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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 2002
---------------
COMMISSION FILE NUMBER 0-30475
TRANSTEXAS GAS CORPORATION
1300 NORTH SAM HOUSTON PARKWAY EAST
SUITE 310
HOUSTON, TEXAS 77032-2949
Registrant's telephone number, including area code: (281) 987-8600
DELAWARE 76-0401023
(State of incorporation) (I.R.S. employer
identification no.)
---------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, $0.01 PAR VALUE
CLASS B COMMON STOCK, $0.01 PAR VALUE
SERIES A SENIOR PREFERRED STOCK, $0.001 PAR VALUE
SERIES A JUNIOR PREFERRED STOCK, $0.001 PAR VALUE
CLASS A COMMON STOCK PURCHASE WARRANTS
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant has filed all documents
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [X] No [ ]
The aggregate market value of the common stock held by non-affiliates of
the registrant on April 19, 2002 was $935,216.
The number of shares of Class A Common Stock of the registrant outstanding
on April 30, 2002 was 1,250,251.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement to be filed with
the Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K in connection with the registrant's 2002 annual meeting of
stockholders are incorporated by reference into Part III of this Form 10-K.
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TABLE OF CONTENTS
Page
PART I
Item 1. Business.......................................................................... 1
Item 2. Properties........................................................................ 5
Item 3. Legal Proceedings................................................................. 6
Item 4. Submission of Matters to a Vote of Security Holders............................... 6
Executive Officers of the Registrant.............................................. 6
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............. 7
Item 6. Selected Financial Data........................................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 10
Item 7A. Quantitative and Qualitative Disclosures about Market Risk........................ 17
Item 8. Financial Statements and Supplementary Data....................................... 18
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure..................................................................... 48
PART III
Item 10. Directors and Executive Officers of the Registrant................................ 48
Item 11. Executive Compensation............................................................ 48
Item 12. Security Ownership of Certain Beneficial Owners and Management.................... 48
Item 13. Certain Relationships and Related Transactions.................................... 48
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................... 49
PART I
ITEM 1. BUSINESS
GENERAL
TransTexas Gas Corporation (the "Company" or "TransTexas") is engaged in
the exploration for and development and production of natural gas and
condensate, primarily along the Upper Texas Gulf Coast. TransTexas' business
strategy is to utilize its experience in drilling and operating wells to find,
develop and produce reserves at a low cost.
The Company's long-term goal is to convert unproven acreage to proved
reserves by drilling in under-exploited areas. In order to meet its long-term
goals, TransTexas' strategy is to drill wells in areas of the Upper Texas Gulf
Coast where 3-D seismic data indicates productive potential and to drill
development wells in its proven producing areas such as the Eagle Bay field and
Wharton County. TransTexas' current drilling program is restricted by reduced
capital available from operations.
As of February 1, 2002, TransTexas' net proved reserves, as estimated by
Netherland, Sewell & Associates, Inc., an independent firm of petroleum
engineers, were 66 Bcfe. As of January 31, 2002, TransTexas owned approximately
56,810 gross (48,256 net) acres of mineral interests. TransTexas' average net
daily natural gas production for the year ended January 31, 2002 was
approximately 62 MMcfd, for a total net production of 22.5 Bcf of natural gas.
TransTexas' average net daily condensate and oil production for the year ended
January 31, 2002 was approximately 3,524 Bpd, for a total net production of
1,286 MBbls of condensate and oil. TransTexas' average net daily production of
natural gas liquids ("NGLs") for the year ended January 31, 2002 was
approximately 109,734 gallons per day, for a total net production of 40.1
million gallons of natural gas liquids.
REORGANIZATION
On April 19, 1999 (the "Petition Date"), TransTexas filed a voluntary
petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. TransTexas filed its
bankruptcy petition in order to preserve cash and to give the Company the
opportunity to restructure its debt. On April 20, 1999, the Company's then
parent, TransAmerican Energy Corporation ("TEC"), and its wholly owned
subsidiary, TransAmerican Refining Corporation ("TARC"), also filed voluntary
petitions for relief under Chapter 11. On May 20, 1999, the cases were
transferred to the United States Bankruptcy Court for the Southern District of
Texas, Corpus Christi Division (the "Bankruptcy Court"). TransTexas' Chapter 11
filing did not include its subsidiaries, including Galveston Bay Processing and
Galveston Bay Pipeline. The Company's Second Amended, Modified and Restated Plan
of Reorganization dated January 25, 2000 (the "Plan") was confirmed by the
Bankruptcy Court on February 7, 2000.
On March 17, 2000, the Effective Date of the Plan, the Company consummated
several transactions, most of which were dated as of March 15, 2000. Among other
things, the Company:
o filed an Amended and Reinstated Certificate of Incorporation;
o cancelled all of the Company's old common stock, the $450 million
intercompany loan payable to TEC and all of the 13 3/4% Senior
Subordinated Notes;
o issued 1,002,751 shares of Class A Common Stock, 247,500 shares of
Class B Common Stock and 625,000 warrants;
o filed a Certificate of Designation relating to 328,667,820 shares of
Series A Senior Preferred Stock, and issued 222,455,320 of those
shares;
o filed a Certificate of Designation relating to 37,469,711 shares of
Series A Junior Preferred Stock, and issued 20,716,080 of those
shares;
o entered into an Indenture relating to, and issued $200 million of, 15%
Senior Secured Notes due 2005;
o entered into a $52.5 million Oil and Gas Credit Facility;
o entered into a $15 million Accounts Receivable Credit Facility; and
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o sold a Production Payment with a primary sum outstanding as of March
15, 2000 of $35 million.
These transactions are more fully described in "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" under Item 7 of this report.
EXPLORATION AND PRODUCTION
The exploration and production activities of TransTexas consist of
geological and geophysical evaluation of current and prospective properties, the
acquisition of mineral interests in prospects and the drilling, development and
operation of leased properties for the production and sale of natural gas,
condensate and crude oil. TransTexas' technical staff consists of geologists,
geophysicists and engineers. TransTexas' technical staff selects drilling
locations based on the interpretation of available well data, and 3-D and 2-D
seismic data. TransTexas operates substantially all of its producing properties.
The Company has commenced negotiations for joint venture drilling opportunities
with several unrelated entities.
Primary Operating Areas
Eagle Bay. In January 1998, TransTexas announced that it had successfully
drilled and completed the State Tract 331 #1 discovery well in Eagle Bay,
Galveston County, Texas. The well is located approximately one mile off the
coast of the City of San Leon, in a water depth of less than 10 feet. This
discovery well tested at a rate of 76.4 MMcfd of natural gas and 11,002 Bpd of
condensate. TransTexas has successfully drilled, completed and produced eight
additional wells and, as of January 31, 2002, was completing one well in the
Eagle Bay field.
TransTexas intends to drill additional development wells in Eagle Bay as a
part of its strategy to further increase reserves and production and has
identified additional drilling locations from 3-D seismic data. For the fiscal
year ended January 31, 2002, TransTexas produced 5.6 Bcf of natural gas, 0.9
million barrels of condensate and 40.1 million gallons of natural gas liquids
from the Eagle Bay field at average net daily rates of 15 MMcfd, 2,388 Bpd and
110,079 gallons per day, respectively. Production from the Eagle Bay field
represents a significant percentage of the Company's total production. The
pipeline used for transporting the Company's production from the Eagle Bay field
was shut-in for modifications from April 29 through May 19, 2001 by the
unaffiliated third-party owner. This shut-in period was mandated by regulatory
agencies responsible for the Galveston Bay marine area. Difficulties encountered
in resuming full production led to lower than expected sales volumes from this
field. See "Drilling and Production Data." As of January 31, 2002, TransTexas
owned a 75% working interest in approximately 5,189 net acres in the Eagle Bay
area.
Southwest Bonus. In 1998, TransTexas completed the Obenhaus #2 discovery
well in the Southwest Bonus field in Wharton County, Texas. Restrictions on
available capital prevented TransTexas from additional drilling until late 1999
when a development drilling program commenced with the drilling and completion
of the Schweinle #1. As of January 31, 2002, TransTexas had successfully
drilled, completed and produced 22 wells in the Southwest Bonus field.
TransTexas has identified additional drilling locations based upon seismic data.
As of January 31, 2002, TransTexas held a 97% working interest covering
approximately 5,068 net acres in the Southwest Bonus area. For the fiscal year
ended January 31, 2002, TransTexas' Southwest Bonus properties produced 12.9 Bcf
of natural gas, at an average net daily rate of 35 MMcfd. Production from the
Southwest Bonus field represents a significant percentage of the Company's total
production. See "Drilling and Production Data."
Other Areas. TransTexas also has an inventory of exploration and
exploitation prospects along the Upper Texas Gulf Coast which it continues to
assemble as part of its strategy to further increase reserves and production.
The Company's primary focus is to seek areas that it believes are
under-exploited and are along the trend with existing proved fields and where
seismic data indicates productive potential. TransTexas has obtained acreage
positions in selected prospects that it intends to drill as part of a balanced
exploration program. Certain of these areas have been drilled and contain proved
reserves and production. The Company intends to drill these additional
exploration and exploitation prospects, which are located in the proximity of
TransTexas' existing producing fields and infrastructure.
Drilling and Production Data
During the five years ended January 31, 2002, TransTexas completed
approximately 59% of 188 wells. As of January 31, 2002, TransTexas was
completing one gross (one net) well. As of January 31, 2002, TransTexas had a
total of
2
42 productive wells. TransTexas had a working interest in the following numbers
of wells that were drilled during the periods indicated:
YEAR ENDED JANUARY 31,
--------------------------------------------------
2002 2001 2000
-------------- --------------- --------------
GROSS NET GROSS NET GROSS NET
----- --- ----- ---- ----- ----
Exploratory Wells (1):
Productive (2)............................... 1 1 -- -- 1 1
Non-Productive............................... 1 1 4 3 6 5
% Productive................................. 50% 50% -- -- 14% 17%
Development Wells (1):
Productive (2)............................... 12 11 11 11 5 5
Non-Productive............................... 1 1 1 1 2 2
% Productive................................. 92% 92% 92% 92% 71% 71%
- --------------------------
(1) The number of net wells is the sum of the fractional working interests
owned in gross wells.
(2) Productive wells consist of producing wells and wells capable of
production, including gas wells awaiting pipeline connection. Wells that
are completed in more than one producing zone are counted as one well.
The following table sets forth information with respect to net production
and average unit prices and costs for the periods indicated:
YEAR ENDED JANUARY 31,
------------------------------------
2002 2001 2000
---------- ----------- ----------
Production:
Gas (Bcf) ................................................. 22.5 26.8 27.8
NGLs (MMgals).............................................. 40.1 48.3 44.0
Condensate and oil (MBbls)................................. 1,286 1,559 1,827
Average sales prices:
Gas (dry) (per Mcf)........................................ $ 3.89 $ 4.73 $ 2.32
NGLs (per gallon).......................................... .36 .49 .32
Condensate and oil (per Bbl)............................... 23.63 30.04 19.88
Average lifting cost per Mcfe (1)............................ .49 .47 .44
- --------------------------
(1) Condensate and oil are converted to a common unit of measure on the basis
of six Mcf of natural gas to one barrel of condensate or oil. The
components of production costs may vary substantially among wells depending
on the methods of recovery employed and other factors.
TRANSPORTATION, PROCESSING AND MARKETING
TransTexas believes that there is currently adequate pipeline
transportation capacity for its hydrocarbon production in all of its operating
areas.
TransTexas has entered into various agreements for the gathering,
transportation, processing and sale of substantially all of its natural gas and
natural gas liquids produced from its Eagle Bay prospects. Unless otherwise
stated, these agreements, described below, expire on June 30, 2003. TransTexas
monitors its transportation needs closely and is actively in discussions with
pipeline companies regarding additional agreements in order to meet potential
future production increases.
Galveston Bay Processing Corporation, a wholly owned subsidiary of
TransTexas, operates onshore facilities to separate produced natural gas and
condensate, dehydrate and treat natural gas for the removal of carbon dioxide
and stabilize condensate from the Company's Eagle Bay field. These facilities
are located approximately 60 miles east of Houston at Winnie, Texas.
TransTexas has entered into contracts with Tejas Ship Channel, LLC for
transportation of its production from the Eagle Bay field to the Winnie
facilities at a fixed negotiated rate. Under these contracts, the Company has
agreed to deliver up to 75,000 MMBtu per day of natural gas and associated
condensate.
3
The Company also entered into a contract with Centana Intrastate Pipeline
Company for transportation of natural gas on a firm and interruptible basis from
the Winnie facility to natural gas liquids recovery facilities located in the
Beaumont/Port Arthur, Texas area, and residue gas from these facilities to
various distribution points. Under the agreement, the Company has agreed to
deliver up to a maximum of 56,250 Mcf of natural gas and up to 19,500 MMBtu of
residue gas per day. Transportation fees for natural gas and residue gas are
based on fixed negotiated rates.
TransTexas and Duke Energy Field Services, Inc. entered into a contract to
extract natural gas liquids from the high-Btu natural gas stream leaving the
Winnie facilities. TransTexas can elect, at its discretion on a monthly basis,
whether to process the natural gas to recover natural gas liquids. The Company's
decision whether to process the natural gas is based on prevailing market
prices.
TransTexas entered into gas purchase agreements with Tejas Gas Marketing,
LLC and PanEnergy Marketing Company, covering the sale by TransTexas of
substantially all of its gas production from the Eagle Bay field. The agreements
provide for deliveries in excess of 50,000 MMBtu per day of residue gas at a
price based on a published industry index.
For the year ended January 31, 2002, two purchasers represented
approximately 66% of the consolidated natural gas, condensate and NGL revenues
of TransTexas. TransTexas believes that the loss of any single purchaser would
not have a material adverse effect on TransTexas due to the availability of
other purchasers for TransTexas' production at comparable prices.
Drilling Rig Commitment
During February 2001, TransTexas entered into a one-year contract with an
independent contractor for utilization of a drilling rig capable of drilling
wells to a depth of approximately 18,500 feet. TransTexas utilized this rig to
drill wells in the Galveston Bay area. As of January 31, 2002, the balance
remaining to be paid under this contract, which commenced in May 2001, was
approximately $1.7 million.
COMPETITION
TransTexas encounters significant competition from major oil and gas
companies and independent operators in the acquisition of desirable undeveloped
natural gas leases and in the sale of natural gas. Many of its competitors are
large, well-established companies with substantially greater capital and human
resources than TransTexas and which, in many instances, have been engaged in the
energy business longer than TransTexas.
The primary bases for competition in the natural gas and oil exploration
and production businesses are available capital and the costs involved in
finding and developing gas and oil resources combined with commodity sales
prices and market access.
EMPLOYEES
As of January 31, 2002, TransTexas had 131 employees, none of which are
parties to a collective bargaining agreement. TransTexas regularly engages the
services of independent geological, engineering, land and other consultants.
GOVERNMENTAL REGULATION
TransTexas' gas exploration, production and related operations are subject
to extensive rules and regulations promulgated by federal and state agencies.
Failure to comply with such rules and regulations can result in substantial
penalties. The regulatory burden on the gas industry increases TransTexas' cost
of doing business and affects its profitability. Because such rules and
regulations are frequently amended or reinterpreted, TransTexas is unable to
predict the future cost or impact of complying with such laws.
The State of Texas (through the Texas Railroad Commission) and many other
states require permits for drilling operations, drilling bonds and reports
concerning operations, and impose other requirements related to the exploration
and production of natural gas. Such states also have statutes or regulations
addressing conservation matters, including provisions for the unitization or
pooling of gas properties, the establishment of maximum rates of production from
gas wells and the regulation of spacing, plugging and abandonment of such wells.
The statutes and regulations of the State of Texas limit the rate at which
natural gas can be produced from TransTexas' properties. Management believes
that these statutes and regulations have not materially impacted TransTexas'
results of operations; however, there can be no assurance that such statutes and
regulations will not affect TransTexas' operating results in the future.
4
Several major regulatory changes have been implemented by the Federal
Energy Regulatory Commission ("FERC") since 1985 that affect the economics of
natural gas production, transportation and sales. In addition, the FERC
continues to promulgate revisions to various aspects of the rules and
regulations affecting those segments of the natural gas industry, most notably
interstate natural gas transmission companies, that remain subject to the FERC's
jurisdiction. These initiatives may also affect the intrastate transportation of
gas under certain circumstances. The stated purpose of many of these regulatory
changes is to promote competition among the various sectors of the gas industry.
The ultimate impact on TransTexas of these complex and overlapping rules and
regulations, many of which are repeatedly subjected to judicial challenge and
interpretation, cannot be predicted.
ENVIRONMENTAL MATTERS
See Note 13 of Notes to Consolidated Financial Statements for a discussion
of environmental matters affecting TransTexas.
ITEM 2. PROPERTIES
ACREAGE AND PRODUCTIVE WELLS
The following table sets forth TransTexas' total developed and undeveloped
acreage and productive wells as of January 31, 2002:
DEVELOPED UNDEVELOPED PRODUCTIVE
ACREAGE ACREAGE WELLS (1)
----------- ------------ -----------
Gross ......................................... 28,132 28,678 42
Net (2) ....................................... 20,520 27,736 34
- --------------------------
(1) All of the productive wells were natural gas wells.
(2) The number of net acres and net wells is the sum of the fractional working
interests owned in gross acres and gross wells, respectively.
RESERVES
As of February 1, 2002, TransTexas had total proved reserves of 55.3 Bcf of
natural gas and 1,786 MBbls of condensate and oil. See Note 20 of Notes to
Consolidated Financial Statements, which contains supplemental information
regarding TransTexas' proved reserves. Proved reserves are the estimated
quantities of natural gas, condensate and oil that geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions. Proved
developed reserves are proved reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. The
estimation of reserves requires substantial judgment on the part of petroleum
engineers, resulting in imprecise determinations, particularly with respect to
recent discoveries. The accuracy of any reserve estimate depends on the quality
of available data and engineering and geological interpretation and judgment.
Results of drilling, testing and production after the date of the estimate may
result in revisions of the estimate. Accordingly, estimates of reserves are
often materially different from the quantities of natural gas, condensate and
oil that are ultimately recovered, and these estimates will change as future
production and development information becomes available. The reserve data
represent estimates only and should not be construed as being exact.
TITLE TO PROPERTIES/LIENS AND CLAIMS
As is customary in the oil and gas industry, TransTexas performs only a
preliminary title investigation before leasing undeveloped properties.
Accordingly, working interest percentages and gross and net acreage amounts for
undeveloped properties are preliminary. However, a title opinion is typically
obtained before the commencement of drilling operations and any material defects
in title are remedied prior to the time actual drilling of a well on the lease
is commenced. TransTexas has not obtained title opinions on all of its
properties. The Company is uncertain as to the impact that failure to obtain a
title opinion has on its title to developed properties. TransTexas' properties
are subject to customary royalty interests, liens incident to operating
agreements, liens for current taxes, liens of vendors and lenders and other
burdens.
5
ITEM 3. LEGAL PROCEEDINGS
TransTexas is a party to various claims and routine litigation arising in
the normal course of its business. Any obligations of the Company in respect of
such claims and litigation arising out of activities prior to the Petition Date
were discharged or otherwise disposed of pursuant to the Plan. Recovery of these
obligations, if any, will be limited to any collateral held by the claimant
and/or such claimant's pro rata share of amounts available to pay general
unsecured claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
three months ended January 31, 2002.
In March 2002, John R. Stanley resigned as Chief Executive Officer and as
Chairman and member of the Board of Directors of the Company.
Executive Officers of the Registrant
The following persons were serving as executive officers of the Company as
of April 30, 2002:
Name Office Age
---- ------ ---
Arnold H. Brackenridge Chief Executive Officer, President and Chief Operating Officer 69
Edwin B. Donahue Vice President, Chief Financial Officer and Secretary 51
Gregory J. Halvatzis Vice President of Exploration 50
David R. Jennings Assistant Secretary and Assistant General Counsel 58
John R. Thompson Vice President of Operations 45
Simon J. Ward Vice President and Treasurer 46
George C. Wright Vice President of Accounting 59
Set forth below is a description of the business experience of each of the
executive officers.
Arnold H. Brackenridge was elected Chief Executive Officer in March 2002
and prior to that he held the position of President and Chief Operating Officer
of the Company since March 2001. Prior to his retirement in 1999, Mr.
Brackenridge was President and Chief Operating Officer of the Company since May
1993. From 1984 until June 1992, Mr. Brackenridge was the President and Chief
Executive Officer of Wintershall Energy, a business group of BASF Corporation.
Edwin B. Donahue has been Vice President, Chief Financial Officer and
Secretary of the Company since May 1993. Mr. Donahue has been employed in
various positions with the Company and TransAmerican for over 25 years.
Gregory J. Halvatzis joined the Company in February 2001 and has been Vice
President of Exploration since March 2002. From 1976 until 2001, he held various
exploration management positions with Cities Service, First Energy and JN Oil
and Gas.
David R. Jennings has been Assistant Secretary since May 2000. He has been
employed by the Company and its affiliates since November 1995.
John R. Thompson has been Vice President of Operations since March 2002. He
has been employed by the Company and its affiliates since 1984. Prior to 1984,
Mr. Thompson was employed by Texaco USA from 1979 to 1984.
Simon J. Ward has been Vice President and Treasurer of the Company since
June 1999. He served as Manager of Investor Relations from 1994 until June 1999.
From 1976 until 1994, he held various positions with ICO, Inc., Baker Hughes
Vetco Services, Inc. and Vetco Services, Inc.
George C. Wright has been Vice President of Accounting of the Company since
March 1999. He has been employed by the Company and its affiliates since June
1982.
6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since April 24, 2000, prices for the Class A Common Stock of TransTexas
have been quoted on NASDAQ's Over The Counter Bulletin Board ("OTCBB") under the
symbol "TTXG." Prior to the Effective Date (from May 4, 1999 through March 21,
2000), prices for the Company's common stock were quoted on OTCBB under the
symbol "TTGGQ." The following table sets forth, on a per-share basis for the
periods indicated, the high and low sales or bid prices for TransTexas' Class A
common stock as reported by the OTCBB. Over-the-counter quotations reflect
inter-dealer prices without retail mark-up, mark-down or commission and may not
necessarily reflect actual transactions.
HIGH LOW
---- ----
Fiscal year ended January 31, 2002:
Fourth Quarter............................................. $ 4.00 $ 1.01
Third Quarter.............................................. 6.50 3.45
Second Quarter............................................. 17.00 5.75
First Quarter.............................................. 17.25 12.94
Fiscal year ended January 31, 2001:
Fourth Quarter............................................. $ 17.00 $ 11.50
Third Quarter ............................................. 22.00 6.50
Second Quarter............................................. 8.00 4.00
First Quarter.............................................. 3.75 2.75
On January 31, 2002, the Company's equity securities consisted of (i)
313,016,913 shares of Series A Senior Preferred Stock, $0.001 par value, (ii)
24,624,894 shares of Series A Junior Preferred Stock, $0.001 par value (iii)
1,002,751 shares of Class A Common Stock, $0.01 par value, (iv) 247,500 shares
of Class B Common Stock, $0.01 par value, and (v) warrants exercisable to
purchase 738,004 shares of Class A Common Stock at a price of $120 per share.
The Series A Senior Preferred Stock (the "Senior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Senior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first two years following the Effective Date, the Company was required to pay
cash dividends at a rate of $0.10 per share per annum, or, at its option,
in-kind dividends of additional shares of Senior Preferred Stock at a rate of
$0.20 per share per annum. The Company paid these quarterly dividends with
additional shares of Preferred Stock. The Senior Preferred Stock is mandatorily
redeemable on March 15, 2006 at a rate of $1.00 per share plus accrued and
unpaid dividends. One-half of the then-outstanding shares of Senior Preferred
Stock is mandatorily convertible into shares of Class A Common Stock at a rate
of 0.3461 shares of Class A Common Stock per $1.00 of liquidation preference if
either (i) more than 75 million shares of Senior Preferred Stock remain
outstanding after March 15, 2006 or (ii) the Company fails to pay dividends on
the Senior Preferred Stock on any two dividend payment dates. The Certificate of
Designation for the Senior Preferred Stock includes restrictive covenants
comparable to those included in the Indenture.
