UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT PURSUANT TO
SECTION
13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
report (Date of earliest event reported): January 11, 2010
TXCO
Resources Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
(State or
other Jurisdiction of Incorporation)
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0-9120
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84-0793089
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(Commission
File Number)
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(IRS
Employer Identification No.)
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777
E. Sonterra Blvd., Suite 350
San
Antonio, Texas 78258
(Address
of Principal Executive Offices) (Zip Code)
Registrant’s
telephone number, including area code: (210) 496-5300
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01 Entry into a Material Definitive Agreement.
On
January 11, 2010, TXCO Resources Inc. (the “Company”) and its subsidiaries TXCO
Energy Corp., Texas Tar Sands Inc., Output Acquisition Corp., Opex Energy, LLC,
Charro Energy, Inc., TXCO Drilling Corp., Eagle Pass Well Service, L.L.C., PPL
Operating, Inc., Maverick Gas Marketing, Ltd., and Maverick-Dimmit Pipeline,
Ltd. (collectively, “TXCO”), entered into a definitive Purchase and Sale
Agreement (the “Agreement”) to sell a substantial portion of TXCO’s assets to
Newfield Exploration Company and Anadarko E&P Company LP (together,
“Purchasers”) for total consideration of the lesser of (i) the sum of the
amounts sufficient to (a) repay TXCO’s lenders (including TXCO’s
debtor-in-possession financing and revolver or term loan credit facilities), (b)
pay all other creditors of TXCO in full, including interest thereon, and (c) pay
any cure amounts of executory contracts to be assumed by Purchasers (other than
certain of Anadarko’s claims which will be waived at closing), or (ii) $310
million in cash, subject to customary purchase price
adjustments. Additionally, Newfield has agreed to irrevocably
subordinate the rights it has as the holder of claims and interests relating to
preferred stock of TXCO for which a notice of redemption was sent to TXCO prior
to the filing of TXCO’s bankruptcy petition (as further described below),
including rights to payments, recoveries or proceeds to which Newfield or its
affiliates may be entitled thereunder, to the rights of the holders of preferred
stock of TXCO which did not deliver a notice of redemption to TXCO prior to the
filing of TXCO’s bankruptcy petition. Newfield has further agreed to
subordinate up to $10,000,000 of its claim and interests in and to such
preferred stock to the rights of holders of TXCO’s common stock to receive
distribution under TXCO’s plan of reorganization.
The sale
is expected to close as early as January 29, 2010, but the economic effective
date of the sale will be January 1, 2010. The respective portion of
the assets covered by the Agreement to be acquired by Newfield and Anadarko,
respectively, will be designated by Purchasers prior to the
closing.
Under the
terms of the Agreement, certain assets are excluded from the assets being
purchased by Purchasers and will be retained by TXCO, including, among others,
TXCO’s drilling rigs, offshore properties, Oklahoma properties, non-operated
properties within the Williston Basin, non-operated properties in south Texas
outside of Maverick, LaSalle, Zavala and Dimmit Counties, and its interests in
the “Dexter Waterflood Unit”, the “Forrest WM B1U” and the “Vinton
Dome.”
TXCO
previously entered into a definitive Purchase and Sale Agreement (the “Newfield
PSA”) on November 6, 2009, to sell the same assets covered by the Agreement to
Newfield Exploration Company for total consideration of $223
million. Subsequently, TXCO entered into a definitive Purchase and
Sale Agreement (the “Anadarko PSA”) on December 31, 2009, to sell the same
assets covered by the Agreement to Anadarko E&P Company LP for total
consideration equal to the lesser of (i) $1 million more than the sum of the
amounts sufficient to (a) repay TXCO’s lenders (including TXCO’s
debtor-in-possession financing and revolver or term loan credit facilities), (b)
pay all other creditors of TXCO in full, including interest thereon, and (c) pay
any cure amounts of executory contracts that were to be assumed by Anadarko
(other than certain of Anadarko’s claims which were to be waived at closing), or
(ii) $310 million in cash, subject to customary purchase price
adjustments. The board of directors of TXCO has determined that the
Agreement constitutes a superior proposal to both the Newfield PSA and the
Anadarko PSA. Accordingly, TXCO intends to seek the entry of an order
of the Bankruptcy Court authorizing the transactions contemplated by the
Agreement. If the Bankruptcy Court authorizes the transactions
contemplated by the Agreement, the Newfield PSA and the Anadarko PSA will be
terminated.
