<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1999
REGISTRATION NO. 333-70357
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
COSTILLA ENERGY, INC.
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<S> <C>
DELAWARE 75-2658940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
---------------------
<TABLE>
<S> <C>
BOBBY W. PAGE, SENIOR VICE PRESIDENT
COSTILLA ENERGY, INC.
400 WEST ILLINOIS, SUITE 1000 400 WEST ILLINOIS, SUITE 1000
MIDLAND, TEXAS 79701 MIDLAND, TEXAS 79701
(915) 683-3092 (915) 683-3092
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including area code, of telephone number, including area code,
Registrant's principal executive offices) of agent for service)
</TABLE>
---------------------
Copies to:
RICHARD T. MCMILLAN
COTTON, BLEDSOE, TIGHE & DAWSON,
A PROFESSIONAL CORPORATION
500 WEST ILLINOIS, SUITE 300
MIDLAND, TEXAS 79701
(915) 684-5782
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD UNTIL
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY 10, 1999
PROSPECTUS
3,000,000 SHARES
COSTILLA ENERGY, INC.
COMMON STOCK
---------------------
This Prospectus covers 3,000,000 shares of our common stock. One of our
stockholders, Pioneer Natural Resources USA, Inc., owns all of these shares.
Pioneer may sell any number of these shares from time to time in various
types of transactions, including sales in the open market and in private
negotiated transactions. These sales may be at market price or at privately
negotiated prices. There are no underwriting arrangements with respect to this
offering. This may result in several sales of a small number of shares.
Pioneer will receive all of the net proceeds from its sale of the shares,
and will pay all brokerage fees and similar sale-related expenses. We will not
receive any of the proceeds from the sale of the shares by Pioneer, but are
paying the costs of registering the shares with the Securities and Exchange
Commission.
Our common stock is traded on the Nasdaq National Market under the symbol
COSE.
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN RISKS TO
BE CONSIDERED IN CONNECTION WITH THE OFFER AND IN EVALUATING AN INVESTMENT IN
THE OFFERED SHARES.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors................................................ 3
Where You Can Find More Information......................... 8
Special Note on Forward-Looking Statements.................. 8
Selling Stockholder......................................... 9
The Offering................................................ 9
Use of Proceeds............................................. 9
Costilla Energy............................................. 10
Material Changes to Reported Information.................... 11
Plan of Distribution........................................ 12
Legal Matters............................................... 13
Experts..................................................... 13
SEC's Position on Indemnification for Securities Act
Liabilities............................................... 13
</TABLE>
---------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN
THIS PROSPECTUS OR ANY OTHER DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE
DATE ON THE FRONT OF THE DOCUMENTS. THIS PROSPECTUS IS NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED OR TO ANY PERSON WHO IS NOT PERMITTED TO BUY THESE SECURITIES.
2
<PAGE> 4
RISK FACTORS
In evaluating a potential investment in the shares offered by this
prospectus, you should consider carefully the following risk factors as well as
the other information contained and incorporated by reference in this
prospectus.
WE MAY NOT FIND NEW RESERVES TO REPLACE PRODUCED OIL AND GAS, REDUCING THE
AMOUNT OF OUR PRIMARY ASSETS.
The volume of oil or gas produced from a property generally decreases as
more oil and gas is produced from that property. The speed at which the decrease
occurs depends upon geologic characteristics of a particular property. If we do
not find new oil and gas production either by exploration and development or
acquisition, then our proved reserves will decrease as we produce oil and gas.
Proved reserves are estimates of the oil and gas located in known producing
reservoirs. Those estimates are based upon available data which demonstrates
that the oil and gas can be produced with reasonable certainty. Our future
production is highly dependent on finding or acquiring additional reserves.
Finding or acquiring additional reserves requires significant capital. If the
cash flow from our operations decreases and other sources of funds, such as debt
or sales of stock, are limited or unavailable, we may not be able to make
sufficient capital investments to replace our oil and gas reserves. Even if the
funds are available, our future exploration, development and acquisition
activities may not add proved reserves or production at acceptable costs.
WE HAVE A SUBSTANTIAL AMOUNT OF DEBT WHICH SIGNIFICANTLY EFFECTS OUR OPERATIONS
AND FINANCIAL RESULTS BY LIMITING THE FUNDS AVAILABLE TO US FOR OUR FUTURE
CAPITAL NEEDS.
As of September 30, 1998, our total long-term debt was approximately $207.5
million and our stockholders' equity was approximately $19.4 million. Our
substantial debt level has several important effects on our future operations.
First, a substantial portion of our cash flow from operations is used to pay
interest on our indebtedness and will not be available for other purposes. In
addition, our revolving credit facility and the indenture agreement with the
holders of our 10 1/4% Senior Notes due 2006 require us to meet financial tests
and impose restrictions that may limit our ability to borrow additional funds or
to sell assets. Those requirements and restrictions may limit our flexibility in
planning for, and reacting to, changes in our business. Our level of
indebtedness may also reduce the amount of additional financing we can obtain in
the future for working capital, capital expenditures, acquisitions or other
purposes.
At January 4, 1999, we had $40 million borrowed under our revolving credit
facility, constituting the full amount we are currently permitted to borrow
under that facility. Some of the restrictions in the indenture currently
prohibit us from borrowing funds from sources other than our revolving credit
facility. Therefore, we do not currently have the ability to borrow funds for
our capital needs, and must rely on cash flow, sales of stock and other sources.
