and natural gas operating 359 217 727 416
Severance and ad valorem taxes 471 232 1,133 542
Depletion, depreciation
and amortization 2,922 1,918 5,579 3,935
General and administrative 1,199 899 2,612 1,822
Interest 64 7 64 8
-------- -------- --------- -------
5,015 3,273 10,115 6,723
-------- -------- --------- -------
INCOME BEFORE
INCOME TAXES 1,903 2,355 5,132 3,984
-------- -------- --------- -------
INCOME TAX EXPENSE:
Current -- -- -- (26)
Deferred 667 824 1,797 1,104
-------- -------- --------- -------
667 824 1,797 1,078
-------- -------- --------- -------
NET INCOME $ 1,236 $ 1,531 $ 3,335 $ 2,906
======== ======== ========= =======
Net income per common
and common equivalent share $ 0.08 $ 0.10 $ 0.21 $ 0.19
======== ======== ========= =======
Weighted average number of common
and common equivalent shares 15,728 15,513 15,814 15,571
======== ======== ========= =======
See notes to consolidated financial statements.
3
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
JUNE 30, DECEMBER 31,
1997 1996
---- ----
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,262 $ 17,267
Accounts receivable (less allowance for
doubtful receivables of $121,000) 9,631 7,116
Due from affiliates 1,670 857
Prepaid expenses and other 393 105
---------- ---------
Total current assets 14,956 25,345
---------- ---------
PROPERTY AND EQUIPMENT:
Oil and natural gas properties, full cost method (including
$42,037,000 [1997] and $29,718,000 [1996]
not subject to depletion) 120,700 92,902
Land 478 478
Equipment 3,342 2,628
---------- ---------
124,520 96,008
Less accumulated depletion and depreciation (24,027) (18,506)
---------- ----------
100,493 77,502
---------- ---------
OTHER ASSETS 357 415
---------- ---------
$ 115,806 $ 103,262
========== =========
See notes to consolidated financial statements.
4
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(unaudited)
JUNE 30, DECEMBER 31
1997 1996
---- ----
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,012 $ 4,225
Revenues and royalties payable 5,362 5,530
Accrued liabilities 5,174 11,752
---------- ---------
Total current liabilities 21,548 21,507
---------- ---------
LONG-TERM DEBT 6,500 --
---------- --------
DEFERRED INCOME TAXES 5,177 3,380
---------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value (25,000,000 shares
authorized, none issued and outstanding) -- --
Common stock, $0.01 par value (100,000,000 shares
authorized, 14,453,308 [1997] and
14,453,298 [1996] issued) 146 145
Additional paid-in capital 76,240 75,265
Accumulated earnings 7,723 4,388
Unamortized deferred compensation (448) (343)
---------- ----------
83,661 79,455
Treasury stock, at cost (60,000 shares) (1,080) (1,080)
---------- ----------
Total stockholders' equity 82,581 78,375
---------- ---------
$ 115,806 $ 103,262
========== ==========
See notes to consolidated financial statements.
5
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
---- ----
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,335 $ 2,906
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depletion and depreciation 5,521 3,893
Amortization of other assets 58 42
Deferred income taxes 1,797 1,104
Non-cash compensation 871 --
Changes in assets and liabilities:
Accounts receivable (2,515) (1,894)
Due from affiliates (813) (884)
Prepaid expenses and other current assets (288) (77)
Accounts payable 6,787 4,271
Revenues and royalties payable (168) 2,453
Accrued liabilities 162 246
--------- --------
Net cash provided by operating activities 14,747 12,060
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (35,252) (17,727)
Other -- (134)
--------- ---------
Net cash used in investing activities (35,252) (17,861)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 6,500 --
Deferred loan costs -- (9)
--------- ---------
Net cash provided by (used in) financing activities 6,500 (9)
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (14,005) (5,810)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 17,267 35,658
--------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 3,262 $ 29,848
========= ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Interest paid $ -- $ --
========= ========
Income taxes paid $ -- $ --
========= =========
See notes to consolidated financial statements.
6
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements reflect the accounts of The
Meridian Resource Corporation ("TMRC") and its subsidiaries after elimination of
all significant intercompany transactions and balances. The financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in TMRC's Annual Report on Form 10-K for the year ended
December 31, 1996, as filed with the Securities and Exchange Commission ("SEC").
The financial statements included herein as of June 30, 1997, and for the three
and six month periods ended June 30, 1997 and 1996 are unaudited, and, in the
opinion of management, the information furnished reflects all material
adjustments, consisting of normal recurring adjustments, necessary for a fair
statement of the results for the interim periods presented.
