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Filed by Bellwether Exploration Company
Pursuant to Rule 425 under 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
File No. 333-54798
The following slide presentation was made by Bellwether Exploration Company
[Slide 1]
[Slide depicts the logo of Mission Resources centered on the page followed by
the text "Mission Resources"]
Lehman Brothers 2001 High Yield Bond and Leveraged Loan Conference
March 2001
[Slide 2]
Safe Harbor Disclosure
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This presentation 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 presentation 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 filed with the
SEC in connection with the proposed merger. Bellwether Exploration Company
("Bellwether") and Bargo Energy Company ("Bargo") have filed 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, 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 is
contained in the Registration Statement on Form S-4.
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 is contained in the Registration Statement on Form S-4.
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[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 3]
SITUATION - BELLWETHER & BARGO
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Bellwether (2000)
o Issues
-- Scattered assets, low reserve life index, 30% operated, 85%
hedged, debt to book capital of 70%, inexperienced management,
too small
o Actions
-- Sold $49 MM of properties
-- Paid down debt
-- Bought back 15,000 MMBTU/Day of hedges
-- Acquired new management expertise - engineering, budget
control, finance
-- Commenced acquisition/merger discussions
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 4]
SITUATION - BELLWETHER & BARGO
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Bargo 2000
o Strong results in executing acquisition strategy, and subsequent
optimization of operations
-- Texaco acquisition quadrupled reserves
o Focus on maximization of return on investments in long-life oil
properties
-- Sold >$100 MM of assets for well above acquisition cost
o Minimal access to capital markets for further growth
o Shareholders desiring tax efficient liquidity - Decided against IPO or
addition of private equity
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 5]
MERGER DETAILS
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o Bellwether acquiring Bargo, deal announced Jan 25th
o New Name: Mission Resources Corporation
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o $1.26 per share for Bargo common ($140 MM, approximately 40% in cash,
60% in Bellwether stock)
o Bargo preferred stockholders receive cash ($61 MM)
o Amendment No. 1 to S-4 filed with the SEC Mar 19th
o Anticipate Bellwether Shareholder meeting in late April
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 6]
MERGER DETAILS
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o Total deal (Pro Forma at December 31, 2000)
-- $200 MM for common and preferred stock ($120 MM Cash, $80MM
stock)
-- $29 MM assumed debt
-- 46.9 MMBOE proved reserves - Less than $5.00/BOE direct
acquisition cost
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 7]
Transaction Timetable
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Sign merger agreement Jan 25
Preliminary S-4 proxy filed Feb 1
Bank Financing Committed Mar 16
Amended S-4 proxy filed Mar 19
Meeting for Equity & High Yield analysts Mar 30
SEC approval Apr 1*
Rating agency upgrade request -
Senior and subordinated debt Apr 6*
Shareholder meeting Apr 30*
Close May 1*
* Projected
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 8]
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DISTRIBUTED BY REGION
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[Slide depicts pie chart entitled: Pro Forma reserves at December 31, 2000 of
78.5 MMBOE. It contains the following text:]
East Texas 14%
Gulf Coast Onshore 20%
Gulf Coast Offshore 8%
Gulf Coast Combined 28%
Ecuador 10%
Permian 39%
Other 9%
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 9]
RESERVE INFORMATION
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o Pro Forma reserves at December 31, 2000 of 78.5 MMBOE
o Production approximately 23,000 BOE per day, reserve life index 9 years
[Slide depicts three pie charts horizontally across the page. The one on the
left side of the page is entitled Reserve Categories. It contains the following
text:]
PUD 20%
PDN 10%
PDP 70%
[The middle pie chart is entitled Oil vs. Gas. It contains the following text:]
Gas 32%
Oil 68%
[To the right of both of those pie charts is a pie chart entitled Operated vs.
