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, 2000
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: 000-21843
TITAN EXPLORATION, INC.
(Exact name of Registrant as specified in its charter)
Delaware 75-2671582
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization
500 W. Texas, Suite 200 79701
Midland, Texas (Zip Code)
(Address of principal executive offices)
(915) 498-8600
(Registrant's telephone number, including area code)
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
--- ---
As of May 1, 2000, 40,189,843 of common stock, par value $.01 per share of
Titan Exploration, Inc. were outstanding.
TABLE OF CONTENTS
Forward Looking Information and Risk Factors ....................................................... 1
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
Consolidated Balance Sheets as of March 31, 2000 (Unaudited) and
December 31, 1999 ...................................................................... 2
Unaudited Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 ................................................................ 3
Unaudited Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 ................................................................ 4
Notes to Consolidated Financial Statements ................................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ..... 11
-------------------------------------------------------------------------------------
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................ 18
----------------------------------------------------------
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings ......................................................................... 20
-----------------
Item 4. Submission of Matters to a Vote of Security Holders ....................................... 20
---------------------------------------------------
Item 5. Other Information ......................................................................... 20
-----------------
Item 6. Exhibits and Reports on Form 8-K .......................................................... 20
--------------------------------
Signatures ................................................................................ 21
TITAN EXPLORATION, INC.
FORWARD LOOKING INFORMATION AND RISK FACTORS
Titan Exploration, Inc. (the "Company") or its representatives may make
forward looking statements, oral or written, including statements in this
report's Management's Discussion and Analysis of Financial Condition and Results
of Operations, press releases and filings with the Securities and Exchange
Commission, regarding estimated future net revenues from oil and natural gas
reserves and the present value thereof, planned capital expenditures (including
the amount and nature thereof), increases in oil and gas production, the number
of wells the Company anticipates drilling through 2000, potential reserves and
the Company's financial position, business strategy and other plans and
objectives for future operations. Although the Company believes that the
expectations reflected in these forward looking statements are reasonable, there
can be no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will have
the expected effects on its business or operations. Among the factors that could
cause actual results to differ materially from the Company's expectations are
general economic conditions, inherent uncertainties in interpreting engineering
data, operating hazards, delays or cancellations of drilling operations for a
variety of reasons, competition, fluctuations in oil and gas prices, government
regulations, Year 2000 issues and other factors set forth in the Company's 1999
Annual Report on Form 10-K. All subsequent oral and written forward looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by these factors. The Company assumes no
obligation to update any of these statements.
1
Item 1. Financial Statements
Titan Exploration, Inc.
Consolidated Balance Sheets
(dollars in thousands)
ASSETS
March 31, December 31,
2000 1999
----------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 1,535 $ 1,310
Accounts receivable:
Oil and gas 12,181 10,365
Other 70 252
Inventories 595 732
Prepaid expenses and other current assets 971 549
---------- -----------
Total current assets 15,352 13,208
---------- -----------
Property, plant and equipment, at cost:
Oil and gas properties, using the successful efforts method of accounting:
Proved properties 354,259 345,349
Unproved properties 14,964 13,438
Accumulated depletion, depreciation and amortization (132,973) (128,686)
---------- -----------
236,250 230,101
---------- -----------
Other property and equipment, net 4,458 4,188
Deferred income taxes 19,348 20,612
Other assets, net of accumulated amortization of $1,002 in 2000 and $700 in 1999 1,138 689
---------- -----------
$ 276,546 $ 268,798
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities:
Trade $ 4,430 $ 7,858
Accrued interest 1,096 959
Other (Note 7) 11,104 8,303
---------- ----------
Total current liabilities 16,630 17,120
---------- ----------
Long-term debt (Note 3) 96,000 90,000
Other liabilities (Note 7) 852 827
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized; none
issued and outstanding - -
Common stock, $.01 par value, 60,000,000 shares authorized; 43,993,843 shares
issued and outstanding at March 31, 2000 and December 31, 1999 440 440
Additional paid-in capital 285,265 285,265
Notes receivable - officers and employees (8,864) (8,729)
Treasury stock, at cost; 3,804,000 shares at March 31, 2000 and December 31, 1999 (25,764) (25,764)
Accumulated deficit (88,013) (90,361)
----------- ----------
Total stockholders' equity 163,064 160,851
----------- ----------
Commitments and contingencies (Note 4)
$ 276,546 $ 268,798
=========== ==========
See accompanying notes to consolidated financial statements.
2
Titan Exploration, Inc.
Unaudited Consolidated Statements of Operations
(in thousands, except per share data)
Three months ended
March 31,
----------------------------
2000 1999
----------------------------
Revenues:
Gas sales $ 10,369 $ 8,411
Oil sales 11,720 6,369
---------- ----------
Total revenues 22,089 14,780
---------- ----------
Expenses:
Oil and gas production 5,159 4,953
Production and other taxes 1,753 1,207
General and administrative 2,544 2,169
Amortization of stock option awards - 1,263
Exploration and abandonment (Note 8) 2,731 2,545
Depletion, depreciation and amortization 4,567 4,826
Impairment of long-lived assets - 25,900
---------- ----------
Total expenses 16,754 42,863
---------- ----------
Operating income (loss) 5,335 (28,083)
---------- ----------
Other income (expense):
Equity in net loss of affiliates - (115)
Interest income 137 11
Interest expense (1,769) (2,551)
Gain on sale of assets - 202
Other (91) 533
---------- ----------
Income (loss) before income taxes 3,612 (30,003)
Income tax expense (1,264) -
---------- ----------
Net income (loss) $ 2,348 $(30,003)
========== ==========
Net income (loss) per share $ 0.06 $ (0.79)
========== ==========
Net income (loss) per share - assuming dilution $ 0.06 $ (0.79)
========== ==========
See accompanying notes to consolidated financial statements.
