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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-10874
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MESA Inc.
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(Exact name of registrant as specified in its charter)
Texas 75-2394500
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
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(Address of Principal (Zip Code)
Executive Offices)
(214) 444-9001
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(Registrant's telephone number)
(No changes)
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(Former name, former address, and former
fiscal year, if changed since last report)
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
--- ---
Number of shares of common stock outstanding as of the close of business on
August 12, 1996: 64,260,721
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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MESA Inc.
Consolidated Statement of Operations
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(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ -------------------
1996 1995 1996 1995
-------- -------- -------- --------
REVENUES:
Natural gas................. $ 44,243 $ 32,875 $ 94,810 $ 68,731
Natural gas liquids......... 19,979 18,573 43,115 36,779
Oil and condensate.......... 4,484 5,174 8,847 10,567
Other....................... 2,616 2,552 5,193 5,344
-------- -------- -------- --------
71,322 59,174 151,965 121,421
-------- -------- -------- --------
COSTS AND EXPENSES:
Lease operating............. 11,739 10,626 25,283 23,200
Production and other taxes.. 4,893 4,482 10,299 9,227
Exploration charges......... 2,270 933 2,814 2,237
General and administrative.. 8,954 5,763 14,538 12,407
Depreciation, depletion and
amortization............... 22,406 20,290 52,648 41,296
-------- -------- -------- --------
50,262 42,094 105,582 88,367
-------- -------- -------- --------
OPERATING INCOME................. 21,060 17,080 46,383 33,054
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest income............. 3,747 4,191 6,964 8,100
Interest expense............ (36,164) (36,449) (73,913) (73,112)
Gains (losses) on investments 586 (2,804) 9,349 1,749
Gain from collection of
interest from Bicoastal
Corporation................ -- -- 2,548 4,653
Gain from adjustment of
contingency reserve........ 15,000 -- 15,000 --
Other....................... 318 4,029 (727) 3,709
-------- -------- -------- --------
(16,513) (31,033) (40,779) (54,901)
-------- -------- -------- --------
NET INCOME (LOSS)................ $ 4,547 $(13,953) $ 5,604 $(21,847)
======== ======== ========= ========
NET INCOME (LOSS) PER COMMON SHARE.$ .07 $ (.22) $ .09 $ (.34)
======== ======== ========= ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING............ 64,057 64,050 64,053 64,050
======== ======== ========= ========
(See accompanying notes to consolidated financial statements.)
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MESA Inc.
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Consolidated Balance Sheets
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(in thousands, except share data)
June 30, December 31,
ASSETS 1996 1995
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(unaudited)
CURRENT ASSETS:
Cash and cash investments.................... $ 174,391 $ 149,143
Investments.................................. 4 38,280
Accounts and notes receivable................ 45,393 44,734
Other........................................ 5,482 4,590
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Total current assets.................... 225,270 236,747
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PROPERTY, PLANT AND EQUIPMENT:
Oil and gas properties, wells and
equipment using the successful
efforts method of accounting............... 1,916,705 1,900,163
Office and other............................. 40,183 41,603
Accumulated depreciation, depletion
and amortization........................... (908,209) (859,077)
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1,048,679 1,082,689
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OTHER ASSETS:
Restricted cash of subsidiary partnership.... 54,856 57,731
Gas balancing receivable..................... 57,319 56,020
Other........................................ 27,335 31,509
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139,510 145,260
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$1,413,459 $1,464,696
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities on long-term debt......... $ 118,634 $ 101,413
Accounts payable and accrued liabilities..... 27,478 31,068
Interest payable............................. 60,783 60,465
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Total current liabilities............... 206,895 192,946
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LONG-TERM DEBT.................................... 1,083,029 1,135,330
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DEFERRED REVENUE.................................. 15,175 17,578
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OTHER LIABILITIES................................. 34,646 51,838
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CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized
500,000,000 shares and 10,000,000 shares,
respectively; no shares issued and
outstanding................................ -- --
Common stock, $.01 par value, authorized
600,000,000 shares and 100,000,000 shares,
respectively; outstanding
64,260,721 shares and 64,050,009 shares,
respectively............................... 643 640
Additional paid-in capital................... 400,068 398,965
Accumulated deficit.......................... (326,997) (332,601)
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73,714 67,004
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$1,413,459 $1,464,696
========== ==========
(See accompanying notes to consolidated financial statements.)
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MESA Inc.
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Consolidated Statements of Cash Flows
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(in thousands)
(unaudited)
Six Months Ended
June 30
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1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................. $ 5,604 $(21,847)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation, depletion and amortization..... 52,648 41,296
Accreted interest on discount notes.......... -- 39,169
Gains from investments....................... (9,349) (1,749)
Changes in operating receivables and payables (20,053) (18,268)
Changes in investments, net.................. 47,625 15,743
Other........................................ 2,098 (907)
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Cash provided by operating activities........ 78,573 53,437
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................. (19,664) (19,392)
Other............................................. (90) 2,025
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Cash used in investing activities............ (19,754) (17,367)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt...................... (34,865) --
Other............................................. 1,294 3,450
-------- --------
Cash provided by (used in) financing
activities................................. (33,571) 3,450
-------- --------
NET INCREASE IN CASH AND CASH INVESTMENTS.............. 25,248 39,520
CASH AND CASH INVESTMENTS AT BEGINNING OF PERIOD....... 149,143 143,422
-------- --------
CASH AND CASH INVESTMENTS AT END OF PERIOD............. $174,391 $182,942
======== ========
(See accompanying notes to consolidated financial statements.)
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MESA Inc.
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Consolidated Statement of Changes in Stockholders' Equity
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(in thousands)
(unaudited)
Common Stock Additional
--------------- Paid-in Accumulated
Shares Amount Capital Deficit
------ ------ ---------- -----------
BALANCE, December 31, 1995..... 64,050 $640 $398,965 $(332,601)
Net income ............... -- -- -- 5,604
Stock Options Exercised... 211 3 1,103 --
------ ---- -------- ---------
BALANCE, June 30, 1996......... 64,261 $643 $400,068 $(326,997)
====== ==== ========= =========
(See accompanying notes to consolidated financial statements.)
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MESA Inc.
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Notes to Consolidated Financial Statements
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June 30, 1996
(unaudited)
MESA Inc., a Texas corporation, was formed in 1991 in connection with a
transaction which reorganized the business of Mesa Limited Partnership (the
"Partnership") into corporate form. The Partnership was formed in 1985 to
succeed to the business of Mesa Petroleum Co. ("Original Mesa"). Unless the
context otherwise requires, as used herein the term "Mesa" refers to MESA Inc.
and its subsidiaries taken as a whole and includes its predecessors.
The consolidated financial statements of Mesa for the three and six month
periods ended June 30, 1996 and 1995, are unaudited but reflect, in the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to fairly present the results for such periods. The
preparation of the consolidated financial statements of Mesa in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from the estimates. The
accompanying financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto contained in Mesa's
Annual Report on Form 10-K ("Form 10-K") for the year ended December 31, 1995.
(1) RECAPITALIZATION
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In August of 1996, Mesa completed a recapitalization of its balance sheet
by issuing new equity and repaying and refinancing substantially all of its
then existing long-term debt. The structure and effects of the
Recapitalization are described below.
