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Filed by Bargo Energy Company
Pursuant to Rule 425 of the
Securities Act of 1933 and deemed
filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934
Subject Company: Bargo Energy Company
Commission File No: 000-08609
The following press release was made by Bellwether Exploration Company and
Bargo Energy Company:
[BARGO ENERGY COMPANY LOGO] [BELLWETHER EXPLORATION
COMPANY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
JANUARY 25, 2001
Bargo Energy Company Bellwether Exploration Company
700 Louisiana, Suite 3700 1331 Lamar, Suite 1455
Houston, Texas 77002 Houston, Texas 77010
CONTACT: CONTACT:
JONATHAN CLARKSON - PRESIDENT DOUG MANNER - PRESIDENT & CEO
jclarkson@bargo.com mannerd@bellwetherexp.com
- ------------------- -------------------------
(713) 236-9792 (713) 495-3010
BELLWETHER EXPLORATION COMPANY TO
ACQUIRE BARGO ENERGY COMPANY
IN A STOCK AND CASH TRANSACTION
HOUSTON - Bellwether Exploration Company (NASDAQ:BELW) announced today it had
reached an agreement to acquire Bargo Energy Company (OTC:BARG) in a cash and
stock transaction which has been approved by each company's Board of Directors.
Under the agreement, Bellwether will provide to Bargo common shareholders and
option holders approximately $60 million in cash and $80 million in Bellwether
stock for an implied consideration of $1.26 per fully diluted share. The number
of shares will be determined by Bellwether's 20 day trading average 3 days prior
to closing and will be subject to a price collar. On this basis, Bargo
shareholders will receive at least 8.9 million Bellwether shares and no more
than 11.4 million Bellwether shares. The transaction is structured to be tax
free with respect to the Bellwether common stock issued to Bargo common
shareholders. The transaction also includes the assumption of Bargo's
liabilities and the redemption of Bargo's preferred stock for $50 million in
cash plus accrued dividends. Based on projected year end 2000 numbers, the value
of this acquisition is approximately $240 million. At Bellwether's January 24,
2001 closing price of $9.22, Bellwether shareholders would own approximately 62%
of the combined company and Bargo shareholders would own approximately 38%. The
new company will have a total pro forma market enterprise value of approximately
$500 million. The Company anticipates arranging new credit facilities to provide
funding for the merger. The companies expect to file a Form S-4 Registration
Statement with the SEC during the first week of February, with shareholder
meetings and subsequent closing to follow in early Spring 2001. A new name for
the combined Company is being developed, and will be disclosed shortly. The
Company will be headquartered in Houston, Texas.
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ON A PRO FORMA BASIS, THE COMBINATION IS ANTICIPATED TO:
o More than double Bellwether's proved reserve base to approximately 80 MMBOE
(65% oil)
o Nearly double Bellwether's daily production exit rate to approximately 25 MBOE
per day (60% oil)
o Add quality reserves at an attractive cost of less than $5 per proved BOE
o Be immediately accretive to both earnings and cash flow per share
o Lengthen Bellwether's reserve life from approximately 6 to 9 years
o Increase the percentage of operated properties from approximately 40% to 50%
o Capture significant annual cost savings through the combination of the two
companies
o Provide a platform for further consolidation in the combined company's key
operating areas, which will be the Permian Basin and the onshore / offshore
Gulf Coast regions
o Strengthen Bellwether's executive management team
Further information concerning the proposed merger along with detailed operating
and financial data from both companies will be included in the Form S-4
Registration Statement.
MANAGEMENT AND BOARD
Doug Manner, Bellwether's current President and Chief Executive Officer, will
remain Chief Executive Officer and become the new Chairman of the Board.
Jonathan Clarkson, the current President of Bargo, who has over 25 years of
experience, both as a banker and financial executive in the independent energy
sector, will become the Company's new President and Chief Financial Officer. The
Company will restructure its Board to include four representatives from
Bellwether and three from Bargo. J.P. Bryan and Tim J. Goff, the previous
chairmen of Bellwether and Bargo, respectively, will retain seats on the new
Board.
PRO FORMA SUMMARY OF CORE AREA PROPERTIES
o Permian Basin (34% of reserves)
- Long-life production, primarily oil
- Mostly operated by majors or large independents
- Waterfloods with long-term CO2 potential for increased oil recovery
- New Mexico gas production with exploration potential
o Gulf Coast (24% of reserves)
- Approximately 67% gas, 33% oil production
- Upside potential in structural and stratigraphic gas plays
- Upside oil potential in large field previously operated by a major
- Significant inventory of exploration and exploitation prospects
o Gulf of Mexico (8% of reserves)
- High rate gas production
- Focus of Bellwether exploration program
o East Texas (14% of reserves)
- Operated oil production, primarily from East Texas oil field
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- Properties purchased from Arco and Texaco
- Optimization potential on previous Texaco properties
o Ecuador (10% of reserves)
- Oil production with significant exploitation upside
- Exploration upside
Doug Manner commented, "This combination meets Bellwether's criteria of a
strategic fit for the company. It significantly increases the Company's position
in the Permian Basin and Gulf Coast area where Bellwether Exploration has
historically achieved high rates of return, and it should enable the Company to
capture additional opportunities as well as cost savings." Manner further
stated, "The increased cash flow from the combination is expected to enable the
Company to better fund its growing portfolio of development opportunities. We
are obviously quite enthused about the potential value that will be created for
our shareholders by the transaction. We are also quite pleased to welcome
certain key Bargo Energy employees to the Company."