3
Titan Exploration, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
Three months ended
March 31,
--------------------------------
2000 1999
--------------------------------
Cash flows from operating activities:
Net income (loss) $ 2,348 $(30,003)
Adjustment to reconcile net income (loss) to net cash provided by
operating activities:
Depletion, depreciation and amortization 4,567 4,826
Impairment of long-lived assets - 25,900
Amortization of stock option awards - 1,263
Exploration and abandonments 2,194 2,015
Equity in net loss of affiliates - 115
Gain on sale of assets - (202)
Deferred income taxes 1,264 -
Other non-cash items - 137
Changes in assets and liabilities:
Accounts receivable (1,633) 3,461
Prepaid expenses and other current assets (288) (195)
Other assets (128) (2)
Accounts payable and accrued liabilities (1,933) (4,158)
--------- ---------
Total adjustments 4,043 33,160
--------- ---------
Net cash provided by operating activities 6,391 3,157
--------- ---------
Cash flows from investing activities:
Investing in oil and gas properties (11,159) (6,920)
Additions to other property and equipment (470) (13)
Capital contribution in equity investments - (615)
Proceeds from sale of assets - 805
Other investing activities (535) -
--------- ---------
Net cash used in investing activities (12,164) (6,743)
--------- ---------
Cash flows from financing activities:
Proceeds from revolving debt, net 6,000 4,100
Other financing activities (2) (38)
--------- ---------
Net cash provided by financing activities 5,998 4,062
--------- ---------
Net increase in cash and cash equivalents 225 476
Cash and cash equivalents, beginning of period 1,310 610
--------- ---------
Cash and cash equivalents, end of period $ 1,535 $ 1,086
========= =========
See accompanying notes to consolidated financial statements.
4
TITAN EXPLORATION, INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Unaudited)
(1) Basis of Presentation
In the opinion of management, the unaudited consolidated financial
statements of Titan Exploration, Inc. (the "Company") as of March 31, 2000 and
for the three months ended March 31, 2000 and 1999 include all adjustments and
accruals, consisting only of normal recurring accrual adjustments, which are
necessary for a fair presentation of the results for the interim period. These
interim results are not necessarily indicative of results for a full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission. These consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's 1999 Form 10-K,
as amended.
Preparation of the accompanying consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Reclassifications
Certain reclassifications have been made to the 1999 amounts to conform to
the 2000 presentations.
(2) Unocal Merger Agreement
On December 13, 1999, the Company, Union Oil Company of California, a
California corporation and wholly-owned subsidiary of Unocal Corporation ("Union
Oil"), Pure Resources, Inc., a Delaware corporation and a wholly-owned
subsidiary of Union Oil ("Pure"), and TRH, Inc., a Delaware corporation and a
wholly-owned subsidiary of Pure ("Merger Sub") entered into an Agreement and
Plan of Merger (the "Merger Agreement"). The Merger Agreement provides that, on
the Closing Date immediately following the Closing (as such terms are defined in
the Merger Agreement), Merger Sub will merge with and into the Company, and the
Company will become a wholly-owned subsidiary of Pure (such events constituting
the "Merger"). Once the Merger is consummated, Merger Sub will cease to exist as
a corporation and all of the business, assets, liabilities and obligations of
Merger Sub will be merged into the Company, with the Company remaining as the
surviving corporation (the "Surviving Corporation") and a wholly-owned
subsidiary of Pure.
As a result of the Merger, each outstanding share of the Common Stock, par
value $0.01 per share (the "Company Common Stock"), other than shares owned by
the Company or any wholly-owned subsidiary of the Company, will be converted
into the right to receive .4302314 of a share (the "Exchange Ratio") of common
stock, par value $0.01 per share, of Pure ("Pure Common Stock"). At the
effective time of the Merger, each outstanding option to purchase the Company
Common Stock under the Company's stock option plans (each a "Company Common
Stock Option") will be assumed by Pure (each an "Assumed Option") and will
become an option to purchase that number of shares of Pure Common Stock equal
(subject to rounding) to the number of shares of Company Common Stock that was
subject to such option immediately prior to the Merger, multiplied by the
Exchange Ratio. The exercise price of each Assumed Option will be equal to the
quotient determined by dividing the exercise price per share of the Company
Common Stock at which the Company Common Stock Option was exercisable
immediately prior to the effective time of the Merger by the Exchange Ratio,
rounded up to the nearest whole cent.
On the Closing Date, Union Oil will transfer to Pure substantially all of
its oil and gas exploration and production assets in the Permian Basin and San
Juan Basin areas of Texas, New Mexico and Colorado in return for
5
Pure Common Stock. Upon consummation of the Merger immediately following
the Closing, Union Oil will own approximately 32.7 million shares of Pure Common
Stock, representing approximately 65% of the outstanding Pure Common Stock, and
the former stockholders of the Company will own the remaining shares
representing approximately 35% of the outstanding Pure Common Stock.
The Company has scheduled a special meeting of stockholders on May 24, 2000
to vote on the Merger. The Company expects the Merger to close on May 25, 2000
(subject to approval by the Company's stockholders), at which time the Company's
stockholders will become stockholders of Pure. Pure is expected to begin trading
on the New York Stock Exchange under the symbol "PRS" on May 26, 2000.
(3) Debt
Debt consists of the following (in thousands):
March 31, 2000 December 31, 1999
-------------- -----------------
Line of credit $ 92,000 $ 89,000
Unsecured line of credit 4,000 1,000
------ ------
$ 96,000 $ 90,000
====== ======
Line of Credit
In June 1999, the Company entered into an amended and restated credit
agreement (the "Credit Agreement") with Chase Bank of Texas, N.A. (the "Bank"),
which established a revolving credit facility of $250 million subject to a
borrowing base. All amounts outstanding are due and payable in full on April 1,
2001. The borrowing base, which is $175 million at March 31, 2000, is subject to
redetermination annually each April by the lenders based on certain proved oil
and gas reserves and other assets of the Company. At March 31, 2000, the
available borrowing capacity was approximately $83 million.
The credit agreement contains various restrictive covenants and compliance
requirements, which include (1) limiting the incurrence of additional
indebtedness, (2) restrictions as to merger, sale or transfer of assets and
transactions with affiliates without the lenders' consent, and (3) prohibition
of any return of capital payments or distributions to any of its partners other
than for taxes due as a result of their partnership interest.
