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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER 0-30475
TRANSTEXAS GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 76-0401023
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
1300 NORTH SAM HOUSTON PARKWAY EAST
SUITE 310
HOUSTON, TEXAS 77032
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (281) 987-8600
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, $0.01 PAR VALUE
SERIES A SENIOR PREFERRED STOCK, $1.00 PAR VALUE
SERIES A JUNIOR PREFERRED STOCK, $1.00 PAR VALUE
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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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant has filed all documents
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [X] No [ ]
The aggregate market value of the common stock held by non-affiliates of
the registrant on April 24, 2000 was $3,755,681.
The number of shares of common stock of the registrant outstanding on April
24, 2000 was 1,250,000, consisting of 1,002,500 shares of Class A Common Stock
and 247,500 shares of Class B Common Stock.
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......... 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 8
Item 6. Selected Financial Data..................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 17
Item 8. Financial Statements and Supplementary Data................. 19
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................. 47
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 47
Item 11. Executive Compensation...................................... 48
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 50
Item 13. Certain Relationships and Related Transactions.............. 52
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 53
Signatures.................................................. 62
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PART I
ITEM 1. BUSINESS
GENERAL
TransTexas Gas Corporation (the "Company" or "TransTexas") is engaged in
the exploration for and development and production of natural gas and
condensate, primarily in South Texas and along the upper Gulf Coast. TransTexas'
business strategy is to utilize its experience in drilling and operating wells
in South Texas to find, develop and produce reserves at a low cost.
The Company's long-term goal is to convert unproven acreage to proved
reserves through drilling in underexploited areas. In order to meet its
long-term goals, TransTexas' strategy is to drill wells in areas of the Upper
Texas Gulf Coast where 3-D seismic data indicates productive potential and to
drill development wells in its proven producing areas such as the Eagle Bay
field and Wharton County. During fiscal 2000, TransTexas' drilling program was
restricted by capital available from operations and debtor-in-possession
financing.
As of February 1, 2000, TransTexas' net proved reserves, as estimated by
Netherland, Sewell & Associates, Inc., were 118 Bcfe. As of January 31, 2000,
TransTexas owned approximately 333,400 gross (210,000 net) acres of mineral
interests. TransTexas' average net daily natural gas production for the year
ended January 31, 2000 was approximately 77 MMcfd, for a total net production of
27.8 Bcf of natural gas. TransTexas' average net daily condensate and oil
production for the year ended January 31, 2000 was approximately 5,005 Bpd, for
a total net production of 1,827 MBbls of condensate and oil. TransTexas' average
net daily production of natural gas liquids for the year ended January 31, 2000
was approximately 120,519 gallons per day, for a total net production of 44
million gallons of natural gas liquids.
REORGANIZATION
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware. On April 20, 1999, the Company's then parent,
TransAmerican Energy Corporation ("TEC"), and TEC's subsidiary, TransAmerican
Refining Corporation ("TARC"), also filed voluntary petitions under Chapter 11.
On May 20, 1999, the cases were transferred to the United States Bankruptcy
Court for the Southern District of Texas, Corpus Christi Division (the
"Bankruptcy Court"). The Company's Second Amended, Modified and Restated Plan of
Reorganization dated January 25, 2000 (the "Plan") was confirmed by the
Bankruptcy Court on February 7, 2000.
On March 17, 2000, the Effective Date of the Plan, the Company consummated
several transactions, most of which were dated as of March 15, 2000. The
Company:
- filed an Amended and Restated Certificate of Incorporation;
- issued 1,002,500 shares of Class A Common Stock and 247,500 shares of
Class B Common Stock;
- issued 625,000 warrants to purchase shares of Class A Common Stock at an
exercise price of $120 per share;
- filed a Certificate of Designation relating to, and issued 222,455,320
shares of, Series A Senior Preferred Stock;
- filed a Certificate of Designation relating to, and issued 20,716,080
shares of, Series A Junior Preferred Stock;
- entered into an Indenture relating to, and issued $200 million of, 15%
Senior Secured Notes due 2005;
- entered into a $52.5 million Oil and Gas Credit Facility;
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- entered into a $15 million Accounts Receivable Credit Facility; and
- sold a Production Payment with a primary sum outstanding as of March 15,
2000 of $35 million.
These transactions are more fully described in "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity" under
Item 7 of this report.
As a result of the effectiveness of the Plan, the Company adopted
"fresh-start" reporting as of January 31, 2000, and a new reporting entity was
created. The Company's assets are recorded at reorganization value and
liabilities are recorded at the present value of amounts to be paid at January
31, 2000. Information prior to January 31, 2000 is that of the predecessor
entity.
EXPLORATION AND PRODUCTION
The exploration and production activities of TransTexas consist of
geological and geophysical evaluation of current and prospective properties, the
acquisition of mineral interests in prospects and the drilling, development and
operation of leased properties for the production and sale of natural gas,
condensate and crude oil. TransTexas' technical staff consists of geologists,
geophysicists and engineers. TransTexas' technical staff selects drilling
locations based on the interpretation of available well data, and 3-D and 2-D
seismic data. TransTexas operates substantially all of its producing properties.
During fiscal 1998, the Company sold the stock of TransTexas Transmission
Corporation ("TTC"), its subsidiary that owned substantially all of TransTexas'
Lobo Trend producing properties and related pipeline transmission system, for an
adjusted sales price of approximately $1.1 billion (the "Lobo Sale").
TransTexas' operating data for fiscal 1998 reflect the impact of the Lobo Sale.
Primary Operating Areas
Eagle Bay. In January 1998, TransTexas announced that it had successfully
drilled and completed the State Tract 331 #1 discovery well in Eagle Bay,
Galveston County, Texas. The well is located approximately one mile off the
coast of the City of San Leon, in a water depth of less than 10 feet. This
discovery well tested at a rate of 76.4 MMcfd of natural gas and 11,002 Bpd of
condensate. TransTexas has successfully drilled, completed and produced four
additional wells, drilled one dry hole and, as of January 31, 2000, was drilling
a sixth well in the Eagle Bay field.
In order to facilitate commercial production of natural gas and oil from
the Eagle Bay field and other contemplated production in the Galveston Bay area,
in July 1998, Galveston Bay Processing Corporation, a wholly owned subsidiary of
the Company, completed construction of onshore production facilities at Winnie,
Texas, approximately 60 miles east of Houston. These facilities are designed to
separate produced natural gas and condensate streams, dehydrate and treat
natural gas and stabilize condensate produced from the Eagle Bay field.
Production from Eagle Bay is currently transported to Winnie through a
third-party pipeline that crosses Galveston Bay.
TransTexas intends to drill additional development wells in Eagle Bay as a
part of its strategy to further increase reserves and production and has
identified additional drilling locations from 3-D seismic data. For the fiscal
year ended January 31, 2000, TransTexas produced 23.7 Bcf (13.5 Bcf net) of
natural gas, 1.6 million barrels of condensate and 44 million gallons of natural
gas liquids from the Eagle Bay field at average net daily rates of 37 MMcfd,
4,450 Bpd and 120,519 gallons per day, respectively. Production from the Eagle
Bay field represents a significant percentage of the Company's total production.
See "Drilling and Production Data." As of January 31, 2000, TransTexas owned a
75% working interest on approximately 5,636 gross (5,592 net) acres in the Eagle
Bay area.
Bob West North. In late 1994, TransTexas made a natural gas discovery in
the Bob West North area of southern Zapata County, Texas. As of January 31,
2000, TransTexas had drilled 56 wells and completed 53 wells in the area. As of
January 31, 2000, TransTexas' mineral interests in the Bob West North area
consisted of a 100% working interest in 11,533 gross (9,786 net) acres. For the
fiscal year ended January 31, 2000, TransTexas produced 9.2 Bcf (6.6 Bcf net) of
natural gas from the Bob West North area at an average net
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daily rate of 18 MMcfd. 3-D seismic data indicates the potential for additional
drilling locations to further develop productive reservoirs in the area.
Southwest Bonus. In 1998, TransTexas completed the Obenhaus #2 discovery
well in the Southwest Bonus field of Wharton County, Texas. Restrictions on the
availability of capital prevented TransTexas from additional drilling until late
1999. In 1999, a development drilling program commenced with the drilling and
completion of the Schweinle #1. TransTexas is currently drilling two additional
development wells in the field as a part of its strategy to further increase
reserves and production, and has identified additional drilling locations from
seismic data. As of January 31, 2000, TransTexas held a 100% working interest
covering approximately 4,901 gross (3,868 net) acres in the Southwest Bonus
area. For the fiscal year ended January 31, 2000, TransTexas' Southwest Bonus
properties produced 2.3 Bcf (1.8 Bcf net) of natural gas, at an average net
daily rate of 5 MMcfd.
Dinero. In June 1998, TransTexas announced the successful drilling of the
McNeil #1 well in Live Oak County, Texas. This discovery well tested at a rate
of 19.2 MMcfd of natural gas with production commencing in August 1998. As of
January 31, 2000, TransTexas had drilled three wells, completed two wells and
was in the process of completing one well in the Dinero field. TransTexas
intends to drill additional wells to develop the field as a part of its strategy
to further increase reserves and production, and has identified potential
drilling locations from 3-D seismic data. For the fiscal year ended January 31,
2000, TransTexas' Live Oak County properties produced 1.0 Bcf (0.7 Bcf net) of
natural gas, at an average net daily rate of 2 MMcfd. As of January 31, 2000,
TransTexas owned an 80% working interest in approximately 8,179 gross (8,102
net) acres in Live Oak County.
Trout Point. In 1998, TransTexas commenced drilling an exploratory well in
the Trout Point prospect in Galveston Bay. TransTexas drilled the Trout Point
sub-salt prospect to a depth of 21,442 feet. The well encountered gas-bearing
zones beneath the salt when drilling problems resulted in the loss of the hole.
Two sidetrack holes were drilled to establish production in the sub-salt zones.
During completion of the second sidetrack, a gas flow from a lower zone caused
an underground blowout and failure of the 9 5/8" casing. Cement was pumped into
the well to control the underground gas flow. The replacement Sheldon 1-R well
was drilled to a total depth of 22,298 feet. During completion of the well,
casing collapsed in the salt section and the well bore was lost. Currently, the
Company is sidetracking the Sheldon 1-R to test the sub-salt zones in the
prospect.
Including Trout Point, TransTexas owns a 99% working interest in 17,584
gross (17,246 net) acres in Chambers County, Texas. As of January 31, 2000,
TransTexas had drilled 10 wells, completed four wells and was in the process of
completing one well and drilling one well in Chambers County. For the fiscal
year ended January 31, 2000, TransTexas' Chambers County properties produced 2.3
Bcf (1.6 Bcf net) of natural gas, at an average daily net rate of 4.4 MMcfd.
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Drilling and Production Data
During the five years ended January 31, 2000, TransTexas completed
approximately 65% of 413 wells. As of January 31, 2000, TransTexas was drilling
two gross (two net) wells. As of January 31, 2000, TransTexas had a total of 116
productive wells. TransTexas had a working interest in the following numbers of
wells that were drilled during the periods indicated:
YEAR ENDED JANUARY 31,
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2000 1999 1998(3)
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GROSS NET GROSS NET GROSS NET
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Exploratory Wells(1):
Productive(2).................................. 1 1 9 9 13 11
Non-Productive................................. 6 5 6 5 16 14
% Productive................................... 14% 17% 60% 63% 45% 44%
Development Wells(1):
Productive(2).................................. 5 5 14 12 47 43
Non-Productive................................. 2 2 9 9 31 27
% Productive................................... 71% 71% 61% 58% 60% 62%
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(1) The number of net wells is the sum of the fractional working interests owned
in gross wells.
(2) Productive wells consist of producing wells and wells capable of production,
including gas wells awaiting pipeline connection. Wells that are completed
in more than one producing zone are counted as one well.
(3) Includes wells in the Lobo Trend properties sold in fiscal 1998.
The following table sets forth information with respect to net production
and average unit prices and costs for the periods indicated:
YEAR ENDED JANUARY 31,
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2000 1999 1998(4)
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Production:
Gas (Bcf)(1)............................................. 27.8 35.6 72.4
NGLs (MMgals)............................................ 44.0 8.4 62.4
Condensate and oil (MBbls)............................... 1,827 1,120 619
Average sales prices:
Gas (dry) (per Mcf)(2)................................... $ 2.32 $ 2.10 $2.09
NGLs (per gallon)........................................ .32 .21 .29
Condensate and oil (per Bbl)............................. 19.88 11.91 19.20
Average lifting cost per Mcfe(3)........................... .41 .37 .34
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(1) Net gas production volumes for the year ended January 31, 1998 include 7.3
Bcf delivered pursuant to volumetric production payments.
(2) Average prices for the year ended January 31, 1998 include 7.3 Bcf delivered
pursuant to volumetric production payments. The average gas price for
TransTexas' undedicated production for this period was $2.10 per Mcf.
(3) Condensate and oil are converted to a common unit of measure on the basis of
six Mcf of natural gas to one barrel of condensate or oil. The components of
production costs may vary substantially among wells depending on the methods
of recovery employed and other factors. The calculation of average lifting
cost per Mcfe for the year ended January 31, 1998 includes volumes delivered
to third parties under volumetric production payments.
(4) Includes production from the Lobo Trend properties sold in fiscal 1998.
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TRANSPORTATION, PROCESSING AND MARKETING
TransTexas believes that there is currently adequate pipeline
transportation capacity for its hydrocarbon production in all of its operating
areas.
TransTexas has entered into various agreements for the gathering,
transportation, processing and sale of substantially all of its natural gas and
natural gas liquids produced from its Eagle Bay prospects. Unless otherwise
stated, these agreements, described below, expire on June 30, 2003. TransTexas
is continuing to negotiate additional agreements in order to meet future
production increases.
Galveston Bay Processing Corporation operates onshore facilities to
separate produced natural gas and condensate, dehydrate and treat natural gas
for the removal of CO(2) and stabilize condensate from the Company's Eagle Bay
field. These facilities are located approximately 60 miles east of Houston at
Winnie, Texas.
TransTexas entered into firm and interruptible contracts with Tejas Ship
Channel LLC for transportation of its production from the Eagle Bay field to the
Winnie facilities at a fixed negotiated rate. Under the firm agreement, the
Company is committed to deliver a minimum of 75,000 MMBtu per day of natural gas
and condensate.
The Company also entered into a contract with Centana Intrastate Pipeline
Company for transportation of natural gas on a firm and interruptible basis from
the Winnie facility to natural gas liquids recovery facilities located in the
Beaumont/Port Arthur, Texas area, and residue gas from these facilities to
various distribution points. Under the agreement, the Company is committed to
deliver up to a maximum of 56,250 Mcf of natural gas and 19,500 MMBtu of residue
gas. Transportation fees for natural gas are based on a fixed negotiated rate.
Transportation fees for residue gas are based on a published industry index.
A connection was established with Sun Pipeline at the Winnie facilities for
the transportation or sale of the stabilized condensate. Enron Reserve
Acquisition Corp. purchases 3,000 Bpd of condensate at a price based on a
published industry index pursuant to a six-month contract expiring April 30,
2000.
TransTexas and Duke Energy Field Services, Inc. entered into a contract to
extract natural gas liquids from the high-Btu natural gas stream leaving the
Winnie facilities. TransTexas can elect, at its discretion on a monthly basis,
whether to process the natural gas to recover natural gas liquids. The Company's
decision whether to process the natural gas is based on prevailing market
prices.
TransTexas entered into gas purchase agreements with Tejas Gas Marketing,
LLC and PanEnergy Marketing Company, covering the sale by TransTexas of
substantially all of its gas production from the Eagle Bay field. The agreements
provide for deliveries in excess of 50,000 MMBtu per day of residue gas at a
price based on a published industry index.
For the year ended January 31, 2000, three purchasers accounted for a total
of 55% of the consolidated natural gas, condensate and NGLs revenues of
TransTexas. TransTexas believes that the loss of any single purchaser would not
have a material adverse effect on TransTexas due to the availability of other
purchasers for TransTexas' production at comparable prices.
COMPETITION
TransTexas encounters significant competition from major oil and gas
companies and independent operators in the acquisition of desirable undeveloped
natural gas leases and in the sale of natural gas. Many of its competitors are
large, well-established companies with substantially greater capital and human
resources than TransTexas' and which, in many instances, have been engaged in
the energy business for a much longer time than TransTexas.
The primary bases for competition in the natural gas and oil exploration
and production businesses are available capital and the costs involved in
finding and developing gas and oil resources combined with commodity sales
prices and market access.
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EMPLOYEES
As of January 31, 2000, TransTexas had approximately 200 employees.
TransTexas may engage the services of independent geological, engineering, land
and other consultants from time to time. None of TransTexas' employees are
parties to a collective bargaining agreement.
GOVERNMENTAL REGULATION
TransTexas' gas exploration, production and related operations are subject
to extensive rules and regulations promulgated by federal and state agencies.
Failure to comply with such rules and regulations can result in substantial
penalties. The regulatory burden on the gas industry increases TransTexas' cost
of doing business and affects its profitability. Because such rules and
regulations are frequently amended or reinterpreted, TransTexas is unable to
predict the future cost or impact of complying with such laws.
The State of Texas (through the Texas Railroad Commission) and many other
states require permits for drilling operations, drilling bonds and reports
concerning operations, and impose other requirements related to the exploration
and production of natural gas. Such states also have statutes or regulations
addressing conservation matters, including provisions for the unitization or
pooling of gas properties, the establishment of maximum rates of production from
gas wells and the regulation of spacing, plugging and abandonment of such wells.
The statutes and regulations of the State of Texas limit the rate at which
natural gas can be produced from TransTexas' properties. Management believes
that these statutes and regulations have not materially impacted TransTexas'
results of operations; however, there can be no assurance that such statutes and
regulations will not affect TransTexas' operating results in the future.
Several major regulatory changes have been implemented by the Federal
Energy Regulatory Commission ("FERC") since 1985 that affect the economics of
natural gas production, transportation and sales. In addition, the FERC
continues to promulgate revisions to various aspects of the rules and
regulations affecting those segments of the natural gas industry, most notably
interstate natural gas transmission companies, that remain subject to the FERC's
jurisdiction. These initiatives may also affect the intrastate transportation of
gas under certain circumstances. The stated purpose of many of these regulatory
changes is to promote competition among the various sectors of the gas industry.
The ultimate impact on TransTexas of these complex and overlapping rules and
regulations, many of which are repeatedly subjected to judicial challenge and
interpretation, cannot be predicted.
ENVIRONMENTAL MATTERS
See Note 14 of Notes to Consolidated Financial Statements for a discussion
of environmental matters affecting TransTexas.
ITEM 2. PROPERTIES
ACREAGE AND PRODUCTIVE WELLS
The following table sets forth TransTexas' total developed and undeveloped
acreage and productive wells as of January 31, 2000:
DEVELOPED UNDEVELOPED PRODUCTIVE
ACREAGE ACREAGE WELLS(1)
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Gross................................................ 19,440 313,935 116
Net(2)............................................... 16,852 193,112 102
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(1) Of the total productive wells, 108 gross (98 net) were gas wells and 8 gross
(4 net) were oil wells. As of January 31, 2000, TransTexas had interests in
2 productive wells which had multiple completions.
(2) The number of net acres and net wells is the sum of the fractional working
interests owned in gross acres and gross wells, respectively.
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RESERVES
As of February 1, 2000, TransTexas had total proved reserves of 95.6 Bcf of
natural gas and 3,686 MBbls of condensate and oil. See Note 17 of Notes to
Consolidated Financial Statements, which contains supplemental information
regarding TransTexas' proved reserves. Proved reserves are the estimated
quantities of natural gas, condensate and oil that geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions. Proved
developed reserves are proved reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. The
estimation of reserves requires substantial judgment on the part of petroleum
engineers, resulting in imprecise determinations, particularly with respect to
recent discoveries. The accuracy of any reserve estimate depends on the quality
of available data and engineering and geological interpretation and judgment.
Results of drilling, testing and production after the date of the estimate may
result in revisions of the estimate. Accordingly, estimates of reserves are
often materially different from the quantities of natural gas, condensate and
oil that are ultimately recovered, and these estimates will change as future
production and development information becomes available. The reserve data
represent estimates only and should not be construed as being exact.
TITLE TO PROPERTIES/LIENS AND CLAIMS
As is customary in the oil and gas industry, TransTexas performs only a
preliminary title investigation before leasing undeveloped properties.
Accordingly, working interest percentages and gross and net acreage amounts for
undeveloped properties are preliminary. However, a title opinion is typically
obtained before the commencement of drilling operations and any material defects
in title are remedied prior to the time actual drilling of a well on the lease
is commenced. TransTexas has not obtained title opinions on all of its
properties. The Company is uncertain as to the impact that failure to obtain a
title opinion has on its title to developed properties. TransTexas' properties
are subject to customary royalty interests, liens incident to operating
agreements, liens for current taxes, liens of vendors and lenders and other
burdens.
ITEM 3. LEGAL PROCEEDINGS
On April 19, 1999 (the "Petition Date"), TransTexas filed a voluntary
petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. On April 20, 1999, TEC and
TARC also filed voluntary petitions under Chapter 11. On May 20, 1999, the cases
were transferred to the United States Bankruptcy Court for the Southern District
of Texas, Corpus Christi Division. The bankruptcy cases are being jointly
administered under the caption "In re: TransTexas Gas Corporation, et al.,
Debtors," Case No. 99-21550-C-11. TransTexas filed a Plan of Reorganization with
the Bankruptcy Court on July 16, 1999. A first amended Plan was filed on July
23, 1999 and a second amended Plan was filed on September 29, 1999. The Debtors
filed a Joint Disclosure Statement with the Bankruptcy Court on August 13, 1999.
A first amended Joint Disclosure Statement was filed with and approved by the
Bankruptcy Court on September 29, 1999. The Company's Second Amended, Modified
and Restated Plan of Reorganization dated January 25, 2000 was confirmed by the
Bankruptcy Court on February 7, 2000. High River Partnership has appealed the
confirmation order. The Company has filed a motion to dismiss High River's
appeal on the grounds of mootness. The Effective Date of the Plan was March 17,
2000.
TransTexas is a party to various claims and routine litigation arising in
the normal course of its business. Any obligations of the Company in respect of
such claims and litigation arising out of activities prior to the Petition Date
will be discharged pursuant to the Plan. Recovery of these obligations, if any,
will be limited to any collateral held by the claimant and/or such claimant's
pro rata share of amounts available to pay general unsecured claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
three months ended January 31, 2000.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to the Effective Date, prices for the common stock of TransTexas were
quoted on Nasdaq's Over The Counter Bulletin Board ("OTCBB") under the symbol
"TTGGQ." TransTexas' common stock traded on the New York Stock Exchange ("NYSE")
under the symbol "TTG" from October 30, 1997 until trading was suspended on
April 19, 1999 due to the Company's bankruptcy filing. The following table sets
forth, on a per-share basis for the periods indicated, the high and low sales or
bid prices, as the case may be, for TransTexas' common stock as reported by the
OTCBB and NYSE.
HIGH LOW
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Fiscal year ended January 31, 2000:
Fourth Quarter............................................ $ 1.500 $ 0.130
Third Quarter............................................. 0.625 0.188
Second Quarter*........................................... 0.563 0.250
First Quarter*............................................ 1.688 0.375
Fiscal year ended January 31, 1999:
Fourth Quarter............................................ $ 4.688 $ 1.938
Third Quarter............................................. 6.938 1.000
Second Quarter............................................ 12.625 7.000
First Quarter............................................. 17.125 11.875
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* Price information is not available from April 20, 1999 through May 12, 1999.