Equity Infusion
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On April 26, 1996, Mesa entered into a stock purchase agreement with
DNR-MESA Holdings L.P., a Texas limited partnership ("DNR"), whose sole general
partner is Rainwater Inc., a Texas corporation owned by Richard E. Rainwater.
The agreement contemplated that Mesa would issue $265 million in new preferred
equity and would repay and/or refinance substantially all of its $1.2 billion
of existing debt (the "Recapitalization"). The sale of shares to DNR and
certain other matters were approved by Mesa's stockholders at a special meeting
on June 25, 1996. On July 2, 1996, DNR purchased, in a private placement,
approximately 58.8 million shares of a new class of Series B 8% Cumulative
Convertible Preferred Stock ("Series B Preferred"). On July 5, 1996, Mesa
commenced a rights offering for approximately 58.6 million shares of a new
class of Series A 8% Cumulative Convertible Preferred Stock ("Series A
Preferred") to its existing stockholders (the "Rights Offering"). DNR
provided a standby commitment to purchase an additional number of shares of
Series B Preferred equal to the number of shares of Series A Preferred not
subscribed to in the Rights Offering. Stockholders received .912 rights in
respect of each share of common stock held. Each full right was exercisable
for one share of Series A Preferred at an exercise price of $2.26 per share,
the same per share price at which DNR purchased shares of Series B Preferred.
On August 5, 1996, the Rights Offering closed. On August 8, 1996, Mesa issued
approximately 58.6 million shares of Series A Preferred to rights holders who
exercised their rights. Because the rights offering was oversubscribed, DNR
was not required to purchase additional Series B Preferred pursuant to its
standby commitment.
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Each share of Series A and B Preferred is convertible into one share of
Mesa common stock at any time prior to mandatory redemption in 2008. After
2006, at the option of Mesa's non-series B directors, Mesa has the right to
redeem any outstanding Series A and Series B Preferred shares for common stock
or cash. At mandatory redemption in 2008, the remaining Series A and B
Preferred shares will be converted into common stock or cash at the option of
Mesa's non-series B directors. An annual 8% pay-in-kind dividend will be paid
quarterly on the shares during the first four years following issuance.
Thereafter, the 8% dividend may, at the option of Mesa, be paid in cash or
additional preferred shares, depending on whether certain financial tests are
met and subject to any limitations in Mesa's debt agreements.
The Series A and B Preferred represent 64.6% of the fully diluted common
shares at the time of issuance and will represent 71.5% of such shares after
the mandatory four-year pay-in-kind period, excluding stock options and
assuming no other stock issuance by Mesa. The Series A and B Preferred have a
liquidation preference per share equal to $2.26 plus accrued and unpaid
dividends. The terms of the Series A and Series B Preferred are substantially
identical except for certain voting rights and certain provisions relating to
transferability. The Series A and B Preferred will vote with the common stock
as a single class on all matters, except as otherwise required by law and
except for (i) the right of the holders of the Series B Preferred to nominate
and elect a majority of Mesa's Board of Directors for so long as DNR and its
affiliates meet certain minimum stock ownership requirements, and (ii) the
right of the holders of the Series A Preferred to elect two directors in the
event of certain dividend arrearages. As a result of the stock issuances, DNR
owns approximately 32.4% of Mesa's fully diluted common shares.
New Debt
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In conjunction with the issuance of Series A and B Preferred, Mesa entered
into a new seven-year $525 million secured revolving credit facility ("New
Credit Facility") with a group of banks. Mesa also issued and sold $475
million of senior subordinated notes consisting of $325 million of 10-5/8%
senior subordinated notes due in 2006 ("Senior Subordinated Notes") and $150
million of 11-5/8% senior subordinated discount notes due in 2006 ("Senior
Discount Notes"). (See Note 3 for a more detailed description of the new
debt.)
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Use of Proceeds
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The total proceeds from the issuance of the new equity and new long-term
debt, together with certain cash and investments on hand, were used to repay
and refinance then existing long-term debt and transaction costs as follows:
Amounts
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(In millions)
Sources
New Credit Facility.......................................... $ 365.0
Senior Subordinated Notes.................................... 325.0
Senior Discount Notes........................................ 150.1
Series A and B Preferred Stock............................... 265.4
Cash and investments......................................... 159.8
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Total sources........................................... $1,265.3
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Uses
Repayment of HCLP Secured Notes............................... $ 492.3
Repayment of Former Credit Facility........................... 38.6
Redemption of 12-3/4% Secured Discount Notes due June 30 1998. 617.4
Redemption of 13-1/2% Subordinated Notes due May 1, 1999...... 7.6
Prepayment premium with respect to HCLP Secured Notes......... 50.9
Fees and expenses............................................. 33.5
Accrued interest.............................................. 25.0
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Total uses............................................... $1,265.3
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See Note 3 for a description of Mesa's existing long-term debt at June 30,
1996 before completion of the Recapitalization. The fees and expenses
associated with the Recapitalization consist primarily of underwriter fees,
preferred stock commitment fees, legal fees, printing and mailing costs and
accounting fees. The fees associated with the Series A and B Preferred stock
will be offset against the proceeds of the issuance of the shares and reflected
in additional paid-in capital on the consolidated balance sheet. The fees
relating to the issuance of new debt will be capitalized and amortized over the
term of the associated debt.
An extraordinary loss totaling approximately $62 million on the
extinguishment of long-term debt will be recognized in the third quarter of
1996. The loss will consist primarily of the $50.9 million HCLP Secured Note
prepayment premium and approximately $11 million of unamortized debt issuance
costs and premiums associated with the debt that was repaid and refinanced.
Effect of the Recapitalization
- ------------------------------
On June 30, 1996, Mesa's direct subsidiaries were Mesa Operating Co.
("MOC"), Mesa Holding Co. ("MHC") and Hugoton Management Co. ("HMC"). MOC
owned all of Mesa's interest in the West Panhandle field of Texas, the Gulf
Coast and the Rocky Mountain areas, as well as an approximate 99% limited
partnership in Hugoton Capital Limited Partnership ("HCLP"). MHC owned cash,
an approximate 1% limited partnership interest in HCLP and 100% of Mesa
Environmental Ventures Co. ("MEV"), a company established to compete in the
natural gas vehicle business. HMC owned the general partnership interest in
HCLP. HCLP owned substantially all of Mesa's Hugoton field natural gas
properties.
In conjunction with the recapitalization of Mesa on July 2, 1996, MHC,
HCLP and HMC merged into MOC. As a result, MOC now owns substantially all of
Mesa's assets and liabilities, including all of Mesa's oil and gas properties
and all of its long-term debt. MEV is now a subsidiary of MOC.
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The Recapitalization will enhance Mesa's ability to compete in the oil and
gas industry by substantially increasing its cash flow available for investment
and improving its ability to attract capital, which will increase its ability
to pursue investment opportunities. Specifically, Mesa's financial condition
will improve significantly as a result of the Recapitalization due to (i) a
significant reduction in total debt outstanding ($317 million, initially), (ii)
a reduction in annual cash interest expense of approximately $75 million, (iii)
the implementation of a cost savings program designed to initially reduce
annual general and administrative and other operating overhead expenses by
approximately $10 million, and (iv) the extension of maturities on its
long-term debt.