Holders of Senior Preferred Stock have the right, voting separately as a
class, to elect four (4) of the five (5) directors to the Board of Directors;
provided, that if the Company has not paid dividends with respect to any two
payments due commencing June 15, 2002, such holders will have the right, voting
separately as a class, to elect all five (5) directors to the Board of
Directors. Holders of Senior Preferred Stock have one vote per share, voting
together with the Class A Common Stock, the Series A Junior Preferred Stock and
any other series or classes of stock entitled to vote with the Class A Common
Stock, on all matters on which the holders of the Class A Common Stock are
entitled to vote generally. Voting rights of the Senior Preferred Stock may not
be changed without the consent of the holders of 75% of the shares of Senior
Preferred Stock, voting as a class.
7
The Series A Junior Preferred Stock (the "Junior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Junior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first six years following the Effective Date, the Company is required to pay
in-kind dividends of additional shares of Junior Preferred Stock at a rate of
$0.10 per share per annum. Thereafter, dividends are payable both in cash at a
rate of $0.10 per share per annum and in-kind at a rate of $0.10 per share per
annum. The Junior Preferred Stock is mandatorily redeemable on March 15, 2010 at
a rate of $1.00 per share plus accrued and unpaid dividends. Each share of
Junior Preferred Stock is mandatorily convertible into shares of Class A Common
Stock at the rate of 0.1168 shares of Class A Common Stock per $1.00 of
liquidation preference if either (i) more than 75 million shares of Senior
Preferred Stock remain outstanding after March 15, 2006 or (ii) the Company
fails to pay dividends on the Senior Preferred Stock on any two dividend payment
dates. The Certificate of Designation for the Junior Preferred Stock includes
restrictive covenants comparable to those included in the Indenture. Such
covenants will become effective when all of the Notes (and any refinancings
thereof) have been repaid and all of the Senior Preferred Stock has been
redeemed.
Holders of Junior Preferred Stock have one vote per share, voting together
with holders of the Class A Common Stock, the Senior Preferred Stock and any
other series or classes of stock entitled to vote with the Class A Common Stock,
on all matters on which holders of the Class A Common Stock are entitled to
vote. If no shares of the Senior Preferred Stock are outstanding, holders of the
shares of Junior Preferred Stock will have the right, voting separately as a
class, to elect two directors to the Board of Directors. Voting rights of the
Junior Preferred Stock may not be changed without the consent of the holders of
75% of the shares of the Junior Preferred Stock, voting as a class.
Based on the reorganization value of the Company, the fair value of the
Junior Preferred Stock, together with the Senior Preferred Stock, (the
"Preferred Stock") and the Class A Common Stock, together with the Class B
Stock, (the "Common Stock"), was estimated to be zero. The Senior Preferred
Stock and Junior Preferred Stock are mandatorily redeemable in 2006 and 2010,
respectively. As a result, the Company accretes, in the form of a non-cash
dividend deducted to arrive at net income (loss) available to common
stockholders and charged to retained earnings, an amount equal to the combined
redemption amount totaling $243.2 million (initial liquidation value) over the
period prior to redemption. In addition, net income (loss) available to common
stockholders reflects dividends earned and accrued on the Preferred Stock.
Accrued preferred stock dividends are recorded at fair value. Any difference
between the initial fair value and the redemption value will be accreted in the
same manner as described above. For the years ended January 31, 2002 and 2001,
accretion of Preferred Stock totaled $46.4 million and $25.7 million,
respectively.
On January 31, May 30, August 29 and November 28, 2001, the Board of
Directors of the Company authorized the payment of quarterly dividends to the
holders of the Company's Preferred Stock of record on March 1, June 1, September
1, and December 1, 2001, respectively. The quarterly dividends were paid in-kind
on March 15, June 15, September 17, and December 17, 2001 in additional shares
of Preferred Stock of the same class at an annual rate of $0.20 per share for
each share of Series A Senior Preferred Stock and at an annual rate of $0.10 per
share for each share of Series A Junior Preferred Stock in accordance with the
Certificate of Designation for Series A Senior Preferred Stock and the
Certificate of Designation for Series A Junior Preferred Stock, respectively.
Fractional shares were not issued, but were settled in cash.
Pursuant to the terms of the Certificate of Designation of the Company's
Preferred Stock, if either (i) more than 75 million shares of Senior Preferred
Stock are outstanding at any time after March 15, 2006 or (ii) the Company fails
to pay dividends on the Senior Preferred Stock on any two dividend payment
dates, one-half of the Senior Preferred Stock and all of the Junior Preferred
Stock would automatically convert into shares of Class A Common Stock. The
Company does not anticipate paying the cash dividends on the Senior or Junior
Preferred Stock in the future. The Company has had discussions with certain of
its preferred stockholders relating to amendments of the Certificates of
Designation of the Senior and Junior Preferred Stock to enable the Company to
convert all of the Preferred Stock to shares of Class A Common Stock based on
agreed upon rates of conversion. Any such conversions would result in very
substantial dilution to the holders of the Class A Common Stock.
On April 24, 2000, prices for the Class A Common Stock commenced quotation
on the OTCBB under the symbol "TTXG." As of April 19, 2002, there were 132
record holders of the Class A Common Stock. The last sale price of the Class A
Common Stock on April 29, 2002 was $0.75.
The Company has not paid any cash dividends on its common stock since
inception, except a dividend of approximately $33 million to its then parent
TransAmerican from the proceeds of its initial public offering in March 1994.
The terms of the Company's senior secured notes due 2005, its oil and gas credit
facility, its accounts receivable facility and its Preferred Stock prohibit the
payment of dividends. Because of these prohibitions, the Company does not
anticipate paying any dividends on its common stock in the foreseeable future.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
8
For a description of the securities issued by the Company pursuant to the
Plan on the Effective Date, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
All of the securities issued pursuant to the Plan were issued pursuant to the
exemption from registration provided in Section 1145(a)(1) of the Bankruptcy
Reform Act of 1978, as amended, Title 11, United States Code. The Company did
not receive any proceeds from the issuance of these securities.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for the
Company as of and for each of the periods presented. From April 19, 1999 through
March 17, 2000, TransTexas operated under Chapter 11 of the United States
Bankruptcy Code. The Company adopted fresh-start reporting as of January 31,
2000; therefore, the Company does not believe that the consolidated balance
sheet data as of January 31, 2000, 2001 and 2002 is comparable to that of
previous years in certain material respects. The following data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's financial statements included
elsewhere in this report.
SUCCESSOR PREDECESSOR
----------------------------- --------------------------------------------
YEAR ENDED JANUARY 31,
-----------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------- ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS
DATA:
Gas, condensate and NGL revenues....... $ 133,138 $ 187,883 | $ 112,898 $ 92,159 $ 167,758
Transportation revenues................ -- -- | -- -- 12,055
Gain (loss) on the sale of assets...... -- -- | (438) 61,247 543,365
Other revenues......................... 1,245 2,208 | 2,770 4,200 3,313
------------- ------------ | ------------ ------------ ------------
134,383 190,091 | 115,230 157,606 726,491
Operating costs and expenses........... 23,370 26,283 | 29,935 30,322 65,576
Depreciation, depletion, an |
amortization....................... 91,266 81,483 | 75,044 86,137 82,659
General and administrative expenses.... 19,854 20,303 | 19,883 21,938 48,156
Loss on asset impairment............... 195,065 -- | -- 425,966 --
------------- ------------ | ------------ ------------ ------------
Operating income (loss)............ (195,172) 62,022 | (9,632) (406,757) 530,100
Net interest expense (1)............... 34,723 33,495 | 38,054 78,716 68,187
Reorganization items................... -- -- | (50,511) -- --
Income taxes and other................. (9,984) 9,984 | 10,000 (38,882) 161,669
Extraordinary (gain) loss, net of taxes -- -- | (436,490) 1,142 72,043
------------- ------------ | ------------ ------------ ------------
Net income (loss).................. $ (219,911) $ 18,543 | $ 429,315 $ (447,733) $ 228,201
============= ============ | ============ ============ ============
Accretion of preferred stock........... $ 46,403 $ 25,722 | $ -- $ -- $ --
============= ============ | ============ ============ ============
Net income (loss) available to |
common stockholders................ $ (266,314) $ (7,179) | $ 429,315 $ (447,733) $ 228,201
============= ============ | ============ ============ ============
Net income (loss) per share: |
Income (loss) before extraordinary |
item............................... $ (213.01) $ (5.74) | $ (0.13) $ (7.76) $ 4.49
Extraordinary item..................... -- -- | 7.59 (0.02) (1.08)
------------- ------------ | ------------ ------------ ------------
Net income (loss).................. $ (213.01) $ (5.74) | $ 7.46 $ (7.78) $ 3.41
============= ============ | ============ ============ ============
Dividends declared per common |
share (2).......................... -- -- | -- -- --
9
SUCCESSOR PREDECESSOR
--------------------------------------------- ---------------------------
YEAR ENDED JANUARY 31,
----------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------- ------------ ------------ ------------ ------------
BALANCE SHEET DATA:
Working capital (deficit)............. $ (8,620) $ 20,589 $ 8,900 | $ 27,072 $ (22,122)
Net property and equipment............ 126,947 332,328 327,087 | 292,143 701,598
Total assets.......................... 154,804 402,243 369,254 | 345,367 816,635
Liabilities subject to compromise..... -- -- -- | 718,139 --
Total debt (3)........................ 264,218 285,540 251,570 | 56,260 630,103
Redeemable preferred stock ........... 72,125 25,722 -- | -- --
Stockholders' equity (deficit)........ (246,120) 17,846 -- | (430,015) 24,637
- -------------------------
(1) Interest expense for the year ended January 31, 2000 excludes $55.5 million
in interest stayed as a result of the bankruptcy filing.
(2) TransTexas' existing debt and equity instruments contain certain
restrictions with respect to the payment of dividends on its common stock.
(3) Excludes long-term debt included in liabilities subject to compromise of
$583.1 million as of January 31, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with TransTexas'
Consolidated Financial Statements and Notes thereto included under Item 8 of
this report.
RESULTS OF OPERATIONS
TransTexas' results of operations are dependent upon natural gas production
volumes and unit prices from sales of natural gas, condensate and natural gas
liquids. The profitability of TransTexas also depends on its ability to minimize
finding and lifting costs and maintain its reserve base while maximizing
production. See "Liquidity and Capital Resources."
From April 19, 1999 through March 17, 2000, the Company operated as a
debtor-in-possession under Chapter 11 of the United States Bankruptcy Code.
Effective January 31, 2000, the Company adopted fresh-start reporting in
accordance with AICPA Statement of Position 90-7. Pursuant to fresh-start
reporting, a new reporting entity was created. The new reporting entity's assets
were recorded at the reorganization value based on the confirmed Plan of
Reorganization, and postpetition liabilities were recorded at the present value
of amounts to be paid. The Company's reorganization value was estimated by
management to be $369 million based primarily on an analysis of discounted cash
flows. The value of postpetition liabilities was estimated to be $369 million.
The present value of liabilities was adjusted for imputed interest at a rate of
15% for the period from February 1, 2000 to the Effective Date of the Plan. The
imputed interest was charged to interest expense during the first quarter of
fiscal 2001.
TransTexas' operating data for the years ended January 31, 2002, 2001 and
2000 are as follows:
YEAR ENDED JANUARY 31,
-----------------------------------------
2002 2001 2000
----------- ----------- -----------
Sales volumes:
Gas (Bcf)..................................... 22.5 26.8 27.8
NGLs (MMgals)................................. 40.1 48.3 44.0
Condensate and oil (MBbls).................... 1,286 1,559 1,827
Average prices:
Gas (dry) (per Mcf)........................... $ 3.89 $ 4.73 $ 2.32
NGLs (per gallon)............................. .36 .49 .32
Condensate and oil (per Bbl).................. 23.63 30.04 19.88
Number of gross wells drilled.................... 15 16 14
Percentage of wells completed.................... 87% 69% 43%
10
TransTexas uses the full cost method of accounting for exploration and
development costs. Under the full cost method, the cost for successful, as well
as unsuccessful, exploration and development activities is capitalized and
amortized on a unit-of-production basis over the life of the remaining proved
reserves. Net capitalized costs of gas and oil properties are limited to the
lower of unamortized cost or the cost center ceiling, defined as the sum of the
present value (10% discount rate) of estimated unescalated future net revenues
from proved reserves; plus the cost of properties not being amortized, if any;
plus the lower of cost or estimated fair value of unproved properties included
in the costs being amortized, if any; less related income tax effects. For the
year ended January 31, 2002, TransTexas recorded impairment losses related to
write-downs of $195.1 million of its net capitalized costs of gas and oil
properties to the cost center ceiling in accordance with the full cost method of
accounting.
A summary of TransTexas' operating expenses is set forth below (in millions
of dollars):
SUCCESSOR PREDECESSOR
----------------------------- --------------
YEAR ENDED JANUARY 31,
-------------------------------------------------
2002 2001 2000
------------- ------------- | -------------
|
Operating costs and expenses: |
Lease.................................................... $ 10.9 $ 10.7 | $ 10.9
Pipeline and gathering................................... 8.3 8.4 | 9.2
------------- ------------- | -------------
19.2 19.1 | 20.1
Taxes other than income taxes (1)........................... 4.2 7.2 | 9.8
------------- ------------- | -------------
$ 23.4 $ 26.3 | $ 29.9
============= ============= | =============
- -------------------------
(1) Taxes other than income taxes include severance, property and other taxes.
TransTexas' average depletion rates have been as follows:
SUCCESSOR PREDECESSOR
----------------------------- --------------
YEAR ENDED JANUARY 31,
-------------------------------------------------
2002 2001 2000
------------- ------------- | -------------
|
Depletion rates (per Mcfe)................................. $ 2.98 $ 2.22 | $ 1.89
============= ============= | =============
Effective February 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," which was amended by Statement of Financial
Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities." These pronouncements establish accounting and
reporting standards for derivative instruments and for hedging activities, which
generally require recognition of all derivatives as either assets or liabilities
in the balance sheet at their fair value. The accounting for changes in fair
value depends on the intended use of the derivative and its resulting
designation. The Company recorded a cumulative effect charge to comprehensive
income of approximately $1.3 million to recognize the fair value of its
liability under the Company's derivative instruments upon the adoption of SFAS
133. During the year ended January 31, 2002, decreases in the prevailing
commodity prices for oil and natural gas have reduced the fair value of the
Company's liability under its derivative instruments, which resulted in an
adjustment to comprehensive income. A summary of the Company's comprehensive
income and accumulated other comprehensive loss for the period ended January 31,
2002 is as follows (in thousands of dollars):
ACCUMULATED
ACCUMULATED OTHER
COMPREHENSIVE COMPREHENSIVE
LOSS INCOME
----------------- -----------------
Balance at January 31, 2001........................................ $ --
Net loss for the year ended January 31, 2002....................... $ (219,911)
Other comprehensive income:
Cumulative effect of adopting SFAS 133.......................... (1,282) (1,282)
Change in the fair value of hedge agreements.................... 2,486 2,486
Reclassification adjustments for hedge agreement settlements.... 1,144 1,144
----------------- -----------------
Comprehensive loss........................................ $ (217,563)
=================
Balance at January 31, 2002........................................ $ 2,348
=================
11
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations," and SFAS 142, "Goodwill and Other Intangible Assets." SFAS 141
requires that the purchase method of accounting be used for all business
combinations initiated or completed after June 30, 2001. SFAS 141 also specifies
criteria that intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill. SFAS
142 requires that goodwill as well as other intangible assets no longer be
amortized to earnings, but instead be reviewed annually for impairment. SFAS 141
and SFAS 142 do not apply to the Company unless it enters into a future business
combination.
In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations." SFAS 143 requires entities to record the fair value of a liability
for an asset retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related long-lived asset.
The Company is evaluating the impact of SFAS 143 that will be effective for the
Company in February 2003.
In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." SFAS 144 requires that one accounting model
be used for long-lived assets to be disposed of by sale and broadens the
reporting of discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that will
be eliminated from the ongoing operations of the entity in a disposal
transaction. SFAS 144 did not affect the ceiling test calculation under the
full cost method of accounting. The adoption of SFAS 144 effective February 1,
2002 had no impact on the Company's financial statements.
Year Ended January 31, 2002, Compared with the Year Ended January 31, 2001
Gas, condensate and NGL revenues for the year ended January 31, 2002
decreased by $54.7 million from the prior period, due primarily to lower prices
and sales volumes for all products. The average monthly prices received per Mcf
of gas ranged from $2.04 to $6.73 in the year ended January 31, 2002, compared
to a range of $2.64 to $9.75 in the prior period. Other revenues decreased by
$1.0 million for the year ended January 31, 2002 due to lower transportation and
gathering revenues.
Lease operating expenses for the year ended January 31, 2002 increased $0.2
million from the prior period due primarily to increases in labor, well service
and testing and rental expenses, partially offset by lower outside
transportation costs. Pipeline and gathering expenses decreased $0.1 million
primarily due to lower costs for natural gas used in operations and lower rental
expenses, partially offset by higher labor costs. Depreciation, depletion and
amortization expense for the year ended January 31, 2002 increased $9.8 million
due to an increase in the depletion rate resulting from higher cost properties
and unsuccessful drilling results in prior periods. General and administrative
expenses decreased by $0.4 million primarily as a result of lower utility costs,
rental expenses and insurance costs. Taxes other than income taxes decreased by
$3.0 million over the prior period due primarily to decreases in severance and
production taxes. Interest expense for the year ended January 31, 2002 increased
$1.2 million due primarily to lower capitalized interest, partially offset by a
decrease in the amount of interest associated with reorganization debt. The
impairment loss relates to a write-down of $195.1 million of TransTexas' net
capitalized costs of gas and oil properties to the cost center ceiling in
accordance with the full cost method of accounting. The cost center ceiling at
January 31, 2002 decreased from that at January 31, 2001 primarily due to a
decrease in prices for natural gas and condensate and a decrease in proved
reserves due to production and the sale of the Bob West field. See Note 19 of
Notes to Consolidated Financial Statements.
Based on the reorganization value of the Company, the fair value of the
Preferred Stock and Common Stock was estimated to be zero. The Senior Preferred
Stock and Junior Preferred Stock are mandatorily redeemable in 2006 and 2010,
respectively. As a result, the Company accretes, in the form of a non-cash
dividend deducted from net income available to common stockholders and charged
to retained earnings, an amount equal to the combined redemption amount totaling
$243.2 million (initial liquidation value) over the period prior to redemption.
In addition, earnings available to common stockholders will be reduced by
dividends paid on the Preferred Stock. For the years ended January 31, 2002 and
2001, accretion of Preferred Stock totaled $46.4 million, and $25.7 million,
respectively.
Year Ended January 31, 2001, Compared with the Year Ended January 31, 2000
Gas, condensate and NGL revenues for the year ended January 31, 2001
increased by $75.0 million from the prior period, due primarily to higher prices
for all products and an increase in NGL sales volumes. The average monthly
prices received per Mcf of gas ranged from $2.64 to $9.75 in the year ended
January 31, 2001, compared to a range of $1.74 to $2.90 in the prior period.
Other revenues decreased by $0.6 million for the year ended January 31, 2001 due
to lower transportation and gathering revenues. For the year ended January 31,
2000, TransTexas recognized a pre-tax loss of $0.4 million on the sale of
certain vehicles and other equipment.
Lease operating expenses for the year ended January 31, 2001 decreased $0.2
million from the prior period due primarily to decreases in maintenance costs.
Pipeline and gathering expenses decreased $0.8 million primarily due to the
termination of
12
certain natural gas transportation contracts in connection with the Company's
bankruptcy proceedings. Depreciation, depletion and amortization expense for the
year ended January 31, 2001 increased $6.4 million due to an increase in the
depletion rate resulting from higher cost properties and unsuccessful drilling
results in prior periods. General and administrative expenses increased by $0.4
million primarily as a result of increased professional fees and higher
insurance costs, partially offset by a lower provision for bad debts. Taxes
other than income taxes decreased by $2.6 million over the prior period due
primarily to decreases in severance taxes since a greater number of TransTexas'
wells qualified for exemption from severance taxes. Interest expense for the
year ended January 31, 2001 decreased $4.5 million due primarily to the
Company's reorganization as of January 31, 2000 which resulted in an overall
decrease in the amount of outstanding debt. Reorganization items of $8.3 million
for the year ended January 31, 2000 included legal and other professional fees
and expenses directly related to TransTexas' Chapter 11 proceedings and an
adjustment to record assets at reorganization value. The extraordinary item for
the year ended January 31, 2000 represents the discharge of certain liabilities
subject to compromise pursuant to the Plan.
Based on the reorganization value of the Company, the fair value of the
Preferred Stock and Common Stock was estimated to be zero. The Senior Preferred
Stock and Junior Preferred Stock are mandatorily redeemable in 2006 and 2010,
respectively. As a result, the Company will accrete, in the form of a non-cash
dividend deducted from net income available to common stockholders and charged
to retained earnings, an amount equal to the combined redemption amount totaling
$243.2 million (initial liquidation value) over the period prior to redemption.
In addition, earnings available to common stockholders will be reduced by
dividends paid on the Preferred Stock. For the year ended January 31, 2001,
accretion of Preferred Stock totaled $25.7 million.
LIQUIDITY AND CAPITAL RESOURCES
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code. As a result of the Chapter 11 filing,
the Company was prohibited from paying, and creditors were prohibited from
attempting to collect, claims or debts arising prior to the bankruptcy. The
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division confirmed the Company's Second Amended, Modified and Restated
Plan of Reorganization dated January 25, 2000 (the "Plan") on February 7, 2000.
The Effective Date of the Plan is March 17, 2000. In connection with the
Effective Date of the Plan, the Company:
(1) paid approximately $2.6 million in cash to settle certain accounts
payable and royalty claims;
(2) agreed to pay approximately $28.3 million to settle certain accounts
payable, severance, property and franchise taxes. The $28.3 million is
payable in quarterly installments generally over a five year period
with stated interest ranging from 8% to 10%. The Company paid $6.6
million and $7.6 million of this amount in fiscal 2002 and 2001,
respectively.
(3) paid approximately $21.9 million in cash, issued $200 million
principal amount of 15% Senior Secured Notes due 2005 (the "Notes"),
222,455,320 shares of Series A Senior Preferred Stock, 20,716,080
shares of Series A Junior Preferred Stock, 1,002,751 shares of Class A
Common Stock, 247,500 shares of Class B Common Stock and 25,000
warrants to purchase Class A Common Stock to settle the TransTexas
Senior Secured Notes Claims. A portion of this distribution was
reallocated pursuant to the Plan as follows:
(a) $20 million in cash and five million shares of Senior Preferred
Stock to settle on a pro rata basis all general prepetition
unsecured claims;
(b) $1.8 million in cash, 2,455,320 shares of Senior Preferred Stock
and all of the Junior Preferred Stock to the holders of
TransTexas 13 3/4% Senior Subordinated Notes;
(c) 52,500 shares of Class A Common Stock and warrants exercisable to
purchase 109,879 shares of Class A Common Stock at a price of
$120 per share to the holders of the old TransTexas common stock
who were not Affiliates of the Debtor (as defined in the Plan);
and
(d) all of the Class B Common Stock and warrants exercisable to
purchase 515,625 shares of Class A Common Stock at an exercise
price of $120 per share to John R. Stanley.
(4) issued $6.7 million in secured notes in exchange for old secured notes
and related accrued interest; and
13
(5) canceled all of the old TransTexas common stock and 13 3/4% Senior
Subordinated Notes
On the Effective Date, the Company, as Borrower, and Galveston Bay
Processing Corporation and Galveston Bay Pipeline Company, as Guarantors,
entered into an Oil and Gas Revolving Credit and Term Loan Agreement, dated as
of March 15, 2000 (the "Oil and Gas Facility") with GMAC Commercial Credit LLC
("GMACC"), as a Lender and as Agent. The Oil and Gas Facility consists of a term
loan (the "Term Loan") in the amount of $22.5 million and a revolving facility
(the "Revolving Loan") in a maximum amount of $30 million (all of which was
funded on the Effective Date). The Term Loan bears interest at a rate of 14% per
annum and the Revolving Loan bears interest at a rate of 13 1/2% per annum.
