<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TITAN EXPLORATION, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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<PAGE> 2
TITAN EXPLORATION, INC.
500 WEST TEXAS, SUITE 500
MIDLAND, TEXAS 79701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1997
To the Stockholders of
TITAN EXPLORATION, INC.
Notice is hereby given that the annual meeting of stockholders of
Titan Exploration, Inc., a Delaware corporation (the "Company"), will be held
on Wednesday, May 28, 1997, at 10:00 a.m., local time, at the Midland Room,
Tower Two, Fasken Center, 550 West Texas, Midland, Texas 79701 for the
following purposes:
1. To elect five directors to serve until the Annual Meeting of
Stockholders in 1998;
2. To approve the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the year ending
December 31, 1997; and
3. To transact such other business as may properly come before
the meeting or any adjournment(s) thereof.
Only stockholders of record at the close of business on April 21, 1997
are entitled to notice of, and to vote at, the meeting or any adjournment(s)
thereof.
You are cordially invited and urged to attend the meeting, but if you
are unable to attend, please sign and date the enclosed proxy and return it
promptly in the enclosed self-addressed stamped envelope. A prompt response
will be appreciated. If you attend the meeting, you may vote in person, if you
wish, whether or not you have returned your proxy. In any event, a proxy may
be revoked at any time before it is exercised.
BY ORDER OF THE BOARD OF DIRECTORS
SUSAN D. ROWLAND
Secretary
Midland, Texas
April 30, 1997
<PAGE> 3
TITAN EXPLORATION, INC.
500 WEST TEXAS, SUITE 500
MIDLAND, TEXAS 79701
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1997
SOLICITATION OF PROXIES
SOLICITATION AND REVOCABILITY OF PROXIES
This proxy statement is furnished to holders of Titan Exploration, Inc.
("Titan" or the "Company") common stock, $0.01 par value ("Common Stock"), in
connection with the solicitation of proxies on behalf of the Board of Directors
of the Company for use at the annual meeting of stockholders of Titan to be
held on Wednesday, May 28, 1997, at 10:00 a.m., local time, at the Midland
Room, Fasken Center, 550 West Texas, Midland, Texas 79701, and at any
adjournment(s) thereof, for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders.
Shares represented by a proxy in the form enclosed, duly signed, dated
and returned to the Company and not revoked, will be voted at the meeting in
accordance with the directions given, but in the absence of directions to the
contrary, such shares will be voted (i) for the election of the Board's
nominees for directors, (ii) for the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the year ending December 31, 1997, and
(iii) in accordance with the best judgment of the persons voting on any other
proposals that may come before the meeting. The Board of Directors knows of no
other matters, other than those stated in the foregoing notice, to be presented
for consideration at the meeting or any adjournment(s) thereof. If, however,
any other matters properly come before the meeting or any adjournment(s)
thereof, it is the intention of the persons named in the enclosed proxy to vote
such proxy in accordance with their judgment on any such matters. The persons
named in the enclosed proxy may also, if it is deemed to be advisable, vote
such proxy to adjourn the meeting from time to time.
Any stockholder executing and returning a proxy has the power to revoke
it at any time before it is voted by delivering to the Secretary of the
Company, 500 West Texas, Suite 500, Midland Texas 79701, a written revocation
thereof or by duly executing a proxy bearing a later date. Any stockholder
attending the annual meeting of stockholders may revoke his proxy by notifying
the Secretary at such meeting and voting in person if he desires to do so.
Attendance at the annual meeting will not by itself revoke a proxy.
The approximate date on which this proxy statement and the form of proxy
are first sent to stockholders is April 30, 1997.
The cost of soliciting proxies will be borne by the Company.
Solicitation may be made, without additional compensation, by directors,
officers and regular employees of the Company in person or by mail, telephone
or telegram. The Company may also request banking institutions, brokerage
firms, custodians, trustees, nominees and fiduciaries to forward solicitation
material to the beneficial owners of the Common Stock held of record by such
persons, and Titan will reimburse the forwarding expense. All costs of
preparing, printing and mailing the form of proxy and the material used in the
solicitation thereof will be borne by the Company.