2. NET INCOME PER SHARE
Net income per share is calculated by dividing net income by the weighted
average common shares and (in periods in which they have a dilutive effect)
common share equivalents outstanding during the period, excluding shares held in
treasury. Shares of common stock issuable under stock options, warrants and
stock rights are treated as common share equivalents when dilutive. For the
periods presented, there is no difference between primary and fully diluted net
income per share.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earning per Share, which is required to be adopted on December 31, 1997. At
that time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating "basic earnings per share" (which calculation
replaces the current "primary earnings per share"), the dilutive effect of stock
options will be excluded. The impact of this statement is not expected to be
material.
3. SUBSEQUENT EVENT
In July 1997, TMRC entered into a definitive merger agreement with Cairn Energy
USA, Inc. ("Cairn"), pursuant to which Cairn would be merged with a subsidiary
of TMRC. The terms of the merger agreement provide for the exchange of 1.08
shares of TMRC's common stock for each share of Cairn common stock in a
pooling-of-interests transaction that is expected to be tax free to both
companies. TMRC would issue approximately 18.9 million shares of its common
stock having a value in excess of $234 million based on TMRC's closing stock
price of $12 5/16 per share on July 3, 1997. The merger is subject to certain
conditions, including the approval of the shareholders of both companies.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following is a discussion of the Company's financial operations for the
three and six month periods ended June 30, 1997 and 1996. The notes to the
Company's consolidated financial statements included in this report, as well as
the Company's Annual Report on Form 10-K for the year ended December 31, 1996
(and the notes attached thereto), should be read in conjunction with this
discussion.
OVERVIEW
Results for the first half of 1997 reflect the Company's efforts in continuing
to increase its oil and natural gas production. Oil and natural gas production
increased 79% and 20%, respectively, for the first six months of 1997 compared
to the first six months of 1996. These increases in production are a direct
result of the continuing increase in exploration and development activities by
the Company and the addition of new producing wells during the last twelve
months. In this regard, during the first six months of 1997, the Company
expended over $27.8 million in property and equipment additions as part of its
1997 exploration and development program and currently expects to expend over
$22 million during the last two quarters of 1997. The Company expects third
quarter production to continue to increase as additional wells are expected to
be completed and placed on production.
The Company recently announced that it has entered into a definitive merger
agreement with Cairn Energy USA, Inc. ("Cairn"), pursuant to which Cairn would
be merged with a subsidiary of TMRC. The terms of the merger agreement provide
for the exchange of 1.08 shares of TMRC's common stock for each share of Cairn
common stock in a pooling-of-interests transaction that is expected to be tax
free to both companies. TMRC would issue approximately 18.9 million shares of
its common stock having a value in excess of $234 million based on TMRC's
closing stock price of $12 5/16 share on July 3, 1997. The merger is expected to
be accretive to 1997 per share cash flow and income, excluding one-time charges
relating to expenses associated with the merger.
On a combined basis, at year-end 1996, both companies had proved reserves of
approximately 164 Bcfe, with a pre-tax present value of future net cash flows
discounted at 10% of approximately $395 million. The Company believes the merger
combines TMRC's experience in the application of 3-D seismic exploration in the
transition zone and onshore Gulf Coast region with Cairn's similar expertise and
an attractive portfolio of offshore Gulf of Mexico drilling prospects.
The merger is subject to certain conditions, including the approval of the
shareholders of both companies. The Company currently expects that the merger
will be completed early in the fourth
quarter of 1997.
8
Although there can be no assurance as to the results of the Company's current
drilling program, the increase in the Company's exploration activities is
expected to result in increased revenue and income for the remainder of 1997 and
into 1998 Future results, however, will be subject to the level of success in
the program and prevailing prices of crude oil and natural gas.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1997, the Company's liquidity needs were met from
oil and natural gas production sales, cash reserves and long-term borrowings. As
of June 30, 1997, the Company had a cash balance of $3.3 million and a negative
working capital of $6.6 million. The decrease in both the cash balance and
working capital reflects capital expenditures related to the Company's
increasing exploration and development activities.
In order to provide the Company with additional funds to finance its future
exploration and development program and to satisfy working capital needs beyond
current cash flows, the Company's operating subsidiary, Texas Meridian Resources
Exploration, Inc. ("TMRX"), maintains a line of credit with The Chase Manhattan
Bank ("Chase"). TMRX's obligations under this facility are guaranteed by the
Company and secured by the stock of TMRX and certain other subsidiaries of the
Company. Under this facility, the Company may borrow, on a revolving basis, up
to $20 million, subject to satisfaction of a borrowing base as determined from
time to time by Chase. The current borrowing base under the facility is $20
million and the Company had outstanding borrowings of $6.5 million as of June
30, 1997. Borrowings under the credit agreement mature on December 31, 1999.