Non-Operated. It contains the following text:]
Non-Op 54%
Operated 46%
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 10]
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PROPERTY OVERVIEW
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[Slide depicts a map of New Mexico, Texas, the Gulf of Mexico and Louisiana with
a map of Ecuador inserted in the lower left corner. The map contains numbers
from 1-20 indicating the top twenty fields. The text to the right of the map is
as follows:]
TOP TWENTY FIELDS
1 East Texas TX Oil
2 Leroy North LA Gas
3 Waddell TX Oil
4 Levelland/Slaughter TX Oil
5 Cross Creek TX Gas
6 Bright Falcon TX Gas
7 Tiguino EC OIl
8 Eugene Island Block 292 FO Gas
9 Wasson TX Oil
10 Raccoon Bend TX Oil
11 Second Bayou LA Gas
12 Goldsmith OBO TX Oil
13 Ship Shoal Block 246 FO Gas
14 Charapa EC Oil
15 Giddings TX Mix
16 TXL TX Oil
17 High Island Block 552 FO Gas
18 Porter's Creek TX Gas
19 Bedford TX Oil
20 Reddell LA Gas
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 11]
STRATEGIC DIRECTION
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o Fully exploit existing asset base
-- Focus on costs, full cycle economics
o Divest non-core, non-strategic properties
-- Reduce Company's operating cost/BOE
o Growth through acquisition
-- Corporate transactions via "unadvertised" opportunities,
public and private companies
-- Property transactions in focus areas, potential addition of
new core area
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 12]
BARGO ACQUISITION HISTORY
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ACQ. COST INCL. PROVED DEVELOPED
COST DEV. RESERVES COST
DEAL PROPERTIES $MM $MM MMBOE $ / BOE
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Conoco I St. Martinville $7.5 $10.6 1.9 $5.58
Conoco II Conroe, Etc 11.0 11.7 4.9 2.37
Phillips Permian Basin 10.5 11.4 3.3 3.41
Texaco Odem 8.7 10.3 1.6 6.65
Cody Misc. Package 8.4 10.6 5.5 1.91
Exxon Raccoon Bend 10.0 13.6 4.2 3.26
ARCO East Texas 16.0 17.0 3.9 4.40
Texaco Permian, Etc. 153.7 168.0 45.3 3.71
Aera Coles Levee 10.1 10.1 4.8 2.13
All others Various 38.4 52.9 14.9 3.53
-------- -------- ---- ------
Total $274.3 $316.2 90.3 $3.50
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
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[Slide 13]
BALANCE SHEET COMPARISON ($ in millions)
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December 31, 2000
----------------------------------
MISSION
MISSION MAY 1, 2001
BELW BARGO PRO FORMA EST. CLOSING
---- ----- --------- ------------
Current Assets 45 29 74
Property, Plant & Equipment 151 155 411
Goodwill -- 2 27
Other Assets 26 10 13
---- ---- ----
Total Assets 222 196 525
==== ==== ====
Current Liabilities 37 25 73
Bank Debt 25 85 170 150
Sub Debt 100 -- 100 100
Deferred Tax & Other Liabilities 3 6 46
Preferred Stock -- 58 --
Stockholders' Equity 57 22 136
---- ---- ----
Total Liabilities & Equity 222 196 525
==== ==== ====
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 14]
FINANCIAL STRATEGY
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o Maintain liquidity and balance sheet capacity
-- Limit capex in 2001 and 2002, free cash flow used to pay down
bank debt
-- Utilize high yield debt to increase liquidity under senior
revolver
-- Long term objective of 50% debt to book capital and $100 MM of
unused bank capacity
o Reduce cost of capital
-- Increased liquidity and analyst coverage - equity and high
yield
-- Lower cost of debt capital
o Focus on reducing G&A and LOE per BOE - divestitures, outsourcing
o Use equity to fund acquisition transactions
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 15]
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HEDGING STRATEGY
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o Hedge to protect downside - plan to use floors and/or collars through
2002
o Hedges currently in place cover about 55% of total equivalent
production
OIL HEDGES
NYMEX NYMEX
BBLS Price Price
Period Per Day Floor Ceiling
- ----------------------------------------------------------------------- ------------ ------------ -----------
Jan. 2001 - Dec. 2001 1,500 $24.00 $30.00
Jan. 2001 - Dec. 2001 6,000 $21.00
GAS HEDGES
NYMEX NYMEX
MCF Price Price
Period Per Day Floor Ceiling
- ----------------------------------------------------------------------- ------------ ------------ -----------
Jan. 2001 - Mar. 2001 25,000 $2.30 $3.37
Apr. 2001 - Oct. 2001 35,000 $2.30 $2.92
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 16]
