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EXHIBIT (C)(2)
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CONFIDENTIAL
PROJECT MAJERUS
PRESENTATION TO THE SPECIAL COMMITTEE
OF THE BOARD OF DIRECTORS
JUNE 19, 2000
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TABLE OF CONTENTS
Section
I. Executive Summary
II. Company Overview
III. Majerus Valuation
A. Summary
B. Discounted Cash Flow Analysis
- Going Concern Case
- Liquidation Case
C. Comparable Companies Analysis
- Financial Multiples
- Reserve Multiples
D. Comparable Transactions Analysis
- Corporate Transactions
- Property Transactions
Appendix A. Selected 13E-3 Transaction Premia
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I. EXECUTIVE SUMMARY
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EXECUTIVE SUMMARY
STRUCTURE OF OFFER: "Knight", which currently owns 58.1% of the
common stock of "Majerus" (the "Company") has offered
to purchase all of the common stock of Majerus that
it does not currently own (the "Merger") in a Rule
13E-3 "going private" transaction.
ACCOUNTING TREATMENT: Purchase method.
CONSIDERATION: The Public Stockholders (all common stockholders
except Knight) will receive $2.85 per share in cash
and Knight will assume all liabilities and
obligations of Majerus. The offer has been revised
from Knight's original proposal for $2.20 per share
on May 3, 2000.
TIMING: PSI will meet with the Special Committee of the Board
of Directors promptly following approval by PSI's
Fairness Opinion Committee in order to review PSI's
analysis and to present the fairness opinion. Majerus
has scheduled a telephonic board meeting for June 20,
2000 to review the recommendation of the Special
Committee. If the Merger is approved by the board,
Majerus will distribute a Proxy Statement on Schedule
14A to stockholders. Knight and Majerus will also
file a Rule 13E-3 Transaction Statement with the SEC.
A press release will promptly follow approval by
Majerus' board.
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EXECUTIVE SUMMARY
DUE DILIGENCE: As majority shareholder of Majerus, Knight has
intimate knowledge of Majerus' assets and the future
prospects of the company.
Representatives of Prudential Securities (principally
Howard House, Paul McMenemy and Jeff Mobley) have
conducted on-going due diligence of Majerus,
beginning with Majerus' 1997 initial public offering
(which Prudential lead-managed), subsequent advisory
assignments and a sale of warrants to Knight in
August 1999 in connection with the issuance of Senior
Subordinated Notes.
Jeff Mobley conducted due diligence on Majerus with
Majerus' senior management in connection with the
proposed Merger on May 15, 2000.
FINANCIAL ADVISOR: The Special Committee of the Board of Directors of
Majerus has retained Prudential Securities to render
a fairness opinion.
Knight has not retained an advisor for this
transaction.
RECOMMENDATION: Based on our analysis, the transaction team
recommends that Prudential Securities opine that the
consideration to be paid to the Public Stockholders
is fair from a financial point of view.
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EXECUTIVE SUMMARY
TRANSACTION STRUCTURE
(Graphic omitted showing structure of the transaction as described in the
narrative below)
Narrative: o Merger Sub will merge with and into Majerus
o Majerus will be the surviving corporation and remain a
wholly-owned subsidiary of Knight
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EXECUTIVE SUMMARY
MAJERUS' RATIONALE FOR THE SALE
o Despite having raised $5.0 million through the sale of Senior Notes and
warrants to Knight on August 22, 1999 and an additional $2.0 million
through a privately negotiated equity sale to Knight on December 28,
1999, Majerus does not have the necessary capital to support its
ongoing operational needs.
- Limited proved developed producing reserves, low production
volumes, low realized commodity prices and significant
overhead burdens have resulted in limited cash flow growth and
have hindered development of the Company's undeveloped reserve
base.
- In addition, after two years of development efforts and an
investment of approximately $12 million, commercial production
from its coal bed methane project in the Raton Basin has yet
to materialize.
- This lack of production and resulting cash flow has forced the
Company to rely on its credit facility, which is currently
fully drawn and in default, for the bulk of its capital
expenditures.
- If this transaction does not occur, Majerus' management
anticipates their senior lender will demand repayment and
force the company to sell assets.
o Majerus' management has independently tried to raise additional capital
through a new credit facility and through asset sales and has not been
successful.
o In 1998, Majerus attempted to sell the entire Company, with no success.
o As a result, Knight has determined that privatizing Majerus into a
better capitalized company is the best alternative for it to realize
greater value.
o The Merger would allow the Public Stockholders to:
- receive cash payment for securities that are steadily becoming
more illiquid and without a capital infusion could go to a
nominal value;
- realize a significant premium to current market prices; and
- monetize an investment in an undercapitalized company with a
high cost structure.
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EXECUTIVE SUMMARY
ISSUES FOR MAJERUS SHAREHOLDERS TO CONSIDER
o Knight is the controlling shareholder.
o Knight's bid is considerably lower than the Company's IPO and the cost
basis of many stockholders.
o Although the implied valuation reflects a significant discount to the
reserve market valuations of its public peers and to Majerus' 1999
year-end SEC Pre-tax PV10%, the equity value based solely on the
Company's proved developed producing reserves only is negative.
- The Company's equity value on the basis of financial multiples
is also nominal.
o The Company's relatively low level of proved developed producing
reserves is 11.5% of total proved reserves.
o The Company has limited capital alternatives to develop its
non-producing reserves.
o The lack of value attributed to the Company's project in the Raton
Basin.
o The contractual obligations of Majerus to pay current Raton Basin gas
marketing commitments and/or pay substantial contract termination
costs.
o The Company's current hedging position that limits its ability to
benefit from currently high oil and gas prices.
o The Company's history of low production volume growth.
o The ability of Majerus to survive as a going concern.
o Relevant valuation parameters.
- A DCF analysis of Majerus provides the best insight into the
value of the Company.
- Traditional reserve and cash flow multiples of comparable
companies and transactions result in widely varied and
inconclusive implied valuations.
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EXECUTIVE SUMMARY
IMPLIED VALUATION OF CONSIDERATION
o Common Stock Value $18.4 million (6.5 million shares at
$2.85 per share)
o Net Debt Assumed $15.5 million
o Preferred Stock Assumed $2.5 million
o Enterprise Value of Offer $36.4 million
o Valuation
($ in Thousands) MAJERUS COMPARABLE
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STATISTIC MULTIPLE MULTIPLE (3)
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Enterprise Value/
2000E EBITDA (1) $ 2,357.3 15.4x 8.4x
2001E EBITDA (1) 4,442.3 8.2x 7.1x
Equity Value
2000E CFFO (1) $ 765.8 24.0x 9.2x
2001E CFFO (1) 2,216.7 8.3x 6.3x
TMCR/
Year end 1999, Pro Forma Proved Reserves (Mmcfe) (2) 156,764.0 $ 0.23 $ 0.89
Year end 1999, Pro Forma Proved SEC Pre-tax PV10% (2) $153,783.0 24% 112%
Year end 1999, Pro Forma PDP Reserves (Mmcfe) (2) 18,071.0 $ 2.01 NA
Year end 1999, Pro Forma PDP SEC Pre-tax PV10% (2) $ 19,496.0 187% NA
(1) Company estimates assuming Raton Basin operations are terminated.
(2) Pro Forma for acquisition of reserves in February 2000.
(3) Reflects mean of comparable publicly traded companies.
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EXECUTIVE SUMMARY
APPROACHES TO VALUATION
VALUATION METHODOLOGY DESCRIPTION
Comparable Companies Analysis The implied valuation determined by
projected 2000 and 2001 CFFO and EBITDA
multiples, as well as a separate valuation
determined by proved reserves and Pre-tax
SEC PV10% multiples of selected comparable
companies.
Comparable Transactions Analysis The implied valuation determined by the
proved reserve multiples paid in comparable
company transactions and the proved reserve
multiples paid for comparable oil and gas
property acquisitions.
Discounted Cash Flow The implied valuation determined by the
present value of after tax cash flows of the
company on a risked basis under two cases:
as a going concern and as if liquidated.
RECOMMENDED METHODOLOGY
DISCOUNTED CASH FLOW The nature of the Company's reserve base,
including a significant percentage of
non-producing reserves and a long reserve
life combined with significant capital
investment requirements results in the need
for a DCF analysis rather than reliance upon
traditional reserve and financial multiple
analysis.