Capital expenditures for the first half of 1997 consisted of $27.8 million for
property and equipment additions related to exploration and development of
various prospects, including leases, seismic data acquisitions, drilling and
completion costs. The Company has budgeted approximately $22 million in capital
expenditures for the last two quarters of 1997 for the further development and
drilling of its south Louisiana and southeast Texas prospects as well as costs
associated with additional acquisition of leases, seismic data and interpretive
work. These expenditures are expected to be funded with the Company's existing
cash, cash flow from operations and borrowings under the Company's credit
facility.
In management's opinion, the Company has sufficient capital resources available
to it to fund its 1997 development and drilling plans and other obligations and
liquidity. Cash requirements beyond 1997 will be dependent upon the success of
the Company's current drilling program and the nature and extent of capital
expenditures that might be required for exploration and development activities
at that time. Upon the consummation of the merger with Cairn, the Company
expects that Cairn's existing $65 million credit facility will be replaced and
combined
9
with the Company's credit facility with Chase. The Company anticipates that the
majority of its and Cairn's capital needs for 1998 will be funded through cash
flow from operations, but that additional funds in the form of new borrowings
or, if desirable, additional issuances of equity or term debt may be utilized to
fully fund the combined Company's exploration activities in 1998. While the
Company may choose to utilize borrowings to fund the excess portion of the
Company's and Cairn's exploration and development program, the Company intends
to maintain its historical strategy of funding exploration activities with cash
flow and equity and funding development activities with working capital and
debt.
In anticipation of these capital requirements, the Company retained Chase
Securities Corporation to assist it in a consolidation of the Company's and
Cairn's credit facilities and an expansion of the combined facility following
the merger. Although there can be no assurance as to final terms and conditions
of any such facility, the Company expects that the new facility will be
effective as of the closing of the Cairn merger. Further, notwithstanding the
Cairn merger, the Company would anticipate expanding its current credit facility
in light of its increased operations and working capital requirements.
It is the policy of the Company to retain its existing cash for reinvestment in
the businesses of the Company and not to pay dividends with respect to its
common stock in the foreseeable future.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997, AS COMPARED
TO THE THREE MONTHS ENDED JUNE 30, 1996
OPERATING REVENUES. Second quarter 1997 oil and natural gas revenues increased
$1.5 million as compared to the second quarter 1996 revenues due to increases in
oil and natural gas production which increases were partially offset by
decreases in both average oil and natural gas prices.
Oil and natural gas production rose by 81% and 24%, respectively, due in large
part to the successful completion of several wells in south Louisiana and
southeast Texas. Oil and natural gas prices declined by 10% and 13%,
respectively, over the same time period.
The decreases in prices, combined with higher depletion, depreciation and
amortization expenses ("DD&A") associated with the Company's increased
exploration activity, were the primary reasons for the decline in the Company's
net income for the current quarter to be less than the net income for the same
quarter of 1996. Absent the 1997 price decline, net income for the 1997 second
quarter would have been greater than the net income for the 1996 second quarter.
10
The following table summarizes production, average prices and gross revenues for
the three months ended June 30, 1997 and 1996.
THREE MONTHS ENDED 1997
JUNE 30, 1997 PERCENTAGE
------------------ INCREASE INCREASE
1997 1996 (DECREASE) (DECREASE)
---- ---- ---------- ----------
Production:
Oil (Mbbl) 172 95 77 81%
Natural gas (Mmcf) 1,558 1,252 306 24%
----- ----- ---
Natural gas equivalent (Mmcfe) 2,590 1,822 768 42%
Average Price Per Unit:
Oil ($/Bbl) $ 19.42 $ 21.50 ($2.08) (10%)
Natural gas ($/Mcf) $ 2.23 $ 2.57 ($0.34) (13%)
Gross Revenues (000's):
Oil $ 3,341 $ 2,050 $1,291 63%
Natural gas 3,473 3,220 253 8%
------- -------- ------
Total $ 6,814 $ 5,270 $1,544 29%
======= ======== ======
INTEREST AND OTHER INCOME. Interest and other income during the second quarter
1997 decreased $0.3 million from the comparable period in 1996. This decrease
was the result of a decrease in average cash balances reflecting the Company's
increase in capital expenditures.
OPERATING EXPENSES. Oil and natural gas operating expenses increased $0.2
million to $0.4 million for the three months ended June 30, 1997, compared to
$0.2 million for the three months ended June 30, 1996. The increase was
primarily due to added operating expenses related to the additional wells
brought on production during the last twelve months.