The expected reduction of annual cash interest expense is based on the
following assumptions: (i) average borrowings under the New Credit Facility of
approximately $365 million, excluding letters of credit, and (ii) annual
interest rates of approximately 7% under the New Credit Facility, 10-5/8% under
the Senior Subordinated Notes and 11-5/8% under the Senior Discount Notes.
Actual borrowings and interest rates under the New Credit Facility will
fluctuate over time and will affect Mesa's actual cash interest expense.
Management believes that cash from operating activities, together with as
much as $150 million of availability under the New Credit Facility will be
sufficient for Mesa to meet its debt service obligations and scheduled capital
expenditures, and to fund its working capital needs, for the next several
years. Notwithstanding the Recapitalization, Mesa continues to be highly
leveraged.
(2) INVESTMENTS
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The value of investments are as follows (in thousands):
June 30, December 31,
1996 1995
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NYMEX Futures Contracts:
Margin Cash............................... $ 4 $17,498
Unrealized gain in trading contracts...... -- 7,558
Commodity Price Swaps:
Margin Cash............................... -- 2,434
Unrealized gain (loss) in price swaps..... -- (811)
Natural Gas Options:
Premiums.................................. -- 66
Unrealized gain in trading options........ -- 978
Equity securities:
Cost...................................... -- 10,719
Unrealized loss........................... -- (162)
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Total market value........................ $ 4 $38,280
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For the six months ended June 30, 1996, Mesa recognized net gains of
approximately $9.3 million from its investments compared with net gains for the
same period in 1995 of $1.7 million. These gains do not include gains or
losses from futures contracts accounted for as a hedge of production. Hedge
gains or losses are included in revenues in the period in which the hedged
production occurs.
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The net investment gains and losses recognized during a period include
both realized and unrealized gains and losses. Mesa realized net gains from
investments of $16.9 million for the six months ended June 30, 1996, and $3.6
million for the same period in 1995. At June 30, 1996, Mesa had no open
futures contracts and no unrealized gain or loss on investments.
In 1995 Mesa entered into certain over-the-counter commodity price swap
agreements for trading purposes. Mesa was required to make payments to (or
receive payments from) a counter party based on the differential between a
fixed and a variable price for specified natural gas volumes. Mesa's
agreements were to expire on the last day of trading for April, May and June
1996 natural gas futures contracts as determined by the NYMEX. During the six
months ended June 30, 1996, Mesa closed all of these positions, which related
to 10.1 million British thermal units ("BTUs") of natural gas, at a gain of
$3.4 million.
(3) LONG-TERM DEBT
==============
Long-term debt and current maturities are as follows (in thousands):
June 30, December 31,
1996 1995
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HCLP Secured Notes.......................... $ 492,309 $ 504,674
Former Credit Agreement..................... 38,632 61,131
12-3/4% secured discount notes.............. 618,302 618,518
12-3/4% unsecured discount notes............ 39,725 39,725
13-1/2% subordinated notes.................. 7,390 7,390
Other....................................... 5,305 5,305
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1,201,663 1,236,743
Current maturities.......................... (118,634) (101,413)
---------- ----------
Long-term debt.............................. $1,083,029 $1,135,330
========== ==========
Pursuant to the Recapitalization, on July 2, 1996, Mesa repaid and
refinanced substantially all of its then outstanding long-term debt. See Note
1 for a description of the Recapitalization. Amounts outstanding under
long-term debt agreements subsequent to the Recapitalization are as follows (in
thousands):
July 2, 1996
------------
New Credit Facility................................. $495,000
Senior Subordinated Notes........................... 325,000
Senior Discount Notes............................... 150,097
13-1/2% Subordinated Notes.......................... 7,390
Other............................................... 5,305
--------
982,792
Current maturities(1)............................... (12,695)
--------
Long-term debt...................................... $970,097
========
(1) On July 23, 1996, Mesa notified holders of the 13-1/2% Subordinated
Notes that the notes will be redeemed in full on August 22, 1996. Current
maturities at July 2, 1996 include the 13-1/2% Subordinated Notes.
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MOC is the borrower under the New Credit Facility and all borrowings are
fully and unconditionally guaranteed by MESA Inc. The New Credit Facility,
which is secured by liens on substantially all of Mesa's assets, matures on
June 30, 2003. The borrowing base for the New Credit Facility is determined
based on the value of Mesa's proved oil and gas reserves. Initially the
borrowing base was set at $525 million. As of August 8, 1996, the New Credit
Facility supports Letters of Credit totaling $11 million and Mesa has $149
million of unused borrowing capacity. Borrowings bear interest, at Mesa's
option, at Interbank Eurodollar rates plus 1-1/2%, CD rates plus 1-1/2%, Fed
Funds rates plus 1% or the prime rate plus 1/2%.
The New Credit Facility restricts, among other things, Mesa's ability to
incur additional indebtedness, create liens, pay dividends, acquire stock or
make investments, loans and advances.
The 10.625% Senior Subordinated Notes are unsecured and mature in 2006.
MOC is the issuer of such notes and such notes are fully and unconditionally
guaranteed by MESA Inc. Interest is payable semiannually in cash.
The 11.625% Senior Discount Notes are unsecured and mature in 2006. MOC
is the issuer of such notes and such notes are fully and unconditionally
guaranteed by MESA Inc. Through June 30, 2001, interest will not accrue;
however, the accreted value, as defined, of such notes will increase at a rate
of 11.625% per year, compounded semiannually. Thereafter, through maturity,
interest will be payable semiannually in cash.
The indentures governing the Senior Subordinated Notes and the Senior
Discount Notes contain certain covenants that, among other things, limit the
ability of Mesa and its restricted subsidiaries to incur additional
indebtedness and issue "disqualified stock," pay dividends, make investments,
make certain other restricted payments, enter into certain transactions with
affiliates, dispose of assets, incur liens and engage in mergers and
consolidations.
HCLP Secured Notes
- ------------------
In 1991 HCLP issued $616 million of HCLP Secured Notes in a private
placement with a group of institutional lenders. Proceeds from the issuance
repaid existing bank debt and funded a $66 million restricted cash balance
within HCLP, which was available to supplement cash flows from the HCLP
properties in the event such cash flows were not sufficient to fund principal
and interest payments on the HCLP Secured Notes when due.
On July 2, 1996, pursuant to the Recapitalization, Mesa prepaid the HCLP
Secured Notes. See Note 1. A prepayment premium, based on prevailing interest
rates at the date of redemption, was due upon redemption of the HCLP Secured
Notes totaling $50.9 million. Such premium will be classified as an
extraordinary loss from early extinguishment of debt in the third quarter of
1996 statement of operations.
Former Credit Agreement
- -----------------------
As of June 30, 1996, Mesa had outstanding borrowings of approximately
$38.6 million and letter of credit obligations of $11.0 million under its $82.5
million bank credit facility, as amended (the "Former Credit Agreement"). The
Former Credit Agreement required principal payments of $22.5 million in the
first half of 1996, with the remainder due in June 1997 (including cash
collateralization of letters of credit outstanding at that time).
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On July 2, 1996, pursuant to the Recapitalization, Mesa prepaid all of its
obligations under the Former Credit Agreement. See Note 1.