On the Effective Date, the Company's then existing securities, including
the common stock, were canceled, and the Company issued (i) $200 million
principal amount of 15% Senior Secured Notes due 2005, (ii) 1,002,500 shares of
Class A Common Stock; (iii) 247,500 shares of Class B Common Stock, (iv)
222,455,320 shares of Series A Senior Preferred Stock, (v) 20,716,080 shares of
Series A Junior Preferred Stock, and (vi) warrants to purchase 625,000 shares of
Class A Common Stock at an exercise price of $120 per share. These securities
were issued in consideration of the discharge of claims of certain creditors
against the Company pursuant to the Plan. The Company relied on the exemption
from the registration requirements of the Securities Act of 1933, as amended,
included in Section 1145(a)(1) of the Bankruptcy Reform Act of 1978, as amended,
Title 11, United States Code.
On April 20, 2000, prices for the Class A Common Stock commenced quotation
on the OTCBB under the symbol "TTXG." As of April 24, 2000, there were 112
record holders of the Class A Common Stock. The last sale price of the Class A
Common Stock on April 24, 2000 was $3.75.
TransTexas has not paid any cash dividends on its common stock since
inception, except a dividend of approximately $33 million to TransAmerican from
the proceeds of its initial public offering in March 1994. TransTexas' ability
to pay dividends on its common stock is restricted by TransTexas' existing debt
instruments and will depend on TransTexas' debt levels, earnings levels and book
value and discounted value of certain tangible assets. The Company does not
anticipate paying any dividends on its common stock in the foreseeable future.
Pursuant to the terms of the Company's Preferred Stock, if either (i) more
than 75 million shares of Senior Preferred Stock are outstanding at any time
after March 15, 2006 or (ii) the Company fails to pay dividends on the Senior
Preferred Stock on any two dividend payment dates, one-half of the Senior
Preferred Stock and all of the Junior Preferred Stock would automatically
convert into shares of Class A Common Stock. Such a conversion would result in
very substantial dilution to the holders of the Class A Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for the
Company as of and for each of the periods presented. From April 19, 1999 through
March 17, 2000, TransTexas operated under Chapter 11 of the United States
Bankruptcy Code. The Company adopted fresh-start reporting as of January 31,
2000; therefore, the Company does not believe that the consolidated balance
sheet data as of January 31, 2000 is comparable to that of previous years in
certain material respects. The data for the years ended January 31, 2000, 1999,
1998 and 1997, the six months ended January 31, 1996 and the year ended July 31,
1995 are derived from the audited consolidated financial statements of the
Company. The data for the six months ended January 31, 1995 is derived from
unaudited consolidated financial statements of the Company. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's financial
statements included elsewhere in this report.
PREDECESSOR
-----------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JANUARY 31, YEAR ENDED
------------------------------------------ ------------------- JULY 31,
2000 1999 1998 1997 1996 1995 1995
-------- --------- -------- -------- -------- -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Gas, condensate and NGLs
revenue......................... $111,400 $ 91,319 $164,538 $363,459 $124,663 $143,304 $275,627
Transportation revenues........... -- -- 12,055 34,423 15,892 19,161 36,787
Gain (loss) on the sale of
assets.......................... (438) 61,247 543,365 7,865 474 -- --
Other revenues.................... 2,770 4,200 3,313 600 127 52 285
-------- --------- -------- -------- -------- -------- --------
113,732 156,766 723,271 406,347 141,156 162,517 312,699
Operating costs and expenses...... 28,437 29,482 62,356 137,019 45,629 50,893 99,310
Depreciation, depletion, and
amortization.................... 75,044 86,137 82,659 132,453 60,894 70,345 129,964
General and administrative
expenses........................ 19,883 21,938 48,156 45,596 13,685 12,595 31,935
Litigation settlements............ -- -- -- (96,000) (18,300) -- --
Loss on asset impairment.......... -- 425,966 -- -- -- -- --
-------- --------- -------- -------- -------- -------- --------
Operating income (loss)......... (9,632) (406,757) 530,100 187,279 39,248 28,684 51,490
Net interest expense(1)........... 38,054 78,716 68,187 91,463 40,436 29,059 65,797
Reorganization items.............. (50,511) -- -- -- -- -- --
Income taxes and other............ 10,000 (38,882) 161,669 12,491 (416) (131) (2,415)
Extraordinary loss, net of
taxes........................... (436,490) 1,142 72,043 -- -- -- 56,637
-------- --------- -------- -------- -------- -------- --------
Net income (loss)............... $429,315 $(447,733) $228,201 $ 83,325 $ (772) $ (244) $(68,529)
======== ========= ======== ======== ======== ======== ========
Net income (loss) per share:
Income (loss) before extraordinary
item............................ $ (0.13) $ (7.76) $ 4.49 $ 1.13 $ (0.01) $ -- $ (0.16)
Extraordinary item.............. 7.59 (.02) (1.08) -- -- -- (0.77)
-------- --------- -------- -------- -------- -------- --------
Net income (loss)............... $ 7.46 $ (7.78) $ 3.41 $ 1.13 $ (0.01) $ -- $ (0.93)
======== ========= ======== ======== ======== ======== ========
Dividends declared per common
share(2)........................ -- -- -- -- -- -- --
SUCCESSOR PREDECESSOR
--------- ---------------------------------------------
JANUARY 31,
---------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- -------- ---------- ---------
BALANCE SHEET DATA:
Working capital (deficit)(3)................... $ 8,900 $ 27,072 $(22,122) $ 71,586 $ 43,602
Net property and equipment..................... 327,087 292,143 701,598 846,393 715,340
Total assets................................... 369,254 345,367 816,635 1,053,152 938,827
Liabilities subject to compromise.............. -- 718,139 -- -- --
Total debt(4).................................. 251,570 56,260 630,103 941,922 824,241
Stockholders' equity (deficit)................. -- (430,015) 24,637 (150,795) (154,440)
- ---------------
(1) Interest expense for the year ended January 31, 2000 excludes $55.5 million
in interest stayed as a result of the bankruptcy filing.
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(2) TransTexas' existing debt instruments contain certain restrictions with
respect to the payment of dividends on TransTexas' common stock.
(3) Working capital as of January 31, 1997 and 1996 includes $46.0 million of
cash restricted for the payment of interest.
(4) Excludes long-term debt included in liabilities subject to compromise of
$583.1 million as of January 31, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with TransTexas'
Consolidated Financial Statements and Notes thereto included under Item 8 of
this report.
RESULTS OF OPERATIONS
TransTexas' results of operations are dependent upon natural gas and
condensate production volumes and unit prices from sales of natural gas,
condensate and NGLs. The profitability of TransTexas also depends on its ability
to minimize finding and lifting costs and maintain its reserve base while
maximizing production. See "Liquidity."
From April 19, 1999 through March 17, 2000, the Company operated as a
debtor-in-possession under Chapter 11 of the United States Bankruptcy Code.
Effective January 31, 2000, the Company adopted fresh-start reporting in
accordance with AICPA Statement of Position 90-7. Pursuant to fresh-start
reporting, a new reporting entity is created. The new reporting entity's assets
are recorded at the reorganization value based on the confirmed Plan of
Reorganization, and post petition liabilities are recorded at the present value
of amounts to be paid. The Company's reorganization value was estimated by
management to be approximately $369 million based primarily on an analysis of
discounted cash flows. The value of liabilities postpetition was estimated to be
$369 million. The present value of liabilities has been adjusted for imputed
interest at a rate of 15% for the period from February 1, 2000 to the Effective
Date of the Plan. The imputed interest will be charged to interest expense
during the first quarter of fiscal 2001.
In fiscal 1998, TransTexas sold the stock of TransTexas Transmission
Corporation ("TTC"), its subsidiary that owned substantially all of TransTexas'
Lobo Trend producing properties and related pipeline transmission system, for an
adjusted sales price of approximately $1.1 billion (the "Lobo Sale").
Accordingly, TransTexas' operating results for the fiscal year ended January 31,
1998 reflect the impact of the Lobo Sale. TransTexas recorded a gain of $543.4
million on the Lobo Sale.
TransTexas' operating data for the years ended January 31, 2000, 1999 and
1998, are as follows:
YEAR ENDED JANUARY 31,
------------------------
2000 1999 1998
------ ------ ------
Sales volumes:
Gas (Bcf)(1)............................................. 27.8 35.6 72.4
NGLs (MMgals)............................................ 44.0 8.4 62.4
Condensate and oil (MBbls)............................... 1,827 1,120 619
Average prices:
Gas (dry) (per Mcf)(2)................................... $ 2.32 $ 2.10 $ 2.09
NGLs (per gallon)........................................ .32 .21 .29
Condensate and oil (per Bbl)............................. 19.88 11.91 19.20
Number of gross wells drilled.............................. 14 38 107
Percentage of wells completed.............................. 43% 61% 56%
- ---------------
(1) Sales volumes for the year ended January 31, 1998 include 7.3 Bcf delivered
pursuant to volumetric production payments.
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(2) Average prices for the year ended January 31, 1998 include amounts delivered
pursuant to volumetric production payments. The average gas price for
TransTexas' undedicated production for this period was $2.10 per Mcf.
TransTexas uses the full-cost method of accounting for exploration and
development costs. Under the full-cost method, the cost for successful, as well
as unsuccessful, exploration and development activities is capitalized and
amortized on a unit-of-production basis over the life of the remaining proved
reserves. Net capitalized costs of gas and oil properties are limited to the
lower of unamortized cost or the cost center ceiling, defined as the sum of the
present value (10% discount rate) of estimated unescalated future net revenues
from proved reserves; plus the cost of properties not being amortized, if any;
plus the lower of cost or estimated fair value of unproved properties included
in the costs being amortized, if any; less related income tax effects. For the
year ended January 31, 1999, TransTexas recorded pre-tax impairments of its gas
and oil properties aggregating $426 million primarily as a result of the
limitations on net capitalized costs of gas and oil properties. Due to higher
gas and oil prices realized by the Company subsequent to January 31, 1999, the
impairment was less than would have been recorded using January 31, 1999 prices.
A summary of TransTexas' operating expenses is set forth below (in millions
of dollars):
PREDECESSOR
------------------------
YEAR ENDED JANUARY 31,
------------------------
2000 1999 1998
------ ------ ------
Operating costs and expenses:
Lease..................................................... $ 9.4 $10.4 $15.2
Pipeline and gathering.................................... 9.2 8.7 32.6
Other..................................................... -- 3.3 3.1
----- ----- -----
18.6 22.4 50.9
Taxes other than income taxes(1)............................ 9.8 7.1 11.4
----- ----- -----
$28.4 $29.5 $62.3
===== ===== =====
- ---------------
(1) Taxes other than income taxes include severance, property and other taxes.
TransTexas' average depletion rates have been as follows:
PREDECESSOR
------------------------
YEAR ENDED JANUARY 31,
------------------------
2000 1999 1998
------ ------ ------
Depletion rates (per Mcfe).................................. $1.89 $1.96 $1.11
===== ===== =====
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. In July
1999, the FASB issued SFAS 137, "Deferral of the Effective Date of FASB
Statement No 133," which delays the effective date for one year, to fiscal years
beginning after June 15, 2000. TransTexas is evaluating the impact of the
provisions of SFAS 133.
YEAR ENDED JANUARY 31, 2000, COMPARED WITH THE YEAR ENDED JANUARY 31, 1999
Gas, condensate and NGL revenues for the year ended January 31, 2000
increased by $20.1 million from the prior period due primarily to increases in
condensate and NGL sales volumes and higher prices for all products offset in
part by a decrease in natural gas sales volumes. The average monthly prices
received per Mcf of gas ranged from $1.74 to $2.90 in the year ended January 31,
2000, compared to a range of $1.90 to $2.36 in the prior period. Other revenues
decreased by $1.4 million for the year ended January 31, 2000 due to
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the sale of certain drilling services division assets in the prior period. For
the year ended January 31, 1999, TransTexas recognized a pretax gain of $63.6
million from the sale of certain drilling services division assets and a pretax
loss of $2.4 million due to postclosing adjustments to the Lobo Sale purchase
price.
Lease operating expenses for the year ended January 31, 2000 decreased $1.0
million from the prior period due primarily to decreases in maintenance costs.
Pipeline and gathering expenses increased $0.5 million primarily due to
operations at Galveston Bay Processing's natural gas treating facility at
Winnie, Texas. Other expenses for the year ended January 31, 2000 decreased $3.3
million due to the sale of certain drilling assets in the prior period.
Depreciation, depletion and amortization expense for the year ended January 31,
2000 decreased $11.1 million due to a decrease in natural gas volumes and a
$0.07 decrease in the depletion rate. General and administrative expenses
decreased by $1.8 million primarily as a result of a decrease in personnel and
related costs. Taxes other than income taxes increased by $2.7 million over the
prior period due primarily to increases in property taxes. The impairment loss
of $426.0 million for the year ended January 31, 1999 related to a write-down of
$420.5 million of TransTexas' net capitalized costs of gas and oil properties to
the cost center ceiling and a $5.5 million write-down of an underutilized
pipeline system that was exchanged as part of a settlement of certain natural
gas delivery commitments.
Interest income for the year ended January 31, 2000 decreased by $0.7
million as compared to the prior period due to lower cash balances available for
investment. Interest expense decreased $41.4 million primarily as a result of
discontinuing interest accruals on prepetition unsecured debt obligations.
Reorganization items of $8.3 million for the year ended January 31, 2000
included legal and other professional fees and expenses directly related to
TransTexas' Chapter 11 proceedings and an adjustment to record assets at
reorganization value. The extraordinary item for the year ended January 31, 2000
represents the discharge of certain liabilities subject to compromise pursuant
to the Plan.
Based on the reorganization value of the Company, the fair value of the
Preferred Stock and Common Stock was estimated to be zero. The Senior Preferred
Stock and Junior Preferred Stock are mandatorily redeemable in 2006 and 2010,
respectively. As a result, the Company will accrete, in the form of a non-cash
dividend deducted from net income available to common stockholders and charged
to retained earnings, an amount equal to the combined redemption amount totaling
$243.2 million (initial liquidation value) over the period prior to redemption.
In addition, earnings available to common stockholders will be reduced by
dividends paid on the Preferred Stock.
YEAR ENDED JANUARY 31, 1999, COMPARED WITH THE YEAR ENDED JANUARY 31, 1998
Gas, condensate and NGL revenues for the year ended January 31, 1999
decreased by $73.2 million from the prior year, due primarily to decreases in
gas and NGLs sales volumes attributable to the divestiture of producing
properties as a result of the Lobo Sale and normal production declines on other
properties. These declines were partially offset by increased production from
Eagle Bay. The average monthly prices received per Mcf of gas ranged from $1.90
to $2.36 in the year ended January 31, 1999, compared to a range of $1.49 to
$3.01 in the prior year. As of January 31, 1999, TransTexas had a total of 127
producing wells compared to 157 producing wells at January 31, 1998.
Transportation revenues decreased $12.1 million over the prior year due
primarily to the divestiture of the pipeline system in connection with the Lobo
Sale. Other revenues decreased by $0.4 million for the year ended January 31,
1999 due to a decrease in services provided to third parties prior to the sale
of the drilling services division. TransTexas' net gain on the sale of assets
includes a pre-tax gain of $63.6 million for the sale of certain drilling
services division assets and a pre-tax loss of $2.4 million due to post-closing
adjustments to the Lobo Sale purchase price.
Lease operating expenses for the year ended January 31, 1999 decreased by
$4.8 million from the prior year due primarily to the Lobo Sale offset by
increased operating expenses for the Eagle Bay field. Pipeline and gathering
expenses decreased by $9.4 million from the prior year due primarily to the
divestiture of the pipeline system. NGL costs decreased by $14.5 million from
the prior year due to the Lobo Sale and the resulting decrease in the volumes of
natural gas processed. Other expenses for the year ended January 31, 1999
increased $0.2 million primarily due to increased costs related to providing
services to the new operator of the Lobo Trend properties prior to divestiture
of the Company's drilling services assets. Depreciation, depletion
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and amortization expense for the year ended January 31, 1999 increased $3.5
million due to a $0.85 per Mcfe increase in the depletion rate due to higher
acquisition cost of properties and increased drilling and development costs,
partially offset by the Lobo Sale and the resulting decrease in TransTexas'
undedicated natural gas production. General and administrative expenses
decreased by $26.3 million primarily as a result of a decrease in litigation
expense. Taxes other than income taxes decreased by $4.3 million over the prior
year due primarily to decreases in ad valorem, severance and excise taxes as a
result of the decrease in the number of producing wells, partially offset by an
increase in franchise taxes. The impairment loss of $426.0 million for the year
ended January 31, 1999 relates to an aggregate write-down of $420.5 million of
TransTexas' net capitalized costs of gas and oil properties as a result of the
limitation on net capitalized costs of gas and oil properties and a $5.5 million
write-down of an underutilized pipeline system.
Interest income for the year ended January 31, 1999 decreased by $11.2
million as compared to the prior period due to lower cash balances available for
investment. Interest expense decreased by $0.7 million primarily as a result of
the retirement of the Senior Secured Notes in June 1997, offset in part by an
increase in interest attributable to the issuance of dollar-denominated
production payments and a decrease in the amount of interest capitalized in
connection with unevaluated leasehold acreage.
LIQUIDITY AND CAPITAL RESOURCES
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code. As a result of the Chapter 11 filing,
the Company was prohibited from paying, and creditors were prohibited from
attempting to collect, claims or debts arising prior to the bankruptcy. The
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division confirmed the Company's Second Amended, Modified and Restated
Plan of Reorganization dated January 25, 2000 (the "Plan") on February 7, 2000.
The Effective Date of the Plan is March 17, 2000. In connection with the
Effective Date of the Plan, the Company
(1) paid approximately $2.6 million in cash to settle certain accounts
payable and royalty claims;
(2) agreed to pay approximately $28.3 million to settle certain
accounts payable, severance, property and franchise taxes. The $28.3
million is payable in quarterly installments generally over a five year
period with stated interest ranging from 8% to 10%. The Company agreed to
pay approximately $8.0 million of this amount in fiscal 2001.
(3) paid approximately $21.9 million in cash, issued $200 million
principal amount of 15% Senior Secured Notes due 2005 (the "Notes"),
222,455,320 shares of Series A Senior Preferred Stock, 20,716,080 shares of
Series A Junior Preferred Stock, 1,002,500 shares of Class A Common Stock,
247,500 shares of Class B Common Stock and 625,000 warrants to purchase
Class A Common Stock to settle the TransTexas Senior Secured Notes Claims.
A portion of this distribution was reallocated pursuant to the Plan as
follows:
(a) $20 million in cash and five million shares of Senior Preferred
Stock to settle on a pro rata basis all general prepetition unsecured
claims;
(b) $1.8 million in cash, 2,455,320 shares of Senior Preferred
Stock and all of the Junior Preferred Stock to the holders of TransTexas
13 3/4% Senior Subordinated Notes;
(c) 52,500 shares of Class A Common Stock and warrants exercisable
to purchase 109,375 shares of Class A Common Stock at a price of $120
per share to the holders of the old TransTexas common stock who are not
Affiliates of the Debtor (as defined in the Plan); and
(d) all of the Class B Common Stock and warrants exercisable to
purchase 515,625 shares of Class A Common Stock at an exercise price of
$120 per share to John R. Stanley.
(4) issued $6.7 million in secured notes in exchange for old secured
notes and related accrued interest; and
(5) canceled all of the old TransTexas common stock and 13 3/4% Senior
Subordinated Notes.
13
16
On the Effective Date, the Company, as Borrower, and Galveston Bay
Processing Corporation and Galveston Bay Pipeline Company, as Guarantors,
entered into an Oil and Gas Revolving Credit and Term Loan Agreement, dated as
of March 15, 2000 (the "Oil and Gas Facility") with GMAC Commercial Credit LLC
("GMACC"), as a Lender and as Agent. The Oil and Gas Facility consists of a term
loan (the "Term Loan") in the amount of $22.5 million and a revolving facility
(the "Revolving Loan") in a maximum amount of $30 million (all of which was
funded on the Effective Date). The Term Loan bears interest at a rate of 14% per
annum and the Revolving Loan bears interest at a rate of 13 1/2% per annum.
Interest on the Term Loan and the Revolving Loan is payable monthly in arrears.
Principal amortization of the Term Loan is due in 20 quarterly installments of
$56,250 each, with the balance due March 14, 2005. The principal amount of the
Revolving Loan is due on March 14, 2005; however the Company may, and in certain
circumstances must, make prepayments of such amount. If, subsequent to such
prepayments, the Company demonstrates sufficient collateral value meeting the
requirements of the Oil and Gas Facility provisions, the Company may be entitled
to borrow additional advances under the Revolving Loan. The Oil and Gas Facility
is secured by substantially all of the assets of the Company. The security
interest in accounts receivable and inventory securing the Oil and Gas Facility
is subordinated to the security interest of GMACC under the Accounts Receivable
Facility.
On the Effective Date, the Company, as Issuer, Galveston Bay Pipeline
Company and Galveston Bay Processing Corporation, as Guarantors, and Firstar
Bank, N.A., as Trustee, entered into an Indenture dated as of March 15, 2000,
pursuant to which the Company issued the Notes. Interest on the Notes is due
semi-annually on March 15 and September 15. The Notes are secured by
substantially all of the assets of the Company other than accounts receivable
and inventory. The Indenture contains certain covenants that restrict the
Company's ability to incur indebtedness, engage in related party transactions,
dispose of assets or engage in sale/leaseback transactions, issue dividends on
common stock, change its line of business, consolidate or merge with or into
another entity or convey, transfer or lease all or substantially all of its
assets, and suffer a change of control. The security interest in favor of the
Trustee is subordinated to the security interest in favor of the agent under the
Oil and Gas Facility.
On the Effective Date, the Company and GMACC entered into a Third Amended
and Restated Accounts Receivable Management and Security Agreement, dated as of
March 15, 2000 (the "Accounts Receivable Facility"). The Accounts Receivable
Facility is a revolving credit facility secured by accounts receivable and
inventory. The maximum loan amount under the facility is $15 million, against
which the Company may from time to time, subject to the conditions of the
Accounts Receivable Facility, borrow, repay and reborrow. As of April 28, 2000,
$0.5 million was available for lending. Advances under the facility bear
interest at a rate per annum equal to the higher of (i) the prime commercial
lending rate of The Bank of New York plus 1/2 of 1%, and (ii) the Federal Funds
Rate plus 1%, payable monthly in arrears. The outstanding principal balance
under the Accounts Receivable Facility will be due on March 14, 2005.
As of the Effective Date, the Company has outstanding 222,455,320 shares of
Series A Senior Preferred Stock (the "Senior Preferred Stock") with a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Senior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first two years following the Effective Date, the Company will be required to
pay cash dividends at a rate of $0.10 per share per annum, or, at its option,
in-kind dividends of additional shares of Senior Preferred Stock at a rate of
$0.20 per share per annum. The Senior Preferred Stock is mandatorily redeemable
on March 15, 2006 at a rate of $1.00 per share plus accrued and unpaid
dividends. One-half of the then-outstanding shares of Senior Preferred Stock is
mandatorily convertible into shares of Class A Common Stock at the rate of
0.3461 shares of Class A Common Stock per $1.00 of liquidation preference if
either (i) more than 75 million shares of Senior Preferred Stock remain
outstanding after March 15, 2006 or (ii) the Company fails to pay dividends on
the Senior Preferred Stock on any two dividend payment dates. The Certificate of
Designation for the Senior Preferred Stock includes restrictive covenants
comparable to those included in the Indenture.
As of the Effective Date, the Company had outstanding 20,716,080 shares of
Series A Junior Preferred Stock (the "Junior Preferred Stock") with a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Junior Preferred Stock include a cumulative dividend preference,
payable
14
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quarterly out of funds legally available therefor, if any. During the first six
years following the Effective Date, the Company will be required to pay in-kind
dividends of additional shares of Junior Preferred Stock at a rate of $0.10 per
share per annum. Thereafter, dividends will be payable both in cash at a rate of
$0.10 per share per annum and in kind at a rate of $0.10 per share per annum.
