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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, 2003
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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.)
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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
SERIES A SENIOR PREFERRED STOCK, $0.001 PAR VALUE
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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 is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [ ] No [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 30, 2003 was $6,979,371.
The number of shares of Class A Common Stock of the registrant
outstanding on April 30, 2003 was 63,448,830.
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 2003 annual
meeting of stockholders are incorporated by reference into Part III of this Form
10-K.
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business.......................................................................... 3
Item 2. Properties........................................................................ 7
Item 3. Legal Proceedings................................................................. 8
Item 4. Submission of Matters to a Vote of Security Holders............................... 8
Executive Officers of the Registrant.............................................. 8
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............. 9
Item 6. Selected Financial Data........................................................... 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 11
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................ 19
Item 8. Financial Statements and Supplementary Data....................................... 20
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 and
Related Stockholder Matters.................................................... 48
Item 13. Certain Relationships and Related Transactions.................................... 48
Item 14. Controls and Procedures........................................................... 48
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K................... 49
PART I
ITEM 1. BUSINESS
GENERAL
TransTexas Gas Corporation (debtor in possession) (the "Company" or
"TransTexas"), a Delaware corporation incorporated in 1993, 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
cash flow available from operations.
As of February 1, 2003, TransTexas' net proved reserves of natural gas
and natural gas equivalents, as estimated by Netherland, Sewell & Associates,
Inc., an independent firm of petroleum engineers, were 54 Bcfe. As of January
31, 2003, TransTexas owned approximately 43,970 gross (35,646 net) acres of
mineral interests. TransTexas' average net daily natural gas production for the
year ended January 31, 2003 was approximately 29 MMcfd, for a total net
production of 10.7 Bcf of natural gas. TransTexas' average net daily condensate
and oil production for the year ended January 31, 2003 was approximately 2,357
Bpd, for a total net production of 860 MBbls of condensate and oil. TransTexas'
average net daily production of natural gas liquids ("NGLs") for the year ended
January 31, 2003 was approximately 85,744 gallons per day, for a total net
production of 31.3 million gallons of natural gas liquids.
Following the separation with the Company's former Chief Executive
Officer in March 2002, a change in business strategy was implemented that
incorporates and promotes working interest partners to carry a significant
portion of the capital expenditure requirements to evaluate and develop the
Company's prospects. In conjunction with this change in management, the Company
began attempting to achieve a consensus among the holders (the "Noteholders") of
the $200 Million Senior Secured Notes due 2005 (the "Notes") so as to effect a
consensual recapitalization. The Company held discussions with the principal
Noteholders that represented approximately 90% of the Notes and engaged a
financial advisor to act as an intermediary in these discussions. From August
2002 to January 2003, the Company worked with the Noteholders in an effort to
obtain an agreement to recapitalize the Company. Although the Company was
advised that an agreement in principle among the Noteholders had been achieved,
subject to documentation, the Company was subsequently informed that these
negotiations had failed.
The Company has undertaken a substantial effort to engage potential
working interest partners and has generated significant industry interest in
participating in its prospects. The Company is working with multiple third
parties in an effort to reach agreements which should allow the Company to
execute this strategy. However, absent available cash to drill, the Company has
been unable to add production or reserves. See "Exploration and Production."
Available Information. The Company files Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other items with
the Securities and Exchange Commission ("SEC"). The Company makes available to
any stockholder, without charge, copies of its Annual Report on Form 10-K, as
filed with the SEC. Stockholders may obtain copies of exhibits to the Annual
Report on Form 10-K upon written request and payment of the Company's reasonable
expenses in furnishing such exhibits. Requests for copies of this Form 10-K or
other Company filings should be sent to: Investor Relations Department,
TransTexas Gas Corporation, 1300 North Sam Houston Parkway East, Houston, Texas
77032-2949 or call (281) 987-8600. The Company maintains an Internet site
located at www.transtexasgas.com that links to the SEC's site at www.sec.gov
where the public may access reports, proxy and other information that the
Company has filed with the SEC. In addition, the public may read and copy any
materials that the Company has filed with the SEC at the SEC's Public Reference
Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
REORGANIZATION
On November 14, 2002 (the "Petition Date"), TransTexas and its
subsidiaries, Galveston Bay Pipeline Company ("Pipeline") and Galveston Bay
Processing Corporation ("Processing"), filed voluntary petitions for relief
under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of Texas, Corpus Christi Division (the
"Bankruptcy Court"). The bankruptcy cases are being jointly administered.
TransTexas, Pipeline and Processing are operating their businesses and managing
their properties as debtors in possession. As a result of the Chapter 11
filings, absent approval from the Bankruptcy Court, the Company is prohibited
from paying, and creditors are prohibited from attempting to collect, claims or
debts arising prior to the Petition Date.
The bankruptcy petitions were filed in order to preserve cash and to
give the Company the opportunity to restructure its debt. The consummation of a
plan of reorganization is the primary objective of the Company. The plan of
reorganization will set forth the means for satisfying claims, including
liabilities subject to compromise, and interests in the Company. A plan of
reorganization may result in, among other things, material dilution or
elimination of the interests of existing security holders as a result of the
issuance of securities to creditors or new investors. The consummation of a plan
of reorganization will require approval of the Bankruptcy Court.
The Company expects to file its Plan of Reorganization and Disclosure
Statement with the Bankruptcy Court on May 1, 2003. Additional information with
respect to the Plan of Reorganization and Disclosure Statement will be provided
on Form 8-K or by an amendment to this Form 10-K. At this time, it is not
possible to predict the outcome of the bankruptcy proceedings or the effect on
the business of the Company or on the interests of creditors, royalty owners or
stockholders.
3
PRIOR REORGANIZATION
On April 19, 1999 (the "Prior Petition Date"), TransTexas filed a
voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. 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. TransTexas' Chapter 11
filing did not include its subsidiaries. The Company's Second Amended, Modified
and Restated Plan of Reorganization dated January 25, 2000 (the "Prior Plan")
was confirmed by the Bankruptcy Court on February 7, 2000.
EXPLORATION AND PRODUCTION
Under prior management, the Company's business strategy dictated that
the Company remain a 100% working interest operator, with the exception of the
Eagle Bay field partnership with Davis Petroleum. This strategy required
substantial capital resources to fund the drilling program. In the year ended
January 31, 2003, TransTexas' ability to fund its capital expenditure needs from
available cash flow was limited by several factors, including the failure of the
San Leon #1 well, which was initially completed in October 2001 in the Company's
Eagle Bay field; a mechanical failure in October 2002 of the Company's single
largest producing well, the State Tract 331-1, that further lowered production
and ultimately mandated the drilling of another well into this reservoir to
resume equivalent production; the rapid decline in production from the Company's
Southwest Bonus field in Wharton County following an aggressive competitive
development drilling program; significant leverage that mandated cash flow be
used to service debt; and volatile commodity prices.
Absent available cash to drill, TransTexas was unable to add production
or reserves. In March 2002, the board of directors reached a severance agreement
with the Company's former Chief Executive Officer that allowed the Company to
embark upon a program for the development of its properties through a revised
business model. This new business model is centered upon the promotion of
working interest partners who carry a significant portion of the capital
expenditure requirements necessary to evaluate the prospects. The Company
believes that this new strategy should allow it to traverse from a "go-it-alone"
exploration and drilling company to one where multiple projects are being
pursued at lower risk to the Company, with outside industry partners assuming a
large portion of the capital risk of these projects and sharing their
exploration and technical expertise with the Company. As a result of the change
in the TransTexas' operating and development strategy, an aggressive marketing
effort and the change in management, TransTexas has generated significant
industry interest in participating in its prospects. However, there can be no
assurance that working interest partners can be obtained on terms acceptable to
the Company, or in a timely manner, to evaluate the Company's properties.
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.
Primary Operating Areas
Eagle Bay, Galveston County, Texas. TransTexas has successfully drilled
and completed ten wells 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. As of January 31, 2003, TransTexas owned a 75%
working interest in approximately 3,594 net acres in the Eagle Bay area. For the
fiscal year ended January 31, 2003, TransTexas sold 4.9 Bcf of natural gas, 0.7
million barrels of condensate and 31.3 million gallons of natural gas liquids
from the Eagle Bay field at average net daily rates of 13 MMcfd, 2,010 Bpd and
85,744 gallons per day, respectively. Production from the Eagle Bay field
represents a significant percentage of the Company's total production. See
"Drilling and Production Data."
In October 2001, a new well in the Eagle Bay field, the San Leon #1,
was brought on-line. With the intent of duplicating the production of the best
wells in Eagle Bay and in order to try to overcome the decline in commodity
prices, an attempt was made to complete this new well and produce it at the
highest rate possible. Unfortunately, doing so caused production to be
inconsistent and the well began to produce sand from the formation. By the end
of January 2002, the well bore had become restricted to the point that
production was completely curtailed. This loss of production further lowered
cash flow and created the need to re-drill the lower section of the well at
additional expense.
In October 2002, the Company's single largest producing well in the
Eagle Bay field, the State Tract 331-1, suffered a mechanical failure that
reduced cash flow and ultimately mandated the drilling of another well into this
reservoir to resume equivalent production. In March 2003, the Bankruptcy Court
authorized TCW Global Project Fund Ltd. and TCW DR VI
4
Investment Partnership, L.P. (collectively "TCW"), the owner of a production
payment, to fund the drilling of this key well in the Eagle Bay field that would
duplicate the previous production rates of the State Tract 331-1 well. As a
result of an agreement with Davis Petroleum Corporation on April 4, 2003, the
Company issued a Tenth Supplemental Production Payment to TCW and Mirant
Americas Energy Capital Assets, LLC ("Mirant") for funding of $5 million to
drill the State Tract 331-9 well. This well is a sidetrack of the depleted State
Tract 352-1 well and is to be drilled as an in-fill development well to the
State Tract 331-1 well. The State Tract 331-9 well, if successful, should allow
the Company to resume increased production from the fault block in the
Eagle Bay field and to take advantage of its full production capacity. The
Company commenced operations on the State Tract 331-9 well on April 17, 2003.
Southwest Bonus, Wharton County, Texas. As of January 31, 2003,
TransTexas had successfully drilled and completed 22 wells in the Southwest
Bonus field. TransTexas has identified additional drilling locations based upon
seismic data and held a 97% working interest covering approximately 4,595 net
acres in the Southwest Bonus area. For the fiscal year ended January 31, 2003,
TransTexas' Southwest Bonus properties produced 5.3 Bcf of natural gas, at an
average net daily rate of 14 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 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 additional hydrocarbon potential. The Company, together with suitably
capitalized and technically competent partners, intend to drill these additional
exploration and exploitation prospects, which are located in the proximity of
TransTexas' existing producing fields and infrastructure or along the same
geological trend.
Drilling and Production Data
During the five years ended January 31, 2003, TransTexas completed
approximately 63% of 82 wells. As of January 31, 2003, TransTexas had a total of
45 productive wells. TransTexas had a working interest in the following numbers
of wells that were drilled during the periods indicated:
YEAR ENDED JANUARY 31,
---------------------------------------------------
2003 2002 2001
-------------- -------------- --------------
GROSS NET GROSS NET GROSS NET
----- --- ----- --- ----- ---
Exploratory Wells (1):
Productive (2)............................... -- -- 1 1 -- --
Non-Productive............................... -- -- 1 1 4 3
% Productive................................. -- -- 50% 50% -- --
Development Wells (1):
Productive (2)............................... -- -- 12 11 11 11
Non-Productive............................... -- -- 1 1 1 1
% Productive................................. -- -- 92% 92% 92% 92%
- -----------------
(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:
5
YEAR ENDED JANUARY 31,
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2003 2002 2001
---------- ----------- ----------
Production:
Gas (Bcf) ................................................. 10.7 22.5 26.8
NGLs (MMgals).............................................. 31.3 40.1 48.3
Condensate and oil (MBbls)................................. 860 1,286 1,559
Average sales prices:
Gas (dry) (per Mcf)........................................ $ 3.38 $ 3.89 $ 4.73
NGLs (per gallon).......................................... .33 .36 .49
Condensate and oil (per Bbl)............................... 25.93 23.63 30.04
Average lifting cost per Mcfe (1)............................ .59 .49 .47
- ------------------
(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 anticipated 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. 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 Kinder Morgan Ship Channel
Pipeline, L.P., formerly 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 the
first 75,000 MMBtu per day of natural gas and associated condensate from the
field to Kinder Morgan Ship Channel Pipeline, L.P.