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TXCO
filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy
Code with the United States Bankruptcy Court for the Western District of Texas
(the “Bankruptcy Court”) on May 17, 2009. TXCO continues to operate
its business as debtor-in-possession under the jurisdiction of the Bankruptcy
Court and in accordance with the applicable provisions of the Bankruptcy Code
and orders of the Bankruptcy Court. As debtors-in-possession, TXCO
may not engage in transactions outside the ordinary course of business without
the prior approval of the Bankruptcy Court. Accordingly, the
consummation of the sale of assets to Purchasers contemplated by the Agreement
is subject to the entry of a final order of the Bankruptcy Court authorizing the
sale. TXCO’s currently proposed Plan of Reorganization contemplated
the potential submission of superior proposals to those contained in the
Newfield PSA and the Anadarko PSA, and TXCO intends to file a proposed amended
plan of reorganization, to the extent necessary, incorporating the terms of the
Agreement with the Bankruptcy Court. Depending on the proceeds, if any,
ultimately received in respect of the assets which will not be transferred to
Purchasers pursuant to the Agreement, the Company anticipates that holders of
the Company’s preferred and common equity securities may receive some cash or
other property in respect of such securities, but the amount of cash or other
property that may ultimately be received by the holders of the Company’s common
equity securities would be limited to $10,000,000 in the
aggregate. The Company anticipates that all of its outstanding
equity securities will be cancelled under the plan of
reorganization. The Company can make no assurances as to whether the
holders of its preferred or common equity securities will ultimately receive any
cash or other property in respect of such securities or as to the amount, if
any, that they may receive in respect thereof. Accordingly, the
Company urges that extreme caution be exercised with respect to existing and
future investments in any Company equity securities.
The
Agreement contains customary representations, warranties, covenants, and
indemnities of TXCO and Purchasers. In addition to having to obtain
the Bankruptcy Court’s approval, the completion of the sale of assets to
Purchasers is subject to various customary conditions, including, among others,
(i) subject to certain materiality qualifications, (ii) the accuracy of the
representations and warranties made by Purchasers and TXCO, respectively, (iii)
compliance by Purchasers and TXCO with their respective obligations under the
Agreement, (iv) the absence of any pending lawsuit, action, or other proceeding
seeking to restrain or prohibit the consummation of the sale transaction, and
(v) the aggregate sum of all casualty and condemnation losses not exceeding 10%
of the unadjusted purchase price.
TXCO has
agreed not to solicit proposals relating to alternative acquisition transactions
or to engage in negotiations or discussions with any person who makes an
unsolicited acquisition proposal (including providing access to non-public
information to persons that have made an unsolicited acquisition
proposal).
The
Agreement also contains certain termination rights for each of Purchasers and
TXCO, including, among others, Purchasers’ right to terminate (i) if the
Bankruptcy Court has not entered an order on or before January 31, 2010
authorizing the sale of the assets to Purchasers, and (ii) if an order of the
Bankruptcy Court authorizing the sale of the assets to Purchasers is not final
by February 15, 2010.
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The
foregoing description of the Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the Agreement, a copy
of which will be filed by amendment to this Current Report on Form
8-K.
Most of
TXCO’s filings with the Bankruptcy Court are available to the public at the
offices of the Clerk of the Bankruptcy Court or the Bankruptcy Court’s web site
(http://www.txwb.uscourts.gov/) or may be obtained through private document
retrieval services, or on the web site established by TXCO’s claims and noticing
agent (http://cases.administarllc.com/txco). Information contained on, or that
can be accessed through, such web sites or the Bankruptcy Court's web site is
not part of this report.