SHARES OUTSTANDING AND VOTING RIGHTS
The close of business on April 21, 1997 is the record date for
determination of stockholders entitled to notice of and to vote at the meeting
or any adjournment(s) thereof. The only voting security of the Company
outstanding is the Common Stock, each share of which entitles the holder
thereof to one vote. At the record date for the meeting, there were
outstanding and entitled to be voted 33,941,513 shares of Common Stock.
1
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information concerning (i) the only persons
known by the Company, based upon statements filed by such persons pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to own beneficially in excess of 5% of the Common Stock as of
April 21, 1997 and (ii) the shares of Common Stock beneficially owned, as of
April 21, 1997, by each director of the Company, each executive officer listed
in the Summary Compensation Table included elsewhere in this proxy statement,
and all executive officers and directors of the Company as a group. Except as
indicated, each individual has sole voting power and sole investment power over
all shares listed opposite his name.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
------------------------------
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS
------------------------------------ --------- ----------
<S> <C> <C>
Directors and Executive Officers (1):
Jack D. Hightower (2) . . . . . . . . . . . . . . . . . . . . . 3,834,212 10.98%
George G. Staley (3) . . . . . . . . . . . . . . . . . . . . . 768,662 2.23%
Rodney L. Woodard (4) . . . . . . . . . . . . . . . . . . . . . 168,721 *
David R. Albin (5)(6) . . . . . . . . . . . . . . . . . . . . . 105,772 *
Kenneth A. Hersh (5) . . . . . . . . . . . . . . . . . . . . . 59,881 *
William J. Vaughn, Jr. (7) . . . . . . . . . . . . . . . . . . 342,541 1.01%
Executive Officers and Directors as a Group (11 persons) (8) . . 5,745,099 16.00%
Natural Gas Partners II, L.P. (9) . . . . . . . . . . . . . . . . 5,000,777 14.73%
777 Main Street, Suite 2700
Fort Worth, Texas 76102
R. Gamble Baldwin (10) . . . . . . . . . . . . . . . . . . . . . 4,776,507 14.07%
1130 Park Avenue
New York, New York 10128
Natural Gas Partners, L.P. and G.F.W. Energy, L.P. (10)(11) . . . 4,767,407 14.05%
777 Main Street, Suite 2700
Fort Worth, Texas 76102
Enron Corp. and Joint Energy Development Investments Limited
Partnership (12) . . . . . . . . . . . . . . . . . . . . . . . 3,423,194 10.09%
1400 Smith Street
Houston, Texas 77002
</TABLE>
- - --------------------
* Represents less than 1% of the outstanding Common Stock or voting power.
(1) The business address of each director and executive officer is c/o Titan
Exploration, Inc., 500 West Texas, Suite 500, Midland, Texas 79701.
(2) Includes (i) 2,667,588 shares held by Mr. Hightower, (ii) 199,524 shares
held by Mr. Hightower's spouse and children and 967,100 shares subject to
stock options that are exercisable within 60 days.
(3) Includes (i) 199,525 shares held by Mr. Staley, and (ii) 569,137 shares
subject to stock options that are exercisable within 60 days.
(4) Includes (i) 46,556 shares held by Mr. Woodard, and (ii) 122,165 shares
subject to stock options that are exercisable within 60 days.
(5) David R. Albin and Kenneth A. Hersh are each managing members of the
general partner of Natural Gas Partners II, L.P. As such, Mr. Albin and
Mr. Hersh may be deemed to share voting and investment power with respect
to the 5,000,777 shares beneficially owned by Natural Gas Partners II,
L.P. Mr. Albin and Mr. Hersh disclaim beneficial ownership of such
shares.
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<PAGE> 5
(6) All of these shares are held in trust for Mr. Albin.
(7) Includes (i) 5.000 shares held by Mr. Vaughn, (ii) 299,287 shares held
in trust for Mr. Vaughn and his spouse, and (iii) 38,254 shares held by
an affiliate of Mr. Vaughn.
(8) Includes 1,975,294 shares that officers and directors as a group have the
right to acquire within 60 days through the exercise of options granted
pursuant to the Initial Stock Option Plan and the 1996 Incentive Plan.
(9) Based upon information reported in a Schedule 13G dated February 5, 1997
filed by Natural Gas Partners II, L.P., G.F.W. Energy II, L.P. and GFW
II, L.L.C. with the Commission. GFW II, L.L.C. is the sole general
partner of G.F.W. Energy II, L.P., which is the sole general partner of
Natural Gas Partners II, L.P.