Discount Notes
- --------------
In August 1993, Mesa issued approximately $435.5 million initial accreted
value ($569.2 million face amount), as defined, of 12-3/4% secured discount
notes due June 30, 1998, $136.9 million initial accreted value ($178.8 million
face amount) of 12-3/4% unsecured discount notes due June 30, 1996 (together,
the "Discount Notes") and $29.3 million principal amount of 0% convertible
notes. The 0% convertible notes were converted into approximately 7.5 million
shares of common stock in 1993. The 12-3/4% unsecured discount notes were paid
at maturity on July 1, 1996.
In 1994, Mesa issued an additional $48.2 million face amount of 12-3/4%
secured discount notes and used the proceeds to settle a lawsuit. Also in
1994, Mesa redeemed $139.1 million face amount of 12-3/4% unsecured discount
notes with proceeds from a public offering of Mesa common stock and from
additional borrowings under the Credit Agreement.
On July 2, 1996, pursuant to the Recapitalization, Mesa defeased the
12-3/4% secured discount notes, which have been redeemed. See Note 1.
Subordinated Notes
- ------------------
The 13-1/2% subordinated notes are unsecured and mature in 1999. Interest
on these notes is payable semiannually in cash. Pursuant to the
Recapitalization, these notes have been called for redemption on August 22,
1996.
Interest and Maturities
- -----------------------
The aggregate interest payments, net of amounts capitalized, made during
the six months ended June 30, 1996 and 1995, were $72.6 million and $31.7
million, respectively. The interest payments in the six months ended June 30,
1996 included a $42 million interest payment made on January 2, 1996, according
to terms of the Discount Notes, related to the regular December 31, 1995
interest payment on Mesa's Discount Notes. In addition, on July 1, 1996, Mesa
made a $41.9 million interest payment related to the regular June 30, 1996
interest payment on its Discount Notes. Payment of approximately $40.3 million
of interest expense incurred during the six months ended June 30, 1995 was
deferred under the terms of the Discount Notes until the repayment dates of the
Discount Notes. Such interest is included in interest expense in the
consolidated statements of operations for the six months ended June 30, 1995.
There are no scheduled principal payments under the terms of the New
Credit Facility, the Senior Subordinated Notes or the Senior Discount Notes in
the next five years.
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(4) CONTINGENCIES
=============
Masterson
- ---------
In February 1992 the current lessors of an oil and gas lease (the "Gas
Lease") dated April 30, 1955, between R. B. Masterson, et al., as lessor, and
Colorado Interstate Gas Company ("CIG"), as lessee, sued CIG in Federal
District Court in Amarillo, Texas, claiming that CIG had underpaid royalties
due under the Gas Lease. Under the agreements with CIG, Mesa has an
entitlement to gas produced from the Gas Lease. In August 1992 CIG filed a
third-party complaint against Mesa for any such royalty underpayments which may
be allocable to Mesa. Plaintiffs alleged that the underpayment was the result
of CIG's use of an improper gas sales price upon which to calculate royalties
and that the proper price should have been determined pursuant to a
"favored-nations" clause in a July 1, 1967, amendment to the Gas Lease (the
"Gas Lease Amendment"). The plaintiffs also sought a declaration by the court
as to the proper price to be used for calculating future royalties.
The plaintiffs alleged royalty underpayments of approximately $500 million
(including interest at 10%) covering the period from July 1, 1967, to the
present. In March 1995 the court made certain pretrial rulings that eliminated
approximately $400 million of the plaintiffs' claims (which related to periods
prior to October 1, 1989), but which also reduced a number of Mesa's defenses.
Mesa and CIG filed stipulations with the court whereby Mesa would have been
liable for between 50% and 60%, depending on the time period covered, of an
adverse judgment against CIG for post-February 1988 underpayments of royalties.
On March 22, 1995, a jury trial began and on May 4, 1995, the jury
returned its verdict. Among its findings, the jury determined that CIG had
underpaid royalties for the period after September 30, 1989, in the amount of
approximately $140,000. Although the plaintiffs argued that the
"favored-nations" clause entitled them to be paid for all of their gas at the
highest price voluntarily paid by CIG to any other lessor, the jury determined
that the plaintiffs were estopped from claiming that the "favored-nations"
clause provides for other than a pricing-scheme to pricing-scheme comparison.
In light of this determination, and the plaintiffs' stipulation that a
pricing-scheme to pricing-scheme comparison would not result in any "trigger
prices" or damages, defendants asked the court for a judgment that plaintiffs
take nothing. The court, on June 7, 1995, entered final judgment that
plaintiffs recover no monetary damages. The plaintiffs have filed a motion for
new trial on which the court has not yet ruled. Mesa cannot predict whether
the court will grant such motion or, if it does not, whether the plaintiffs
will appeal the court's final judgment. However, based on the jury verdict and
final judgment, Mesa does not expect the ultimate resolution of this lawsuit to
have a material adverse effect on its financial position or results of
operations.
On June 7, 1996, the plaintiffs filed a separate suit against CIG and Mesa
in state court in Amarillo, Texas, similarly claiming underpayment of royalties
under the "favored-nations" clause, but based upon the above-described
pricing-scheme to pricing-scheme comparison on a well-by-well monthly basis.
The plaintiffs also claim underpayment of royalties since June 7, 1995 under
the "favored-nations" clause based upon either the pricing-scheme to
pricing-scheme method or their previously alleged higher price method. Mesa
believes it has several defenses to this action and intends to contest it
vigorously. Mesa has not yet determined the amount of damages, if any, that
would be payable if such action were determined adversely to Mesa.
The federal court in the above-referenced first suit issued an order on
July 29, 1966 which stayed the state suit pending a decision by the court on
plaintiff's motion for new trial.
13
14
Thompson
- --------
In May 1996, the current lessors of an oil and gas lease dated October 8,
1958 between Terry Thompson, Jr., et al., as Lessor, and CIG, as Lessee, sued
CIG in state court in Amarillo claiming CIG has underpaid royalties based upon
allegations that CIG failed to develop, produce and market the gas properly.
Mesa is not currently a party of this litigation; however, if CIG is found to
be liable for any such underpayments, it may seek to recover from Mesa the
portion of such underpayments which may be allocable to Mesa. Mesa believes
there are several defenses to this action and, to the extent Mesa becomes a
party, intends to contest such action vigorously. Mesa has not yet determined
the amount of damages, if any, that would be payable if such action were
determined adversely to Mesa.
Mesa does not expect the resolution of this lawsuit to have a material
adverse effect on its financial position or results of operations.
Lease Termination
- -----------------
In 1991 Mesa sold certain producing oil and gas properties to Seagull
Energy Company ("Seagull"). In 1994, two lawsuits were filed against Seagull
in the 100th District Court in Carson County, Texas, by certain land and
royalty owners claiming that certain of the oil and gas leases owned by Seagull
have terminated due to cessation in production and/or lack of production in
paying quantities occurring at various times from first production through
1994. In the third quarter of 1995, Seagull filed third-party complaints
against Mesa claiming breach of warranty and false representation in connection
with the sale of such properties to Seagull. Seagull filed a similar
third-party complaint June 29, 1995, against Mesa covering a different lease in
the 69th District Court in Moore County, Texas. The plaintiffs in the cases
against Seagull are seeking to terminate the leases. Seagull, in its complaint
against Mesa, is seeking unspecified damages relating to any leases which are
terminated. Mesa believes it has several defenses to these lawsuits, including
a two-year limitation on indemnification set forth in the purchase and sale
agreement pursuant to which Mesa sold the properties.