In addition, the lenders under our revolving credit facility have advised us
that they will be redetermining the maximum amount we are allowed to borrow
under our revolving credit facility. See "Material Changes to Reported
Information" on page 11. If we are required to make a significant repayment due
to the redetermination of the maximum borrowing amount, we may not be able to
obtain the funds needed for our 1999 operating plan and other capital needs.
Our ability to timely pay our debt obligations and to reduce our total
indebtedness depends upon our future performance. Some factors involved in our
future performance, such as the price we receive for our oil and gas production,
are beyond our control. If we are not able to generate sufficient cash flow from
operations to timely pay our debt, we may have to attempt to refinance all or a
portion of our existing debt or obtain additional financing. We may not be able
to refinance the debt or obtain additional financing. Substantially all of our
assets are pledged to secure our revolving credit facility and cannot be used as
collateral for future loans. This lack of available collateral could harm our
ability to obtain other financing. If we are not able to obtain additional
financing, it may have serious and unfavorable effects on our financial
condition and operations.
3
<PAGE> 5
ESTIMATES OF PROVED RESERVES AND FUTURE NET CASH FLOWS ARE UNCERTAIN AND BASED
UPON ASSUMPTIONS AND SUBJECTIVE INTERPRETATION. THE DIFFERENCE BETWEEN THOSE
ESTIMATES AND THE ACTUAL RESULTS MAY BE SUBSTANTIAL.
The oil and gas reserve data contained and incorporated by reference in
this prospectus are estimates only. While we believe those estimates are
reasonable, oil and gas reserve estimates are imprecise and will most likely
change as additional information becomes available. Estimates of oil and gas
reserves are projections based on engineering information. The interpretation of
that information and the determination of projections of future drilling and
rates of production involve many uncertainties. Similarly, estimates of future
net revenues from proved reserves and the present value of that revenue are
based upon assumptions about production levels, prices and costs, which may not
be correct.
Reserve engineering is a subjective process of estimating oil and gas that
is still in the ground and cannot be exactly measured. The accuracy of any
reserve estimate depends upon the quality of the information used and the
knowledge and skill of the engineers preparing the estimates. Accordingly,
reserve estimates and estimates of the future net cash flows expected from those
reserves prepared by different engineers or by the same engineers at different
times may be substantially different.
We cannot provide any assurance that our estimated reserves will ultimately
be produced when we expect, or if they will be produced at all. The difference
between reserve estimates and the actual production could be substantial. You
should not consider the discounted future net cash flows to be the same as the
fair market value of our proved oil and gas properties. Discounted future net
cash flows are based upon projected cash flows that do not take into account
changes in oil and gas prices or increases in expenses and capital costs. Those
estimates are very dependent upon the accuracy of the assumptions used in
calculating the estimates. If those assumptions are not accurate, the estimates
based on those assumptions may be significantly different from actual results.
A SIGNIFICANT PORTION OF OUR OIL AND GAS RESERVES IS CONCENTRATED IN ONE FIELD.
While our oil and gas reserves are attributable to over 2,000 wells and
locations representing proved developed and proved undeveloped reserves, 31% of
our total proved reserves at October 1, 1998 were attributable to three
productive wells and two future drilling locations representing proved
undeveloped reserves in the Southwest Speaks Field in Lavaca County, Texas. Each
of the three productive wells were completed in 1998. Proved developed reserves
are those oil and gas reserves expected to be recovered from existing wells,
while proved undeveloped reserves are those expected to be recovered from new
wells or from major recompletions of existing wells. Estimates of proved
undeveloped reserves, as well as reserve estimates made early in the productive
life of wells, may be less reliable than reserve estimates attributable to wells
that have a longer production history. Any significant downward revision of the
reserve estimates attributable to the Southwest Speaks Field, or any
interference in production from the Field, could significantly reduce our future
cash flows.
IF OUR PIONEER ACQUISITION DOES NOT CLOSE, IT COULD ADVERSELY EFFECT OUR
FINANCIAL CONDITION.
Our previously-announced agreement to acquire oil and gas properties from
Pioneer Natural Resources USA, Inc., which was originally scheduled to close on
or about December 15, 1998, has been modified to provide us with an option to
purchase the same properties at a reduced purchase price. This option expires on
March 31, 1999. For the option, we paid Pioneer $25 million in cash which we
borrowed under our revolving credit facility, 3 million shares of Costilla
common stock valued at $13 million, and property valued at $3 million. We do not
have a contractual right to recover any of the payment made for the option,
although we have the right to repurchase the property we transferred to Pioneer
as part of the option payment for $3 million and to repurchase the 3 million
shares for $13 million. If the Pioneer acquisition does not close, we will not
receive any value for the option payment. However, we may have certain legal
rights and remedies if Pioneer breaches the agreement. Our failure to close the
Pioneer acquisition would limit the amount of funds available to carry out our
operating plans. We may be forced to sell assets or reduce our level of
operations, which could have a serious negative effect on our results of
operations and financial condition.
4
<PAGE> 6
ACQUISITIONS OF OIL AND GAS PROPERTIES, SUCH AS THE PIONEER ACQUISITION, INVOLVE
RISKS OF INCREASED LIABILITY EXPOSURE, INACCURATE PROPERTY ASSESSMENT,
MANAGEMENT CHALLENGES AND INCREASED EXPENSES.