FINANCIAL HIGHLIGHTS
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REPORTED PRO FORMA
BELW MISSION 2001
2000 EST.
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Production (MBOE/D) 15.8 23.0
Spot WTI Price ($/BBL) $30.14 $26.53
Spot Henry Hub Price ($/MCF) 3.91 5.47
Total Revenue ($MM) 119 190 - 200
EBITDA 68 125 - 140
Discretionary Cash Flow 63 90 - 100
DCF/Share 4.42 3.85 - 4.30
Recurring Net Income 18 25 - 35
Recurring NI/Share 1.25 1.10 - 1.50
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
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[Slide 17]
FINANCIAL HIGHLIGHTS
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REPORTED PRO FORMA
BELW MISSION 2001
2000 EST.
--------------- ----------------
Proved Reserves (MMBOE) 31.6 (Jan 01) 76.5
Reserve Life (R/P) 6 9
Cash Interest Expense ($MM) $14.8 $25 - 30
Total Debt - Year End 125.5 200 - 225
Stockholders Equity 57.0 160 - 180*
Total Book Capitalization 182.5 360 - 405
EBITDA/Interest Expense 4.6x 4.7x - 5.0x
Total Debt/EBITDA 1.8x 1.4x - 1.8x
Total Debt/Book Capitalization 69% 55% - 60%
*Excludes potential non-cash loss items (FAS 133, etc.)
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 18]
PRICE SENSITIVITIES
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2001 PRICE CHANGE
----------------------------------------
$1.00 / BBL $.10 / MCF
----------- ----------
Net Income $2.5 MM $0.7 MM
Per Share - Diluted $.11 $.03
Discretionary Cash Flow $3.7 MM $1.0 MM
Per Share - Diluted $.16 $.04
EBITDA $4.1 MM $1.1 MM
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 19]
BELLWETHER SENIOR SUBORDINATED NOTES
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Issue: $100 million Senior Subordinated Notes, issued April 1997
Coupon: 10 7/8%
Maturity: 10 years (2007)
Optional
Redemption: 5 year non-call
(callable April 2002 @ 105.4)
Ratings
(Moody's / S&P) B3 / B-
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
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[Slide 20]
EXECUTIVE MANAGEMENT
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[Slide depicts a flow chart of the management structure. The text of the flow
chart from top to bottom is as follows:]
Doug Manner
Chairman & CEO
[lines connect Doug Manner to Jon Clarkson, Kent Williamson, and Joe Nicknish]
Jon Clarkson
President & CFO
[the following are on the same level and each is connected by a line to Jon
Clarkson]
Ken Williamson
Sr. VP-Planning & Exploration
[below which is stated Portfolio Management, Budget Control, Explorations]
Joe Nicknish
Sr. VP-Operations & Exploitation
[below which is stated Field Operations, Drilling, Land]
Dan Foley
Sr. VP-Corporate Finance
[below which is stated Corporate M&A, Finance, Accounting & Tax, Marketing,
Administration]
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 21]
BOARD OF DIRECTORS (NOMINATED)
Doug Manner Chairman and CEO, Mission Resources
Jon Clarkson President and CFO, Mission Resources
Judy Ley Allen Board Member of Federal Reserve Bank - Dallas
J.P. Bryan Senior Managing Director,
Torch Energy Advisors, Inc.
Tim J. Goff Ranching (former Chairman and CEO, Bargo)
Habib Kairouz Managing Director, Rho Management Co., Inc.
D. Martin Phillips Managing Director, Encap Investments L.L.C.
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 22]
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MISSION RESOURCES - STATUS & GOALS
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o Major goals for 2001
-- Maintain production levels with targeted capex - predominantly
exploitation, nominal exploration
-- Reduce costs by managing the portfolio and improving operation
efficiencies
-- Increase balance sheet liquidity
-- Pursue corporate consolidation opportunities, close one or
more
-- Improve visibility and perception in capital markets
o Mission Resources is a unique mid-cap E&P investment opportunity
-- New, enthusiastic management team with expertise in
exploitation, M&A, and capital markets
-- Growth philosophy coupled with extensive industry contacts
[Slide depicts the logo of Mission Resources centered in the bottom of the page
followed by the text "Mission Resources"]
[Slide 23]
[Slide depicts the logo of Mission Resources centered on the page followed by
the text "Mission Resources".]
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