Mesa does not expect the resolution of this lawsuit to have a material
adverse effect on its financial position or results of operations.
Other
- -----
Mesa is also a defendant in other lawsuits and has assumed liabilities
relating to Original Mesa and the Partnership. Mesa does not expect the
resolution of these other matters to have a material adverse effect on its
financial position or results of operations.
14
15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- --------------------------------------------------------------------------------
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
===============================================
This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Form 10-Q, including without
limitation, the statements under "Capital Resources and Liquidity" and Notes 1
and 3 to the consolidated financial statements of Mesa regarding MESA Inc.'s
("Mesa") financial position and liquidity, its ability to make debt service
payments and other matters are forward-looking statements. Although Mesa
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from Mesa's expectations ("Cautionary Statements") are disclosed in
this Form 10-Q, including without limitation, and in Mesa's Form 10-K for the
year ended December 31, 1995, in conjunction with the forward-looking
statements included in this Form 10-Q. All subsequent written and oral
forward-looking statements attributable to Mesa or persons acting on its behalf
are expressly qualified in their entirety by the Cautionary Statements.
RESULTS OF OPERATIONS
=====================
Mesa reported net income of $4.5 million in the second quarter of 1996
compared with a net loss of $14.0 million in the second quarter of 1995. Mesa
had net income of $5.6 million for the six months ended June 30, 1996 compared
with a net loss of $21.8 million for the same period in 1995.
The following table presents a summary of the results of operations of
Mesa for the periods indicated (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenues....................... $ 71,322 $ 59,174 $151,965 $121,421
Operating and
administrative costs.......... (27,856) (21,804) (52,934) (47,071)
Depreciation, depletion
and amortization.............. (22,406) (20,290) (52,648) (41,296)
-------- -------- -------- --------
Operating income............... 21,060 17,080 46,383 33,054
Interest expense, net
of interest income............ (32,417) (32,258) (66,949) (65,012)
Other.......................... 15,904 1,225 26,170 10,111
-------- -------- -------- --------
Net income (loss).............. $ 4,547 $(13,953) $ 5,604 $(21,847)
======== ======== ======== ========
15
16
Revenues
--------
The table below presents, for the periods indicated, the revenues,
production and average prices received from sales of natural gas, natural gas
liquids and oil and condensate.
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenues (in thousands):
Natural gas............... $ 44,243 $ 32,875 $ 94,810 $ 68,731
Natural gas liquids....... 19,979 18,573 43,115 36,779
Oil and condensate........ 4,484 5,174 8,847 10,567
-------- -------- -------- --------
Total................ $ 68,706 $ 56,622 $146,772 $116,077
-------- -------- -------- --------
Natural Gas Production
(million cubic feet):
Hugoton................... 12,111 12,978 25,054 25,677
West Panhandle............ 4,097 4,516 9,568 9,443
Other..................... 4,757 1,487 8,454 3,736
-------- -------- -------- --------
Total................ 20,965 18,981 43,076 38,856
-------- -------- -------- --------
Natural Gas Liquids Production
(thousand barrels):
Hugoton................... 842 934 1,712 1,864
West Panhandle............ 617 653 1,457 1,349
Other..................... 58 14 71 29
-------- -------- -------- --------
Total................ 1,517 1,601 3,240 3,242
======== ======== ======== ========
Oil and Condensate Production
(thousand barrels):
Hugoton................... -- -- -- --
West Panhandle............ 42 19 76 36
Other..................... 192 285 402 590
-------- -------- -------- --------
Total................. 234 304 478 626
======== ======== ======== ========
Average Prices:
Natural gas (per thousand
cubic feet).............. $ 2.06 $ 1.71 $ 2.17 $ 1.71
Natural gas liquids
(per barrel)............. $ 13.17 $ 11.60 $ 13.52 $ 11.39
Oil and condensate
(per barrel)............. $ 19.54 $ 16.98 $ 18.55 $ 16.74
Mesa's natural gas equivalent production was 3 percent higher in the
second quarter of 1996 and 5 percent higher for the six-month period ended June
30, 1996 as compared to the same periods in 1995. The increase in production
is primarily due to Mesa's success in the Gulf of Mexico.
Mesa's natural gas price increased 20 percent, natural gas liquids
increased 14 percent, and oil prices increased 15 percent in the second quarter
of 1996 as compared to 1995. The natural gas, natural gas liquids and oil
prices for the six-month period ended June 30, 1996 increased 27 percent, 19
percent and 11 percent, respectively, as compared to 1995.
16
17
Approximately 90 percent of Mesa's 1996 natural gas production was sold at
market prices. The remaining 10 percent was sold under a fixed-price contract.
From time to time, Mesa hedges its production; however, in the first half of
1996, Mesa hedged none of its production. Amortization of deferred gains and
losses from hedging activities are included in revenues when the hedged
production occurs. Mesa recognized $6.4 million in the second quarter of 1995
and $11.3 million in the six months ended June 30, 1995 of hedge gains as
natural gas revenues. The following table shows the effect of hedging
activities on Mesa's natural gas prices:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
------- ------- ------- -------
Natural gas prices (per Mcf):
Actual price received
for production.......... $ 2.06 $ 1.37 $ 2.17 $ 1.42
Effect of hedging
activities.............. -- .34 -- .29
------- ------- ------- -------
Average price............. $ 2.06 $ 1.71 $ 2.17 $ 1.71
======= ======= ======= =======
In the second quarter of 1996, Mesa hedged a portion of its natural gas
liquids and oil production for the second half of 1996. These positions were
also closed in the second quarter of 1996 and Mesa realized a net loss of $.9
million which will be recognized in the second half of 1996 as the hedged
production occurs.
Costs and Expenses
------------------
Mesa's costs and expenses increased from $42.1 million in the second
quarter of 1995 to $50.3 million for the same period in 1996. Lease operating
expense increased due to higher production costs in the West Panhandle field
and higher production. Production and other taxes were higher due to increased
revenues resulting from higher prices partially offset by lower tax rates for
Hugoton field production. Exploration charges were greater, reflecting
increased exploration activities in the Gulf of Mexico and consist primarily of
exploratory dry-hole expense. General and administrative ("G&A") expenses
increased due to a $3.6 million charge associated with a reduction in
personnel. Depreciation, depletion and amortization ("DD&A") expense, which is
calculated quarterly on a unit-of-production basis, was higher primarily due to
increased production.
Mesa's costs and expenses increased from $88.4 million to $105.6 million
in the six-month period ended June 30, 1996, compared to the same period in
1995. Lease operating expense increased due to higher production costs in the
West Panhandle field and higher production. Production and other taxes were
higher due to increased revenues resulting from higher prices partially offset
by lower tax rates for Hugoton field production. Exploration charges were
greater, reflecting increased exploration activities in the Gulf of Mexico and
consist primarily of exploratory dry-hole expense. G&A expenses increased due
to a $3.6 million charge associated with a reduction in personnel. DD&A
expense, which is calculated quarterly on a unit-of-production basis, was
higher primarily due to increased production and an impairment of long-lived
assets of approximately $6.8 million in accordance with the adoption of a new
accounting requirement (SFAS No. 121).
17
18
Other Income (Expense)
----------------------
Interest income and interest expense in the three- and six-month periods
ended June 30, 1996 were not materially different from such income and expense
during the same periods in 1995 as average cash balances and aggregate debt
outstanding were not materially different.