Interest on the Term Loan and the Revolving Loan is payable monthly in arrears.
Principal amortization of the Term Loan is due in 20 quarterly installments of
$56,250 each beginning June 14, 2000, with the balance due March 14, 2005;
however, the Company may, and in certain circumstances must, make prepayments of
such amount. If, subsequent to such prepayments, the Company demonstrates
sufficient collateral value meeting the requirements of the Oil and Gas Facility
provisions, the Company may be entitled to borrow additional advances under the
Revolving Loan. The Oil and Gas Facility is secured by substantially all of the
assets of the Company. The security interest in accounts receivable and
inventory securing the Oil and Gas Facility is subordinated to the security
interest of GMACC under the Accounts Receivable Facility.
On the Effective Date, the Company, as Issuer, Galveston Bay Pipeline
Company and Galveston Bay Processing Corporation, as Guarantors, and Firstar
Bank, N.A., as Trustee, entered into an Indenture dated as of March 15, 2000,
pursuant to which the Company issued the Notes. Interest on the Notes is due
semi-annually on March 15 and September 15. The Notes are secured by
substantially all of the assets of the Company other than accounts receivable
and inventory. The Indenture contains certain covenants that restrict the
Company's ability to incur indebtedness, engage in related party transactions,
dispose of assets or engage in sale/leaseback transactions, issue dividends on
common stock, change its line of business, consolidate or merge with or into
another entity or convey, transfer or lease all or substantially all of its
assets, and suffer a change of control. The security interest in favor of the
Trustee is subordinated to the Security Interest in favor of the Agent under the
Oil and Gas Facility.
On the Effective Date, the Company and GMACC entered into a Third Amended
and Restated Accounts Receivable Management and Security Agreement, dated as of
March 15, 2000 (the "Accounts Receivable Facility"). The Accounts Receivable
Facility is a revolving credit facility secured by accounts receivable and
inventory. The maximum loan amount under the facility is $20 million, against
which the Company may from time to time, subject to the conditions of the
Accounts Receivable Facility, borrow, repay and reborrow. Advances under the
facility bear interest at a rate per annum equal to the higher of (i) the prime
commercial lending rate of The Bank of New York plus 1/2 of 1%, and (ii) the
Federal Funds Rate plus 1% payable monthly in arrears. As of January 31, 2002,
the outstanding principal balance under the Accounts Receivable Facility was
$1.3 million with availability for additional advances of approximately $1.3
million and will be due on March 14, 2005.
As of the Effective Date, the Company had outstanding 222,455,320 shares of
Series A Senior Preferred Stock (the "Senior Preferred Stock") with a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Senior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first two years following the Effective Date, the Company was required to pay
cash dividends at a rate of $0.10 per share per annum, or, at its option,
in-kind dividends of additional shares of Senior Preferred Stock at a rate of
$0.20 per share per annum. The Company paid these quarterly dividends with
additional shares of Preferred Stock. The Senior Preferred Stock is mandatorily
redeemable on March 15, 2006 at a rate of $1.00 per share plus accrued and
unpaid dividends. One-half of the then-outstanding shares of Senior Preferred
Stock is mandatorily convertible into shares of Class A Common Stock at a rate
of 0.3461 shares of Class A Common Stock per $1.00 of liquidation preference if
either (i) more than 75 million shares of Senior Preferred Stock remain
outstanding after March 15, 2006 or (ii) the Company fails to pay dividends on
the Senior Preferred Stock on any two dividend payment dates. The Certificate of
Designation for the Senior Preferred Stock includes restrictive covenants
comparable to those included in the Indenture.
As of the Effective Date, the Company had outstanding 20,716,080 shares of
Series A Junior Preferred Stock (the "Junior Preferred Stock" and, together with
the Senior Preferred Stock, the "Preferred Stock") with a liquidation preference
of $1.00 per share plus accrued and unpaid dividends. The terms of the Junior
Preferred Stock include a cumulative dividend preference, payable quarterly out
of funds legally available therefor, if any. During the first six years
following the Effective Date, the Company will be required to pay in-kind
dividends of additional shares of Junior Preferred Stock at a rate of $0.10 per
share per annum. Thereafter, dividends will be payable both in cash at a rate of
$0.10 per share per annum and in-kind at a rate of $0.10 per share per annum.
The Junior Preferred Stock is mandatorily redeemable on March 15, 2010 at a rate
of $1.00 per share plus accrued and unpaid dividends. Each share of Junior
Preferred Stock is mandatorily
14
convertible into shares of Class A Common Stock at the rate of 0.1168 shares of
Class A Common Stock per $1.00 of liquidation preference if either (i) more than
75 million shares of Senior Preferred Stock remain outstanding after March 15,
2006 or (ii) the Company fails to pay dividends on the Senior Preferred Stock on
any two dividend payment dates. The Certificate of Designation for the Junior
Preferred Stock includes restrictive covenants comparable to those included in
the Indenture. Such covenants will become effective when all of the Notes (and
any refinancings thereof) have been repaid and all of the Senior Preferred Stock
has been redeemed.
On January 31, May 30, August 29, November 28, 2001 and March 12, 2002, the
Board of Directors of the Company authorized the payment of quarterly dividends
to the holders of the Company's Preferred Stock of record on March 1, June 1,
September 1, December 1, 2001 and March 1, 2002, respectively. The quarterly
dividends were paid in-kind on March 15, June 15, September 17, December 17,
2001 and March 15, 2002 in additional shares of Preferred Stock of the same
class at an annual rate of $0.20 per share for each share of Series A Senior
Preferred Stock and at an annual rate of $0.10 per share for each share of
Series A Junior Preferred Stock in accordance with the Certificate of
Designation for Series A Senior Preferred Stock and the Certificate of
Designation for Series A Junior Preferred Stock, respectively. Fractional shares
were not issued, but were settled in cash. The Company does not anticipate
paying the cash dividends on the Senior or Junior Preferred Stock in the future.
The Company has had discussions with certain of its preferred stockholders
relating to amendments of the Certificates of Designation of the Senior and
Junior Preferred Stock to enable the Company to convert all of the Preferred
Stock to shares of Class A Common Stock based on agreed upon rates of
conversion.
In March 2000, TransTexas entered into a production payment drilling
program agreement with two unaffiliated third parties in the form of a term
overriding royalty interest carved out of and burdening certain properties
("Subject Interests"). The Company has the right to offer additional interests
to the production payment parties at a negotiated purchase price. The production
payment calls for the repayment of the primary sum plus an amount equivalent to
a 15% annual interest rate on the unpaid portion of such primary sum. In
February 2001, the Company closed a Fourth Supplement to the production payment
whereby the Company received $19.8 million in exchange for additional properties
being made subject to the production payment. In July 2001, the Company closed a
Fifth Supplement to the production payment whereby the Company received $15.0
million. In September 2001, the Company closed a Sixth and Seventh Supplement to
the production payment whereby the Company received $15.0 million. As of January
31, 2002, the aggregate purchase price of all interests purchased pursuant to
this production payment drilling program was $76.8 million and the outstanding
balance of the production payment was $28.5 million, of which $2.5 million
attributable to produced volumes is included in accrued liabilities. The Oil and
Gas Revolving Credit Term Loan Agreement (the "Oil and Gas Facility") entered
into by the Company, as borrower, Galveston Bay Processing Corporation and
Galveston Bay Pipeline Company, as Guarantors, and with GMACC, as a Lender and
as Agent, places certain restrictions on the amount that may be outstanding
under the production payment. Certain of these restrictions were waived by the
required lenders in connection with the Sixth and Seventh Supplements to the
production payment. In March 2002, the Company closed an Eighth Supplement to
the production payment whereby the Company received $14.0 million.
In connection with the production payment, the Company entered into various
marketing and processing agreements with one of the other parties to the
production payment. Pursuant to these agreements, the Company will pay a nominal
marketing fee with respect to the Company's production associated with the
Subject Interests. In addition, the third party will pay a fee for certain
processing services to be provided by Galveston Bay Processing. See Item 7A for
information about certain hedging provisions in the new production payment
agreements.
TransTexas is highly leveraged and has significant cash requirements for
debt service and significant charges for Preferred Stock dividends to net income
available for common stockholders.
In order to maintain or increase its proved oil and gas reserves,
TransTexas must continue to make substantial capital expenditures for the
exploration and development of its natural gas and oil prospects. For the year
ended January 31, 2002, total capital expenditures incurred were $135 million,
including $11 million for nonproducing leases and seismic, $11 for capitalized
interest, $105 million for drilling and development and $8 million for gas
gathering and other equipment. Capital expenditures for fiscal 2003 are
estimated to be approximately $27 million. Management plans to fund
TransTexas' 2003 debt service requirements and capital expenditures with cash
flows from operating activities and borrowings under the production payment
drilling program and other financings. In addition, the Company has commenced
negotiations for joint venture drilling opportunities with several unrelated
entities.
Should TransTexas' drilling prospects not be productive or should oil and
gas prices decline for a prolonged period, absent other sources of capital, the
Company would substantially reduce its capital expenditures, which would limit
its ability to maintain or increase production and in turn meet its debt service
requirements. Asset sales and financings are
15
restricted under the terms of TransTexas' debt documents and Senior Preferred
Stock. In October 2001, TransTexas sold its interest in the Bob West field in
Zapata County, Texas for a sales price of $56.5 million, exclusive of closing
costs.
At January 31, 2002, the Company had a working capital deficit of $8.6
million. The long-term borrowing of $14 million under the production payment
drilling program in March 2002 was entered into primarily to alleviate the
working capital deficit.
Potential Tax Liabilities
Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provision (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended (the "Tax Code"), and has reduced its tax attributes (including
its net operating loss and credit carryforwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this transaction,
however, and TransAmerican has not obtained a ruling from the Internal Revenue
Service ("IRS") regarding this transaction. TransTexas believes that there is
substantial legal authority to support the position that the COD Exclusion
applies to the cancellation of TransAmerican's indebtedness. However, due to
factual and legal uncertainties, there can be no assurance that the IRS will not
challenge this position, or that any such challenge would not be upheld. Prior
to the Effective Date, TransTexas filed a consolidated tax return with
TransAmerican. Income taxes were due from or payable to TransAmerican in
accordance with a tax allocation agreement, as amended, between TransTexas, TNGC
Holdings Corporation, TransAmerican and TransAmerican's other subsidiaries (the
"Tax Allocation Agreement"). Under the Tax Allocation Agreement, TransTexas has
agreed to pay an amount equal to any federal tax liability (which would be
approximately $25.4 million) attributable to the inapplicability of the COD
Exclusion. Any such tax would be offset in future years by alternative minimum
tax credits and retained loss and credit carryforwards to the extent recoverable
from TransAmerican.
As a former member of the affiliated group for tax purposes (the "TNGC
Consolidated Group") which included TNGC Holdings Corporation, the sole
stockholder of TransAmerican ("TNGC"), TransAmerican, TEC, TransTexas and TARC,
TransTexas will be severally liable for any tax liability resulting from any
transaction of the TNGC Consolidated Group that occurred during any taxable year
of the TNGC Consolidated Group during which TransTexas was a member, including
the above-described transactions. The IRS has commenced an audit of the
consolidated federal income tax returns of the TNGC Consolidated Group for its
taxable years ended July 31, 1994 and July 31, 1995. The Company has not been
advised by the IRS as to whether any tax deficiencies will be proposed by the
IRS as a result of its review.
TransTexas expects that a significant portion of its net operating loss
carryovers ("NOLs") will be eliminated and the use of those NOLs that are not
eliminated will be severely restricted as a consequence of the Plan. In
addition, certain other tax attributes of TransTexas may under certain
circumstances be eliminated or reduced as a consequence of the Plan. The
potential elimination or reduction of NOLs and such other tax attributes may
substantially increase the amount of tax payable by TransTexas.
Inflation and Changes in Prices
TransTexas' results of operations and the value of its gas properties are
highly dependent upon the prices TransTexas receives for its natural gas,
condensate and oil. Substantially all of TransTexas' sales of natural gas,
condensate and oil are made pursuant to long-term contracts at market prices.
Accordingly, the prices received by TransTexas for its natural gas production
are dependent upon numerous factors beyond the control of TransTexas, including
the level of consumer product demand, the North American supply of natural gas,
government regulations and taxes, the price and availability of alternative
fuels, the level of foreign imports of oil and natural gas and the overall
economic environment. Demand for natural gas is seasonal, with demand typically
higher during the summer and winter, and lower during the spring and fall, with
concomitant changes in price. As a result of high demand for drilling services,
TransTexas experienced increases in the cost of oilfield services and equipment
used in exploration and development drilling, and to a lesser extent well
completion and production costs.
Any significant decline in current prices for natural gas could have a
material adverse effect on TransTexas' financial condition, results of
operations and quantities of reserves recoverable on an economic basis. Based on
an assumed average net daily production level of approximately 43 MMcfd,
TransTexas estimates that a $0.10 per MMBtu change in average gas prices
received would change annual operating income by approximately $1.3 million.
ACCOUNTING POLICIES
The following accounting policies are important to an understanding of our
operating results and financial condition and should be considered as an
integral part of the financial review. We have adopted a number of accounting
policies, the most important of which are discussed in Note 1 to the
consolidated financial statements, "Summary of Significant Accounting Policies."
16
Gas and Oil Activities
We use the full cost method of accounting for our gas and oil activities.
Under this method of accounting, the cost of all acquisition, exploration and
development activities are capitalized. Such capitalized costs and estimated
future development and reclamation costs are amortized on a unit-of-production
method. Costs of unevaluated gas and oil properties are excluded from
capitalized costs being amortized. We exclude these costs until proved reserves
are found or until it is determined that the costs are impaired. All excluded
costs are reviewed quarterly to determine if impairment has occurred. Any
impairment is transferred to costs to be amortized. Net capitalized costs of gas
and oil properties are limited to the lower of unamortized cost or the cost
center ceiling, defined as the sum of the present value (10% discount rate) of
estimated unescalated future net revenues from proved reserves; plus the cost of
properties not being amortized, if any; plus the lower of cost or estimated fair
value of unproved properties included in the costs being amortized, if any; less
the effects of related income taxes. This is referred to as a "ceiling test" and
we are required to perform this calculation based on prices and costs in effect
on the last day of each quarter. If net capitalized costs of our gas and oil
properties exceed the cost center ceiling, we must write down our properties (a
non-cash charge to income) by the amount of such excess. We occasionally sell
certain gas and oil properties. Proceeds from a sale reduce the costs in the
cost center unless the sale involves a significant quantity of reserves in
relation to the cost center, then we recognize a gain or loss.
Hedging Agreements
From time to time, we enter into commodity price swap agreements to reduce
our exposure to price risk in the spot market for natural gas and condensate.
Beginning in February 2001, the estimated fair value of these agreements is
reflected in our consolidated balance sheet and represents hedges against the
price we will receive for future natural gas and condensate production. Changes
in the fair value of the hedging agreements are recorded directly to
stockholders' equity until the hedged quantities of natural gas or condensate
are produced. We do not use derivative instruments for trading purposes.
FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
are included throughout this report. All statements other than statements of
historical facts included in this report regarding TransTexas' financial
position, business strategy, and plans and objectives of management for future
operations, including, but not limited to words such as "anticipates,"
"expects," "estimates," "believes" and "likely" indicate forward-looking
statements. TransTexas' management believes its current views and expectations
are based on reasonable assumptions; however, there are significant risks and
uncertainties that could significantly affect expected results. Factors that
could cause actual results to differ materially from those in the
forward-looking statements include fluctuations in the commodity prices for
natural gas, crude oil, condensate and natural gas liquids, the extent of
TransTexas' success in discovering, developing and producing reserves,
conditions in the equity and capital markets, competition and the ultimate
resolution of litigation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from adverse changes in prices for
natural gas, condensate and oil and interest rates as discussed below.
The Company's revenues, profitability, access to capital and future rate of
growth are substantially dependent upon the prevailing prices of natural gas,
condensate and oil. These prices are subject to wide fluctuations in response to
relatively minor changes in supply and demand and a variety of additional
factors beyond the Company's control. From time to time, the Company has
utilized hedging transactions with respect to a portion of its gas and oil
production to achieve a more predictable cash flow, as well as to reduce
exposure to price fluctuations. While hedging limits the downside risk of
adverse price movements, it may also limit future revenues from favorable price
movements. Because gains or losses associated with hedging transactions are
included in gas and oil revenues when the hedged volumes are delivered, such
gains and losses are generally offset by similar changes in the realized prices
of commodities.
Pursuant to the terms of the Company's production payment agreement entered
into in March 2000, the Company entered into the following hedge arrangements
with respect to a portion of the natural gas and condensate production
associated therewith and which effectively hedge a portion of the Company's
production:
17
TOTAL CONTRACT PRICE
---------------------
VOLUMES IN COLLAR
---------------------
PERIOD MMBtus/Bbls FLOOR CEILING
------ ----------- -------- -----------
Natural gas:
April 2000 - October 2000...................................... 3,745,000 $ 2.10 $ 3.40
November 2000 - March 2001..................................... 1,887,500 2.35 3.95
Condensate:
April 2000 - September 2000.................................... 228,750 18.50 32.50
October 2000 - March 2001..................................... 182,000 18.50 29.25
Under these contracts, the counterparty was required to make payment to the
Company if the settlement price (based on New York Merchantile Exchange prices)
for the period was below the floor, and the Company was required to make payment
to the counterparty if the settlement price for any period was above the ceiling
price. The Company recognized hedging losses of $1.6 million and $6.7 million
under these contracts for the years ended January 31, 2002 and 2001,
respectively.
In July and September 2001, the Company entered into the following hedging
arrangements (settlement price based on a published industry index of natural
gas prices at Houston Ship Channel) with respect to a portion of the Company's
natural gas production:
TOTAL CONTRACT PRICE
---------------------
VOLUMES IN COLLAR
---------------------
PERIOD MMBtus FLOOR CEILING
------ ------------- --------- ---------
Natural gas:
August 2001 - July 2002......................................... 2,555,000 $ 3.30 $ 3.95
November 2001 - March 2002...................................... 1,510,000 2.85 3.30
April 2002 - October 2002....................................... 1,070,000 2.85 3.35
As of January 31, 2002, the Company recognized hedging gains of $1.1
million. At January 31, 2002, the Company estimated that these contracts had a
fair value of $2.3 million.
In November 2000, the Company entered into the following commodity price
hedging arrangement with respect to a portion of the Company's natural gas
production:
TOTAL CONTRACT PRICE
--------------------
VOLUMES IN COLLAR
--------------------
PERIOD MMBtus/Bbls FLOOR CEILING
------ ----------- -------- ---------
Natural gas:
December 2000 - November 2001.................................. 7,300,000 $ 3.50 $ 6.00
Under terms of this collar transaction, the counterparty is required to
make payment to the Company if the settlement price (based on a published
industry index of natural gas prices at Houston Ship Channel) for any settlement
period is below the floor price for such transaction and the Company is required
to make payment to the counterparty if the settlement price for any settlement
period is above the ceiling price for such transaction. For the years ended
January 31, 2002 and 2001, the Company recognized hedging gains of $2.1 million
and hedging losses of $2.4 million, respectively, under this contract.
Because substantially all of its long-term obligations at January 31, 2002
are at fixed rates, the Company considers its interest rate exposure to be
minimal. The Company's borrowings under its credit facility ($1.3 million
outstanding at January 31, 2002) are subject to a rate of interest that
fluctuates based on short-term interest rates. The Company had no interest rate
hedges at January 31, 2002.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Report of Independent Accountants........................................................................... 19
Financial Statements:
Consolidated Balance Sheet.............................................................................. 20
Consolidated Statement of Operations.................................................................... 21
Consolidated Statement of Stockholders' Equity (Deficit)................................................ 22
Consolidated Statement of Cash Flows.................................................................... 23
Notes to Consolidated Financial Statements.............................................................. 24
18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
TransTexas Gas Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statement of operations, stockholders' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of
TransTexas Gas Corporation (successor) at January 31, 2002 and 2001, and the
results of operations and cash flow for the two years ended January 31, 2002 and
2001, the results of operations and cash flow for TransTexas Gas Corporation
(predecessor) for the period ended January 31, 2000 (successor and predecessor
are collectively referred to as the "Company"), in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for derivative instruments and hedging
activities effective February 1, 2001.
As discussed in Note 2 to the consolidated financial statements, on April
19, 1999, the Company filed a voluntary petition for relief under Chapter 11 of
the U.S. Bankruptcy Code. The Company's Plan of Reorganization, as amended,
became effective on March 17, 2000 and the Company emerged from Chapter 11. In
connection with its emergence from Chapter 11, the Company adopted fresh-start
reporting as of January 31, 2000.
PricewaterhouseCoopers LLP
Houston, Texas
April 30, 2002
19
TRANSTEXAS GAS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
JANUARY 31,
-------------------------------
2002 2001
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 6,559 $ 20,715
Accounts receivable................................................................ 15,267 42,533
Receivables from affiliates........................................................ -- 21
Inventories........................................................................ 818 1,476
Other ............................................................................. 3,112 2,521
-------------- -------------
Total current assets............................................................ 25,756 67,266
-------------- -------------
Property and equipment............................................................... 494,748 413,811
Less accumulated depreciation, depletion and amortization............................ 367,801 81,483
-------------- -------------
Net property and equipment -- based on the full cost method of accounting for
gas and oil properties of which $45,301 and $81,381 was excluded from
amortization at January 31, 2002 and 2001, respectively............................ 126,947 332,328
-------------- -------------
Other assets......................................................................... 2,101 2,649
-------------- -------------
$ 154,804 $ 402,243
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt............................................... $ 2,444 $ 4,269
Accounts payable................................................................... 5,805 9,255
Accrued liabilities................................................................ 26,127 33,153
-------------- -------------
Total current liabilities....................................................... 34,376 46,677
-------------- -------------
Long-term debt, net of current maturities ........................................... 261,774 281,271
Production payments, net of current portion ......................................... 26,005 12,732
Deferred income taxes ............................................................... -- 9,984
Other liabilities ................................................................... 6,644 8,011
Redeemable preferred stock .......................................................... 72,125 25,722
Commitments and contingencies (Note 14).............................................. -- --
Stockholders' equity (deficit) (Note 2):
Common stock, $0.01 par value, 100,247,500 shares authorized;
1,250,251 shares issued and outstanding.......................................... 12 12
Additional paid-in capital......................................................... 25,013 25,013
Accumulated deficit ............................................................... (273,493) (7,179)
Accumulated other comprehensive income............................................. 2,348 --
-------------- -------------
Total stockholders' equity (deficit)............................................ (246,120) 17,846
-------------- -------------
$ 154,804 $ 402,243
============== =============
The accompanying notes are an integral part of the financial statements.