(10) Based upon information reported in a Schedule 13G dated February 5, 1997
filed by R. Gamble Baldwin with the Commission. Mr. Baldwin has sole
voting and investment power with respect to 9,100 shares of Common Stock
he beneficially owns. In addition, Mr. Baldwin may, as the sole general
partner of G.F.W. Energy, L.P., the sole general partner of Natural Gas
Partners, L.P., be deemed to be the beneficial owner of all 4,767,407
shares of Common Stock beneficially owned by Natural Gas Partners, L.P.
(11) Based upon information reported in a Schedule 13G dated February 5, 1997
filed by Natural Gas Partners, L.P. and G.F.W. Energy, L.P. with the
Commission. G.F.W. Energy, L.P. is the sole general partner of Natural
Gas Partners, L.P.
(12) Based upon information reported in a Schedule 13G dated January 20, 1997
filed by Enron Corp. and Joint Energy Development Investments Limited
Partnership ("JEDI") with the Commission. The general partner of JEDI is
Enron Capital Management Limited Partnership, whose general partner is
Enron Capital Corp., an indirect wholly owned subsidiary of Enron Corp.
PROPOSAL 1. ELECTION OF DIRECTORS
The business and affairs of the Company are managed by and under the
direction of the Board of Directors, which exercises all corporate powers of
the Company and establishes broad corporate policies.
The Company's Board of Directors formed standing audit and compensation
committees on March 20, 1997, which are composed of David R. Albin, Kenneth A.
Hersh and William J. Vaughn, Jr. The Compensation Committee will exercise the
power of the Board of Directors in connection with all matters relating to
compensation of executive officers, employee benefit plans and the
administration of the Company's stock option programs.
The Audit Committee's primary responsibilities will be to (i) recommend
the Company's independent auditors to the Board of Directors, (ii) review with
the Company's auditors the plan and scope of the auditor's annual audit, the
results thereof and the auditors' fees, (iii) review the Company's financial
statements and (iv) take such other action as they deem appropriate as to the
accuracy and completeness of financial records of the Company and financial
information gathering, reporting policies and procedures of the Company.
All duly submitted and unrevoked proxies will be voted for the nominees
for directors selected by the Board of Directors, except where authorization so
to vote is withheld. If any nominee(s) should become unavailable for election
for any presently unforeseen reason, the persons designated as proxies will
have full discretion to cast votes for another person(s) designated by the
Board. The five nominees of the Board of Directors of the Company are named
below. Each of the nominees has consented to serve as a director if elected.
Set forth below is certain information with respect to the nominees, including
information as to each nominee's age as of April 30, 1997, position with the
Company, business experience during the past five years and directorships of
publicly held companies.
JACK D. HIGHTOWER, age 48, has served as President, Chief Executive
Officer and Chairman of the Board of Directors of the Company since he founded
the Company in March 1995. Prior to forming the Company, from 1986 to January
1996, Mr. Hightower served as Chairman of the Board and Chief Executive Officer
of United Oil Services, Inc., a complete oil field service company serving
customers in the Permian Basin. From 1978 to 1995, Mr. Hightower served as
Chairman of the Board and President of Amber Energy, Inc., a company formed to
identify oil and gas exploration prospects. From 1991 to 1994, Mr. Hightower
served as Chairman of the Board,
3
<PAGE> 6
Chief Executive Officer and President of Enertex, Inc., which served as the
operator of record for several oil and gas properties involving Mr. Hightower
and other nonoperators, including Selma International Investment Limited.
GEORGE G. STALEY, age 62, has served as Executive Vice President,
Exploration and Director of the Company since its formation. From 1975 until
1995, Mr. Staley served as President and Chief Executive Officer of Staley Gas
Co., Inc. and Staley Operating Co., which are oil and gas exploration and
operating companies.
DAVID R. ALBIN, age 37, has served as a director of the Company since its
formation. Since 1988, Mr. Albin has been a manager of the NGP investment
funds, which were organized to make direct equity investments in the North
American oil and gas industry. He is currently responsible for co-managing
NGP's overall investment portfolio. Mr. Albin serves as a director of Offshore
Energy Development Corporation, an independent oil and gas company that does
not materially compete with the Company.