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EXECUTIVE SUMMARY
VALUATION CONCLUSION
IMPLIED
SHARE VALUE RANGE
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Discounted Cash Flow - Going Concern Case $ 2.68 -- $ 3.58
Discounted Cash Flow - Liquidation Case $ 2.75 -- $ 3.70
------ ----- ------- ------
Comparable Companies - Financial Multiples ($ 0.15) -- $ 0.32
Comparable Companies - Reserve Multiples $18.98 -- $24.00
Comparable Corporate Transactions $ 6.89 -- $ 9.22
Comparable Property Transactions $ 4.42 -- $ 6.21
PSI's Estimated Valuation Range $ 2.70 -- $ 3.65
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Knight Offer $2.85
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PSI Valuation Premium/(Discount) to Offer -5% -- 28%
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Stock Price on Day Prior to Offer $2.00
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Offer Premium to Pre-Offer Price 43%
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II. COMPANY OVERVIEW
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COMPANY OVERVIEW
DESCRIPTION
o Majerus is engaged in the exploration, development, and acquisition of
domestic crude oil and natural gas reserves.
- The Company's primary activities are focused in the Lower
Green River formation of the Uinta Basin in Utah.
- Majerus has other activities focused on:
o Other formations in the Uinta Basin, above and below
the Lower Green River formation;
o The Raton Basin of Colorado; and
o The Gulf Coast Region of South Texas
o At January 1, 2000, Majerus' pro forma proved reserves were
approximately 156.8 Bcfe with a Pre-tax SEC PV10% value of $153.8
million.
- Approximately 11.5% of Majerus' proved reserves were proved
developed producing, 72% were oil and 97% were in the Uinta
Basin.
- The Company has not included any reserves from its Raton Basin
development in proved categories.
o Majerus trades on the Nasdaq National Market with an equity market
capitalization of $12.5MM and enterprise value of $30.5MM based on the
closing stock price of $1 15/16 per share on June 14, 2000.
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COMPANY OVERVIEW
COMPANY HISTORY
o Majerus was formed in 1997 for the purpose of becoming the holding
company for "Majerus" Gas Partners L.P. Majerus Gas Partners was formed
in 1993, and grew primarily through the acquisition of oil and natural
gas properties and the development of such properties. Effective upon
consummation of Majerus's initial public offering (IPO);
- The limited partners of Majerus Gas Partners transferred all
of their limited partnership interests to Majerus in exchange
for Common Stock; and
- The stockholders of the general partner of Majerus Gas
Partners transferred all of the issued and outstanding stock
of the general partner to Majerus in exchange for Common
Stock.
o Majerus' IPO was completed in November 1997 at $12.50 per share,
resulting in net proceeds of approximately $30.5 million.
o Effective June 30, 1998, Majerus consolidated Majerus Gas Partners and
its subsidiaries into the parent company, "Majerus" Energy, Inc., and
the partnership was dissolved.
o On August 18, 1999, a subsidiary of Knight gained a controlling
majority interest in Majerus through the purchase of 2,753,392 shares
of common stock, or 50.4% of the then outstanding shares, from certain
Company Directors and entities controlled by Natural Gas Partners, L.P.
for $3.00 per share.
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COMPANY OVERVIEW
RECENT DEVELOPMENTS
o On August 22, 1999, Majerus sold $5.0 million in Senior Subordinated
Notes, together with a warrant to purchase 150,000 shares of common
stock, to Knight. Proceeds of the Notes sale were used to fund the
purchase of the remaining 50% interest in the Antelope Creek field that
Majerus did not already own, which served to roughly double the
Company's proved reserve base.
o On December 28, 1999, Majerus sold one million shares of common stock
to Knight for $2.0 million. The sale of the shares was privately
negotiated with a purchase price of $2.00 per share.
o On February 28, 2000, Majerus announced shareholder approval of the
purchase of certain Uinta Basin properties from Knight for $2.5 million
in Series A 8% Convertible Preferred Stock. This stock is payable in
kind and converts into common stock at $3.50 per share.
o On May 3, 2000, Majerus received an offer from Knight to purchase the
2.7 million shares of the company that it does not already own. The
offer was for $2.20 per share in cash. In addition, Knight offered to
advance Majerus $1.0 million in debt financing before completion of the
acquisition.
o On June 14, 2000, Knight offered to increase the cash consideration to
$2.85 per share.
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COMPANY OVERVIEW
AREAS OF OPERATIONS
Uinta Basin
Raton Basin
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COMPANY OVERVIEW
MAJERUS STOCK PERFORMANCE SINCE IPO
Graph depicts the daily closing prices of shares and trading volume of Majerus
from October 21, 1997 through May 19, 2000. From late October 1997 until
February 1999, the price fell from $13.25 to less than $3.00. From February 1999
until May 2000 the price fluctuated between $1.38 and $3.94 with a volume of
trading generally less than 100,000. Specific information pertaining to key
events during this period are listed below:
EVENT SHARE PRICE
First day as a public company $13.25
1997 Stock Market crash $11.75
Knight buys control stake from NGP and certain Directors $ 2.31
Remaining 50% of Antelope Creek acquired, doubling $ 2.38
reserve base
1 MM Common shares sold to Knight $ 1.56
Knight offers $2.20 per share $ 2.00
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COMPANY OVERVIEW
MAJERUS HISTORIC TRADED VOLUME - LAST THREE MONTHS
Graph depicts percentage of the total volume of shares that were traded during
the prior three months. The graph indicates that 400,000 shares were traded,
representing 6.9% of the total shares outstanding, as reported in the quarter
ending March 31, 2000. The high was $2.50, the low was $1.25 and the average
price during this period was $1.92. The specific breakdown is as follows:
Percentage of shares traded Price per share
17% $1.28 - $1.60
27% $1.60 - $1.92
37% $1.92 - $2.24
20% $2.24 - $2.56
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COMPANY OVERVIEW
MAJERUS HISTORIC TRADED VOLUME - LAST SIX MONTHS
Graph depicts percentage of the total volume of shares that were traded during
the prior six months. The graph indicates that 1.3 million shares were traded,
representing 20.5% of the total shares outstanding, as reported in the quarter
ending March 31, 2000. The high was $2.69, the low was $1.25 and the average
price during this period was $1.93. The specific breakdown is as follows:
Percentage of shares traded Price per share
20% $1.20 - $1.60
41% $1.60 - $2.00
27% $2.00 - $2.40
12% $2.40 - $2.80
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COMPANY OVERVIEW
MAJERUS HISTORIC TRADED VOLUME - LAST TWELVE MONTHS
Graph depicts percentage of the total volume of shares that were traded during
the prior twelve months. The graph indicates that 3.7 million shares were
traded, representing 57.0% of the total shares outstanding, as reported in the
quarter ending March 31, 2000. The high was $3.94, the low was $1.25 and the
average price during this period was $2.39. The specific breakdown is as
follows:
Percentage of shares traded Price per share
7% $ .80 - $1.60
44% $1.60 - $2.40
21% $2.40 - $3.20
28% $3.20 - $4.00
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COMPANY OVERVIEW
RELATIVE STOCK PRICE PERFORMANCE
Graph depicts performance of Majerus' stock as compared to the stock performance
of comparable companies over a period from June 15, 1999 to June 9, 2000. The
following table summarizes the graph, with all numbers indexed to 100 at
6/15/99:
RELATIVE PRICE PER SHARE PERFORMANCE
Petroglyph Comparable Companies* Oil (WTI)** Gas (HH)**
6/15/99 100 100 100 100
8/13/99 91 109 107 113
10/13/99 124 104 111 116
12/13/99 55 87 101 125
2/10/00 70 97 108 139
4/11/00 55 123 121 126
6/09/00 70 175 151 149
*Includes EVER, HSE, INLN, MLRC, POG
** Oil and Gas represent the 12-month NYMEX strip
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COMPANY OVERVIEW
HISTORICAL & PROJECTED OPERATING DATA
ACTUAL RESULTS
-----------------------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
------------------------------------------- --------------------------
1997 1998 1999 1999 2000
--------- --------- --------- --------- ---------
Operating Revenues:
Oil Revenues $ 3,735.0 $ 2,912.0 $ 3,652.1 $ 616.0 $ 1,667.0
Gas Revenues 1,070.0 1,366.0 1,159.5 320.0 211.0
Other 61.0 190.0 230.0 79.0 --
--------- --------- --------- --------- ---------
Total $ 4,866.0 $ 4,468.0 $ 5,041.6 $ 1,015.0 $ 1,878.0
Operating Expenses:
Lease operating $ 1,559.9 $ 1,927.3 $ 2,953.4 $ 501.0 $ 1,262.0
Production taxes 178.8 218.1 359.1 36.0 127.0
General and administrative 1,299.9 2,128.8 2,024.1 475.0 441.0
--------- --------- --------- --------- ---------
EBITDA $ 1,827.4 $ 193.8 $ (295.0) $ 3.0 $ 48.0
--------- --------- --------- --------- ---------
Exploration costs -- $ 192.5 $ 38.6 -- --
Depletion, depreciation & amortization 1,852.3 1,866.1 1,673.4 448.0 508.0
Impairments -- 4,848.4 -- -- --
--------- --------- --------- --------- ---------
EBIT $ (24.9) $(6,713.3) $(2,007.1) $ (445.0) $ (460.0)
--------- --------- --------- --------- ---------
Interest income (expense), net 114.0 407.0 (679.0) (69.0) (282.0)
Gain on sale of assets, net 12.0 59.0 840.0 -- 21.0
Income tax benefit (expense) (2,514.0) 2,062.0 390.0 185.0 --
--------- --------- --------- --------- ---------
NET INCOME $(2,412.9) $(4,185.3) $(1,456.1) $ (329.0) $ (721.0)
--------- --------- --------- --------- ---------
PROJECTED (1)
--------------------------
YEAR ENDED
--------------------------
2000 2001
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Operating Revenues:
Oil Revenues $ 7,075.1 $ 9,133.5
Gas Revenues 1,090.1 1,358.5
Other 48.0 48.0
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Total $ 8,213.1 $10,540.1
Operating Expenses:
Lease operating $ 3,441.5 $ 3,458.8
Production taxes 581.8 586.3
General and administrative 1,832.6 2,052.6
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EBITDA $ 2,357.3 $ 4,442.3
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Exploration costs -- --
Depletion, depreciation & amortization 2,321.2 2,373.8
Impairments -- --
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EBIT $ 36.1 $ 2,068.5
--------- ---------
Interest income (expense), net (1,591.5) (2,225.6)
Gain on sale of assets, net -- --
Income tax benefit (expense) -- --
--------- ---------
NET INCOME $(1,555.4) $ (157.1)
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(1) Company estimates assuming Raton Basin operations are terminated.