Our rapid growth since 1995 has been largely the result of acquisitions of
producing properties. We expect to continue to evaluate available acquisition
opportunities and pursue those opportunities that management decides are
favorable. In considering an acquisition of producing properties, we do an
evaluation of recoverable reserves, future oil and gas prices, operating costs,
potential environmental and other liabilities and other factors beyond our
control. Our evaluation is based upon limited information and we cannot be
certain of its accuracy before completing an acquisition. In connection with the
evaluation, we review the properties that we would like to acquire in a method
that we believe is customary in the oil and gas industry. That review does not
reveal all existing or potential problems, and does not permit us to become
familiar enough with the properties to fully determine their positive and
negative characteristics. We may not be able to inspect every well, and we may
not discover all of the structural and environmental problems even when we do an
inspection. We do not generally receive an agreement from the seller to protect
us from preclosing liabilities, including environmental liabilities, and
generally acquire interests in the properties on an "as is" basis.
If the Pioneer acquisition is completed, the size of our business will be
increased significantly. We will be challenged in managing this larger business.
We cannot be certain how long it may take to assimilate the new properties and
realize any increase in value from our efforts on those properties. We
anticipate that some of the new properties will require workovers, recompletions
and other improvements. These activities may increase our lease operating
expenses without realizing any increase in production or revenue, if any, from
those efforts until a later time.
OUR FINANCIAL RESULTS ARE VERY DEPENDENT UPON UNSTABLE OIL AND GAS PRICES THAT
ARE CURRENTLY AT THEIR LOWEST LEVELS IN MANY YEARS.
The price we receive for our oil and gas production has a significant
effect on our financial results and our ability to pay debt. Historically, the
prices for oil and gas have been volatile and may continue to be volatile in the
future. Prices of oil and gas are subject to wide fluctuations in response to
market uncertainty, changes in supply and demand and a variety of additional
factors, all of which are beyond our control. These factors include domestic and
foreign political conditions, the overall level of supply and demand for oil and
gas, the price of imported oil and gas, weather conditions, the price and
availability of alternative fuels and overall economic conditions.
Currently, oil and gas prices are at their lowest levels in many years.
This has reduced our cash flow and adversely effected our financial results. Our
future financial condition and results of operations depend, in part, upon the
prices we receive for our oil and gas production. To reduce our exposure to
price risks in the sale of our oil and gas, we enter into hedging arrangements
from time to time. Although we hedge a significant portion of our production, an
extended period at current prices or any substantial or extended decline in the
price of oil or gas would materially and adversely effect our financial
condition and results of operations, as well as reduce the wells that could be
operated economically. Moreover, low oil and gas prices significantly reduce the
funds we have available and our ability to repay debt.
THE SALE OF ADDITIONAL SHARES OF COSTILLA COMMON STOCK MAY REDUCE THE STOCK'S
MARKET VALUE AND THE CURRENT STOCKHOLDERS' LEVEL OF OWNERSHIP.
If a substantial number of additional shares of Costilla common stock
become available for future sales on the public market, then the market price
for Costilla common stock could decline. We currently have the following
securities outstanding that are convertible or exercisable into shares of
Costilla common stock in addition to those shares already outstanding:
- 50,000 shares of our convertible preferred stock are currently
outstanding. Those shares are held by affiliates of Enron Corp. and are
presently convertible for approximately 4,035,513 shares of Costilla
common stock.
5
<PAGE> 7
- Stock options currently held by our officers, directors and employees are
presently exercisable for approximately 684,500 shares of Costilla common
stock.
In addition, our stockholders recently approved the sale of up to 250,000
shares of convertible preferred stock and up to 50 million shares of Costilla
common stock to raise part of the funds needed for the Pioneer acquisition. The
3,000,000 shares of Costilla common stock owned by Pioneer are some of the
shares approved by the stockholders, and increased the total number of shares
outstanding by approximately 30%. The sale of more of the shares approved by the
stockholders would also significantly increase the total number of outstanding
shares. The increase of outstanding shares reduces the current stockholders'
percentage ownership and may adversely effect the market price of Costilla
common stock.
Our stockholders also approved an increase of the number of shares that the
we may use for our 1996 Stock Option Plan from 1,250,000 shares to 4,000,000
shares. We have not granted options covering these additional shares at this
time. If we grant more options and issue shares upon exercise of options, then
the total shares outstanding will increase and may have the effects discussed
above. Also, if we sell shares upon exercises of options or conversions of
preferred stock for less than market prices, the financial interests of current
stockholders will be diluted.
WE DEPEND HEAVILY ON OUR SENIOR MANAGEMENT AND EXPERIENCED TECHNICAL STAFF.
We depend on the services of Cadell S. Liedtke, Chairman of the Board,
Michael J. Grella, President and Chief Executive Officer, and Henry G.
Musselman, Executive Vice President and Chief Operating Officer. The loss of the
services of any of these gentlemen could seriously effect our operations. Each
of these gentlemen has an employment agreement with us. They have agreed not to
compete with us for a one-year period if they voluntarily leave Costilla or if
their employment is terminated for cause within the initial three-year term of
the employment agreement. We believe that our success is also dependent upon our
ability to continue to employ and retain skilled technical personnel.
SENIOR MANAGEMENT OWNS A SIGNIFICANT AMOUNT OF COSTILLA COMMON STOCK, GIVING
THEM SIGNIFICANT INFLUENCE IN STOCKHOLDER VOTING.
Messrs. Liedtke, Grella and Musselman own directly and indirectly, in the
aggregate, approximately 41% of the outstanding Costilla common stock. This
stock ownership may allow these gentlemen to exercise significant influence over
the election of directors and control of management, operations and affairs.