KENNETH A. HERSH, age 34, has served as a director of the Company since
its formation. Since 1989, Mr. Hersh has served as a co-manager of the NGP
investment funds, which were organized to make direct equity investments in the
North American oil and gas industry. He is currently responsible for
co-managing NGP's overall investment portfolio. Mr. Hersh serves as a
director of Mesa Inc. and HS Resources, Inc., two independent oil and gas
companies whose operations do not materially compete with those of the Company.
WILLIAM J. VAUGHN, JR., age 76, has served as director of the Company
since March 1997. Since 1975, Mr. Vaughn has served as Chairman of the Board
and President of WJV, Inc. and DMV, Inc., which are oil and gas exploration
companies. From 1986 to 1996, Mr. Vaughn served as Vice President of United
Oil Services, Inc., an oil field service company. From 1975 to 1995, Mr.
Vaughn was an independent geologist in association with Mr. Hightower.
COMPENSATION OF DIRECTORS
Fees and Expenses. In 1996, each director who is not an employee of the
Company received a fee of $5,000 for serving as a director. The Company also
reimburses directors for travel, lodging and related expenses they may incur in
attending Board and committee meetings.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act requires directors and officers of the
Company, and persons who own more than 10 percent of the Common Stock, to file
with the SEC initial reports of ownership and reports of changes in ownership
of the Common Stock. Directors, officers and more than 10 percent stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the year ended
December 31, 1996, all Section 16(a) filing requirements applicable to its
directors, officers and more than 10 percent beneficial owners were met.
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<PAGE> 7
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain summary information concerning the
compensation paid or awarded to the Chief Executive Officer of the Company and
the only other executive officers of the Company who earned in excess of
$100,000 in 1996 (the "named executive officers") for the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------ ---------------
SHARES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS (#) COMPENSATION
- - ----------------------- ------ ---------- -------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jack Hightower (2) . . . . . 1996 $ 109,167 $ 12,000 $ -- 73,103 $ 10,455(5)
President and Chief 1995 75,000 1,000 -- 1,682,491 6,201
Executive Officer
George G. Staley (3) . . . . 1996 109,167 12,000 -- 56,858 15,139(6)
Executive Vice 1995 75,000 1,000 -- 975,313 10,423
President,
Exploration
Rodney L. Woodard (4) . . . . 1996 97,875 10,800 13,431(7) 24,368 9,442(8)
Vice President, 1995 67,500 1,000 -- 196,313 5,596
Engineering
</TABLE>
- - ------------------
(1) Other Annual Compensation does not include perquisites and other
personal benefits if the aggregate amount of such compensation does
not exceed the lesser of (i) $50,000 or (ii) 10% of individual
combined salary and bonus for the named executive officer in each
year.
(2) Upon completion of the Company's initial public offering, Mr.
Hightower's base salary was increased to $160,000.
(3) Upon completion of the Company's initial public offering, Mr. Staley's
base salary was increased to $160,000.
(4) Upon completion of the Company's initial public offering, Mr.
Woodard's base salary was increased to $135,000.
(5) Consists of premiums paid by the Company under a nondiscriminatory
group insurance program and contributions by the Company under its
401(k) Retirement Plan of $7,180 and $3,275, respectively, during 1996
and $5,076 and $1,125, respectively, during 1995.
(6) Consists of premiums paid by the Company under a nondiscriminatory
group insurance program and contributions by the Company under its
401(k) Retirement Plan of $11,864 and $3,275, respectively, during
1996 and $9,298 and $1,125, respectively, during 1995.
(7) Consists of lease payments made by the Company for an automobile used
by Mr. Woodard in connection with his position with the Company.
(8) Consists of premiums paid by the Company under a nondiscriminatory
group insurance program and contributions by the Company under its
401(k) Retirement Plan of $6,506 and $2,936, respectively, during 1996
and $4,583 and $1,013, respectively, during 1995.
Upon completion of the Company's initial public offering, the base
salary of each of Thomas H. Moore, Vice President, Business Development, and
Dan P. Colwell, Vice President, Land was increased to $135,000.
William K. White was elected Vice President, Finance and Chief
Financial Officer of the Company on September 30, 1996 and receives an annual
base salary of $135,000.