The Junior Preferred Stock is mandatorily redeemable on March 15, 2010 at a rate
of $1.00 per share plus accrued and unpaid dividends. Each share of Junior
Preferred Stock is mandatorily convertible into shares of Class A Common Stock
at the rate of 0.1168 shares of Class A Common Stock per $1.00 of liquidation
preference if either (i) more than 75 million shares of Senior Preferred Stock
remain outstanding after March 15, 2006 or (ii) the Company fails to pay
dividends on the Senior Preferred Stock on any two dividend payment dates. The
Certificate of Designation for the Junior Preferred Stock includes restrictive
covenants comparable to those included in the Indenture. Such covenants will
become effective when all of the Notes (and any refinancings thereof) have been
repaid and all of the Senior Preferred Stock has been redeemed.
There can be no assurance that the Company will have sufficient funds or
funds legally available for the payment of either cash or in kind dividends.
In February and September 1998, TransTexas entered into two production
payment agreements with an unaffiliated third party pursuant to which the
Company conveyed certain properties (the "Original Subject Interests") in the
form of a term overriding royalty interest. As of January 31, 2000, the
outstanding balance of these production payments was $35.1 million.
In March 2000, the Original Subject Interests were reconveyed to TransTexas
and a new production payment drilling program agreement was entered into between
TransTexas and two unaffiliated third parties in the form of a term overriding
royalty interest carved out of and burdening certain properties including the
Original Subject Interests (collectively, the "New Subject Interests"). The
Company has the right to offer additional properties ("Offered Wells") to the
production payment parties at a negotiated purchase price, up to an aggregate
maximum for all such wells, of up to $52 million. Upon acceptance of the Offered
Wells, one of the third parties would be committed to pay to the Company either
the drilling costs of the Offered Wells or, at the third party's discretion, a
higher, mutually agreed upon amount. The production payment calls for the
repayment of the primary sum plus an amount equivalent to a 15% annual interest
rate on the unpaid portion of such primary sum. The Oil and Gas Facility places
certain restrictions on the amount that may be outstanding under the production
payment. As of March 15, 2000, the primary sum outstanding under the production
payment was $35 million.
In connection with the new production payment, the Company entered into
various marketing and processing agreements with one of the third parties.
Pursuant to these agreements, the Company will pay a nominal marketing fee with
respect to the Company's production associated with the New Subject Interests.
In addition, the third party will pay a fee for certain processing services to
be provided by Galveston Bay Processing. See Item 7A for information about
certain hedging provisions in the new production payment agreements.
After the Effective Date, TransTexas remains highly leveraged and will have
significant cash requirements for debt service and significant charges for
Preferred Stock dividends to net income available for common stockholders.
In order to maintain or increase proved oil and gas reserves, TransTexas is
required to make substantial capital expenditures for the exploration and
development of natural gas and oil reserves in the normal course of business.
For the fiscal year ended January 31, 2000, total capital expenditures incurred
were $54 million, including $6 million for lease acquisitions, $42 million for
drilling and development and $6 million for gas gathering, other equipment and
seismic acquisitions. Capital expenditures for fiscal 2001 are estimated to be
approximately $66 million which amount is in excess of anticipated cash flows
from operating activities. Management's plans are to fund its 2001 debt service
requirements and planned capital expenditures with cash flows from existing
producing properties and certain identified relatively low risk exploratory
prospects to be drilled and completed during fiscal 2001. Expected reserves from
these prospects will be used to obtain additional production payment financing
which, together with excess cash flow from these prospects, is necessary to
continue to fund debt service and capital expenditure requirements. Should these
prospects not be
15
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productive or should prices decline for a prolonged period, absent other sources
of capital, the Company would substantially reduce its capital expenditures
which would limit its ability to maintain or increase production and in turn
meet its debt service requirements. Asset sales and financings are restricted
under the terms of TransTexas' debt documents and Senior Preferred Stock.
Potential Tax Liability
Based upon independent legal advice, including an opinion from a nationally
recognized law firm, TransTexas did not report any significant federal income
tax liability as a result of the Lobo Sale. There are, however, significant
uncertainties regarding TransTexas' tax position and no assurance can be given
that TransTexas' position will be sustained if challenged by the Internal
Revenue Service (the "IRS"). Prior to the bankruptcy, TransTexas was part of an
affiliated group for tax purposes (the "TNGC Consolidated Group"), which
included TNGC Holdings Corporation, the sole stockholder of TransAmerican
("TNGC"), TransAmerican, TEC, TransTexas and TARC. If the IRS were to
successfully challenge TransTexas' position, each member of the TNGC
Consolidated Group would be severally liable under the consolidated tax return
regulations for the resulting taxes, in the estimated amount of up to $270
million (assuming the use of none of the available tax attributes of the TNGC
Consolidated Group), possible penalties equal to 20% of the amount of the tax,
and interest at the statutory rate (currently 9%) on the tax and penalties (if
any). Assuming the use of available tax attributes of the TNGC Consolidated
Group, primarily the carryback of net operating loss carryovers ("NOLs"), this
estimated tax would be reduced to approximately $10 million (with the NOL
carrybacks reducing interest as of the end of the tax year in which the
carryback arose and not reducing penalties). In this event, a substantial
portion of TransTexas' NOLs would be utilized and thus not available to
TransTexas after the bankruptcy. Pursuant to the tax allocation agreement among
the members of the TNGC Consolidated Group, TransAmerican is obligated to fund
the entire tax deficiency (if any) resulting from the Lobo Sale. There can be no
assurance that TransAmerican would be able to make any such payment and the
other members of the TNGC Consolidated Group, including TransTexas as a former
member, may be required to pay the tax, penalties and interest. There can be no
assurance that TransTexas could pay this contingency.
Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provision (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended (the "Tax Code"), and has reduced its tax attributes (including
its net operating loss and credit carryforwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this transaction,
however, and TransAmerican has not obtained a ruling from the IRS regarding this
transaction. TransTexas believes that there is substantial legal authority to
support the position that the COD Exclusion applies to the cancellation of
TransAmerican's indebtedness. However, due to factual and legal uncertainties,
there can be no assurance that the IRS will not challenge this position, or that
any such challenge would not be upheld. Under the Tax Allocation Agreement,
TransTexas has agreed to pay an amount equal to any federal tax liability (which
would be approximately $25.4 million) attributable to the inapplicability of the
COD Exclusion. Any such tax would be offset in future years by alternative
minimum tax credits and retained loss and credit carryforwards to the extent
recoverable from TransAmerican.
As a former member of the TNGC Consolidated Group, TransTexas will be
severally liable for any tax liability resulting from any transaction of the
TNGC Consolidated Group that occurred during any taxable year of the TNGC
Consolidated Group during which TransTexas was a member, including the above-
described transactions. The IRS has commenced an audit of the consolidated
federal income tax returns of the TNGC Consolidated Group for its taxable years
ended July 31, 1994 and July 31, 1995. The Company has not been advised by the
IRS as to whether any tax deficiencies will be proposed by the IRS as a result
of its review.
TransTexas expects that a significant portion of its NOLs will be
eliminated and the use of those NOLs that are not eliminated will be severely
restricted as a consequence of the Plan. In addition, certain other tax
16
19
attributes of TransTexas may under certain circumstances be eliminated or
reduced as a consequence of the Plan. The elimination or reduction of NOLs and
such other tax attributes may substantially increase the amount of tax payable
by TransTexas following the consummation of the Plan as compared with the amount
of tax payable had no such attribute reduction or restriction been required.
Inflation and Changes in Prices
TransTexas' results of operations and the value of its gas properties are
highly dependent upon the prices TransTexas receives for its natural gas,
condensate and oil. Substantially all of TransTexas' sales of natural gas,
condensate and oil are made pursuant to long-term contracts at market prices.
Accordingly, the prices received by TransTexas for its natural gas production
are dependent upon numerous factors beyond the control of TransTexas, including
the level of consumer product demand, the North American supply of natural gas,
government regulations and taxes, the price and availability of alternative
fuels, the level of foreign imports of oil and natural gas and the overall
economic environment. Demand for natural gas is seasonal, with demand typically
higher during the summer and winter, and lower during the spring and fall, with
concomitant changes in price. As a result of high demand for drilling services
in 1998 and 1999, TransTexas experienced increases in the cost of oilfield
services and equipment used in exploration and development drilling, and to a
lesser extent well completion and production costs.
Any significant decline in current prices for natural gas could have a
material adverse effect on TransTexas' financial condition, results of
operations and quantities of reserves recoverable on an economic basis. Based on
an assumed average net daily production level of approximately 97 MMcfd,
TransTexas estimates that a $0.10 per MMBtu change in average gas prices
received would change annual operating income by approximately $3.6 million.
Forward-Looking Statements
Forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
are included throughout this report. All statements other than statements of
historical facts included in this report regarding TransTexas' financial
position, business strategy, and plans and objectives of management for future
operations, including, but not limited to words such as "anticipates,"
"expects," "estimates," "believes" and "likely" indicate forward-looking
statements. TransTexas' management believes its current views and expectations
are based on reasonable assumptions; however, there are significant risks and
uncertainties that could significantly affect expected results. Factors that
could cause actual results to differ materially from those in the
forward-looking statements include fluctuations in the commodity prices for
natural gas, crude oil, condensate and natural gas liquids, the extent of
TransTexas' success in discovering, developing and producing reserves,
conditions in the equity and capital markets, competition and the ultimate
resolution of litigation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from adverse changes in prices for
natural gas, condensate and oil and interest rates as discussed below.
The Company's revenues, profitability, access to capital and future rate of
growth are substantially dependent upon the prevailing prices of natural gas,
condensate and oil. These prices are subject to wide fluctuations in response to
relatively minor changes in supply and demand and a variety of additional
factors beyond the Company's control. From time to time, the Company has
utilized hedging transactions with respect to a portion of its gas and oil
production to achieve a more predictable cash flow, as well as to reduce
exposure to price fluctuations. While hedging limits the downside risk of
adverse price movements, it may also limit future revenues from favorable price
movements. Because gains or losses associated with hedging transactions are
included in gas and oil revenues when the hedged volumes are delivered, such
gains and losses
17
20
are generally offset by similar changes in the realized prices of commodities.
The Company had no open hedging transactions at January 31, 2000.
Pursuant to the terms of the Company's production payment agreement entered
into in March 2000, the production payment purchasers entered into the following
hedge arrangements with respect to a portion of the natural gas and condensate
production associated therewith and which effectively hedge a portion of the
Company's production:
CONTRACT PRICE
---------------
COLLAR
VOLUMES IN ---------------
PERIOD MMBTUS/BBLS FLOOR CEILING
- ------ ----------- ----- -------
Natural Gas:
April 2000 -- October 2000............................ 3,745,000 $2.10 $3.40
November 2000 -- March 2001........................... 1,887,500 2.35 3.95
Condensate:
April 2000 -- September 2000.......................... 228,750 18.50 32.50
October 2000 -- March 2001............................ 182,000 18.50 29.95
Under these contracts, the counterparty is required to make payment to the
production payment purchaser if the settlement price for the period is below the
floor, and the production payment purchaser is required to make payment to the
counterparty if the settlement price for any period is above the ceiling price.
Because substantially all of its long-term obligations at January 31, 2000
are at fixed rates, the Company considers its interest rate exposure to be
minimal. The Company's borrowings under its credit facility are subject to a
rate of interest that fluctuates based on short-term interest rates ($4.2
million outstanding at January 31, 2000). The Company had no open interest rate
hedge positions at January 31, 2000.
18
21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
----
Report of Independent Accountants........................... 20
Financial Statements:
Consolidated Balance Sheet................................ 21
Consolidated Statement of Operations...................... 22
Consolidated Statement of Stockholders' Equity
(Deficit).............................................. 23
Consolidated Statement of Cash Flows...................... 24
Notes to Consolidated Financial Statements................ 25
19
22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
TransTexas Gas Corporation:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statement of operations, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
TransTexas Gas Corporation (successor) at January 31, 2000 and TransTexas Gas
Corporation (predecessor) at January 31, 1999 (successor and predecessor are
collectively referred to as the "Company"), and the results of the predecessor's
operations and its cash flows for each of the three years in the period ended
January 31, 2000, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, on April
19, 1999, the Company filed a voluntary petition for relief under Chapter 11 of
the U.S. Bankruptcy Code. The Company's Plan of Reorganization, as amended,
became effective on March 17, 2000 and the Company emerged from Chapter 11. In
connection with its emergence from Chapter 11, the Company adopted fresh-start
reporting as of January 31, 2000.
PricewaterhouseCoopers LLP
Houston, Texas
May 1, 2000
20
23
TRANSTEXAS GAS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 18,288 $ 3,775
Accounts receivable....................................... 19,592 16,091
Receivable from affiliates................................ 1,107 1,286
Inventories............................................... 1,741 3,210
Other current assets...................................... 926 3,693
-------- ----------
Total current assets.............................. 41,654 28,055
-------- ----------
Property and equipment...................................... 327,087 1,459,630
Less accumulated depreciation, depletion and amortization... -- 1,167,487
-------- ----------
Net property and equipment -- based on the full cost
method of accounting for gas and oil properties of
which $90,000 and $20,477 are excluded from
amortization at January 31, 2000 and 1999,
respectively........................................... 327,087 292,143
-------- ----------
Other assets, net........................................... 513 25,169
-------- ----------
$369,254 $ 345,367
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt...................... $ 6,934 $ --
Accounts payable.......................................... 15,759 --
Accrued liabilities....................................... 10,061 983
-------- ----------
Total current liabilities......................... 32,754 983
-------- ----------
Production payments, less current portion................... 32,460 56,260
Long-term debt, less current maturities..................... 48,290 --
Note payable to affiliate................................... 196,346 --
Deferred income taxes....................................... 10,000 --
Other liabilities........................................... 49,404 --
Liabilities subject to compromise........................... -- 718,139
Commitments and contingencies (Note 14)..................... -- --
Stockholders' equity (deficit) (Note 2):
Common stock, $0.01 par value, 100,000,000 shares
authorized, 57,515,566 shares issued and outstanding at
January 31, 2000 and 1999, respectively................ 740 740
Additional paid-in capital................................ (740) 19,915
Accumulated deficit....................................... -- (188,265)
-------- ----------
-- (167,610)
Treasury stock, at cost, 16,484,434 shares................ -- (262,405)
-------- ----------
Total stockholders' equity (deficit).............. -- (430,015)
-------- ----------
$369,254 $ 345,367
======== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
21
24
TRANSTEXAS GAS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
PREDECESSOR
---------------------------------------
YEAR ENDED JANUARY 31,
---------------------------------------
2000 1999 1998
----------- ----------- -----------
Revenues:
Gas, condensate and natural gas liquids............. $ 111,400 $ 91,319 $ 164,538
Transportation...................................... -- -- 12,055
Gain (loss) on the sale of assets................... (438) 61,247 543,365
Other............................................... 2,770 4,200 3,313
----------- ----------- -----------
Total revenues.............................. 113,732 156,766 723,271
----------- ----------- -----------
Costs and expenses:
Operating........................................... 18,649 22,352 50,957
Depreciation, depletion and amortization............ 75,044 86,137 82,659
General and administrative.......................... 19,883 21,938 48,156
Taxes other than income taxes....................... 9,788 7,130 11,399
Impairment of gas and oil properties................ -- 425,966 --
----------- ----------- -----------
Total costs and expenses.................... 123,364 563,523 193,171
----------- ----------- -----------
Operating income (loss)............................. (9,632) (406,757) 530,100
----------- ----------- -----------
Other income (expense):
Interest income..................................... 472 1,205 12,393
Interest expense, net............................... (38,526) (79,921) (80,580)
----------- ----------- -----------
Total other income (expense)................ (38,054) (78,716) (68,187)
----------- ----------- -----------
Income (loss) before reorganization items,
income taxes and extraordinary item....... (47,686) (485,473) 461,913
Reorganization items:
Legal and professional fees......................... (8,325) -- --
Revaluation of assets to fair market value.......... 58,836 -- --
----------- ----------- -----------
Total reorganization items.................. 50,511 -- --
----------- ----------- -----------
Income tax expense (benefit).......................... 10,000 (38,882) 161,669
----------- ----------- -----------
Income (loss) before extraordinary item..... (7,175) (446,591) 300,244
Extraordinary item -- gain (loss) on early
extinguishment of debt, net of tax.................. 436,490 (1,142) (72,043)
----------- ----------- -----------
Net income (loss)........................... $ 429,315 $ (447,733) $ 228,201
=========== =========== ===========
Basic and diluted net income (loss) per share:
Income (loss) before extraordinary item............. $ (0.13) $ (7.76) $ 4.49
Extraordinary item.................................. 7.59 (0.02) (1.08)
----------- ----------- -----------
$ 7.46 $ (7.78) $ 3.41
=========== =========== ===========
Weighted average number of shares outstanding for
basic and diluted net income (loss) per share....... 57,515,566 57,515,566 66,905,903
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
22
25
TRANSTEXAS GAS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
RETAINED
COMMON STOCK ADDITIONAL EARNINGS
-------------------- PAID-IN CAPITAL (ACCUMULATED TREASURY ADVANCES
SHARES AMOUNT (CAPITAL DEFICIT) DEFICIT) STOCK TO AFFILIATES
----------- ------ ----------------- ------------ --------- -------------
PREDECESSOR:
Balance at January 31, 1997.............. 74,000,000 $ 740 $(123,524) $ 31,267 $ -- $(59,278)
Purchase of treasury stock, at cost,
16,484,434 shares.................... -- -- -- -- (262,405) --
Advance to affiliate................... -- -- (13,304) -- -- --
Contribution from affiliate............ -- -- 21,513 -- -- --
Assumption of tax liability by
TransAmerican........................ -- -- 129,549 -- -- --
Contribution of debt issue costs by
TEC.................................. -- -- 12,600 -- --
Collection of advances to affiliates... -- -- -- -- -- 59,278
Net income............................. -- -- -- 228,201 -- --
----------- ----- --------- --------- --------- --------
Balance at January 31, 1998.............. 74,000,000 740 26,834 259,468 (262,405) --
Advance to affiliate................... -- -- (6,919) -- -- --
Net loss............................... -- -- -- (447,733) -- --
----------- ----- --------- --------- --------- --------
Balance at January 31, 1999.............. 74,000,000 740 19,915 (188,265) (262,405) --
Contribution from TEC.................. -- -- 700 -- -- --
Adoption of fresh-start reporting...... (21,355) (241,050) 262,405 --
Net income............................. -- -- -- 429,315 -- --
SUCCESSOR:
----------- ----- --------- --------- --------- --------
Balance at January 31, 2000.............. 1,250,000 $ 740 $ (740) $ -- $ -- $ --
=========== ===== ========= ========= ========= ========
TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------
PREDECESSOR:
Balance at January 31, 1997.............. $(150,795)
Purchase of treasury stock, at cost,
16,484,434 shares.................... (262,405)
Advance to affiliate................... (13,304)
Contribution from affiliate............ 21,513
Assumption of tax liability by
TransAmerican........................ 129,549
Contribution of debt issue costs by
TEC.................................. 12,600
Collection of advances to affiliates... 59,278
Net income............................. 228,201
---------
Balance at January 31, 1998.............. 24,637
Advance to affiliate................... (6,919)
Net loss............................... (447,733)
---------
Balance at January 31, 1999.............. (430,015)
Contribution from TEC.................. 700
Adoption of fresh-start reporting...... --
Net income............................. 429,315
SUCCESSOR:
---------
Balance at January 31, 2000.............. $ --
=========
The accompanying notes are an integral part of the consolidated financial
statements.
23
26
TRANSTEXAS GAS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
PREDECESSOR
----------------------------------
YEAR ENDED JANUARY 31,
----------------------------------
2000 1999 1998
--------- --------- ----------
Operating activities:
Net income (loss)......................................... $ 429,315 $(447,733) $ 228,201
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Reorganization adjustments:
Extraordinary item.................................... (436,490) 1,142 72,043
Revaluation of assets................................. (58,836) -- --
Depreciation, depletion and amortization................ 75,044 86,137 82,659
Impairment of gas and oil properties.................... -- 425,966 --
Amortization of debt issue costs........................ 1,641 5,730 2,030
Accretion on subordinated notes......................... -- -- 4,941
(Gain) loss on the sale of assets....................... 438 (61,247) (543,365)
Deferred income taxes................................... 10,000 (38,882) 161,670
Repayment of volumetric production payments............. -- -- (45,134)
Amortization of deferred revenue........................ -- -- (9,420)
Changes in assets and liabilities:
Accounts receivable................................... (3,501) 965 61,604
Receivable from affiliates............................ 179 (1,286) 3,248
Inventories........................................... 1,469 13,227 (3,953)
Other current assets.................................. 2,767 7,026 10,265
Accounts payable...................................... 5,430 7,981 18,451
Accrued interest payable to affiliates................ 14,628 1,851 6,762
Accrued liabilities................................... (3,271) 9,177 (50,966)
Transactions with affiliates, net..................... 700 (6,166) 31,223
Other assets.......................................... 378 126 65
Other liabilities..................................... 6,691 (5,384) (8,371)
--------- --------- ----------
Net cash provided (used) by operating activities... 46,582 (1,370) 21,953
--------- --------- ----------
Investing activities:
Capital expenditures...................................... (42,342) (190,601) (423,915)
Proceeds from the sale of assets.......................... 445 156,212 1,062,490
Withdrawals from cash restricted for interest............. -- -- 46,000
Advances to affiliate..................................... -- (1,648) --
Payment of advances by affiliate.......................... -- -- 24,750
Contribution to affiliate................................. -- -- (13,304)
--------- --------- ----------
Net cash provided (used) by investing activities... (41,897) (36,037) 696,021
--------- --------- ----------
Financing activities:
Issuance of note payable.................................. 30,000 -- --
Issuance of long-term debt................................ -- 19,650 14,946
Principal payments on long-term debt...................... (1,896) (62,235) (10,128)
Revolving credit agreement, net........................... 3,860 (7,572) (18,351)
Issuance of production payments........................... -- 69,824 20,977
Principal payments on production payments................. (22,136) (17,355) (29,504)
Issuance of note payable to affiliate..................... -- 1,395 486,991
Retirement of senior secured notes........................ -- -- (892,000)
Debt issue costs.......................................... -- (1,027) (13,559)
Increase in cash restricted for share repurchases......... -- -- (399,284)
Withdrawals from cash restricted for share repurchases.... -- -- 399,284
Purchases of treasury stock............................... -- -- (262,405)
--------- --------- ----------
Net cash provided (used) by financing activities... 9,828 2,680 (703,033)
--------- --------- ----------
Increase (decrease) in cash and cash equivalents... 14,513 (34,727) 14,941
Beginning cash and cash equivalents......................... 3,775 38,502 23,561
--------- --------- ----------
Ending cash and cash equivalents............................ $ 18,288 $ 3,775 $ 38,502
========= ========= ==========
The accompanying notes are an integral part of the consolidated financial
statements.
24
27
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
TransTexas Gas Corporation (together with its subsidiaries, the "Company"
or "TransTexas") was incorporated in Delaware in May 1993. Prior to March 17,
2000 (the "Effective Date"), TransTexas was a subsidiary of TransAmerican Energy
Corporation ("TEC"), which is wholly owned by TEC/TransAmerican LLC, which is
wholly owned by TransAmerican Natural Gas Corporation ("TransAmerican"). Unless
otherwise noted, the term "TransTexas" refers to TransTexas Gas Corporation and
its subsidiaries, including Galveston Bay Processing Corporation and Galveston
Bay Pipeline Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date(s) of the financial
statements and the reported amounts of revenues and expenses during the
reporting period(s). TransTexas' most significant financial estimates are based
on remaining proved gas and oil reserves. Actual results could differ from these
estimates.