OUR FOREIGN INVESTMENT SUBJECTS US TO RISKS NOT ENCOUNTERED IN OUR DOMESTIC
BUSINESS.
Our investment in Moldova subjects us to risks related to Moldova and
Eastern Europe, such as:
- foreign taxation or currency exchange which may make our efforts
unprofitable;
- political unrest or war that may cause our operations to be reduced or
suspended;
- the Moldovan government or other regional political force modifying or
canceling our concession and/or contracts without our agreement;
- the Moldovan government taking ownership of our property and interests
without our consent and without compensation; and
- being subject to foreign courts and legal systems, without recourse in
the United States.
These risks may result in our investment in Moldova being unprofitable or
lost entirely. While we attempt to conduct our affairs in Moldova in a way to
minimize these risks, many of these matters are not within our control and we
cannot guard against losses resulting from some of these risks.
OUR BUSINESS IS SUBJECT TO MANY OPERATIONAL RISKS THAT MAY CAUSE PRODUCTION OR
TRANSPORTATION DIFFICULTIES AND MAY RESULT IN SIGNIFICANT LIABILITIES.
6
<PAGE> 8
Our success is significantly effected by risks associated with our drilling
and other operational activities. We do not conduct drilling operations
ourselves, but hire drilling companies at standard industry rates. Costs of
drilling differ greatly depending upon demand for drilling rigs and any
difficulties encountered during drilling. These costs directly effect our
profits. Perhaps the most significant drilling risk is the risk that no oil or
gas will be found that can be produced at a profit. If we are not successful in
finding oil or gas when drilling, or if drilling costs are significantly higher
than projected, it will adversely effect our financial results.
Our production and other operations, and the transportation of our
production by others, also involve a number of hazards and risks such as fires,
natural disasters, explosions, blowouts and spills. These hazards and risks may
result in property damage or personal injury and may cause operations to be
suspended. We maintain insurance coverage that we consider adequate and
customary in the oil and gas industry. However, we are not fully insured against
some of these risks, either because the insurance is not available or because of
high premium costs. If a significant accident or other event happens and is not
fully covered by insurance, it could adversely effect our financial condition
and operations.
SOME OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER RESOURCES WHICH MAY GIVE THEM
A COMPETITIVE ADVANTAGE OVER US.
We have substantial competition in acquiring properties, marketing oil and
gas and employing trained personnel. Many of our competitors have substantially
larger financial resources, staffs and facilities. If we directly compete
against one of those larger companies in a desired acquisition of oil and gas
properties or in the hiring of experienced and skilled personnel, we may not
have the resources available to obtain the result we would like. As a result, we
must carefully select our acquisition prospects, personnel moves and similar
matters.
WE ARE SUBJECT TO COMPLEX GOVERNMENT LAWS AND REGULATION, INCLUDING
ENVIRONMENTAL REGULATIONS, THAT MAY RESULT IN INCREASED EXPENSES AND EXPOSURE TO
LIABILITY.
Our operations are affected from time to time in varying degrees by
political developments and federal, state and local laws and regulations. In
particular, oil and gas production, operations and economics are or have been
significantly affected by price controls, taxes and other laws. We cannot
predict how existing laws and regulations may be interpreted by enforcement
agencies or court rulings, whether additional laws and regulations will be
adopted, or the effect such changes may have on our business, financial
condition or results of operations.
Specifically, our operations are subject to complex and constantly changing
environmental laws and regulations adopted by federal, state and local
governmental authorities. We believe that compliance with those laws has not
significantly effected our operations to date. Nevertheless, if we discharge
oil, gas or other pollutants into the air, soil or water, we may incur
significant liabilities to the government and third parties. In past
acquisitions, we have agreed to protect the sellers against some of the
liabilities for environmental claims related to the properties we have
purchased. Our results of operations and financial condition may be adversely
affected by existing or future environmental laws or regulations. In addition,
we may be subject to significant claims by Sellers to protect them from
liability with respect to properties we have acquired.
THE YEAR 2000 ISSUE MAY ADVERSELY EFFECT OUR OPERATIONS THROUGH FAILURE OF OUR
OWN SYSTEMS OR PROBLEMS ENCOUNTERED BY OTHER COMPANIES WITH WHOM WE DO BUSINESS.
The third-party software vendor for our integrated oil and gas information
system has modified the system to accurately handle the Year 2000 issue. These
modifications were part of the routine updates we receive from our third-party
software vendor as part of the systems support contract. We have not, and do not
believe that we will, incur any material costs in addition to the ordinary
software maintenance costs in preparing our information systems for the Year
2000 issue. In addition to our information systems, we are conducting an
assessment of the Year 2000 issue with respect to the production and other field
equipment associated with our properties. A significant failure of that
equipment may cause delays in production and product transportation which could
adversely effect our operations and financial condition. Following this
assessment,
7
<PAGE> 9
we intend to establish a plan to make that equipment Year 2000 compliant or
develop a contingency plan for a possible failure of that equipment.
The Year 2000 issue also affects service companies, purchasers of
production, utility providers and other companies with whom we have a business
relationship. We have submitted Year 2000 compliance questionnaires to many of
these companies, but are currently not aware of the preparations undertaken by
these companies. A material and widespread failure of the utility service,
transportation of oil or gas, or similar service we use could significantly
effect our production, cash flow and overall financial condition. Therefore,
failure of such third parties to adequately prepare for Year 2000 issue may
adversely effect us, even though we have taken actions to prepare our own
information systems. We do not currently have a contingency plan in the event
those third parties are unable to provide services or products to us.