The Company is in the process of negotiating a new credit facility, which
will replace the Credit Agreement, for Pure, the new parent of the Company after
the Merger.
Unsecured Credit Agreement
In April 1997, the Company entered into a credit agreement, as amended (the
"Unsecured Credit Agreement"), with the Bank which establishes a revolving
credit facility, up to the maximum of $5 million. Individual borrowings may be
made for up to a three week period. The Unsecured Credit Agreement has no
maturity date and is cancellable at anytime by the Bank. The interest of each
loan under the Unsecured Credit Agreement is at a rate determined by agreement
between the Company and the Bank. The rate shall not exceed the maximum interest
rate permitted under applicable law. Interest rates generally are at the Bank's
cost of funds plus 1% per annum.
6
(4) Commitments and Contingencies
Litigation
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
Severance Agreements
On June 10, 1999, the board of directors of the Company approved the form
of an Officer Severance and Retention Bonus Agreement (the "Severance
Agreement") to be entered into with each of the officers of the Company. The
triggering event of the Severance Agreement would involve "change of control" of
the Company as defined in the Severance Agreement.
Upon a termination event as defined in the Severance Agreement, each
officer will be entitled to receive, among other benefits, (a) three times such
officer's base salary plus bonus received in the preceding 12 month period, (b)
continuation of life insurance, long-term disability coverage and accidental
death and disability coverage for an eighteen month period, (c) payment of all
medical and dental insurance premiums until the officer obtains other employment
and (d) reimbursement of all reasonable legal fees and other expenses incurred
in seeking to obtain or enforce any right or benefit provided by the Severance
Agreement. If the payments under the Severance Agreement and other benefit plans
from a termination event cause the officer to be subject to federal excise tax,
the officer will receive a grossed-up amount to pay the officer's federal excise
taxes. At March 31, 2000, the Company's estimated maximum contingent obligation
pursuant to the Severance Agreements was approximately $8.3 million. The actual
liability might be reduced by amounts potentially payable under (b), (c) and (d)
above if the covered officers were not terminated as a result of a triggering
event.
The Merger is a change of control under the Severance Agreements. Upon the
closing of the Merger, the Company expects to pay the officers subject to the
Severance Agreements approximately $6.5 million for signing a general release to
the Severance Agreements and for executing non-compete agreements.
Letters of Credit
At March 31, 2000, the Company had outstanding letters of credit of
$144,000, which were issued through the Credit Agreement.
(5) Earnings per Common Share
The following table sets forth the computation of basic and diluted
earnings per common share:
Three months ended March 31,
------------------------------
2000 1999
---- ----
(in thousands, except per share amounts)
Numerator:
Net income (loss) and numerator for basic and diluted net income
(loss) per common share - income available to common
stockholders $ 2,348 $(30,003)
======== =========
Denominator:
Denominator for basic net income (loss) per common share -
weighted average common shares 40,190 37,935
Effect of dilutive securities - employee stock options 17 -
------- --------
Denominator for diluted net income (loss) per common share -
adjusted weighted average common shares and assumed
conversions 40,207 37,935
====== ======
Basic net income (loss) per common share $ .06 $ (.79)
====== ======
Diluted net income (loss) per common share $ .06 $ (.79)
====== ======
7
Employee stock options to purchase 1,067,743 shares of common stock were
outstanding during the three months ended March 31, 2000 but only 17,151 were
included in the computation of diluted net income per common share because the
employee stock options' exercise price of the remaining 1,050,592 shares was
greater than the average market price of the common stock of the Company.
Employee stock options to purchase 4,252,728 shares of common stock were
outstanding during the three months ended March 31, 1999 but were not included
in the computation of diluted net loss per common share because either (i) the
employee stock options' exercise price was greater than the average market price
of the common stock of the Company or (ii) the Company had a loss from
continuing operations and, therefore, the effect would be antidilutive.
(6) Derivative Financial Instruments
The Company utilizes various option and swap contracts and other financial
instruments to hedge the effect of price changes on future oil and gas
production. The index price for the natural gas collars settles based on New
York Mercantile Exchange ("NYMEX") Henry Hub, while the oil collars settle based
on the prices for West Texas Intermediate on NYMEX. The basis swaps lock in the
basis differential between NYMEX Henry Hub and the El Paso/Permian delivery
point or the Waha West Texas delivery point.
The following table sets forth the future volumes hedged by year and the
range of prices to be received based upon the fixed price of the individual
option and swap contracts and other financial instruments outstanding at March
31, 2000:
2000 2001
---- ----
Gas related derivatives:
Collar options (a):
Volume (MMBtu) 8,250,000 4,065,000
Index price per MMBtu (floor - ceiling prices) $2.60 - $3.32 $2.60 - $3.32
Basis swaps:
Volume (MMBtu) 5,955,000 1,350,000
Index Price per MMBtu $.095 - $.115 $.095
Oil related derivatives:
Collar options (b):
Volume (Bbls) 1,053,500 452,500
Index price per Bbl (floor - ceiling prices) $16.50 - $23.40 $16.50 - $20.48
- ---------------
(a) Includes amounts in which a counterparty has the option to extend the
collar option from October 1, 2000 to June 30, 2001, on volumes of 15,000
MMBtu per day at a floor and ceiling price of $2.60 and $3.08 per MMBtu,
respectively.
(b) Includes amounts in which a counterparty has the option to extend the
collar option from July 1, 2000 to June 30, 2001, on volumes of 2,500 Bbls
per day at a floor and ceiling price of $16.50 and $20.48 per barrel,
respectively.