The Company also entered into a contract with a subsidiary of Duke
Energy Field Services, LLC 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 the first 56,250 Mcf of natural gas and 19,500
MMBtu of residue gas per day to Duke Energy Field Services. Transportation fees
for natural gas and residue gas are based on fixed negotiated rates.
TransTexas and Duke Energy Field Services, LLC 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 Duke Energy Field
Services, 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 that deliveries in excess of 50,000 MMBtu per day of residue
gas be based on a published industry index price.
For the year ended January 31, 2003, two purchasers represented
approximately 71% 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.
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-
6
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, 2003, TransTexas had 75 employees (including field
and plant personnel), none of which are parties to a collective bargaining
agreement. The Company has undertaken significant reductions in its overhead
expenses and number of employees. Employees at the Company's headquarters have
been reduced 65% from 116 on January 1, 2002 to 41 as of January 31, 2003. From
time to time, TransTexas may engage the services of independent geological,
engineering, land and other consultants when specific expertise is required.
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.
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.
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, 2003:
DEVELOPED UNDEVELOPED PRODUCTIVE
ACREAGE ACREAGE WELLS (1)
------- ------- ---------
Gross ......................................... 19,458 24,512 45
Net (2) ....................................... 12,358 23,288 37
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(1) Of the total productive wells, 44 gross (36 net) were gas wells and 1
gross (1 net) was an oil well.
(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.
7
RESERVES
As of February 1, 2003, TransTexas had total proved reserves of 45.7
Bcf of natural gas and 1,430 MBbls of condensate and oil. See Note 19 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.
ITEM 3. LEGAL PROCEEDINGS
See Note 13 of Notes to Consolidated Financial Statements for a
discussion of legal proceedings affecting TransTexas.
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, 2003.
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, 2003:
Name Office Age
- ---- ------ ---
Arnold H. Brackenridge Chief Executive Officer, President and Chief Operating Officer 70
Edwin B. Donahue Vice President, Chief Financial Officer and Secretary 52
Gregory J. Halvatzis Vice President of Exploration 51
David R. Jennings Assistant General Counsel and Assistant Secretary 59
John R. Thompson Vice President of Operations 46
Simon J. Ward Vice President and Treasurer 47
George C. Wright Vice President of Accounting 60
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.
8
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 General Counsel and 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.
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." 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, 2003:
Fourth Quarter............................................. $ 0.65 $ 0.04
Third Quarter.............................................. 0.75 0.05
Second Quarter............................................. 0.85 0.30
First Quarter.............................................. 2.05 0.75
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
The Certificate of Designation for the Senior Preferred Stock of the
Company provides for the mandatory conversion of one-half of the outstanding
shares of Senior Preferred Stock into fully paid and non-assessable shares of
Class A Common Stock at the rate of 0.3461 shares of Class A Common Stock for
each $1.00 of liquidation preference per share, plus an amount equal to accrued
and unpaid dividends, of Senior Preferred Stock if the Company fails to pay
dividends on the Senior Preferred Stock as required by the Certificate of
Designation for the Senior Preferred Stock on any two dividend payment dates.
The Certificate of Designation for the Series A Junior Preferred Stock ("Junior
Preferred Stock" and together with the Senior Preferred Stock, the "Preferred
Stock") provides for the mandatory conversion of all of the outstanding shares
of Junior Preferred Stock into fully paid and non-assessable shares of Class A
Common Stock at the rate of 0.1168 shares of Class A Common Stock for each $1.00
of liquidation preference per share, plus an amount equal to accrued and unpaid
dividends, of Junior Preferred Stock if the Company fails to pay dividends on
the Senior Preferred Stock as required by the Certificate of Designation for the
Senior Preferred Stock on any two dividend payment dates.
The Certificate of Designation for each of the Senior Preferred Stock
and the Junior Preferred Stock required the payment to the holders of a cash
dividend on the Senior Preferred Stock and an in-kind dividend on the Junior
Preferred Stock, respectively, by the Company on June 15, 2002 and on September
15, 2002. The Company did not make the required dividend payments on either
date. Therefore, the liquidation preference of the Senior Preferred Stock was
increased to approximately $1.04 per share and the liquidation preference of the
Junior Preferred Stock was increased to approximately $1.05 per share. As a
result, on September 16, 2002, each two shares of Senior Preferred Stock was
converted into one share of New Senior Preferred and into approximately 0.3596
shares of Class A Common Stock and each share of Junior Preferred Stock was
converted into approximately 0.1227 shares of Class A Common Stock. No
fractional shares were issued in the conversion.
9
The Board of Directors of the Company determined that the fair market value of
each share of the Preferred Stock and Common Stock for purposes of the
conversion was less than $0.01 per share and, therefore, no cash was paid to
holders of Preferred Stock in lieu of fractional shares.
In the aggregate, 164,333,875 shares of Senior Preferred Stock
representing one-half of all of the outstanding Senior Preferred Stock were
converted into 59,101,243 shares of Class A Common Stock and 25,240,513 shares
of Junior Preferred Stock representing all of the outstanding Junior Preferred
Stock were converted into 3,097,336 shares of Class A Common Stock. Since the
Company did not pay the required dividend payments, holders of the Senior
Preferred Stock have the right, voting separately as a class, to elect all five
directors to the Company's Board of Directors. On December 16, 2002 and March
17, 2003, the Company did not make the required cash dividend payments to the
remaining holders of the Senior Preferred Stock.
On April 24, 2000, prices for the Class A Common Stock commenced
quotation on the OTCBB under the symbol "TTXG." As of April 30, 2003, there were
3,082 record holders of the Class A Common Stock. The last sale price of the
Class A Common Stock on April 30,2003, was $0.11.
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 Senior 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."
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, 1999 is comparable to that of later 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.
10
SUCCESSOR PREDECESSOR
--------------------------------------------- ----------------------------
YEAR ENDED JANUARY 31,
-----------------------------------------------------------------------------
2003 2002 2001 2000 1999
------------- ------------ ------------ ------------ -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS
DATA:
Gas, condensate and NGL revenues......... $ 70,051 $ 133,138 $ 187,883 | $ 112,898 $ 92,159
Transportation revenues.................. -- -- -- | -- --
Gain (loss) on the sale of assets........ -- -- -- | (438) 61,247
Other revenues........................... 1,029 1,245 2,208 | 2,770 4,200
------------- ------------ ------------ | ------------ ------------
71,080 134,383 190,091 | 115,230 157,606
Operating costs and expenses............. 14,814 23,370 26,283 | 29,935 30,322
Depreciation, depletion, and |
amortization......................... 27,092 91,266 81,483 | 75,044 86,137
General and administrative expenses...... 16,363 19,854 20,303 | 19,883 21,938
Loss on asset impairment................. -- 195,065 -- | -- 425,966
------------- ------------ ------------ | ------------ ------------
Operating income (loss).............. 12,811 (195,172) 62,022 | (9,632) (406,757)
Net interest expense (1)................. 31,937 34,723 33,495 | 38,054 78,716
Reorganization items..................... 660 -- -- | (50,511) --
Income taxes and other................... -- (9,984) 9,984 | 10,000 (38,882)
Extraordinary (gain) loss, net of taxes.. -- -- -- | (436,490) 1,142
------------- ------------ ------------ | ------------ ------------
Net income (loss).................... (19,786) (219,911) 18,543 | 429,315 (447,733)
Accretion of preferred stock............. 43,344 46,403 25,722 | -- --
------------- ------------ ------------ | ------------ ------------
Net income (loss) available to |
common stockholders.................. $ (63,130) $ (266,314) $ (7,179)| $ 429,315 $ (447,733)
============= ============ ============ | ============ ============
Net income (loss) per share: |
Loss before extraordinary item........... $ (2.55) $ (213.01) $ (5.74)| $ (0.13) $ (7.76)
Extraordinary item....................... -- -- -- | 7.59 (0.02)
------------- ------------ ------------ | ------------ ------------
Net income (loss).................... $ (2.55) $ (213.01) $ (5.74)| $ 7.46 $ (7.78)
============= ============ ============ | ============ ============
Dividends declared per common |
share (2)............................ -- -- -- | -- --
SUCCESSOR PREDECESSOR
------------------------------------------------------------- -------------
YEAR ENDED JANUARY 31,
-----------------------------------------------------------------------------
2003 2002 2001 2000 1999
------------- ------------ ------------ ------------ -------------
BALANCE SHEET DATA:
Working capital (deficit)................ $ (51,168) $ (8,620) $ 20,589 $ 8,900 | $ 27,072
Net property and equipment............... 107,816 126,947 332,328 327,087 | 292,143
Total assets............................. 127,662 154,804 402,243 369,254 | 345,367
Liabilities subject to compromise........ 238,894 -- -- -- | 718,139
Total debt (3)........................... 56,281 264,218 285,540 251,570 | 56,260
Redeemable preferred stock .............. 60,822 72,125 25,722 -- | --
Stockholders' equity (deficit)........... (259,043) (246,120) 17,846 -- | (430,015)
- -----------------
(1) Interest expense for the years ended January 31, 2003 and 2000 exclude
$6.7 million and $55.5 million, respectively, in interest stayed as a result of
the bankruptcy filings.
(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 $238.9 million and $583.1 million as of January 31, 2003 and 1999,
respectively.
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.
11
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."
On November 14, 2002, TransTexas, Pipeline and Processing filed
voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in
the United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division. The bankruptcy cases are being jointly administered.
TransTexas, Pipeline and Processing are operating their businesses and managing
their properties as debtors in possession. As a result of the Chapter 11
filings, absent approval from the Bankruptcy Court, the Company is prohibited
from paying, and creditors are prohibited from attempting to collect, claims or
debts arising prior to the Petition Date.
The bankruptcy petitions were filed in order to preserve cash and to
give the Company the opportunity to restructure its debt. The consummation of a
plan of reorganization is the primary objective of the Company. The plan of
reorganization will set forth the means for satisfying claims, including
liabilities subject to compromise, and interests in the Company. A plan of
reorganization may result in, among other things, material dilution or
elimination of the interests of existing security holders as a result of the
issuance of securities to creditors or new investors. The consummation of a plan
of reorganization will require approval of the Bankruptcy Court.
The Company expects to file its Plan of Reorganization and Disclosure
Statement with the Bankruptcy Court on May 1, 2003. Additional information with
respect to the Plan of Reorganization and Disclosure Statement will be provided
on Form 8-K or by an amendment to this Form 10-K. At this time, it is not
possible to predict the outcome of the bankruptcy proceedings or the effect on
the business of the Company or on the interests of creditors, royalty owners or
stockholders.
Management's revised business model is centered around the promotion of
working interest partners who carry a significant portion of the capital
expenditures necessary to evaluate the Company's properties, much of which are
unevaluated as of January 31, 2003. The Company intends to finance its share of
the necessary capital expenditures through cash flow from operations, production
payment issuances and any supplemental fundings provided pursuant to its
emergence from bankruptcy proceedings. However, there can be no assurance that
working interest partners can be obtained on terms acceptable to the Company, or
additional financing obtained, to evaluate the Company's properties in a timely
manner.
From April 19, 1999 through March 17, 2000 (the "Effective Date"), 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.
TransTexas' operating data for the years ended January 31, 2003, 2002
and 2001 are as follows:
YEAR ENDED JANUARY 31,
-----------------------------------------------------------
2003 2002 2001
----------------- ---------------- -----------------
Sales volumes:
Gas (Bcf)..................................... 10.7 22.5 26.8
NGLs (MMgals)................................. 31.3 40.1 48.3
Condensate and oil (MBbls).................... 860 1,286 1,559
Average prices:
Gas (dry) (per Mcf)........................... $ 3.38 $ 3.89 $ 4.73
NGLs (per gallon)............................. .33 .36 .49
Condensate and oil (per Bbl).................. 25.93 23.63 30.04
Number of gross wells drilled.................... -- 15 16
Percentage of wells completed.................... -- 87% 69%
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.