Cash and Cash Equivalents
TransTexas considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash and cash
equivalents at January 31, 2000 includes $1.4 million restricted for payments of
future goods and services provided by certain vendors.
Inventories
TransTexas' inventories, consisting primarily of tubular goods, are stated
at the lower of average cost (which, at January 31, 2000, was estimated fair
value) or market.
Gas and Oil Properties
TransTexas uses the full cost method of accounting for exploration and
development costs. Under this method of accounting, the cost for successful as
well as unsuccessful exploration and development activities are capitalized.
Such capitalized costs and estimated future development and reclamation costs
are amortized on a unit-of-production method. Net capitalized costs of gas and
oil properties are limited to the lower of unamortized cost or the cost center
ceiling, defined as the sum of the present value (10% discount rate) of
estimated unescalated future net revenues from proved reserves; plus the cost of
properties not being amortized, if any; plus the lower of cost or estimated fair
value of unproved properties included in the costs being amortized, if any; less
related income tax effects. As of January 31, 1999, TransTexas' net capitalized
costs of gas and oil properties exceeded the cost center ceiling. TransTexas
adjusted its net capitalized costs resulting in a non-cash pre-tax loss of
approximately $426 million for the year ended January 31, 1999. Due to higher
gas and oil prices realized by the Company subsequent to January 31, 1999, the
impairment was less than would have been recorded using January 31, 1999 prices.
Proceeds from the sale of gas and oil properties are applied to reduce the
costs in the cost center unless the sale involves a significant quantity of
reserves in relation to the cost center, in which case a gain or loss is
recognized.
Unevaluated properties and associated costs not currently being amortized
and included in gas and oil properties were $92.2 million and $20 million at
January 31, 2000 and 1999, respectively. The properties represented by these
costs were undergoing exploration activities at such date, or are properties on
which
25
28
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TransTexas intends to commence such activities in the future. TransTexas
believes that the unevaluated properties at January 31, 2000 will be
substantially evaluated in 12 to 24 months and it will begin to amortize these
costs at such time.
Other Property and Equipment
Other property and equipment are stated at cost. The cost of repairs and
minor replacements is charged to operating expense while the cost of renewals
and betterments is capitalized. At the time depreciable assets are retired or
otherwise disposed of, the cost and related accumulated depreciation or
amortization are removed from the accounts. Gains or losses on dispositions in
the ordinary course of business are included in the consolidated statement of
operations. Impairment of other property and equipment is reviewed whenever
events or changes in circumstances indicate that the carrying value of assets
may not be recoverable.
Depreciation of oilfield services equipment and other buildings and
equipment is computed by the straight-line method at rates that will amortize
the unrecovered cost of depreciable property over their estimated useful lives
of 4 to 10 years.
Costs of improving leased property are amortized over the estimated useful
lives of the assets or the terms of the leases, whichever is shorter.
Environmental Remediation Costs
Environmental expenditures are expensed or capitalized as appropriate,
depending on their future economic benefit. Expenditures that relate to an
existing condition caused by past operations and that do not have future
economic benefits are expensed. Liabilities for these expenditures are provided
when the responsibility to remediate is probable and the amount of associated
costs is reasonably estimable.
Debt Issue Costs
Costs related to the issuance of long-term debt are classified as "Other
assets." Capitalized debt costs are amortized to interest expense over the
scheduled maturity of the debt utilizing the interest method. In the event of a
redemption of long-term debt, the related debt issue costs will be charged to
income in the period of presentation.
Defined Contribution Plan
TransTexas maintains a defined contribution plan, which incorporates a
"401(k) feature" as allowed under the Internal Revenue Code. All investments are
made through Massachusetts Mutual Life Insurance Company. Employees who are at
least 21 years of age and have completed one year of credited service are
eligible to participate on the next semiannual entry date. TransTexas matches
10%, 20% or 50% of employee contributions up to a maximum of 3% of the
participant's compensation, based on years of plan participation. TransTexas'
contributions with respect to this plan totaled $0.2 million, $0.3 million and
$0.5 million for years ended January 31, 2000, 1999 and 1998, respectively. All
Company contributions are currently funded.
Fair Value of Financial Instruments
TransTexas includes fair value information in the Notes to Consolidated
Financial Statements when the fair value of its financial instruments can be
determined and is different from the book value. TransTexas generally assumes
the book value of those financial instruments that are classified as current
approximate fair value because of the short maturity of these instruments. For
noncurrent financial instruments, TransTexas uses quoted market prices or, to
the extent that there are no available quoted market prices, market prices for
similar instruments. Due to the adoption of fresh-start reporting, all financial
instruments were recorded at estimated fair value, based on the present value of
amounts to be paid, at January 31, 2000.
26
29
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
TransTexas recognizes revenues from the sales of natural gas, condensate
and natural gas liquids in the period of delivery. Revenues are recognized from
transportation of natural gas in the period the service is provided. The sales
method is used for natural gas imbalances that arise from jointly produced
properties. Volumetric production is monitored to minimize these natural gas
imbalances. A natural gas imbalance liability is recorded in other liabilities
if TransTexas' excess sales of natural gas exceed its estimated remaining
recoverable reserves for such properties.
Concentrations
Financial instruments that potentially expose TransTexas to credit risk
consist principally of cash and trade receivables. TransTexas selects depository
banks based upon management's review of the financial stability of the
institution. Balances generally exceed the $100,000 level covered by federal
deposit insurance. To date, TransTexas has not incurred any losses due to excess
deposits in any financial institution. Trade accounts receivable are generally
from companies with significant natural gas marketing activities, which would be
impacted by conditions or occurrences affecting that industry. TransTexas
performs ongoing credit evaluations and, generally, requires no collateral from
its customers. TransTexas is not aware of any significant credit risk relating
to its customers and has not experienced significant credit losses associated
with such receivables.
Approximately 65% of the Company's production was produced from four wells
in the Company's Eagle Bay field.
Hedging Agreements
From time to time, TransTexas enters into commodity price swap agreements
(the "Hedge Agreements") to reduce its exposure to price risk in the spot market
for natural gas. The Hedge Agreements are accounted for as hedges if the pricing
of the hedge agreement correlates with the pricing of the natural gas and oil
production hedged. Accordingly, gains or losses are deferred and recognized as
an increase or decrease in revenues in the respective month the physical volumes
are sold.
Pursuant to the terms of the Company's production payment agreement entered
into in March 2000, the production payment purchasers entered into the following
hedge arrangements with respect to a portion of the natural gas and condensate
production associated therewith and which effectively hedge a portion of the
Company's production:
CONTRACT PRICE
----------------
COLLAR
VOLUMES IN ----------------
PERIOD MMBTUS/BBLS FLOOR CEILING
- ------ ----------- ------ -------
Natural Gas:
April 2000 -- October 2000.......................... 3,745,000 $ 2.10 $ 3.40
November 2000 -- March 2001......................... 1,887,500 2.35 3.95
Condensate:
April 2000 -- September 2000........................ 228,750 18.50 32.50
October 2000 -- March 2001.......................... 182,000 18.50 29.95
Under these contracts, the counterparty is required to make payment to the
production payment purchaser if the settlement price for the period is below the
floor, and the production payment purchaser is required to make payment to the
counterparty if the settlement price for any period is above the ceiling price.
27
30
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
Prior to the Effective Date, TransTexas filed a consolidated tax return
with TransAmerican. Income taxes were due from or payable to TransAmerican in
accordance with a tax allocation agreement, as amended, between TransTexas, TNGC
Holdings Corporation, TransAmerican and TransAmerican's other subsidiaries (the
"Tax Allocation Agreement"). It is TransTexas' policy to record income tax
expense as though TransTexas had filed separately. Subsequent to the Effective
Date, TransTexas is a stand alone taxpayer. Deferred income taxes are
recognized, at enacted tax rates, to reflect the future effects of temporary
differences arising between the financial reporting and tax bases of assets and
liabilities. Income taxes include federal and state income taxes.
Net Income (Loss) Per Share
Basic and diluted net income (loss) per share has been calculated based on
the weighted average number of shares of common stock outstanding during each
period, excluding treasury shares. After adoption of fresh-start reporting, the
number of common shares used to calculate basic earnings per share will be
1,250,000. Potential common shares to be included in diluted earnings per share,
if they are dilutive, will be 81,286,424, as follows:
Series A Senior Preferred Stock.......................... 76,991,786
Series A Junior Preferred Stock.......................... 2,419,638
Class A Common Stock..................................... 1,002,500
Class B Common Stock..................................... 247,500
Class A Common Stock Warrants............................ 625,000
----------
Total potential common shares....................... 81,286,424
==========
Recently Issued Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. In July
1999, the FASB issued SFAS 137, "Deferral of the Effective Date of FASB
Statement No 133," which delays the effective date for one year, to fiscal years
beginning after June 15, 2000. TransTexas is evaluating the impact of the
provisions of SFAS 133.
2. REORGANIZATION
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware. On April 20, 1999, TEC and its wholly owned
subsidiary, TransAmerican Refining Corporation ("TARC"), also filed voluntary
petitions under Chapter 11. On May 20, 1999, the cases were transferred to the
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division (the "Bankruptcy Court"). The bankruptcy cases are being
jointly administered. TransTexas' Chapter 11 filing did not include its
subsidiaries, including Galveston Bay Processing and Galveston Bay Pipeline.
TransTexas filed its bankruptcy petition in order to preserve cash and to give
the Company the opportunity to restructure its debt. The Company's Second
Amended, Modified and Restated Plan of Reorganization dated January 25, 2000
(the "Plan") was confirmed by the Bankruptcy Court on February 7, 2000. The
Effective Date of the Plan is March 17, 2000.
The consolidated financial statements as of January 31, 2000 and for the
year then ended have been prepared in accordance with the American Institute of
Certified Public Accountants Statement of Position
28
31
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7"). In accordance with guidance provided by SOP 90-7, the
consummation of the Plan (the "Reorganization") has been reflected through the
adoption of fresh-start reporting as though effective on January 31, 2000.
As a result of the bankruptcy filing, a significant amount of the Company's
liabilities, including secured debt, was subject to compromise. As of January
31, 2000 and 1999, liabilities subject to compromise included the following (in
thousands of dollars):
PREDECESSOR
-------------------
JANUARY 31,
-------------------
2000(*) 1999
-------- --------
Long-term debt.............................................. $124,324 $125,170
Notes payable to affiliates................................. 456,533 457,928
Accounts payable............................................ 69,280 66,231
Accrued interest payable to affiliates...................... 23,241 8,613
Accrued liabilities......................................... 36,905 46,073
Other liabilities........................................... 21,927 14,124
-------- --------
$732,210 $718,139
======== ========
- ---------------
(*) Immediately prior to adoption of fresh-start reporting.
As of the petition date, in accordance with SOP 90-7, TransTexas
discontinued the accrual of interest and amortization of deferred debt issue
costs related to liabilities subject to compromise. If such interest had
continued to be accrued, based on contractual terms without increase for default
provisions, and related deferred debt issue costs continued to be amortized,
interest expense for the fiscal year ended January 31, 2000 would have increased
approximately $55.5 million.
In connection with the Effective Date of the Plan, the Company
(1) paid approximately $2.6 million in cash to settle certain accounts
payable and royalty claims;
(2) agreed to pay approximately $28.3 million to settle certain
accounts payable, severance, property and franchise taxes. The $28.3
million is payable in quarterly installments generally over a five year
period with stated interest ranging from 8% to 10%. The Company agreed to
pay approximately $8.0 million of this amount in fiscal 2001.
(3) paid approximately $21.9 million in cash, issued $200 million
principal amount of 15% Senior Secured Notes due 2005 (the "Notes"),
222,455,320 shares of Series A Senior Preferred Stock, 20,716,080 shares of
Series A Junior Preferred Stock, 1,002,500 shares of Class A Common Stock,
247,500 shares of Class B Common Stock and 625,000 warrants to purchase
Class A Common Stock to settle the TransTexas Senior Secured Notes Claims.
A portion of this distribution was reallocated pursuant to the Plan as
follows:
(a) $20 million in cash and five million shares of Senior Preferred
Stock to settle on a pro rata basis all general prepetition unsecured
claims;
(b) $1.8 million in cash, 2,455,320 shares of Senior Preferred
Stock and all of the Junior Preferred Stock to the holders of TransTexas
13 3/4% Senior Subordinated Notes;
(c) 52,500 shares of Class A Common Stock and warrants exercisable
to purchase 109,375 shares of Class A Common Stock at a price of $120
per share to the holders of the old TransTexas common stock who were not
Affiliates of the Debtor (as defined in the Plan); and
29
32
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) all of the Class B Common Stock and warrants exercisable to
purchase 515,625 shares of Class A Common Stock at an exercise price of
$120 per share to John R. Stanley.
(4) issued $6.7 million in secured notes in exchange for old secured
notes and related accrued interest; and
(5) canceled all of the old TransTexas common stock and 13 3/4% Senior
Subordinated Notes.
Under provisions of SOP 90-7, the January 31, 2000 consolidated balance
sheet is the opening balance sheet of reorganized TransTexas, the successor
company. The January 31, 2000 consolidated balance sheet includes all
adjustments necessary to reflect assets at the reorganization value and the
Plan's treatment of creditor claims and previous equity interests. Since the
January 31, 2000 consolidated balance sheet was affected by fresh-start
reporting, it is not comparable in certain material respects to the consolidated
balance sheets of any prior period. The consolidated statements of operations
and cash flows for the years ended January 31, 2000, 1999 and 1998 reflect the
activities of the predecessor reporting entity; however, the statements for
fiscal 2000 reflect certain reorganization items.
Pursuant to fresh-start reporting, the Company's reorganization value was
estimated by management and allocated to identified assets based on their
relative fair values. Postpetition liabilities were valued at the present value
of amounts to be paid. The present value of liabilities has been adjusted for
imputed interest at a rate of 15% for the period from February 1, 2000 to the
Effective Date of the Plan. The imputed interest will be charged to interest
expense during the first quarter of fiscal 2001.
Reorganization value was determined to be approximately $369 million
primarily based on discounted estimated future cash flows. Discounted cash flows
were based on projected cash flows over six years before interest and deducting
capital expenditures with a terminal value which was a multiple of year six cash
flows. The Company used a discount rate of 17%, and projected average prices of
$2.46 per Mcf for natural gas and $17.62 per Bbl for condensate and oil. Average
prices were based on a three-year trailing average.
Oil and gas prices are historically volatile and exploring for, developing
and producing oil and gas involves risk. A change in prices from estimated
amounts or higher than anticipated costs to find and develop additional gas and
oil reserves could result in a reduction in cash flows from operations which
could reduce cash flows available for capital expenditures which could impair
the Company's ability to maintain or increase its production. This in turn would
reduce the estimated fair value of the Company's assets.
30
33
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effects of the fresh start reporting adjustments at January 31, 2000
are as follows:
PREDECESSOR SUCCESSOR
----------- ----------- PRO FORMA
JANUARY 31, JANUARY 31, PRO FORMA JANUARY 31,
2000(1) REORGANIZATION FRESH-START 2000 ADJUSTMENTS 2000
----------- -------------- ----------- ----------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents........... $ 18,288 $ -- $ -- $ 18,288 $ 32,500(g) $ 16,364
(10,000)(h)
4,500(i)
(1,284)(g)
(27,640)(h)
Accounts receivable................. 19,592 -- -- 19,592 -- 19,592
Receivable from affiliates.......... 1,107 -- -- 1,107 -- 1,107
Inventories......................... 1,741 -- -- 1,741 -- 1,741
Other current assets................ 926 -- -- 926 -- 926
--------- --------- --------- -------- -------- --------
Total current assets......... 41,654 -- -- 41,654 (1,924) 39,730
--------- --------- --------- -------- -------- --------
Property and equipment................ 268,251 -- 58,836(b) 327,087 3,458(k) 330,545
--------- --------- --------- -------- -------- --------
Other assets.......................... 22,997 (22,484)(a) -- 513 1,284(g) 1,797
--------- --------- --------- -------- -------- --------
$ 332,902 $ (22,484) $ 58,836 $369,254 $ 2,818 $372,072
========= ========= ========= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current maturities of long-term
debt.............................. $ -- $ -- $ 6,934(c) $ 6,934 $ (1,841)(h) $ 5,222
129(j)
Accounts payable.................... 11,921 -- 3,838(c) 15,759 (3,561)(h) 12,269
71(j)
Accrued liabilities................. 7,432 -- 2,629(c) 10,061 4,500(i) 14,610
49(j)
--------- --------- --------- -------- -------- --------
Total current liabilities.... 19,353 -- 13,401 32,754 (653) 32,101
--------- --------- --------- -------- -------- --------
Production payments, less current
portion............................. 32,460 -- -- 32,460 -- 32,460
196,346(g)
Long-term debt, less current
maturities.......................... 34,205 -- 14,085(c) 48,290 32,500(g) 271,052
(10,000)(h)
3,916(j)
Note payable to affiliate............. -- -- 196,346(c) 196,346 (196,346)(g) --
Deferred income taxes................. 10,000 -- -- 10,000 -- 10,000
(22,238)(h)
Other liabilities..................... -- -- 49,404(c) 49,404 641(j) 27,807
Redeemable preferred stock............ -- -- -- -- --(f) --
Liabilities subject to compromise..... 732,210 (458,974)(a) (273,236)(c) -- -- --
Stockholders' equity (deficit):
Common stock........................ 740 740 (728)(e) 12
Additional paid-in capital.......... 20,615 (21,355)(d) (740) 728(e) (12)
Accumulated deficit................. (254,276) 436,490(a) 58,836(b) -- (4,806)(j) (1,348)
(241,050)(d) 3,458(k)
--------- --------- --------- -------- -------- --------
(232,921) 436,490 (203,569) -- (1,348) (1,348)
Treasury stock...................... (262,405) -- 262,405(d) -- --
--------- --------- --------- -------- -------- --------
Total stockholders' equity
(deficit).................. (495,326) 436,490 58,836 -- (1,348) (1,348)
--------- --------- --------- -------- -------- --------
$ 332,902 $ (22,484) $ 58,836 $369,254 $ 2,818 $372,072
========= ========= ========= ======== ======== ========
31
34
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- ---------------
(1) Immediately prior to adopting fresh-start reporting.
(a) Discharge of indebtedness, net of related debt issue costs.
(b) Allocation of reorganization value to gas and oil properties.
(c) Establish new debt.
(d) Elimination of the accumulated deficit and treasury stock.
(e) Cancellation of old common stock and issuance of 1,002,500 shares of new
Class A Common Stock and 247,500 shares of new Class B Common Stock.
(f) Issuance of Redeemable Senior and Junior Preferred Stock.
(g) Issuance and assumption of long-term debt, net of debt issue costs.
(h) Payment of long-term debt and prepetition claims.
(i) Issuance of production payment.
(j) Accretion of discount on reorganization liabilities.
(k) Capitalization of interest on unevaluated properties.
Based on the reorganization value of the Company, the fair value of the
Preferred Stock and Common Stock was estimated to be zero. The Senior Preferred
Stock and Junior Preferred Stock are mandatorily redeemable in 2006 and 2010,
respectively. As a result, the Company will accrete, in the form of a non-cash
dividend deducted from net income available to common stockholders and charged
to retained earnings, an amount equal to the combined redemption amount totaling
$243.2 million (initial liquidation value) over the period prior to redemption.
In addition, earnings available to common stockholders will be reduced by
dividends paid on the Preferred Stock.
On the Effective Date, the Company's capital consists of (i) 1,002,500
shares of Class A Common Stock, $0.01 par value, (ii) 247,500 shares of Class B
Common Stock, $0.01 par value, (iii) 222,455,320 shares of Series A Senior
Preferred Stock, $1.00 par value, (iv) 20,716,080 shares of Series A Junior
Preferred Stock, $1.00 par value, and (v) warrants exercisable to purchase
625,000 shares of Class A Common Stock at a price of $120 per share.
The Series A Senior Preferred Stock (the "Senior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Senior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first two years following the Effective Date, the Company will be required to
pay cash dividends at a rate of $0.10 per share per annum, or, at its option,
in-kind dividends of additional shares of Senior Preferred Stock at a rate of
$0.20 per share per annum. The Senior Preferred Stock is mandatorily redeemable
on March 15, 2006 at a rate of $1.00 per share plus accrued and unpaid
dividends. One-half of the then-outstanding shares of Senior Preferred Stock is
mandatorily convertible into shares of Class A Common Stock at the rate of
0.3461 shares of Class A Common Stock per $1.00 of liquidation preference if
either (i) more than 75 million shares of Senior Preferred Stock remain
outstanding after March 15, 2006 or (ii) the Company fails to pay dividends on
the Senior Preferred Stock on any two dividend payment dates. The Certificate of
Designation for the Senior Preferred Stock includes restrictive covenants
comparable to those included in the Indenture.
The Series A Junior Preferred Stock (the "Junior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Junior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first six years following the Effective Date, the Company will be required to
pay in-kind dividends of additional shares of Junior Preferred Stock at a rate
of $0.10 per share per annum. Thereafter, dividends will be payable both in cash
at a rate of $0.10 per share per annum and in kind at a rate of $0.10 per share
per annum. The Junior Preferred Stock is mandatorily redeemable on March 15,
2010 at a rate of $1.00 per share plus accrued
32
35
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and unpaid dividends. Each share of Junior Preferred Stock is mandatorily
convertible into shares of Class A Common Stock at the rate of 0.1168 shares of
Class A Common Stock per $1.00 of liquidation preference if either (i) more than
75 million shares of Senior Preferred Stock remain outstanding after March 15,
2006 or (ii) the Company fails to pay dividends on the Senior Preferred Stock on
any two dividend payment dates. The Certificate of Designation for the Junior
Preferred Stock includes restrictive covenants comparable to those included in
the Indenture. Such covenants will become effective when all of the Notes (and
any refinancings thereof) have been repaid and all of the Senior Preferred Stock
has been redeemed.
3. LIQUIDITY
In order to maintain or increase proved oil and gas reserves, TransTexas is
required to make substantial capital expenditures for the exploration and
development of natural gas and oil reserves in the normal course of business.
TransTexas remains highly leveraged and a substantial portion of its cash
flow will be required for debt service. In addition, cash flow from operations
is dependent on the level of gas and oil prices which are historically volatile.
Management's plans are to fund its 2001 debt service and planned capital
expenditures with cash flows from existing producing properties and certain
identified relatively low risk exploratory prospects to be drilled and completed
during fiscal 2001. Expected reserves from these prospects will be used to
obtain additional production payment financing which, together with excess cash
flow from these prospects, is necessary to continue to fund debt service and
capital expenditure requirements. Should these prospects not be productive or
should prices decline for a prolonged period, absent other sources of capital,
the Company would substantially reduce its capital expenditures which would
limit its ability to maintain or increase production and in turn meet its debt
service requirements. Asset sales and financings are restricted under the terms
of TransTexas' debt documents and Senior Preferred Stock.
4. OTHER CURRENT ASSETS
The major components of other current assets are as follows (in thousands
of dollars):
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
Prepayments:
Trade................................................. $ 478 $ 676
Insurance............................................. 240 2,300
Other................................................... 208 717
------ ------
$ 926 $3,693
====== ======
5. PROPERTY AND EQUIPMENT
The major components of property and equipment, at cost (estimated fair
value at January 31, 2000), are as follows (in thousands of dollars):
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
Gas and oil properties................................ $279,844 $1,394,325
Gas gathering and transportation...................... 40,920 53,761
Equipment and other................................... 6,323 11,544
-------- ----------
$327,087 $1,459,630
======== ==========
33
36
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1997, TransTexas consummated a stock purchase agreement with an
unaffiliated buyer (the "Lobo Sale Agreement"), to effect the sale (the "Lobo
Sale") of the stock of TransTexas Transmission Corporation ("TTC"), its
subsidiary that owned substantially all of TransTexas' Lobo Trend producing
properties and related pipeline transmission system, for an adjusted sales price
of approximately $1.1 billion. TransTexas recorded a gain of $543.4 million on
the Lobo Sale. In accordance with the full cost method, the cost of the
properties sold was determined based on relative fair market value.