8
(7) Other Liabilities
The other current and noncurrent liabilities consist of the following (in
thousands):
March 31, December 31,
2000 1999
---- ----
(unaudited)
Other current liabilities:
Capital costs and operating expenses $ 7,668 $ 6,079
Oil and gas payables 1,009 1,108
Hedge obligations due to counterparties 1,149 -
Other 1,248 1,116
------- -------
$11,104 $ 8,303
======= =======
Other noncurrent liabilities:
Environmental reserve $ 802 $ 804
Other 50 23
---- ----
$ 852 $ 827
==== ====
(8) Exploration and Abandonment
Exploration and abandonment expense consist of the following (in
thousands):
Three months ended March 31,
------------------------------
2000 1999
---- ----
Geological and geophysical staff $ 270 $ 270
Uneconomical exploratory projects 1,738 1,914
Seismic costs 463 101
Delay rentals 59 79
Other 201 181
----- -----
$ 2,731 $ 2,545
===== =====
(9) Impairment of Long-Lived Assets
Assets Held for Sale
The Company, in accordance with FAS 121, records its assets held for sale
at the lower of the carrying amounts or fair value. When the carrying amount of
the assets held for sale exceed fair value an impairment is recognized. Fair
value for the Company's assets held for sale is generally the estimated sales
proceeds for the assets less estimated costs to sell the assets.
The Company generally determines the estimated sales proceeds at each
measurement period based on a number of factors, including:
. Prices at which similar assets are presently being bought and sold.
. Reserve report evaluations of the properties' future cash flows.
. Current industry oil and gas price outlook.
. Information from financial firms.
. Other available industry data.
In the fourth quarter of 1998, the Company approved a plan to dispose of
its Gulf of Mexico, Gulf Coast and non-strategic Permian Basin assets. The
assets to be disposed of were primarily proved and unproved oil and gas
properties or investments in midstream oil and gas assets. The Company's reason
for disposing of these assets
9
varied depending on the portfolio of assets being considered. The disposition
would allow the Company to (a) realize full value for certain assets whose value
was not fully reflected in the public valuation of the Company, (b) redeploy
capital to higher return projects or acquisitions, (c) invest in projects that
would accelerate cash flow to the Company, (d) eliminate certain administrative
costs and (e) reduce the Company's debt obligations.
In the first quarter of 1999, the Company recognized an impairment of $25.9
million on the assets held for sale, related to its Gulf Coast and Gulf of
Mexico assets. The impairment was the result of comparing the revised estimated
sales proceeds, less costs to sell, to the underlying net cost basis of each
specific portfolio of assets from the fourth quarter of 1998. The downward
revision in the estimated sales proceeds leading to the impairment was primarily
the result of (a) continued low oil and gas prices, (b) decreases in prices for
which similar assets were being bought and sold and (c) receipt of offers for
the Gulf Coast and Gulf of Mexico assets which lowered management's estimation
of ultimate sales proceeds.
In April 1999, the Company sold the Gulf Coast assets, which were comprised
of proved and unproved oil and gas properties, for approximately $5.4 million.
In May 1999, the Company sold the Gulf of Mexico assets, which were comprised of
proved and unproved oil and gas properties and investments in midstream oil and
gas assets, for approximately $71.3 million.
In the fourth quarter of 1999, the Company reclassified from assets held
for sale approximately $15.2 million of Permian Basin assets to assets held for
use. When these assets were evaluated in conjunction with the properties
involved in the Merger it became apparent that these properties had location and
leasehold attributes which may be valuable to the combined assets. The assets
were reclassified at their lower of the carrying amount or fair value.
The Company suspends depreciation, depletion and amortization expense on
assets once they are classified as assets held for sale. For the three months
ended March 31, 2000, the Company had no suspended depreciation, depletion and
amortization expense. For the three months ended March 31, 1999, the suspended
depreciation, depletion and amortization expense was approximately $1.2 million.
(10) Common Stock
In May 1997, the Company originally announced a plan to repurchase up to
$25 million, which in August 1999 the Company's board of directors increased to
$35 million, of the Company's common stock. The repurchases will be made
periodically, depending on market conditions, and will be funded with cash flow
from operations and, as necessary, borrowings under the Credit Agreement. At
March 31, 2000 and December 31, 1999, the Company had purchased, pursuant to the
repurchase plan, 3,751,000 shares of its common stock for approximately $25.3
million.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Unocal Merger
On December 13, 1999, the Company announced its agreement to merge the
Company and the Permian Basin business unit of Unocal Corporation ("Unocal")
into a new company named Pure Resources, Inc. ("Pure"). Pure will be a publicly
traded company. The Permian Basin business unit of Unocal includes oil and gas
exploration and production assets in the Permian Basin of West Texas and the San
Juan Basin in New Mexico and Colorado.
Pure will have approximately 50 million shares of common stock outstanding
upon completion of the Merger. Unocal will hold approximately 65% (32.7 million
shares) of Pure. The Merger will cause a change of control of the Company. Upon
approval by the Company stockholders of the Merger, the Company stockholders
will receive 0.4302314 shares of Pure common stock for every share held of the
Company's common stock and will collectively own approximately 35% of the
outstanding common stock of Pure.
The Company has scheduled a special meeting of stockholders on May 24, 2000
to vote on the Merger. The Company expects the Merger to close on May 25, 2000
(subject to approval by the Company's stockholders), at which time the Company's
stockholders will become stockholders of Pure. Pure is expected to begin trading
on the New York Stock Exchange under the symbol "PRS" on May 26, 2000. For more
information about the Merger, see definitive proxy materials relating to the
Merger, which were filed with the SEC.
Impact on Pure of Ancillary Agreements and Severance Arrangements
Under a business opportunities agreement entered into in connection with
the Merger among Titan, Pure and Union Oil, Pure has agreed to limit its
business activities. The agreement's restrictions may limit Pure's ability to
diversify its operating base following the Merger. Because of Pure's geographic
concentration, any regional events that increase costs, reduce availability of
equipment or supplies, reduce demand or limit production may impact Pure
Resources more than if its operations were more geographically diversified.
Mr. Hightower's employment agreement with Pure and new Pure officer
severance agreements to be entered into in connection with the Merger will
entitle each of the initial Pure officers to require Pure to purchase his or her
Pure common stock at a price that may be in excess of market value in the event
of a change of control of Pure or Unocal and in some circumstances following
termination of employment. On March 31, 2000, when the trading price of Titan
common stock was $5.00 per share, the pro forma "per share net asset value" of
Pure, calculated in accordance with the agreements, adjusted to a Titan
equivalent price, was estimated at approximately $6.88. On a pro forma basis
using a market price of $5.00 per share, Pure would incur a non-cash expense of
approximately $10.0 million per year for three years to amortize the deferred
compensation recorded as a result of these arrangements. The amortization
amounts will change quarterly based on relative changes in the net asset value
and market value of the Pure shares.