SEVERANCE AND AD VALOREM TAXES. Severance and ad valorem taxes increased $0.2
million for the current quarter when compared to the same quarter during 1996.
This increase was primarily a direct result of the increase in producing wells
and in total production and revenues.
DEPLETION, DEPRECIATION AND AMORTIZATION. DD&A increased during the quarter
ended June 30, 1997, to $2.9 million from $1.9 million for the comparable period
of 1996. DD&A increased primarily as a result of increased capital expenditures
subject to depletion and increased total production. The natural gas equivalent
production for the three months ended June 30, 1997, increased 42% to 2,590
Mmcfeq as compared to 1,822 Mmcfeq for the three months ended June 30, 1996. The
Company uses the unit of production method of amortization of its oil and
natural gas properties.
11
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased
$0.3 million for the second quarter of 1997 as compared to the second quarter of
1996. The increase is primarily a result of increases in salaries and wages and
related employee costs associated with the Company's expanded exploration
activities and overall growth.
INTEREST EXPENSE. The interest expense of $0.1 million is due to the borrowings
under the Company's credit facility made during the current quarter to fund
exploration and development activities.
INCOME TAX EXPENSE. The provision for deferred income taxes decreased $0.1
million to $0.7 million for the three months ended June 30, 1997, as compared to
$0.8 million for the three months ended June 30, 1996. This decrease is a direct
result of the decrease in net income for the current quarter.
SIX MONTHS ENDED JUNE 30, 1997 AS COMPARED
TO THE SIX MONTHS ENDED JUNE 30, 1996
OPERATING REVENUES. Oil and natural gas revenues for the six months ended June
30, 1997, increased $5 million, or 51%, compared to the six months ended June
30, 1996. This increase was attributable to an increase in production along with
a small increase in average prices.
The following table summarizes production, average prices and gross revenues for
the six months ended June 30, 1997 and 1996.
SIX MONTHS ENDED 1997
JUNE 30, 1997 PERCENTAGE
------------------ INCREASE INCREASE
1997 1996 (DECREASE) (DECREASE)
---- ---- ---------- ----------
Production:
Oil (Mbbl) 325 182 143 79%
Natural gas (Mmcf) 3,000 2,498 502 20%
----- ----- ---
Natural gas equivalent (Mmcfe) 4,950 3,590 1,360 38%
Average Price Per Unit:
Oil ($/Bbl) $ 20.86 $ 20.48 $ 0.38 2%
Natural Gas ($/Mcf) $ 2.72 $ 2.47 $ 0.25 10%
Gross Revenues (000's):
Oil $ 6,780 $ 3,727 $ 3,053 82%
Natural gas 8,165 6,169 1,996 32%
------- -------- -------
Total $14,945 $ 9,896 $ 5,049 51%
======= ======== =======
12
INTEREST AND OTHER INCOME. Interest and other income during the first six months
of 1997 decreased $0.5 million compared to the first six months of 1996. This
decrease was the result of a decrease in average cash balances reflecting the
Company's increase in capital expenditures.
OPERATING EXPENSES. Oil and natural gas operating expenses increased $0.3
million to $0.7 million for the six months ended June 30, 1997, compared to $0.4
million for the six months ended June 30, 1996. This increase was primarily due
to added operating expenses related to the additional wells brought on
production during the last twelve months.
SEVERANCE AND AD VALOREM TAXES. Severance and ad valorem taxes increased $0.6
million for the first half of 1997 as compared to the same time period of 1996.
This increase was the direct result of the increase in producing wells and in
total oil and natural gas production and revenues.
DEPLETION, DEPRECIATION AND AMORTIZATION. DD&A increased during the six months
ended June 30, 1997 to $5.6 million from $3.9 million for the comparable period
of 1996. DD&A increased primarily as a result of increased capital expenditures
subject to depletion and increased total production. The Company uses the unit
of production method of amortization of its oil and natural gas properties.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased
$0.8 million to $2.6 million for the first half of 1997 when compared to $1.8
million for the first half of 1996. The increase was due primarily to an
increase in salaries and wages and related employee costs associated with the
Company's expanded exploration activities and growth.
INTEREST EXPENSE. Interest expense increased to $0.1 million for the six months
ended June 30, 1997, as a direct result of the borrowings under the Company's
credit facility made during this period.
INCOME TAX EXPENSE. The provision for deferred income taxes was $1.8 million for
the first half of 1997 as compared to $1.1 million for the first half of 1996.