Jonathan Clarkson stated, "We expect the combined companies to provide the
critical mass and offer the financial flexibility that will allow us to exploit
a large inventory of exploitation and development projects. The stronger
prospect inventory and technical talent will enable the combined companies to
deliver enhanced shareholder return." He further added, "When I joined the Bargo
team in 1999, the focus was on increasing value and liquidity for our
shareholders by assembling and exploiting a large reserve base. This transaction
with Bellwether, along with a successful divestiture program in the second half
of 2000, fulfills our commitment to Bargo's shareholders by providing them with
an immediate cash return on their investment, plus providing them with longer
term upside potential with their continued ownership in the new company."
ADVISORS
Johnson Rice & Company, L.L.C. is serving as the financial advisor to Bellwether
and provided a fairness opinion for this transaction to Bellwether. Lehman
Brothers Inc. and J.P. Morgan Chase and Co. are serving as financial advisors to
Bargo. J.P. Morgan Chase and Co. provided a fairness opinion to Bargo's Board of
Directors.
TELECONFERENCE CALL
The new management team will hold a teleconference call Thursday, January 25,
2001 at 12:00 p.m. Eastern Daylight Time (EDT) to review the proposed
transaction. If you would like to participate, please call (212) 896-6168 just
prior to the start time. A replay of the teleconference call will be available
for 48 hours after the finish of the call. The replay can be accessed by dialing
toll-free (800) 633-8284 (for U.S.) and (800) 812-6440 (for International),
reservation No. 17717694. In addition, you may log on to the Bellwether
Exploration website at www.bellwetherexp.com to listen to a replay of the
teleconference via Webcast.
Bellwether Exploration Company is an independent oil and gas exploration and
production company headquartered in Houston, Texas with oil and gas properties
located in three core areas: the Gulf of Mexico both onshore and offshore,
Southeast New Mexico/West Texas and Ecuador. Bargo Energy Company is a domestic
oil and gas production, exploitation and acquisition firm headquartered in
Houston, Texas with oil and gas properties located in the Permian Basin, Gulf
Coast and East Texas.
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INVESTOR NOTICES
This press release includes "forward-looking statements" as defined by the
Securities and Exchange Commission. Such statements are those concerning the
companies' merger and strategic plans, expectations and objectives for future
operations. All statements included in this press release that address
activities, events or developments that the companies expect, believe or
anticipate will or may occur in the future are forward-looking statements. This
includes completion of the proposed merger, completion of reserve estimates,
production, cash flow and EBITDA estimates, future financial performance, future
equity issuance and other matters. These statements are based on certain
assumptions made by the companies based on their experience and perception of
historical trends, current conditions, expected future developments and other
factors they believe are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, many of which are
beyond the control of the companies. Statements regarding future production are
subject to all of the risks and uncertainties normally incident to the
exploration for and development and production of oil and gas. These risks
include, but are not limited to, inflation or lack of availability of goods and
services, environmental risks, drilling risks and regulatory changes. Investors
are cautioned that any such statements are not guarantees of future performance
and that actual results or developments may differ materially from those
projected in the forward-looking statements.
Investors and security holders are urged to read the proxy statement/prospectus
that will be included in the Registration Statement on Form S-4 to be filed with
the SEC in connection with the proposed merger. Bellwether Exploration Company
("Bellwether") and Bargo Energy Company ("Bargo") will file the proxy
statement/prospectus with the SEC. Investors and security holders may obtain a
free copy of the proxy statement/prospectus (when available) and other documents
filed by Bellwether and Bargo with the SEC at the SEC's web site at www.sec.gov.
The proxy statement/prospectus and such other documents (relating to Bellwether)
may also be obtained for free from Bellwether by directing such request to:
Bellwether Exploration Company, Bellwether Exploration Company, 1331 Lamar,
Suite 1455, Houston, Texas 77010, Attention: Lance Weaver; telephone: (713)
495-3061; e-mail: weaverl@bellwetherexp.com. The proxy statement/prospectus and
such other documents (relating to Bargo) may also be obtained for free from
Bargo by directing such request to: Bargo Energy Company, 700 Louisiana, Suite
3700, Houston, Texas 77002, Attention: Jerry Sears; telephone: (713) 236-9792;
e-mail: jsears@bargo.com.
Bellwether, its directors, executive officers and certain members of management
and employees may be considered "participants in the solicitation" of proxies
from Bellwether's shareholders in connection with the merger. Information
regarding such persons and a description of their interests in the merger will
be contained in the Registration Statement on Form S-4 when it is filed.
Bargo, its directors, executive officers and certain members of management and
employees may be considered "participants in the solicitation" in connection
with the merger. Information regarding such persons and a description of their
interests in the merger will be contained in the Registration Statement on Form
S-4 when it is filed.