General
The Company is an independent energy company engaged in the exploitation,
development, exploration and acquisition of oil and gas properties. The
Company's strategy is to grow reserves, production and net income per share by:
. identifying acquisition opportunities that provide significant
development and exploratory drilling potential,
. exploiting and developing its reserve base,
. pursuing exploration opportunities for oil and gas reserves,
11
. capitalizing on advanced technology to identify, explore and exploit
projects, and
. emphasizing a low overhead and operating cost
structure.
The Company has grown rapidly through the acquisition and exploitation of
oil and gas properties, consummating the 1995 acquisition for a purchase price
of approximately $41.0 million, the 1996 acquisition for approximately $136.0
million and the Pioneer acquisition, in 1997, for approximately $55.8 million.
In addition, the Company issued, in 1997, 5,486,734 shares and 899,965 shares of
the Company's common stock in connection with the OEDC acquisition and the
Carrollton acquisition, respectively.
The Company's growth from acquisitions has impacted its financial results
in a number of ways. Acquired properties may not have received focused attention
prior to sale. After acquisition, certain of these properties required extensive
maintenance, workovers, recompletions and other remedial activity that while not
constituting capital expenditures may initially increase lease operating
expenses. The Company may dispose of certain of the properties it determines are
outside the Company's strategic focus. The increased production and revenue
resulting from the rapid growth of the Company has required it to recruit and
develop operating, accounting and administrative personnel compatible with its
increased size. As a result, the Company has incurred increases in its general
and administrative expense levels.
The Company uses the successful efforts method of accounting for its oil
and gas producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that result in proved reserves,
and to drill and equip development wells are capitalized. Costs to drill
exploratory wells that do not result in proved reserves and geological and
geophysical costs are expensed. Costs of significant nonproducing properties,
wells in the process of being drilled and significant development projects are
excluded from depletion until such time as the related project is developed and
proved reserves are established or impairment is determined.
Impact of Commodity Prices
During 1998 and through the first quarter of 1999, the posted price of West
Texas intermediate crude oil (the "West Texas Crude Oil Price") ranged from
$15.75 to $8.00 per barrel. These low prices were thought to be caused primarily
by an oversupply of crude oil inventory created, in part, by an unusually warm
winter in the United States and Europe, the apparent unwillingness of
Organization of Petroleum Exporting Countries ("OPEC") to abide by crude oil
production quotas and a decline in demand in Asian markets. The prices for crude
oil during the second quarter of 1999 to the present have shown significant
improvement over those during 1998 and early 1999.
A return of low prices for crude oil, natural gas or other commodities sold
by the Company could have a material adverse effect on the Company's results of
operations, on the quantities of crude oil and natural gas that can be
economically produced from its fields, and on the quantities and economic values
of its proved reserves and potential resources. Such adverse pricing scenarios
could result in write-downs of the carrying values of the Company's properties
and materially adversely affect the Company's financial condition, as well as
its results of operations.
12
Operating Data
The following sets forth the Company's historical operating data:
Three months ended
March 31,
-----------------------------
2000 1999
----------- ------------
Production:
Oil and condensate (MBbls)................................... 547 598
Natural gas (MMcf)........................................... 5,175 6,192
Total (MBOE)................................................. 1,409 1,630
Average daily production:
Oil and condensate (Bbls).................................... 6,009 6,644
Natural gas (Mcf)............................................ 56,869 68,800
Total (BOE).................................................. 15,487 18,111
Average sales price per unit (excluding effects of hedging):
Oil and condensate (per Bbl)................................. $ 26.72 $ 10.64
Natural gas (per Mcf)........................................ $ 2.00 $ 1.24
Total (per BOE).............................................. $ 17.71 $ 8.64
Average sales price per unit (including effects of hedging):
Oil and condensate (per Bbl)................................. $ 21.43 $ 10.64
Natural gas (per Mcf)........................................ $ 2.00 $ 1.36
Total (per BOE).............................................. $ 15.67 $ 9.07
Expenses per BOE:
Production costs, excluding production and other taxes....... $ 3.66 $ 3.06
Production and other taxes................................... $ 1.24 $ 0.72
General and administrative................................... $ 1.81 $ 1.32
Depletion, depreciation and amortization..................... $ 3.24 $ 2.94
Results of Operations
The Company began operations on March 31, 1995. As a result of the
Company's limited operating history and rapid growth, its financial statements
are not readily comparable and may not be indicative of future results. In May
1999, the Company sold its offshore assets acquired in the OEDC acquisition and
accordingly only 5 months of those assets' operations are reflected in the 1999
operating results.
13
Three Months Ended March 31, 2000 as compared to Three Months Ended March
31,1999
The Company's revenues from the sale of oil and gas (excluding the effects
of hedging activities) were $14.6 million and $10.3 million in 2000 and $6.4
million and $7.7 million in 1999, respectively. Realized oil and gas prices
increased $10.79 per Bbl and $.64 per Mcf, respectively. Oil and gas production
decreased 51,000 barrels and 1,017 MMcf, respectively, between periods.
Excluding the production from the two significant dispositions in 1999, oil
production was 547,000 barrels and 566,000 barrels and gas production was 5,175
MMcf and 5,363 MMcf in 2000 and 1999, respectively. Excluding the production
from the two significant dispositions in 1999, oil and gas production decreased
19,000 barrels and 188 MMcf, respectively, between years. The decrease in the
oil and gas production is principally due to normal production declines, offset
by increased gas production from the Company's recent drilling activities.