WHERE YOU CAN FIND MORE INFORMATION
Costilla Energy, Inc. files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You can read and copy this information at the Public Reference Room of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
You can also access these materials electronically on the SEC's Internet site
(http://www.sec.gov).
We filed a registration statement on Form S-3 with the SEC to register the
shares offered by this prospectus. As allowed by the SEC, this prospectus does
not contain all of the information you can find in the registration statement or
the exhibits to the registration statement. The SEC allows us to "incorporate by
reference" the information we file with it, which means that we can disclose
important information to you by referring to those documents. The information we
incorporate by reference is an important part of this prospectus, and
information that we file later with the SEC will automatically update and
supercede this information. We incorporate by reference the following documents
which have been filed by us with the SEC (File No. 0-21411):
- Costilla's Annual Report on Form 10-K for the year ended December 31,
1997;
- Costilla's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998;
- Costilla's Current Reports on Form 8-K filed on June 5, June 15 and
December 30, 1998;
- Costilla's Form S-4 Registration Statement filed on April 17, 1998 (File
No. 333-50347), as amended or supplemented; and
- The description of Costilla common stock contained in our registration
statement on Form 8-A filed on September 23, 1996.
We also incorporate by reference all documents filed by us pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934 after the date of
this prospectus until this offering has been completed.
You may obtain copies of these documents upon written or oral request
without charge from us by contacting our Manager, Investor Relations at 400 West
Illinois, Suite 1000, Midland, Texas 79705, telephone number 915-683-3092.
Copies of the documents may also be accessed electronically on our home page on
the Internet (http://www.costillaenergy.com).
8
<PAGE> 10
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This prospectus and the documents "incorporated by reference" as discussed
under "Where You Can Find More Information" may contain "forward-looking
statements" within the meaning of federal securities law. Such statements can be
identified by use of forward-looking terms such as may, will, expect, project,
anticipate, believe, estimate, continue or other similar words. These statements
discuss future expectations, such as oil and gas reserves, future drilling and
operations, future production of oil and gas, future net cash flows, future
capital expenditures and other forward-looking matters.
We have based these statements on our assumptions and analysis of
historical trends, current conditions, expected future developments and other
factors that we believe are appropriate under the circumstances. We believe that
the expectations reflected in our forward-looking statements are based on
reasonable assumptions. However, many factors may cause a material difference
between actual results and the forward-looking statements, many of which are
beyond our control. These factors include the following:
- Those discussed in our most recent Annual Report on Form 10-K;
- Those discussed in our Quarterly Reports on Form 10-Q;
- General economic and business conditions and the business opportunities,
or lack of those opportunities, presented to or pursued by us;
- The risk factors discussed in this prospectus under the heading "Risk
Factors", beginning on page 3; and
- Those discussed in our other filings with the SEC.
Any forward-looking statement speaks only as of the date that statement is
made. We will not update any forward-looking statement to reflect events or
circumstances that arise after the date the statement was made.
SELLING STOCKHOLDER
Pioneer Natural Resources USA, Inc., an independent oil and gas company,
owns all of the 3,000,000 shares of Costilla common stock offered in this
prospectus. We issued these shares to Pioneer as a portion of our payment for
the option to purchase oil and gas properties from Pioneer as stated in an
option to purchase agreement and a purchase and sale agreement, each dated as of
December 16, 1998 between Costilla, Pioneer and a Pioneer affiliate. We agreed
to register the sale of these shares by Pioneer. Pioneer does not own any shares
of Costilla common stock other than the 3,000,000 shares offered in this
prospectus. Pioneer may sell any or all of these shares. Pioneer does not have,
and has not had during the last three years, a material relationship with us
other than the Pioneer agreement and two other acquisition transactions
described under "Costilla Energy" on page 10.
THE OFFERING
Pioneer may sell any number of the 3,000,000 shares covered by this
prospectus at any time and from time to time in public market or in private
transactions at market or negotiated prices. However, Pioneer has agreed not to
sell these shares prior to May 30, 1999 if the Pioneer acquisition is completed.
Pioneer has also granted us the right to repurchase these shares for a total
purchase price of $13 million at any time prior to May 30, 1999. This offering
may continue until all of the 3,000,000 shares are sold.
USE OF PROCEEDS
All of the 3,000,000 shares of Costilla common stock offered in this
prospectus will be offered and sold by Pioneer as a selling stockholder. Pioneer
will receive all of the net proceeds from those sales. We will not receive any
proceeds from those sales, but we will pay expenses for registering the shares.
Pioneer will pay any brokerage fees or commissions in connection with the sales.
9
<PAGE> 11
COSTILLA ENERGY
Costilla is an independent energy company engaged in the exploration,
acquisition and development of oil and gas properties. Our primary operations
are in the Gulf Coast region, the Rocky Mountain region and the Permian Basin.
We use current and developing technology to increase our oil and gas reserves in
the following ways.
- A targeted exploration program which consists of drilling wells in areas
with little or no existing production.
- Acquisitions of oil and gas properties that compliment our current
properties.
- Development of currently producing properties by additional drilling,
workovers of wells and other operational improvements.