12
A summary of TransTexas' operating expenses is set forth below (in
millions of dollars):
YEAR ENDED JANUARY 31,
-----------------------------------------------------------
2003 2002 2001
----------------- ---------------- -----------------
Operating costs and expenses:
Lease........................................ $ 6.4 $ 10.9 $ 10.7
Pipeline and gathering....................... 5.1 8.3 8.4
----------------- ---------------- -----------------
11.5 19.2 19.1
Taxes other than income taxes (1)................ 3.3 4.2 7.2
----------------- ---------------- -----------------
$ 14.8 $ 23.4 $ 26.3
================= ================ =================
- -----------------
(1) Taxes other than income taxes include severance, property and other
taxes.
TransTexas' average depletion rates have been as follows:
YEAR ENDED JANUARY 31,
-----------------------------------------------------------
2003 2002 2001
----------------- ---------------- -----------------
Depletion rates (per Mcfe)....................... $ 1.65 $ 2.98 $ 2.22
================= ================ =================
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 established 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.
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS 143, "Accounting for Asset Retirement Obligations". SFAS 143 provides
accounting requirements for costs associated with legal obligations to retire
tangible, long-lived assets. Under SFAS 143, the asset retirement obligation is
recorded at fair value in the period in which it is incurred by increasing the
carrying amount of the related long-lived asset. In each subsequent period, the
liability is accreted to its present value and the capitalized cost is
depreciated over the useful life of the related asset. Effective upon our
adoption, the cumulative effect of applying SFAS 143 will be recognized as a
change in accounting principle in the consolidated statements of operations.
At January 31, 2003 the Company had not previously recorded an asset
retirement obligation related to its long-lived assets. As such, the Company
adopted SFAS 143 effective February 1, 2003. The Company expects the impact of
adopting SFAS 143 will be a decrease to earnings, net of tax, of approximately
$3 million, to be reflected as a cumulative effect of a change in accounting
principle in the first quarter of fiscal year 2004.
Liabilities for other contingencies are recognized in accordance with
SFAS 5 upon identification of an exposure, which when fully analyzed indicates
that it is both probable that an asset has been impaired or that a liability has
been incurred and that such a loss amount can be reasonably estimated.
Non-capital costs to remedy such contingencies or other exposures are charged to
a reserve, if one exists, or otherwise to current-period operations. When a
range of probable loss exists, the Company accrues the lesser end of the range.
In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections." SFAS 145 provides guidance for income statement classification of
gains or losses from extinguishment of debt and accounting for certain lease
modifications that have economic effects similar to sale-leaseback transactions.
Gains or losses from extinguishments that are part of a company's recurring
operations would not be reported as an extraordinary item. The Company adopted
SFAS 145 effective February 1, 2003, which had no impact on the Company's
financial statements.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146
requires recognition of a liability for costs associated with an exit or
disposal activity when the liability is incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS 146 is to be applied prospectively
to exit or disposal activities initiated after December 31, 2002 and will be
used to report any future exits or disposal activities. The Company's adoption
of SFAS 146 on January 1, 2003 had no effect on the Company's financial
statements.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 addresses the disclosures
to be made by a guarantor in its interim and annual financial statements about
its obligations under certain guarantees that it has issued. FIN 45 also
clarifies the requirement that a guarantor recognize a liability at the
inception of the guarantee for the fair value of the obligation that the
guarantor has undertaken in issuing the guarantee. The initial recognition and
measurement provisions of FIN 45 are applicable to guarantees issued or modified
after December 31, 2002 and are not expected to have a material impact on the
Company's financial statements.
13
Year Ended January 31, 2003, Compared with the Year Ended January 31, 2002
Gas, condensate and NGL revenues for the year ended January 31, 2003
decreased by $63.1 million from the prior period, due primarily to lower prices
for natural gas and lower sales volumes for all products. Approximately 2.5 Bcf
of the decrease in natural gas volumes for the year ended January 31, 2003 was
attributable to the sale in the prior year of TransTexas' interest in the Bob
West field and approximately 7.6 Bcf of the decrease is attributable to reduced
production rates from wells in the Southwest Bonus field. The average monthly
prices received per Mcf of gas ranged from $2.16 to $5.09 in the year ended
January 31, 2003, compared to a range of $2.04 to $6.73 in the prior period.
Lease operating expenses for the year ended January 31, 2003 decreased
$4.5 million from the prior period due primarily to decreases in workover costs
and fewer number of productive wells due to the sale in the prior year of the
Bob West field. Pipeline and gathering expenses decreased $3.2 million primarily
due to lower labor costs and lower costs for natural gas used in operations.
Depreciation, depletion and amortization expense for the year ended January 31,
2003 decreased $64.2 million due to a $1.33 decrease in the depletion rate. The
decrease in the depletion rate is due primarily to the impairment of gas and oil
properties recorded during fiscal year 2002. General and administrative expenses
decreased by $3.5 million primarily as a result of lower professional fees and
labor costs. However, included in the current year's general and administrative
expenses is a $3.0 million charge for a severance obligation due Mr. Stanley
pursuant to his employment agreement. Taxes other than income taxes decreased by
$0.9 million over the prior period due primarily to decreases in property,
severance and production taxes. Interest income decreased $0.5 million compared
to the prior period due to lower cash balances available for investment.
Interest expense for the year ended January 31, 2003 decreased $3.3 million
primarily because the Company ceased to expense interest on debt reclassed to
liabilities subject to compromise, effective after the Petition Date. This lower
interest expense was partially offset by lower capitalized interest.
Reorganization items of $0.7 million for the year ended January 31, 2003 include
legal and professional fees and expenses directly related to TransTexas' Chapter
11 proceeding.
The impairment loss recorded during the year ended January 31, 2002
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 Company's reorganization value as of January 31, 2000, the
fair value of the Preferred Stock and Common Stock was estimated to be zero. The
remaining Senior Preferred Stock is mandatorily redeemable in 2006. 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, 2003, 2002 and 2001, accretion
of Preferred Stock totaled $43.3 million, $46.4 million and $25.7 million,
respectively. At January 31, 2003, the amount remaining to be accreted on the
Senior Preferred Stock is $103.5 million.
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.
14
Based on the Company's reorganization value as of January 31, 2000, 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.
LIQUIDITY AND CAPITAL RESOURCES
Chapter 11 Bankruptcy Proceeding
On November 14, 2002, TransTexas, Pipeline and Processing filed
voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in
the United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division (the "Bankruptcy Court"). The bankruptcy cases are being
jointly administered. TransTexas, Pipeline and Processing are operating their
businesses and managing their properties as debtors in possession. As a result
of the Chapter 11 filings, absent approval from the Bankruptcy Court, the
Company is prohibited from paying, and creditors are prohibited from attempting
to collect, claims or debts arising prior to the Petition Date.
The bankruptcy petitions were filed in order to preserve cash and to
give the Company the opportunity to restructure its debt. The consummation of a
plan of reorganization is the primary objective of the Company. The plan of
reorganization will set forth the means for satisfying claims, including
liabilities subject to compromise, and interests in the Company. A plan of
reorganization may result in, among other things, material dilution or
elimination of the interests of existing security holders as a result of the
issuance of securities to creditors or new investors. The consummation of a plan
of reorganization will require approval of the Bankruptcy Court.
The Company expects to file its Plan of Reorganization and Disclosure
Statement with the Bankruptcy Court on May 1, 2003. Additional information with
respect to the Plan of Reorganization and Disclosure Statement will be provided
on Form 8-K or by an amendment to this Form 10-K. At this time, it is not
possible to predict the outcome of the bankruptcy proceedings or the effect on
the business of the Company or on the interests of creditors, royalty owners or
stockholders.
Long-Term Debt
On the Effective Date, the Company, as Borrower, and Processing and
Pipeline, 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. Interim and Final Financing Orders of the Bankruptcy Court modified
certain terms of the Oil and Gas Facility. Pursuant to these Interim and Final
Orders, GMACC waived compliance with certain provisions of the facility.
Pursuant to the Final Financing Order, the Oil and Gas Facility is due on August
7, 2003.
On the Effective Date, the Company, as Issuer, Pipeline and Processing,
as Guarantors, and U.S. Bank, N.A., as successor indenture trustee to Firstar
Bank, N.A. 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
15
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 $7.5
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, 2003, there were no outstanding advances under the Accounts
Receivable Facility and the Company had availability for advances of
approximately $1.8 million. Interim and Final Financing Orders of the Bankruptcy
Court modified the maximum loan amount under the Accounts Receivable Facility
and modified certain other terms of the facility. Pursuant to these Interim and
Final Orders, GMACC waived compliance with certain provisions of the facility.
Pursuant to the Final Financing Order, the Accounts Receivable Facility is due
on August 7, 2003.
Preferred Stock
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
Certificate of Designation for the Senior Preferred Stock of the Company
provides for the mandatory conversion of one-half of the outstanding shares of
Senior Preferred Stock into fully paid and non-assessable shares of Class A
Common Stock at the rate of 0.3461 shares of Class A Common Stock for each $1.00
of liquidation preference per share, plus an amount equal to accrued and unpaid
dividends, of Senior Preferred Stock if the Company fails to pay dividends on
the Senior Preferred Stock as required by the Certificate of Designation for the
Senior Preferred Stock on any two dividend payment dates. The Certificate of
Designation for the Series A Junior Preferred Stock ("Junior Preferred Stock"
and together with the Senior Preferred Stock, the "Preferred Stock") provides
for the mandatory conversion of all of the outstanding shares of Junior
Preferred Stock into fully paid and non-assessable shares of Class A Common
Stock at the rate of 0.1168 shares of Class A Common Stock for each $1.00 of
liquidation preference per share, plus an amount equal to accrued and unpaid
dividends, of Junior Preferred Stock if the Company fails to pay dividends on
the Senior Preferred Stock as required by the Certificate of Designation for the
Senior Preferred Stock on any two dividend payment dates.
The Certificate of Designation for each of the Senior Preferred Stock
and the Junior Preferred Stock required the payment to the holders of a cash
dividend on the Senior Preferred Stock and an in-kind dividend on the Junior
Preferred Stock, respectively, by the Company on June 15, 2002 and on September
15, 2002. The Company did not make the required dividend payments on either
date. Therefore, the liquidation preference of the Senior Preferred Stock was
increased to approximately $1.04 per share and the liquidation preference of the
Junior Preferred Stock was increased to approximately $1.05 per share. As a
result, on September 16, 2002, each two shares of Senior Preferred Stock was
converted into one share of New Senior Preferred and into approximately 0.3596
shares of Class A Common Stock and each share of Junior Preferred Stock was
converted into approximately 0.1227 shares of Class A Common Stock. No
fractional shares were issued in the conversion. The Board of Directors of the
Company determined that the fair market value of each share of the Preferred
Stock and Common Stock for purposes of the conversion was less than $0.01 per
share and, therefore, no cash was paid to holders of Preferred Stock in lieu of
fractional shares.
In the aggregate, 164,333,875 shares of Senior Preferred Stock
representing one-half of all of the outstanding Senior Preferred Stock were
converted into 59,101,243 shares of Class A Common Stock and 25,240,513 shares
of Junior Preferred Stock representing all of the outstanding Junior Preferred
Stock were converted into 3,097,336 shares of Class A Common Stock. Since the
Company did not pay the required dividend payments, holders of the Senior
Preferred Stock have the right, voting separately as a class, to elect all five
directors to the Company's Board of Directors. On December 16, 2002 and March
17, 2003, the Company did not make the required cash dividend payments to the
remaining holders of the Senior Preferred Stock. The Company does not anticipate
paying cash dividends on the Senior Preferred Stock in the future.