Results of operations for the six months ended June 30, 1996 and 1995
include certain items which are either non-recurring or are not directly
associated with Mesa's oil and gas producing operations. The following table
sets forth the amounts of such items for the periods indicated (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
Gains from investments......... $ 586 $ (2,804) $ 9,349 $ 1,749
Gains from collections
from Bicoastal Corporation.... -- -- 2,548 4,653
Gain from adjustment of
contingency reserve........... 15,000 -- 15,000 --
Other.......................... 318 4,029 (727) 3,709
-------- -------- -------- --------
Total Other Income.......... $ 15,904 $ 1,225 $ 26,170 $ 10,111
======== ======== ======== ========
The gains from investments relate to Mesa's investments in marketable
securities and energy futures contracts, which include NYMEX futures contracts,
commodity price swaps and options that are not accounted for as hedges of
future production. Mesa's investments in marketable securities and futures
contracts are valued at market prices at each reporting date with gains and
losses included in the statement of operations for such reporting period
whether or not such gains or losses have been realized.
The gains from collection of interest from Bicoastal Corporation relate to
a note receivable from such company, which was in bankruptcy. Mesa's claims in
the bankruptcy exceeded its recorded receivable. As of June 30, 1996, Mesa had
collected the full amount of its allowed claim plus a portion of the interest
due on such claims. Mesa does not expect any future amounts received from such
company to be significant.
In the second quarter of 1996, Mesa revalued certain contingencies
associated primarily with contracts which were settled in the mid-to-late
1980's. As a result of the revaluation, Mesa recorded a net gain of $15
million in the second quarter of 1996.
CAPITAL RESOURCES AND LIQUIDITY
===============================
In August of 1996, Mesa completed a recapitalization of its balance sheet
by issuing new preferred equity and repaying and refinancing substantially all
of its existing long-term debt (the "Recapitalization"). See Note 1 to the
consolidated financial statements of Mesa included elsewhere in this Form 10-Q
for a detail discussion of the Recapitalization, which discussion is
incorporated herein by reference.
18
19
The Recapitalization will enhance Mesa's ability to compete in the oil and
gas industry by substantially increasing its cash flow available for investment
and improving its ability to attract capital, which will increase its ability
to pursue investment opportunities. Specifically, Mesa's financial condition
will improve significantly as a result of the Recapitalization due to (i) a
significant reduction in total debt outstanding ($317 million, initially), (ii)
a reduction in annual cash interest expense of approximately $75 million, (iii)
the implementation of a cost savings program designed to initially reduce
annual general and administrative and other operating overhead expenses by
approximately $10 million, and (iv) the extension of maturities on its
long-term debt.
The expected reduction of annual cash interest expense is based on the
following assumptions: (i) average borrowings under the New Credit Facility of
approximately $365 million, excluding letters of credit, and (ii) annual
interest rates of approximately 7% under the New Credit Facility, 10-5/8% under
the Senior Subordinated Notes and 11-5/8% under the Senior Discount Notes.
Actual borrowings and interest rates under the New Credit Facility will
fluctuate over time and will affect Mesa's actual cash interest expense.
Management believes that cash from operating activities, together with as
much as $150 million of availability under the New Credit Facility will be
sufficient for Mesa to meet its debt service obligations and scheduled capital
expenditures, and to fund its working capital needs, for the next several
years. Notwithstanding the Recapitalization, Mesa continues to be highly
leveraged.
OTHER
=====
See Note 4 to the consolidated financial statements of Mesa included
elsewhere in this Form 10-Q for information regarding the status of certain
pending litigation.
Mesa recognizes its ownership interest in natural gas production as
revenue. Actual production quantities sold may be different from Mesa's
ownership share of production in a given period. Mesa records these
differences as gas balancing receivables or as deferred revenue. Net gas
balancing underproduction represented approximately 3.7% of total equivalent
production for the six months ended June 30, 1996, compared with 1.6% during
the same period in 1995. The gas balancing receivable or deferred revenue
component of natural gas and natural gas liquids revenues in future periods is
dependent on future rates of production, field allowables and the amount of
production taken by Mesa or by its joint interest partners.
Mesa invests from time to time in marketable equity and other securities,
as well as in energy-related commodity futures contracts, which include NYMEX
futures contracts, price swaps and options. Mesa also enters into natural gas
futures contracts as a hedge against natural gas price fluctuations.
Management does not anticipate that inflation will have a significant
effect on Mesa's operations.
19
20
PART II - OTHER INFORMATION
===========================
Item 1. Legal Proceedings
- --------------------------
Reference is made to Part I, Item 1, Note 4 of this Form 10-Q for
information regarding legal proceedings, which information is incorporated
herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
A special meeting of stockholders was held on June 25, 1996. There were
three matters submitted to the stockholder at the meeting. The results of the
votes were as follows:
1. Approval of the issuance and sale of a minimum of approximately 58.8
million shares and a maximum of approximately 117.3 million shares
(subject to appropriate adjustment to reflect the reverse stock split
described in Proposal Three, if approved) of Series B 8% Cumulative
Convertible Preferred Stock, par value $.01 per share, of MESA Inc.
("Mesa") to DNR-MESA Holdings, L.P., a Texas limited partnership
("DNR"), the sole general partner of which is Rainwater, Inc., at a
price of $2.26 per share on the terms and subject to the conditions
set forth in that certain Stock Purchase Agreement, dated April 26,
1996, between Mesa and DNR.
Votes Cast Number of
------------------------- -----------
For Against Abstentions
---------- --------- -----------
34,459,789 8,236,989 644,979
2. Approval of an amendment of Mesa's Amended and Restated Articles of
Incorporation to (i) increase the number of authorized shares of
Common Stock, par value $.01 per share, of Mesa from 100,000,000 to
600,000,000 (subject to the effect of the reverse stock split
described in Proposal Three, if approved), (ii) increase the number
of authorized shares of Preferred Stock, par value $.01 per share, of
Mesa from 10,000,000 to 500,000,000 (subject to the effect of the
reverse stock split described in Proposal Three, if approved) and
(iii) permit the taking of action by written consent of the holders
of any series of Preferred Stock if and to the extent provided in the
resolution of the Board of Directors establishing any such series.
Votes Cast Number of
------------------------- -----------
For Against Abstentions
---------- --------- -----------
34,153,553 8,532,498 655,706
3. Defeat of an amendment of Mesa's Amended and Restated Articles of
Incorporation to effect (i) a one-for-four reverse stock split of the
outstanding shares of Common Stock, (ii) a reduction of the
authorized shares of Common Stock from 600,000,000 to 150,000,000 and
(iii) a reduction of the authorized shares of Preferred Stock from
500,000,000 to 125,000,000.
Votes Cast Number of
------------------------- -----------
For Against Abstentions
---------- ---------- -----------
30,937,033 10,591,559 1,813,165
21
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits (Asterisk indicates incorporated by reference herein)
*2.1 - Stock Purchase Agreement dated April 29, 1996 between MESA Inc.
And DNR-MESA Holdings, L.P. (Exhibit 10 to April 29, 1996 Form
8-K).
*3.1 - Amended and Restated Articles of Incorporation of MESA Inc.
dated December 31, 1991 (Exhibit 3[a] to Mesa's Form 10-K dated
December 31, 1991).