Forward-Looking
Statements
This
Current Report on Form 8-K may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Statements by
TXCO (which term, unless otherwise specified or the context otherwise requires,
refers to TXCO Resources Inc. and its subsidiaries) of expectations,
anticipations, beliefs, plans, intentions, targets, estimates, or projections
and similar expressions relating to the future are forward-looking statements
within the meaning of these laws. Forward-looking statements in some
cases can be identified by their being preceded by, followed by or containing
words such as “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,”
“anticipate,” “believe,” “seek,” “target” and other similar
expressions. Forward-looking statements are based on assumptions and
assessments made by TXCO’s management in light of their experience and their
perception of historical trends, current conditions, expected future
developments and other factors they believe to be appropriate. Any
forward-looking statements are not guarantees of TXCO’s future performance and
are subject to risks and uncertainties that could cause actual results,
developments and business decisions to differ materially from those contemplated
by any forward-looking statements. Except as required by law, TXCO
undertakes no obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise.
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Some of
the factors that may cause actual results, developments and business decisions
to differ materially from those contemplated by any forward-looking statements
include the following: the ability of TXCO to continue as a going concern;
TXCO’s ability to satisfy the conditions for drawing on any existing
debtor-in-possession financing and to obtain additional debtor-in-possession
financing on an interim or final basis; the ability of TXCO to operate pursuant
to the terms and conditions of any debtor-in-possession financing and any cash
collateral order entered by the Bankruptcy Court in connection with TXCO’s
bankruptcy cases; TXCO’s ability to obtain court approval with respect to
motions in the chapter 11 cases prosecuted by TXCO from time to time; TXCO’s
ability to develop, prosecute, confirm and consummate a plan of reorganization
with respect to TXCO’s bankruptcy cases; risks associated with third parties
seeking and obtaining court approval to terminate or shorten the exclusivity
period that TXCO has to propose and confirm a plan of reorganization, for the
appointment of a chapter 11 trustee or to convert TXCO’s bankruptcy cases to
cases under chapter 7 of the U.S. Bankruptcy Code; TXCO’s ability to obtain and
maintain normal terms with vendors and service providers; TXCO’s ability to
maintain contracts that are critical to its operations; the potential adverse
impact of TXCO’s bankruptcy cases on TXCO’s liquidity or results of operations;
TXCO’s ability to fund and execute its business plan; TXCO’s ability to attract,
motivate and retain key executives and employees; TXCO’s ability to attract and
retain vendors and service providers, TXCO’s ability to obtain capital to fund
TXCO’s working capital needs; the adequacy of TXCO’s liquidity and its ability
to meet its cash commitments, working capital needs, lender and vendor
obligations; general market conditions; adverse capital and credit market
conditions; the costs and accidental risks inherent in exploring and developing
new oil and natural gas reserves; the price for which such reserves and
production can be sold; fluctuation in prices of oil and natural gas; the
uncertainties inherent in estimating quantities of proved reserves and cash
flows; competition; actions by third party co-owners in properties in which TXCO
also owns an interest; acquisitions of properties and businesses; operating
hazards; environmental concerns affecting the drilling of oil and natural gas
wells; impairment of oil and natural gas properties due to depletion or other
causes; and hedging decisions, including whether or not to hedge; TXCO’s ability
to secure additional financing; and other risks referenced from time to time in
TXCO’s filings with the Securities and Exchange Commission, including the risk
factors listed in Part II, Item 1A, “Risk Factors” in TXCO’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2009, filed with the
Securities and Exchange Commission on November 9, 2009. Similarly, these and
other factors, including the terms of any reorganization plan ultimately
confirmed, can affect the value of TXCO’s various pre-petition liabilities and
TXCO Resources Inc.’s common stock and preferred stock. No assurance
can be given as to what values, if any, will be ascribed in the chapter 11 cases
to each of these constituencies. The Company anticipates that all of its
outstanding equity securities will be cancelled under the plan of
reorganization. The Company can make no assurances as to whether the
holders of its preferred or common equity securities will ultimately receive any
cash or other property in respect of such securities or as to the amount, if
any, that they may receive in respect thereof. Accordingly, the
Company urges that extreme caution be exercised with respect to existing and
future investments in any of these pre-petition liabilities or equity
securities.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, hereunto
duly authorized.
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TXCO
Resources Inc.
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Date: January
12, 2009
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/s/ James E. Sigmon
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James
E. Sigmon
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Chairman
and Chief Executive Officer
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