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 March
2002, the Company closed an Eighth Supplement to the production payment whereby
the Company received $14.0 million. In June 2002, the Company closed a Ninth
Supplement to the production payment whereby the Company received $13.0 million
in exchange for additional properties being made subject to the production
payment. As of January 31, 2003, the outstanding balance of the production
payment was $18.6 million,
16
of which $2.2 million attributable to produced volumes is included in accrued
liabilities. The Oil and Gas Facility entered into by the Company, as borrower,
Processing and Pipeline, 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. In April 2003, the Company closed a Tenth Supplement to
the production payment whereby the Company received $5.0 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 pays a nominal marketing fee with
respect to the Company's production associated with the New Subject Interests.
In addition, the third party pays a fee for certain processing services provided
by Processing.
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, 2003, total capital expenditures incurred were $12 million,
including $1 million for nonproducing leases and seismic, $7 million for
capitalized interest and $4 million for drilling and development. Capital
expenditures for fiscal 2004 are estimated to be approximately $25 million.
Management's revised business model is centered around the promotion of working
interest partners who carry a significant portion of the capital expenditures
necessary to evaluate the Company's properties, much of which are unevaluated as
of January 31, 2003. The Company intends to finance its share of the necessary
capital expenditures through cash flow from operations, production payment
issuances and any supplemental fundings provided pursuant to its emergence from
bankruptcy proceedings. However, there can be no assurance that working interest
partners can be obtained on terms acceptable to the Company, or additional
financing obtained, to evaluate the Company's properties in a timely manner.
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 restricted under the terms
of TransTexas' debt documents and Senior Preferred Stock and subject to
Bankruptcy Court approval. 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.
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.
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. During fiscal year 1997, the IRS 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 been advised by the IRS that they have completed their audit and do not
propose any adjustments.
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 TransTexas'
reorganization. In addition, certain other tax attributes of TransTexas may
under certain circumstances be eliminated or reduced as a consequence of
TransTexas' reorganization. The potential elimination or reduction of NOLs and
such other tax attributes may substantially increase the amount of tax payable
by TransTexas.
17
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 of approximately 20.5 MMcfd, TransTexas
estimates that a $0.10 per MMBtu change in average gas prices received would
change annual operating income by approximately $0.7 million. Based on an
assumed average net daily production of approximately 1,687 Bpd, TransTexas
estimates that a $1.00 per barrel change in condensate prices received would
change annual operating income by approximately $0.6 million.
ACCOUNTING POLICIES
The following accounting policies are important to an understanding of
the Company's operating results and financial position and should be considered
as an integral part of the financial review. The Company has 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."
Gas and Oil Activities
The Company uses the full cost method of accounting for its 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. The Company excludes 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 the Company is required to perform this
calculation based on prices and costs in effect on the last day of each quarter.
If net capitalized costs of the gas and oil properties exceed the cost center
ceiling, the Company must write down its properties (a non-cash charge to
income) by the amount of such excess. The Company occasionally sells 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 the Company recognizes a gain or loss.
Hedging Agreements
From time to time, the Company enters into commodity price swap
agreements to reduce its 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 the Company's consolidated balance sheet and
represents hedges against the price it 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. The Company does not use derivative instruments
for trading purposes.
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,
disclosure of contingent assets and liabilities at the date of the financial
statements, the reported amounts of revenues and expenses during the reporting
period and the reported amounts of gas and oil reserves. TransTexas' most
significant financial estimates are based on remaining proved gas and oil
reserves. Actual results could differ from these estimates.
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. TransTexas uses the sales method of accounting for production
imbalances that arise from jointly produced properties. Volumetric production is
monitored to minimize these imbalances. An imbalance liability is recorded in
other liabilities if TransTexas' excess sales of production volumes exceed its
share of estimated remaining recoverable reserves for such properties.
Receivables are not recorded for those properties in which TransTexas has taken
less than its share of production.
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.
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
18
"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.
As of January 31, 2003, the Company had entered into the following
hedging arrangements (settlement price based on a published industry index of
natural gas prices at Houston Ship Channel) as cash flow hedges of forecasted
sales of a portion of the Company's natural gas production:
CONTRACT PRICE
--------------------
TOTAL COLLAR
VOLUMES IN --------------------
PERIOD MMBtus FLOOR CEILING
- ------ ------------- --------- ---------
Natural gas:
February 2002 - March 2002.................................... 590,000 $ 2.85 $ 3.30
February 2002 - July 2002..................................... 1,267,000 3.30 3.95
April 2002 - October 2002..................................... 1,070,000 2.85 3.35
August 2002 - October 2002.................................... 644,000 3.10 3.40
November 2002 - March 2003.................................... 755,000 3.50 3.95
November 2002 - March 2003.................................... 755,000 3.50 3.90
April 2003 - October 2003..................................... 1,284,000 3.25 4.05
For the year ended January 31, 2003, the Company recognized hedging
gains of $0.4 million, which are reflected in gas, condensate and natural gas
liquids revenues. At January 31, 2003, the Company's estimated net liability of
these contracts was $2.1 million.
Because substantially all of its long-term obligations at January 31,
2003 are at fixed rates, the Company considers its interest rate exposure to be
minimal. The Company's borrowings under its credit facility 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, 2003.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
INDEX
CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants........................................................................... 21
Financial Statements:
Consolidated Balance Sheet.............................................................................. 22
Consolidated Statement of Operations.................................................................... 23
Consolidated Statement of Stockholders' Equity (Deficit)................................................ 24
Consolidated Statement of Cash Flows.................................................................... 25
Notes to Consolidated Financial Statements.............................................................. 26
20
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 and its subsidiaries (debtor in possession) (the
"Company") at January 31, 2003 and 2002, and the results of their operations and
their cash flows for each of the three years in the period ended January 31,
2003 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.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As a result of the
Company's bankruptcy, there is substantial doubt about the Company's ability to
continue as a going concern. Management's plans are described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
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.
PricewaterhouseCoopers LLP
Houston, Texas
April 30, 2003
21
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
JANUARY 31,
-------------------------------
2003 2002
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 7,518 $ 6,559
Accounts receivable, less allowance for doubtful accounts of $267 in 2003
and 2002....................................................................... 8,741 15,267
Inventories..................................................................... 435 818
Other........................................................................... 1,218 3,112
-------------- -------------
Total current assets........................................................ 17,912 25,756
-------------- -------------
Property and equipment............................................................ 501,980 494,748
Less accumulated depreciation, depletion and amortization......................... 394,164 367,801
-------------- -------------
Net property and equipment -- based on the full cost method of accounting for
gas and oil properties of which $49,146 and $45,301 was excluded from
amortization at January 31, 2003 and 2002, respectively........................ 107,816 126,947
-------------- -------------
Other assets...................................................................... 1,934 2,101
-------------- -------------
$ 127,662 $ 154,804
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt............................................ $ 3,502 $ 2,444
Notes payable................................................................... 51,881 --
Accounts payable................................................................ 2,157 5,805
Accrued liabilities............................................................. 11,550 26,127
-------------- -------------
Total current liabilities................................................... 69,090 34,376
-------------- -------------
Long-term debt, net of current maturities ........................................ 898 261,774
Production payments, net of current portion ...................................... 16,373 26,005
Other liabilities ................................................................ 628 6,644
Liabilities subject to compromise................................................. 238,894 --
Redeemable preferred stock........................................................ 60,822 72,125
Commitments and contingencies (Note 13)........................................... -- --
Stockholders' equity (deficit) (Note 2):
Common stock, $0.01 par value, 200,000,000 shares and 100,247,500
shares authorized at January 31, 2003 and 2002; 63,448,830 shares and
1,250,251 shares issued and outstanding at January 31, 2003 and 2002........... 634 12
Additional paid-in capital 79,038 25,013
Accumulated deficit (336,623) (273,493)
Accumulated other comprehensive income (loss) (2,092) 2,348
-------------- -------------
Total stockholders' deficit................................................. (259,043) (246,120)
-------------- -------------
$ 127,662 $ 154,804
============== =============
The accompanying notes are an integral part of the consolidated financial
statements.
22
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
YEAR ENDED JANUARY 31,
-------------------------------------------------------
2003 2002 2001
------------- ------------- -------------
Revenues:
Gas, condensate and natural gas liquids ............. $ 70,051 $ 133,138 $ 187,883
Other ............................................... 1,029 1,245 2,208
------------- ------------- -------------
Total revenues.................................... 71,080 134,383 190,091
------------- ------------- -------------
Costs and expenses:
Operating ........................................... 11,548 19,195 19,127
Depreciation, depletion and amortization ............ 27,092 91,266 81,483
General and administrative .......................... 16,363 19,854 20,303
Taxes other than income taxes........................ 3,266 4,175 7,156
Impairment of gas and oil properties................. -- 195,065 --
------------- ------------- -------------
Total costs and expenses ......................... 58,269 329,555 128,069
------------- ------------- -------------
Operating income (loss)........................... 12,811 (195,172) 62,022
------------- ------------- -------------
Other income (expense):
Interest income...................................... 114 580 574
Interest expense, net................................ (32,051) (35,303) (34,069)
------------- ------------- -------------
Total other expense............................... (31,937) (34,723) (33,495)
------------- ------------- -------------
Income (loss) before reorganization items
and income taxes............................... (19,126) (229,895) 28,527
Reorganization items.................................... (660) -- --
------------- ------------- -------------
Income (loss) before income taxes................. (19,786) (229,895) 28,527
Income tax expense (benefit)............................ -- (9,984) 9,984
------------- ------------- -------------
Net income (loss)................................. (19,786) (219,911) 18,543
Accretion of preferred stock............................ 43,344 46,403 25,722
------------- ------------- -------------
Net loss available to common stockholders ........... $ (63,130) $ (266,314) $ (7,179)
============= ============= =============
Basic and diluted net loss per share.................... $ (2.55) $ (213.01) $ (5.74)
============= ============= =============
Weighted average number of shares outstanding
for basic and diluted net loss per share............. 24,766,425 1,250,251 1,250,251
============= ============= =============
The accompanying notes are an integral part of the consolidated financial
statements.
23
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
RETAINED ACCUMULATED
COMMON STOCK ADDITIONAL EARNINGS OTHER TOTAL
---------------------- PAID-IN CAPITAL (ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT (CAPITAL DEFICIT) DEFICIT) INCOME (LOSS) EQUITY (DEFICIT)
------------ ------ ----------------- ------------ ------------- ----------------
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)
Change in fair value of hedge
agreements........................... -- -- -- -- (4,440) (4,440)
Reclassification adjustments for
conversion of preferred stock........ 62,198,579 622 54,025 -- -- 54,647
Accretion of preferred stock.......... -- -- -- (43,344) -- (43,344)
Net loss.............................. -- -- -- (19,786) -- (19,786)
------------ ------ ---------------- ------------ ------------- ---------------
Balance at January 31, 2003............. 63,448,830 $ 634 $ 79,038 $ (336,623) $ (2,092) $ (259,043)
============ ====== ================ ============ ============= ===============
The accompanying notes are an integral part of the consolidated financial
statements.