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COMPANY OVERVIEW
HISTORICAL BALANCE SHEET
($ in thousands) ----------------------------------------- -------------------------
DECEMBER 31, MARCH 31,
----------------------------------------- -------------------------
1997 1998 1999 1999 2000
--------- --------- --------- --------- ---------
Cash and Equivalents $16,679.0 $ 2,007.7 $ 1,741.8 $ 532.0 $ 416.0
Other Current Assets 2,896.0 2,714.9 2,403.7 2,375.0 2,917.0
--------- --------- --------- --------- ---------
Total Current Assets $19,575.0 $ 4,722.7 $ 4,145.6 $ 2,907.0 $ 3,333.0
Net Property & Equipment $26,570.0 $40,697.9 $48,512.7 $41,800.0 $51,464.0
Other Assets 569.0 614.6 288.3 447.0 289.0
--------- --------- --------- --------- ---------
TOTAL ASSETS $46,714.0 $46,035.2 $52,946.5 $45,154.0 $55,086.0
========= ========= ========= ========= =========
Current Portion of Long-term Debt $ 37.0 -- $ 916.7 $ 500.0 $ 1,833.0
Other Current Liabilities 4,665.0 2,771.0 1,260.5 1,578.0 1,614.0
--------- --------- --------- --------- ---------
Total Current Liabilities $ 4,702.0 $ 2,771.0 $ 2,177.2 $ 2,078.0 $ 3,447.0
Long-term Debt -- $ 7,500.0 $14,953.1 $ 8,000.0 $14,043.0
Deferred Tax Liability 2,514.0 452.5 -- 204.0 --
Convertible Preferred Stock -- -- -- -- $ 2,500.0
Stockholder's Equity 39,498.0 35,311.8 35,816.2 34,872.0 35,096.0
--------- --------- --------- --------- ---------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $46,714.0 $46,035.2 $52,946.5 $45,154.0 $55,086.0
========= ========= ========= ========= =========
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COMPANY OVERVIEW
SUMMARY OF RESERVES (1)
PROVED RESERVES AS OF JANUARY 1, 2000
-----------------------------------------------------
OIL NATURAL GAS TOTAL PRE-TAX PV10%
(MBbls) (MMcf) (MMcfe) ($ IN THOUSANDS)
Proved Developed Producing 2,184 4,964 18,071 19,496
Proved Developed Non-Producing 2,354 6,103 20,226 16,580
(Behind Pipe)
Proved Developed Non-Producing 6,236 13,075 50,489 76,653
(Improved Recovery)
Proved Undeveloped 6,397 13,415 51,799 20,591
(Primary/Improved Recovery)
Proved Undeveloped 0 2,262 2,262 1,714
(Primary)
Proved Undeveloped 1,717 3,613 13,918 18,750
(Improved Recovery)
------- ------- ------- -------
TOTAL 18,889 43,432 156,764 153,783
======= ======= ======= =======
(1) Reserves have been adjusted to reflect purchase of reserves from an
affiliate of Knight.
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COMPANY OVERVIEW
MANAGEMENT TEAM
NAME POSITION
- ---- --------
Robert C. Murdock Chairman of the Board, Chief Executive Officer &
President
S. Kennard Smith Executive Vice President, Chief Operating Officer &
Secretary
Tim A. Lucas Vice President, Chief Financial Officer & Treasurer
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COMPANY OVERVIEW
BOARD OF DIRECTORS
NAME BIOGRAPHY
- ---- ---------
Robert C. Murdock Mr. Murdock has served as President, Chief Executive
Officer and Chairman of the Board of the Company
since its formation in April 1993. Prior to forming
the Company, from 1985 to 1993, Mr. Murdock was
President of GasTrak Holdings, Inc., a natural gas
gathering and marketing company. From 1982 to 1985,
Mr. Murdock held various staff and management
positions at Panhandle Eastern Pipe Line Company.
William C. Glynn Mr. Glynn has served as a director of the Company
since August 1999. Mr. Glynn has served as President
of Knight and each of its subsidiaries since 1987.
Mr. Glynn is a member of and has served as Chairman
of the Board of Directors of the Pacific Coast Gas
Association. He is also a member of the Board of
Directors of the American Gas Association. He is also
a member of the Board of Directors of the American
Gas Association.
Richard Hokin Mr. Hokin has served as a director of the Company
since August 1999. Mr. Hokin has been a member of the
board of Knight since 1982 and has served as Chairman
of its board and of each of its subsidiaries since
1984. Mr. Hokin has been a director of Displaytech,
Inc., a developer and manufacturer of microelectronic
displays, since 1995.
A.J. Schwartz (1) A.J. Schwartz has served as a director of the Company
since April 1997. Since 1980, Mr. Schwartz has been a
shareholder in the law firm of Morris, Laing, Evans,
Brock & Kennedy, Chartered.
Eugene C. Thomas Mr. Thomas has served as a director of the Company
since August 1999. Mr. Thomas has served on the Board
of Directors of Knight and of each of its
subsidiaries since 1984. Mr. Thomas is a partner of
Moffatt, Thomas, Barrett, Rock & Fields, Chtd., and
he has acted as general counsel to Knight since 1978.
Mr. Thomas is a member of the American Bar
Association and served as its President for 1986-87.
(1) Special Committee of the Board of Directors.
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COMPANY OVERVIEW
OTHER EXECUTIVE OFFICERS
NAME BIOGRAPHY
- ---- ---------
S. Kennard Smith Mr. Smith has served as Executive Vice President and
Chief Operating Officer of the Company since January
1994 and Secretary of the Company since April 1997,
and was responsible for accounting, financial
planning and budgeting through December 1995.
Currently Mr. Smith serves as President of Majerus
Operating Company.
Tim A. Lucas Mr. Lucas has served as Vice President, Chief
Financial Officer and Treasurer of the Company since
July 1997. From August 1994 until joining the Company
in 1997, Mr. Lucas served as Senior Financial Manager
for Cross Oil Refining & Marketing, Inc., where he
was responsible for all financial matters of the
Company. From June 1989 to July 1994, Mr. Lucas
worked in the audit division of Arthur Andersen LLP.