In January 1998, TransTexas sold a portion of its Lodgepole producing
properties for a sales price of $19.1 million. The proceeds from this sale were
credited to the full cost pool.
On April 30, 1998, TransTexas sold its oilfield stimulation, cementing and
coiled tubing equipment and related facilities to an unaffiliated third party
for a sales price of $30 million, subject to post-closing adjustments. For the
year ended January 31, 1999, TransTexas recorded a $10.5 million pre-tax gain as
a result of this sale.
On June 26, 1998, TransTexas sold its drilling rigs and related facilities
to an unaffiliated third party for a sales price of $75 million. On August 17,
1998, TransTexas sold its remaining drilling services assets to an unaffiliated
third party for a sales price of $20.5 million. TransTexas recorded pre-tax
gains of $51.2 million and $5.3 million, respectively, as a result of these
sales.
Additional purchase price adjustments related to the Lobo Sale resulted in
a pre-tax loss on the sale of assets of $2.4 million during the year ended
January 31, 1999.
In December 1998, TransTexas sold certain gas and oil properties for net
proceeds of approximately $16.7 million.
6. OTHER ASSETS
The major components of other assets are as follows (in thousands of
dollars):
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
Debt issue costs, net of accumulated amortization of
$2,030 at January 31, 1999............................ $ -- $24,278
Other................................................... 513 891
---- -------
$513 $25,169
==== =======
7. LONG-TERM DEBT AND PRODUCTION PAYMENTS
Long-Term Debt
Long-term debt consists of the following (in thousands of dollars):
SUCCESSOR PREDECESSOR
PRO FORMA ----------- -----------
JANUARY 31, JANUARY 31,
2000 2000 1999(*)
----------- ----------- -----------
15% Senior Secured Notes due 2005..................... $200,000 $ -- $ --
Revolving credit agreements........................... 34,205 4,205 345
Term Note............................................. 22,500 -- --
Notes payable, ranging from 8% to 15%, due through
2005................................................ 19,569 49,212 9,010
13 3/4% Senior Subordinated Notes due 2001............ -- 1,807 115,815
-------- ------- --------
Total long-term debt........................ 276,274 55,224 125,170
Current maturities.................................... 5,222 6,934 --
-------- ------- --------
$271,052 $48,290 $125,170
======== ======= ========
- ---------------
(*) Subject to compromise (see Note 2).
34
37
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On the Effective Date, the Company, as Issuer, Galveston Bay Pipeline
Company and Galveston Bay Processing Corporation, as Guarantors, and Firstar
Bank, N.A., as Trustee, entered into an Indenture dated as of March 15, 2000,
pursuant to which the Company issued the Notes. Interest on the Notes is due
semi-annually on March 15 and September 15. The Notes are secured by
substantially all of the assets of the Company other than accounts receivable
and inventory. The security interest in favor of the Trustee is subordinated to
the Security Interest in favor of the Agent under the Oil and Gas Facility.
On the Effective Date, the Company and GMACC entered into a Third Amended
and Restated Accounts Receivable Management and Security Agreement, dated as of
March 15, 2000 (the "Accounts Receivable Facility"). The Accounts Receivable
Facility is a revolving credit facility secured by accounts receivable and
inventory. The maximum loan amount under the facility is $15 million, against
which the Company may from time to time, subject to the conditions of the
Accounts Receivable Facility, borrow, repay and reborrow. As of April 28, 2000,
$0.5 million was available for lending. Advances under the facility bear
interest at a rate per annum equal to the higher of (i) the prime commercial
lending rate of The Bank of New York plus 1/2 of 1%, and (ii) the Federal Funds
Rate plus 1%, payable monthly in arrears. The outstanding principal balance
under the Accounts Receivable Facility will be due on March 14, 2005.
On the Effective Date, the Company, as Borrower, and Galveston Bay
Processing Corporation and Galveston Bay Pipeline Company, as Guarantors,
entered into an Oil and Gas Revolving Credit and Term Loan Agreement, dated as
of March 15, 2000 (the "Oil and Gas Facility") with GMAC Commercial Credit LLC
("GMACC"), as a Lender and as Agent. The Oil and Gas Facility consists of a term
loan (the "Term Loan") in the amount of $22.5 million and a revolving facility
(the "Revolving Loan") in a maximum amount of $30 million (all of which was
funded on the Effective Date). The Term Loan bears interest at a rate of 14% per
annum and the Revolving Loan bears interest at a rate of 13 1/2% per annum.
Interest on the Term Loan and the Revolving Loan is payable monthly in arrears.
Principal amortization of the Term Loan is due in 20 quarterly installments of
$56,250 each, with the balance due March 14, 2005. The principal amount of the
Revolving Loan is due on March 14, 2005; however the Company may, and in certain
circumstances must, make prepayments of such amount. If, subsequent to such
prepayments, the Company demonstrates sufficient collateral value meeting the
requirements of the Oil and Gas Facility provisions, the Company may be entitled
to borrow additional advances under the Revolving Loan. The Oil and Gas Facility
is secured by substantially all of the assets of the Company. The security
interest in accounts receivable and inventory securing the Oil and Gas Facility
is subordinated to the security interest of GMACC under the Accounts Receivable
Facility.
In December 1998, TransTexas borrowed $5.65 million from an unaffiliated
third party in order to meet a portion of its December 31, 1998 interest payment
obligations. In accordance with the Plan, the principal amount of the note was
increased to $6.7 million, bears interest at 8% and is collateralized by a
pledge of the stock of Galveston Bay Processing Corporation and a mortgage on
the Winnie processing facility.
Additional notes payable totaling $13.9 million consist of amounts payable
pursuant to the Plan in settlement of the claims of certain creditors. Such
amounts are generally payable over a five year period with stated interest
ranging from 8% to 10%.
Prior to the Effective Date, the Company had outstanding $115.8 million
principal amount of 13 3/4% Senior Subordinated Notes due 2001 (the
"Subordinated Notes"). The fair value of the Subordinated Notes, based on quoted
market prices as of January 31, 1999, was $34.7 million. As described in Note 2,
in accordance with the Plan, the holders of the Subordinated Notes received $1.8
million cash, 2,455,320 shares of Senior Preferred Stock and 20,716,080 shares
of Junior Preferred Stock and the Subordinated Notes were canceled. The balance
of $1.8 million at January 31, 2000 represents the fair value of the
Subordinated Notes in accordance with fresh-start reporting.
35
38
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate principal payments on the Company's (Successor) long-term debt as
of the effective date total $5.2 million, $3.1 million, $1.9 million, $3.6
million and $.4 million for the fiscal years ended January 31, 2001, 2002, 2003,
2004 and 2005, respectively.
Production Payments
In February and September 1998, TransTexas entered into two production
payment agreements with an unaffiliated third party pursuant to which the
Company conveyed certain properties (the "Original Subject Interests") in the
form of a term overriding royalty interest. As of January 31, 2000, the
outstanding balance of these production payments was $35.1 million.
In March 2000, the Original Subject Interests were reconveyed to TransTexas
and a new production payment drilling program agreement was entered into between
TransTexas and two unaffiliated third parties in the form of a term overriding
royalty interest carved out of and burdening certain properties including the
Original Subject Interests (collectively, the "New Subject Interests"). The
Company has the right to offer additional properties ("Offered Wells") to the
production payment parties at a negotiated purchase price, up to an aggregate
maximum for all such wells, of up to $52 million. Upon acceptance of the Offered
Wells, one of the third parties would be committed to pay to the Company either
the drilling costs of the Offered Wells or, at the third party's discretion, a
higher, mutually agreed upon amount. The production payment calls for the
repayment of the primary sum plus an amount equivalent to a 15% annual interest
rate on the unpaid portion of such primary sum. The Oil and Gas Facility places
certain restrictions on the amount that may be outstanding under the production
payment.
In connection with the new production payment, the Company entered into
various marketing and processing agreements with one of the third parties.
Pursuant to these agreements, the Company will pay a nominal marketing fee with
respect to the Company's production associated with the New Subject Interests.
In addition, the third party will pay a fee for certain processing services to
be provided by Galveston Bay Processing.
8. NOTES PAYABLE TO AFFILIATES
Notes payable to affiliates consist of the following (in thousands of
dollars):
SUCCESSOR PREDECESSOR
----------- -----------
PRO FORMA JANUARY 31,
JANUARY 31, -------------------------
2000 2000 1999(*)
----------- ----------- -----------
TransTexas Intercompany Loan........................ $ -- $196,346 $450,000
Notes payable to affiliates......................... -- -- 7,928
-------- -------- --------
$ -- $196,346 $457,928
======== ======== ========
- ---------------
(*) Subject to compromise (see Note 2).
Prior to the Effective Date, the Company had outstanding a $450 million
note payable to TEC (the "TransTexas Intercompany Loan"). The TransTexas
Intercompany Loan accrued interest at a rate of 10 7/8% per annum and was
pledged to secure TEC's obligations on its 11 1/2% Senior Secured Notes and 13%
Senior Secured Discount Notes due 2002 (the "TEC Notes"). The fair value of the
TransTexas Intercompany Loan was $121.5 million at January 31, 1999. As
described in Note 2, the TransTexas Intercompany Loan was settled on the
Effective Date pursuant to the Plan.
During the year ended January 31, 1999, TEC made advances to TransTexas
pursuant to a $50 million promissory note which was scheduled to mature on June
14, 2002. The note accrued interest at a rate of 11.375% per annum. At January
31, 1999, the outstanding balance on the note was $6.5 million. This note was
canceled on the Effective Date pursuant to the Plan.
36
39
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1998, TransTexas executed a note payable to TransAmerican in
the original principal amount of $1.4 million plus interest at a rate of 15% per
annum. The proceeds from this loan were used to meet a portion of the Company's
interest payment obligations on December 31, 1998. This note was fully repaid in
December 1999.
9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following information reflects TransTexas' noncash investing and
financing activities (in thousands of dollars):
PREDECESSOR
----------------------------
YEAR ENDED JANUARY 31,
----------------------------
2000 1999 1998
------- ------- --------
INVESTING ACTIVITIES:
Accounts payable and long-term liabilities for property
and equipment........................................ $48,381 $38,841 $ 32,666
======= ======= ========
FINANCING ACTIVITIES:
Assumption of tax liability by TransAmerican........... $ -- $ -- $129,549
======= ======= ========
Contribution from affiliate............................ $ -- $ -- $ 21,513
======= ======= ========
Exchange of Subordinated Notes......................... $ -- $ -- $115,815
======= ======= ========
Contribution of debt issue costs from affiliate........ $ -- $ -- $ 12,600
======= ======= ========
Cash paid for interest is as follows (in thousands of dollars):
PREDECESSOR
--------------------------
YEAR ENDED JANUARY 31,
--------------------------
2000 1999 1998
------ ------- -------
Interest................................................. $9,616 $69,970 $52,563
====== ======= =======
Cash paid during the year ended January 31, 2000 for reorganization items
was $6.2 million.
TransTexas incurred approximately $41.2 million, $89.6 million and $96.4
million of interest charges of which approximately $2.7 million, $9.7 million
and $15.8 million were capitalized for the years ended January 31, 2000, 1999
and 1998, respectively.
10. ACCRUED LIABILITIES
Accrued liabilities classified as current liabilities consist of the
following (in thousands of dollars):
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
Royalties................................................... $ 1,581 $ --
Taxes other than income taxes............................... 899 --
Accrued interest............................................ 44 --
Payroll..................................................... 1,197 --
Current portion of production payments...................... 2,647 983
Reorganization claims....................................... 2,629 --
Other....................................................... 1,064 --
------- ----
$10,061 $983
======= ====
37
40
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. OTHER LIABILITIES
The major components of other liabilities are as follows (in thousands of
dollars):
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999(*)
--------- -----------
Reorganization claims....................................... $34,404 --
Litigation accrual.......................................... -- 527
Litigation settlements...................................... -- 7,102
Long-term payables and other................................ 15,000 6,495
------- -------
$49,404 $14,124
======= =======
- ---------------
(*) Subject to compromise (see Note 2).
12. INCOME TAXES
Income tax expense (benefit) includes the following (in thousands of
dollars):
PREDECESSOR
-----------------------------
YEAR ENDED JANUARY 31,
-----------------------------
2000 1999 1998
------- -------- --------
Federal:
Current............................................. $ -- $ -- $(21,380)
Deferred............................................ 10,000 (39,497) 144,256
------- -------- --------
$10,000 $(39,497) $122,876
======= ======== ========
Total income tax expense differs from amounts computed by applying the
statutory federal income tax rate to income before income taxes. The items
accounting for this difference are as follows (in thousands of dollars):
PREDECESSOR
--------------------------------
YEAR ENDED JANUARY 31,
--------------------------------
2000 1999 1998
--------- --------- --------
Federal income tax expense (benefit) at the
statutory rate................................... $ 153,760 $(170,530) $122,876
Increase (decrease) in tax resulting from:
Debt discharged pursuant to Plan................. (160,641) -- --
Adjustment of tax assumption..................... 10,000 (75,000) --
Valuation allowance.............................. 6,881 206,033 --
--------- --------- --------
$ 10,000 $ (39,497) $122,876
========= ========= ========
38
41
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of TransTexas' tax attributes are as follows (in
thousand of dollars):
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
------------------------
2000 1999
--------- -----------
Deferred tax liabilities:
Tax assumption............................................ $10,000 $ --
------- ---------
Deferred tax assets:
Depreciation, depletion and amortization.................. -- 75,368
Net operating loss carryforwards.......................... -- 127,901
Contingent liabilities.................................... -- 1,833
Other, net................................................ -- 931
------- ---------
-- 206,033
Valuation allowance......................................... -- (206,033)
------- ---------
Net deferred tax assets..................................... -- --
------- ---------
$10,000 $ --
======= =========
Based upon independent legal advice, including an opinion from a nationally
recognized law firm, TransTexas did not report any significant federal income
tax liability as a result of the Lobo Sale. There are, however, significant
uncertainties regarding TransTexas' tax position and no assurance can be given
that TransTexas' position will be sustained if challenged by the Internal
Revenue Service (the "IRS"). Prior to the bankruptcy, TransTexas was part of an
affiliated group for tax purposes (the "TNGC Consolidated Group"), which
included TNGC Holdings Corporation, the sole stockholder of TransAmerican
("TNGC"), TransAmerican, TEC, TransTexas and TARC. If the IRS were to
successfully challenge TransTexas' position, each member of the TNGC
Consolidated Group would be severally liable under the consolidated tax return
regulations for the resulting taxes, in the estimated amount of up to $270
million (assuming the use of none of the available tax attributes of the TNGC
Consolidated Group), possible penalties equal to 20% of the amount of the tax,
and interest at the statutory rate (currently 9%) on the tax and penalties (if
any). Assuming the use of available tax attributes of the TNGC Consolidated
Group, primarily the carryback of net operating loss carryovers ("NOLs"), this
estimated tax would be reduced to approximately $10 million (with the NOL
carrybacks reducing interest as of the end of the tax year in which the
carryback arose and not reducing penalties). In this event, a substantial
portion of TransTexas' NOLs would be utilized and thus not available to
TransTexas after the bankruptcy. Pursuant to the tax allocation agreement among
the members of the TNGC Consolidated Group, TransAmerican is obligated to fund
the entire tax deficiency (if any) resulting from the Lobo Sale. There can be no
assurance that TransAmerican would be able to make any such payment and the
other members of the TNGC Consolidated Group, including TransTexas as a former
member, may be required to pay the tax, penalties and interest. There can be no
assurance that TransTexas could pay this contingency.
Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provision (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended (the "Tax Code"), and has reduced its tax attributes (including
its net operating loss and credit carryforwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this transaction,
however, and TransAmerican has not obtained a ruling from the IRS regarding this
transaction. TransTexas believes that there is substantial legal authority to
support the position that the COD Exclusion applies to the cancellation of
TransAmerican's
39
42
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
indebtedness. However, due to factual and legal uncertainties, there can be no
assurance that the IRS will not challenge this position, or that any such
challenge would not be upheld. Under the Tax Allocation Agreement, TransTexas
has agreed to pay an amount equal to any federal tax liability (which would be
approximately $25.4 million) attributable to the inapplicability of the COD
Exclusion. Any such tax would be offset in future years by alternative minimum
tax credits and retained loss and credit carryforwards to the extent recoverable
from TransAmerican.
As a former member of the TNGC Consolidated Group, TransTexas will be
severally liable for any tax liability resulting from any transaction of the
TNGC Consolidated Group that occurred during any taxable year of the TNGC
Consolidated Group during which TransTexas was a member, including the above-
described transactions. The IRS has commenced an audit of the consolidated
federal income tax returns of the TNGC Consolidated Group for its taxable years
ended July 31, 1994 and July 31, 1995. The Company has not been advised by the
IRS as to whether any tax deficiencies will be proposed by the IRS as a result
of its review.
TransTexas expects that a significant portion of its NOLs will be
eliminated and the use of those NOLs that are not eliminated will be severely
restricted as a consequence of the Plan. In addition, certain other tax
attributes of TransTexas may under certain circumstances be eliminated or
reduced as a consequence of the Plan. The elimination or reduction of NOLs and
such other tax attributes may substantially increase the amount of tax payable
by TransTexas following the consummation of the Plan as compared with the amount
of tax payable had no such attribute reduction or restriction been required.
13. TRANSACTIONS WITH AFFILIATES
On June 13, 1997, a services agreement was entered into among
TransAmerican, TEC, TARC and TransTexas. Under the services agreement,
TransTexas provided accounting, legal, administrative and other services to
TARC, TEC and TransAmerican and its affiliates. TransAmerican provided advisory
services to TransTexas, TARC and TEC. As of January 31, 1999, the receivable
from TARC and TransAmerican for service agreement fees was $0.2 million. As of
January 31, 1999, receivables of $4.6 million for other services provided to
TransAmerican and certain of its affiliates were recorded as a reduction of
additional paid-in capital.
In connection with a December 15, 1998 transaction pursuant to which TARC
transferred its refinery assets to a minority-owned subsidiary, TCR Holding
Corporation, ("TCR Holding"), and TCR Holding transferred such assets to its
majority-owned subsidiary, Orion Refining Corporation, ("Orion"), TransTexas
entered into an Amended and Restated Services Agreement (the "TCR Group Services
Agreement") with TCR Holding and Orion. The TCR Group Services Agreement called
for TransTexas to provide certain accounting, legal, administrative and other
services to the TCR Group through December 15, 2000 and receive payment for such
services, through February 28, 1999, in the amount of $200,000 per month.
Subsequent to February 28, 1999, the monthly fee was adjusted based on an
assessment of the cost to TransTexas of providing such services. As of January
31, 2000, the receivable from Orion for such services was $0.1 million.
In March 2000, a services agreement was entered into between TNGC and the
Company. Pursuant to the agreement, TransTexas will provide certain accounting,
legal, administrative and other services to TNGC and its affiliates in exchange
for a monthly fee of $2,000.
During the year ended January 31, 1999, TEC made advances to TransTexas
pursuant to a $50 million promissory note which was scheduled to mature on June
14, 2002. The note accrued interest at a rate of 11.375% per annum. As of
January 31, 2000, the outstanding balance of the note was $6.5 million, and the
accrued interest was $0.3 million. This note was canceled on March 17, 2000
pursuant to the Plan.
40
43
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1998, TransTexas executed a note payable to TransAmerican in
the original principal amount of $1.4 million plus interest at a rate of 15% per
annum. On December 31, 1998, TransTexas used the proceeds from this loan to pay
a portion of its interest payment obligations on its public debt securities.
This note was secured by a lien on the assets of Galveston Bay Processing.
During the fiscal year ended January 31, 2000, Galveston Bay Processing made
payments of principal and interest under this note to TransAmerican of
approximately $1.6 million. As of January 31, 2000 and 1999, the balance due on
the note was $0 and $1.4 million, respectively.
In April 1999, TEC made a cash contribution of $0.7 million to TransTexas.
During the fiscal year ended January 31, 1998, TransTexas sold natural gas
to TARC under an interruptible long-term sales contract. Revenues from TARC
under this contract totaled approximately $1.1 million.
During the fiscal year ended January 31, 1998, TEC allocated $12.6 million
of debt issuance costs relating to the TEC Notes to TransTexas. TransTexas
recorded these costs as a contribution of capital.
During the fiscal year ended January 31, 1998, the Company recorded a
contribution to paid-in capital of approximately $129.5 million in connection
with TransAmerican's assumption of the Lobo Sale tax contingency.
During the fiscal year ended January 31, 1998, the Company contributed
$13.3 million to TransAmerican to retire debt related to certain oil and gas
properties. Those properties, which had a net book value of $21.5 million were
contributed to TransTexas.
During the fiscal year ended January 31, 1999, the Company paid
approximately $5.6 million of Texas franchise taxes on behalf of certain
affiliates pursuant to the Tax Allocation Agreement. Approximately $2.3 million
of the franchise taxes paid exceeded the payable to affiliates for such taxes
and was recorded as a reduction of additional paid-in capital.
14. COMMITMENTS AND CONTINGENCIES
Environmental Matters
TransTexas' operations and properties are subject to extensive federal,
state, and local laws and regulations relating to the generation, storage,
handling, emission, transportation, and discharge of materials into the
environment. Permits are required for various of TransTexas' operations, and
these permits are subject to revocation, modification, and renewal by issuing
authorities. TransTexas also is subject to federal, state, and local laws and
regulations that impose liability for the cleanup or remediation of property
which has been contaminated by the discharge or release of hazardous materials
or wastes into the environment. Governmental authorities have the power to
enforce compliance with their regulations, and violations are subject to fines
or injunctions, or both. Certain aspects of TransTexas' operations may not be in
compliance with applicable environmental laws and regulations, and such
noncompliance may give rise to compliance costs and administrative penalties. It
is not anticipated that TransTexas will be required in the near future to expend
amounts that are material to the financial condition or operations of TransTexas
by reason of environmental laws and regulations, but because such laws and
regulations are frequently changed and, as a result, may impose increasingly
strict requirements, TransTexas is unable to predict the ultimate cost of
complying with such laws and regulations.
Legal Proceedings
TransTexas is a party to various claims and routine litigation arising in
the normal course of its business. Any obligations of the Company in respect of
such claims and litigation arising out of activities prior to the Petition Date
will be discharged pursuant to the Plan. Recovery of these obligations, if any,
will be limited to
41
44
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
any collateral held by the claimant and/or such claimant's pro rata share of
amounts available to pay general unsecured claims.
As described in Note 2, the Company's Plan was confirmed by the Bankruptcy
Court on February 7, 2000. High River Partnership has appealed the confirmation
order. The Company has filed a motion to dismiss High River's appeal on the
grounds of mootness.
Operating Leases
As of January 31, 2000, TransTexas had long-term leases covering land and
other property and equipment. Rental expense was approximately $3 million, $3
million and $2 million for the years ended January 31, 2000, 1999 and 1998,
respectively. Future minimum rental payments required under operating leases
that have initial or remaining noncancellable lease terms in excess of one year
as of January 31, 2000, are as follows (in thousands of dollars):
2001........................................................ $234
2002........................................................ 81
----
$315
====
Gas Delivery Commitments
In March 2000, TransTexas entered into firm and interruptible contracts
with Tejas Ship Channel LLC for transportation of its production from the Eagle
Bay field to the Winnie facilities at a fixed negotiated rate. Under the firm
agreement, the Company is committed to deliver a minimum of 75,000 MMBtu per day
of natural gas and condensate.
The Company also entered into a contract with Centana Intrastate Pipeline
Company for transportation of natural gas on a firm and interruptible basis from
the Winnie facility to natural gas liquids recovery facilities located in the
Beaumont/Port Arthur, Texas area, and residue gas from these facilities to
various distribution points. Under the agreement, the Company is committed to
deliver up to a maximum of 56,250 Mcf of natural gas and 19,500 MMBtu of residue
gas. Transportation fees for natural gas are based on a fixed negotiated rate.