24
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
YEAR ENDED JANUARY 31,
---------------------------------------------------
2003 2002 2001
------------- -------------- -------------
Operating activities:
Net income (loss).............................................. $ (19,786) $ (219,911) $ 18,543
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization.................... 27,092 91,266 81,483
Impairment of gas and oil properties........................ -- 195,065 --
Accretion of discount on long-term debt..................... 166 161 3,813
Amortization of debt issue costs............................ 1,287 530 343
Deferred income taxes....................................... -- (9,984) 9,984
Changes in assets and liabilities
Accounts receivable..................................... 6,526 27,266 (22,941)
Receivable from affiliates.............................. -- 21 1,086
Inventories............................................. 383 658 265
Other current assets.................................... (454) 1,757 (1,595)
Accounts payable........................................ (3,648) (3,450) (6,567)
Accrued liabilities..................................... 9,618 (7,422) 23,255
Other assets............................................ 200 156 (112)
Other liabilities....................................... (373) (1,367) (26,635)
------------- -------------- -------------
Net cash provided by operating activities.............. 21,011 74,746 80,922
------------- -------------- -------------
Investing activities:
Capital expenditures........................................... (11,343) (134,325) (101,189)
Proceeds from litigation settlement............................ 3,000 -- --
Proceeds from the sale of assets............................... 697 53,627 16,182
------------- -------------- -------------
Net cash used by investing activities.................. (7,646) (80,698) (85,007)
------------- -------------- -------------
Financing activities:
Issuance of production payments................................ 27,000 49,800 27,000
Principal payments on production payments...................... (36,865) (36,131) (47,303)
Issuance of debt............................................... 2,000 2,134 32,500
Principal payments on debt..................................... (1,637) (7,059) (16,943)
Revolving credit agreement, net................................ (1,305) (16,639) 13,739
Proceeds from short-swing sale................................. -- -- 25
Debt issue costs............................................... (1,599) (309) (2,506)
------------- -------------- -------------
Net cash provided (used) by financing activities....... (12,406) (8,204) 6,512
------------- -------------- -------------
Increase (decrease) in cash and cash equivalents....... 959 (14,156) 2,427
Beginning cash and cash equivalents............................... 6,559 20,715 18,288
------------- -------------- -------------
Ending cash and cash equivalents.................................. $ 7,518 $ 6,559 $ 20,715
============= ============== =============
The accompanying notes are an integral part of the consolidated financial
statements.
25
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
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"), whose ultimate parent company was
TransAmerican Natural Gas Corporation ("TransAmerican"). The Company is engaged
in the exploration, development and production of natural gas, crude oil,
condensate and natural gas liquids. Unless otherwise noted, the term
"TransTexas" refers to TransTexas Gas Corporation and its subsidiaries,
Galveston Bay Processing Corporation ("Processing") and Galveston Bay Pipeline
Company ("Pipeline"). See Note 2 for a discussion of TransTexas'
reorganizations.
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,
disclosure of contingent assets and liabilities at the date of the financial
statements, the reported amounts of revenues and expenses during the reporting
period and the reported amounts of gas and oil reserves. 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, 2003 and 2002 include $0.3 million and $0.2 million,
respectively, restricted for payments of future goods and services provided by
certain vendors.
Inventories
TransTexas' inventories, which are stated at the lower of average cost
or market, consist primarily of condensate produced but not sold and tubular
goods.
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 $49 million and $45
million at January 31, 2003 and 2002, 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, 2003
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
26
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
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.
Through January 31, 2002, we reviewed the carrying value of our
long-lived assets in accordance with provisions of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." In August 2001,
the Financial Accounting Standards Board ("FASB") issued SFAS 144, "Accounting
for the Impairment or Disposal of Long Lived Assets." SFAS 144 addresses the
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS 121 and APB Opinion No. 30 "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
144 requires assets to be evaluated for impairment when events or circumstances
indicate that a long-lived asset's carrying value may not be recovered. These
events include market declines, changes in the manner in which we intend to use
an asset or decision to sell an asset and adverse changes in the legal or
business environment. Our adoption of SFAS 144 on February 1, 2002 did not have
any impact on our financial position or result of operations.
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.
In June 2001, The FASB issued SFAS 143, "Accounting for Asset
Retirement Obligations". SFAS 143 provides accounting requirements for costs
associated with legal obligations to retire tangible, long-lived assets. Under
SFAS 143, the asset retirement obligation is recorded at fair value in the
period in which it is incurred by increasing the carrying amount of the related
long-lived asset. In each subsequent period, the liability is accreted to its
present value and the capitalized cost is depreciated over the useful life of
the related asset. Effective upon our adoption, the cumulative effect of
applying SFAS 143 will be recognized as a change in accounting principle in the
consolidated statements of operations.
At January 31, 2003 the Company had not previously recorded an asset
retirement obligation related to its long-lived assets. As such, the Company
adopted SFAS 143 effective February 1, 2003. The Company expects the impact of
adopting SFAS 143 will be a decrease to earnings, net of tax, of approximately
$3 million, to be reflected as a cumulative effect of a change in accounting
principle in the first quarter of fiscal year 2004.
Liabilities for other contingencies are recognized in accordance with
SFAS 5 upon identification of an exposure, which when fully analyzed indicates
that it is both probable that an asset has been impaired or that a liability has
been incurred and that such a loss amount can be reasonably estimated.
Non-capital costs to remedy such contingencies or other exposures are charged to
a reserve, if one exists, or otherwise to current-period operations. When a
range of probable loss exists, the Company accrues the lesser end of the range.
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, 2003, 2002 and 2001. 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.
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. TransTexas uses the sales method of accounting for production
imbalances that arise from jointly produced properties. Volumetric production is
monitored to minimize these imbalances. An imbalance liability is recorded in
other liabilities if TransTexas' excess sales of production volumes exceed its
share of estimated remaining recoverable reserves for such properties.
Receivables are not recorded for those properties in which TransTexas has taken
less than its share of production.
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 due to excess
deposits in any financial institution. Trade accounts receivable are generally
from companies with significant natural
27
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
established 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. A summary of the Company's comprehensive loss for the
years ended January 31, 2003 and 2002 is as follows (in thousands of dollars):
YEAR ENDED JANUARY 31,
----------------------------------------
2003 2002
----------------- -----------------
Comprehensive loss:
Net loss........................................................ $ (19,786) $ (219,911)
Cumulative effect of adopting SFAS 133.......................... -- (1,282)
Change in the fair value of hedge agreements.................... (4,440) 2,486
Reclassification adjustments for hedge agreement settlements.... -- 1,144
----------------- -----------------
Comprehensive loss.......................................... $ (24,226) $ (217,563)
================= =================
As of January 31, 2003, the Company had entered into the following
hedging arrangements (settlement price based on a published industry index of
natural gas prices at Houston Ship Channel) as cash flow hedges of forecasted
sales of a portion of the Company's natural gas production:
CONTRACT PRICE
--------------------
TOTAL COLLAR
VOLUMES IN --------------------
PERIOD MMBtus FLOOR CEILING
- ------ ------------- --------- -------
Natural gas:
February 2002 - March 2002.................................... 590,000 $ 2.85 $ 3.30
February 2002 - July 2002..................................... 1,267,000 3.30 3.95
April 2002 - October 2002..................................... 1,070,000 2.85 3.35
August 2002 - October 2002.................................... 644,000 3.10 3.40
November 2002 - March 2003.................................... 755,000 3.50 3.95
November 2002 - March 2003.................................... 755,000 3.50 3.90
April 2003 - October 2003..................................... 1,284,000 3.25 4.05
For the years ended January 31, 2003 and 2002, the Company recognized
hedging gains of $0.4 million and $1.6 million, respectively, which are
reflected in gas, condensate and natural gas liquids revenues. The Company
recognized hedging losses of $9.1 million for the year ended January 31, 2001.
At January 31, 2003 and 2002, the Company's estimated net liability of its
hedging arrangements was $2.1 million and $2.3 million, respectively.
28
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Recently Issued Pronouncements
For a discussion related to SFAS 143, see "Environmental Remediation
Costs" under Note 1.
In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections." SFAS 145 provides guidance for income statement classification of
gains or losses from extinguishment of debt and accounting for certain lease
modifications that have economic effects similar to sale-leaseback transactions.
Gains or losses from extinguishments that are part of a company's recurring
operations would not be reported as an extraordinary item. The Company adopted
SFAS 145 effective February 1, 2003, which had no impact on the Company's
financial statements.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146
requires recognition of a liability for costs associated with an exit or
disposal activity when the liability is incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS 146 is to be applied prospectively
to exit or disposal activities initiated after December 31, 2002 and will be
used to report any future exits or disposal activities. The Company's adoption
of SFAS 146 on January 1, 2003 had no effect on the Company's financial
statements.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 addresses the disclosures
to be made by a guarantor in its interim and annual financial statements about
its obligations under certain guarantees that it has issued. FIN 45 also
clarifies the requirement that a guarantor recognize a liability at the
inception of the guarantee for the fair value of the obligation that the
guarantor has undertaken in issuing the guarantee. The initial recognition and
measurement provisions of FIN 45 are applicable to guarantees issued or modified
after December 31, 2002 and are not expected to have a material impact on the
Company's financial statements.
2. REORGANIZATIONS
On November 14, 2002 (the "Petition Date"), TransTexas, Pipeline and
Processing filed voluntary petitions for relief under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the Southern District
of Texas, Corpus Christi Division (the "Bankruptcy Court"). The bankruptcy cases
are being jointly administered (see Note 13). TransTexas, Pipeline and
Processing are operating their businesses and managing their properties as
debtors in possession. As a result of the Chapter 11 filings, absent approval
from the Bankruptcy Court, the Company is prohibited from paying, and creditors
are prohibited from attempting to collect, claims or debts arising prior to the
Petition Date.
29
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The bankruptcy petitions were filed in order to preserve cash and to
give the Company the opportunity to restructure its debt. The consummation of a
plan of reorganization is the primary objective of the Company. The plan of
reorganization will set forth the means for satisfying claims, including
liabilities subject to compromise, and interests in the Company. A plan of
reorganization may result in, among other things, material dilution or
elimination of the interests of existing security holders as a result of the
issuance of securities to creditors or new investors. The consummation of a plan
of reorganization will require approval of the Bankruptcy Court.
The Company expects to file its Plan of Reorganization and Disclosure
Statement with the Bankruptcy Court on May 1, 2003. Additional information with
respect to the Plan of Reorganization and Disclosure Statement will be provided
on Form 8-K or by an amendment to this Form 10-K. At this time, it is not
possible to predict the outcome of the bankruptcy proceedings or the effect on
the business of the Company or on the interests of creditors, royalty owners or
stockholders.
Management's revised business model is centered around the promotion of
working interest partners who carry a significant portion of the capital
expenditures necessary to evaluate the Company's properties, much of which are
unevaluated as of January 31, 2003. The Company intends to finance its share of
the necessary capital expenditures through cash flow from operations, production
payment issuances and any supplemental fundings provided pursuant to its
emergence from bankruptcy proceedings. However, there can be no assurance that
working interest partners can be obtained on terms acceptable to the Company, or
additional financing obtained, to evaluate the Company's properties in a timely
manner.
As a result of the bankruptcy filing, a significant amount of the
Company's liabilities, including secured debt, are subject to compromise. As of
January 31, 2003, liabilities subject to compromise included the following (in
thousands of dollars):
Long-term debt................................ $ 205,197
Note payable ................................. 2,000
Accrued liabilities........................... 26,054
Other liabilities............................. 5,643
-------------
$ 238,894
=============
The consolidated financial statements as of January 31, 2003 and for
the year then ended have been prepared 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" ("SOP 90-7"). As of the
petition date, in accordance with SOP 90-7, the Company discontinued the accrual
of interest and amortization of deferred debt issue costs related to liabilities
subject to compromise. If such interest had continued to be accrued, based on
contractual terms without increase for default provisions, and related deferred
debt issue costs continued to be amortized, interest expense for the fiscal year
ended January 31, 2003 would have been increased $6.7 million.
The accompanying financial statements have been prepared on a going
concern basis which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the ordinary course of business. As a result
of the bankruptcy filing and related events, there is no assurance that the
carrying amounts of assets will be realized or that liabilities will be
liquidated or settled for the amounts recorded. In addition, a plan of
reorganization, or rejection thereof, could change the amounts reported in the
financial statements. As a result, there is substantial doubt about the
Company's ability to continue as a going concern. The ability of TransTexas to
continue as a going concern is dependent upon confirmation of a plan of
reorganization, adequate sources of capital and the ability to sustain positive
results of operations and cash flows sufficient to continue to explore for and
develop gas and oil reserves.
Prior Reorganization
On April 19, 1999 ("Prior Petition Date"), TransTexas filed a voluntary
petition for relief under Chapter 11 of the U.S. Bankruptcy Code. 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 ("Prior Bankruptcy"). This Chapter 11
filing did not include TransTexas' subsidiaries. The Company's Second Amended,
Modified and Restated Plan of Reorganization dated January 25, 2000 (the "Prior
Plan") was confirmed by the Bankruptcy Court on February 7, 2000. The Effective
Date of the Prior Plan is March 17, 2000.