The Company's hedging activities in 2000 decreased oil revenues $2.9
million ($5.29 per Bbl) and increased gas revenues $26,000 ($.005 per Mcf),
respectively, as compared to 1999, when hedging activities increased gas
revenues $717,000 ($.12 per Mcf). The Company had no oil hedges in the 1999
period. At March 31, 2000, the Company had oil and gas hedges in place for
approximately 1.5 million barrels and 12,315 MMBtu of the Company's production
through the remainder of 2000 and the first half of 2001. The hedges will allow
the Company to realize, at a minimum, a price of $16.86 per barrel of oil and
$2.64 per MMBtu on the volumes hedged. The outstanding hedges had an estimated
cost to settle of approximately $6.5 million at March 31, 2000.
The Company's oil and gas production costs were $5.2 million ($3.66 per
BOE) and $5.0 million ($3.06 per BOE) in 2000 and 1999, respectively. Excluding
the production costs from the two significant dispositions in 1999, the
Company's production costs would have been $4.1 million ($2.81 per BOE) in 1999.
A majority of the increase is due to the Company performing only routine and
necessary expenditures in certain fields early in 1999 due to depressed
commodity prices and performance of special well repairs in 2000 of $.32 per
BOE.
Depletion, depreciation and amortization expense (DD&A) was $4.6 million
($3.24 per BOE) and $4.8 million ($2.94 per BOE) in 2000 and 1999, respectively.
DD&A in 1999 excluded amounts from assets then classified as assets held for
sale. If the DD&A from the assets then classified as assets held for sale were
included, the 1999 DD&A would have been approximately $6.0 million ($3.68 per
BOE). The decrease between $3.24 and $3.68 per BOE is primarily attributable to
increased proved reserves, resulting from increased commodity prices and recent
drilling activities.
The Company recognized an impairment of $25.9 million in 1999. The
impairment related to the write-down of the net cost of the assets held for sale
based upon the expected net proceeds from the sale of these assets. See Note 9
of the consolidated financial statements for additional details.
Estimated future cash flows for purposes of determining impairment of oil
and gas properties are determined using the following assumptions:
. Reserve economics are adjusted for known changes such as extensions
and discoveries, acquisitions and dispositions of proved properties
and changes in production rates and projected decline characteristics.
. Only cash flows from proved oil and gas properties are considered in
the analysis.
. The prices used for determining cash flows are determined based on the
near-term (a period of one to three years, depending on management's
current views of future market conditions) NYMEX futures index
adjusted for property specific qualitative and location differentials.
The latest futures price in the near-term price outlook is then held
constant for the remaining life of the properties. Prices estimated
for future periods may be above or below current pricing levels. For
example, futures prices for periods following December 31, 1998 were
significantly higher than the actual prices for oil and gas as of that
date, and futures prices for the periods following December 31, 1999
were significantly below the actual prices for oil and gas as of that
date. Consequently, the prices used in the Company's impairment
analysis were adjusted accordingly.
. If production is subject to hedges, future product prices are further
adjusted to reflect the prices to be realized under these
arrangements.
14
The Company's exploration and abandonment expense was $2.7 million and $2.5
million in 2000 and 1999, respectively. The increase is due primarily to the
Company's increased seismic costs in 2000 compared to the same period in 1999.
The Company's general and administrative expense (G&A) was $2.5 million
($1.81 per BOE) and $2.2 million ($1.32 BOE) in 2000 and 1999, respectively.
Excluding G&A from the two significant dispositions in 1999, the Company's G&A
would have been $1.8 million ($1.24 per BOE). The increase in G&A is due to (a)
increased staff and related costs of the Company's new Central Gulf Coast region
activity and (b) staff increases in non-synergy areas related to the
anticipation of the Merger.
The 1999 equity in net loss of affiliates is primarily attributable to the
Company's ownership in two partnerships acquired in the OEDC acquisition, both
of which were included in the Gulf of Mexico disposition. Included in the 1999
equity loss is approximately $211,000 of amortization of the Company's cost
basis in excess of the underlying historical net assets of one of the
partnerships.
The Company's interest expense was $1.8 million and $2.6 million in 2000
and 1999, respectively. The decrease is due to the decrease in average debt
level between years, resulting primarily from the sale of the Gulf of Mexico
properties in the second quarter of 1999, offset by recent increased drilling
activity and smaller property acquisitions.
The Company's effective income tax rate was 35% for the quarter ended
March 31, 2000 During the same period in 1999, the Company did not record an
income tax benefit related to the loss from operations. In 1998 the Company
provided a valuation allowance of $14.0 million against its deferred tax asset
which was reversed in the fourth quarter of 1999. During the year ended December
31, 1999 and at the present, commodity prices for the Company's products
improved significantly. As a result, based on the Company's analysis of the
expected future results of operations based on current prices, the associated
reserve volumes and the availability of tax planning strategies (such as
elective capitalization of intangible drilling costs) it does not appear more
likely than not that the Company will be unable to generate the $51.6 million in
taxable income necessary to utilize net operating loss carryforwards over the
carryforward period. The change in the outlook for commodity prices is the major
factor that changed management's view with respect to the reversal of the
deferred tax asset valuation as of December 31, 1999. In the first quarter of
2000 the Company generated operating income. In addition, for the year ended
December 31, 1999, the Company would have generated significant operating income
if impairments were not considered. This was not the case in 1998 or for the
three months ended March 31, 1999 when the Company did not record any deferred
tax benefit due to it being more likely than not that the company would not be
able to utilize all of its available loss carryforwards prior to their ultimate
expiration. Future estimated revenues, net of operating expenses from proved
properties as disclosed in unaudited reserve disclosures in Note 22 of the
Company's December 31, 1999 consolidated financial statements included in the
Company's 1999 Form 10-K, as amended, amounted to over $775 million based on
current prices and costs. These estimates of net revenues have not decreased as
of March 31, 2000. This net revenue, when considered together with estimated
future general and administrative expenses and existing tax basis expected to be
deductible in future years is not more likely than not to yield insufficient
taxable income to utilize the current tax net operating loss carryforwards
during the carryforward period. A similar analysis of expected future results as
of March 31, 1999 did not yield a similar result. Changes in future economic
conditions, future business combinations or other factors may significantly
alter this assessment.