Transportation fees for residue gas are based on a published industry index.
15. BUSINESS SEGMENTS
TransTexas currently conducts its operations in one industry segment:
exploration and production ("E&P"). Prior to the Lobo Sale, TransTexas also
operated a gas transportation segment. The E&P segment explores for, develops,
produces and markets natural gas, condensate and natural gas liquids. The
transportation segment was engaged in intrastate natural gas transportation and
marketing. All of TransTexas' significant gas and oil operations are located in
South Texas, Louisiana and along the Texas Gulf Coast. TransTexas' revenues are
derived principally from sales to interstate and intrastate gas pipelines,
direct end users, industrial companies, marketers and refiners located in the
United States.
For the year ended January 31, 2000, three customers provided approximately
$62 million in E&P revenues. For the year ended January 31, 1999, five customers
provided approximately $65 million in E&P revenues. For the year ended January
31, 1998, three customers provided approximately $79 million in E&P and
transportation revenues.
42
45
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share data)
PREDECESSOR
----------------------------------------------
YEAR ENDED JANUARY 31, 2000
----------------------------------------------
1ST 2ND 3RD 4TH
QUARTER(4) QUARTER QUARTER(4) QUARTER
---------- ------- ---------- --------
Revenues......................................... $19,065 $28,573 $ 29,405 $ 36,689
Operating income (loss).......................... (13,217) (4,116) 2,855 4,846
Net income (loss)................................ (35,881) (6,954) (4,406) 476,556(1)
Net income (loss) per share -- basic and
diluted........................................ (0.62) (0.12) (0.08) 8.28
PREDECESSOR
-------------------------------------------
YEAR ENDED JANUARY 31, 1999
-------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- --------- ---------
Revenues......................................... $33,467 $71,439 $ 32,793 $ 19,067
Operating income (loss).......................... 8,488 21,059(2) (162,674) (273,630)
Net income (loss)................................ (6,803) (806) (147,763) (292,361)
Net income (loss) per share -- basic and
diluted........................................ (0.12) (0.01) (2.57) (5.08)
PREDECESSOR
------------------------------------------
YEAR ENDED JANUARY 31, 1998
------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- ------- --------
Revenues.......................................... $ 82,351 $575,420 $37,233 $ 28,267
Operating income (loss)........................... 1,298 531,425(3) 9,586 (12,209)
Net income (loss)................................. (14,538) 262,745 (1,249) (18,757)
Net income (loss) per share -- basic and
diluted......................................... (0.20) 3.61 (0.02) (0.33)
- ---------------
(1) Net income for the fourth quarter of 2000 includes a $436.5 million
extraordinary gain on the extinguishment of debt and a $50.5 million credit
for reorganization items.
(2) Operating income for the second quarter of 1999 includes a $47.6 million
gain on the sale of assets.
(3) Operating income for the second quarter of 1998 includes a $532.9 million
gain on the sale of assets.
(4) Operating income (loss) and net income (loss) for the first and third
quarters have been restated to increase depletion for the first quarter by
$1,473 or $0.02 per share and decrease depletion for the third quarter by
$366 or $0.01 per share.
17. SUPPLEMENTAL GAS AND OIL DISCLOSURE (UNAUDITED)
The accompanying tables present information concerning TransTexas' gas and
oil producing activities and are prepared in accordance with Statement of
Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing
Activities."
Estimates of TransTexas' proved reserves and proved developed reserves were
prepared by Netherland, Sewell & Associates, Inc., an independent firm of
petroleum engineers, based on data supplied to them by TransTexas.
Such estimates are inherently imprecise and may be subject to substantial
revisions as additional information such as reservoir performance, additional
drilling, technological advancements and other factors become available.
43
46
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capitalized costs relating to gas and oil producing activities are as
follows (in thousands of dollars):
SUCCESSOR PREDECESSOR
--------- -----------
JANUARY 31,
-----------------------
2000 1999
--------- -----------
Proved properties........................................... $230,764 $1,427,608
Unproved properties......................................... 90,000 20,477
-------- ----------
Total............................................. 320,764 1,448,085
Less accumulated depreciation, depletion and amortization... -- 1,164,224
-------- ----------
$320,764 $ 283,861
======== ==========
Costs incurred for gas and oil producing activities are as follows (in
thousands of dollars):
PREDECESSOR
-----------------------------
YEAR ENDED JANUARY 31,
-----------------------------
2000 1999 1998
------- -------- --------
Property acquisitions................................. $ 6,175 $ 13,084 $ 56,205
Exploration........................................... 43,238 98,294 196,728
Development........................................... 4,350 77,322 123,273
------- -------- --------
$53,763 $188,700 $376,206
======= ======== ========
Results of operations for gas and oil producing activities are as follows
(in thousands of dollars):
PREDECESSOR
-------------------------------
YEAR ENDED JANUARY 31,
-------------------------------
2000 1999 1998
-------- --------- --------
Revenues............................................ $111,400 $ 91,319 $164,538
-------- --------- --------
Expenses:
Production costs.................................. 28,437 27,694 60,832
Depreciation, depletion and amortization.......... 76,093 84,883 62,933
General and administrative........................ 10,572 9,767 9,635
Impairment of gas and oil properties.............. -- 425,966 --
-------- --------- --------
Total operating expenses.................. 115,102 548,310 133,400
-------- --------- --------
Income before income taxes................ (3,702) (456,991) 31,138
Income taxes (benefit).............................. (1,296) (159,947) 10,898
-------- --------- --------
$ (2,406) $(297,044) $ 20,240
======== ========= ========
Depletion rate per net equivalent Mcf............... $ 1.93 $ 1.96 $ 1.11
======== ========= ========
Reserve Quantity Information
Proved reserves are estimated quantities of natural gas, condensate and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed reserves are
those proved reserves that can be expected to be recovered through existing
wells with existing equipment and operating methods. Natural gas quantities
represent gas volumes which include amounts that will be extracted
44
47
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
as natural gas liquids. TransTexas' estimated net proved reserves and proved
developed reserves of natural gas (billions of cubic feet) and condensate
(millions of barrels) are shown in the table below.
PREDECESSOR
----------------------------------------------
YEAR ENDED JANUARY 31,
----------------------------------------------
2000 1999 1998
------------ --------------- -------------
GAS OIL GAS OIL GAS OIL
----- ---- ------ ---- ------ ----
Proved reserves:
Beginning of year............................ 120.7 6.6 348.7 15.9 919.7 5.7
Increase (decrease) during the year
attributable to:
Revisions of previous estimates.............. (4.1) (1.2) (127.1)(1) (9.7) (103.8) (1.0)
Extensions, discoveries and other
additions................................. 6.8 0.1 26.1 2.0 123.7 15.1
Sales of reserves............................ -- -- (91.4) (0.5) (525.8) (3.3)
Purchase of reserves......................... -- -- -- -- -- --
Production................................... (27.8) (1.8) (35.6) (1.1) (65.1) (0.6)
----- ---- ------ ---- ------ ----
End of year (SUCCESSOR IN 2000)................ 95.6 3.7 120.7 6.6 348.7 15.9
===== ==== ====== ==== ====== ====
Proved developed reserves:
Beginning of year............................ 87.8 5.0 134.3 4.2 381.5 2.4
End of year (SUCCESSOR IN 2000).............. 82.3 3.5 87.8 5.0 134.3 4.2
- ---------------
(1) Reserve estimates were revised downward principally as a result of
additional seismic information which indicated more highly faulted
structures in certain key properties causing reserves to be reclassified
from proved to probable.
Standardized Measure Information
The calculation of estimated future net cash flows in the following table
assumed the continuation of existing economic conditions and applied year-end
prices (except for future price changes as allowed by contract) of gas and
condensate to the expected future production of such reserves, less estimated
future expenditures (based on current costs) to be incurred in developing and
producing those proved reserves.
The standardized measure of discounted future net cash flows does not
purport, nor should it be interpreted, to present the fair market value of
TransTexas' gas and oil reserves. These estimates reflect proved reserves only
and ignore, among other things, changes in prices and costs, revenues that could
result from probable reserves which could become proved reserves in fiscal 2001
or later years and the risks inherent in reserve estimates. The standardized
measure of discounted future net cash flows relating to proved gas and oil
reserves is as follows (in thousands of dollars):
SUCCESSOR PREDECESSOR
--------- --------------------
YEAR ENDED JANUARY 31,
---------------------------------
2000 1999 1998
--------- -------- ---------
Future cash inflows.................................. $361,411 $296,831 $ 898,257
Future production costs.............................. (61,810) (57,453) (154,725)
Future development costs............................. (18,302) (33,180) (198,180)
Future income taxes.................................. (18,611) -- --
-------- -------- ---------
Future net cash flows...................... 262,688 206,198 545,352
Annual discount (10%) for estimated timing of cash
flows.............................................. (49,085) (44,668) (149,679)
-------- -------- ---------
Standardized measure of discounted future
net cash flows........................... $213,603 $161,530 $ 395,673
======== ======== =========
45
48
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Principal sources of change in the standardized measure of discounted
future net cash flows are as follows (in thousands of dollars):
PREDECESSOR
----------------------------------
YEAR ENDED JANUARY 31,
----------------------------------
2000 1999 1998
-------- --------- ----------
Beginning of year................................... $161,530 $ 395,673 $1,057,256
Revisions:
Quantity estimates and production rates........... (18,829) (194,041)(1) (215,564)
Prices, net of lifting costs...................... 136,550 (76,157) (348,781)
Estimated future development costs................ 14,534 58,455 (33,033)
Additions, extensions, discoveries and improved
recovery.......................................... 10,467 42,184 238,403
Net sales of production............................. (93,481) (73,819) (124,498)
Development costs incurred.......................... 4,350 77,322 119,944
Accretion of discount............................... 13,615 39,566 144,909
Net changes in income taxes......................... (15,133) -- 391,812
Purchases (sales) of reserves....................... -- (107,653) (834,775)
-------- --------- ----------
End of year (SUCCESSOR IN 2000)........... $213,603 $ 161,530 $ 395,673
======== ========= ==========
- ---------------
(1) Reserve estimates were revised downward principally as a result of
additional seismic information which indicated more highly faulted
structures in certain key properties causing reserves to be reclassified
from proved to probable.
Year-end wellhead prices received by TransTexas from sales of natural gas,
including margins from natural gas liquids, were $2.74, $1.79 and $1.96 per Mcf
for 2000, 1999 and 1998, respectively. Year-end condensate prices were $26.89,
$12.12 and $13.54 per barrel for 2000, 1999 and 1998, respectively.
46
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons were serving as directors and executive officers of
the Company as of April 30, 2000:
NAME OFFICE AGE
- ---- ------ ---
John R. Stanley Director and Chief Executive Officer 61
Ronald P. Nowak President and Chief Operating Officer 47
Edwin B. Donahue Vice President, Chief Financial Officer and Secretary 49
Simon Ward Vice President and Treasurer 44
George C. Wright Vice President of Accounting 57
R. Gerald Bennett Director 58
Ronald H. Benson Director 54
Walter S. Piontek Director 63
John L. Whitmire Director 59
Set forth below is a description of the business experience of each of the
directors and executive officers.
John R. Stanley has been a director and Chief Executive Officer since May
1993. He has been Chairman of the Board since March 2000. Mr. Stanley is also
the founder, Chairman of the Board, Chief Executive Officer and sole stockholder
of TNGC Holdings Corporation, which is the sole stockholder of TransAmerican.
Mr. Stanley has operated TransAmerican since 1958.
Ronald P. Nowak has served as President and Chief Operating Officer since
November 1999. Prior to joining TransTexas, Mr. Nowak was with 3DX Technologies
Inc. where he served as President, Chief Executive Officer and Director from
June 1998 until September 1999. Mr. Nowak also served as Vice President of
Exploration from February 1998 through May 1998. From August 1993 to January
1998, Mr. Nowak was with YPF/Maxus Energy Corporation where he served as U.S.
Exploration Manager and U.S. Manager from 1996. Mr. Nowak was with Arco Oil &
Gas from 1987 to 1993. Prior to joining Arco, Mr. Nowak was employed by Exxon
Company, USA as an independent geologist working in the onshore U.S. Gulf Coast
region.
Edwin B. Donahue has been Vice President, Chief Financial Officer and
Secretary since May 1993. Mr. Donahue has been employed in various positions
with TransAmerican for over 20 years.
Simon Ward has been Vice President and Treasurer since June 1999. He served
as Manager of Investor Relations from 1994 until June 1999. From 1976 until
1994, he held various positions with ICO, Inc., Baker Hughes Vetco Services,
Inc. and Vetco Services, Inc.
George C. Wright has been Vice President of Accounting since March 1999. He
has been employed by the Company and its affiliates since June 1982.
R. Gerald Bennett has been a director of the Company since March 17, 2000.
He is serving in the office of Chairman of the Board of FLASHFIND Corporation.
From June 1996 to December 1998, Mr. Bennett was a Senior Vice President of
Equitable Gas Company. Prior thereto, Mr. Bennett served as President and Chief
Executive Officer of Fuel Resources, Inc., a wholly owned subsidiary of The
Brooklyn Union Gas Company. Mr. Bennett has over 35 years experience in the oil
and gas industry.
Ronald H. Benson has been a director of the Company since March 17, 2000.
He is an independent consultant for Soforgas Exploration and Production and a
private investor. From 1994 to 1998, he was Vice President of TPC Gathering and
Transmission Company. From 1991 to 1993, he was President of Phibro
47
50
Energy Productions, Inc. Prior thereto, he was vice president of natural gas
trading for Phibro Energy, Inc. He also worked for Marathon Oil Company in
various capacities from 1968 to 1980.
Walter S. Piontek has been a director of the Company since March 17, 2000.
He is retired from Mobil Oil Corporation where he was employed for 39 years in
various capacities including as executive vice president of Mobil's North
American exploration and production operations.
John L. Whitmire has been a director of the Company since March 17, 2000.
He is Chairman of the Board of CONSOL Energy Inc. From January 1996 to September
1998, Mr. Whitmire was Chairman of the Board and Chief Executive Officer of
Union Texas Petroleum Holdings, Inc. Prior thereto, he worked for Phillips
Petroleum for over 30 years in various capacities including as Executive Vice
President of exploration and production and director. He is also a director of
Global Marine, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, officers and holders of more than 10% of the Company's
Common Stock ("Reporting Persons") to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and reports of changes in
ownership of the Company's stock ("Section 16 Reports"). Such Reporting Persons
are required by SEC regulations to furnish the Company with copies of all
Section 16 Reports they file with the SEC. Based solely on a review of the
Section 16 Reports furnished to the Company by the Reporting Persons, none of
the Reporting Persons, other than John R. Stanley, failed to timely file any
Section 16 Reports during the year ended January 31, 2000. During the fiscal
year ended January 31, 2000, John R. Stanley failed to timely file Form 4
reports disclosing 21 transactions. The transactions were reported on a timely
filed Form 5.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes the compensation paid during the fiscal
years ended January 31, 2000, 1999 and 1998 to the Chief Executive Officer and
each other executive officer whose total annual salary and bonus exceeded
$100,000 in the fiscal year ended January 31, 2000 ("Named Executive Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------------------------
NAME AND PRINCIPAL POSITION FISCAL OTHER ANNUAL
IN THE COMPANY YEAR SALARY BONUS COMPENSATION(1)
- --------------------------- ------ -------- -------- ---------------
John R. Stanley........................... 2000 $396,815 $ -- $5,808
Chief Executive Officer 1999 367,309 -- 4,800
1998 400,483 -- 4,346
Ron Nowak(2).............................. 2000 $ 69,231 $ -- $ --
President and Chief Operating Officer 1999 -- -- --
1998 -- -- --
Edwin B. Donahue.......................... 2000 $317,730 $208,333 $1,467
Vice President, Chief Financial 1999 271,923 111,111 7,701
Officer and Secretary 1998 200,000 213,885 4,519
Simon Ward................................ 2000 $195,656 -- --
Vice President and Treasurer 1999 172,000 $ -- $ --
1998 144,308 15,000 --
George C. Wright.......................... 2000 $188,909 $ -- $4,800
Vice President of Accounting 1999 170,394 -- 5,019
1998 165,000 7,500 4,560
- ---------------
(1) Reflects amounts contributed by the Company under the Savings Plan. Certain
of the Company's executive officers receive personal benefits in addition to
salary and cash bonuses. The aggregate amount
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of such personal benefits, however, does not exceed the lesser of $50,000 or
10% of the total of the annual salary and bonus reported for the named
executive officer and accordingly, such amounts have been excluded from the
table.
(2) Mr. Nowak joined the Company in November 1999.
EMPLOYMENT AGREEMENTS
On March 17, 2000, the Company and Mr. Stanley entered into a three-year
management agreement. The management agreement may be renewed for two additional
one-year terms if certain performance tests are met. Pursuant to the management
agreement, Mr. Stanley will receive an annual salary of $300,000. Each year he
will also receive warrants to purchase 37,500 shares of Class A Common Stock
exercisable at a price of $120 per share. If the management agreement is
terminated for cause, Mr. Stanley will be entitled to receive a severance
payment of $1.5 million. If the management agreement is terminated other than
for cause, the severance payment will be $3 million. "Cause" includes, among
other things, the failure of the Company to meet any two payment obligations on
the Notes or on the Preferred Stock and a bankruptcy filing by the Company.
In December 1998, the Company and Mr. Donahue entered into a two-year
employment agreement which provides for an annual salary of $300,000. The
employment agreement also provides that Mr. Donahue shall be entitled to a bonus
of $500,000 payable in two equal installments on January 31, 1999 and July 31,
1999. If the Company terminates Mr. Donahue's employment other than for cause,
or Mr. Donahue terminates his employment for cause, prior to the end of the term
of the agreement, the Company shall pay Mr. Donahue his salary for the remaining
term of the agreement plus an additional six months' salary. "Cause" includes a
sale, reorganization or merger of the Company that results in a change of
control of the Company.
In May 1998, the Company and Mr. Ward entered into a Severance Agreement
which provides that if the Company terminates Mr. Ward's employment other than
for cause, the Company shall pay Mr. Ward his salary for 12 months past the date
of termination.
DIRECTOR COMPENSATION
All directors, other than Mr. Stanley, are paid an annual fee of $60,000.
The Board meets regularly each quarter. Directors also receive $2,000 for each
meeting attended in addition to the four regular quarterly meetings.
SAVINGS PLAN
The Company maintains a long-term savings plan (the "Savings Plan") in
which eligible employees may elect to participate. Each employee becomes
eligible to participate in the Savings Plan on January 1 or July 1 following the
completion of one year of service with the Company or its participating
affiliates and attainment of age 21. The Savings Plan is intended to constitute
a qualified plan under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") and contains a salary reduction arrangement described in
Section 401(k) of the Code.
Each participant may elect to reduce his compensation by a percentage equal
to 2% to 15% and the Company will contribute that amount to the Savings Plan on
a pre-tax basis on behalf of the participant. The Code limits the annual amount
that a participant may elect to have contributed on his behalf on a pre-tax
basis to the Savings Plan. For 2000, this limit is $10,500. The Company
presently makes a matching contribution in an amount equal to 10%, 20% or 50% of
the amount elected to be contributed by each participant on a pre-tax basis, up
to a maximum of 3% of each participant's compensation, depending on whether the
employee has been a participant in the Savings Plan for one year, two years, or
three years. Each participant also may elect to contribute up to 10% of his
compensation to the Savings Plan on an after-tax basis. The Code imposes
nondiscrimination tests on contributions made to the Savings Plan pursuant to
participant elections and on the Company's matching contributions, and limits
amounts that may be allocated
49
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to a participant's Savings Plan account each year. In order to satisfy the
nondiscrimination tests, contributions made on behalf of certain highly
compensated employees (as defined in the Code) may be limited. Contributions
made to the Savings Plan pursuant to participant elections and matching
contributions are at all times 100% vested. Contributions to the Savings Plan
are invested, according to specified investment options selected by the
participants, in investment funds maintained by the trustee of the Savings Plan.
Generally, a participant's vested benefits will be distributed from the Savings
Plan as soon as administratively practicable following a participant's
retirement, death, disability, or other termination of employment. In addition,
a participant may elect to withdraw his after-tax contributions from the Savings
Plan prior to his termination of employment, and subject to strict limitations
and exceptions, the Savings Plan provides for withdrawals of a participant's
pre-tax contributions prior to a participant's termination of employment, in the
event of the participant's severe financial hardship or attainment of age
59 1/2. The Savings Plan may be amended or terminated by the Board of Directors.
As of January 31, 2000, approximately 170 employees of the Company were eligible
to participate in the Savings Plan, including the Named Executive Officers.
EXECUTIVE REIMBURSEMENT PLAN
The Company also maintains an executive reimbursement plan in which certain
officers of the Company are entitled to participate. Pursuant to this plan,
participants are entitled to reimbursement for medical expenses not otherwise
covered by the Company's medical insurance. During the year ended January 31,
2000, John R. Stanley received approximately $1,200 in reimbursements under this
plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of each class of the Company's voting securities, as of
March 31, 2000, by (i) each director and director nominee, (ii) each Named
Executive Officer, (iii) each person known to the Company to beneficially own
more than five percent of each class of voting securities, and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
indicated, each stockholder identified in the table has sole voting and
investment power with respect to its or his shares.
Senior Preferred Stock:
SHARES OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENTAGE
- ---------------- ------- ----------
John R. Stanley(1)....................................... -- --
Ron Nowak................................................ -- --
Edwin B. Donahue......................................... -- --
Simon Ward............................................... -- --
George Wright............................................ -- --
R. Gerald Bennett........................................ -- --
Ronald H. Benson......................................... -- --
Walter S. Piontek........................................ -- --
John L. Whitmire......................................... -- --
All directors and executive officers as a group (9
persons)............................................... -- --
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Junior Preferred Stock:
SHARES OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENTAGE
- ---------------- ------- ----------
John R. Stanley(1)....................................... -- --
Ron Nowak................................................ -- --
Edwin B. Donahue......................................... -- --
Simon Ward............................................... -- --
George Wright............................................ -- --
R. Gerald Bennett........................................ -- --
Ronald H. Benson......................................... -- --
Walter S. Piontek........................................ -- --
John L. Whitmire......................................... -- --
All directors and executive officers as a group (9
persons)............................................... -- --
Class A Common Stock:
SHARES OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENTAGE
- ---------------- ------- ----------
John R. Stanley(1)(2).................................... 518,662 34%
Ron Nowak................................................ -- --
Edwin B. Donahue(3)...................................... 75 *
Simon Ward............................................... -- --
George Wright............................................ -- --
R. Gerald Bennett........................................ -- --
Ronald H. Benson......................................... -- --
Walter S. Piontek........................................ -- --
John L. Whitmire......................................... -- --
All directors and executive officers as a group (9
persons)............................................... 518,737 34%
Class B Common Stock:
SHARES OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENTAGE
- ---------------- ------- ----------
John R. Stanley(1)....................................... 247,500 100%
Ron Nowak................................................ -- --
Edwin B. Donahue......................................... -- --
George Wright............................................ -- --
Simon Ward............................................... -- --
R. Gerald Bennett........................................ -- --
Ronald H. Benson......................................... -- --
Walter S. Piontek........................................ -- --
John L. Whitmire......................................... -- --
All directors and executive officers as a group (9
persons)............................................... 247,500 100%
- ---------------
* Less than 1% of the shares outstanding in the class.
(1) The address for John R. Stanley is 1300 North Sam Houston Parkway East,
Houston, Texas 77032.
(2) Mr. Stanley is deemed to beneficially own 10 shares of Class A Common Stock
held by his wife and 975 shares of Class A Common Stock held by a
corporation controlled by him. Includes 515,625 shares of Class A Common
Stock underlying currently exercisable common stock purchase warrants. Mr.