20
TRANSTEXAS GAS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
SUCCESSOR PREDECESSOR
---------------------------------- --------------
YEAR ENDED JANUARY 31,
--------------------------------------------------------
2002 2001 2000
------------- ------------- | -------------
|
Revenues: |
Gas, condensate and natural gas liquids ............. $ 133,138 $ 187,883 | $ 112,898
Loss on the sale of assets........................... -- -- | (438)
Other ............................................... 1,245 2,208 | 2,770
------------- ------------- | -------------
Total revenues.................................... 134,383 190,091 | 115,230
------------- ------------- | -------------
Costs and expenses: |
Operating ........................................... 19,195 19,127 | 20,147
Depreciation, depletion and amortization ............ 91,266 81,483 | 75,044
General and administrative .......................... 19,854 20,303 | 19,883
Taxes other than income taxes........................ 4,175 7,156 | 9,788
Impairment of gas and oil properties................. 195,065 -- | --
------------- ------------- | -------------
Total costs and expenses ......................... 329,555 128,069 | 124,862
------------- ------------- | -------------
Operating income (loss)........................... (195,172) 62,022 | (9,632)
------------- ------------- | -------------
Other income (expense): |
Interest income...................................... 580 574 | 472
Interest expense, net................................ (35,303) (34,069) | (38,526)
------------- ------------- | -------------
Total other expense............................... (34,723) (33,495) | (38,054)
------------- ------------- | -------------
Income (loss) before reorganization items, |
income taxes and extraordinary item .............. (229,895) 28,527 | (47,686)
------------- ------------- | -------------
Reorganization items: |
Legal and professional fees.......................... -- -- | (8,325)
Revaluation of assets to fair market value........... -- -- | 58,836
------------- ------------- | -------------
Total reorganization items........................ -- -- | 50,511
------------- ------------- | -------------
Income tax expense (benefit)............................ (9,984) 9,984 | 10,000
------------- ------------- | -------------
Income (loss) before extraordinary item........... (219,911) 18,543 | (7,175)
Extraordinary item - gain on early |
extinguishment of debt, net of tax.................... -- -- | 436,490
------------- ------------- | -------------
Net income (loss)................................. $ (219,911) $ 18,543 | $ 429,315
============= ============= | =============
Accretion of preferred stock............................ $ 46,403 $ 25,722 | $ --
============= ============= | =============
Net income (loss) available to common |
stockholders ........................................ $ (266,314) $ (7,179) | $ 429,315
============= ============= | =============
Basic and diluted net income (loss) per share: |
Loss before extraordinary item....................... $ (213.01) $ (5.74) | $ (0.13)
Extraordinary item................................... -- -- | 7.59
------------- ------------- | -------------
$ (213.01) $ (5.74) | $ 7.46
============= ============= | =============
|
Weighted average number of shares outstanding |
for basic and diluted net income (loss) per share.... 1,250,251 1,250,251 | 57,515,566
============= ============= | =============
The accompanying notes are an integral part of the
consolidated financial statements.
21
TRANSTEXAS GAS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
ADDITIONAL
PAID-IN RETAINED ACCUMULATED TOTAL
COMMON STOCK CAPITAL EARNINGS OTHER STOCKHOLDERS'
------------------------ (CAPITAL (ACCUMULATED TREASURY COMPREHENSIVE EQUITY
SHARES AMOUNT DEFICIT) DEFICIT) STOCK INCOME (DEFICIT)
----------- --------- ----------- ----------- --------- ------------- -------------
PREDECESSOR:
Balance at January 31, 1999 ........ 74,000,000 $ 740 $ 19,915 $ (188,265) $(262,405) $ -- $(430,015)
Contribution from TEC ............ -- -- 700 -- -- -- 700
Adoption of fresh-start reporting -- -- (21,355) (241,050) 262,405 -- --
Net income ....................... -- -- -- 429,315 -- -- 429,315
----------- ---------- ---------- ---------- --------- -------- ---------
SUCCESSOR:
Balance at January 31, 2000 ........ 74,000,000 740 (740) -- -- -- --
Cancellation of old common stock . (74,000,000) (740) 740 -- -- -- --
Issuance of new common stock ..... 1,250,251 12 (12) -- -- -- --
Proceeds from short-swing sale ... -- -- 25 -- -- -- 25
Accretion of preferred stock ..... -- -- -- (25,722) -- -- (25,722)
Adjustment to reorganization value -- -- 25,000 -- -- 25,000
Net income ....................... -- -- -- 18,543 -- -- 18,543
----------- ---------- ---------- ---------- --------- -------- ---------
Balance at January 31, 2001 ........ 1,250,251 12 25,013 (7,179) -- -- 17,846
Cumulative effect of adopting
SFAS 133 ........................ -- -- -- -- -- (1,282) (1,282)
Change in fair value of hedge
agreements ...................... -- -- -- -- -- 2,486 2,486
Reclassification adjustments for
hedge agreement settlements ..... -- -- -- -- -- 1,144 1,144
Accretion of preferred stock ..... -- -- -- (46,403) -- -- (46,403)
Net loss ......................... -- -- -- (219,911) -- -- (219,911)
----------- --------- ---------- ---------- --------- --------- ---------
Balance at January 31, 2002 ........ 1,250,251 $ 12 $ 25,013 $ (273,493) $ -- $ 2,348 $(246,120)
=========== ========= ========== ========== ========= ========= =========
The accompanying notes are an integral part of the
consolidated financial statements.
22
TRANSTEXAS GAS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
SUCCESSOR PREDECESSOR
-------------------------------- -------------
YEAR ENDED JANUARY 31,
---------------------------------------------------
2002 2001 2000
------------- -------------- | -------------
|
Operating activities: |
Net income (loss)......................................... $ (219,911) $ 18,543 | $ 429,315
Adjustments to reconcile net income (loss) to net cash |
provided by operating activities: |
Reorganization adjustments: |
Extraordinary item................................. -- -- | (436,490)
Revaluation of assets.............................. -- -- | (58,836)
Depreciation, depletion and amortization............... 91,266 81,483 | 75,044
Impairment of gas and oil properties................... 195,065 -- | --
Accretion of discount on long-term debt................ 161 3,813 | --
Amortization of debt issue costs....................... 530 343 | 1,641
Loss on the sale of assets............................. -- -- | 438
Deferred income taxes.................................. (9,984) 9,984 | 10,000
Changes in assets and liabilities |
Accounts receivable................................ 27,266 (22,941) | (3,501)
Receivable from affiliates......................... 21 1,086 | 179
Inventories........................................ 658 265 | 1,469
Other current assets............................... 1,757 (1,595) | 2,767
Accounts payable................................... (3,450) (6,567) | 5,430
Accrued interest payable to affiliates............. -- -- | 14,628
Accrued liabilities................................ (7,422) 23,255 | (3,271)
Transactions with affiliates, net.................. -- -- | 700
Other assets....................................... 156 (112) | 378
Other liabilities.................................. (1,367) (26,635) | 6,691
------------- -------------- | -------------
Net cash provided by operating activities....... 74,746 80,922 | 46,582
------------- -------------- | -------------
Investing activities: |
Capital expenditures...................................... (134,325) (101,189) | (42,342)
Proceeds from the sale of assets.......................... 53,627 16,182 | 445
------------- -------------- | ---------------
Net cash used by investing activities........... (80,698) (85,007) | (41,897)
------------- -------------- | -------------
Financing activities: |
Issuance of note payable.................................. -- -- | 30,000
Issuance of long-term debt................................ 2,134 32,500 | --
Principal payments on long-term debt...................... (7,059) (16,943) | (1,896)
Revolving credit agreement, net........................... (16,639) 13,739 | 3,860
Issuance of production payments........................... 49,800 27,000 | --
Principal payments on production payments................. (36,131) (47,303) | (22,136)
Proceeds from short-swing sale............................ -- 25 | --
Debt issue costs.......................................... (309) (2,506) | --
------------- -------------- | -------------
Net cash provided (used) by financing activities (8,204) 6,512 | 9,828
------------- -------------- | -------------
Increase (decrease) in cash and cash equivalents (14,156) 2,427 | 14,513
Beginning cash and cash equivalents.......................... 20,715 18,288 | 3,775
------------- -------------- | -------------
Ending cash and cash equivalents............................. $ 6,559 $ 20,715 | $ 18,288
============= ============== | =============
The accompanying notes are an integral part of the
consolidated financial statements.
23
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
TransTexas Gas Corporation (together with its subsidiaries, the "Company"
or "TransTexas") was incorporated in Delaware in May 1993. Prior to March 17,
2000 (the "Effective Date"), TransTexas was a subsidiary of TransAmerican Energy
Corporation ("TEC"), which is wholly owned by TEC/TransAmerican LLC, which is
wholly owned by TransAmerican Natural Gas Corporation ("TransAmerican"). Unless
otherwise noted, the term "TransTexas" refers to TransTexas Gas Corporation and
its subsidiaries, including Galveston Bay Processing Corporation and Galveston
Bay Pipeline Company. See Note 2 for a discussion of TransTexas' reorganization.
Use of Estimates
The preparation of financial statements 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. TransTexas' most significant financial estimates are based on
remaining proved gas and oil reserves. Actual results could differ from these
estimates.
Cash and Cash Equivalents
TransTexas considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash and cash
equivalents at January 31, 2002 and 2001 include $0.2 million and $2.2 million,
respectively, restricted for payments of future goods and services provided by
certain vendors.
Inventories
TransTexas' inventories, consisting primarily of tubular goods, are stated
at the lower of average cost or market.
Gas and Oil Properties
TransTexas uses the full cost method of accounting for exploration and
development costs. Under this method of accounting, the cost of all exploration
and development activities are capitalized. Such capitalized costs and estimated
future development and reclamation costs are amortized on a unit-of-production
method. Net capitalized costs of gas and oil properties are limited to the lower
of unamortized cost or the cost center ceiling, defined as the sum of the
present value (10% discount rate) of estimated unescalated future net revenues
from proved reserves; plus the cost of properties not being amortized, if any;
plus the lower of cost or estimated fair value of unproved properties included
in the costs being amortized, if any; less related income tax effects. For the
year ended January 31, 2002, TransTexas recorded impairment losses related to
write-downs of $195.1 million of its net capitalized costs of gas and oil
properties to the cost center ceiling in accordance with the full cost method of
accounting.
Proceeds from the sale of gas and oil properties are applied to reduce the
costs in the cost center unless the sale involves a significant quantity of
reserves in relation to the cost center, in which case a gain or loss is
recognized.
Unevaluated properties and associated costs not currently being amortized
and included in gas and oil properties were $45 million and $81 million at
January 31, 2002 and 2001, respectively. The properties represented by these
costs were undergoing exploration activities at such date, or are properties on
which TransTexas intends to commence such activities in the future. TransTexas
believes that the unevaluated properties at January 31, 2002 will be
substantially evaluated in 12 to 24 months and it will begin to amortize these
costs at such time.
Other Property and Equipment
Other property and equipment are stated at cost. The cost of repairs and
minor replacements is charged to operating expense while the cost of renewals
and betterments is capitalized. At the time depreciable assets are retired or
otherwise disposed of, the cost and related accumulated depreciation or
amortization are removed from the accounts. Gains or losses
24
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on dispositions in the ordinary course of business are included in the
consolidated statement of operations. Impairment of other property and equipment
is reviewed whenever events or changes in circumstances indicate that the
carrying value of assets may not be recoverable.
Depreciation of oilfield services equipment and other buildings and
equipment is computed by the straight-line method at rates that will amortize
the unrecovered cost of depreciable property over their estimated useful lives
of 4 to 10 years.
Costs of improving leased property are amortized over the estimated useful
lives of the assets or the terms of the leases, whichever is shorter.
Environmental Remediation Costs
Environmental expenditures are expensed or capitalized as appropriate,
depending on their future economic benefit. Expenditures that relate to an
existing condition caused by past operations and that do not have future
economic benefits are expensed. Liabilities for these expenditures are provided
when the responsibility to remediate is probable and the amount of associated
costs is reasonably estimable.
Debt Issue Costs
Costs related to the issuance of long-term debt are classified as "Other
assets." Capitalized debt costs are amortized to interest expense over the
scheduled maturity of the debt utilizing the interest method. In the event of a
redemption of long-term debt, the related debt issue costs will be charged to
income in the period of presentation.
Defined Contribution Plan
TransTexas maintains a defined contribution plan, which incorporates a
"401(k) feature" as allowed under the Internal Revenue Code. All investment
transactions are administered by Massachusetts Mutual Life Insurance Company.
Employees who are at least 21 years of age and have completed one year of
credited service are eligible to participate on the first day of the month
following their eligibility. TransTexas matches employee contributions up to a
maximum of 100% of the first 3% and 50% of the next 2% of the participant's
compensation. TransTexas' contributions with respect to this plan totaled $0.2
million for each of the years ended January 31, 2002, 2001 and 2000. All Company
contributions are currently funded.
Fair Value of Financial Instruments
TransTexas includes fair value information in the Notes to Consolidated
Financial Statements when the fair value of its financial instruments can be
determined and is different from the book value. TransTexas generally assumes
that the book value of financial instruments classified as current approximates
fair value because of the short maturity of these instruments. For noncurrent
financial instruments, TransTexas uses quoted market prices or, to the extent
that there are no available quoted market prices, market prices for similar
instruments. Due to the adoption of fresh-start reporting, all financial
instruments were recorded at estimated fair value, based on the present value of
amounts to be paid, at January 31, 2000.
Revenue Recognition
TransTexas recognizes revenues from the sales of natural gas, condensate
and natural gas liquids in the period of delivery. Revenues are recognized from
transportation of natural gas in the period the service is provided. The sales
method is used for natural gas imbalances that arise from jointly produced
properties. Volumetric production is monitored to minimize these natural gas
imbalances. A natural gas imbalance liability is recorded in other liabilities
if TransTexas' excess sales of natural gas exceed its share of estimated
remaining recoverable reserves for such properties.
Concentrations
Financial instruments that potentially expose TransTexas to credit risk
consist principally of cash and trade receivables. TransTexas selects depository
banks based upon management's review of the financial stability of the
institution. Balances generally exceed the $100,000 level covered by federal
deposit insurance. To date, TransTexas has not incurred any losses
25
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
due to excess deposits in any financial institution. Trade accounts receivable
are generally from companies with significant natural gas marketing activities,
which would be impacted by conditions or occurrences affecting that industry.
TransTexas performs ongoing credit evaluations and, generally, requires no
collateral from its customers. TransTexas is not aware of any significant credit
risk relating to its customers and has not experienced significant credit losses
associated with such receivables.
Hedging Agreements
From time to time, TransTexas enters into commodity price swap agreements
(the "Hedge Agreements") to reduce its exposure to price risk in the spot market
for natural gas. Effective February 1, 2001, the Company adopted Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," which was amended by Statement of Financial
Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities." These pronouncements establish accounting and
reporting standards for derivative instruments and for hedging activities, which
generally require recognition of all derivatives as either assets or liabilities
in the balance sheet at their fair value. The accounting for changes in fair
value depends on the intended use of the derivative and its resulting
designation. The Company recorded a cumulative effect charge to comprehensive
income of approximately $1.3 million to recognize the fair value of its
liability under the Company's derivative instruments upon the adoption of SFAS
133. During the year ended January 31, 2002, decreases in the prevailing
commodity prices for oil and natural gas have reduced the fair value of the
Company's liability under its derivative instruments, which resulted in an
adjustment to comprehensive income. A summary of the Company's comprehensive
income and accumulated other comprehensive loss for the period ended January 31,
2002 is as follows (in thousands of dollars):
ACCUMULATED
ACCUMULATED OTHER
COMPREHENSIVE COMPREHENSIVE
LOSS INCOME
----------------- -----------------
Balance at January 31, 2001........................................ $ $ --
Net loss for the year ended January 31, 2002....................... (219,911)
Other comprehensive income:
Cumulative effect of adopting SFAS 133.......................... (1,282) (1,282)
Change in the fair value of hedge agreements.................... 2,486 2,486
Reclassification adjustments for hedge agreement settlements.... 1,144 1,144
----------------- -----------------
Comprehensive loss....................................... $ (217,563)
=================
Balance at January 31, 2002........................................ $ 2,348
=================
Pursuant to the terms of the Company's production payment agreement entered
into in March 2000, the Company entered into the following hedge arrangements
with respect to a portion of the natural gas and condensate production
associated therewith and which effectively hedge a portion of the Company's
production:
CONTRACT PRICE
-------------------
TOTAL COLLAR
VOLUMES IN -------------------
PERIOD MMBtus/Bbls FLOOR CEILING
------ ----------- -------- ---------
Natural gas:
April 2000 - October 2000...................................... 3,745,000 $ 2.10 $ 3.40
November 2000 - March 2001..................................... 1,887,500 2.35 3.95
Condensate:
April 2000 - September 2000.................................... 228,750 18.50 32.50
October 2000 - March 2001..................................... 182,000 18.50 29.25
Under these contracts, the counterparty was required to make payment to the
Company if the settlement price (based on New York Merchantile Exchange prices)
for the period was below the floor, and the Company was required to make payment
to the counterparty if the settlement price for any period was above the ceiling
price. The Company recognized hedging losses of $1.6 million and $6.7 million
under these contracts for the years ended January 31, 2002 and 2001,
respectively.
26
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In July and September 2001, the Company entered into the following hedging
arrangements (settlement price based on a published industry index of natural
gas prices at Houston Ship Channel) with respect to a portion of the Company's
natural gas production:
CONTRACT PRICE
--------------------
TOTAL COLLAR
VOLUMES IN --------------------
PERIOD MMBtus FLOOR CEILING
------ -------------- --------- --------
Natural gas:
August 2001 - July 2002........................................ 2,555,000 $ 3.30 $ 3.95
November 2001 - March 2002..................................... 1,510,000 2.85 3.30
April 2002 - October 2002...................................... 1,070,000 2.85 3.35
As of January 31, 2002, the Company recognized hedging gains of $1.1
million. At January 31, 2002, the Company estimated that these contracts had a
fair value of $2.3 million.
In November 2000, the Company entered into the following commodity price
hedging arrangement with respect to a portion of the Company's natural gas
production:
CONTRACT PRICE
-------------------
TOTAL COLLAR
VOLUMES IN -------------------
PERIOD MMBtus/Bbls FLOOR CEILING
------ ----------- -------- ---------
Natural gas:
December 2000 - November 2001................................. 7,300,000 $ 3.50 $ 6.00
Under terms of this collar transaction, the counterparty is required to
make payment to the Company if the settlement price (based on a published
industry index of natural gas prices at Houston Ship Channel) for any settlement
period is below the floor price for such transaction and the Company is required
to make payment to the counterparty if the settlement price for any settlement
period is above the ceiling price for such transaction. For the years ended
January 31, 2002 and 2001, the Company recognized hedging gains of $2.1 million
and hedging losses of $2.4 million, respectively, under this contract.
Income Taxes
Prior to the Effective Date, TransTexas filed a consolidated tax return
with TransAmerican. Income taxes were due from or payable to TransAmerican in
accordance with a tax allocation agreement, as amended, between TransTexas, TNGC
Holdings Corporation, TransAmerican and TransAmerican's other subsidiaries (the
"Tax Allocation Agreement"). It was TransTexas' policy to record income tax
expense as though TransTexas had filed separately. Subsequent to the Effective
Date, TransTexas and its wholly owned subsidiaries file a consolidated tax
return. Deferred income taxes are recognized, at enacted tax rates, to reflect
the future effects of temporary differences arising between the financial
reporting and tax bases of assets and liabilities. Income taxes include federal
and state income taxes.
Net Income (Loss) Per Share
Basic and diluted net income (loss) per share has been calculated based on
the weighted average number of shares of common stock outstanding during each
period, excluding treasury shares. After adopting fresh-start reporting, the
number of common shares used to calculate basic earnings per share is 1,250,251.
At January 31, 2002, potential common shares to be included in diluted earnings
per share, if they were dilutive, are as follows:
Series A Senior Preferred Stock.......................... 54,167,576
Series A Junior Preferred Stock.......................... 2,876,187
Class A Common Stock..................................... 1,002,751
Class B Common Stock..................................... 247,500
Class A Common Stock Warrants............................ 738,004
------------
59,032,018
============
27
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Recently Issued Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations," and SFAS 142, "Goodwill and Other Intangible Assets." SFAS 141
requires that the purchase method of accounting be used for all business
combinations initiated or completed after June 30, 2001. SFAS 141 also specifies
criteria that intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill. SFAS
142 requires that goodwill as well as other intangible assets no longer be
amortized to earnings, but instead be reviewed annually for impairment. SFAS 141
and SFAS 142 do not apply to the Company unless it enters into a future business
combination.
In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations." SFAS 143 requires entities to record the fair value of a liability
for an asset retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related long-lived asset.
The Company is evaluating the impact of SFAS 143 that will be effective for the
Company in February 2003.
In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." SFAS 144 requires that one accounting model
be used for long-lived assets to be disposed of by sale and broadens the
reporting of discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that will
be eliminated from the ongoing operations of the entity in a disposal
transaction. SFAS 144 did not affect the ceiling test calculation under the
full cost method of accounting. The adoption of SFAS 144 effective February 1,
2002 had no impact on the Company's financial statements.
2. REORGANIZATION
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware. TransTexas filed its bankruptcy petition in order to
preserve cash and to give the Company the opportunity to restructure its debt.
On April 20, 1999, TEC and its wholly owned subsidiary, TransAmerican Refining
Corporation ("TARC") also filed voluntary petitions under Chapter 11. On May 20,
1999, the cases were transferred to the United States Bankruptcy Court for the
Southern District of Texas, Corpus Christi Division (the "Bankruptcy Court").
TransTexas' Chapter 11 filing did not include its subsidiaries, including
Galveston Bay Processing and Galveston Bay Pipeline. The Company's Second
Amended, Modified and Restated Plan of Reorganization dated January 25, 2000
(the "Plan") was confirmed by the Bankruptcy Court on February 7, 2000. The
Effective Date of the Plan is March 17, 2000.
In connection with the Effective Date of the Plan, the Company:
(1) paid approximately $2.6 million in cash to settle certain accounts payable
and royalty claims;
(2) agreed to pay approximately $28.3 million to settle certain accounts
payable, severance, property and franchise taxes. The $28.3 million is
payable in quarterly installments generally over a five year period with
stated interest ranging from 8% to 10%. The Company paid $6.6 million and
$7.6 million of this amount in fiscal 2002 and 2001, respectively.
(3) paid approximately $21.9 million in cash, issued $200 million principal
amount of 15% Senior Secured Notes due 2005 (the "Notes"), 222,455,320
shares of Series A Senior Preferred Stock, 20,716,080 shares of Series A
Junior Preferred Stock, 1,002,751 shares of Class A Common Stock, 247,500
shares of Class B Common Stock and 625,000 warrants to purchase Class A
Common Stock to settle the TransTexas Senior Secured Notes Claims. A
portion of this distribution was reallocated pursuant to the Plan as
follows:
(a) $20 million in cash and five million shares of Senior Preferred Stock
to settle on a pro rata basis all general prepetition unsecured
claims;
(b) $1.8 million in cash, 2,455,320 shares of Senior Preferred Stock and
all of the Junior Preferred Stock to the holders of TransTexas 13 3/4%
Senior Subordinated Notes;
28
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) 52,500 shares of Class A Common Stock and warrants exercisable to
purchase 109,879 shares of Class A Common Stock at a price of $120 per
share to the holders of the old TransTexas common stock who were not
Affiliates of the Debtor (as defined in the Plan); and
(d) all of the Class B Common Stock and warrants exercisable to purchase
515,625 shares of Class A Common Stock at an exercise price of $120
per share to John R. Stanley;
(4) issued $6.7 million in secured notes in exchange for old secured notes and
related accrued interest; and
(5) canceled all of the old TransTexas common stock and 13 3/4% Senior
Subordinated Notes.
The January 31, 2000 consolidated balance sheet is the opening balance
sheet of reorganized TransTexas, the successor company, in accordance with the
American Institute of Certified Public Accountants Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code."
The January 31, 2000 consolidated balance sheet includes all adjustments
necessary to reflect assets at the reorganization value and the Plan's treatment
of creditor claims and previous equity interests. Since the January 31, 2000
consolidated balance sheet was affected by fresh-start reporting, it is not
comparable in certain material respects to the consolidated balance sheets of
any prior period. The consolidated statements of operations and cash flows for
the years ended January 31, 2000 and 1999 reflect the activities of the
predecessor reporting entity; however, the statements for fiscal 2000 reflect
certain reorganization items.
Pursuant to fresh-start reporting, the Company's reorganization value as of
January 31, 2000 was estimated by management and allocated to identified assets
based on their relative fair values. Postpetition liabilities were valued at the
present value of amounts to be paid. The present value of liabilities was
adjusted for imputed interest at a rate of 15% for the period from February 1,
2000 to the Effective Date of the Plan. The imputed interest was charged to
interest expense during the first quarter of fiscal 2001.