Liquidity and Capital Resources
The Company's primary sources of capital have been its initial
capitalization, private equity sales, bank financing, cash flow from operations
and the Company's initial public offering. The 1996 acquisition was principally
funded with bank financing, which was repaid with the proceeds from the
Company's initial public offering. The OEDC acquisition and the Carrollton
acquisition were completed by issuing common stock in exchange for the equity
interest in each entity. The Pioneer acquisition was funded with bank financing.
Net Cash Provided by Operating Activities. Net cash provided by operating
activities was $6.4 million for 2000, compared to $3.2 million for 1999 and net
cash provided by operating activities, before changes in operating assets and
liabilities, was $10.4 million for 2000, compared to $4.1 million for 1999. The
increase was primarily
15
attributable to an increase in revenues. The increase in revenues is due to an
increase in commodity prices offset by decrease in production due primarily to
the sale of properties and normal production declines.
Capital Expenditures. In 2000, the Company incurred actual cash expenditures of
$12.2 million as compared to $7.5 million in 1999. The increase in capital
expenditures is prompted by an improved commodity price outlook in 2000 as
compared to 1999.
The Company requires capital primarily for the exploration, development and
acquisition of oil and gas properties, the repayment of indebtedness and general
working capital needs.
Excluding the effects of the Merger, for 2000 the Company, currently,
expects to spend approximately $50 million in capital projects, of which
approximately $25 million would be for development projects.
The Company regularly engages in discussions relating to potential
acquisitions of oil and gas properties. Other than the Merger, the Company has
no present agreement, commitment or understanding with respect to any such
acquisition, other than the acquisition of oil and gas properties and interests
in its normal course of business. Any future acquisitions may require additional
financing and may be dependent upon financing which may be required in the
future to fund the Company's acquisition and drilling programs.
Capital Resources. The Company's primary capital resources are net cash provided
by operating activities and the availability under the Credit Agreement, of
which approximately $83 million was available at March 31, 2000.
Credit Agreement. In June 1999, the Company entered into an amended and restated
credit agreement (the "Credit Agreement") with Chase Bank of Texas, N.A. (the
"Bank"), which established a revolving credit facility of $250 million subject
to a borrowing base. The borrowing base, which is $175 million at March 31,
2000, is subject to redetermination annually each April by the lenders based on
certain proved oil and gas reserves and other assets of the Company. To the
extent the borrowing base is less than the aggregate principal amount of all
outstanding loans and letters of credit under the Credit Agreement, such
deficiency must be cured by the Company ratably within 180 days, by either
prepaying a portion of the outstanding amounts under the Credit Agreement or
pledging additional collateral to the lenders. A portion of the Credit Agreement
is available for the issuance of up to $15.0 million of letters of credit, of
which $144,000 was outstanding at March 31, 2000. All amounts outstanding are
due and payable in full on April 1, 2001. At March 31, 2000, the outstanding
principal was $92 million and the available capacity was approximately $83
million.
At the Company's option, borrowings under the Credit Agreement bear
interest at either the "Base Rate" (i.e., the higher of the applicable prime
commercial lending rate, or the federal funds rate plus .5% per annum) or the
Eurodollar rate, plus 1% to 1.50% per annum, depending on the level of the
Company's aggregate outstanding borrowings. In addition, the Company is
committed to pay quarterly in arrears a fee of .300% to .375% of the unused
borrowing base.
The Credit Agreement contains certain covenants and restrictions that are
customary in the oil and gas industry. In addition, the line of credit is
secured by substantially all of the Company's oil and gas properties.
Liquidity and Working Capital. At March 31, 2000, the Company had $1.5 million
of cash and cash equivalents as compared to $1.3 million at December 31, 1999.
The Company's ratio of current assets to current liabilities was .92 at March
31, 2000, compared to .77 at December 31, 1999. The working capital deficits are
due partially to the Company maintaining low cash levels for cash management
purposes. The Company, at March 31, 2000, has availability under its Credit
Agreement to fund any working capital deficit.
Unsecured Credit Agreement. In April 1997, the Company entered into a credit
agreement, as amended (the "Unsecured Credit Agreement"), with the Bank which
establishes a revolving credit facility, up to the maximum of $5 million.
Individual borrowings may be made for up to a three week period. The Unsecured
Credit Agreement has no maturity date and is cancellable at any time by the
Bank. Proceeds of the Unsecured Credit Agreement are utilized to fund short-term
needs (less than thirty days). The Company had $4 million in outstanding
principal under the Unsecured Credit Agreement at March 31, 2000.
16
The interest rate of amounts outstanding under the Unsecured Credit
Agreement is at a rate determined by agreement between the Company and the Bank.
The rate shall not exceed the maximum interest rate permitted under applicable
law. Interest rates generally are the Bank's cost of funds plus 1% per annum.
Other Matters
Hedging Activities
The Company uses swap agreements and other financial instruments in an
attempt to reduce the risk of fluctuating oil and gas prices and interest rates.
There are various counterparties to these agreements, including Enron Capital &
Trade Resources Corp., an affiliate of a significant stockholder of the Company.
Settlement of gains or losses on the hedging transactions are generally based on
the difference between the contract price and a formula using NYMEX or other
major indices related prices and is reported as a component of oil and gas
revenues as the associated production occurs. At March 31, 2000, the Company had
entered into hedging transactions with respect to approximately 8,250,000 and
4,065,000 MMBtu of its future 2000 and 2001, respectively, estimated natural gas
production and 1,053,500 and 452,500 barrels of its future 2000 and 2001,
respectively, estimated crude oil production. For additional information, see
note 6 of Notes to Consolidated Financial Statements.
Environmental and Other Laws and Regulations
The Company's business is subject to certain federal, state and local laws
and regulations relating to the exploration for and the development, production
and transportation of oil and gas, as well as environmental and safety matters.
Many of these laws and regulations have become more stringent in recent years,
often imposing greater liability on a larger number of potentially responsible
parties. Although the Company believes it is in substantial compliance with all
applicable laws and regulations, the requirements imposed by such laws and
regulations are frequently changed and subject to interpretation, and the
Company is unable to predict the ultimate cost of compliance with these
requirements or their effect on its operations. The Company has no material
commitments for capital expenditures to comply with existing environmental
requirements.