Stanley is also deemed to beneficially own 20 shares of Class A Common Stock
underlying currently exercisable common stock purchase warrants held by his
wife, and 2,032 shares of Class A Common Stock
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underlying currently exercisable common stock purchase warrants held by a
corporation controlled by him.
(3) Includes 51 shares of Class A Common Stock underlying currently exercisable
common stock purchase warrants.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 13, 1997, a services agreement was entered into among
TransAmerican, TEC, TARC and TransTexas. Under the services agreement,
TransTexas provided accounting, legal, administrative and other services to
TARC, TEC and TransAmerican and its affiliates. TransAmerican provided advisory
services to TransTexas, TARC and TEC. As of January 31, 1999, the receivable
from TARC and TransAmerican for service agreement fees was $0.2 million. As of
January 31, 1999, receivables of $4.6 million for other services provided to
TransAmerican and certain of its affiliates were recorded as a reduction of
additional paid-in capital.
In connection with a December 15, 1998 transaction pursuant to which TARC
transferred its refinery assets to a minority-owned subsidiary, TCR Holding
Corporation ("TCR Holding"), and TCR Holding transferred such assets to its
majority-owned subsidiary, Orion Refining Corporation ("Orion"), TransTexas
entered into an Amended and Restated Services Agreement (the "TCR Group Services
Agreement") with TCR Holding and Orion. The TCR Group Services Agreement called
for TransTexas to provide certain accounting, legal, administrative and other
services to the TCR Group through December 15, 2000 and receive payment for such
services, through February 28, 1999, in the amount of $200,000 per month.
Subsequent to February 28, 1999, the monthly fee was adjusted based on an
assessment of the cost to TransTexas of providing such services. As of January
31, 2000, the receivable from Orion for such services was $0.1 million.
In March 2000, a services agreement was entered into between TNGC and the
Company. Pursuant to the agreement, TransTexas will provide certain accounting,
legal, administrative and other services to TNGC and its affiliates in exchange
for a monthly fee of $2,000.
During the year ended January 31, 1999, TEC made advances to TransTexas
pursuant to a $50 million promissory note which was scheduled to mature on June
14, 2002. The note accrued interest at a rate of 11.375% per annum. As of
January 31, 2000, the outstanding balance of the note was $6.5 million, and the
accrued interest was $0.3 million. This note was canceled on March 17, 2000
pursuant to the Plan.
In December 1998, TransTexas executed a note payable to TransAmerican in
the original principal amount of $1.4 million plus interest at a rate of 15% per
annum. On December 31, 1998, TransTexas used the proceeds from this loan to pay
a portion of its interest payment obligations on its public debt securities.
This note was secured by a lien on the assets of Galveston Bay Processing.
During the fiscal year ended January 31, 2000, Galveston Bay Processing made
payments of principal and interest under this note to TransAmerican of
approximately $1.6 million. As of January 31, 2000 and 1999, the balance due on
the note was $0 and $1.4 million, respectively.
In April 1999, TEC made a cash contribution of $0.7 million to TransTexas.
During the fiscal year ended January 31, 1998, TransTexas sold natural gas
to TARC under an interruptible long-term sales contract. Revenues from TARC
under this contract totaled approximately $1.1 million.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits
PAGE
----
(1) Report of Independent Accountants........................... 20
Consolidated Balance Sheet.................................. 21
Consolidated Statement of Operations........................ 22
Consolidated Statement of Stockholders' Equity (Deficit).... 23
Consolidated Statement of Cash Flows........................ 24
Notes to Consolidated Financial Statements.................. 25
(2) Report of Independent Accountants........................... 63
Schedule II -- Valuation and Qualifying Accounts............ 64
(3) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 -- Second Amended, Modified and Restated Plan of
Reorganization dated January 25, 2000 (filed as an
exhibit to the Company's current report on Form 8-K dated
February 7, 2000, and incorporated herein by reference).
2.2 -- Order Confirming Plan of Reorganization dated February 7,
2000 (filed as an exhibit to the Company's current report
on Form 8-K dated February 7, 2000, and incorporated
herein by reference).
3.1 -- Articles of Incorporation (filed as an exhibit to the
Company's Registration Statement on Form S-1 (No.
33-75050), and incorporated herein by reference).
3.2 -- By-laws of TransTexas (filed as an exhibit to the
Company's Registration Statement on Form S-1 (No.
33-75050), and incorporated herein by reference).
3.3 -- Amended and Restated Certificate of Incorporation (filed
as an exhibit to the Company's Registration Statement on
Form 8-A (No. 0-30475), and incorporated herein by
reference).
3.4 -- Certificate of Designation, Series A Senior Preferred
Stock (filed as an exhibit to the Company's Registration
Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.5 -- Certificate of Designation, Series A Junior Preferred
Stock (filed as an exhibit to the Company's Registration
Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.6 -- Amended and Restated Bylaws (filed as an exhibit to the
Company's Registration Statement on Form 8-A (No.
0-30475), and incorporated herein by reference).
4.1 -- Indenture dated as of June 15, 1995, among TransTexas,
TTC and American Bank National Association, as Trustee
(the "Indenture Trustee"), with respect to the Senior
Secured Notes including the forms of Senior Secured Note
and Senior Secured Guarantee as exhibits (filed as an
exhibit to TransTexas' current report on Form 8-K dated
June 20, 1995, and incorporated herein by reference).
4.2 -- Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement, effective as
of June 23, 1995, from TransTexas to James A. Taylor, as
trustee for the benefit of the Indenture Trustee (filed
as an exhibit to TransTexas' current report on Form 8-K
dated June 20, 1995, and incorporated herein by
reference).
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EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.3 -- Pipeline Mortgage, Deed of Trust, Assignment, Security
Agreement and Financing Statement, dated as of June 20,
1995, from TTC to James A. Taylor, as trustee for the
benefit of the Indenture Trustee (filed as an exhibit to
TransTexas' current report on Form 8-K dated on June 20,
1995, and incorporated herein by reference).
4.4 -- Security Agreement, Pledge and Financing Statement, dated
as of June 20, 1995, by TransTexas in favor of the
Indenture Trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 20, 1995, and
incorporated herein by reference).
4.5 -- Security Agreement, Pledge and Financing Statement, dated
as of June 20, 1995, by TTC in favor of the Indenture
Trustee (filed as an exhibit to TransTexas' current
report on Form 8-K dated June 20, 1995, and incorporated
herein by reference).
4.6 -- Cash Collateral and Disbursement Agreement, dated as of
June 20, 1995, among TransTexas, the Indenture Trustee
and the Disbursement Agent (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 20,
1995, and incorporated herein by reference).
4.7 -- Pledge and Security Agreement dated as of September 19,
1996, between TransAmerican Exploration Corporation and
Fleet National Bank (previously filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31,
1996, and incorporated herein by reference).
4.8 -- Registration Rights Agreement dated as of September 19,
1996, by and among TransTexas, TransAmerican,
TransAmerican Exploration Corporation and Fleet National
Bank (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended October 31, 1996, and incorporated
herein by reference).
4.9 -- Pledge Agreement dated as of February 23, 1995, between
TEC and First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to Post-Effective Amendment
No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.10 -- Pledge Agreement dated as of February 23, 1995, between
TARC and First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to Post-Effective Amendment
No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.11 -- Registration Rights Agreement dated as of February 23,
1995, among TransTexas, TARC and TEC (filed as an exhibit
to Post-Effective Amendment No. 5 to the Company's
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.12 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and Halliburton Company (filed
as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.13 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and RECO Industries, Inc.
(filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.14 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and Frito-Lay, Inc. (filed as
an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
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57
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.15 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and EM Sector Holdings, Inc.
(filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.16 -- Stock Pledge Agreement dated January 27, 1995, between
TransAmerican and ITT Commercial Corp. (filed as an
exhibit to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.17 -- Registration Rights Agreement dated January 27, 1995,
among TransAmerican, TransTexas and ITT Commercial
Finance Corp. (filed as an exhibit to Post-Effective
Amendment No. 5 to TransTexas' Registration Statement on
Form S-3 (33-91494), and incorporated herein by
reference).
4.18 -- Note Purchase Agreement dated December 13, 1996 between
TransTexas and the Purchasers of 13 1/4% Series A Senior
Subordinated Notes due 2003 (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.19 -- Indenture dated December 13, 1996 between TransTexas and
Bank One, Columbus, NA, as Trustee (filed as an exhibit
to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.20 -- Registration Rights Agreement dated December 13, 1996
between TransTexas and each of the Purchasers of the
Subordinated Notes (filed as an exhibit to Post-
Effective Amendment No. 5 to TransTexas' Registration
Statement on Form S-3 (33-91494), and incorporated herein
by reference).
4.21 -- First Supplemental Indenture dated May 29, 1997 by and
among TransTexas, TTC and Firstar Bank of Minnesota,
N.A., as trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated May 29, 1997, and
incorporated herein by reference).
4.22 -- Second Supplemental Indenture dated June 13, 1997 between
TransTexas, as issuer, and Firstar Bank of Minnesota,
N.A., as trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 13, 1997, and
incorporated herein by reference).
4.23 -- Indenture dated June 13, 1997 governing TransTexas'
Senior Subordinated Notes due 2001 between TransTexas, as
issuer, and Bank One, N.A., as trustee (filed as an
exhibit to TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.24 -- Registration Rights Agreement dated June 13, 1997 between
TransTexas and the holders of TransTexas' Senior
Subordinated Notes due 2001 (filed as an exhibit
TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.25 -- Loan Agreement dated June 13, 1997 between TransTexas and
TEC (filed as an exhibit to TransTexas' current report on
Form 8-K dated June 13, 1997, and incorporated herein by
reference).
4.26 -- Security and Pledge Agreement dated June 13, 1997 by
TransTexas in favor of TEC (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 13,
1997, and incorporated herein by reference).
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58
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.27 -- Disbursement Agreement dated June 13, 1997 among
TransTexas, TEC and Firstar Bank of Minnesota, as
disbursement agent and Trustee (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 13,
1997, and incorporated herein by reference).
4.28 -- Forms of Mortgage dated June 13, 1997 between TransTexas
and TransAmerican Energy Corporation, (filed as an
exhibit to TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.29 -- Intercreditor and Collateral Agency Agreement dated June
13, 1997 among Firstar Bank of Minnesota, TEC and
TransTexas (filed as an exhibit to TEC's Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein
by reference).
4.30 -- Registration Rights Agreement dated August 12, 1997, by
and among TransTexas, Firstar Bank of Minnesota, N.A.,
TEC and TARC (filed as an exhibit to Post-Effective
Amendment No. 6 to TransTexas' Registration Statement on
Form S-4 (33-91494) and incorporated herein by
reference).
4.31 -- First Supplemental Indenture dated as of September 2,
1997, between TransTexas, as issuer, and Bank One, N.A.,
as trustee (filed as an exhibit to TransTexas'
Registration Statement on Form S-4 (333-33803), and
incorporated herein by reference).
4.32 -- First Amendment to Loan Agreement dated December 30, 1997
between TransTexas and TEC (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
4.33 -- First Amendment to Disbursement Agreement dated December
30, 1997 between TransTexas, TEC and Firstar Bank of
Minnesota, as disbursement agent and Trustee (filed as an
exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 1998, and incorporated herein by
reference).
4.34 -- Second Amendment dated December 15, 1998 to Loan
Agreement between TransTexas and TEC (filed as an exhibit
to TEC's current report on Form 8-K dated February 23,
1999, and incorporated herein by reference).
*4.35 -- Indenture dated March 15, 2000 between the Company and
Firstar Bank, N.A., Indenture Trustee, governing the
Company's 15% Senior Secured Notes due 2005 (the "Notes")
*4.36 -- Form of Mortgage dated March 15, 2000 between the Company
and Firstar Bank, N.A.
*4.37 -- Security and Pledge Agreement dated March 15, 2000
between the Company and Firstar Bank, N.A.
*4.38 -- Oil and Gas Revolving Credit and Term Loan Agreement
dated March 15, 2000 among GMAC Commercial Credit LLC, as
Lender and Agent, the Company, as Borrower, and Galveston
Bay Processing Corporation and Galveston Bay Pipeline
Company, as Guarantors.
*4.39 -- Form of Mortgage dated March 15, 2000 between the Company
and GMAC Commercial Credit LLC.
*4.40 -- Security and Pledge Agreement dated March 15, 2000
between the Company and GMAC Commercial Credit LLC.
*4.41 -- Intercreditor Agreement dated March 15, 2000 between
Firstar Bank, N.A. and GMAC Commercial Credit LLC.
56
59
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*4.42 -- Warrant Agreement, including form of Warrant Certificate,
dated March 15, 2000 between the Company and ChaseMellon
Shareholder Services, LLC, Warrant Agent.
*4.43 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Notes named
therein.
*4.44 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Class A Common
Stock named therein.
*4.45 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Senior
Preferred Stock named therein.
*4.46 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Junior
Preferred Stock named therein.
10.1 -- Services Agreement dated August 24, 1993, by and among
TransTexas and TransAmerican (filed as an exhibit to
TransTexas' current report on Form 8-K dated August 24,
1993, and incorporated herein by reference).
10.2 -- Tax Allocation Agreement dated August 24, 1993, by and
among TransAmerican, TransTexas, and the other
subsidiaries of TransAmerican, as amended (filed as an
exhibit to TransTexas' Registration Statement on Form S-1
(No. 33-75050), and incorporated herein by reference).
10.3 -- Interruptible Gas Sales Terms and Conditions, between
TransTexas and TARC, as amended (filed as an exhibit to
TARC's Registration Statement on Form S-1 (No. 33-82200),
and incorporated herein by reference).
10.4 -- Bank Group Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, and the Bank Group (filed as
an exhibit to TransTexas' current report on Form 8-K
dated August 24, 1993, and incorporated herein by
reference).
10.5 -- Gas Purchase Agreement dated June 8, 1987, by and between
TransAmerican and The Coastal Corporation, as amended by
the Amendment to Gas Purchase Agreement dated February
13, 1990, by and between TransAmerican and Texcol Gas
Services, Inc., as successor to The Coastal Corporation
(filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-62740), and incorporated
herein by reference).
10.6 -- Gas Purchase Agreement dated October 29, 1987, by and
between TransAmerican and The Coastal Corporation as
amended by the Amendment to Gas Purchase Agreement dated
February 13, 1990, by and between TransAmerican and
Texcol Gas Services, Inc., successor to The Coastal
Corporation (filed as an exhibit to TransTexas'
Registration Statement on Form S-1 (No. 33-62740), and
incorporated herein by reference).
10.7 -- Gas Transportation Agreement dated the Effective Date (as
therein defined), by and between TransAmerican and The
Coastal Corporation, as amended by the Amendment to Gas
Transportation Agreement dated February 13, 1990, by and
between TransAmerican and Texcol Gas Services, Inc.,
successor to The Coastal Corporation (filed as an exhibit
to TransTexas' Registration Statement on Form S-1 (No.
33-62740), and incorporated herein by reference).
10.8 -- Firm Natural Gas Sales Agreement dated September 30,
1993, by and between TransTexas and Associated Natural
Gas, Inc. (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended October 31, 1993, and incorporated
herein by reference).
57
60
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.9 -- Form of Indemnification Agreement by and between
TransTexas and each of its directors (filed as an exhibit
to TransTexas' current report on Form 8-K dated August
24, 1993 and incorporated herein by reference).
10.10 -- Gas Purchase Agreement dated November 1, 1985, between
TransAmerican and Washington Gas and Light Company,
Frederick Gas Company, Inc., and Shenandoah Gas Company
(filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-75050), and incorporated
herein by reference).
10.11 -- Natural Gas Sales Agreement between TransTexas and
Associated Natural Gas, Inc. dated September 30, 1993
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended October 31, 1993, and incorporated herein
by reference).
10.12 -- Amendment Extending Gas Purchase Agreement between
TransTexas and Washington Gas Light Company, Inc., and
Shenandoah Gas Company, as amended, dated November 1,
1993 (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended January 31, 1994, and incorporated
herein by reference).
10.13 -- Agreement for Purchase of Production Payment between
TransTexas and Southern States Exploration, Inc. dated
April 1, 1994 (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1994, and
incorporated herein by reference).
10.14 -- Assignment of Proceeds Production Payment between
TransTexas and Southern States Exploration, Inc. dated
April 1, 1994 (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1994, and
incorporated herein by reference).
10.15 -- Transfer Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, TTC, and John R. Stanley
(filed as an exhibit to TransTexas' current report on
Form 8-K dated August 24, 1993, and incorporated herein
by reference).
10.16 -- Amended and Restated Accounts Receivable Management and
Security Agreement between TransTexas and BNY Financial
Corporation (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended October 31, 1995, and incorporated
herein by reference).
10.17 -- Note Purchase Agreement, dated as of May 10, 1996, among
TransTexas, TCW Shared Opportunity Fund II, L.P. and
Jefferies & Company, Inc. (filed as an exhibit to the
Company's Form 10-Q for the quarter ended April 30, 1996,
and incorporated herein by reference).
10.18 -- Master Swap Agreement, dated June 6, 1996, between
TransTexas and AIG Trading Corporation (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.19 -- Purchase Agreement, dated January 30, 1996, between
TransTexas and Sunflower Energy Finance Company (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.20 -- Production Payment Conveyance, executed on January 30,
1996, from TransTexas to Sunflower Energy Finance Company
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended April 30, 1996, and incorporated herein by
reference).
10.21 -- First Supplement to Purchase Agreement, dated as of
February 12, 1996, among TransTexas, Sunflower Energy
Finance Company and TCW Portfolio No. 1555 DR V
Sub-Custody Partnership, L.P. (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
58
61
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.22 -- First Supplement to Production Payment Conveyance,
executed February 12, 1996, among TransTexas, Sunflower
Energy Finance Company and TCW Portfolio No. 1555 DR V
Sub-Custody Partnership, L.P. (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.23 -- Purchase Agreement, dated May 14, 1996, among TransTexas,
TCW Portfolio No. 1555 DR V Sub-Custody Partnership, L.P.
and Sunflower Energy Finance Company (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.24 -- Production Payment Conveyance, executed May 14, 1996,
from TransTexas to TCW Portfolio No. 1555 Dr V
Sub-Custody Partnership, L.P. and Sunflower Energy
Finance Company (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
10.25 -- Employment Agreement between TransTexas and Richard
Bianchi dated August 12, 1996 (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31,
1996, and incorporated herein by reference).
10.26 -- Employment Agreement between TransTexas and Arnold
Brackenridge dated August 12, 1996 (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended October
31, 1996, and incorporated herein by reference).
10.27 -- Stock Purchase Agreement dated as of May 29, 1997 by and
between TransTexas and First Union Bank of Connecticut,
as trustee (filed as an exhibit to TransTexas' current
report on Form 8-K dated May 29, 1997, and incorporated
herein by reference).
10.28 -- Interruptible Gas Transportation Agreement dated
Effective March 1, 1997 between TransTexas, as shipper,
and Lobo Pipeline Company, as transporter (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.29 -- Intrastate Firm Gas Transportation Agreement dated
effective March 1, 1997 between TransTexas, as shipper,
and Lobo Pipeline Company, as transporter (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.30 -- Master Services Contract dated May 30, 1997 between
Conoco Inc. and TransTexas (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.31 -- Agreement for Services dated effective March 1, 1997
between Conoco Inc. and TransTexas (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.32 -- Services Agreement dated June 13, 1997 among TNGC
Holdings Corporation, TransAmerican, TEC, TARC,
TransTexas and TTXD (filed as an exhibit to TransTexas'
Form 10-Q for the quarter ended July 31, 1997, and
incorporated herein by reference).
10.33 -- Amendment No. 3 to Tax Allocation Agreement dated May 29,
1997 (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein
by reference).
10.34 -- Amendment No. 4 to Tax Allocation Agreement dated June
13, 1997 (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended July 31, 1997, and incorporated
herein by reference).
59
62
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.35 -- Amendment No. 2 to Transfer Agreement dated May 29, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by
reference).
10.36 -- Amendment No. 3 to Transfer Agreement dated June 13, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by
reference).
10.37 -- Second Amended and Restated Accounts Receivable
Management Agreement dated October 14, 1997 between
TransTexas and BNY Financial Corporation (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
October 31, 1997, and incorporated herein by reference).
10.38 -- Employment Agreement dated December 1, 1997 between
TransTexas and Arnold Brackenridge (filed as an exhibit
to TransTexas' annual report on Form 10-K for the year
ended January 31, 1998, and incorporated herein by
reference).
10.39 -- Employment Agreement Settlement dated April 28, 1998
between TransTexas and Richard Bianchi (filed as an
exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 1998, and incorporated herein by
reference).
10.40 -- Severance Agreement dated November 21, 1997 between
TransTexas and Lee Muncy (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
10.41 -- Purchase Agreement dated February 23, 1998 between
TransTexas and TCW (filed as an exhibit to TransTexas'
annual report on Form 10-K for the year ended January 31,
1998, and incorporated herein by reference).
10.42 -- Production Payment Conveyance dated February 23, 1998
between TransTexas and TCW (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
10.43 -- Asset Purchase Agreement dated May 26, 1998 by and among
TransTexas, Bayard Drilling, L.P. and Bayard Drilling
Technologies, Inc. (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 26, 1998, and
incorporated herein by reference).
10.44 -- Employment Agreement between the Company and John R.
Stanley dated November 1, 1998 (filed as an exhibit to
the Company's annual report on Form 10-K for the year
ended January 31, 1999, and incorporated herein by
reference).
10.45 -- Employment Agreement between the Company and Ed Donahue
dated December 1, 1998 (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended
January 31, 1999, and incorporated herein by reference).
10.46 -- Credit Agreement dated April 27, 1999 among TransTexas,
Credit Suisse First Boston Management Corporation, the
Lenders named therein and TEC and TARC, as guarantors
(filed as an exhibit to the Company's annual report on
Form 10-K for the year ended January 31, 1999, and
incorporated herein by reference).
10.47 -- Post-Petition Amendment No. 1 to Financing Agreement
dated as of April 19, 1999 between the Company and GMAC
Commercial Credit LLC (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter
ended April 30, 1999, and incorporated herein by
reference).
60
63
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.48 -- Amendment No. 1 dated June 28, 1999 to Credit Agreement
dated April 27, 1999 among TransTexas, Credit Suisse
First Boston Management Corporation, the Lenders named
therein, and TEC and TARC, as guarantors (filed as an
exhibit to the Company's quarterly report on Form 10-Q
for the quarter ended July 31, 1999, and incorporated
herein by reference).
10.49 -- Employment Agreement dated November 8, 1999 between the
Company and Ronald P. Nowak (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter
ended October 31, 1999, and incorporated herein by
reference).
*10.50 -- Employment Agreement dated March 17, 2000 between the
Company and John R. Stanley.
*10.51 -- Severance Agreement dated May 27, 1998 between the
Company and Simon J. Ward.
*10.52 -- Purchase Agreement dated March 14, 2000 between the
Company, Southern Producer Services, L.P.("SPS"), and TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P.,
TCW DR VI Investment Partnership, L.P. and TCW Asset
Management Company ("TCW").
*10.53 -- Production Payment Conveyance dated March 14, 2000
between the Company, SPS and TCW.
*10.54 -- Gas and Natural Gas Liquids Purchase Agreement dated
March 14, 2000 between SPS and TTG.
*10.55 -- Crude Oil Purchase Agreement dated March 14, 2000 between
SPS and TTG.
*10.56 -- Natural Gas Treating and Condensate Handling Agreement
dated March 14, 2000 between Galveston Bay Processing
Corporation and SPS.
*10.57 -- Third Amended and Restated Accounts Receivable Management
and Security Agreement dated March 15, 2000 between the
Company and GMAC Commercial Credit LLC.