On January 31, 2002, the Company's equity securities consisted of (i)
313,016,913 shares of Series A Senior Preferred Stock, $0.001 par value, (ii)
24,624,894 shares of Series A Junior Preferred Stock, $0.001 par value (iii)
1,002,751 shares of Class A Common Stock, $0.01 par value, (iv) 247,500 shares
of Class B Common Stock, $0.01 par value, and (v) warrants exercisable to
purchase 738,004 shares of Class A Common Stock at a price of $120 per share.
Redeemable Preferred Stock
The Series A Senior Preferred Stock (the "Senior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Senior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first two years following the Effective Date, the Company was required to pay
cash dividends at a rate of $0.10 per share per annum, or, at its option,
in-kind dividends of additional shares of Senior Preferred Stock at a rate of
$0.20 per share per annum. The Company paid these quarterly dividends with
additional shares of Preferred Stock. The Senior Preferred Stock is mandatorily
redeemable on March 15, 2006 at a rate of $1.00 per share plus accrued and
unpaid dividends. One-half of the then-outstanding shares of Senior Preferred
Stock is mandatorily convertible into shares of Class A Common Stock at a rate
of 0.3461 shares of Class A Common Stock per $1.00 of liquidation preference if
either (i) more than 75 million shares of Senior Preferred Stock remain
outstanding after March 15, 2006 or (ii) the Company fails to pay dividends on
the Senior Preferred Stock on any two dividend payment dates. The Certificate of
Designation for the Senior Preferred Stock includes restrictive covenants
comparable to those included in the Indenture.
Holders of Senior Preferred Stock have the right, voting separately as a
class, to elect four (4) of the five (5) directors to the Board of Directors;
provided, that if the Company has not paid dividends with respect to any two
payments due commencing June 15, 2002, such holders will have the right, voting
separately as a class, to elect all five (5) directors to the Board of
Directors. Holders of Senior Preferred Stock have one vote per share, voting
together with the Class A Common Stock, the Junior Preferred Stock and any other
series or classes of stock entitled to vote with the Class A Common Stock, on
all matters on which the holders of the Class A Common Stock are entitled to
vote generally. Voting rights of the Senior Preferred Stock may not be changed
without the consent of the holders of 75% of the shares of Senior Preferred
Stock, voting as a class.
29
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Series A Junior Preferred Stock (the "Junior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Junior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first six years following the Effective Date, the Company is required to pay
in-kind dividends of additional shares of Junior Preferred Stock at a rate of
$0.10 per share per annum. Thereafter, dividends are payable both in cash at a
rate of $0.10 per share per annum and in-kind at a rate of $0.10 per share per
annum. The Junior Preferred Stock is mandatorily redeemable on March 15, 2010 at
a rate of $1.00 per share plus accrued and unpaid dividends. Each share of
Junior Preferred Stock is mandatorily convertible into shares of Class A Common
Stock at the rate of 0.1168 shares of Class A Common Stock per $1.00 of
liquidation preference if either (i) more than 75 million shares of Senior
Preferred Stock remain outstanding after March 15, 2006 or (ii) the Company
fails to pay dividends on the Senior Preferred Stock on any two dividend payment
dates. The Certificate of Designation for the Junior Preferred Stock includes
restrictive covenants comparable to those included in the Indenture. Such
covenants will become effective when all of the Notes (and any refinancings
thereof) have been repaid and all of the Senior Preferred Stock has been
redeemed.
Holders of Junior Preferred Stock have one vote per share, voting together
with holders of the Class A Common Stock, the Senior Preferred Stock and any
other series or classes of stock entitled to vote with the Class A Common Stock,
on all matters on which holders of the Class A Common Stock are entitled to
vote. If no shares of the Senior Preferred Stock are outstanding, holders of the
shares of Junior Preferred Stock will have the right, voting separately as a
class, to elect two directors to the Board of Directors. Voting rights of the
Junior Preferred Stock may not be changed without the consent of the holders of
75% of the shares of the Junior Preferred Stock, voting as a class.
Based on the reorganization value of the Company, the fair value of the
Junior Preferred Stock, together with the Senior Preferred Stock, (the
"Preferred Stock") and the Class A Common Stock, together with the Class B
Common Stock, (the "Common Stock") was estimated to be zero. The Senior
Preferred Stock and Junior Preferred Stock are mandatorily redeemable in 2006
and 2010, respectively. As a result, the Company accretes, in the form of a
non-cash dividend deducted to arrive at net income (loss) available to common
stockholders and charged to retained earnings, an amount equal to the combined
redemption amount totaling $243.2 million (initial liquidation value) over the
period prior to redemption. In addition, net income (loss) available to common
stockholders reflects dividends earned and accrued on the Preferred Stock.
Accrued preferred stock dividends are recorded at fair value. Any difference
between the initial fair value and the redemption value are accreted in the same
manner as described above. For the years ended January 31, 2002 and 2001,
accretion of preferred stock totaled $46.4 million and $25.7 million,
respectively.
The Company does not anticipate paying cash dividends on the Senior or
Junior Preferred Stock in the future. The Company has had discussions with
certain of its preferred stockholders relating to amendments of the Certificates
of Designation of the Senior and Junior Preferred Stock to enable the Company to
convert all of the Preferred Stock to shares of Class A Common Stock based on
agreed upon rates of conversion.
3. LIQUIDITY
In order to maintain or increase proved oil and gas reserves, TransTexas is
required to make substantial capital expenditures for the exploration and
development of natural gas and oil prospects. TransTexas remains highly
leveraged and a substantial portion of its cash flow will be required for debt
service. In addition, cash flow from operations is dependent on the level of gas
and oil prices, which are historically volatile. Management plans to fund
TransTexas' 2003 debt service requirements and capital expenditures with cash
flows from operating activities and borrowings under the production payment
drilling program and other financings. In addition, the Company has commenced
negotiations for joint venture drilling opportunities with several unrelated
entities. Should these drilling prospects not be productive or should oil and
gas prices decline for a prolonged period, absent other sources of capital, the
Company would substantially reduce its capital expenditures, which would limit
its ability to maintain or increase production and in turn meet its debt service
requirements. Asset sales and financings are restricted under the terms of
TransTexas' debt documents and Senior Preferred Stock.
30
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. OTHER CURRENT ASSETS
The major components of other current assets are as follows (in thousands
of dollars):
JANUARY 31,
------------------------------
2002 2001
------------- --------------
Prepayments:
Trade................................................................. $ 485 $ 362
Insurance............................................................. 252 147
Fair value of hedging contracts......................................... 2,348 --
Deferred commodity hedging contract losses.............................. -- 1,972
Other................................................................... 27 40
------------- ---------------
$ 3,112 $ 2,521
============= ==============
5. PROPERTY AND EQUIPMENT
The major components of property and equipment, at cost, are as follows (in
thousands of dollars):
JANUARY 31,
------------------------------
2002 2001
------------- --------------
Gas and oil properties.................................................. $ 437,813 $ 364,171
Gas gathering and transportation ....................................... 50,462 43,774
Equipment and other..................................................... 6,473 5,866
------------- --------------
$ 494,748 $ 413,811
============= ==============
In October 2001, TransTexas sold its interest in the Bob West field in
Zapata County, Texas for a sales price of $56.5 million, exclusive of closing
costs.
In August 2000, TransTexas sold certain producing properties in Jim Hogg
County, Texas for a sales price of $6.5 million, exclusive of closing costs. In
December 2000, TransTexas sold certain producing properties in Kent, Starr,
Wharton and Zapata Counties, Texas for a sales price of $11.0 million, exclusive
of closing costs.
TransTexas incurred approximately $46.7 million, $48.2 million and $41.2
million of interest charges of which approximately $11.4 million, $14.1 million
and $2.7 million were capitalized for the years ended January 31, 2002, 2001 and
2000, respectively. Capitalized interest is included as part of the cost of gas
and oil properties. TransTexas uses capitalization rates based on its weighted
average cost of borrowings used to finance such expenditures.
For the year ended January 31, 2002, TransTexas recorded impairment losses
related to write-downs of $195.1 million of its net capitalized costs of gas
and oil properties to the cost center ceiling in accordance with the full cost
method of accounting.
6. OTHER ASSETS
The major components of other assets are as follows (in thousands of
dollars):
JANUARY 31,
------------------------------
2002 2001
------------- --------------
Debt issue costs, net of accumulated amortization of $1,184 at January
31, 2002 and $482 at January 31, 2001................................. $ 1,632 $ 2,024
Other ................................................................ 469 625
------------- --------------
$ 2,101 $ 2,649
============= ==============
7. LONG-TERM DEBT AND PRODUCTION PAYMENTS
Long-Term Debt
Long-term debt consists of the following (in thousands of dollars):
31
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JANUARY 31,
----------------------------
2002 2001
------------- ------------
15% Senior Secured Notes due 2005 ...................................... $ 200,000 $ 200,000
Revolving Credit Note................................................... 30,000 30,000
Term Note............................................................... 22,106 22,331
Revolving credit agreement ............................................. 1,305 17,944
Notes payable, ranging from 8% to 10%, due
through 2005.......................................................... 10,807 15,265
------------ ------------
Total long-term debt................................................ 264,218 285,540
Less current maturities................................................. 2,444 4,269
------------ ------------
$ 261,774 $ 281,271
============ ============
Aggregate annual maturities of long-term debt for fiscal years 2003 to 2006
are $3.2 million, $4.8 million, $2.0 million and $254.2 million, respectively.
All of the Company's long-term debt is scheduled to be paid by the end of fiscal
year 2006.
On the Effective Date, the Company and GMAC Commercial Credit LLC ("GMACC")
entered into a Third Amended and Restated Accounts Receivable Management and
Security Agreement, dated as of March 15, 2000 (the "Accounts Receivable
Facility"). The Accounts Receivable Facility is a revolving credit facility
secured by accounts receivable and inventory. The maximum loan amount under the
facility is $20 million, against which the Company may from time to time,
subject to the conditions of the Accounts Receivable Facility, borrow, repay and
reborrow. Advances under the facility bear interest monthly in arrears at a rate
per annum equal to the higher of (i) the prime commercial lending rate of The
Bank of New York plus 1/2 of 1%, and (ii) the Federal Funds Rate plus 1%. In
July 2001, GMACC agreed to make advances of $3.0 million in excess of a
predetermined formula ("Overadvances") used to calculate the amount that the
Company can borrow under the Accounts Receivable Facility. The Company utilized
the Overadvances in August 2001 and repaid $2.0 million of the Overadvances in
October 2001. As of January 31, 2002, the outstanding principal balance under
the Accounts Receivable Facility was $1.3 million with availability for
additional advances of approximately $1.3 million and will be due on March 14,
2005.
On the Effective Date, the Company, as Borrower, and Galveston Bay
Processing Corporation and Galveston Bay Pipeline Company, as Guarantors,
entered into an Oil and Gas Revolving Credit and Term Loan Agreement, dated as
of March 15, 2000 (the "Oil and Gas Facility") with GMACC, as a Lender and as
Agent. The Oil and Gas facility consists of a term loan (the "Term Loan") in the
amount of $22.5 million and a revolving facility (the "Revolving Loan") in a
maximum amount of $30 million (all of which was funded on the Effective Date).
The Term Loan bears interest at a rate of 14% per annum and the Revolving Loan
bears interest at a rate of 13 1/2% per annum. Interest on the Term Loan and the
Revolving Loan is payable monthly in arrears. Principal amortization of the Term
Loan is due in 20 quarterly installments of $56,250 each beginning June 14,
2000, with the balance due March 14, 2005; however the Company may, and in
certain circumstances must, make prepayments of such amount. If, subsequent to
such prepayments, the Company demonstrates sufficient collateral value meeting
the requirements of the Oil and Gas Facility provisions, the Company may be
entitled to borrow additional advances under the Revolving Loan. The Oil and Gas
Facility is secured by substantially all of the assets of the Company. The
security interest in accounts receivable and inventory securing the Oil and Gas
Facility is subordinated to the security interest of GMACC under the Accounts
Receivable Facility.
On the Effective Date, the Company, as Issuer, Galveston Bay Pipeline
Company and Galveston Bay Processing Corporation, as Guarantors, and Firstar
Bank, N.A., as Trustee, entered into an Indenture dated as of March 15, 2000,
pursuant to which the Company issued the Notes. Interest on the Notes is due
semi-annually on March 15 and September 15. The Notes are secured by
substantially all of the assets of the Company other than accounts receivable
and inventory. The Indenture contains certain covenants that restrict the
Company's ability to incur indebtedness, engage in related party transactions,
dispose of assets or engage in sale/leaseback transactions, issue dividends on
common stock, change its line of business, consolidate or merge with or into
another entity or convey, transfer or lease all or substantially all of its
assets, and suffer a change of control. The security interest in favor of the
Trustee is subordinated to the Security Interest in favor of the Agent under the
Oil and Gas Facility. The fair value of the Notes, based on quoted market prices
on January 31, 2002, was $108 million.
32
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1998, TransTexas borrowed $5.65 million from an unaffiliated
third party in order to meet a portion of its December 31, 1998 interest payment
obligations. In accordance with the Plan, the principal amount of the note was
increased to $6.7 million, bears interest at 8% and is collateralized by a
pledge of the stock of Galveston Bay Processing Corporation and a mortgage on
the Winnie, Texas processing facility. At January 31, 2002, the undiscounted
principal balance outstanding of this note was $4.2 million.
Additional notes payable totaling $6.8 million and $10.2 million at January
31, 2002 and 2001, respectively, consist of amounts payable pursuant to the Plan
in settlement of the claims of certain creditors. Such amounts are generally
payable over a five year period with stated interest rates ranging from 8% to
10%; however, these notes have been discounted to an effective interest rate of
14%.
Production Payments
In March 2000, TransTexas entered into a production payment drilling
program agreement with two unaffiliated third parties in the form of a term
overriding royalty interest carved out of and burdening certain properties
("Subject Interests"). The Company has the right to offer additional interests
to the production payment parties at a negotiated purchase price. The production
payment calls for the repayment of the primary sum plus an amount equivalent to
a 15% annual interest rate on the unpaid portion of such primary sum. In
February 2001, the Company closed a Fourth Supplement to the production payment
whereby the Company received $19.8 million in exchange for additional properties
being made subject to the production payment. In July 2001, the Company closed a
Fifth Supplement to the production payment whereby the Company received $15.0
million. In September 2001, the Company closed a Sixth and Seventh Supplement to
the production payment whereby the Company received $15.0 million. As of January
31, 2002, the aggregate purchase price of all interests purchased pursuant to
this production payment drilling program was $76.8 million and the outstanding
balance of the production payment was $28.5 million, of which $2.5 million
attributable to produced volumes is included in accrued liabilities. The Oil and
Gas Revolving Credit Term Loan Agreement (the "Oil and Gas Facility") entered
into by the Company, as borrower, Galveston Bay Processing Corporation and
Galveston Bay Pipeline Company, as Guarantors, and with GMACC, as a Lender and
as Agent, places certain restrictions on the amount that may be outstanding
under the production payment. Certain of these restrictions were waived by the
required lenders in connection with the Sixth and Seventh Supplements to the
production payment. In March 2002, the Company closed an Eighth Supplement to
the production payment whereby the Company received $14.0 million.
In connection with the production payment, the Company entered into various
marketing and processing agreements with one of the third parties. Pursuant to
these agreements, the Company will pay a nominal marketing fee with respect to
the Company's production associated with the New Subject Interests. In addition,
the third party will pay a fee for certain processing services to be provided by
Galveston Bay Processing.
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following information reflects TransTexas' noncash financing activities
(in thousands of dollars):
SUCCESSOR PREDECESSOR
------------------------------ -------------
YEAR ENDED JANUARY 31,
---------------------------------------------------
2002 2001 2000
------------- -------------- | --------------
|
Financing activities: |
Accretion of stock............................ $ 46,403 $ 25,722 | $ --
============= ============== | =============
Cancellation of old preferred common stock.... $ -- $ 740 | $ --
============= ============== | =============
Issuance of new common stock.................. $ -- $ 12 | $ --
============= ============== | =============
33
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash paid for interest is as follows (in thousands of dollars):
SUCCESSOR PREDECESSOR
------------------------------ ------------
YEAR ENDED JANUARY 31,
--------------------------------------------------
2002 2001 2000
------------- ------------- | -------------
|
Interest......................................... $ 33,321 $ 16,352 | $ 9,616
============= ============== | =============
Cash paid during the year ended January 31, 2000 for reorganization items
was $6.2 million.
9. ACCRUED LIABILITIES
Accrued liabilities classified as current liabilities consist of the
following (in thousands of dollars):
JANUARY 31,
-----------------------------------
2002 2001
-------------- --------------
Royalties............................................. $ 2,110 $ 5,849
Taxes other than income taxes......................... 498 749
Accrued interest...................................... 14,803 13,511
Payroll............................................... 1,090 1,283
Current portion of production payments................ 2,468 2,072
Accrued insurance..................................... 1,980 1,675
Commodity hedging contract losses..................... -- 5,178
Reorganization claims................................. 2,084 2,446
Other................................................. 1,094 390
-------------- --------------
$ 26,127 $ 33,153
============== ==============
10. OTHER LIABILITIES
The major components of other liabilities are as follows (in thousands of
dollars):
JANUARY 31,
-----------------------------------
2002 2001
-------------- --------------
Reorganization claims................................. $ 6,644 $ 8,011
============== ==============
11. INCOME TAXES
Income tax expense (benefit) includes the following (in thousands of
dollars):
SUCCESSOR PREDECESSOR
----------------------------- -------------
YEAR ENDED JANUARY 31,
------------------------------------------------
2002 2001 2000
------------ ------------- | -------------
|
Federal |
Deferred ...................................... $ (9,984) $ 9,984 | $ 10,000
============ ============= | =============
Total income tax expense differs from amounts computed by applying the
statutory federal income tax rate to income before income taxes. The items
accounting for this difference are as follows (in thousands of dollars):
34
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUCCESSOR PREDECESSOR
----------------------------- -------------
YEAR ENDED JANUARY 31,
------------------------------------------------
2002 2001 2000
------------- ------------- | -------------
|
Federal income tax expense (benefit) at the |
statutory rate................................ $ (80,463) $ 9,984 | $ 153,760
Increase (decrease) in tax resulting from: |
Debt discharged pursuant to Plan.............. -- -- | (160,641)
Adjustment of tax assumption.................. -- -- | 10,000
Valuation allowance........................... 70,479 -- | 6,881
------------- ------------- | -------------
$ (9,984) $ 9,984 | $ 10,000
============= ============= | =============
Significant components of TransTexas' tax attributes are as follows (in
thousand of dollars):
JANUARY 31,
--------------------------------
2002 2001
------------- -------------
Deferred tax liabilities:
Depreciation, depletion and amortization..................... $ -- $ 12,694
------------- -------------
Net deferred tax liabilities ........................... -- 12,694
------------- -------------
Deferred tax assets:
Depreciation, depletion and amortization..................... 56,634 --
Net operating loss carryforwards........................ 13,845 2,710
------------- -------------
70,479 2,710
Valuation allowance.......................................... (70,479) --
------------- -------------
Net deferred tax assets................................. -- 2,710
------------- -------------
$ -- $ 9,984
============= =============
Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provision (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended (the "Tax Code"), and has reduced its tax attributes (including
its net operating loss and credit carryforwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this transaction,
however, and TransAmerican has not obtained a ruling from the Internal Revenue
Service ("IRS") regarding this transaction. TransTexas believes that there is
substantial legal authority to support the position that the COD Exclusion
applies to the cancellation of TransAmerican's indebtedness. However, due to
factual and legal uncertainties, there can be no assurance that the IRS will not
challenge this position, or that any such challenge would not be upheld. Prior
to the Effective Date, TransTexas filed a consolidated tax return with
TransAmerican. Income taxes were due from or payable to TransAmerican in
accordance with a tax allocation agreement, as amended, between TransTexas, TNGC
Holdings Corporation, TransAmerican and TransAmerican's other subsidiaries (the
"Tax Allocation Agreement"). Under the Tax Allocation Agreement, TransTexas has
agreed to pay an amount equal to any federal tax liability (which would be
approximately $25.4 million) attributable to the inapplicability of the COD
Exclusion. Any such tax would be offset in future years by alternative minimum
tax credits and retained loss and credit carryforwards to the extent recoverable
from TransAmerican.
As a former member of the affiliated group for tax purposes (the "TNGC
Consolidated Group") which included TNGC Holdings Corporation, the sole
stockholder of TransAmerican ("TNGC"), TransAmerican, TEC, TransTexas and TARC,
TransTexas will be severally liable for any tax liability resulting from any
transaction of the TNGC Consolidated Group that occurred during any taxable year
of the TNGC Consolidated Group during which TransTexas was a member, including
the above described transactions. The IRS has commenced an audit of the
consolidated federal income tax returns of the TNGC Consolidated Group for its
taxable years ended July 31, 1994 and July 31, 1995. The Company has not been
advised by the IRS as to whether any tax deficiencies will be proposed by the
IRS as a result of its review.
TransTexas expects that a significant portion of its net operating loss
carryovers ("NOLs") will be eliminated and the use of those NOLs that are not
eliminated will be severely restricted as a consequence of the Plan. In
addition, certain other tax
35
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
attributes of TransTexas may under certain circumstances be eliminated or
reduced as a consequence of the Plan. The potential elimination or reduction of
NOLs and such other tax attributes may substantially increase the amount of tax
payable by TransTexas.
12. RELATED PARTY TRANSACTIONS
In March 2000, a services agreement was entered into between TNGC and the
Company. Pursuant to the agreement, TransTexas provided certain accounting,
legal, administrative and other services to TNGC and its affiliates in exchange
for a monthly fee of $2,000. This agreement expired on September 30, 2001.
In March 2002, John R. Stanley resigned as Chief Executive Officer and as
Chairman and member of the Board of Directors of the Company. Pursuant to a
separation agreement, the Company will pay Mr. Stanley $3.0 million in cash, in
installments through November 2002, together with interest at the rate of 10%
per annum until paid in full.
13. COMMITMENTS AND CONTINGENCIES
Environmental Matters
TransTexas' operations and properties are subject to extensive federal,
state, and local laws and regulations relating to the generation, storage,
handling, emission, transportation, and discharge of materials into the
environment. Permits are required for various of TransTexas' operations, and
these permits are subject to revocation, modification, and renewal by issuing
authorities. TransTexas also is subject to federal, state, and local laws and
regulations that impose liability for the cleanup or remediation of property
which has been contaminated by the discharge or release of hazardous materials
or wastes into the environment. Governmental authorities have the power to
enforce compliance with their regulations, and violations are subject to fines
or injunctions, or both. Certain aspects of TransTexas' operations may not be in
compliance with applicable environmental laws and regulations, and such
noncompliance may give rise to compliance costs and administrative penalties. It
is not anticipated that TransTexas will be required in the near future to expend
amounts that are material to the financial condition or operations of TransTexas
by reason of environmental laws and regulations, but because such laws and
regulations are frequently changed and, as a result, may impose increasingly
strict requirements, TransTexas is unable to predict the ultimate cost of
complying with such laws and regulations.
Legal Proceedings
TransTexas is a party to various claims and routine litigation arising in
the normal course of its business. Any obligations of the Company in respect of
such claims and litigation arising out of activities prior to the Petition Date
were discharged or otherwise disposed of pursuant to the Plan. Recovery of these
obligations, if any, will be limited to any collateral held by the claimant
and/or such claimant's pro rata share of amounts available to pay general
unsecured claims.
Operating Leases
As of January 31, 2002, TransTexas had long-term leases covering land and
other property and equipment. Rental expense was approximately $3 million for
each of the years ended January 31, 2002, 2001 and 2000, respectively. Future
minimum rental payments required under operating leases that have initial or
remaining noncancellable lease terms in excess of one year as of January 31,
2002, are as follows (in thousands of dollars): 2003-$317, 2004-$179, 2005-$90,
2006-$77, 2007-$7.
Drilling Rig Commitment
During February 2001, TransTexas entered into a one-year contract with an
independent contractor for utilization of a drilling rig capable of drilling
wells to a depth of approximately 18,500 feet. TransTexas utilized this rig to
drill wells in the Galveston Bay area. As of January 31, 2002, the balance
remaining to be paid under this contract, which commenced in May 2001, was
approximately $1.7 million.