30
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. Absent the
November 14, 2002 Chapter 11 filing, 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'
2004 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.
4. OTHER CURRENT ASSETS
The major components of other current assets are as follows (in
thousands of dollars):
JANUARY 31,
-----------------------
2003 2002
-------- --------
Prepayments:
Trade............................ $ 123 $ 485
Insurance........................ 607 252
Fair value of hedging contracts..... -- 2,348
Legal............................... 488 27
-------- --------
$ 1,218 $ 3,112
======== ========
5. PROPERTY AND EQUIPMENT
The major components of property and equipment, at cost, are as follows
(in thousands of dollars):
JANUARY 31,
-----------------------
2003 2002
-------- --------
Gas and oil properties ........... $446,059 $437,813
Gas gathering and transportation.. 50,236 50,462
Equipment and other .............. 5,685 6,473
-------- --------
$501,980 $494,748
======== ========
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.
TransTexas incurred approximately $39.0 million, $46.7 million and
$48.2 million of interest charges of which approximately $6.9 million, $11.4
million and $14.1 million were capitalized for the years ended January 31, 2003,
2002 and 2001, 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.
31
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. OTHER ASSETS
The major components of other assets are as follows (in thousands of
dollars):
JANUARY 31,
-------------------------------
2003 2002
------------- -------------
Debt issue costs, net of accumulated amortization of $2,750 at
January 31, 2003 and $1,184 at January 31, 2002 .................... $ 1,665 $ 1,632
Other ................................................................. 269 469
------------- -------------
$ 1,934 $ 2,101
============= =============
7. LONG-TERM DEBT AND PRODUCTION PAYMENTS
Long-Term Debt
Long-term debt consists of the following (in thousands of dollars):
JANUARY 31,
-------------------------------
2003 2002
------------- -------------
15% Senior Secured Notes due 2005 ..................................... $ 200,000* $ 200,000
Revolving Credit Note.................................................. 30,000 30,000
Term Note.............................................................. 21,881 22,106
Note payable at 8% due 2005............................................ 5,197* 5,209
Revolving credit agreement ............................................ -- 1,305
Notes payable, ranging from 8% to 10%, due through 2005................ 4,400 5,598
------------- -------------
Total long-term debt............................................... 261,478 264,218
Less liabilities subject to compromise................................. 205,197* --
Less Revolving Credit Note and Term Note reclassified to current....... 51,881 --
Less current maturities................................................ 3,502 2,444
------------- -------------
$ 898 $ 261,774
============= =============
(*) Subject to compromise (see Note 2).
Aggregate annual maturities of long-term debt for fiscal years 2004 to
2006 are $3.5 million, $0.9 million and $51.9 million, respectively. Prior to
the Company's bankruptcy filing in November 2002, all of the Company's long-term
debt was 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 $7.5 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, 2003, there were no outstanding advances
under the Accounts Receivable Facility and the Company had availability for
advances of approximately $1.8 million. Interim and Final Financing Orders of
the Bankruptcy Court modified the maximum loan amount under the Accounts
Receivable Facility and modified certain other terms of the facility. Pursuant
to these Interim and Final Orders, GMACC waived compliance with certain
provisions of the facility. Pursuant to the Final Financing Order, the Accounts
Receivable Facility is due on August 7, 2003.
On the Effective Date, the Company, as Borrower, and Processing and
Pipeline, 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
32
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. Interim and Final Financing Orders of the Bankruptcy Court modified
certain terms of the Oil and Gas Facility. Pursuant to these Interim and Final
Orders, GMACC waived compliance with certain provisions of the facility.
Pursuant to the Final Financing Order, the Oil and Gas Facility is due on
August 7, 2003.
On the Effective Date, the Company, as Issuer, Pipeline and Processing,
as Guarantors, and U.S. Bank, N.A., as successor indenture trustee to Firstar
Bank, N.A., 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, 2003,
was $70 million.
On March 15, 2002, Credit Suisse First Boston Management Corporation
("CSFB") and the Company, as borrower, and Processing, as guarantor, entered
into an unsecured Term Loan Agreement, wherein CSFB advanced to the Company the
principal sum of $2.0 million which was due and payable, together with interest
at a rate of 15% per annum, on October 15, 2002. The Company has not paid the
principal and accrued interest of this loan and is in default under its terms.
At January 31, 2003, the outstanding balance of this loan is included in
liabilities subject to compromise. CSFB is the beneficial owner of more than 10%
of each of the 15% Notes, Class A Common Stock and Senior Preferred Stock.
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 Processing and a mortgage on the
Winnie, Texas processing facility. At January 31, 2003, the undiscounted
principal balance outstanding of this note was $3.2 million.
Additional notes payable totaling $1.2 million and $6.8 million at
January 31, 2003 and 2002, respectively, consist of amounts payable pursuant to
the Prior 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 March
2002, the Company closed an Eighth Supplement to the production payment whereby
the Company received $14.0 million. In June 2002, the Company closed a Ninth
Supplement to the production payment whereby the Company received $13.0 million
in exchange for additional properties being made subject to the production
payment. As of January 31, 2003, the outstanding balance of the production
payment was $18.6 million, of which $2.2 million attributable to produced
volumes is included in accrued liabilities. The Oil and Gas Facility places
certain restrictions on the amount that may be outstanding under the production
payment. In April 2003, the Company closed a Tenth Supplement to the production
payment whereby the Company received $5.0 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 pays a nominal marketing fee with
respect to the Company's production associated with the New Subject Interests.
In addition, the third party pays a fee for certain processing services provided
by Processing.
33
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following information reflects TransTexas' noncash activities
(in thousands of dollars):
YEAR ENDED JANUARY 31,
------------------------------------------------
2003 2002 2001
------------ ------------- -----------
Accretion of stock............................................. $ 43,344 $ 46,403 $ 25,722
============ ============= ===========
Conversion of preferred stock.................................. $ 54,647 $ -- $ --
============ ============= ===========
(Increase) decrease in fair value of hedging agreements........ $ 4,440 $ (2,486) $ --
============ ============= ===========
Capitalization of amortization of debt issuance costs.......... $ 279 $ 171 $ 139
============ ============= ===========
Cancellation of old common stock............................... $ -- $ -- $ 740
============ ============= ===========
Issuance of new common stock................................... $ -- $ -- $ 12
============ ============= ===========
Cash paid for interest is as follows (in thousands of dollars):
YEAR ENDED JANUARY 31,
------------------------------------------------
2003 2002 2001
------------ ------------- -----------
Interest........................................................... $ 20,703 $ 33,321 $ 16,352
============ ============= ===========
9. ACCRUED LIABILITIES
Accrued liabilities classified as current liabilities consist of the
following (in thousands of dollars):
JANUARY 31,
-------------------------------
2003 2002
------------ -------------
Royalties.......................................................... $ 1,200 $ 2,110
Taxes other than income taxes...................................... 2,560 498
Accrued interest................................................... 949 14,803
Payroll............................................................ 1,325 1,090
Current portion of production payments............................. 2,235 2,468
Hedging losses..................................................... 2,390 --
Accrued insurance.................................................. 127 1,980
Reorganization claims.............................................. 608 2,084
Other.............................................................. 156 1,094
------------ -------------
$ 11,550 $ 26,127
============ =============
10. OTHER LIABILITIES
The major components of other liabilities are as follows (in thousands
of dollars):
JANUARY 31,
-------------------------------
2003 2002
------------ -------------
Reorganization claims.............................................. $ 625 $ 6,644
Other.............................................................. 3 --
------------ -------------
$ 628 $ 6,644
============ =============
34
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INCOME TAXES
Income tax expense (benefit) includes the following (in thousands of
dollars):
YEAR ENDED JANUARY 31,
------------------------------------------------
2003 2002 2001
------------ ------------- -----------
Federal:
Deferred ............................................. $ -- $ (9,984) $ 9,984
============ ============= ===========
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):
YEAR ENDED JANUARY 31,
------------------------------------------------
2003 2002 2001
------------ ------------- -----------
Federal income tax expense (benefit) at the
statutory rate....................................... $ (6,925) $ (80,463) $ 9,984
Increase (decrease) in tax resulting from:
Valuation allowance.................................. 6,925 70,479 --
------------ ------------- -----------
$ -- $ (9,984) $ 9,984
============ ============= ===========
Significant components of TransTexas' tax attributes are as follows (in
thousand of dollars):
JANUARY 31,
-------------------------------------------
2003 2002
------------------ ------------------
Deferred tax assets:
Depreciation, depletion and amortization............. $ 63,147 $ 56,634
Net operating loss carryforwards..................... 14,257 13,845
------------------ ------------------
77,404 70,479
Valuation allowance.................................. (77,404) (70,479)
------------------ ------------------
Net deferred tax assets ........................ -- --
------------------ ------------------
$ -- $ --
================== ==================
Part of the debt refinancing of TransAmerican 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, and has reduced its tax attributes (including its net
operating loss and credit carryforwards) as a consequence of the COD Exclusion.
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. During fiscal year 1997, the IRS 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 been advised by the IRS that they have completed their audit and do not
propose any adjustments.
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 TransTexas'
reorganization. In addition, certain other tax attributes of TransTexas may
under certain circumstances be eliminated or reduced as a consequence of
TransTexas' reorganization. The potential elimination or reduction of NOLs and
such other tax attributes may substantially increase the amount of tax payable
by TransTexas.
Since the Effective Date, TransTexas had NOLs for federal income tax
purposes of approximately $40.7 million that may be used in future years to
offset taxable income. The NOLs will begin to expire during the years 2021
through 2024.
35
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. RELATED PARTY TRANSACTIONS
In March 2002, John R. Stanley resigned as Chief Executive Officer and
as Chairman and member of the Board of Directors of the Company. Mr. Stanley's
employment agreement provided that the Company would pay Mr. Stanley $3.0
million in cash upon the termination of his employment. A separation agreement
between Mr. Stanley and the Company provided that the Company would pay Mr.
Stanley $3.0 million in installments, together with interest at a rate of 10%
per annum. At January 31, 2003, the severance remaining to be paid to Mr.
Stanley was $0.8 million and this amount is included in liabilities subject to
compromise.
As discussed above (see Note 7), the Company and CSFB entered into an
unsecured Term Loan Agreement wherein CSFB advanced to the Company the principal
sum of $2.0 million. CSFB is the beneficial owner of more than 10% of each of
the 15% Notes, Class A Common Stock and Senior Preferred Stock.
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. TransTexas believes that it is in material compliance
with applicable environmental laws and regulations. Noncompliance with such
laws and regulations could 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
Chapter 11 Bankruptcy. On November 14, 2002, TransTexas, Pipeline and
Processing filed voluntary petitions for relief under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the Southern District
of Texas, Corpus Christi Division. The bankruptcy cases are being jointly
administered under the caption "In re: TransTexas Gas Corporation, et al.,
Debtors," Case No. 02-21926-C-11. TransTexas, Pipeline and Processing are
operating their businesses and managing their properties as debtors in
possession. As a result of the Chapter 11 filings, absent approval from the
Bankruptcy Court, the Company is prohibited from paying, and creditors are
prohibited from attempting to collect, claims or debts arising prior to the
Petition Date.
Litigation Settlement. In October 2002, TransTexas entered into a
settlement agreement with an unaffiliated oilfield service company whereby that
company paid TransTexas $3.0 million. This settlement was approved by the
Bankruptcy Court on December 4, 2002.
Prior Plan. TransTexas is a party to various claims and litigation
arising out of the Prior Bankruptcy. Any obligations of the Company in respect
of such claims and litigation arising out of the Prior Bankruptcy will be
discharged or otherwise disposed of pursuant to the Prior 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.
General. TransTexas is a party to various claims and routine litigation
arising in the normal course of its business. The resolution in any reporting
period of one or more of the such claims or litigation could have a material
effect on TransTexas' results of operations and cash flows for that period.