We began operating in 1988 and completed the initial public offering of
Costilla common stock in October 1996. As of October 1, 1998, we had estimated
net proved reserves of 11 million barrels of oil and 165 billion cubic feet of
gas. These oil and gas reserves total about 232 billion cubic feet of gas
equivalent, which represents the reserves as if the oil reserves and gas
reserves were all gas reserves by using a ratio of six thousand cubic feet of
gas for every barrel of oil. The total estimated net proved reserves are
attributable 29% to oil and 71% to gas, with a present discounted value of
future net revenues of approximately $180 million. The present discounted value
of estimated future net revenues is an estimate of future net revenue from our
properties at a specified date, discounted at an annual rate of 10% to show
"present" value. That value is provided as an estimate of the value of our
future revenue stream, and should not be used as an estimate of fair market
value of our properties.
In addition to producing reserves, we also have a significant amount of
developed acreage on which producing wells are located and undeveloped acreage
on which no commercially productive wells are located. At June 30, 1998, we had
a total of 1,007,479 gross acres (760,529 net acres), which included 715,038
gross acres (653,296 net acres) of undeveloped acreage. Gross acres represent
the total number of acres of properties in which we own any amount of working
interest, while net acres represent the total number of acres of each of those
properties multiplied by our percentage interest in that property.
We began active efforts to acquire and develop oil and gas properties in
1993. From January 1, 1993 to December 31, 1998, we closed nine acquisitions for
a total purchase price of approximately $149 million. The three most significant
acquisitions completed to date are the following:
- The acquisition of 36 billion cubic feet of gas equivalent of proved
reserves (at July 1, 1997), extensive undeveloped acreage and seismic
data located in the Rocky Mountain region from Ballard Petroleum, L.L.C.
in August 1997 for approximately $41 million.
- The acquisition from a predecessor of Pioneer of 64 billion cubic feet of
gas equivalent of proved reserves and undeveloped acreage located in the
Permian Basin and the Gulf Coast region in June 1996 for approximately
$39 million.
- The acquisition from a predecessor of Pioneer of 86 billion cubic feet of
gas equivalent of proved reserves and undeveloped acreage in the Permian
Basin, Gulf Coast and Rocky Mountain regions in June 1995 for
approximately $47 million.
We intend to continue our strategy to increase oil and gas reserves,
production and cash flow by using a three-pronged approach. This approach
combines an active exploration program using developing technology with
strategic property acquisitions and focused development drilling. Our management
and technical staff have significant oil and gas experience in drilling and
completion of oil and gas wells, production operations, acquisitions and
divestitures and petroleum engineering. Most members of the our technical staff
have in-depth knowledge of our core operating regions as a result of having
spent substantial portions of their careers specializing in those regions. We
try to reduce our operating and commodity risks by holding properties in several
oil and gas producing regions in the United States.
Our principal executive offices are located at 400 West Illinois, Suite
1000 Midland, Texas 79701 (915) 683-3092.
10
<PAGE> 12
MATERIAL CHANGES TO REPORTED INFORMATION
Other than as described below, there have been no material changes in the
information contained in the documents or reports incorporated by reference in
this prospectus as of the date of this prospectus.
As previously reported, Costilla and Pioneer entered into a purchase and
sale agreement dated September 4, 1998 with respect to our purchase of oil and
gas properties from Pioneer. The transaction was originally scheduled to close
on or about December 15, 1998, effective October 1, 1998. The purchase price was
originally $410 million. On December 16, 1998, Costilla and Pioneer signed the
new Pioneer agreement, which gives us an option to purchase the same oil and gas
properties included in the earlier agreement. We paid Pioneer $25 million in
cash, 3,000,000 shares of Costilla common stock valued at $13 million, and
property interests valued at $3 million for the option. The purchase price for
the oil and gas properties, in addition to the amount already paid for the
option, is now $294 million. Our option to purchase the properties expires on
March 31, 1999. When completed, the transaction will have a January 1, 1999
effective date. This means that we will be owner of the properties, entitled to
the production from the properties and subject to the liabilities with respect
to the properties, beginning on January 1, 1999 even though the closing date is
after that date.
We borrowed the $25 million cash portion of the option payment under our
revolving credit facility. If we do not receive any value for that $25 million
expenditure, we will continue to have a substantial amount of debt compared to
the value of our assets. In addition, the loss of the option payment for no
value in return may significantly and adversely affect our ability to generate
or obtain capital resources sufficient to fund our operating plans.
We intend to fund the $294 million purchase price of the Pioneer
acquisition through a combination of bank debt and the sale of stock. On
November 30, 1998, our stockholders approved the sale of up to 250,000 shares of
convertible preferred stock and up to 50 million shares of Costilla common stock
in connection with the Pioneer acquisition. The 3,000,000 shares issued to
Pioneer were a portion of the stock issuance approved by the stockholders. We
may sell any or all of the remaining 47 million shares of Costilla common stock
and/or the 250,000 shares of convertible preferred stock to raise a portion of
the money to pay the acquisition purchase price. We do not currently have any
agreements, commitments or similar arrangements with respect to either the bank
debt or the sale of stock to pay for the Pioneer acquisition.
Due to the delay in completing the Pioneer acquisition, our senior lenders
are in the process of redetermining the maximum amount of money we can borrow
under our revolving credit facility. We believe that this redetermination will
be completed by March 15, 1999. At this time we have borrowed the entire $40
million maximum borrowing amount previously set under the revolving credit
facility. In redetermining the maximum amount of money we can borrow, the
lenders will probably use pricing assumptions for future sale of oil and gas
production that are substantially lower than the assumptions used in prior
redeterminations. When the redetermination is completed, if our outstanding
indebtedness exceeds the new maximum amount set by the lenders, we will be
required to repay this difference in not more than six (6) equal installments.
