SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 5, 1999
MICHAEL PETROLEUM CORPORATION
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(Exact name of registrant as specified in its charter)
Texas 333-52263* 76-0510239
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(State or other jurisdiction of (Commission File Number) (IRS Employer Identification
incorporation) No.)
13101 Northwest
Freeway, Suite 320
Houston, Texas 77040
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 895-0909
* The Commission File Number refers to a Form S-4 Registration Statement
filed by the Registrant under the Securities Act of 1933 which was
declared effective on July 22, 1998.
Item 5. OTHER EVENTS
On October 5, 1999, representatives of Michael Petroleum Corporation
(the "Company") and the Company's financial advisor met with representatives
of the Unofficial Creditors' Committee for holders of the Company's 11 1/2%
Senior Notes due 2005 (the "Senior Notes") and the Committee's financial
advisor, regarding the Company's revised debt restructuring proposal to its
Noteholders. The principal terms of the revised proposal are contained in the
Company's Current Report on Form 8-K, which was filed with the Securities and
Exchange Commission on September 30, 1999 (the "September 8-K"). As set forth
in the September 8-K, the proposal contemplates an exchange of New Senior
Notes and Common Stock of the Company for the outstanding indebtedness
represented by the Senior Notes. As contemplated by the September 8-K, on
October 1, 1999 the Company did not make its approximately $7.8 million
interest payment then due on the Senior Notes. The Indenture governing the
terms of the Senior Notes provides for a 30-day grace period before an Event
of Default will occur under the Indenture as the result of a failure to
timely pay interest.
The Company's presentation to the Committee representatives
indicated that due to higher prices for natural gas and increased production
levels since May 1999, the Company's management now believes that some
sustainable level of debt may be carried on its balance sheet. In addition,
the combination of higher natural gas prices since April 1999, improved
drilling success to date in fiscal 1999, and increased estimated reserve values
attributable to the higher prices and an increase in estimated proved
developed producing reserves at July 1, 1999 (compared to year-end 1998) has,
in management's opinion, increased the willingness of commercial banks to
provide working capital and capital expenditure financing. Additionally,
assuming that the Company's drilling program performs according to plan,
management believes that a new senior bank facility and increased cash flows
should support projected levels of drilling and development capital
expenditures.
The proposal would result in the Company's existing Common Stockholders
owning 50% of the Company's outstanding Common Stock, immediately following
the proposed restructuring. In addition, as indicated in the Company's
September 8-K, the existing Common Stockholders would receive
performance-based warrants having exercise prices beginning considerably in
excess of the estimated initial fair market value of the restructured
Company's Common Stock. The Company's representatives requested that the
Committee return with a formal response to its revised restructuring proposal
by mid-October, with a view toward reaching an agreement in principle
concerning the terms of the restructuring by November 1, 1999.
The Company is continuing to negotiate with its senior bank lender
regarding its $23 million outstanding senior bank facility indebtedness. The
current terms of this facility require monthly mandatory reductions in the
borrowing base, and in
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total amount outstanding, of $1.5 million per month, beginning on October 31,
1999. Any such payment default or an acceleration in maturity of the
Company's senior bank indebtedness will constitute an Event of Default under
the Indenture governing the Senior Notes.
The proposal described above and in the September 8-K is preliminary
in nature. No predictions can be made by Company management as to the degree
of success the Company may achieve in its negotiations with Noteholders,
whether a restructuring or refinancing of its Senior Notes and senior bank
indebtedness can be accomplished on the terms described above, and if so,
whether the Company will be able to achieve its business plan objectives
following such a restructuring. Nothing contained in this report shall
constitute an offer to purchase, sell or exchange any security.
Certain statements made in this press release, including, but not
limited to, statements containing the words "contemplates," "will," "may,"
"believes," "estimated," "assuming," "should," "projected" and similar terms
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
based on management's current expectations and include known and unknown
risks, uncertainties and other factors, many of which the Company is unable
to predict or control, that may cause the Company's actual results to differ
materially from the results expressed or implied by such forward-looking
statements. These statements involve risks, uncertainties and other factors
detailed from time to time in the Company's filings with the Securities and
Exchange Commission. Such factors include, without limitation, the Company's
ability to restructure or refinance its existing debt, achievement of its
drilling and development program objectives, uncertainties inherent in any
court-supervised insolvency proceedings, and future prices for and associated
costs of the Company's oil and natural gas production and development. The
Company cautions investors that any forward-looking statements made by the
Company are not guarantees of the future performance. The Company disclaims
any obligation to update any such factors or to announce publicly the results
of any revisions to any of the forward-looking statements included herein to
reflect future events or developments.
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SIGNATURE
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, hereunto duly authorized.
MICHAEL PETROLEUM CORPORATION
By: /s/ Robert L. Swanson
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Robert L. Swanson
Vice President -- Finance
Dated: October 6, 1999
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