*3.2 - Statement of Resolution establishing series of notes designated
Series A 8% Cumulative Convertible Preferred Stock and Series B
8% Cumulative Convertible Preferred Stock. (Exhibit 4 to April
29, 1996 8-K).
3.3 - Amended and Restated Bylaws of MESA Inc.
*4.1 - Indenture dated as of May 1, 1993, among MESA Inc., Mesa
Operating Limited Partnership, Mesa Capital Corporation and
Harris Trust and Savings Bank, as Trustee, relating to the
secured discount notes and including (a) a form of Secured
Notes, (b) a form of Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement, dated as of May 1,
1993, between Mesa Operating Limited Partnership and Harris
Trust and Savings Bank, as trustee, securing the Secured Notes,
and (c) a form of Security Agreement, Pledge and Financing
Statement dated as of May 1, 1993, between Mesa Operating
Limited Partnership and Harris Trust and Savings Bank, as
trustee, securing the Secured Notes (Exhibit 4[f] to Mesa's Form
10-Q/A dated June 30, 1993).
*4.2 - First Supplemental Indenture dated as of January 5, 1994, among
MESA Inc., Mesa Operating Co., Mesa Capital Corporation and
Harris Trust and Savings Bank, as Trustee (Exhibit 4.2 to Mesa's
Registration Statement on Form S-1, Registration No. 33-51909).
*4.3 - First Supplement to Security Agreement, Pledge and Financing
Statement dated as of March 2, 1994, by Mesa Operating Co. in
favor of Harris Trust and Savings Bank, as Trustee for the pro
rata benefit of the Noteholders under the Indenture (Exhibit 4.9
to Mesa's Form 10-Q dated March 31, 1994).
*4.4 - Indenture dated as of May 1, 1993, among MESA Inc., Mesa
Operating Limited Partnership, Mesa Capital Corporation and
American Stock Transfer & Trust Company, as Trustee, relating to
the unsecured discount notes (Exhibit 4[g] to Mesa's Form 10-Q/A
dated June 30, 1993).
*4.5 - First Supplemental Indenture dated as of January 5, 1994, among
MESA Inc., Mesa Operating Co., Mesa Capital Corporation and
American Stock Transfer & Trust Company, as Trustee (Exhibit 4.4
to Mesa's Registration Statement on Form S-1, Registration No.
33-51909).
21
22
*4.6 - Indenture dated May 1, 1989, among Mesa Capital Corporation,
Mesa Limited Partnership, Mesa Operating Limited Partnership,
and Texas Commerce Bank National Association, as Trustee
(Exhibit 4[c] to the Partnership's Form 10-Q dated March 31,
1989).
*4.7 - First Supplemental Indenture dated as of December 31, 1991,
among Mesa Capital Corporation, MESA Inc., Mesa Operating
Limited Partnership, as Issuers, and Texas Commerce Bank
National Association, as Trustee (Exhibit 4[e] to Mesa's Form
10-K dated December 31, 1991).
*4.8 - Second Supplemental Indenture dated as of April 30, 1992, among
Mesa Capital Corporation, MESA Inc., Mesa Operating Limited
Partnership and Texas Commerce Bank National Association, as
Trustee (Exhibit 4[k] to Mesa's Form 10-Q dated June 30, 1992).
*4.9 - Third Supplemental Indenture dated as of August 26, 1993, among
Mesa Capital Corporation, MESA Inc., Mesa Operating Limited
Partnership and Texas Commerce Bank National Association, as
Trustee (Exhibit 4[l] to Mesa's Form 10-Q/A dated June 30,
1993).
*4.10 - Fourth Supplemental Indenture dated as of January 5, 1994, among
MESA Inc., Mesa Operating Co., Mesa Capital Corporation and
Texas Commerce Bank National Association, as Trustee (Exhibit
4.16 to Mesa's Registration Statement on Form S-1, Registration
No. 33-51909).
*4.11 - Indenture dated as of May 30, 1991, among Hugoton Capital
Limited Partnership, Hugoton Capital Corporation and Bankers
Trust Company (Exhibit 4[e] to the Partnership's Form 10-Q dated
June 30, 1991).
*4.12 - First Supplemental Indenture dated September 1, 1991, among
Hugoton Capital Limited Partnership, Hugoton Capital Corporation
and Bankers Trust Company, as Trustee (Exhibit 4[h] to Mesa's
Registration Statement on Form S-4, Registration No. 33-42102).
*4.13 - Amended and Restated Mortgage, Assignment, Security Agreement
and Financing Statement dated June 12, 1991, from Hugoton
Capital Limited Partnership to Bankers Trust Company, as
Collateral Agent (Exhibit 4[f] to the Partnership's Form 10-Q
dated June 30, 1991).
*4.14 - Third Amended and Restated Credit Agreement dated as of November
29, 1994, among Mesa, Mesa Operating Co., and the Banks named in
this Credit Agreement and Societe Generale, Southwest Agency, as
Agent (Exhibit 4.7 to Mesa's Form 10-K dated December 31, 1994).
*4.15 - Intercreditor Agreement dated as of August 26, 1993, among
Societe Generale, Southwest Agency, as agent for the Banks under
Mesa's Credit Agreement, Harris Trust and Savings Bank, as
trustee with respect to the Secured Notes, and American Stock
Transfer & Trust Company, as trustee with respect to the
Unsecured Notes (Exhibit 4.18 to Mesa's Registration Statement
on Form S-4, Registration No. 33-53706).
22
23
The Registrant agrees to furnish to the Commission upon request
any instruments defining the right of holders of long-term debt
with respect to which the total amount outstanding does not
exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis.
4.16 - Credit Agreement dated as of July 2, 1996, among Mesa Operating
Co., as Borrower, MESA Inc. and the Banks listed as lenders in
the Credit Agreement and The Chase Manhattan Bank, N.A., as
Administrative Agent, Bankers Trust Company, as Syndication
Agent, and Society Generale, Southwest Agency, as Documentation
Agent.
4.17 - Indenture dated July 2, 1996, among Mesa Operating Co., as
Issuer, MESA Inc., as a Guarantor, and Harris Trust and Savings
Bank as Trustee relating to 11-5.8% Senior Subordinated Discount
Notes Due 2006.
4.18 - Indenture dated July 2, 1996, among Mesa Operating Co., as
Issuer, MESA Inc., as a Guarantor, and Harris Trust and Savings
Bank as Trustee relating to 10-5/8% Senior Subordinated Notes
Due 2006.
*10.1 - Stock Purchase Agreement, dated April 26, 1996, between Mesa and
DNR-MESA Holdings, L.P. (Exhibit No. 10 to Mesa's Form 8-K filed
on April 29, 1996).
*10.2 - Contract dated January 3, 1928, between Colorado Interstate Gas
Company and Amarillo Oil Company (the "B" Contract) (Exhibit
10.1 to Pioneer Corporation's Form 10-K dated December 31,
1985).
*10.3 - Amendments to the "B" Contract (Exhibit 10.2 to Pioneer
Corporation's Form 10-K dated December 31, 1985).
*10.5 - Gathering Charge Agreement dated January 20, 1984, as amended,
with respect to the "B" Contract (Exhibit 10.3 to Pioneer
Corporation's Form 10-K dated December 31, 1985).