We may not have the funds available for that repayment and may be forced to sell
assets or otherwise modify our operations to fund those payments. If the Pioneer
acquisition is not consummated, a required repayment could adversely effect our
ability to carry out our 1999 business plan and capital expenditure budget.
This information is in addition to, and will be supplemented and replaced
by, the information contained in the documents and reports incorporated by
reference in this prospectus. Those documents and reports, both those already
filed and those we will file in the future, are described under "Where You Can
Find More Information" on page 8.
11
<PAGE> 13
PLAN OF DISTRIBUTION
Pioneer may sell some or all of the 3,000,000 shares of Costilla common
stock offered by this prospectus from time to time:
- through dealers, brokers or other agents;
- directly to one or more purchasers, including persons who have a lien on
the shares;
- in transactions (which may involve cross or block transactions) on the
Nasdaq National Market;
- in privately negotiated transactions (including sales pursuant to
pledges);
- in the over-the counter market; or
- in a combination of such transactions.
These transactions may be at market prices prevailing at the time of sale,
at prices related to prevailing market prices, at negotiated prices, or at fixed
prices, which may be changed. Brokers, dealers, or other agents participating in
these transactions may receive compensation in the form of discounts,
concessions or commissions from Pioneer, and, if they act as agent for the
purchaser of the shares, from the purchaser.
Pioneer and any brokers, dealers or other agents that participate in such
distribution may be considered "underwriters" within the meaning of the
Securities Act of 1933, and any discounts, commissions or concessions received
by them might be deemed to be underwriting discounts and commissions under the
1933 Act. We cannot, nor can Pioneer, presently estimate the amount of any of
that compensation. We do not know of any existing arrangements between Pioneer
and any broker, dealer or other agent relating to the sale or distribution of
its shares of Costilla common stock.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in those jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with. Also, the anti-manipulative
provisions of Regulation M promulgated under the Securities Exchange Act of 1934
may apply to sales by Pioneer in the public market.
We have not engaged any underwriter, broker, dealer or agent in connection
with the distribution of the shares. We will pay all of the expenses incident to
the registration of the shares, other than discounts, commissions and
concessions of brokers dealers or other agents, if any.
Any shares covered by this prospectus which qualify for sale pursuant to
Rule 144 under the 1933 Act may be sold under Rule 144 rather than pursuant to
this prospectus. There is no assurance that Pioneer will sell any of the shares.
Pioneer may transfer, devise or gift shares by other means not described in this
prospectus. Pioneer may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of shares against certain
liabilities, including liabilities under the 1933 Act.
If we are notified by Pioneer that any material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution or a purchase
by a broker or dealer, we will file a supplement to this prospectus, if
required, pursuant to Rule 424(b) under the 1933 Act. The supplement will
disclose the following:
- the name of the selling stockholder and of the participating
broker-dealer(s);
- the number of shares involved;
- the price at which such shares will be sold;
- the commissions to be paid or discounts or concessions to be allowed to
such broker-dealer)s), where applicable;
12
<PAGE> 14
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus;
and
- other facts material to the transaction.
LEGAL MATTERS
Certain legal matters related to the shares of Costilla common stock
offered hereby will be passed upon for us by Cotton, Bledsoe, Tighe and Dawson,
a Professional Corporation, Midland, Texas.
EXPERTS
Costilla's consolidated financial statements as of December 31, 1997 and
1996 and for each of the years in the three-year period ended December 31, 1997
have been incorporated herein by reference in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated herein by reference,
and upon the authority of said firm as experts in accounting and auditing.
The statement of revenues and direct operating expenses of the business
acquired from Ballard Petroleum LLC for the year ended December 31, 1996 and the
statement of revenues and direct operating expenses of the 1995 Acquisition from
a Pioneer predecessor for the period ended June 12, 1995, incorporated herein by
reference in reliance upon the reports of KPMG LLP, independent certified public
accountants, incorporated herein by reference, and upon the authority of said
firm as experts in accounting and auditing.
Certain information appearing in reports and documents incorporated by
reference in this prospectus regarding estimated quantities of oil and gas
reserves and the discounted present value of future pre-tax cash flows therefrom
attributable to certain of our properties at January 1, 1997 and January 1, 1998
are based on reports prepared or reviewed by Williamson Petroleum Consultants,
Inc. and W. Scott Epley, P.E.
SEC'S POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Certificate of Incorporation and Bylaws provide indemnification for our
officers and directors under the circumstances defined in Section 145 of the
General Corporation Law of the State of Delaware.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Costilla
pursuant to the foregoing provisions, we have been informed that in the opinion
of the SEC such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
13
<PAGE> 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COSTILLA ENERGY, INC.
3,000,000 SHARES
COMMON STOCK
------------------------
PROSPECTUS
------------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a list of estimated expenses in connection with the
issuance and distribution of the securities being registered, with the exception
of underwriting discounts and commissions:
<TABLE>
<S> <C>
Registration Fee............................................ $ 3,753
Legal fees and expenses (other than Blue Sky)............... $10,000
Accounting fees and expenses................................ $ 2,000
Nasdaq listing fee.......................................... $17,500
Miscellaneous............................................... $ 3,000
-------
Total............................................. $36,253
=======
</TABLE>
All of the above expenses other than the Registration fee and the Nasdaq
listing fee are estimates. All of the above expenses will be borne by Costilla.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation to indemnify certain persons, including officers and directors and
former officers and directors, and to purchase insurance with respect to
liability arising out of their capacity or status as officers and directors.