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COMPANY OVERVIEW
OWNERSHIP PROFILE
Total %
--------- ------
INSIDER OWNERSHIP (1)
Robert C. Murdock 122,043 1.9%
S. Ken Smith 45,198 *
A.J. Schwartz 10,710 *
--------- -----
Total Executive Group (2) 177,951 2.8%
INSTITUTIONAL OWNERSHIP (2)
Wellington Management Company 540,000 8.4%
Sentry Investment Management 250,000 3.9%
Dimensional Fund Advisors 158,000 2.4%
CIBC World Markets 3,000 0.0%
Barclays Bank PLC 3,000 0.0%
Commerce Bank N.A. 2,000 0.0%
--------- -----
Total Major Institutions 956,000 14.8%
OTHER MAJOR SHAREHOLDERS
Knight 3,753,392 58.1%
RETAIL & OTHER (3) 1,570,990 24.3%
--------- -----
TOTAL SHAREHOLDERS (4) 6,458,333 100.0%
========= =====
*Less than 1.0%.
(1) Source: Proxy Statement dated April 28, 2000; excludes out of the money
options.
(2) Source: CDA/Spectrum dated May 7, 2000.
(3) Balance of total shareholders.
(4) At April 30, 2000; excludes out of the money options.
The omitted pie chart is represented by the table above.
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III. MAJERUS VALUATION
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A. SUMMARY
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
SUMMARY VALUATION
VALUATION CONCLUSION
IMPLIED
SHARE VALUE RANGE
Discounted Cash Flow - Going Concern Case $ 2.68 $ 3.58
Discounted Cash Flow - Liquidation Case $ 2.75 -- $ 3.70
------ ----- ------
Comparable Companies - Financial Multiples ($ 0.15) -- $ 0.32
Comparable Companies - Reserve Multiples $18.98 -- $24.00
Comparable Corporate Transactions $ 6.89 -- $ 9.22
Comparable Property Transactions $ 4.42 -- $ 6.21
PSI's Estimated Valuation Range $ 2.70 -- $ 3.65
====== ===== ======
Knight Offer $2.85
====== ===== ======
PSI Valuation Premium/(Discount) to Offer -5% -- 28%
====== ===== ======
Stock Price on Day Prior to Offer $2.00
====== ===== ======
Offer Premium to Pre-Offer Price 43%
====== ===== ======
31
32
PROJECT MAJERUS
- --------------------------------------------------------------------------------
SUMMARY VALUATION
VALUATION CONCLUSION, CONT.
The valuation conclusion table above was presented in graph form. The
graph has been omitted.
32
33
PROJECT MAJERUS
- --------------------------------------------------------------------------------
SUMMARY VALUATION
VALUATION CONCLUSION, CONT.
(A continuation of the previous graph was omitted. The information from
the omitted graph is listed in tabular form on page 31.)
33
34
PROJECT MAJERUS
- --------------------------------------------------------------------------------
SUMMARY VALUATION
TRANSACTION PREMIUM COMPARISON
1 Day Prior 30 Day Prior 90 Day Prior 6 Month Prior 12 Month
Prior Mean Mean Mean Mean
------- ------------ ------------ ------------- --------------
Majerus Closing Price $ 2.00 $ 1.62 $ 2.02 $ 2.02 $ 2.47
Knight Offer 2.85 2.85 2.85 2.85 2.85
Offer Premium 43% 76% 41% 41% 15%
====================================== ====== ====== ====== ====== ======
Mean of recent 13E-3 offer premiums(1) 31% 39% 39% 41% 37%
====================================== ====== ====== ====== ====== ======
- ----------
(1) Historical completed 13E-3 transactions from 1/1/98 to present value under
$100MM
34
35
PROJECT MAJERUS
- --------------------------------------------------------------------------------
B. DISCOUNTED CASH FLOW
- --------------------------------------------------------------------------------
35
36
PROJECT MAJERUS
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW -- GOING CONCERN CASE
($ in thousands except per share data) VALUATION RANGE
LOW MID HIGH
--------- --------- ---------
At March 31, 2000
Reserves:
PDP - Generic (1) $ 14,412 $ 15,170 $ 15,170
PDP - Helen Gohlke (2) 1,032 1,087 1,087
PDNP (BEHIND PIPE) - Generic (3) 7,134 7,531 7,927
PDNP (BEHIND PIPE) - Helen Gohlke (4) 1,275 1,346 1,417
PDNP (SECONDARY) - Generic (5) 35,666 38,410 41,153
PUD (PRIMARY&SECONDARY) - Ant. Creek (6) -- -- --
PUD (PRIMARY) - Generic (7) 88 98 107
PUD (PRIMARY) - Helen Gohlke (8) 919 1,002 1,086
PUD (SECONDARY) - Generic (9) 5,239 5,821 6,403
-------- -------- --------
Value of Domestic Oil & Gas Assets $ 65,766 $ 70,465 $ 74,351
Plus:
Net Undeveloped Acreage (10) $ 286 $ 572 $ 858
Non-cash Working Capital (11) 1,303 1,303 1,303
Cash on Balance Sheet (11) 416 416 416
Less:
Total Debt (11) $(15,876) $(15,876) $(15,876)
Preferred Stock (11) (2,500) (2,500) (2,500)
CIG Liability (Raton) (12) (6,414) (6,508) (6,606)
Present Value of Hegding Activities (12) (1,346) (1,356) (1,366)
Income Taxes (13) (7,653) (9,330) (10,764)
Corporate G&A Expense (14) (16,665) (16,665) (16,665)
-------- -------- --------
Net Discounted Equity Value $ 17,318 $ 20,521 $ 23,151
======== ======== ========
Equity Value Range $ 17,318 $ 20,521 $ 23,151
Shares Outstanding (11) 6,458 6,458 6,458
-------- -------- --------
Equity Value Per Share Range $ 2.68 $ 3.18 $ 3.58
- ---------
Based on Majerus internal reserve report as of April 1, 2000 & NYMEX based
forward prices
(1) Risked at 95%, 100% and 100% for the Low, Base and High cases, respectively.
(2) Risked at 95%, 100% and 100% for the Low, Base and High cases, respectively.
(3) Risked at 90%, 95% and 100% for the Low, Base and High cases, respectively.
(4) Risked at 90%, 95% and 100% for the Low, Base and High cases, respectively.
(5) Risked at 65%, 70% and 75% for the Low, Base and High cases, respectively.
(6) Risked at 0%, 0% and 0% for the Low, Base and High cases, respectively.
(7) Risked at 45%, 50% and 55% for the Low, Base and High cases, respectively.
(8) Risked at 55%, 60% and 65% for the Low, Base and High cases, respectively.
(9) Risked at 45%, 50% and 55% for the Low, Base and High cases, respectively.
(10) Valued at $10.00, $20.00 and $30.00 per net undeveloped acre for the Low,
Base and High cases, respectively.
(11) As of March 31, 2000.
(12) Discounted at 12%, 10% and 8% for the Low, Base and High cases,
respectively.
(13) Assumed tax rate of 38%.
(14) Reflects annual G&A expense of $2,029,000 discounted at 10% over the life
of the reserve base.
36
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW -- LIQUIDATION CASE
($ in thousands except per share data) VALUATION RANGE
LOW MID HIGH
At March 31, 2000
PDP - Generic (1) $ 13,653 $ 14,412 $ 15,170
PDP - Helen Gohlke (2) 978 1,032 1,087
PDNP (BEHIND PIPE) - Generic (3) 5,153 5,549 5,945
PDNP (BEHIND PIPE) - Helen Gohlke (4) 921 992 1,063
PDNP (SECONDARY) - Generic (5) 24,692 27,436 30,179
PUD (PRIMARY&SECONDARY) - Ant. Creek (6) -- -- --
PUD (PRIMARY) - Generic (7) 68 78 88
PUD (PRIMARY) - Helen Gohlke (8) -- -- --
PUD (SECONDARY) - Generic (9) 4,075 4,657 5,239
-------- -------- --------
Value of Domestic Oil & Gas Assets $ 49,540 $ 54,155 $ 58,771
Plus:
Net Undeveloped Acreage (10) $ 286 $ 572 $ 858
Non-cash Working Capital (11) 1,303 1,303 1,303
Cash on Balance Sheet (11) 416 416 416
Less:
Total Debt (11) $(15,876) $(15,876) $(15,876)
Preferred Stock (11) (2,500) (2,500) (2,500)
CIG Liability (Raton) (12) (6,414) (6,508) (6,606)
Present Value of Hegding Activities (12) (1,346) (1,356) (1,366)
Income Taxes (13) (7,634) (9,353) (11,084)
-------- -------- --------
Net Discounted Equity Value $ 17,776 $ 20,853 $ 23,916
======== ======== ========
Equity Value Range 17,776 $ 20,853 $ 23,916
Shares Outstanding (11) 6,458 6,458 6,458
-------- -------- --------
Equity Value Per Share Range $ 2.75 $ 3.23 $ 3.70
- ----------
Note: Assumes orderly liquidation scenario. Does not include meaningful costs
associated with an actual liquidation.