Although the outcome of claims and litigation cannot be predicted with
certainty, TransTexas does not expect that any of these various claims or
routine litigation matters will have a material adverse effect on its financial
position.
Operating Leases
As of January 31, 2003, TransTexas had long-term leases covering land
and other property and equipment. Rental expense was approximately $2 million
for the year ended January 31, 2003 and approximately $3 million for each of the
years ended January 31, 2002 and 2001, 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, 2003, are as
follows (in thousands of dollars): 2004-$73, 2005-$73, 2006-$66, 2007-$7.
36
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 2003, the balance
remaining to be paid under this contract, which commenced in May 2001, was
approximately $1 million. In April 2003, the independent contractor released
TransTexas from any claim that it had under the 2001 contract.
Gas Delivery Agreements
TransTexas has entered into contracts with Kinder Morgan Ship Channel
Pipeline, L.P., formerly 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 the
first 75,000 MMBtu per day of natural gas and associated condensate to Kinder
Morgan Ship Channel Pipeline, L.P.
The Company also entered into a contract with a subsidiary of Duke
Energy Field Services, LLC 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 the first 56,250 Mcf of natural gas and 19,500
MMBtu of residue gas per day to Duke Energy Field Services. Transportation fees
for natural gas and residue gas are based on fixed negotiated rates.
14. PREFERRED STOCK DIVIDENDS AND CONVERSION TO CLASS A COMMON STOCK
The Certificate of Designation for the Senior Preferred Stock of the
Company provides for the mandatory conversion of one-half of the outstanding
shares of Senior Preferred Stock into fully paid and non-assessable shares of
Class A Common Stock at the rate of 0.3461 shares of Class A Common Stock for
each $1.00 of liquidation preference per share, plus an amount equal to accrued
and unpaid dividends, of Senior Preferred Stock if the Company fails to pay
dividends on the Senior Preferred Stock as required by the Certificate of
Designation for the Senior Preferred Stock on any two dividend payment dates.
The Certificate of Designation for the Series A Junior Preferred Stock ("Junior
Preferred Stock" and together with the Senior Preferred Stock, the "Preferred
Stock") provides for the mandatory conversion of all of the outstanding shares
of Junior Preferred Stock into fully paid and non-assessable shares of Class A
Common Stock at the rate of 0.1168 shares of Class A Common Stock for each $1.00
of liquidation preference per share, plus an amount equal to accrued and unpaid
dividends, of Junior Preferred Stock if the Company fails to pay dividends on
the Senior Preferred Stock as required by the Certificate of Designation for the
Senior Preferred Stock on any two dividend payment dates.
The Certificate of Designation for each of the Senior Preferred Stock
and the Junior Preferred Stock required the payment to the holders of a cash
dividend on the Senior Preferred Stock and an in-kind dividend on the Junior
Preferred Stock, respectively, by the Company on June 15, 2002 and on September
15, 2002. The Company did not make the required dividend payments on either
date. Therefore, the liquidation preference of the Senior Preferred Stock was
increased to approximately $1.04 per share and the liquidation preference of the
Junior Preferred Stock was increased to approximately $1.05 per share. As a
result, on September 16, 2002, each two shares of Senior Preferred Stock was
converted into one share of New Senior Preferred and into approximately 0.3596
shares of Class A Common Stock and each share of Junior Preferred Stock was
converted into approximately 0.1227 shares of Class A Common Stock. No
fractional shares were issued in the conversion. The Board of Directors of the
Company determined that the fair market value of each share of the Preferred
Stock and Common Stock for purposes of the conversion was less than $0.01 per
share and, therefore, no cash was paid to holders of Preferred Stock in lieu of
fractional shares.
In the aggregate 164,333,875 shares of Senior Preferred Stock
representing one-half of all of the outstanding Senior Preferred Stock were
converted into 59,101,243 shares of Class A Common Stock and 25,240,513 shares
of Junior Preferred Stock representing all of the outstanding Junior Preferred
Stock were converted into 3,097,336 shares of Class A Common Stock. Since the
Company did not pay the required dividend payments, holders of the Senior
Preferred Stock have the right, voting separately as a class, to elect all five
directors to the Company's Board of Directors. On December 16, 2002 and March
17, 2003, the Company did not make the required cash dividend payments to the
remaining holders of the Senior Preferred Stock. The Company does not anticipate
paying cash dividends on the Senior Preferred Stock in the future.
37
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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, 2003, two customers provided
approximately $50 million in E&P revenues. 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. 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)
YEAR ENDED JANUARY 31, 2003
-------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- --------- --------- -----------
Revenues........................................... $ 21,973 $ 19,745 $ 15,149 $ 14,213
Operating income................................... 2,181 5,284 2,414 2,932
Net loss........................................... (7,350) (4,640) (7,375) (421)
Net loss per share -- basic and diluted............ (18.14) (13.56) (0.52) (0.11)
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 loss per share-- basic and diluted............. (4.21) (53.80) (51.78) (103.22)
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
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, 2003 and 2002.
38
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
JANUARY 31, 2003
(IN THOUSANDS OF DOLLARS)
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- --------- ---------- ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents .................. $ 7,188 $ 3 $ 327 $ $ 7,518
Accounts receivable ........................ 8,602 -- 139 -- 8,741
Receivables from affiliates ................ 17,639 -- -- (17,639) --
Inventories ................................ 435 -- -- -- 435
Other ...................................... 1,218 -- -- -- 1,218
--------- --------- --------- --------- ---------
Total current assets ..................... 35,082 3 466 (17,639) 17,912
--------- --------- --------- --------- ---------
Property and equipment ........................ 488,066 2,271 11,643 -- 501,980
Less accumulated depreciation, depletion and
amortization ............................... 388,329 866 4,969 -- 394,164
--------- --------- --------- --------- ---------
Net property and equipment ............... 99,737 1,405 6,674 -- 107,816
--------- --------- --------- --------- ---------
Other assets .................................. 1,936 -- -- (2) 1,934
--------- --------- --------- --------- ---------
$ 136,755 $ 1,408 $ 7,140 $ (17,641) $ 127,662
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt ....... $ 3,411 $ 26 $ 65 $ -- $ 3,502
Notes payable .............................. 51,881 -- -- -- 51,881
Accounts payable ........................... 2,032 4 121 -- 2,157
Accrued liabilities ........................ 11,410 12 128 -- 11,550
--------- --------- --------- --------- ---------
Total current liabilities ................ 68,734 42 314 -- 69,090
--------- --------- --------- --------- ---------
Payable to affiliates ......................... -- 2,423 15,216 (17,639) --
Long-term debt, net of current maturities...... 528 276 94 -- 898
Production payments, net of current portion.... 16,373 -- -- -- 16,373
Other liabilities ............................. 628 -- -- -- 628
Liabilities subject to compromise ............. 238,894 -- -- -- 238,894
Redeemable preferred stock .................... 60,822 -- -- -- 60,822
Stockholders' equity (deficit):
Common stock ............................... 634 -- -- -- 634
Additional paid-in capital ................. 79,038 1 1 (2) 79,038
Accumulated deficit ........................ (326,804) (1,334) (8,485) -- (336,623)
Accumulated other comprehensive loss ....... (2,092) -- -- -- (2,092)
--------- --------- --------- --------- ---------
Total stockholders' deficit .............. (249,224) (1,333) (8,484) (2) (259,043)
--------- --------- --------- --------- ---------
$ 136,755 $ 1,408 $ 7,140 $ (17,641) $ 127,662
========= ========= ========= ========= =========
39
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
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 ........................ (267,031) (899) (5,563) -- (273,493)
Accumulated other comprehensive income ..... 2,348 -- -- -- 2,348
--------- --------- --------- --------- ---------
Total stockholders' deficit .............. (239,658) (898) (5,562) (2) (246,120)
--------- --------- --------- --------- ---------
$ 160,152 $ 1,647 $ 8,530 $ (15,525) $ 154,804
========= ========= ========= ========= =========
40
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 2003
(IN THOUSANDS OF DOLLARS)
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- --------- ---------- ------------ ------------
Revenues:
Gas, condensate and natural gas liquids..... $ 70,051 $ -- $ -- $ -- $ 70,051
Other....................................... 119 45 3,639 (2,774) 1,029
--------- --------- --------- --------- ---------
Total revenues............................ 70,170 45 3,639 (2,774) 71,080
--------- --------- --------- --------- ---------
Costs and expenses:
Operating................................... 10,559 19 3,744 (2,774) 11,548
Depreciation, depletion and amortization.... 25,720 213 1,159 -- 27,092
General and administrative.................. 16,283 8 72 -- 16,363
Taxes other than income taxes............... 3,141 2 123 -- 3,266
--------- --------- --------- --------- ---------
Total costs and expenses.................. 55,703 242 5,098 (2,774) 58,269
--------- --------- --------- --------- ---------
Operating income (loss)................... 14,467 (197) (1,459) -- 12,811
--------- --------- --------- --------- ---------
Other income (expense):
Interest income............................. 111 -- 3 -- 114
Interest expense, net....................... (30,354) (235) (1,462) -- (32,051)
--------- --------- --------- --------- ---------
Total other expense....................... (30,243) (235) (1,459) -- (31,937)
--------- --------- --------- --------- ---------
Loss before reorganization items ......... (15,776) (432) (2,918) -- (19,126)
Reorganization items........................ (653) (3) (4) -- (660)
--------- --------- --------- --------- ---------
Net loss.................................. $ (16,429) $ (435) $ (2,922) $ -- $ (19,786)
========= ========= ========= ========= =========
41
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
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)
========= ========= ========= ========= =========
42
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED JANUARY 31, 2003
(IN THOUSANDS OF DOLLARS)
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- --------- ---------- ------------ ------------
Operating activities:
Net loss........................................ $ (16,429) $ (435) $ (2,922) $ -- $ (19,786)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation, depletion and amortization........ 25,720 213 1,159 -- 27,092
Accretion of discount on long-term debt......... 127 20 19 -- 166
Amortization of debt issue costs................ 1,287 -- -- -- 1,287
Changes in assets and liabilities:
Accounts receivable........................... 6,431 -- 95 -- 6,526
Receivable from affiliates.................... (2,088) -- -- 2,088 --
Inventories................................... 383 -- -- -- 383
Other current assets.......................... (456) -- 2 -- (454)
Accounts payable.............................. (3,514) 4 (138) -- (3,648)
Accrued liabilities........................... 9,490 12 116 -- 9,618
Transactions with affiliates, net............. -- 475 1,613 (2,088) --
Other assets.................................. 200 -- -- -- 200
Other liabilities............................. (373) -- -- -- (373)
--------- --------- --------- --------- ---------
Net cash provided (used) by operating
activities............................... 20,778 289 (56) -- 21,011
--------- --------- --------- --------- ---------
Investing activities:
Capital expenditures............................ (11,332) (4) (7) -- (11,343)
Proceeds from litigation settlement............. 3,000 -- -- -- 3,000
Proceeds from the sale of assets................ 697 -- -- -- 697
--------- --------- --------- --------- ---------
Net cash used by investing
activities............................... (7,635) (4) (7) -- (7,646)
--------- --------- --------- --------- ---------
Financing activities:
Issuance of production payments................. 27,000 -- -- -- 27,000
Principal payments on production payments....... (36,865) -- -- -- (36,865)
Issuance of debt................................ 2,000 -- -- -- 2,000
Principal payments on debt...................... (1,244) (315) (78) -- (1,637)
Revolving credit agreement net.................. (1,305) -- -- -- (1,305)
Debt issue costs................................ (1,599) -- -- -- (1,599)
--------- --------- --------- --------- ---------
Net cash used by financing activities..... (12,013) (315) (78) -- (12,406)
--------- --------- --------- --------- ---------
Increase (decrease) in cash and
cash equivalents......................... 1,130 (30) (141) -- 959
Beginning cash and cash equivalents................ 6,058 33 468 -- 6,559
--------- --------- --------- --------- ---------
Ending cash and cash equivalents................... $ 7,188 $ 3 $ 327 $ -- $ 7,518
========= ========= ========= ========= =========
43
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
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
Principal payments on production payments....... (36,131) -- -- -- (36,131)
Issuance of long-term debt...................... 2,134 -- -- -- 2,134
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
========= ========= ========= ========= =========
44
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
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 SFAS 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,
-------------------
2003 2002
-------- --------
Proved properties ................................ $447,149 $442,974
Unproved properties .............................. 49,146 45,301
-------- --------
Total ...................................... 496,295 488,275
Less accumulated depreciation, depletion
and amortization............................ 391,341 365,182
-------- --------
$104,954 $123,093
======== ========
Costs incurred for gas and oil producing activities are as follows (in
thousands of dollars):
YEAR ENDED JANUARY 31,
--------------------------------
2003 2002 2001
-------- -------- --------
Property acquisitions ............... $ 8,370 $ 21,965 $ 20,594
Exploration ......................... -- 89,850 82,004
Development ......................... 3,288 22,110 --
-------- -------- --------
$ 11,658 $133,925 $102,598
======== ======== ========
Results of operations for gas and oil producing activities are as
follows (in thousands of dollars):
YEAR ENDED JANUARY 31,
--------------------------------
2003 2002 2001
-------- --------- --------
Revenues ............................ $ 70,051 $ 133,138 $187,883
-------- --------- --------
Expenses:
Production costs ................ 14,600 23,381 25,723
Depreciation, depletion and
amortization.................. 26,159 89,973 80,145
General and administrative ...... 7,738 9,017 8,578
Impairment of gas and oil
properties ................... -- 195,065 --
-------- --------- --------
Total operating expenses ..... 48,497 317,436 114,446
-------- --------- --------
Income (loss) before
income taxes .............. 21,554 (184,298) 73,437
Income taxes (benefit) .............. 7,544 (64,504) 25,703
-------- --------- --------
$ 14,010 $(119,794) $ 47,734
======== ========= ========
Depletion rate per net
equivalent Mcf ............... $ 1.65 2.98 $ 2.22
======== ========= ========
45
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
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.