*10.58 -- Services Agreement dated March 17, 2000 between TNGC
Holdings Corporation and the Company.
21.1 -- Schedule of Subsidiaries of TransTexas (filed as an
exhibit to the Company's annual report on Form 10-K for
the year ended January 31, 1999, and incorporated herein
by reference).
*23.1 -- Consent of Netherland, Sewell & Associates, Inc.
*27.1 -- Financial Data Schedule.
- ---------------
* filed herewith
(b) There were no reports on Form 8-K filed during the three months ended
January 31, 2000.
61
64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on May 1, 2000.
TRANSTEXAS GAS CORPORATION
By: /s/ JOHN R. STANLEY
----------------------------------
John R. Stanley,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities indicated on May 1, 2000.
NAME TITLE
---- -----
/s/ JOHN R. STANLEY Director and Chief Executive Officer
- ----------------------------------------------------- (Principal Executive Officer)
John R. Stanley
Director
- -----------------------------------------------------
John Whitmire
/s/ WALTER S. PIONTEK Director
- -----------------------------------------------------
Walter S. Piontek
/s/ R. GERALD BENNETT Director
- -----------------------------------------------------
R. Gerald Bennett
/s/ RONALD BENSON Director
- -----------------------------------------------------
Ronald Benson
/s/ ED DONAHUE Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial and Accounting
Ed Donahue Officer)
62
65
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
TransTexas Gas Corporation:
Our report on the consolidated financial statements of TransTexas Gas
Corporation is included on page 20 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index on page 53 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
PricewaterhouseCoopers LLP
Houston, Texas
May 1, 2000
63
66
SCHEDULE II
TRANSTEXAS GAS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
BALANCE AT BALANCE AT
BEGINNING ADDITIONS OTHER END
DESCRIPTION OF PERIOD AT COSTS RETIREMENTS CHANGES OF PERIOD
- ----------- ---------- --------- ----------- -------- ----------
PREDECESSOR:
Year Ended January 31, 1998:
Valuation allowance -- accounts
receivable....................... $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ========
Year Ended January 31, 1999:
Valuation allowance -- accounts
receivable....................... $ -- $ 191 $ -- $ -- $ 191
======== ======== ======== ======== ========
Year Ended January 31, 2000:
Valuation allowance -- accounts
receivable....................... $ 191 $ 2,898 $ -- $ (3,089)(1) $ --(2)
======== ======== ======== ======== ========
- ---------------
(1) Adjustment for fresh-starting reporting.
(2) Successor balance at January 31, 2000.
64
67
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 -- Second Amended, Modified and Restated Plan of
Reorganization dated January 25, 2000 (filed as an
exhibit to the Company's current report on Form 8-K dated
February 7, 2000, and incorporated herein by reference).
2.2 -- Order Confirming Plan of Reorganization dated February 7,
2000 (filed as an exhibit to the Company's current report
on Form 8-K dated February 7, 2000, and incorporated
herein by reference).
3.1 -- Articles of Incorporation (filed as an exhibit to the
Company's Registration Statement on Form S-1 (No.
33-75050), and incorporated herein by reference).
3.2 -- By-laws of TransTexas (filed as an exhibit to the
Company's Registration Statement on Form S-1 (No.
33-75050), and incorporated herein by reference).
3.3 -- Amended and Restated Certificate of Incorporation (filed
as an exhibit to the Company's Registration Statement on
Form 8-A (No. 0-30475), and incorporated herein by
reference).
3.4 -- Certificate of Designation, Series A Senior Preferred
Stock (filed as an exhibit to the Company's Registration
Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.5 -- Certificate of Designation, Series A Junior Preferred
Stock (filed as an exhibit to the Company's Registration
Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.6 -- Amended and Restated Bylaws (filed as an exhibit to the
Company's Registration Statement on Form 8-A (No.
0-30475), and incorporated herein by reference).
4.1 -- Indenture dated as of June 15, 1995, among TransTexas,
TTC and American Bank National Association, as Trustee
(the "Indenture Trustee"), with respect to the Senior
Secured Notes including the forms of Senior Secured Note
and Senior Secured Guarantee as exhibits (filed as an
exhibit to TransTexas' current report on Form 8-K dated
June 20, 1995, and incorporated herein by reference).
4.2 -- Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement, effective as
of June 23, 1995, from TransTexas to James A. Taylor, as
trustee for the benefit of the Indenture Trustee (filed
as an exhibit to TransTexas' current report on Form 8-K
dated June 20, 1995, and incorporated herein by
reference).
4.3 -- Pipeline Mortgage, Deed of Trust, Assignment, Security
Agreement and Financing Statement, dated as of June 20,
1995, from TTC to James A. Taylor, as trustee for the
benefit of the Indenture Trustee (filed as an exhibit to
TransTexas' current report on Form 8-K dated on June 20,
1995, and incorporated herein by reference).
4.4 -- Security Agreement, Pledge and Financing Statement, dated
as of June 20, 1995, by TransTexas in favor of the
Indenture Trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 20, 1995, and
incorporated herein by reference).
4.5 -- Security Agreement, Pledge and Financing Statement, dated
as of June 20, 1995, by TTC in favor of the Indenture
Trustee (filed as an exhibit to TransTexas' current
report on Form 8-K dated June 20, 1995, and incorporated
herein by reference).
4.6 -- Cash Collateral and Disbursement Agreement, dated as of
June 20, 1995, among TransTexas, the Indenture Trustee
and the Disbursement Agent (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 20,
1995, and incorporated herein by reference).
68
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.7 -- Pledge and Security Agreement dated as of September 19,
1996, between TransAmerican Exploration Corporation and
Fleet National Bank (previously filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31,
1996, and incorporated herein by reference).
4.8 -- Registration Rights Agreement dated as of September 19,
1996, by and among TransTexas, TransAmerican,
TransAmerican Exploration Corporation and Fleet National
Bank (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended October 31, 1996, and incorporated
herein by reference).
4.9 -- Pledge Agreement dated as of February 23, 1995, between
TEC and First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to Post-Effective Amendment
No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.10 -- Pledge Agreement dated as of February 23, 1995, between
TARC and First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to Post-Effective Amendment
No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.11 -- Registration Rights Agreement dated as of February 23,
1995, among TransTexas, TARC and TEC (filed as an exhibit
to Post-Effective Amendment No. 5 to the Company's
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.12 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and Halliburton Company (filed
as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.13 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and RECO Industries, Inc.
(filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.14 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and Frito-Lay, Inc. (filed as
an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.15 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican, TransTexas and EM Sector Holdings, Inc.
(filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.16 -- Stock Pledge Agreement dated January 27, 1995, between
TransAmerican and ITT Commercial Corp. (filed as an
exhibit to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.17 -- Registration Rights Agreement dated January 27, 1995,
among TransAmerican, TransTexas and ITT Commercial
Finance Corp. (filed as an exhibit to Post-Effective
Amendment No. 5 to TransTexas' Registration Statement on
Form S-3 (33-91494), and incorporated herein by
reference).
4.18 -- Note Purchase Agreement dated December 13, 1996 between
TransTexas and the Purchasers of 13 1/4% Series A Senior
Subordinated Notes due 2003 (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
69
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.19 -- Indenture dated December 13, 1996 between TransTexas and
Bank One, Columbus, NA, as Trustee (filed as an exhibit
to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.20 -- Registration Rights Agreement dated December 13, 1996
between TransTexas and each of the Purchasers of the
Subordinated Notes (filed as an exhibit to Post-
Effective Amendment No. 5 to TransTexas' Registration
Statement on Form S-3 (33-91494), and incorporated herein
by reference).
4.21 -- First Supplemental Indenture dated May 29, 1997 by and
among TransTexas, TTC and Firstar Bank of Minnesota,
N.A., as trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated May 29, 1997, and
incorporated herein by reference).
4.22 -- Second Supplemental Indenture dated June 13, 1997 between
TransTexas, as issuer, and Firstar Bank of Minnesota,
N.A., as trustee (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 13, 1997, and
incorporated herein by reference).
4.23 -- Indenture dated June 13, 1997 governing TransTexas'
Senior Subordinated Notes due 2001 between TransTexas, as
issuer, and Bank One, N.A., as trustee (filed as an
exhibit to TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.24 -- Registration Rights Agreement dated June 13, 1997 between
TransTexas and the holders of TransTexas' Senior
Subordinated Notes due 2001 (filed as an exhibit
TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.25 -- Loan Agreement dated June 13, 1997 between TransTexas and
TEC (filed as an exhibit to TransTexas' current report on
Form 8-K dated June 13, 1997, and incorporated herein by
reference).
4.26 -- Security and Pledge Agreement dated June 13, 1997 by
TransTexas in favor of TEC (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 13,
1997, and incorporated herein by reference).
4.27 -- Disbursement Agreement dated June 13, 1997 among
TransTexas, TEC and Firstar Bank of Minnesota, as
disbursement agent and Trustee (filed as an exhibit to
TransTexas' current report on Form 8-K dated June 13,
1997, and incorporated herein by reference).
4.28 -- Forms of Mortgage dated June 13, 1997 between TransTexas
and TransAmerican Energy Corporation, (filed as an
exhibit to TransTexas' Registration Statement on Form S-4
(333-33803), and incorporated herein by reference).
4.29 -- Intercreditor and Collateral Agency Agreement dated June
13, 1997 among Firstar Bank of Minnesota, TEC and
TransTexas (filed as an exhibit to TEC's Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein
by reference).
4.30 -- Registration Rights Agreement dated August 12, 1997, by
and among TransTexas, Firstar Bank of Minnesota, N.A.,
TEC and TARC (filed as an exhibit to Post-Effective
Amendment No. 6 to TransTexas' Registration Statement on
Form S-4 (33-91494) and incorporated herein by
reference).
4.31 -- First Supplemental Indenture dated as of September 2,
1997, between TransTexas, as issuer, and Bank One, N.A.,
as trustee (filed as an exhibit to TransTexas'
Registration Statement on Form S-4 (333-33803), and
incorporated herein by reference).
70
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.32 -- First Amendment to Loan Agreement dated December 30, 1997
between TransTexas and TEC (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
4.33 -- First Amendment to Disbursement Agreement dated December
30, 1997 between TransTexas, TEC and Firstar Bank of
Minnesota, as disbursement agent and Trustee (filed as an
exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 1998, and incorporated herein by
reference).
4.34 -- Second Amendment dated December 15, 1998 to Loan
Agreement between TransTexas and TEC (filed as an exhibit
to TEC's current report on Form 8-K dated February 23,
1999, and incorporated herein by reference).
*4.35 -- Indenture dated March 15, 2000 between the Company and
Firstar Bank, N.A., Indenture Trustee, governing the
Company's 15% Senior Secured Notes due 2005 (the
"Notes").
*4.36 -- Form of Mortgage dated March 15, 2000 between the Company
and Firstar Bank, N.A.
*4.37 -- Security and Pledge Agreement dated March 15, 2000
between the Company and Firstar Bank, N.A.
*4.38 -- Oil and Gas Revolving Credit and Term Loan Agreement
dated March 15, 2000 among GMAC Commercial Credit LLC, as
Lender and Agent, the Company, as Borrower, and Galveston
Bay Processing Corporation and Galveston Bay Pipeline
Company, as Guarantors.
*4.39 -- Form of Mortgage dated March 15, 2000 between the Company
and GMAC Commercial Credit LLC.
*4.40 -- Security and Pledge Agreement dated March 15, 2000
between the Company and GMAC Commercial Credit LLC.
*4.41 -- Intercreditor Agreement dated March 15, 2000 between
Firstar Bank, N.A. and GMAC Commercial Credit LLC.
*4.42 -- Warrant Agreement, including form of Warrant Certificate,
dated March 15, 2000 between the Company and ChaseMellon
Shareholder Services, LLC, Warrant Agent.
*4.43 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Notes named
therein.
*4.44 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Class A Common
Stock named therein.
*4.45 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Senior
Preferred Stock named therein.
*4.46 -- Registration Rights Agreement dated March 15, 2000
between the Company and the holders of the Junior
Preferred Stock named therein.
10.1 -- Services Agreement dated August 24, 1993, by and among
TransTexas and TransAmerican (filed as an exhibit to
TransTexas' current report on Form 8-K dated August 24,
1993, and incorporated herein by reference).
10.2 -- Tax Allocation Agreement dated August 24, 1993, by and
among TransAmerican, TransTexas, and the other
subsidiaries of TransAmerican, as amended (filed as an
exhibit to TransTexas' Registration Statement on Form S-1
(No. 33-75050), and incorporated herein by reference).
71
EXHIBIT
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10.3 -- Interruptible Gas Sales Terms and Conditions, between
TransTexas and TARC, as amended (filed as an exhibit to
TARC's Registration Statement on Form S-1 (No. 33-82200),
and incorporated herein by reference).
10.4 -- Bank Group Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, and the Bank Group (filed as
an exhibit to TransTexas' current report on Form 8-K
dated August 24, 1993, and incorporated herein by
reference).
10.5 -- Gas Purchase Agreement dated June 8, 1987, by and between
TransAmerican and The Coastal Corporation, as amended by
the Amendment to Gas Purchase Agreement dated February
13, 1990, by and between TransAmerican and Texcol Gas
Services, Inc., as successor to The Coastal Corporation
(filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-62740), and incorporated
herein by reference).
10.6 -- Gas Purchase Agreement dated October 29, 1987, by and
between TransAmerican and The Coastal Corporation as
amended by the Amendment to Gas Purchase Agreement dated
February 13, 1990, by and between TransAmerican and
Texcol Gas Services, Inc., successor to The Coastal
Corporation (filed as an exhibit to TransTexas'
Registration Statement on Form S-1 (No. 33-62740), and
incorporated herein by reference).
10.7 -- Gas Transportation Agreement dated the Effective Date (as
therein defined), by and between TransAmerican and The
Coastal Corporation, as amended by the Amendment to Gas
Transportation Agreement dated February 13, 1990, by and
between TransAmerican and Texcol Gas Services, Inc.,
successor to The Coastal Corporation (filed as an exhibit
to TransTexas' Registration Statement on Form S-1 (No.
33-62740), and incorporated herein by reference).
10.8 -- Firm Natural Gas Sales Agreement dated September 30,
1993, by and between TransTexas and Associated Natural
Gas, Inc. (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended October 31, 1993, and incorporated
herein by reference).
10.9 -- Form of Indemnification Agreement by and between
TransTexas and each of its directors (filed as an exhibit
to TransTexas' current report on Form 8-K dated August
24, 1993 and incorporated herein by reference).
10.10 -- Gas Purchase Agreement dated November 1, 1985, between
TransAmerican and Washington Gas and Light Company,
Frederick Gas Company, Inc., and Shenandoah Gas Company
(filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-75050), and incorporated
herein by reference).
10.11 -- Natural Gas Sales Agreement between TransTexas and
Associated Natural Gas, Inc. dated September 30, 1993
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended October 31, 1993, and incorporated herein
by reference).
10.12 -- Amendment Extending Gas Purchase Agreement between
TransTexas and Washington Gas Light Company, Inc., and
Shenandoah Gas Company, as amended, dated November 1,
1993 (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended January 31, 1994, and incorporated
herein by reference).
10.13 -- Agreement for Purchase of Production Payment between
TransTexas and Southern States Exploration, Inc. dated
April 1, 1994 (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1994, and
incorporated herein by reference).
72
EXHIBIT
NUMBER DESCRIPTION
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10.14 -- Assignment of Proceeds Production Payment between
TransTexas and Southern States Exploration, Inc. dated
April 1, 1994 (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1994, and
incorporated herein by reference).
10.15 -- Transfer Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, TTC, and John R. Stanley
(filed as an exhibit to TransTexas' current report on
Form 8-K dated August 24, 1993, and incorporated herein
by reference).
10.16 -- Amended and Restated Accounts Receivable Management and
Security Agreement between TransTexas and BNY Financial
Corporation (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended October 31, 1995, and incorporated
herein by reference).
10.17 -- Note Purchase Agreement, dated as of May 10, 1996, among
TransTexas, TCW Shared Opportunity Fund II, L.P. and
Jefferies & Company, Inc. (filed as an exhibit to the
Company's Form 10-Q for the quarter ended April 30, 1996,
and incorporated herein by reference).
10.18 -- Master Swap Agreement, dated June 6, 1996, between
TransTexas and AIG Trading Corporation (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.19 -- Purchase Agreement, dated January 30, 1996, between
TransTexas and Sunflower Energy Finance Company (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.20 -- Production Payment Conveyance, executed on January 30,
1996, from TransTexas to Sunflower Energy Finance Company
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended April 30, 1996, and incorporated herein by
reference).
10.21 -- First Supplement to Purchase Agreement, dated as of
February 12, 1996, among TransTexas, Sunflower Energy
Finance Company and TCW Portfolio No. 1555 DR V
Sub-Custody Partnership, L.P. (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.22 -- First Supplement to Production Payment Conveyance,
executed February 12, 1996, among TransTexas, Sunflower
Energy Finance Company and TCW Portfolio No. 1555 DR V
Sub-Custody Partnership, L.P. (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.23 -- Purchase Agreement, dated May 14, 1996, among TransTexas,
TCW Portfolio No. 1555 DR V Sub-Custody Partnership, L.P.
and Sunflower Energy Finance Company (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended April 30,
1996, and incorporated herein by reference).
10.24 -- Production Payment Conveyance, executed May 14, 1996,
from TransTexas to TCW Portfolio No. 1555 Dr V
Sub-Custody Partnership, L.P. and Sunflower Energy
Finance Company (filed as an exhibit to TransTexas' Form
10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
10.25 -- Employment Agreement between TransTexas and Richard
Bianchi dated August 12, 1996 (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31,
1996, and incorporated herein by reference).
10.26 -- Employment Agreement between TransTexas and Arnold
Brackenridge dated August 12, 1996 (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended October
31, 1996, and incorporated herein by reference).
73
EXHIBIT
NUMBER DESCRIPTION
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10.27 -- Stock Purchase Agreement dated as of May 29, 1997 by and
between TransTexas and First Union Bank of Connecticut,
as trustee (filed as an exhibit to TransTexas' current
report on Form 8-K dated May 29, 1997, and incorporated
herein by reference).
10.28 -- Interruptible Gas Transportation Agreement dated
Effective March 1, 1997 between TransTexas, as shipper,
and Lobo Pipeline Company, as transporter (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.29 -- Intrastate Firm Gas Transportation Agreement dated
effective March 1, 1997 between TransTexas, as shipper,
and Lobo Pipeline Company, as transporter (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.30 -- Master Services Contract dated May 30, 1997 between
Conoco Inc. and TransTexas (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.31 -- Agreement for Services dated effective March 1, 1997
between Conoco Inc. and TransTexas (filed as an exhibit
to TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.32 -- Services Agreement dated June 13, 1997 among TNGC
Holdings Corporation, TransAmerican, TEC, TARC,
TransTexas and TTXD (filed as an exhibit to TransTexas'
Form 10-Q for the quarter ended July 31, 1997, and
incorporated herein by reference).
10.33 -- Amendment No. 3 to Tax Allocation Agreement dated May 29,
1997 (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein
by reference).
10.34 -- Amendment No. 4 to Tax Allocation Agreement dated June
13, 1997 (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended July 31, 1997, and incorporated
herein by reference).
10.35 -- Amendment No. 2 to Transfer Agreement dated May 29, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by
reference).
10.36 -- Amendment No. 3 to Transfer Agreement dated June 13, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by
reference).
10.37 -- Second Amended and Restated Accounts Receivable
Management Agreement dated October 14, 1997 between
TransTexas and BNY Financial Corporation (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended
October 31, 1997, and incorporated herein by reference).
10.38 -- Employment Agreement dated December 1, 1997 between
TransTexas and Arnold Brackenridge (filed as an exhibit
to TransTexas' annual report on Form 10-K for the year
ended January 31, 1998, and incorporated herein by
reference).
10.39 -- Employment Agreement Settlement dated April 28, 1998
between TransTexas and Richard Bianchi (filed as an
exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 1998, and incorporated herein by
reference).
10.40 -- Severance Agreement dated November 21, 1997 between
TransTexas and Lee Muncy (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
74
EXHIBIT
NUMBER DESCRIPTION
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10.41 -- Purchase Agreement dated February 23, 1998 between
TransTexas and TCW (filed as an exhibit to TransTexas'
annual report on Form 10-K for the year ended January 31,
1998, and incorporated herein by reference).
10.42 -- Production Payment Conveyance dated February 23, 1998
between TransTexas and TCW (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended
January 31, 1998, and incorporated herein by reference).
10.43 -- Asset Purchase Agreement dated May 26, 1998 by and among
TransTexas, Bayard Drilling, L.P. and Bayard Drilling
Technologies, Inc. (filed as an exhibit to TransTexas'
current report on Form 8-K dated June 26, 1998, and
incorporated herein by reference).
10.44 -- Employment Agreement between the Company and John R.
Stanley dated November 1, 1998 (filed as an exhibit to
the Company's annual report on Form 10-K for the year
ended January 31, 1999, and incorporated herein by
reference).
10.45 -- Employment Agreement between the Company and Ed Donahue
dated December 1, 1998 (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended
January 31, 1999, and incorporated herein by reference).
10.46 -- Credit Agreement dated April 27, 1999 among TransTexas,
Credit Suisse First Boston Management Corporation, the
Lenders named therein and TEC and TARC, as guarantors
(filed as an exhibit to the Company's annual report on
Form 10-K for the year ended January 31, 1999, and
incorporated herein by reference).
10.47 -- Post-Petition Amendment No. 1 to Financing Agreement
dated as of April 19, 1999 between the Company and GMAC
Commercial Credit LLC (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter
ended April 30, 1999, and incorporated herein by
reference).
10.48 -- Amendment No. 1 dated June 28, 1999 to Credit Agreement
dated April 27, 1999 among TransTexas, Credit Suisse
First Boston Management Corporation, the Lenders named
therein, and TEC and TARC, as guarantors (filed as an
exhibit to the Company's quarterly report on Form 10-Q
for the quarter ended July 31, 1999, and incorporated
herein by reference).
10.49 -- Employment Agreement dated November 8, 1999 between the
Company and Ronald P. Nowak (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter
ended October 31, 1999, and incorporated herein by
reference).
*10.50 -- Employment Agreement dated March 17, 2000 between the
Company and John R. Stanley.
*10.51 -- Severance Agreement dated May 27, 1998 between the
Company and Simon J. Ward.
*10.52 -- Purchase Agreement dated March 14, 2000 between the
Company, Southern Producer Services, L.P.("SPS"), and TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P.,
TCW DR VI Investment Partnership, L.P. and TCW Asset
Management Company ("TCW").
*10.53 -- Production Payment Conveyance dated March 14, 2000
between the Company, SPS and TCW.
*10.54 -- Gas and Natural Gas Liquids Purchase Agreement dated
March 14, 2000 between SPS and TTG.
75
EXHIBIT
NUMBER DESCRIPTION
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*10.55 -- Crude Oil Purchase Agreement dated March 14, 2000 between
SPS and TTG.
*10.56 -- Natural Gas Treating and Condensate Handling Agreement
dated March 14, 2000 between Galveston Bay Processing
Corporation and SPS.
*10.57 -- Third Amended and Restated Accounts Receivable Management
and Security Agreement dated March 15, 2000 between the
Company and GMAC Commercial Credit LLC.
*10.58 -- Services Agreement dated March 17, 2000 between TNGC
Holdings Corporation and the Company.
21.1 -- Schedule of Subsidiaries of TransTexas (filed as an
exhibit to the Company's annual report on Form 10-K for
the year ended January 31, 1999, and incorporated herein
by reference).
*23.1 -- Consent of Netherland, Sewell & Associates, Inc.
*27.1 -- Financial Data Schedule.
- ---------------
* filed herewith