Nevertheless, changes in existing environmental laws or in interpretations
thereof could have a significant adverse impact on the operating costs of the
Company, as well as the oil and gas industry in general.
Recently Issued Accounting Standards
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities," which establishes standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. It establishes conditions
under which a derivative may be designated as a hedge, and establishes standards
for reporting changes in the fair value of a derivative. SFAS No. 133 is
required to be implemented for the first quarter of the fiscal year ended 2001.
Early adoption is permitted. The Company has not evaluated the effects of
implementing SFAS No. 133.
17
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following quantitative and qualitative information is provided about
financial instruments to which the Company is a party as of March 31, 2000, and
from which the Company may incur future earnings gains or losses from changes in
market interest rates and commodity prices. The Company does not enter into
derivative or other financial instruments for trading purposes.
Quantitative Disclosures
Commodity Price Sensitivity:
The following table provides information about the Company's derivative
financial instruments that are sensitive to changes in natural gas and crude oil
commodity prices. See note 6 of Notes to Consolidated Financial Statements
included in "Item 1. Financial Statements" for specific information regarding
the terms of the Company's commodity derivative financial instruments that are
sensitive to natural gas and crude oil commodity prices.
Fair
2000 2001 Total Value
---- ---- ----- -----
(dollars in thousands, except volumes and prices)
Natural Gas Hedge Derivatives (a):
Collar option contracts (b):
Notional volumes (MMBtu) 8,250,000 4,065,000 12,315,000 $ (833,935)
Weighted average short call strike price per MMBtu (c) $ 2.650 $ 2.633 $ 2.644
Weighted average long put strike price per MMBtu (c) $ 3.200 $ 3.160 $ 3.187
Basis differential contracts (d):
Notional volumes (MMBtu) 5,955,000 1,350,000 7,305,000 $ (135,521)
Weighted average MMBtu strike price $ .110 $ .095 $ .1075
Crude Oil Hedge Derivatives (a):
Collar option contracts (e):
Notional volume (Bbls) 1,053,500 452,500 1,506,000 $(5,493,260)
Weighted average short call strike price per Bbl (c) $ 17.02 $ 16.50 $ 16.86
Weighted average long put strike price per Bbl (c) $ 21.40 $ 20.48 $ 21.13
- --------------------------------
(a) See note 6 of Notes to Consolidated Financial Statements included in "Item
1. Financial Statements" for additional information related to hedging
activities.
(b) A counterparty has the option to extend a collar option from October 1,
2000 to June 30, 2001 on volumes of 15,000 MMBtu per day at a floor and
ceiling price of $2.60 and $3.08 per MMBtu, respectively. The fair value
assumes the extension is exercised by the counterparty.
(c) The strike prices are based on the prices traded on the NYMEX.
(d) The basis differential relates to the spread between the NYMEX price and an
El Paso/Permian price or Waha West Texas price.
(e) A counterparty has the option to extend a collar option from July 1, 2000
to June 30, 2001 on volumes of 2,500 barrels per day at a floor and ceiling
price of $16.50 and $20.48 per barrel, respectively. The fair value assumes
the extension is exercised by the counterparty.
18
Interest Rate Sensitivity:
The following table provides information about the Company's financial
instruments that are sensitive to interest rates. The debt obligations are
presented in the table at their contractual maturity dates together with the
weighted average interest rates expected to be paid on the debt. The weighted
average interest rates for the variable debt represents the weighted average
interest paid and/or accrued in March 2000. See note 3 of Notes to Consolidated
Financial Statements included in "Item 1. Financial Statements" for specific
information regarding the terms of the Company's debt obligations that are
sensitive to interest rates.
Fair
2000 2001 Total Value
---- ---- ----- -----
(in thousands, except interest rates)
Debt (a):
Variable rate debt:
Chase Bank of Texas, N.A. (Secured) $ - $ 92,000 $92,000 $92,000
Average interest rate -% 7.66%
Chase Bank of Texas, N.A. (Unsecured) $ - $ 4,000 $ 4,000 $ 4,000
Average interest rate -% 7.37%
- --------------------------
(a) See note 3 of Notes to Consolidated Financial Statements included in "Item
1. Financial Statements" for additional information related to debt.
Qualitative Disclosures
The Company, from time to time, enters into interest rate and commodity
price derivative contracts as hedges against interest rate and commodity price
risk. See note 6 of Notes to Consolidated Financial Statements included in "Item
1. Financial Statements" for discussions relative to the Company's objectives
and general strategies associated with it hedging instruments. The Company is a
borrower under variable rate debt instruments that give rise to interest rate
risk. See note 3 of Notes to Consolidated Financial Statements included in "Item
1. Financial Statements" for specific information regarding the terms of the
Company's debt obligations. The Company's policy and strategy, as of March 31,
2000, is to only enter into interest rate and commodity price derivative
instruments that qualify as hedges of its existing interest rate or commodity
price risks.
As of March 31, 2000, the Company's primary risk exposures associated with
financial instruments to which it is a party include natural gas price
volatility and interest rate volatility. The Company's primary risk exposures
associated with financial instruments have not changed significantly since
December 31, 1999.
19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
---------
10.1 Amendment No. 1 to Merger Agreement, dated April 14, 2000, by
and among Union Oil Company of California, Pure Resources, Inc.
(formerly named Titan Resources Holdings, Inc.), TRH, Inc. and
Titan Exploration, Inc. (filed as Exhibit 2.2 to Pure
Resources, Inc.'s Registration Statement filed on Form S-4,
Registration No. 333-34970), and incorporated herein by
reference.
27 Financial Data Schedule.
(b) Reports Submitted on Form 8-K:
------------------------------
None.
20
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.
TITAN EXPLORATION, INC.
By: /s/ Jack Hightower
----------------------
Jack Hightower
President and Chief Executive Officer
By: /s/ William K. White
------------------------
William K. White
Vice President and Chief Financial Officer
Date: May 15, 2000
21