YEAR ENDED JANUARY 31,
-------------------------------------------------------------
2003 2002 2001
--------------- -------------- ----------------
GAS OIL GAS OIL GAS OIL
---- --- ----- --- ----- ----
Proved reserves:
Beginning of year ............... 55.3 1.8 112.9 3.2 95.6 3.7
Increase (decrease) during
the year attributable to:
Revisions of previous estimates . 1.1 0.5 (15.4) (0.2) 7.9 0.4
Extensions, discoveries and other
additions ..................... -- -- 5.5 0.1 42.4 0.8
Sales of reserves ............... -- -- (25.2) -- (6.2) (0.2)
Production ...................... (10.7) (0.9) (22.5) (1.3) (26.8) (1.5)
---- --- ---- --- ----- ---
End of year ..................... 45.7 1.4 55.3 1.8 112.9 3.2
==== === ==== === ===== ===
Proved developed reserves:
Beginning of year ............... 33.9 1.4 66.9 2.0 82.3 3.5
End of year (1) ................. 19.8 0.7 33.9 1.4 66.9 2.0
- ------------------------
(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 2004
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
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED JANUARY 31,
---------------------------------
2003 2002 2001
-------- -------- --------
Future cash inflows ....................... $323,306 $163,275 $810,031
Future production costs ................... (63,241) (44,260) (103,245)
Future development costs .................. (48,900) (39,707) (81,004)
Future income taxes ....................... -- -- (97,259)
-------- -------- --------
Future net cash flows ................. 211,165 79,308 528,523
Annual discount (10%) for estimated
timing of cash flows .................... (53,628) (14,174) (118,355)
-------- -------- --------
Standardized measure of discounted
future net cash flows ............... $157,537 $ 65,134 $410,168
======== ======== ========
Principal sources of change in the standardized measure of discounted
future net cash flows are as follows (in thousands of dollars):
YEAR ENDED JANUARY 31,
--------------------------------
2003 2002 2001
-------- -------- --------
Beginning of year ........................... $ 65,134 $410,168 $213,603
Revisions:
Quantity estimates and production rates.. 15,038 (24,583) 84,923
Prices, net of lifting costs ............ 110,846 (320,982) 162,231
Estimated future development costs ...... 18,102 44,898 7,403
Additions, extensions, discoveries and
improved recovery ......................... -- 8,697 163,384
Net sales of production ..................... (60,535) (118,297) (170,832)
Development costs incurred .................. 3,288 22,110 --
Accretion of discount ....................... 5,664 39,598 18,322
Net changes in income taxes ................. -- 75,480 (60,347)
Purchases (sales) of reserves ............... -- (71,955) (8,519)
-------- -------- --------
End of year ............................. $157,537 $ 65,134 $410,168
======== ======== ========
- ---------------------
Year-end wellhead prices received by TransTexas from sales of natural
gas, including margins from natural gas liquids, were $6.03, $2.35 and $6.39 per
Mcf for 2003, 2002 and 2001, respectively. Year-end condensate prices were
$33.26, $18.61 and $28.23 per barrel for 2003, 2002 and 2001, 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 AND
RELATED STOCKHOLDER MATTERS
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.
ITEM 14. CONTROLS AND PROCEDURES
a) Evaluation of Disclosure Controls and Procedures. Within the 90 days
prior to the date of this annual report, the Company evaluated the
effectiveness of the design and operation of its disclosure controls
and procedures. This evaluation was conducted under the supervision and
with the participation of the Company's management, including its Chief
Executive Officer and Chief Financial Officer. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer
have each concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be
disclosed by the Company in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
b) Changes in Internal Controls. There have been no significant changes in
the Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of the
Company's most recent evaluation.
48
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
----
(a) Financial Statements, Financial Statement
Schedules and Exhibits
(1) The consolidated financial statements of TransTexas Gas
Corporation are listed on the Index to this report (page 20).
(2) Report of Independent Accountants on Financial Statement
Schedule....................................................... 59
Schedule II - Valuation and Qualifying Accounts................ 60
(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-3 (33-91494), and incorporated herein by reference).
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).
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).
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).
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).
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).
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).
10.65 - Eighth Supplement to 2000 Production Payment Agreement, dated March
5, 2002 (filed as an exhibit to TransTexas' quarterly report on Form
10-Q for the quarter ended April 30, 2002, and incorporated herein by
reference).
10.66 - Eighth Supplement to 2000 Production Payment Conveyance, dated March
5, 2002 (filed as an exhibit to TransTexas' quarterly report on Form
10-Q for the quarter ended April 30, 2002, and incorporated herein by
reference).
10.67 - Ninth Supplement to 2000 Production Payment Agreement, dated June 7,
2002 (filed as an exhibit to TransTexas' quarterly report on Form 10-Q
for the quarter ended April 30, 2002, and incorporated herein by
reference).
10.68 - Ninth Supplement to 2000 Production Payment Conveyance, dated June 7,
2002 (filed as an exhibit to TransTexas' quarterly report on Form 10-Q
for the quarter ended April 30, 2002, and incorporated herein by
reference).
10.69 - Amendment No. 2 to Oil and Gas Revolving Credit and Term Loan
Agreement, dated June 6, 2002, 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 quarterly report on
Form 10-Q for the quarter ended July 31, 2002, and incorporated herein
by reference.
10.70 - Amendment No. 2 to Third Amended and Restated Accounts Receivable
Management and Security Agreement dated June 6, 2002 between the
Company and GMAC Commercial Credit LLC (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter ended July 31,
2002, and incorporated herein by reference.
*10.71 - Tenth Supplement to Production Payment Agreement, dated March 27,
2003.
*10.72 - Tenth Supplement to Production Payment Conveyance, dated March 27,
2003.
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.
*99.1 - Certification of Chief Executive Officer and Chief Financial Officer.
- ---------------------------
* filed herewith
(b) Reports on Form 8-K:
On November 15, 2002, the Company filed a Current Report on Form 8-K to
report that on November 14, 2002 it filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for
the Southern District of Texas, Corpus Christi Division. On November 14, 2002,
the Company's subsidiaries, Galveston Bay Pipeline Company and Galveston Bay
Processing Corporation also filed voluntary petitions under Chapter 11.
On April 2, 2003, the Company filed a Current Report on Form 8-K to report
that on March 27, 2003 Mr. Vincent Intrieri resigned from the Company's Board
of Directors.
49
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, 2003.
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 below by the following persons on behalf of the
registrant and in the capacities indicated on May 1, 2003.
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
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Arnold H. Brackenridge, certify that:
1. I have reviewed this annual report on Form 10-K of TransTexas Gas
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or other persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 1, 2003 /s/ ARNOLD H. BRACKENRIDGE
--------------------------------
Arnold H. Brackenridge
President, Chief Executive Officer and
Chief Operating Officer
57
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Ed Donahue, certify that:
1. I have reviewed this annual report on Form 10-K of TransTexas Gas
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or other persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 1, 2003 /s/ ED DONAHUE
---------------------------------------
Ed Donahue
Vice President, Chief Financial Officer
and Secretary
58
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Stockholders and Board of Directors of
TransTexas Gas Corporation:
Our audits of the consolidated financial statements referred to in our
report dated April 30, 2003 appearing in the January 31, 2003 10-K of TransTexas
Gas Corporation also included an audit of the financial statement schedule
listed in Item 15(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, 2003
TRANSTEXAS GAS CORPORATION
(DEBTOR IN POSSESSION)
SCHEDULE II - 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
- ----------- ---------- ---------- -------- ---------- ----------
Year ended January 31, 2001:
Valuation allowance -
Accounts receivable .. $ -- $ 850 $(531) $(319) $ --
Deferred tax asset ... -- -- -- -- --
Year ended January 31, 2002:
Valuation allowance -
Accounts receivable .. $ -- $ 239 $ 28 $ -- $ 267
Deferred tax asset ... -- 70,479 -- -- 70,479
Year ended January 31, 2003:
Valuation allowance -
Accounts receivable .. $ 267 $ -- $ -- $ -- $ 267
Deferred tax asset ... 70,479 6,925 -- -- 77,404
60
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-3 (33-91494), and incorporated herein by reference).
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).
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).
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).
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).
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).
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).
10.65 - Eighth Supplement to 2000 Production Payment Agreement, dated March
5, 2002 (filed as an exhibit to TransTexas' quarterly report on Form
10-Q for the quarter ended April 30, 2002, and incorporated herein by
reference).
10.66 - Eighth Supplement to 2000 Production Payment Conveyance, dated March
5, 2002 (filed as an exhibit to TransTexas' quarterly report on Form
10-Q for the quarter ended April 30, 2002, and incorporated herein by
reference).
10.67 - Ninth Supplement to 2000 Production Payment Agreement, dated June 7,
2002 (filed as an exhibit to TransTexas' quarterly report on Form 10-Q
for the quarter ended April 30, 2002, and incorporated herein by
reference).
10.68 - Ninth Supplement to 2000 Production Payment Conveyance, dated June 7,
2002 (filed as an exhibit to TransTexas' quarterly report on Form 10-Q
for the quarter ended April 30, 2002, and incorporated herein by
reference).
10.69 - Amendment No. 2 to Oil and Gas Revolving Credit and Term Loan
Agreement, dated June 6, 2002, 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 quarterly report on
Form 10-Q for the quarter ended July 31, 2002, and incorporated herein
by reference.
10.70 - Amendment No. 2 to Third Amended and Restated Accounts Receivable
Management and Security Agreement dated June 6, 2002 between the
Company and GMAC Commercial Credit LLC (filed as an exhibit to the
Company's quarterly report on Form 10-Q for the quarter ended July 31,
2002, and incorporated herein by reference.
*10.71 - Tenth Supplement to Production Payment Agreement, dated March 27,
2003.
*10.72 - Tenth Supplement to Production Payment Conveyance, dated March 27,
2003.
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.
*99.1 - Certification of Chief Executive Officer and Chief Financial Officer.
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* filed herewith