Gas Delivery Agreements
TransTexas has entered into contracts with Tejas Ship Channel LLC for
transportation of its production from the Eagle Bay field to the Winnie
facilities at a fixed negotiated rate. Under these contracts, the Company has
agreed to deliver up to 75,000 MMBtu per day of natural gas and associated
condensate.
36
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company also entered into a contract with Centana Intrastate Pipeline
Company for transportation of natural gas on a firm and interruptible basis from
the Winnie facility to natural gas liquids recovery facilities located in the
Beaumont/Port Arthur, Texas area, and residue gas from these facilities to
various distribution points. Under the agreement, the Company has agreed to
deliver up to a maximum of 56,250 Mcf of natural gas and up to 19,500 MMBtu of
residue gas per day. Transportation fees for natural gas and residue gas are
based on fixed negotiated rates.
14. PREFERRED STOCK DIVIDENDS
On January 31, May 30, August 29, November 28, 2001 and March 12, 2002, the
Board of Directors of the Company authorized the payment of quarterly dividends
to the holders of the Company's Preferred Stock of record on March 1, June 1,
September 1, December 1, 2001 and March 1, 2002, respectively. The quarterly
dividends were paid in-kind on March 15, June 15, September 17, December 17,
2001 and March 15, 2002 in additional shares of Preferred Stock of the same
class at an annual rate of $0.20 per share for each share of Series A Senior
Preferred Stock and at an annual rate of $0.10 per share for each share of
Series A Junior Preferred Stock in accordance with the Certificate of
Designation for Series A Senior Preferred Stock and the Certificate of
Designation for Series A Junior Preferred Stock, respectively. Fractional shares
were not issued, but were settled in cash.
15. SHORT-SWING SALE
During the year ended January 31, 2001, the Company received $25,000 in
cash from a stockholder as a result of such stockholder's compliance with the
requirement of the Securities Exchange Act of 1934, as amended, that profits
from the sale of certain securities of a company that were held less than six
months by certain officers, directors and principal stockholders must be
returned to the Company. The Company recorded the proceeds as an increase to
additional paid-in capital.
16. BUSINESS SEGMENTS
TransTexas currently conducts its operations in one industry segment,
exploration and production ("E&P"), which explores for, develops, produces and
markets natural gas, condensate and natural gas liquids. All of TransTexas'
significant gas and oil operations are located along the Texas Gulf Coast and in
South Texas. TransTexas' revenues are derived principally from sales to
interstate and intrastate gas pipelines, direct end users, industrial companies,
marketers and refiners located in the United States.
For the year ended January 31, 2002, two customers provided approximately
$88 million in E&P revenues. For the year ended January 31, 2001, two customers
provided approximately $124 million in E&P revenues. For the year ended January
31, 2000, three customers provided approximately $62 million in E&P revenues.
TransTexas believes that the loss of any single purchaser would not have a
material adverse effect on TransTexas due to the availability of other
purchasers for its production at comparable prices.
17. CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share data)
SUCCESSOR
--------------------------------------------------------------
YEAR ENDED JANUARY 31, 2002
--------------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ ------------
Revenues.................................... $ 47,417 $ 29,962 $ 32,373 $ 24,631
Operating income (loss)..................... 14,958 (60,580) (43,575) (105,975)
Net income (loss)........................... 4,380 (56,406) (52,531) (115,354)
Net income (loss) per share-- basic
and diluted............................... (4.21) (53.80) (51.78) (103.22)
37
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUCCESSOR
--------------------------------------------------------------
YEAR ENDED JANUARY 31, 2001
--------------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ ------------
Revenues.................................... $ 38,609 $ 44,240 $ 50,082 $ 57,160
Operating income............................ 6,949 13,206 19,044 22,823
Net income (loss)........................... (2,232) 3,917 6,912 9,946
Net income (loss) per share-- basic
and diluted............................... (5.72) (5.03) 2.69 2.32
PREDECESSOR
--------------------------------------------------------------
YEAR ENDED JANUARY 31, 2000
--------------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ ------------
Revenues..................................... $ 19,078 $ 28,584 $ 29,415 $ 38,153
Operating income (loss)...................... (13,217) (4,116) 2,855 4,846
Net income (loss)............................ (35,881) (6,954) (4,406) 476,556(1)
Net income (loss) per share-- basic
and diluted................................ (0.62) (0.12) (0.08) 8.28
- -------------------
(1) Net income for the fourth quarter of 2000 includes a $436.5 million
extraordinary gain on the extinguishment of debt and a $50.5 million credit
for reorganization items.
18. SUPPLEMENTAL GUARANTOR INFORMATION
Galveston Bay Pipeline Company and Galveston Bay Processing Corporation are
guarantors of the Notes and the Oil and Gas Facility. Separate financial
statements of the Guarantors are not considered to be material to holders of the
Notes and GMACC. The following condensed consolidating financial statements
present supplemental information of the Guarantors as of and for the years ended
January 31, 2002 and 2001.
38
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
JANUARY 31, 2002
(IN THOUSANDS OF DOLLARS)
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- --------- ---------- ------------ -----------
ASSETS
Current assets:
Cash and cash equivalents .................... $ 6,058 $ 33 $ 468 $ $ 6,559
Accounts receivable .......................... 15,033 -- 234 -- 15,267
Receivables from affiliates .................. 15,523 -- -- (15,523) --
Inventories .................................. 818 -- -- -- 818
Other ........................................ 3,110 -- 2 -- 3,112
--------- --------- --------- --------- ---------
Total current assets ...................... 40,542 33 704 (15,523) 25,756
--------- --------- --------- --------- ---------
Property and equipment .......................... 480,850 2,267 11,631 -- 494,748
Less accumulated depreciation, depletion and
amortization .................................. 363,343 653 3,805 -- 367,801
--------- --------- --------- --------- ---------
Net property and equipment ................ 117,507 1,614 7,826 -- 126,947
--------- --------- --------- --------- ---------
Other assets .................................... 2,103 -- -- (2) 2,101
--------- --------- --------- --------- ---------
$ 160,152 $ 1,647 $ 8,530 $ (15,525) $ 154,804
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt ......... $ 2,353 $ 17 $ 74 $ -- $ 2,444
Accounts payable ............................. 5,546 -- 259 -- 5,805
Accrued liabilities .......................... 26,115 -- 12 -- 26,127
--------- --------- --------- --------- ---------
Total current liabilities ................. 34,014 17 345 -- 34,376
--------- --------- --------- --------- ---------
Payable to affiliates ........................... (28) 1,948 13,603 (15,523) --
Long-term debt, net of current maturities ....... 261,050 580 144 -- 261,774
Production payments, net of current portion ..... 26,005 -- -- -- 26,005
Other liabilities ............................... 6,644 -- -- -- 6,644
Redeemable preferred stock ...................... 72,125 -- -- -- 72,125
Stockholders' equity (deficit):
Common stock ................................. 12 -- -- -- 12
Additional paid-in capital ................... 25,013 1 1 (2) 25,013
Accumulated deficit .......................... (264,683) (899) (5,563) -- (271,145)
--------- --------- --------- --------- ---------
Total stockholders' equity (deficit) ...... (239,658) (898) (5,562) (2) (246,120)
--------- --------- --------- --------- ---------
$ 160,152 $ 1,647 $ 8,530 $ (15,525) $ 154,804
========= ========= ========= ========= =========
39
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
JANUARY 31, 2001
(IN THOUSANDS OF DOLLARS)
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- ---------- ---------- ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents .................. $ 19,902 $ 39 $ 774 $ -- $ 20,715
Accounts receivable ........................ 42,127 -- 406 -- 42,533
Receivables from affiliates ................ 11,660 -- -- (11,639) 21
Inventories ................................ 1,476 -- -- -- 1,476
Other ...................................... 2,486 -- 35 -- 2,521
--------- --------- --------- --------- ---------
Total current assets .................... 77,651 39 1,215 (11,639) 67,266
--------- --------- --------- --------- ---------
Property and equipment ....................... 401,290 1,917 10,604 -- 413,811
Less accumulated depreciation, depletion and
amortization ............................... 79,181 314 1,988 -- 81,483
--------- --------- --------- --------- ---------
Net property and equipment ............. 322,109 1,603 8,616 -- 332,328
--------- --------- --------- --------- ---------
Other assets ................................. 2,651 -- -- (2) 2,649
--------- --------- --------- --------- ---------
$ 402,411 $ 1,642 $ 9,831 $ (11,641) $ 402,243
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt ....... $ 3,641 $ 14 $ 614 $ -- $ 4,269
Accounts payable ........................... 9,070 27 158 -- 9,255
Accrued liabilities ........................ 33,145 -- 8 -- 33,153
--------- --------- --------- --------- ---------
Total current liabilities .............. 45,856 41 780 -- 46,677
--------- --------- --------- --------- ---------
Payable to affiliates ........................ -- 1,114 10,525 (11,639) --
Long-term debt, net of current maturities .... 280,240 828 203 -- 281,271
Production payments, net of current portion .. 12,732 -- -- -- 12,732
Deferred income taxes ........................ 9,984 -- -- -- 9,984
Other liabilities ............................ 8,011 -- -- -- 8,011
Redeemable preferred stock ................... 25,722 -- -- -- 25,722
Stockholders' equity (deficit):
Common stock ............................... 12 -- -- -- 12
Additional paid-in capital ................. 25,013 1 1 (2) 25,013
Accumulated deficit ........................ (5,159) (342) (1,678) -- (7,179)
--------- --------- --------- --------- ---------
Total stockholders' equity (deficit) .... 19,866 (341) (1,677) (2) 17,846
--------- --------- --------- --------- ---------
$ 402,411 $ 1,642 $ 9,831 $ (11,641) $ 402,243
========= ========= ========= ========= =========
40
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended January 31, 2002
(In thousands of dollars)
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- ---------- ---------- ------------ ------------
Revenues:
Gas, condensate and natural gas liquids $ 133,138 $ -- $ -- $ -- $ 133,138
Other .................................. 167 285 4,307 (3,514) 1,245
--------- --------- --------- --------- ---------
Total revenues ...................... 133,305 285 4,307 (3,514) 134,383
--------- --------- --------- --------- ---------
Costs and expenses:
Operating .............................. 18,089 9 4,611 (3,514) 19,195
Depreciation, depletion and amortization 89,110 339 1,817 -- 91,266
General and administrative ............. 19,559 201 94 -- 19,854
Taxes other than income taxes .......... 4,045 2 128 -- 4,175
Impairment of gas and oil properties ... 195,065 -- -- -- 195,065
--------- --------- --------- --------- ---------
Total costs and expenses ............ 325,868 551 6,650 (3,514) 329,555
--------- --------- --------- --------- ---------
Operating loss ...................... (192,563) (266) (2,343) -- (195,172)
--------- --------- --------- --------- ---------
Other income (expense):
Interest income ........................ 573 -- 7 -- 580
Interest expense, net .................. (33,463) (291) (1,549) -- (35,303)
--------- --------- --------- --------- ---------
Total other expense ................. (32,890) (291) (1,542) -- (34,723)
--------- --------- --------- --------- ---------
Loss before income taxes ............ (225,453) (557) (3,885) -- (229,895)
Income tax benefit - deferred .......... (9,984) -- -- -- (9,984)
--------- --------- --------- --------- ---------
Net loss ............................ $(215,469) $ (557) $ (3,885) $ -- $(219,911)
========= ========= ========= ========= =========
41
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended January 31, 2001
(In thousands of dollars)
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- --------- ---------- ------------ ------------
Revenues:
Gas, condensate and natural gas liquids $ 187,883 $ -- $ -- $ -- $ 187,883
Other .................................. 520 599 6,830 (5,741) 2,208
--------- --------- --------- --------- ---------
Total revenues ....................... 188,403 599 6,830 (5,741) 190,091
--------- --------- --------- --------- ---------
Costs and expenses:
Operating .............................. 20,559 34 4,275 (5,741) 19,127
Depreciation, depletion and amortization 79,182 314 1,987 -- 81,483
General and administrative ............. 19,713 132 458 -- 20,303
Taxes other than income taxes .......... 7,104 7 45 -- 7,156
--------- --------- --------- --------- ---------
Total costs and expenses ............. 126,558 487 6,765 (5,741) 128,069
--------- --------- --------- --------- ---------
Operating income ..................... 61,845 112 65 -- 62,022
--------- --------- --------- --------- ---------
Other income (expense):
Interest income ........................ 574 -- -- -- 574
Interest expense, net .................. (31,872) (454) (1,743) -- (34,069)
--------- --------- --------- --------- ---------
Total other expense .................. (31,298) (454) (1,743) -- (33,495)
--------- --------- --------- --------- ---------
Income before income taxes ........... 30,547 (342) (1,678) -- 28,527
Income taxes-- deferred .................. 9,984 -- -- -- 9,984
--------- --------- --------- --------- ---------
Net income (loss) .................... $ 20,563 $ (342) $ (1,678) $ -- $ 18,543
========= ========= ========= ========= =========
42
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended January 31, 2002
(In thousands of dollars)
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- ----------- ---------- ------------ ------------
Operating activities:
Net loss ..................................... $(215,469) $ (557) $ (3,885) $ -- $(219,911)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation, depletion and amortization .... 89,110 339 1,817 -- 91,266
Impairment of gas and oil properties ........ 195,065 -- -- -- 195,065
Accretion of discount on long-term debt ..... 78 38 45 -- 161
Amortization of debt issue costs ............ 530 -- -- -- 530
Deferred income taxes ....................... (9,984) -- -- -- (9,984)
Changes in assets and liabilities:
Accounts receivable ...................... 27,094 -- 172 -- 27,266
Receivable from affiliates ............... (3,891) -- -- 3,912 21
Inventories .............................. 658 -- -- -- 658
Other current assets ..................... 1,724 -- 33 -- 1,757
Accounts payable ......................... (3,524) (27) 101 -- (3,450)
Accrued liabilities ...................... (7,426) -- 4 -- (7,422)
Transactions with affiliates, net ........ -- 834 3,078 (3,912) --
Other assets ............................. 156 -- -- -- 156
Other liabilities ........................ (1,367) -- -- -- (1,367)
--------- --------- --------- --------- ---------
Net cash provided by operating
activities ............................ 72,754 627 1,365 -- 74,746
--------- --------- --------- --------- ---------
Investing activities:
Capital expenditures ......................... (132,977) (350) (998) -- (134,325)
Proceeds from the sale of assets ............. 53,627 -- -- -- 53,627
--------- --------- --------- --------- ---------
Net cash used by investing
activities ............................ (79,350) (350) (998) -- (80,698)
--------- --------- --------- --------- ---------
Financing activities:
Issuance of production payments .............. 49,800 -- -- -- 49,800
Issuance of long-term debt ................... 2,134 -- -- -- 2,134
Principal payments on production payments .... (36,131) -- -- -- (36,131)
Principal payments on long-term debt ......... (6,103) (283) (673) -- (7,059)
Revolving credit agreement net ............... (16,639) -- -- -- (16,639)
Debt issue costs ............................. (309) -- -- -- (309)
--------- --------- --------- --------- ---------
Net cash used by financing activities .. (7,248) (283) (673) -- (8,204)
--------- --------- --------- --------- ---------
Decrease in cash and cash equivalents .. (13,844) (6) (306) -- (14,156)
Beginning cash and cash equivalents ............ 19,902 39 774 -- 20,715
--------- --------- --------- --------- ---------
Ending cash and cash equivalents ............... $ 6,058 $ 33 $ 468 $ -- $ 6,559
========= ========= ========= ========= =========
43
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended January 31, 2001
(In thousands of dollars)
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
--------- --------- --------- ------------ ------------
Operating activities:
Net income (loss) ............................. $ 20,563 $ (342) $ (1,678) $ -- $ 18,543
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization .... 79,182 314 1,987 -- 81,483
Accretion of discount on long-term debt ..... 3,571 58 184 -- 3,813
Amortization of debt issue costs ............ 343 -- -- -- 343
Deferred income taxes ....................... 9,984 -- -- -- 9,984
Changes in assets and liabilities:
Accounts receivable ...................... (22,984) 110 (67) -- (22,941)
Receivable from affiliates ............... (1,414) -- -- 2,500 1,086
Inventories .............................. 265 -- -- -- 265
Other current assets ..................... (1,578) -- (17) -- (1,595)
Accounts payable ......................... (6,645) 24 54 -- (6,567)
Accrued liabilities ...................... 23,313 (11) (47) -- 23,255
Transactions with affiliates, net ........ -- 477 2,023 (2,500) --
Other assets ............................. (113) -- 1 -- (112)
Other liabilities ........................ (26,635) -- -- -- (26,635)
--------- --------- --------- --------- ---------
Net cash provided by operating
activities ........................... 77,852 630 2,440 -- 80,922
--------- --------- --------- --------- ---------
Investing activities:
Capital expenditures .......................... (99,853) (682) (654) -- (101,189)
Proceeds from the sale of assets .............. 15,646 536 -- -- 16,182
--------- --------- --------- --------- ---------
Net cash used by investing
activities ........................... (84,207) (146) (654) -- (85,007)
--------- --------- --------- --------- ---------
Financing activities:
Issuance of production payments ............. 27,000 -- -- -- 27,000
Principal payments on production payments ... (47,303) -- -- -- (47,303)
Issuance of long-term debt .................. 32,500 -- -- -- 32,500
Principal payments on long-term debt ........ (15,049) (489) (1,405) -- (16,943)
Revolving credit agreement, net ............. 13,739 -- -- -- 13,739
Proceeds from short-swing sale .............. 25 -- -- -- 25
Debt issue costs ............................ (2,506) -- -- -- (2,506)
--------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities ............................ 8,406 (489) (1,405) -- 6,512
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents ........................... 2,051 (5) 381 -- 2,427
Beginning cash and cash equivalents ............. 17,851 44 393 -- 18,288
--------- --------- --------- --------- ---------
Ending cash and cash equivalents ................ $ 19,902 $ 39 $ 774 $ -- $ 20,715
========= ========= ========= ========= =========
44
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
19. SUPPLEMENTAL GAS AND OIL DISCLOSURE (Unaudited)
The accompanying tables present information concerning TransTexas' gas and
oil producing activities and are prepared in accordance with Statement of
Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing
Activities."
Estimates of TransTexas' proved reserves and proved developed reserves were
prepared by Netherland, Sewell & Associates, Inc., an independent firm of
petroleum engineers, based on data supplied to them by TransTexas. Such
estimates are inherently imprecise and may be subject to substantial revisions
as additional information such as reservoir performance, additional drilling,
technological advancements and other factors become available.
Capitalized costs relating to gas and oil producing activities are as
follows (in thousands of dollars):
JANUARY 31,
----------------------
2002 2001
-------- --------
Proved properties ............................................................ $442,974 $326,564
Unproved properties .......................................................... 45,301 81,381
-------- --------
Total ..................................................................... 488,275 407,945
Less accumulated depreciation, depletion and amortization..................... 365,182 80,145
-------- --------
$123,093 $327,800
======== ========
Costs incurred for gas and oil producing activities are as follows (in
thousands of dollars):
SUCCESSOR PREDECESSOR
---------------------- -----------
YEAR ENDED JANUARY 31,
--------------------------------------
2002 2001 2000
-------- -------- | --------
|
Property acquisitions ......................................... $ 21,965 $ 20,594 | $ 6,175
Exploration ................................................... 89,850 82,004 | 43,238
Development ................................................... 22,110 -- | 4,350
-------- -------- | --------
$133,925 $102,598 | $ 53,763
======== ======== | ========
Results of operations for gas and oil producing activities are as follows
(in thousands of dollars):
SUCCESSOR PREDECESSOR
------------------------ -----------
YEAR ENDED JANUARY 31,
-----------------------------------------
2002 2001 2000
--------- --------- | ----------
|
Revenues ....................................................... $ 133,138 $ 187,883 | $112,898
--------- --------- | --------
|
Expenses: |
Production costs ............................................. 23,381 25,723 | 29,935
Depreciation, depletion and amortization ..................... 89,973 80,145 | 73,721
General and administrative ................................... 9,017 8,578 | 10,572
Impairment of gas and oil properties ......................... 195,065 -- | --
--------- --------- | --------
Total operating expenses .................................. 317,436 114,446 | 114,228
--------- --------- | --------
Income (loss) before income taxes ......................... (184,298) 73,437 | (1,330)
Income taxes (benefit) ......................................... (64,504) 25,703 | (466)
--------- --------- | --------
$(119,794) $ 47,734 | $ (864)
========= ========= | ========
Depletion rate per net equivalent Mcf .......................... $ 2.98 2.22 | $ 1.89
========= ========= | ========
45
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Reserve Quantity Information
Proved reserves are estimated quantities of natural gas, condensate and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed reserves are
those proved reserves that can be expected to be recovered through existing
wells with existing equipment and operating methods. Natural gas quantities
represent gas volumes which include amounts that will be extracted as natural
gas liquids. TransTexas' estimated net proved reserves and proved developed
reserves of natural gas (billions of cubic feet) and condensate (millions of
barrels) are shown in the table below.
SUCCESSOR PREDECESSOR
------------------------------------- -------------
YEAR ENDED JANUARY 31,
-------------------------------------------------------
2002 2001 2000
--------------- ----------------- | -------------
GAS OIL GAS OIL | GAS OIL
----- ----- ----- ----- | ----- -----
|
Proved reserves: |
Beginning of year ................. 112.9 3.2 95.6 3.7 | 120.7 6.6
Increase (decrease) during |
the year attributable to: |
Revisions of previous estimates ... (15.4) (0.2) 7.9 0.4 | (4.1) (1.2)
Extensions, discoveries and other |
additions ........................ 5.5 0.1 42.4 0.8 | 6.8 0.1
Sales of reserves ................. (25.2) -- (6.2) (0.2) | -- --
Production ........................ (22.5) (1.3) (26.8) (1.5) | (27.8) (1.8)
----- ----- ----- ----- | ----- -----
End of year (Successor in 2000) ... 55.3 1.8 112.9 3.2 | 95.6 3.7
===== ===== ===== ===== | ===== =====
Proved developed reserves: |
Beginning of year ................. 66.9 2.0 82.3 3.5 | 87.8 5.0
End of year (Successor in 2000) (1) 33.9 1.4 66.9 2.0 | 82.3 3.5
- ---------------
(1) As of January 31, 2001, proved undeveloped reserves in the amount of 5.7 Bcf
of natural gas and 0.5 MMBbls of condensate became proved developed reserves in
February 2001 with the casing of a well in the Eagle Bay field.
Standardized Measure Information
The calculation of estimated future net cash flows in the following table
assumed the continuation of existing economic conditions and applied year-end
prices (except for future price changes as allowed by contract) of gas and
condensate to the expected future production of such reserves, less estimated
future expenditures (based on current costs) to be incurred in developing and
producing those proved reserves.