The deferred income tax increase is due to the Company's increase in net income
and due to prior years' loss carryforwards having been fully utilized for
financial accounting purposes in 1996.
OTHER
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995) and that involve risk and uncertainty. These forward-looking
statements may include, but are not limited to, statements regarding the
proposed merger with Cairn and expectations regarding the combined
13
Company's operations and business prospects following such merger, future
financings, exploration and seismic acquisition plans, anticipated results from
current and future exploration prospects, the anticipated results of wells based
on logging data and production tests, future sales of production, earnings,
margins, production levels and costs, market trends in the oil and gas industry
and the exploration and development sector thereof, environmental and other
expenditures and various business trends. These forward-looking statements are
identified by their use of terms and phrases such as "anticipate," "expect,"
"estimate," "intend," "project," "believe," and similar terms and phrases and
may be made by management orally or in writing including, but not limited to,
the Management's Discussion and Analysis and Financial Condition Results of
Operation section and other sections of the Company's filings with the
Securities and Exchange Commission under the Securities Act of 1933 and the
Securities Exchange Act of 1934.
Although TMRC believes that the expectations described in such forward-looking
statements are reasonable, these statements involve risks and uncertainties that
may cause actual future activities and results of operations to be materially
different from that suggested or described herein.
These risks include changes in market conditions in the oil and gas industry and
demand and prices for oil and gas, the ability of TMRC to integrate and realize
anticipated synergies related to the combination of TMRC and Cairn, dependence
on current managements, the ability of TMRC to achieve and execute internal
business plans, the impact of any economic downturns and inflation and other
market factors affecting the demand and supply of oil and gas, the timing of
drilling new prospects, the ability of TMRC to successfully identify and
complete its prospects and Cairn's current prospects in the event the merger is
consummated, variation in actual production results from that estimated in
existing reserve data, regulatory changes affecting exploration activities and
higher costs associated with drilling. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those expected, estimated or projected.
14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 7, 1997, a lawsuit was filed in the Delaware Chancery Court in the
county of New Castle against Cairn, its directors and TMRC. The lawsuit, a
proposed class action, alleges that the Cairn's Board of Directors breached
their fiduciary duties to Cairn's stockholders in connection with the merger.
The lawsuit also alleges that TMRC aided and abetted the alleged breach of
fiduciary duty by the directors of Cairn. The lawsuit seeks to enjoin the
merger, and, in the alternative, seeks recission of the merger. The lawsuit also
seek compensatory damages, attorneys' fees and other costs from the defendants.
Cairn and TMRC believe that the lawsuit it without merit and intend to
vigorously contest it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Shareholders of the Company held on June 19, 1997, the
Company's shareholders voted in favor of (i) the election of two Class I
Directors and one Class II Director to the Board of Directors, (ii) a change in
the name of the Company to "The Meridian Resource Corporation," and (iii)
approval of the 1997 Long-Term Incentive Plan. The number of shares voted for
and withheld with respect to the election of the directors, and the number of
shares voted for and against and the number of abstentions for and broker
non-votes with respect to the other two proposals were as follows:
Withheld/ Broker
Nominees: For Against Abstain Non-Votes
--------- --- -------- ------- ---------
Class I Directors:
Jack A. Prizzi 11,924,240 60,130 --
James T. Bond 11,921,211 63,119 --
Class II Director:
Gary A. Messersmith 11,924,111 59,619 --
Company Name Change 11,781.811 124,373 77,246 900
1997 Incentive Plan 8,966,312 821,853 113,141 2,083,024
15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
2.1 Agreement and Plan of Merger dated July 3, 1997, between the
Company, C Acquisition Corporation and Cairn Energy USA, Inc.
(incorporated by reference from the Company's Form 8-K dated
July 3, 1997 and filed with the Security and Exchange Commission
on July 7, 1997). Pursuant to Item 601(b)(2) of Regulation S-K,
certain schedules and similar attachments to the Agreement and
Plan of Merger have not been filed with this exhibit. Such
schedules and attachments contain various items relating to the
representation and warranties made by the parties to the
Agreement and Plan of Merger. The Company agrees to furnish
supplementally any omitted schedule to the Commission upon
request.
3.1 Amendment to the Company's Second Amended and Restated Articles
of Incorporation changing the name of the Company to "The
Meridian Resource Corporation."
10.2 1997 Long-Term Incentive Plan.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
The Registrant filed no reports on Form 8-K during the quarter covered
by this report.
16
SIGNATURE
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.
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
(Registrant)
Date: August 13, 1997 By: /s/ LLOYD V. DELANO
Lloyd V. DeLano
Vice President
(Chief Financial and
Accounting Officer)
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