Based on Majerus internal reserve report as of April 1, 2000 & NYMEX based
forward prices
(1) Risked at 90%, 95% and 100% for the Low, Base and High cases, respectively.
(2) Risked at 90%, 95% and 100% for the Low, Base and High cases, respectively.
(3) Risked at 65%, 70% and 75% for the Low, Base and High cases, respectively.
(4) Risked at 65%, 70% and 75% for the Low, Base and High cases, respectively.
(5) Risked at 45%, 50% and 55% for the Low, Base and High cases, respectively.
(6) Risked at 0%, 0% and 0% for the Low, Base and High cases, respectively.
(7) Risked at 35%, 40% and 45% for the Low, Base and High cases, respectively.
(8) Risked at 0%, 0% and 0% for the Low, Base and High cases, respectively.
(9) Risked at 35%, 40% and 45% for the Low, Base and High cases, respectively.
(10) Valued at $10.00, $20.00 and $30.00 per net undeveloped acre for the Low,
Base and High cases, respectively.
(11) As of March 31, 2000.
(12) Discounted at 12%, 10% and 8% for the Low, Base and High cases,
respectively.
(13) Assumed tax rate of 38%.
37
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
C. COMPARABLE COMPANIES ANALYSIS
- --------------------------------------------------------------------------------
38
39
PROJECT MAJERUS
- --------------------------------------------------------------------------------
IMPLIED VALUATION BASED UPON COMPARABLE COMPANIES' FINANCIAL MULTIPLES
ENTERPRISE VALUE/EBITDA EQUITY VALUE/CFFO
($ in thousands except per share data)
2000E 2001E 2000E 2001E
-------- -------- -------- --------
Mean 8.4x 7.1x 9.2x 6.3x
MEDIAN 8.0 6.6 7.1 4.7
High 12.4 10.2 19.3 12.7
Low 5.3 4.8 3.4 3.0
-------- -------- -------- --------
Majerus Parameter (1) $ 2,357 $ 4,442 $ 766 $ 2,217
-------- -------- -------- --------
IMPLIED ENTERPRISE VALUATION
Mean $ 19,873 $ 31,364 $ 18,512 $ 25,316
MEDIAN 18,911 29,516 16,879 21,832
High 29,157 45,203 26,214 39,545
Low 12,513 21,220 14,073 18,053
-------- -------- -------- --------
At March 31, 2000
Total Debt $ 15,876 $ 15,876 $ 15,876 $ 15,876
Preferred Stock 2,500 2,500 2,500 2,500
CIG Liability 6,508 6,508 6,508 6,508
Cash & Equivalents 416 416 416 416
-------- -------- -------- --------
IMPLIED EQUITY VALUATION
Mean $ (4,595) $ 6,896 $ 552 $ 7,356
MEDIAN (5,558) 5,048 (1,081) 3,872
High 4,689 20,735 8,254 21,585
Low (11,955) (3,248) (3,887) 93
-------- -------- -------- --------
Shares Outstanding (2) 6,458 6,458 6,458 6,458
-------- -------- -------- --------
IMPLIED EQUITY VALUATION PER SHARE
Mean $ (0.71) $ 1.07 $ 0.09 $ 1.14
MEDIAN (0.86) 0.78 (0.17) 0.60
High 0.73 3.21 1.28 3.34
Low (1.85) (0.50) (0.60) 0.01
-------- -------- -------- --------
- --------------------
(1) Company estimates assuming Raton Basin operations are terminated.
(2) Shares outstanding on March 31, 1999.
39
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
PSI ESTIMATED VALUE RANGE BASED UPON FINANCIAL MULTIPLES
($ in thousands except per share data) PSI ESTIMATED VALUATION RANGE
-----------------------------------------
MAJERUS RANGE OF VALUATION MULTIPLES
PARAMETER LOW MEDIAN HIGH
--------- ---- ------ ----
Majerus Enterprise Value/
2000E EBITDA (1) $2,357 7.2x 8.0x 8.8x
2001E EBITIDA (1) 4,442 6.0x 6.6x 7.3x
Majerus Equity Value/
2000E CFFO (1) $ 766 6.4x 7.1x 7.8x
2001E CFFO (1) 2,217 4.2 4.7 5.2
PSI ESTIMATED VALUATION RANGE
---------------------------------------
ENTERPRISE VALUATION
LOW MEDIAN HIGH
------------ ------------ ------------
Majerus Enterprise Value/
2000E EBITDA (1) $ 17,020 $ 18,911 $ 20,802
Less: Net Debt (17,960) (17,960) (17,960)
Less: CIG Liability (6,414) (6,508) (6,606)
Equity Value (7,354) (5,558) (3,764)
----------- ----------- ------------
EQUITY VALUE PER SHARE $ (1.14) $ (0.86) $ (0.58)
=========== =========== ============
2001E EBITIDA (1) $ 26,564 $ 29,516 $ 32,467
Less: Net Debt (17,960) (17,960) (17,960)
Less: CIG Liability (6,414) (6,508) (6,606)
Equity Value 2,191 5,048 7,901
----------- ----------- -----------
EQUITY VALUE PER SHARE $ 0.34 $ 0.78 $ 1.22
=========== =========== ===========
Majerus Equity Value/
2000E CFFO (1) $ 22,845 $ 23,388 $ 23,930
Less: Net Debt (17,960) (17,960) (17,960)
Less: CIG Liability (6,414) (6,508) (6,606)
Equity Value (1,529) (1,081) (636)
----------- ----------- ------------
EQUITY VALUE PER SHARE $ (0.24) $ (0.17) $ (0.10)
=========== =========== ============
2001E CFFO (1) $ 27,302 $ 28,340 $ 29,379
Less: Net Debt (17,960) (17,960) (17,960)
Less: CIG Liability (6,414) (6,508) (6,606)
Equity Value 2,929 3,872 4,813
----------- ----------- -----------
EQUITY VALUE PER SHARE $ 0.45 $ 0.60 $ 0.75
=========== =========== ===========
Enterprise Value Range (2) $ 23,433 $ 25,039 $ 26,644
Total Debt (3) (15,876) (15,876) (15,876)
Preferred Stock (3) (2,500) (2,500) (2,500)
CIG Liability (6,414) (6,508) (6,606)
Cash & Equivalents (3) 416 416 416
----------- ----------- -----------
Equity Value $ (941) $ 570 $ 2,078
Shares Outstanding (3) 6,458 6,458 6,458
----------- ----------- -----------
Equity Value Per Share $ (0.15) $ 0.09 $ 0.32
- ----------
(1) Company estimates assuming Raton Basin operations are terminated.
(2) Average of all financial performance valuation methodologies.
(3) Balance sheet as of March 31, 2000.
40
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
IMPLIED VALUATION BASED UPON COMPARABLE COMPANIES' RESERVE MULTIPLES
($ in thousands except per share data) TMR/
MCFE SEC PRE-TAX PV10
-------- ----------------
Mean $ 0.89 112.2%
MEDIAN 1.02 108.3
High 1.10 146.6
Low 0.56 69.7
Majerus Parameter(1) 156,764 $153,783
IMPLIED ENTERPRISE VALUATION
Mean $139,882 $172,603
MEDIAN 159,922 166,569
High 172,366 225,412
Low 87,241 107,134
At March 31, 2000
Total Debt $ 15,876 $ 15,876
Preferred Stock 2,500 2,500
CIG Liability 6,508 6,508
Cash & Equivalents 416 416
Other Tangible Assets -- --
IMPLIED EQUITY VALUATION
Mean $115,414 $148,134
MEDIAN 135,454 142,101
High 147,898 200,944
Low 62,772 82,666
Shares Outstanding(2) 6,458 6,458
IMPLIED EQUITY VALUATION PER SHARE
Mean $ 17.87 $ 22.94
MEDIAN 20.97 22.00
High 22.90 31.11
Low 9.72 12.80
(1) As of January 1, 2000. Adjusted for purchase of properties from an affiliate
of Knight.