The standardized measure of discounted future net cash flows does not
purport, nor should it be interpreted, to present the fair market value of
TransTexas' gas and oil reserves. These estimates reflect proved reserves only
and ignore, among other things, changes in prices and costs, revenues that could
result from probable reserves which could become proved reserves in fiscal 2003
or later years and the risks inherent in reserve estimates. The standardized
measure of discounted future net cash flows relating to proved gas and oil
reserves is as follows (in thousands of dollars):
46
TRANSTEXAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEAR ENDED JANUARY 31,
-----------------------------------------
2002 2001 2000
--------- --------- ---------
Future cash inflows ........................ $163,275 $ 810,031 $ 361,411
Future production costs .................... (44,260) (103,245) (61,810)
Future development costs ................... (39,707) (81,004) (18,302)
Future income taxes ........................ -- (97,259) (18,611)
-------- --------- ---------
Future net cash flows ................... 79,308 528,523 262,688
Annual discount (10%) for estimated
timing of cash flows ...................... (14,174) (118,355) (49,085)
-------- --------- ---------
Standardized measure of discounted
future net cash flows .................. $ 65,134 $ 410,168 $ 213,603
======== ========= =========
Principal sources of change in the standardized measure of discounted
future net cash flows are as follows (in thousands of dollars):
SUCCESSOR PREDECESSOR
----------------------- -----------
YEAR ENDED JANUARY 31,
-----------------------------------------
2002 2001 2000
--------- --------- | ---------
|
Beginning of year .......................... $ 410,168 $ 213,603 | $ 161,530
Revisions: |
Quantity estimates and production rates... (24,583) 84,923 | (18,829)
Prices, net of lifting costs ............. (320,982) 162,231 | 136,550
Estimated future development costs ....... 44,898 7,403 | 14,534
Additions, extensions, discoveries and |
improved recovery ......................... 8,697 163,384 | 10,467
Net sales of production .................... (118,297) (170,832) | (93,481)
Development costs incurred ................. 22,110 -- | 4,350
Accretion of discount ...................... 39,598 18,322 | 13,615
Net changes in income taxes ................ 75,480 (60,347) | (15,133)
Purchases (sales) of reserves .............. (71,955) (8,519) | --
--------- --------- | ---------
End of year (Successor in 2000) .......... $ 65,134 $ 410,168 | $ 213,603
========= ========= | =========
- -----------------------------
Year-end wellhead prices received by TransTexas from sales of natural gas,
including margins from natural gas liquids, were $2.35, $6.39 and $2.74 per Mcf
for 2002, 2001 and 2000, respectively. Year-end condensate prices were $18.61,
$28.23 and $26.89 per barrel for 2002, 2001 and 2000, respectively.
47
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by this item is incorporated by reference from
TransTexas' definitive proxy statement to be filed with the Commission within
120 days after the end of the fiscal year covered by this Form 10-K.
ITEM 11. Executive Compensation
The information required by this item is incorporated by reference from
TransTexas' definitive proxy statement to be filed with the Commission within
120 days after the end of the fiscal year covered by this Form 10-K.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference from
TransTexas' definitive proxy statement to be filed with the Commission within
120 days after the end of the fiscal year covered by this Form 10-K.
ITEM 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference from
TransTexas' definitive proxy statement to be filed with the Commission within
120 days after the end of the fiscal year covered by this Form 10-K.
48
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Page
----
(a) Financial Statements, Schedules and Exhibits
(1) Report of Independent Accountants...................................................................... 19
Consolidated Balance Sheet............................................................................. 20
Consolidated Statement of Operations................................................................... 21
Consolidated Statement of Stockholders' Equity (Deficit)............................................... 22
Consolidated Statement of Cash Flows................................................................... 23
Notes to Consolidated Financial Statements............................................................. 24
(2) Report of Independent Accountants...................................................................... 57
Schedule II - Valuation and Qualifying Accounts........................................................ 58
(3) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1 - Second Amended, Modified and Restated Plan of Reorganization dated
January 25, 2000 (filed as an exhibit to the Company's current
report on Form 8-K dated February 7, 2000, and incorporated herein
by reference).
2.2 - Order Confirming Plan of Reorganization dated February 7, 2000
(filed as an exhibit to the Company's current report on Form 8-K
dated February 7, 2000, and incorporated herein by reference).
3.1 - Amended and Restated Certificate of Incorporation (filed as an
exhibit to the Company's Registration Statement on Form 8-A (No.
0-30475), and incorporated herein by reference).
3.2 - Certificate of Designation, Series A Senior Preferred Stock (filed
as an exhibit to the Company's Registration Statement on Form 8-A
(No. 0-30475), and incorporated herein by reference).
3.3 - Certificate of Designation, Series A Junior Preferred Stock (filed
as an exhibit to the Company's Registration Statement on Form 8-A
(No. 0-30475), and incorporated herein by reference).
3.4 - Amended and Restated Bylaws (filed as an exhibit to the Company's
Registration Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.5 - Certificate of Amendment to Amended and Restated Certificate of
Incorporation (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
3.6 - Certificate of Amendment to Amended and Restated Certificate of
Incorporation (regarding Amendments to Certificates of Designation)
(filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 333-38252), and incorporated herein by reference).
4.1 - Pledge and Security Agreement dated as of September 19, 1996,
between TransAmerican Exploration Corporation and Fleet National
Bank (previously filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended October 31, 1996, and incorporated herein by
reference).
4.2 - Registration Rights Agreement dated as of September 19, 1996, by
and among TransTexas, TransAmerican, TransAmerican Exploration
Corporation and Fleet National Bank (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31, 1996, and
incorporated herein by reference).
4.3 - Pledge Agreement dated as of February 23, 1995, between TEC and
First Fidelity Bank, National Association, as Trustee (filed as an
exhibit to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S- (33-91494), and incorporated
herein by reference).
49
4.4 - Pledge Agreement dated as of February 23, 1995, between TARC and
First Fidelity Bank, National Association, as Trustee (filed as an
exhibit to Post-Effective Amendment No. 5 to TransTexas' Registration
Statement on Form S-3 (33-91494), and incorporated herein by
reference).
4.5 - Registration Rights Agreement dated as of February 23, 1995, among
TransTexas, TARC and TEC (filed as an exhibit to Post-Effective
Amendment No. 5 to the Company's Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.6 - Pledge Agreement dated as of February 23, 1995, among TransAmerican,
TransTexas and Halliburton Company (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas' Registration Statement
on Form S-3 (33-91494), and incorporated herein by reference).
4.7 - Pledge Agreement dated as of February 23, 1995, among TransAmerican,
TransTexas and RECO Industries, Inc. (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas' Registration Statement
on Form S-3 (33-91494), and incorporated herein by reference).
4.8 - Pledge Agreement dated as of February 23, 1995, among TransAmerican,
TransTexas and Frito-Lay, Inc. (filed as an exhibit to Post-Effective
Amendment No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.9 - Pledge Agreement dated as of February 23, 1995, among TransAmerican,
TransTexas and EM SectorHoldings, Inc. (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas' Registration Statement
on Form S-3 (33-91494), and incorporated herein by reference).
4.10 - Stock Pledge Agreement dated January 27, 1995, between TransAmerican
and ITT Commercial Corp. (filed as an exhibit to Post-Effective
Amendment No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.11 - Registration Rights Agreement dated January 27, 1995, among
TransAmerican, TransTexas and ITT Commercial Finance Corp. (filed as
an exhibit to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and incorporated herein
by reference).
4.12 - Note Purchase Agreement dated December 13, 1996 between TransTexas
and the Purchasers of 13 1/4% Series A Senior Subordinated Notes due
2003 (filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.13 - Indenture dated March 15, 2000 between the Company and Firstar Bank,
N.A., Indenture Trustee, governing the Company's 15% Senior Secured
Notes due 2005 (filed as an exhibit to the Company's annual report on
Form 10-K for the year ended January 31, 2000, and incorporated herein
by reference).
4.14 - Form of Mortgage dated March 15, 2000 between the Company and
Firstar Bank, N.A. (filed as an exhibit to the Company's annual report
on Form 10-K for the year ended January 31, 2000, and incorporated
herein by reference).
4.15 - Security and Pledge Agreement dated March 15, 2000 between the
Company and Firstar Bank, N.A. (filed as an exhibit to the Company's
annual report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
4.16 - Oil and Gas Revolving Credit and Term Loan Agreement dated March 15,
2000 among GMAC Commercial Credit LLC, as Lender and Agent, the
Company, as Borrower, and Galveston Bay Processing Corporation and
Galveston Bay Pipeline Company, as Guarantors (filed as an exhibit to
the Company's annual report on Form 10-K for the year ended January
31, 2000, and incorporated herein by reference).
4.17 - Form of Mortgage dated March 15, 2000 between the Company and GMAC
Commercial Credit LLC (filed as an exhibit to the Company's annual
report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
4.18 - Security and Pledge Agreement dated March 15, 2000 between the
Company and GMAC Commercial Credit LLC (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended January 31,
2000, and incorporated herein by reference).
50
4.19 - Intercreditor Agreement dated March 15, 2000 between Firstar Bank,
N.A. and GMAC Commercial Credit LLC (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended January 31,
2000, and incorporated herein by reference).
4.20 - Warrant Agreement, including form of Warrant Certificate, dated
March 15, 2000 between the Company and ChaseMellon Shareholder
Services, LLC, Warrant Agent (filed as an exhibit to the Company's
annual report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
4.21 - Registration Rights Agreement dated March 15, 2000 between the
Company and the holders of the Notes named therein (filed as an
exhibit to the Company's annual report on Form 10-K for the year ended
January 31, 2000, and incorporated herein by reference).
4.22 - Registration Rights Agreement dated March 15, 2000 between the
Company and the holders of the common stock named therein (filed as an
exhibit to the Company's annual report on Form 10-K for the year ended
January 31, 2000, and incorporated herein by reference).
4.23 - Registration Rights Agreement dated March 15, 2000 between the
Company and the holders of the Senior Preferred Stock named therein
(filed as an exhibit to the Company's annual report on Form 10-K for
the year ended January 31, 2000, and incorporated herein by
reference).
4.24 - Registration Rights Agreement dated March 15, 2000 between the
Company and the holders of the Junior Preferred Stock named therein
(filed as an exhibit to the Company's annual report on Form 10-K for
the year ended January 31, 2000, and incorporated herein by
reference).
4.25 - First Supplemental Indenture dated as of June 28, 2000 by and among
the Company, Galveston Bay Processing Corporation, Galveston Bay
Pipeline Company and Firstar Bank, N.A., Indenture Trustee, governing
the Company's 15% Senior Secured Notes due 2005 (filed as an exhibit
to the Company's Registration Statement on Form S-1 (No. 333-38252),
and incorporated herein by reference).
4.26 - Amendment to Warrant Agreement dated as of March 28, 2001 between
TransTexas and ChaseMellon Shareholder Services, L.L.C., Warrant Agent
(filed as an exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 2001, and incorporated herein by reference).
10.1 - Tax Allocation Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, and the other subsidiaries of
TransAmerican, as amended (filed as an exhibit to TransTexas'
Registration Statement on Form S-1 (No. 33-75050), and incorporated
herein by reference).
10.2 - Gas Purchase Agreement dated June 8, 1987, by and between
TransAmerican and The Coastal Corporation, as amended by the Amendment
to Gas Purchase Agreement dated February 13, 1990, by and between
TransAmerican and Texcol Gas Services, Inc., as successor to The
Coastal Corporation (filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-62740), and incorporated herein by
reference).
10.3 - Gas Purchase Agreement dated October 29, 1987, by and between
TransAmerican and The Coastal Corporation as amended by the Amendment
to Gas Purchase Agreement dated February 13, 1990, by and between
TransAmerican and Texcol Gas Services, Inc., successor to The Coastal
Corporation (filed as an exhibit to TransTexas' Registration Statement
on Form S-1 (No. 33-62740), and incorporated herein by reference).
10.4 - Gas Transportation Agreement dated the Effective Date (as therein
defined), by and between TransAmerican and The Coastal Corporation, as
amended by the Amendment to Gas Transportation Agreement dated
February 13, 1990, by and between TransAmerican and Texcol Gas
Services, Inc., successor to The Coastal Corporation (filed as an
exhibit to TransTexas' Registration Statement on Form S-1 (No.
33-62740), and incorporated herein by reference).
10.5 - Firm Natural Gas Sales Agreement dated September 30, 1993, by and
between TransTexas and Associated Natural Gas, Inc. (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended October 31,
1993, and incorporated herein by reference).
10.6 - Form of Indemnification Agreement by and between TransTexas and each
of its directors (filed as an exhibit to TransTexas' current report on
Form 8-K dated August 24, 1993 and incorporated herein by reference).
51
10.7 - Gas Purchase Agreement dated November 1, 1985, between TransAmerican
and Washington Gas and Light Company, Frederick Gas Company, Inc., and
Shenandoah Gas Company (filed as an exhibit to TransTexas'
Registration Statement on Form S-1 (No. 33-75050), and incorporated
herein by reference).
10.8 - Natural Gas Sales Agreement between TransTexas and Associated
Natural Gas, Inc. dated September 30, 1993 (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31, 1993, and
incorporated herein by reference).
10.9 - Amendment Extending Gas Purchase Agreement between TransTexas and
Washington Gas Light Company, Inc., and Shenandoah Gas Company, as
amended, dated November 1, 1993 (filed as an exhibit to TransTexas'
Form 10-Q for the quarter ended January 31, 1994, and incorporated
herein by reference).
10.10 - Agreement for Purchase of Production Payment between TransTexas and
Southern States Exploration, Inc. dated April 1, 1994 (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended April 30, 1994,
and incorporated herein by reference).
10.11 - Assignment of Proceeds Production Payment between TransTexas and
Southern States Exploration, Inc. dated April 1, 1994 (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended April 30, 1994,
and incorporated herein by reference).
10.12 - Transfer Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, TTC, and John R. Stanley (filed as an
exhibit to TransTexas' current report on Form 8-K dated August 24,
1993, and incorporated herein by reference).
10.13 - Amended and Restated Accounts Receivable Management and Security
Agreement between TransTexas and BNY Financial Corporation (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended October 31,
1995, and incorporated herein by reference).
10.14 - Note Purchase Agreement, dated as of May 10, 1996, among TransTexas,
TCW Shared Opportunity Fund II, L.P. and Jefferies & Company, Inc.
(filed as an exhibit to the Company's Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.15 - Master Swap Agreement, dated June 6, 1996, between TransTexas and
AIG Trading Corporation (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended April 30, 1996, and incorporated herein by
reference).
10.16 - Purchase Agreement, dated January 30, 1996, between TransTexas and
Sunflower Energy Finance Company (filed as an exhibit to TransTexas'
Form 10-Q for the quarter ended April 30, 1996, and incorporated
herein by reference).
10.17 - Production Payment Conveyance, executed on January 30, 1996, from
TransTexas to Sunflower Energy Finance Company (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
10.18 - First Supplement to Purchase Agreement, dated as of February 12,
1996, among TransTexas, Sunflower Energy Finance Company and TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended April 30, 1996,
and incorporated herein by reference).
10.19 - First Supplement to Production Payment Conveyance, executed February
12, 1996, among TransTexas, Sunflower Energy Finance Company and TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended April 30, 1996,
and incorporated herein by reference).
10.20 - Purchase Agreement, dated May 14, 1996, among TransTexas, TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. and Sunflower
Energy Finance Company (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended April 30, 1996, and incorporated herein by
reference).
10.21 - Production Payment Conveyance, executed May 14, 1996, from
TransTexas to TCW Portfolio No. 1555 Dr V Sub-Custody Partnership,
L.P. and Sunflower Energy Finance Company (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
52
10.22 - Stock Purchase Agreement dated as of May 29, 1997 by and between
TransTexas and First Union Bank of Connecticut, as trustee (filed as
an exhibit to TransTexas' current report on Form 8-K dated May 29,
1997, and incorporated herein by reference).
10.23 - Interruptible Gas Transportation Agreement dated Effective March 1,
1997 between TransTexas, as shipper, and Lobo Pipeline Company, as
transporter (filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by reference).
10.24 - Intrastate Firm Gas Transportation Agreement dated effective March
1, 1997 between TransTexas, as shipper, and Lobo Pipeline Company, as
transporter (filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by reference).
10.25 - Master Services Contract dated May 30, 1997 between Conoco Inc. and
TransTexas (filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by reference).
10.26 - Agreement for Services dated effective March 1, 1997 between Conoco
Inc. and TransTexas (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein by
reference).
10.27 - Amendment No. 3 to Tax Allocation Agreement dated May 29, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.28 - Amendment No. 4 to Tax Allocation Agreement dated June 13, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.29 - Amendment No. 2 to Transfer Agreement dated May 29, 1997 (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.30 - Amendment No. 3 to Transfer Agreement dated June 13, 1997 (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.31 - Employment Agreement dated December 1, 1997 between TransTexas and
Arnold Brackenridge (filed as an exhibit to TransTexas' annual report
on Form 10-K for the year ended January 31, 1998, and incorporated
herein by reference).
10.32 - Purchase Agreement dated February 23, 1998 between TransTexas and
TCW (filed as an exhibit to TransTexas' annual report on Form 10-K for
the year ended January 31, 1998, and incorporated herein by
reference).
10.33 - Production Payment Conveyance dated February 23, 1998 between
TransTexas and TCW (filed as an exhibit to TransTexas' annual report
on Form 10-K for the year ended January 31, 1998, and incorporated
herein by reference).
10.34 - Employment Agreement dated March 17, 2000 between the Company and
John R. Stanley (filed as an exhibit to the Company's annual report on
Form 10-K for the year ended January 31, 2000, and incorporated herein
by reference).
10.35 - Severance Agreement dated May 27, 1998 between the Company and Simon
J. Ward (filed as an exhibit to the Company's annual report on Form
10-K for the year ended January 31, 2000, and incorporated herein by
reference).
10.36 - Purchase Agreement dated March 14, 2000 between the Company,
Southern Producer Services, L.P. ("SPS"), and TCW Portfolio No. 1555
DR V Sub-Custody Partnership, L.P., TCW DR VI Investment Partnership,
L.P. and TCW Asset Management Company ("TCW") (filed as an exhibit to
the Company's annual report on Form 10-K for the year ended January
31, 2000, and incorporated herein by reference).
10.37 - Production Payment Conveyance dated March 14, 2000 between the
Company, SPS and TCW (filed as an exhibit to the Company's annual
report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
53
10.38 - Gas and Natural Gas Liquids Purchase Agreement dated March 14, 2000
between SPS and TransTexas (filed as an exhibit to the Company's
annual report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
10.39 - Crude Oil Purchase Agreement dated March 14, 2000 between SPS and
TransTexas (filed as an exhibit to the Company's annual report on Form
10-K for the year ended January 31, 2000, and incorporated herein by
reference).
10.40 - Natural Gas Treating and Condensate Handling Agreement dated March 14,
2000 between Galveston Bay Processing Corporation and SPS (filed as an
exhibit to the Company's annual report on Form 10-K for the year ended
January 31, 2000, and incorporated herein by reference).
10.41 - Third Amended and Restated Accounts Receivable Management and
Security Agreement dated March 15, 2000 between the Company and GMAC
Commercial Credit LLC (filed as an exhibit to the Company's annual
report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
10.42 - Services Agreement dated March 17, 2000 between TNGC Holdings
Corporation and the Company (filed as an exhibit to the Company's
annual report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
10.43 - First Supplement to 2000 Production Payment Agreement, dated as of
June 7, 2000 (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
10.44 - First Supplement to 2000 Production Payment Conveyance, dated as of
June 7, 2000 (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
10.45 - Second Supplement to 2000 Production Payment Agreement, dated as of
September 8, 2000 (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
10.46 - Second Supplement to 2000 Production Payment Conveyance, dated as of
September 8, 2000 (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
10.47 - Subordination Agreement, dated as of September 7, 2000 between the
Company and Firstar Bank of Minnesota, relating to the Second
Supplement to 2000 Production Payment Conveyance (filed as an exhibit
to the Company's Registration Statement on Form S-1 (No. 333-38252),
and incorporated herein by reference).
10.48 - Subordination Agreement, dated as of September 7, 2000 between the
Company and GMAC Commercial Credit, LLC, relating to the Second
Supplement to 2000 Production Payment Conveyance (filed as an exhibit
to the Company's Registration Statement on Form S-1 (No. 333-38252),
and incorporated herein by reference).
10.49 - Amendment No.1 to Third Amended and Restated Accounts Receivable
Management and Security Agreement dated October 1, 2000 between the
Company and GMAC Commercial Credit LLC (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended January 31,
2001, and incorporated herein by reference).
10.50 - Third Supplement to 2000 Production Payment Agreement, dated
November 7, 2000 (filed as an exhibit to TransTexas' annual report on
Form 10-K for the year ended January 31, 2001, and incorporated herein
by reference).
10.51 - Third Supplement to 2000 Production Payment Conveyance, dated
November 7, 2000 (filed as an exhibit to TransTexas' annual report on
Form 10-K for the year ended January 31, 2001, and incorporated herein
by reference).
10.52 - Subordination Agreement, dated as of February 7, 2001 between the
Company and Firstar Bank of Minnesota, relating to the Fourth
Supplement to 2000 Production Payment Conveyance (filed as an exhibit
to TransTexas' annual report on Form 10-K for the year ended January
31, 2001, and incorporated herein by reference).
10.53 - Subordination Agreement, dated as of February 7, 2001 between the
Company and GMAC Commercial Credit LLC as Agent, relating to the
Fourth Supplement to 2000 Production Payment Conveyance (filed as an
exhibit to TransTexas' annual report on Form 10-K for the year ended
January 31, 2001, and incorporated herein by reference).
54
10.54 - Subordination Agreement, dated as of February 7, 2001 between the
Company and GMAC Commercial Credit LLC, relating to the Fourth
Supplement to 2000 Production Payment Conveyance (filed as an exhibit
to TransTexas' annual report on Form 10-K for the year ended January
31, 2001, and incorporated herein by reference).
10.55 - Fourth Supplement to 2000 Production Payment Agreement, dated
February 7, 2001 (filed as an exhibit to TransTexas' annual report on
Form 10-K for the year ended January 31, 2001, and incorporated herein
by reference).
10.56 - Fourth Supplement to 2000 Production Payment Conveyance, dated
February 7, 2001 (filed as an exhibit to TransTexas' annual report on
Form 10-K for the year ended January 31, 2001, and incorporated herein
by reference).
10.57 - Employment Agreement dated March 5, 2001 between TransTexas and
Arnold Brackenridge (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended April 30, 2001, and
incorporated herein by reference).
10.58 - Amendment No. 1 to Oil and Gas Revolving Credit and Term Loan
Agreement dated September 7, 2001 among GMAC Commercial Credit LLC, as
Lender and Agent, TransTexas as Borrower, and Galveston Bay Processing
Corporation and Galveston Bay Pipeline Company, as Guarantors (filed
as an exhibit to TransTexas' quarterly report on Form 10-Q for the
quarter ended July 31, 2001, and incorporated herein by reference).
10.59 - Fifth Supplement to 2000 Production Payment Agreement, dated July 9,
2001 (filed as an exhibit to TransTexas' quarterly report on Form 10-Q
for the quarter ended July 31, 2001, and incorporated herein by
reference).
10.60 - Fifth Supplement to 2000 Production Payment Conveyance, dated July
9, 2001 (filed as an exhibit to TransTexas' quarterly report on Form
10-Q for the quarter ended July 31, 2001, and incorporated herein by
reference).
10.61 - Sixth Supplement to 2000 Production Payment Agreement, dated
September 10, 2001 (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended July 31, 2001, and
incorporated herein by reference).
10.62 - Sixth Supplement to 2000 Production Payment Conveyance, dated
September 10, 2001 (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended July 31, 2001, and
incorporated herein by reference).
10.63 - Seventh Supplement to 2000 Production Payment Agreement, dated
September 10, 2001 (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended July 31, 2001, and
incorporated herein by reference).
10.64 - Seventh Supplement to 2000 Production Payment Conveyance, dated
September 10, 2001 (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended July 31, 2001, and
incorporated herein by reference).
21.1 - Schedule of Subsidiaries of TransTexas (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended January 31,
1999, and incorporated herein by reference).
21.2 - Schedule of Subsidiaries of TransTexas (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended January 31,
2001, and incorporated herein by reference).
*23.1 - Consent of Netherland, Sewell & Associates, Inc.
- ------------
* filed herewith
(b) There were no reports on Form 8-K filed during the three months ended
January 31, 2002.
55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on May 1, 2002.
TRANSTEXAS GAS CORPORATION
By: /s/ ARNOLD H. BRACKENRIDGE
---------------------------------
Arnold H. Brackenridge,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities indicated on May 1, 2002.