Such law provides further that the indemnification permitted hereunder shall not
be deemed exclusive of any other rights to which officers and directors may be
entitled under the corporation's bylaws, any agreement or otherwise. Article IX
of the Company's Certificate of Incorporation and Article VI of the Company's
Bylaws provide, in general, that the Company shall indemnify its directors and
officers under the circumstances defined in Section 145 of the General
Corporation Law of the State of Delaware and gives authority to the Company to
purchase insurance with respect to such indemnification. The Company may in the
future seek to obtain insurance providing for indemnification of officers and
directors of the Company and certain other persons against liabilities and
expenses incurred by any of them in certain stated proceedings and under certain
stated conditions.
In addition, Section 102(b)(7) of the General Corporation Law of the State
of Delaware permits a corporation to limit the liability of its directors
subject to certain exceptions. In accordance with Section 102(b)(7), Article VI
of the Company's Certificate of Incorporation provides, in general, that no
director of the Company shall be personally liable for breach of fiduciary duty
as a director, provided that such limitation of liability shall not apply to (i)
any breach of the directors' duty of loyalty to the Company or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the General
Corporation Law of the State of Delaware or (iv) any transaction from which the
director derived an improper personal benefit.
II-1
<PAGE> 17
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
*5.1 -- Opinion of Cotton, Bledsoe, Tighe & Dawson, P.C.
**23.1 -- Consent of KPMG LLP
**23.2 -- Consent of Williamson Petroleum Consultants
**23.3 -- Consent of W. Scott Epley, P.E.
*23.4 -- Consent of Cotton, Bledsoe, Tighe & Dawson, P.C.
(included as part of Exhibit 5.1)
*24.1 -- Power of Attorney
*24.2 -- Certified copy of resolution of Board of Directors of
Costilla Energy, Inc. authorizing signature by Power of
Attorney
</TABLE>
- ---------------
* Previously Filed
** Filed herewith
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
II-2
<PAGE> 18
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Midland, State of Texas on this 10th day of
February, 1999.
COSTILLA ENERGY, INC.
By: /s/ MICHAEL J. GRELLA*
----------------------------------
Michael J. Grella
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ MICHAEL J. GRELLA* President, Chief Executive February 10, 1999
- ----------------------------------------------------- Officer and Director
Michael J. Grella
/s/ CADELL S. LIEDTKE* Chairman of the Board and February 10, 1999
- ----------------------------------------------------- Director
Cadell S. Liedtke
/s/ HENRY G. MUSSELMAN* Executive Vice President and February 10, 1999
- ----------------------------------------------------- Director
Henry G. Musselman
/s/ JERRY J. LANGDON* Director February 10, 1999
- -----------------------------------------------------
Jerry J. Langdon
/s/ W. D. KENNEDY* Director February 10, 1999
- -----------------------------------------------------
W. D. Kennedy
/s/ SAMUEL J. ATKINS, III* Director February 10, 1999
- -----------------------------------------------------
Samuel J. Atkins, III
/s/ TIMOTHY J. DETMERING* Director February 10, 1999
- -----------------------------------------------------
Timothy J. Detmering
/s/ BOBBY W. PAGE Senior Vice President and February 10, 1999
- ----------------------------------------------------- Chief Financial Officer
Bobby W. Page
*By: /s/ BOBBY W. PAGE
------------------------------------------------
Bobby W. Page,
Attorney in Fact
</TABLE>
II-4
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
*5.1 -- Opinion of Cotton, Bledsoe, Tighe & Dawson, P.C.
**23.1 -- Consent of KPMG LLP
**23.2 -- Consent of Williamson Petroleum Consultants
**23.3 -- Consent of W. Scott Epley, P.E.
*23.4 -- Consent of Cotton, Bledsoe, Tighe & Dawson, P.C.
(included as part of Exhibit 5.1)
*24.1 -- Power of Attorney
*24.2 -- Certified copy of resolution of Board of Directors of
Costilla Energy, Inc. authorizing signature by Power of
Attorney
</TABLE>
- ---------------
* Previously Filed
** Filed herewith
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Costilla Energy, Inc.
We consent to the use of our reports incorporated herein by reference and
to the reference to our firm under the heading "Experts" in the Prospectus.
KPMG LLP
Midland, Texas
February 10, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ENGINEERS
As independent engineering consultants, we hereby consent to the use of our
reports and data extracted therefrom (and all references to our Firm)
incorporated by reference in or otherwise made a part of this Amendment No. 2 to
Registration Statement on Form S-3 relating to the registration of 3,000,000
shares of the Common Stock, $0.10 par value, of Costilla Energy, Inc. to be
filed with the Securities and Exchange Commission on or about February 10, 1999.
WILLIAMSON PETROLEUM CONSULTANTS, INC.
Houston, Texas
February 10, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ENGINEER
As an independent engineering consultant, I hereby consent to the use of my
reports and data extracted therefrom (and all references to me and my Firm)
incorporated by reference in or otherwise made a part of this Amendment No. 2 to
Registration Statement on Form S-3 relating to the registration of 3,000,000
shares of the Common Stock, $0.10 par value, of Costilla Energy, Inc. to be
filed with the Securities and Exchange Commission on or about February 10, 1999.
W. SCOTT EPLEY, P.E.
Midland, Texas
February 10, 1999