(2) Shares outstanding on March 31, 1999.
41
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
PSI ESTIMATED VALUE RANGE BASED UPON RESERVE MULTIPLES
($ in thousands except per share data) PSI ESTIMATED VALUATION RANGE
MAJERUS RANGE OF VALUATION MULTIPLES ENTERPRISE VALUATION
PARAMETER LOW MEDIAN HIGH LOW MEDIAN HIGH
Majerus Total Market Cap of Reserves /
Total Proved Reserves (Mcfe) (1) 156,764 $ 0.92 $ 1.02 $ 1.12 $ 143,930 $ 159,922 $ 175,914
SEC Pre-tax PV10 (1) $ 153,783 $ 97.5% 108.3% 119.1% 149,912 166,569 183,226
----------- ----------- ----------
Enterprise Value Range $ 146,921 $ 163,246 $ 179,570
Total Debt (2) 15,876 15,876 15,876
Preferred Stock (2) 2,500 2,500 2,500
CIG Liability $ 6,413.54 $ 6,508.16 $ 6,605.98
Cash & Equivalents (2) 416 416 416
Equity Value $ 122,548 $ 138,777 $ 155,004
Shares Outstanding (2) 6,458 6,458 6,458
Equity Value Per Share $ 18.98 $ 21.49 $ 24.00
(1) As of January 1, 2000. Adjusted for purchase of properties from an affiliate
of Knight.
(2) Balance sheet as of March 31, 2000.
42
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
COMPARABLE COMPANIES ANALYSIS
Market Valuation
Closing (in millions) Reserve Information (as of 12/31/99)
----------- ----------------------- --------------------------------------
Price as of Pretax %Natural % Reserve
Company 6/14/00 Equity Enterprise Bcfe PV10 (in Mil) Gas Developed Life (yrs)
Majerus (1) $ 1.94 $ 12.5 $ 30.5 156.8 $ 153.8 27.7% 56.6% 78.1
Evergreen Resources $ 27.38 $ 409.1 $ 430.0 559.4 $ 331.4 100.0% 59.8% 41.0
HS Resources 29.75 571.3 1,138.5 1,111.5 1,051.1 78.1 65.8 15.2
Inland Resources 4.75 13.8 193.0 343.7 274.6 17.7 33.5 34.7
Mallon Resources 8.88 69.6 108.3 103.9 72.3 89.1 44.0 15.7
Patina Oil &Gas 19.81 322.5 513.4 465.8 473.6 77.6 87.5 11.8
Mean $ 277.2 $ 476.6 516.9 $ 440.6 72.5% 58.1% 23.7
Median 322.5 430.0 465.8 331.4 78.1 59.8 15.7
High 571.3 1,138.5 1,111.5 1,051.1 100.0 87.5 41.0
Low 13.8 108.3 103.9 72.3 17.7 33.5 11.8
Valuation Ratios Leverage Ratios
--------------------------------------------------- ---------------
TMCR/ Ent. Value/EBITDPrice/CFFO(3) Net Debt % of LTD % of
Company Pretax PV10 Mcfe 2000E 2001E 2000E 2001E Ent. Value SEC PV10
Majerus (1) 19.6% $ 0.19 12.9x 6.9x 16.1x 6.5x 58.9% 10.8%
Evergreen Resources 128.5% $ 0.76 8.9x 10.2x 19.3x 12.7x 4.9% 6.8%
HS Resources 108.3 1.02 5.3 4.8 3.4 3.0 49.8 52.1
Inland Resources 69.7 0.56 NA NA NA NA 92.9 65.6
Mallon Resources 146.6 1.02 12.4 6.1 9.1 4.2 35.8 55.3
Patina Oil &Gas 108.1 1.10 7.2 7.2 5.1 5.2 37.2 40.5
Mean 112.2% $ 0.89 8.4x 7.1x 9.2x 6.3x 44.1% 44.1%
Median 108.3 1.02 8.0 6.6 7.1 4.7 37.2 52.1
High 146.6 1.10 12.4 10.2 19.3 12.7 92.9 65.6
Low 69.7 0.56 5.3 4.8 3.4 3.0 4.9 6.8
(1) EBITDA and CFFO projections provided by the company assuming Raton Basin
operations are terminated.
(2) EBITDA estimates from various Wall Street research reports and Prudential
Securities.
(3) Cash Flow estimates from First Call.
43
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
COMPARABLE COMPANIES ANALYSIS
($ in thousands, except per share data) Evergreen HS
Majerus Resources Resources
---------- ----------- ---------------
Symbol EVER HSE
Latest Fiscal Year End 12/31/99 12/31/99 12/31/99
Latest Quarter 3/31/00 3/31/00 3/31/00
MARKET INFORMATION:
Exchange Rate
Closing Price as of: NA NA NA
6/14/00 $ 1.94 $ 27.38 $ 29.75
52 Week - High 3.94 28.25 33.81
- Low 1.25 15.69 12.50
Indicated Dividend -- -- --
Indicated Dividend Yield 0.0% 0.0% 0.0%
Common Shares Outstanding, front of 10-K or 10-Q (00) 6,458.333 14,943.106 18,853.756
Weighted Average Basic Shares from I/S -- -- 18,813.000
Weighted Average FD Shares from I/S -- -- 19,161.000
---------- ----------- --------------
Fully Diluted Shares Outstanding 6,458.333 14,943.106 19,201.756
Enterprise Value:
Equity Value $ 12,513 $ 409,068 $ 571,252
Total Debt 15,876 22,500 568,183
Preferred Stock 2,500 -- --
Less: Cash and Equivalents (416) (1,614) (980)
---------- ----------- --------------
Enterprise Value $ 30,473 $ 429,954 $ 1,138,455
---------- ----------- --------------
Total Market Cap of Reserves (TMCR):
Enterprise Value $ 30,473 $ 429,954 $ 1,138,455
Less: Net Other Tangible Assets (289) (4,150) --
---------- ----------- --------------
Total TMCR $ 30,184 $ 425,804 $ 1,138,455
---------- ----------- --------------
($ in thousands, except per share data) Inland Mallon Patina
Resources Resources Oil & Gas
---------- ----------- ---------------
Symbol INLN MLRC POG
Latest Fiscal Year End 12/31/99 12/31/99 12/31/99
Latest Quarter 3/31/00 3/31/00 3/31/00
MARKET INFORMATION:
Exchange Rate
Closing Price as of: NA NA NA
6/14/00 $ 4.75 $ 8.88 19.81
52 Week - High 15.00 9.03 19.81
- Low 2.13 3.81 5.75
Indicated Dividend -- -- 0.08
Indicated Dividend Yield 0.0% 0.0% 0.4%
Common Shares Outstanding, front of 10-K or 10-Q (00) 2,897.732 7,839.700 16,275.371
Weighted Average Basic Shares from I/S -- -- 15,777.000
Weighted Average FD Shares from I/S -- -- 15,777.000
---------- ----------- --------------
Fully Diluted Shares Outstanding 2,897.732 7,839.700 16,275.371
Enterprise Value:
Equity Value $ 13,764 $ 69,577 $ 322,456
Total Debt 81,668 39,078 132,000
Preferred Stock 98,321 1,352 59,600
Less: Cash and Equivalents (791) (1,681) (626)
---------- ----------- --------------
Enterprise Value $ 192,962 $ 108,326 $ 513,430
---------- ----------- --------------
Total Market Cap of Reserves (TMCR):
Enterprise Value $ 192,962 $ 108,326 $ 513,430
Less: Net Other Tangible Assets (1,685) (2,332) (1,292)
---------- ----------- --------------
Total TMCR $ 191,277 $ 105,994 $ 512,138
---------- ----------- --------------
44
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
COMPARABLE COMPANIES ANALYSIS
($ in thousands, except per share data) Evergreen HS
Majerus Resources Resources
---------- ---------- ----------------
BALANCE SHEET INFORMATION (OOO):
Cash and equivalents 416 1,614 980
Total current assets 3,333 6,923 89,068
Other assets 289 4,150 --
Total current liabilities 3,447 8,444 129,331
Short-term debt 1,833 -- 20,445
Long-term debt at book value (excl. current) 14,043 22,500 547,738
Long-term liabilities -- -- 20,471
Minority Interest -- -- --
Preferred stock at book value 2,500 -- --
Liquidation Value of Redeemable Preferred Stock 2,500 -- --
Common Stock Equity 35,096 160,769 178,502
---------- ---------- ----------
Total Book Capitalization $ 51,639 $ 183,269 $ 726,240
---------- ---------- ----------
RESERVE INFORMATION 12/31/99 12/31/99 12/31/99
Accounting Method SE FC FC
Reserve Engineers Lee Keeling NSA Williamson, NSA
Total proved
Petroleum liquids (MBbls) 18,889 -- 40,628
Natural gas (MMcf) 43,432 559,418 867,781
---------- ---------- ----------
Total Equivalents (MMcfe) (6:1 basis) 156,764 559,418 1,111,549
---------- ---------- ----------
Proved developed
Petroleum liquids (MBbls) 10,774 -- 24,268
Natural gas (MMcf) 24,142 334,804 585,465
Natural Gas as a % of Total MMcfe 27.7% 100.0% 78.1%