NAME TITLE
---- -----
/s/ ARNOLD H. BRACKENRIDGE President, Chief Executive Officer and Chief Operating Officer
- ----------------------------------------------------------- (Principal Executive Officer)
Arnold H. Brackenridge
/s/ ED DONAHUE Vice President and Chief Financial Officer
- ----------------------------------------------------------- (Principal Financial and Accounting Officer)
Ed Donahue
/s/ R. GERALD BENNETT Director
- -----------------------------------------------------------
R. Gerald Bennett
/s/ RONALD BENSON Director
- -----------------------------------------------------------
Ronald Benson
/s/ TED E. DAVIS Director
- -----------------------------------------------------------
Ted E. Davis
/s/ WALTER S. PIONTEK Director
- -----------------------------------------------------------
Walter S. Piontek
56
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Stockholders and Board of Directors
TransTexas Gas Corporation
Our audits of the consolidated financial statements referred to in our
report dated April 30, 2002 appearing in the January 31, 2002 10-K of TransTexas
Gas Corporation also included an audit of the financial statement schedule
listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial
statement schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PricewaterhouseCoopers LLP
Houston, Texas
April 30, 2002
57
Schedule II
TRANSTEXAS GAS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(In thousands of dollars)
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ----------- ---------- ---------- -------- ---------- -----------
Predecessor:
Year ended January 31, 2000:
Valuation allowance -
accounts receivable ...... $ 191 $ 2,898 $ -- $(3,089)(1) $ -- (2)
======= ======= ======= ======= =======
Successor:
Year ended January 31, 2001:
Valuation allowance -
accounts receivable ...... $ -- $ 850 $ (531) $ (319) $ --
======= ======= ======= ======= =======
Year ended January 31, 2002:
Valuation allowance -
accounts receivable ...... $ -- $ 239 $ 28 $ -- $ 267
======= ======= ======= ======= =======
- ------------------
(1) Adjustment for fresh-start reporting.
(2) Successor balance at January 31, 2000.
58
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1 - Second Amended, Modified and Restated Plan of Reorganization dated
January 25, 2000 (filed as an exhibit to the Company's current report
on Form 8-K dated February 7, 2000, and incorporated herein by
reference).
2.2 - Order Confirming Plan of Reorganization dated February 7, 2000
(filed as an exhibit to the Company's current report on Form 8-K dated
February 7, 2000, and incorporated herein by reference).
3.1 - Amended and Restated Certificate of Incorporation (filed as an
exhibit to the Company's Registration Statement on Form 8-A (No.
0-30475), and incorporated herein by reference).
3.2 - Certificate of Designation, Series A Senior Preferred Stock (filed
as an exhibit to the Company's Registration Statement on Form 8-A (No.
0-30475), and incorporated herein by reference).
3.3 - Certificate of Designation, Series A Junior Preferred Stock (filed
as an exhibit to the Company's Registration Statement on Form 8-A (No.
0-30475), and incorporated herein by reference).
3.4 - Amended and Restated Bylaws (filed as an exhibit to the Company's
Registration Statement on Form 8-A (No. 0-30475), and incorporated
herein by reference).
3.5 - Certificate of Amendment to Amended and Restated Certificate of
Incorporation (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
3.6 - Certificate of Amendment to Amended and Restated Certificate of
Incorporation (regarding Amendments to Certificates of Designation)
(filed as an exhibit to the Company's Registration Statement on Form
S-1 (No. 333-38252), and incorporated herein by reference).
4.1 - Pledge and Security Agreement dated as of September 19, 1996,
between TransAmerican Exploration Corporation and Fleet National Bank
(previously filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended October 31, 1996, and incorporated herein by reference).
4.2 - Registration Rights Agreement dated as of September 19, 1996, by and
among TransTexas, TransAmerican, TransAmerican Exploration Corporation
and Fleet National Bank (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended October 31, 1996, and incorporated herein by
reference).
4.3 - Pledge Agreement dated as of February 23, 1995, between TEC and
First Fidelity Bank, National Association, as Trustee (filed as an
exhibit to Post-Effective Amendment No. 5 to TransTexas' Registration
Statement on Form S- (33-91494), and incorporated herein by
reference).
59
4.4 - Pledge Agreement dated as of February 23, 1995, between TARC and
First Fidelity Bank, National Association, as Trustee (filed as an
exhibit to Post-Effective Amendment No. 5 to TransTexas' Registration
Statement on Form S-3 (33-91494), and incorporated herein by
reference).
4.5 - Registration Rights Agreement dated as of February 23, 1995, among
TransTexas, TARC and TEC (filed as an exhibit to Post-Effective
Amendment No. 5 to the Company's Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.6 - Pledge Agreement dated as of February 23, 1995, among TransAmerican,
TransTexas and Halliburton Company (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas' Registration Statement
on Form S-3 (33-91494), and incorporated herein by reference).
4.7 - Pledge Agreement dated as of February 23, 1995, among TransAmerican,
TransTexas and RECO Industries, Inc. (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas' Registration Statement
on Form S-3 (33-91494), and incorporated herein by reference).
4.8 - Pledge Agreement dated as of February 23, 1995, among TransAmerican,
TransTexas and Frito-Lay, Inc. (filed as an exhibit to Post-Effective
Amendment No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.9 - Pledge Agreement dated as of February 23, 1995, among TransAmerican,
TransTexas and EM SectorHoldings, Inc. (filed as an exhibit to
Post-Effective Amendment No. 5 to TransTexas' Registration Statement
on Form S-3 (33-91494), and incorporated herein by reference).
4.10 - Stock Pledge Agreement dated January 27, 1995, between TransAmerican
and ITT Commercial Corp. (filed as an exhibit to Post-Effective
Amendment No. 5 to TransTexas' Registration Statement on Form S-3
(33-91494), and incorporated herein by reference).
4.11 - Registration Rights Agreement dated January 27, 1995, among
TransAmerican, TransTexas and ITT Commercial Finance Corp. (filed as
an exhibit to Post-Effective Amendment No. 5 to TransTexas'
Registration Statement on Form S-3 (33-91494), and incorporated herein
by reference).
4.12 - Note Purchase Agreement dated December 13, 1996 between TransTexas
and the Purchasers of 13 1/4% Series A Senior Subordinated Notes due
2003 (filed as an exhibit to Post-Effective Amendment No. 5 to
TransTexas' Registration Statement on Form S-3 (33-91494), and
incorporated herein by reference).
4.13 - Indenture dated March 15, 2000 between the Company and Firstar Bank,
N.A., Indenture Trustee, governing the Company's 15% Senior Secured
Notes due 2005 (filed as an exhibit to the Company's annual report on
Form 10-K for the year ended January 31, 2000, and incorporated herein
by reference).
4.14 - Form of Mortgage dated March 15, 2000 between the Company and
Firstar Bank, N.A. (filed as an exhibit to the Company's annual report
on Form 10-K for the year ended January 31, 2000, and incorporated
herein by reference).
4.15 - Security and Pledge Agreement dated March 15, 2000 between the
Company and Firstar Bank, N.A. (filed as an exhibit to the Company's
annual report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
4.16 - Oil and Gas Revolving Credit and Term Loan Agreement dated March 15,
2000 among GMAC Commercial Credit LLC, as Lender and Agent, the
Company, as Borrower, and Galveston Bay Processing Corporation and
Galveston Bay Pipeline Company, as Guarantors (filed as an exhibit to
the Company's annual report on Form 10-K for the year ended January
31, 2000, and incorporated herein by reference).
4.17 - Form of Mortgage dated March 15, 2000 between the Company and GMAC
Commercial Credit LLC (filed as an exhibit to the Company's annual
report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
4.18 - Security and Pledge Agreement dated March 15, 2000 between the
Company and GMAC Commercial Credit LLC (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended January 31,
2000, and incorporated herein by reference).
60
4.19 - Intercreditor Agreement dated March 15, 2000 between Firstar Bank,
N.A. and GMAC Commercial Credit LLC (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended January 31,
2000, and incorporated herein by reference).
4.20 - Warrant Agreement, including form of Warrant Certificate, dated
March 15, 2000 between the Company and ChaseMellon Shareholder
Services, LLC, Warrant Agent (filed as an exhibit to the Company's
annual report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
4.21 - Registration Rights Agreement dated March 15, 2000 between the
Company and the holders of the Notes named therein (filed as an
exhibit to the Company's annual report on Form 10-K for the year ended
January 31, 2000, and incorporated herein by reference).
4.22 - Registration Rights Agreement dated March 15, 2000 between the
Company and the holders of the common stock named therein (filed as an
exhibit to the Company's annual report on Form 10-K for the year ended
January 31, 2000, and incorporated herein by reference).
4.23 - Registration Rights Agreement dated March 15, 2000 between the
Company and the holders of the Senior Preferred Stock named therein
(filed as an exhibit to the Company's annual report on Form 10-K for
the year ended January 31, 2000, and incorporated herein by
reference).
4.24 - Registration Rights Agreement dated March 15, 2000 between the
Company and the holders of the Junior Preferred Stock named therein
(filed as an exhibit to the Company's annual report on Form 10-K for
the year ended January 31, 2000, and incorporated herein by
reference).
4.25 - First Supplemental Indenture dated as of June 28, 2000 by and among
the Company, Galveston Bay Processing Corporation, Galveston Bay
Pipeline Company and Firstar Bank, N.A., Indenture Trustee, governing
the Company's 15% Senior Secured Notes due 2005 (filed as an exhibit
to the Company's Registration Statement on Form S-1 (No. 333-38252),
and incorporated herein by reference).
4.26 - Amendment to Warrant Agreement dated as of March 28, 2001 between
TransTexas and ChaseMellon Shareholder Services, L.L.C., Warrant Agent
(filed as an exhibit to TransTexas' annual report on Form 10-K for the
year ended January 31, 2001, and incorporated herein by reference).
10.1 - Tax Allocation Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, and the other subsidiaries of
TransAmerican, as amended (filed as an exhibit to TransTexas'
Registration Statement on Form S-1 (No. 33-75050), and incorporated
herein by reference).
10.2 - Gas Purchase Agreement dated June 8, 1987, by and between
TransAmerican and The Coastal Corporation, as amended by the Amendment
to Gas Purchase Agreement dated February 13, 1990, by and between
TransAmerican and Texcol Gas Services, Inc., as successor to The
Coastal Corporation (filed as an exhibit to TransTexas' Registration
Statement on Form S-1 (No. 33-62740), and incorporated herein by
reference).
10.3 - Gas Purchase Agreement dated October 29, 1987, by and between
TransAmerican and The Coastal Corporation as amended by the Amendment
to Gas Purchase Agreement dated February 13, 1990, by and between
TransAmerican and Texcol Gas Services, Inc., successor to The Coastal
Corporation (filed as an exhibit to TransTexas' Registration Statement
on Form S-1 (No. 33-62740), and incorporated herein by reference).
10.4 - Gas Transportation Agreement dated the Effective Date (as therein
defined), by and between TransAmerican and The Coastal Corporation, as
amended by the Amendment to Gas Transportation Agreement dated
February 13, 1990, by and between TransAmerican and Texcol Gas
Services, Inc., successor to The Coastal Corporation (filed as an
exhibit to TransTexas' Registration Statement on Form S-1 (No.
33-62740), and incorporated herein by reference).
10.5 - Firm Natural Gas Sales Agreement dated September 30, 1993, by and
between TransTexas and Associated Natural Gas, Inc. (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended October 31,
1993, and incorporated herein by reference).
10.6 - Form of Indemnification Agreement by and between TransTexas and each
of its directors (filed as an exhibit to TransTexas' current report on
Form 8-K dated August 24, 1993 and incorporated herein by reference).
61
10.7 - Gas Purchase Agreement dated November 1, 1985, between TransAmerican
and Washington Gas and Light Company, Frederick Gas Company, Inc., and
Shenandoah Gas Company (filed as an exhibit to TransTexas'
Registration Statement on Form S-1 (No. 33-75050), and incorporated
herein by reference).
10.8 - Natural Gas Sales Agreement between TransTexas and Associated
Natural Gas, Inc. dated September 30, 1993 (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended October 31, 1993, and
incorporated herein by reference).
10.9 - Amendment Extending Gas Purchase Agreement between TransTexas and
Washington Gas Light Company, Inc., and Shenandoah Gas Company, as
amended, dated November 1, 1993 (filed as an exhibit to TransTexas'
Form 10-Q for the quarter ended January 31, 1994, and incorporated
herein by reference).
10.10 - Agreement for Purchase of Production Payment between TransTexas and
Southern States Exploration, Inc. dated April 1, 1994 (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended April 30, 1994,
and incorporated herein by reference).
10.11 - Assignment of Proceeds Production Payment between TransTexas and
Southern States Exploration, Inc. dated April 1, 1994 (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended April 30, 1994,
and incorporated herein by reference).
10.12 - Transfer Agreement dated August 24, 1993, by and among
TransAmerican, TransTexas, TTC, and John R. Stanley (filed as an
exhibit to TransTexas' current report on Form 8-K dated August 24,
1993, and incorporated herein by reference).
10.13 - Amended and Restated Accounts Receivable Management and Security
Agreement between TransTexas and BNY Financial Corporation (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended October 31,
1995, and incorporated herein by reference).
10.14 - Note Purchase Agreement, dated as of May 10, 1996, among TransTexas,
TCW Shared Opportunity Fund II, L.P. and Jefferies & Company, Inc.
(filed as an exhibit to the Company's Form 10-Q for the quarter ended
April 30, 1996, and incorporated herein by reference).
10.15 - Master Swap Agreement, dated June 6, 1996, between TransTexas and
AIG Trading Corporation (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended April 30, 1996, and incorporated herein by
reference).
10.16 - Purchase Agreement, dated January 30, 1996, between TransTexas and
Sunflower Energy Finance Company (filed as an exhibit to TransTexas'
Form 10-Q for the quarter ended April 30, 1996, and incorporated
herein by reference).
10.17 - Production Payment Conveyance, executed on January 30, 1996, from
TransTexas to Sunflower Energy Finance Company (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
10.18 - First Supplement to Purchase Agreement, dated as of February 12,
1996, among TransTexas, Sunflower Energy Finance Company and TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended April 30, 1996,
and incorporated herein by reference).
10.19 - First Supplement to Production Payment Conveyance, executed February
12, 1996, among TransTexas, Sunflower Energy Finance Company and TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. (filed as an
exhibit to TransTexas' Form 10-Q for the quarter ended April 30, 1996,
and incorporated herein by reference).
10.20 - Purchase Agreement, dated May 14, 1996, among TransTexas, TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. and Sunflower
Energy Finance Company (filed as an exhibit to TransTexas' Form 10-Q
for the quarter ended April 30, 1996, and incorporated herein by
reference).
10.21 - Production Payment Conveyance, executed May 14, 1996, from
TransTexas to TCW Portfolio No. 1555 Dr V Sub-Custody Partnership,
L.P. and Sunflower Energy Finance Company (filed as an exhibit to
TransTexas' Form 10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
62
10.22 - Stock Purchase Agreement dated as of May 29, 1997 by and between
TransTexas and First Union Bank of Connecticut, as trustee (filed as
an exhibit to TransTexas' current report on Form 8-K dated May 29,
1997, and incorporated herein by reference).
10.23 - Interruptible Gas Transportation Agreement dated Effective March 1,
1997 between TransTexas, as shipper, and Lobo Pipeline Company, as
transporter (filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by reference).
10.24 - Intrastate Firm Gas Transportation Agreement dated effective March
1, 1997 between TransTexas, as shipper, and Lobo Pipeline Company, as
transporter (filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by reference).
10.25 - Master Services Contract dated May 30, 1997 between Conoco Inc. and
TransTexas (filed as an exhibit to TransTexas' Form 10-Q for the
quarter ended July 31, 1997, and incorporated herein by reference).
10.26 - Agreement for Services dated effective March 1, 1997 between Conoco
Inc. and TransTexas (filed as an exhibit to TransTexas' Form 10-Q for
the quarter ended July 31, 1997, and incorporated herein by
reference).
10.27 - Amendment No. 3 to Tax Allocation Agreement dated May 29, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.28 - Amendment No. 4 to Tax Allocation Agreement dated June 13, 1997
(filed as an exhibit to TransTexas' Form 10-Q for the quarter ended
July 31, 1997, and incorporated herein by reference).
10.29 - Amendment No. 2 to Transfer Agreement dated May 29, 1997 (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.30 - Amendment No. 3 to Transfer Agreement dated June 13, 1997 (filed as
an exhibit to TransTexas' Form 10-Q for the quarter ended July 31,
1997, and incorporated herein by reference).
10.31 - Employment Agreement dated December 1, 1997 between TransTexas and
Arnold Brackenridge (filed as an exhibit to TransTexas' annual report
on Form 10-K for the year ended January 31, 1998, and incorporated
herein by reference).
10.32 - Purchase Agreement dated February 23, 1998 between TransTexas and
TCW (filed as an exhibit to TransTexas' annual report on Form 10-K for
the year ended January 31, 1998, and incorporated herein by
reference).
10.33 - Production Payment Conveyance dated February 23, 1998 between
TransTexas and TCW (filed as an exhibit to TransTexas' annual report
on Form 10-K for the year ended January 31, 1998, and incorporated
herein by reference).
10.34 - Employment Agreement dated March 17, 2000 between the Company and
John R. Stanley (filed as an exhibit to the Company's annual report on
Form 10-K for the year ended January 31, 2000, and incorporated herein
by reference).
10.35 - Severance Agreement dated May 27, 1998 between the Company and Simon
J. Ward (filed as an exhibit to the Company's annual report on Form
10-K for the year ended January 31, 2000, and incorporated herein by
reference).
10.36 - Purchase Agreement dated March 14, 2000 between the Company,
Southern Producer Services, L.P. ("SPS"), and TCW Portfolio No. 1555
DR V Sub-Custody Partnership, L.P., TCW DR VI Investment Partnership,
L.P. and TCW Asset Management Company ("TCW") (filed as an exhibit to
the Company's annual report on Form 10-K for the year ended January
31, 2000, and incorporated herein by reference).
10.37 - Production Payment Conveyance dated March 14, 2000 between the
Company, SPS and TCW (filed as an exhibit to the Company's annual
report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
63
10.38 - Gas and Natural Gas Liquids Purchase Agreement dated March 14, 2000
between SPS and TransTexas (filed as an exhibit to the Company's
annual report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
10.39 - Crude Oil Purchase Agreement dated March 14, 2000 between SPS and
TransTexas (filed as an exhibit to the Company's annual report on Form
10-K for the year ended January 31, 2000, and incorporated herein by
reference).
10.40 - Natural Gas Treating and Condensate Handling Agreement dated March 14,
2000 between Galveston Bay Processing Corporation and SPS (filed as an
exhibit to the Company's annual report on Form 10-K for the year ended
January 31, 2000, and incorporated herein by reference).
10.41 - Third Amended and Restated Accounts Receivable Management and
Security Agreement dated March 15, 2000 between the Company and GMAC
Commercial Credit LLC (filed as an exhibit to the Company's annual
report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
10.42 - Services Agreement dated March 17, 2000 between TNGC Holdings
Corporation and the Company (filed as an exhibit to the Company's
annual report on Form 10-K for the year ended January 31, 2000, and
incorporated herein by reference).
10.43 - First Supplement to 2000 Production Payment Agreement, dated as of
June 7, 2000 (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
10.44 - First Supplement to 2000 Production Payment Conveyance, dated as of
June 7, 2000 (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
10.45 - Second Supplement to 2000 Production Payment Agreement, dated as of
September 8, 2000 (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
10.46 - Second Supplement to 2000 Production Payment Conveyance, dated as of
September 8, 2000 (filed as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-38252), and incorporated herein by
reference).
10.47 - Subordination Agreement, dated as of September 7, 2000 between the
Company and Firstar Bank of Minnesota, relating to the Second
Supplement to 2000 Production Payment Conveyance (filed as an exhibit
to the Company's Registration Statement on Form S-1 (No. 333-38252),
and incorporated herein by reference).
10.48 - Subordination Agreement, dated as of September 7, 2000 between the
Company and GMAC Commercial Credit, LLC, relating to the Second
Supplement to 2000 Production Payment Conveyance (filed as an exhibit
to the Company's Registration Statement on Form S-1 (No. 333-38252),
and incorporated herein by reference).
10.49 - Amendment No.1 to Third Amended and Restated Accounts Receivable
Management and Security Agreement dated October 1, 2000 between the
Company and GMAC Commercial Credit LLC (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended January 31,
2001, and incorporated herein by reference).
10.50 - Third Supplement to 2000 Production Payment Agreement, dated
November 7, 2000 (filed as an exhibit to TransTexas' annual report on
Form 10-K for the year ended January 31, 2001, and incorporated herein
by reference).
10.51 - Third Supplement to 2000 Production Payment Conveyance, dated
November 7, 2000 (filed as an exhibit to TransTexas' annual report on
Form 10-K for the year ended January 31, 2001, and incorporated herein
by reference).
10.52 - Subordination Agreement, dated as of February 7, 2001 between the
Company and Firstar Bank of Minnesota, relating to the Fourth
Supplement to 2000 Production Payment Conveyance (filed as an exhibit
to TransTexas' annual report on Form 10-K for the year ended January
31, 2001, and incorporated herein by reference).
10.53 - Subordination Agreement, dated as of February 7, 2001 between the
Company and GMAC Commercial Credit LLC as Agent, relating to the
Fourth Supplement to 2000 Production Payment Conveyance (filed as an
exhibit to TransTexas' annual report on Form 10-K for the year ended
January 31, 2001, and incorporated herein by reference).
64
10.54 - Subordination Agreement, dated as of February 7, 2001 between the
Company and GMAC Commercial Credit LLC, relating to the Fourth
Supplement to 2000 Production Payment Conveyance (filed as an exhibit
to TransTexas' annual report on Form 10-K for the year ended January
31, 2001, and incorporated herein by reference).
10.55 - Fourth Supplement to 2000 Production Payment Agreement, dated
February 7, 2001 (filed as an exhibit to TransTexas' annual report on
Form 10-K for the year ended January 31, 2001, and incorporated herein
by reference).
10.56 - Fourth Supplement to 2000 Production Payment Conveyance, dated
February 7, 2001 (filed as an exhibit to TransTexas' annual report on
Form 10-K for the year ended January 31, 2001, and incorporated herein
by reference).
10.57 - Employment Agreement dated March 5, 2001 between TransTexas and
Arnold Brackenridge (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended April 30, 2001, and
incorporated herein by reference).
10.58 - Amendment No. 1 to Oil and Gas Revolving Credit and Term Loan
Agreement dated September 7, 2001 among GMAC Commercial Credit LLC, as
Lender and Agent, TransTexas as Borrower, and Galveston Bay Processing
Corporation and Galveston Bay Pipeline Company, as Guarantors (filed
as an exhibit to TransTexas' quarterly report on Form 10-Q for the
quarter ended July 31, 2001, and incorporated herein by reference).
10.59 - Fifth Supplement to 2000 Production Payment Agreement, dated July 9,
2001 (filed as an exhibit to TransTexas' quarterly report on Form 10-Q
for the quarter ended July 31, 2001, and incorporated herein by
reference).
10.60 - Fifth Supplement to 2000 Production Payment Conveyance, dated July
9, 2001 (filed as an exhibit to TransTexas' quarterly report on Form
10-Q for the quarter ended July 31, 2001, and incorporated herein by
reference).
10.61 - Sixth Supplement to 2000 Production Payment Agreement, dated
September 10, 2001 (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended July 31, 2001, and
incorporated herein by reference).
10.62 - Sixth Supplement to 2000 Production Payment Conveyance, dated
September 10, 2001 (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended July 31, 2001, and
incorporated herein by reference).
10.63 - Seventh Supplement to 2000 Production Payment Agreement, dated
September 10, 2001 (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended July 31, 2001, and
incorporated herein by reference).
10.64 - Seventh Supplement to 2000 Production Payment Conveyance, dated
September 10, 2001 (filed as an exhibit to TransTexas' quarterly
report on Form 10-Q for the quarter ended July 31, 2001, and
incorporated herein by reference).
21.1 - Schedule of Subsidiaries of TransTexas (filed as an exhibit to the
Company's annual report on Form 10-K for the year ended January 31,
1999, and incorporated herein by reference).
21.2 - Schedule of Subsidiaries of TransTexas (filed as an exhibit to
TransTexas' annual report on Form 10-K for the year ended January 31,
2001, and incorporated herein by reference).
*23.1 - Consent of Netherland, Sewell & Associates, Inc.
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* filed herewith
65