*10.5 - Agreement of Compromise and Settlement dated May 29, 1987,
between the Partnership and Colorado Interstate Gas Company
(Confidential Treatment Requested) (Exhibit 10[s] to the
Partnership's Form 10-K dated December 31, 1987).
*10.6 - Agreement of Sale between Pioneer Corporation and Cabot
Corporation dated August 29, 1984 (Exhibit 10.5 to Pioneer
Corporation's Form 10-K dated December 31, 1985).
*10.7 - Settlement Agreement dated March 15, 1989, by and among Mesa
Operating Limited Partnership and Mesa Limited Partnership, et
al, Energas Company and the City of Amarillo (Exhibit 10[k] to
the Partnership's Form 10-K dated December 31, 1990).
*10.8 - Gas Purchase Agreement dated December 1, 1989, between Williams
Natural Gas Company and Mesa Operating Limited Partnership
acting on behalf of itself and as agent for Mesa Midcontinent
Limited Partnership (Exhibit 10.1 to Registration Statement of
the Partnership on Form S-3, Registration No. 33-32978).
23
24
*10.9 - "B" Contract Production Allocation Agreement dated July 29,
1991, and effective as of January 1, 1991, between Colorado
Interstate Gas Company and Mesa Operating Limited Partnership
(Exhibit 10[r] to Mesa's Form 10-K dated December 31, 1991).
*10.10 - Amendment to "B" Contract Production Allocation Agreement
effective as of January 1, 1993, between Colorado Interstate Gas
Company and Mesa Operating Limited Partnership (Exhibit 10.24 to
Mesa's Registration Statement on Form S-1, Registration No.
033-51909).
*10.11 - Amended Supplemental Stipulation and Agreement between Colorado
Interstate Gas Company and Mesa Operating Limited Partnership
dated June 19, 1991 (Exhibit 10[w] to the Partnership's
Registration Statement on Form S-4, Registration No. 33-42102).
*10.12 - Amended Peak Day Gas Purchase Agreement dated effective June 19,
1991, between Colorado Interstate Gas Company and Mesa Operating
Limited Partnership (Exhibit 10[t] to Mesa's Form 10-K dated
December 31, 1991).
*10.13 - Omnibus Amendment to Collateral Instruments to Supplemental
Stipulation and Agreement dated June 19, 1991, between Colorado
Interstate Gas Company and Mesa Operating Limited Partnership
(Exhibit 10[u] to Mesa's Form 10-K dated December 31, 1991).
*10.14 - Amarillo Supply Agreement between Mesa Operating Limited
Partnership, Seller, and Energas Company, a division of Atmos
Energy Corporation, Buyer, dated effective January 2, 1993
(Exhibit 10.14 Mesa's Form 10-K dated December 31, 1995).
*10.15 - Gas Gathering Agreement-Interruptible between Colorado
Interstate Gas Company, Transporter, and Mesa Operating Limited
Partnership, Shipper, dated effective October 1, 1993, as
amended by agreements dated January 1, 1994, January 5, 1994,
and June 1, 1994 (Exhibit 10.15 Mesa's Form 10-K dated December
31, 1995).
*10.16 - Gas Supply Agreement dated May 11, 1994, between Mesa Operating
Co., as successor to Mesa Operating Limited Partnership, acting
on behalf of itself and as agent for Hugoton Capital Limited
Partnership, and Williams Gas Marketing Company, and Gas Supply
Guarantee dated May 11, 1994 (Exhibit 10.14 Mesa's Form 10-K
dated December 31, 1995).
*10.17 - Gas Transportation Agreement dated June 14, 1994, between
Western Resources, Inc. and Mesa Operating Co., acting on behalf
of itself and as agent for Hugoton Capital Limited Partnership
(Exhibit 10.24 to Mesa's Form 10-K dated December 31, 1994).
*10.18 - Incentive Bonus Plan of Mesa Operating Limited Partnership, as
amended, dated effective January 1, 1986 (Exhibit 10[s] to the
Partnership's Form 10-K dated December 31, 1990).
*10.19 - Performance Bonus Plan of Mesa Operating Limited Partnership
dated effective January 1, 1990 (Exhibit 10[t] to the
Partnership's Form 10-K dated December 31, 1990).
24
25
*10.20 - 1991 Stock Option Plan of Mesa (Exhibit 10[v] to Mesa's Form
10-K dated December 31, 1991).
*10.21 - Interruptible Gas Transportation and Sales Agreement dated
January 1, 1991, between Mesa Operating Limited Partnership and
Energas Company and Amendment dated January 1, 1995 (Exhibit
10.22 Mesa's Form 10-K dated December 31, 1995).
*10.22 - "B" Contract Operating Agreement dated January 1, 1988, between
Mesa Operating Limited Partnership and Colorado Interstate Gas
Company (Exhibit 10.23 Mesa's Form 10-K dated December 31,
1995).
*10.23 - "B" Contract Agreement of Compromise and Settlement dated May
29, 1987, between Mesa Operating Limited Partnership and
Colorado Interstate Gas Company, and Amendment to Gathering
Agreement dated July 15, 1990 (Exhibit 10.24 Mesa's Form 10-K
dated December 31, 1995).
*10.24 - Gas Purchase Agreement dated January 1, 1996, between Mesa
Operating Co., as Seller, and KN Marketing L.P., as Buyer, and
Amendment dated August 1, 1995 (Exhibit 10.25 Mesa's Form 10-K
dated December 31, 1995).
*10.25 - Change in Control Retention/Severance Plan adopted August 22,
1995, and Amendment dated October 20, 1995 (Exhibit 10.26 Mesa's
Form 10-K dated December 31, 1995).
27 - Article 5 of Regulation S-X Financial Data Schedule for the
Second Quarter 1996 Form 10-Q.
(b) Reports on Form 8-K
1. Current Report on Form 8-K dated April 29, 1996 regarding the Stock
Purchase Agreement between MESA Inc. and DNR-MESA Holdings, L.P.
25
26
SIGNATURES
==========
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MESA Inc.
(Registrant)
/s/ Wayne A. Stoerner
-----------------------------
Wayne A. Stoerner
Manager-Accounting
(Principal accounting officer
duly authorized to sign on
behalf of the Registrant)
Date: August 13, 1996
26
27
INDEX TO EXHIBITS
-----------------
Exhibit No. Description
- ----------- -----------
3.3 Amended and Restated Bylaws of MESA Inc.
4.16 Credit Agreement dated as of July 2, 1996, among Mesa
Operating Co., as Borrower, MESA Inc. and the Banks listed as
lenders in the Credit Agreement and The Chase Manhattan Bank,
N.A., as Administrative Agent, Bankers Trust Company, as
Syndication Agent, and Society Generale, Southwest Agency, as
Documentation Agent.
4.17 Indenture dated July 2, 1996, among Mesa Operating Co., as
Issuer, MESA Inc., as a Guarantor, and Harris Trust and
Savings Bank as Trustee relating to 11-5.8% Senior
Subordinated Discount Notes Due 2006.
4.18 Indenture dated July 2, 1996, among Mesa Operating Co., as
Issuer, MESA Inc., as a Guarantor, and Harris Trust and
Savings Bank as Trustee relating to 10-5/8% Senior
Subordinated Notes Due 2006.
27 Article 5 of Regulation S-X Financial Data Schedule
for the Second Quarter 1996 Form 10-Q.