Proved Developed as a % of Total MMCfe 56.6% 59.8% 65.8%
Annual oil production (MBbls) 230 -- 2,410
Annual gas production (MMcf) 630 13,656 58,799
---------- ---------- ----------
Total Equivalent Production (MMcfe) (6:1 basis) 2,008 13l,656 73,259
---------- ---------- ----------
Present value of pre-tax FNR @10% (000) 153,783 331,384 1,051,064
Reserve Life (Yrs) 78.1 41.0 15.2
3 Year Reserve Replacement 1667% 1459% 229%
($ in thousands, except per share data) Inland Mallon Patina
Resources Resources Oil & Gas
------------ ---------- ---------
BALANCE SHEET INFORMATION (OOO):
Cash and equivalents 791 1,681 626
Total current assets 6,887 4,118 19,350
Other assets 1,685 2,332 1,292
Total current liabilities 4,497 7,139 19,108
Short-term debt -- 414 --
Long-term debt at book value (excl. current) 81,668 38,664 132,000
Long-term liabilities -- -- 13,218
Minority Interest -- -- --
Preferred stock at book value 77,414 1,344 24
Liquidation Value of Redeemable Preferred Stock 98,321 1,352 59,600
Common Stock Equity (85,612) 16,825 165,866
---------- ---------- -------
Total Book Capitalization $ 73,470 $ 56,833 297,890
---------- ---------- -------
RESERVE INFORMATION 12/31/99 12/31/99 12/31/99
Accounting Method SE SE SE
Reserve Engineers Ryder Scott RS NSA
Total proved
Petroleum liquids (MBbls) 47,129 1,896 17,420
Natural gas (MMcf) 60,935 92,525 361,261
---------- ---------- -------
Total Equivalents (MMcfe) (6:1 basis) 343,709 103,901 465,781
---------- ---------- -------
Proved developed
Petroleum liquids (MBbls) 16,634 1,204 16,633
Natural gas (MMcf) 15,476 38,539 307,560
Natural Gas as a % of Total MMcfe 17.7% 89.1% 77.6%
Proved Developed as a % of Total MMCfe 33.5% 44.0% 87.5%
Annual oil production (MBbls) 1,165 172 1,653
Annual gas production (MMcf) 2,901 5,600 29,477
---------- ---------- -------
Total Equivalent Production (MMcfe) (6:1 basis) 9,891 6,632 39,395
---------- ---------- -------
Present value of pre-tax FNR @10% (000) 274,563 72,312 473,599
Reserve Life (Yrs) 34.7 15.7 11.8
3 Year Reserve Replacement 1110% 499% 130%
45
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
COMPARABLE COMPANIES ANALYSIS
($ in thousands, except per share data) Evergreen HS Inland Mallon Patina
Majerus Resources Resources Resources Resources Oil & Gas
--------- ---------- ---------- ---------- ---------- ----------
SELECTED VALUATION RATIOS:
TMCR/SEC Pre-tax PV @ 10% 19.6% 128.5% 108.3% 69.7% 146.6% 108.1%
TMCR/Mcfe $ 0.19 $ 0.76 $ 1.02 $ 0.56 $ 1.02 $ 1.10
FORWARD ESTIMATES AND MULTIPLES (1):
EPS
2000 Estimate (0.24) 0.66 2.53 NA (0.35) 1.63
2001 Estimate (0.02) 1.01 3.26 NA 0.24 1.34
2000 Multiple -8.1x 41.5x 11.8x NA -25.4x 12.2x
2001 Multiple -96.9x 27.1x 9.1x NA 37.0x 14.8x
CFPS
2000 Estimate 0.12 1.42 8.69 NA 0.98 3.87
2001 Estimate 0.30 2.16 9.99 NA 2.11 3.84
2000 Multiple 16.1x 19.3x 3.4x NA 9.1x 5.1x
2001 Multiple 6.5x 12.7x 3.0x NA 4.2x 5.2x
EBITDA
2000 Estimate 2,357 48,351 214,463 NA 8,758 71,786
2001 Estimate 4,442 42,253 238,326 NA 17,708 71,597
2000 Multiple 12.9x 8.9x 5.3x NA 12.4x 7.2x
2001 Multiple 6.9x 10.2x 4.8x NA 6.1x 7.2x
SELECTED LEVERAGE AND COVERAGE RATIOS:
LTD as a % of Book Capitalization 32.0% 12.3% 75.4% 245.0% 70.4% 64.3%
LTD as a % of Pre-tax PV10 10.8% 6.8% 52.1% 65.6% 55.3% 40.5%
Net Debt as a % of Enterprise Value 58.9% 4.9% 49.8% 92.9% 35.8% 37.2%
(1) Majerus EPS, CFPS and EBITDA provided by the Company assuming Raton
Basin operations are terminated. All other EPS, CFPS and EBITDA
estimates are from First Call and various Wall Street research reports.
46
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
D. COMPARABLE TRANSACTIONS ANALYSIS
- --------------------------------------------------------------------------------
47
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
IMPLIED VALUATION BASED UPON COMPARABLE CORPORATE TRANSACTIONS
($ in thousands except per share data) TMCR/
MCFE
---------------
================================================================================
COMPARABLE COMPANY MULTIPLES
- --------------------------------------------------------------------------------
Mean $ 0.51
MEDIAN 0.49
High 0.70
Low 0.38
================================================================================
- --------------------------------------------------------------------------------
MAJERUS PARAMETER (1) 156,764
- --------------------------------------------------------------------------------
================================================================================
IMPLIED ENTERPRISE VALUATION
- --------------------------------------------------------------------------------
Mean $ 80,416
MEDIAN 76,489
High 109,457
Low 59,008
================================================================================
At March 31, 2000
Total Debt $ 15,876
Preferred Stock 2,500
CIG Liability 6,508
Cash & Equivalents 416
Other Tangible Assets --
================================================================================
IMPLIED EQUITY VALUATION
- --------------------------------------------------------------------------------
Mean $ 59,948
MEDIAN 52,020
High 84,988
Low 34,540
================================================================================
================================================================================
Shares Outstanding (2) 6,458
================================================================================
================================================================================
IMPLIED EQUITY VALUATION PER SHARE
- --------------------------------------------------------------------------------
Mean $ 8.66
MEDIAN 8.05
High 13.16
Low 5.35
================================================================================
(1) As of January 1, 2000. Adjusted for purchase of properties from an affiliate
of Knight.
(2) Shares outstanding on March 31, 2000.
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
PSI ESTIMATED VALUE RANGE BASED UPON COMPARABLE CORPORATE TRANSACTIONS
($ in thousands except per share data) PSI ESTIMATED VALUATION RANGE
-------------------------------------------------------------------------------
MAJERUS RANGE OF VALUATION MULTIPLIED ENTERPRISE VALUATION
PARAMETERS LOW MEDIAN HIGH LOW MEDIAN HIGH
---------- ------- ------- ----- ------- ------- -------
CORPORATE TRANSACTIONS
Majerus Total Market Cap of Reserves/
Total Proved Reserves (Mcfe) (1) 156,764 $ 0.44 $ 0.49 $0.54 $68,840 $76,489 $84,137
-----------------------------------------------------------
ENTERPRISE VALUE RANGE $68,840 $76,489 $84,137
Total Debt (2) 15,876 15,876 15,876
Preferred Stock (2) 2,500 2,500 2,500
CIG Liability 6,414 6,508 6,606
Cash & Equivalents (2) 416 416 416
------- ------- -------
EQUITY VALUE $44,466 $52,020 $59,571
Shares Outstanding (2) 6,458 6,458 6,458
------- ------- -------
EQUITY VALUE PER SHARE $ 6.89 $ 8.05 $ 9.22
-----------------------------------------------------------
(1) As of January 1, 2000. Adjusted for purchase of properties from an affiliate
of Knight.
(2) As of March 31, 2000.
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
COMPARABLE CORPORATE TRANSACTIONS
PROVED
RESERVES PURCHASE PRICE
(MMCFE) RESERVE OF RESERVES OTHER
BUYER DATE SIZE PERCENT LIFE -------------- ASSETS REGION
SELLER CLOSED $MM GAS (YEARS) $MM $/Mcfe ($MM) LOCATION(S)
- -------------------------------- ---------- ------ -------- ------- ------ ------ ------ -------------------------------------
Melrose Petroleum Group Limited 5/21/97 $ 22.1 47.1 21.2 $ 20.3 $ 0.43 $ 1.8 Gulf Coast - onshore
Pentex Energyplc 17.2% N/A
Windsor Energy Corp. 7/1/97 $ 24.9 51.0 18.6 $ 24.9 $ 0.49 $ -- Gulf Coast -- onshore
SMK Energy Corp. 18.8% Louisiana/Texas
Columbia Energy Corp. 8/7/97 $ 97.9 147.8 21.4 $ 87.9 $ 0.59 $10.0 Appalachia
Alamco, Inc. 91.9% N/A
Seneca Resources Corp. 5/5/98 $ 81.3 134.0 22.3 $ 70.8 $ 0.53 $10.5 West Coast
HarCor Energy, Inc. 55.7% California
Quicksilver Resources Inc. 3/4/99 $ 31.6 78.0 66.1 $ 29.4 $ 0.38 $ 2.2 Gulf Coast -- onshore/Rocky Mountains
MSR Exploration Ltd. 27.2% Montana/Texas
Prize Energy Corp. 2/8/00 $ 91.8 127.4 15.0 $ 89.0 $ 0.70 $ 2.9 Gulf Coast -- onshore/Mid-Continent
Vista Energy Resources, Inc. 30.1% New Mexico/Texas
Flying J Oil & Gas Inc. 3Q2000 est $166.8 343.7 34.7 $162.7 $ 0.47 $ 4.1 Monument Butte Field Uinta Basin
Inland Resources Inc. 17.7% Northeastern Utah
--------------------------
MEAN $ 0.51
MEDIAN $ 0.49
HIGH $ 0.70
LOW $ 0.38
--------------------------
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
IMPLIED VALUATION BASED UPON COMPARABLE PROPERTY TRANSACTIONS
-------
($ in thousands except per share data) TMCR/
Mcfe
-------
================================================================================
COMPARABLE COMPANY MULTIPLES
- --------------------------------------------------------------------------------
Mean 0.47
Median 0.38
High 0.97
Low 0.29
================================================================================
================================================================================
Majerus Parameter (1) 156,764
================================================================================
================================================================================
IMPLIED ENTERPRISE VALUATION
- --------------------------------------------------------------------------------
Mean 72.991
Median 58,787
High 152,815
Low 46,225
================================================================================
At March 31, 2000
Total Debt 15,876
Preferred Stock 2,500
CIG Liability 6,508
Cash & Equivalents 416
Other Tangible Assets --
================================================================================
IMPLIED EQUITY VALUATION
- --------------------------------------------------------------------------------
Mean 48,522
Median 34,318
High 128,346
Low 21,757
================================================================================
================================================================================
Shares Outstanding (2) 6,458
================================================================================
================================================================================
IMPLIED EQUITY VALUATION PER SHARE
- --------------------------------------------------------------------------------
Mean 7.51
Median 5.31
High 19.87
Low 3.37
================================================================================
- ----------
(1) As of January 1, 2000. Adjusted for purchase of properties from an affiliate
of Knight.
(2) Shares outstanding on March 31, 2000.
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
PSI ESTIMATED VALUE RANGE BASED UPON COMPARABLE PROPERTY TRANSACTIONS
($ in thousands except per share data) PSI ESTIMATED VALUATION RANGE
------------------------------------------------------------------------------------
MAJERUS RANGE OF VALUATION MULTIPLIED ENTERPRISE VALUATION
PARAMETERS LOW MEDIAN HIGH LOW MEDIAN HIGH
---------- -------- -------- ------ -------- -------- --------
PROPERTY TRANSACTIONS
Majerus Total Market Cap of Reserves/
Total Proved Reserves (Mcfe) (1) 156,764 $ 0.34 $ 0.38 $0.41 $ 52,908 $ 58,787 $ 64,665
ENTERPRISE VALUE RANGE $ 52,908 $ 58,787 $ 64,665
Total Debt (2) 15,876 15,876 15,876
Preferred Stock (2) 2,500 2,500 2,500
CIG Liability 6,414 6,508 6,606
Cash & Equivalents (2) 416 416 416
-------- -------- --------
EQUITY VALUE $ 28,534 $ 34,318 $ 40,099
Shares Outstanding (2) 6,458 6,458 6,458
-------- -------- --------
EQUITY VALUE PER SHARE $ 4.42 $ 5.31 $ 6.21
-------- -------- --------
- ----------
(1) As of January 1, 2000. Adjusted for purchase of properties from an affiliate
of Knight.
(2) As of March 31, 2000.
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
COMPARABLE PROPERTY TRANSACTIONS
PROVED
RESERVES PURCHASE PRICE
(MMCFE) RESERVE OF RESERVES OTHER
BUYER DATE SIZE PERCENT LIFE -------------- ASSETS REGION
SELLER CLOSED $MM GAS (YEARS) $MM $/MCFE ($MM) LOCATION(S)
- -------------------------------------- -------- ----- -------- ------- ----- ------ ------ ---------------
Energen Corporation 4/4/97 $77.8 225.0 32.1 $77.8 $0.35 $ -- Rocky Mountains
Burlington Resources Inc. 95.0% New Mexico
Cabot Oil & Gas Corp. 10/3/97 $44.0 74.0 20.3 $43.3 $0.59 $ 0.7 Rocky Mountains
Equitable Resources, Inc. 95.0% Wyoming
Conoco Inc. 12/15/97 $56.9 101.0 22.1 $55.9 $0.55 $ 1.0 Rocky Mountains
Amoco Corp. 100.0% New Mexico
United States Exploration Inc. 5/15/98 $41.0 139.0 40.8 $41.0 $0.29 $ -- Rocky Mountains
Union Pacific Resources Group Inc. 83.6% Colorado
Bergreen Resources, Inc. 7/2/98 $13.1 40.0 31.3 $13.1 $0.33 $ -- Rocky Mountains
Amoco Corp. 100.0% Colorado
Devon Energy Corp. 7/2/98 $15.4 31.8 29.3 $14.8 $0.47 $ 0.6 Rocky Mountains
Undisclosed 100.0% Wyoming
Ballard Petroleum LLC 1/21/99 $28.8 50.7 16.6 $27.2 $0.54 $ 1.6 Rocky Mountains
Snyder Oil Corp. 97.5% Colorado
Undisclosed 1/29/99 $15.8 42.0 32.9 $15.8 $0.38 $ -- Rocky Mountains
Howell Corp. 100.0% Wyoming
Cabot Oil & Gas Corp. 9/21/99 $17.4 15.8 18.0 $15.4 $0.97 $ 2.0 Rocky Mountains
Undisclosed 100.0% Wyoming
Barrett Resources Corp. 12/16/99 $72.0 143.3 16.4 $47.0 $0.33 $25.0 Rocky Mountains
Undisclosed private company 100.0% Colorado
Barnett Resources Corp. 1/10/00 $10.7 32.0 18.3 $10.7 $0.33 $ -- Rocky Mountains
Undisclosed private company 100.0% Colorado
----------------------------
MEAN $0.47
MEDIAN $0.38
HIGH $0.97
LOW $0.29
----------------------------
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
APPENDIX
- --------------------------------------------------------------------------------
54
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PROJECT MAJERUS
- --------------------------------------------------------------------------------
A. SELECTED 13E-3 TRANSACTION PREMIA
- --------------------------------------------------------------------------------
55