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<PAGE> 8
Option Grants
The following table contains information about stock option grants to
the named executive officers in 1996:
OPTION GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (2)
----------------------------------------------- -----------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 0% ($) 5% ($) 10% ($)
---------------------- ---------- ------------ -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack Hightower . . . 1,755,594 48.35% 2.08 3/31/01 17,415,492 22,506,715 28,739,074
George G. Staley . . 1,032,171 28.42% 2.08 3/31/01 10,239,136 13,232,432 16,896,639
Rodney L. Woodard . . 220,681 6.08% 2.08 3/31/01 2,189,156 2,829,130 3,612,548
</TABLE>
- - -----------------
(1) Includes (i) options granted in the Conversion that were substituted
for options granted in 1995 and (ii) additional options granted during
1996.
(2) Amounts represent hypothetical gains that could be achieved for the
options if they are exercised at the end of the option term. Those
gains are based on assumed rates of stock price appreciation of 0%, 5%
and 10% compounded annually from January 1, 1996, as if such options
had been granted on such date, through the expiration date. For the
option term ending March 31, 2001, based on the closing price on The
Nasdaq Stock Market's National Market of the Common Stock of $12.00 on
December 31, 1996, a share of the Common Stock would have a value on
March 1, 2001 of approximately $14.90 at an assumed appreciation rate
of 5% and approximately $18.45 at an assumed appreciation rate of 10%.
Option Exercises and Year-End Option Values
The following table provides information about the number of shares
issued upon option exercises by the named executive officers during 1996, and
the value realized by the named executive officers. The table also provides
information about the number and value of options that were held by the named
executive officers at December 31, 1996 as if the options granted in the
Conversion to substitute for option grants in 1996 had been granted on January
1, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
SHARES AT FY-END (#) OPTIONS AT FY-END ($)
ACQUIRED ON VALUE ------------------------------ ---------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------- ------------ ------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Hightower . . . 0 0 967,100 788,494 9,593,632 7,821,860
George G. Staley . . 0 0 569,137 463,034 5,645,839 4,593,297
Rodney L. Woodard . . 0 0 122,165 98,516 1,211,877 977,279
</TABLE>
BOARD REPORT ON EXECUTIVE COMPENSATION POLICY
The Company's executive compensation policy is designed to attract,
motivate, reward and retain the key executive talent necessary to achieve the
Company's business objectives and contribute to the long-term success of the
Company. In order to meet these goals, the Company's compensation policy for
its executive officers focuses primarily on determining appropriate salary
levels and providing long-term stock-based incentives. To a lesser
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<PAGE> 9
extent, the Company's compensation policy also contemplates performance-based
cash bonuses. The Company's compensation principles for the Chief Executive
Officer are identical to those of the Company's other executive officers.
Cash Compensation. In determining its recommendations for adjustments
to officers' base salaries for fiscal 1996, the Company focused primarily on
the scope of each officer's responsibilities, each officer's contributions to
the Company's success in moving toward its long-term goals during the fiscal
year, the completion of the Company's initial public offering of common stock,
the accomplishment of goals set by the officer and approved by the Board for
that year, the Company's assessment of the quality of services rendered by the
officer, comparison with compensation for officers of comparable companies and
an appraisal of the Company's financial position. In certain situations, the
Company may also pay cash bonuses, the amount of which will be determined based
on the contribution of the officer and the benefit to the Company of the
transaction or development.
Equity Compensation. The grant of stock options to executive officers
constitutes an important element of long-term compensation for the executive
officers. The grant of stock options increases management's equity ownership
in the Company with the goal of ensuring that the interests of management
remain closely aligned with those of the Company's stockholders. The Board
believes that stock options in the Company provide a direct link between
executive compensation and stockholder value. By attaching vesting
requirements, stock options also create an incentive for executive officers to
remain with the Company for the long term.
Chief Executive Officer Compensation. As indicated above, the factors
and criteria upon which the compensation of Jack D. Hightower, the Chief
Executive Officer, is based are identical to the criteria used in evaluating
the compensation packages of the other executive officers of the Company. The
Chief Executive Officer's individual contributions to the Company included his
leadership role in establishing and retaining a strong management team,
developing and implementing the Company's business plans and attracting
investment capital to the Company. In addition, the Company reviewed
compensation levels of chief executive officers at comparable companies in the
Company's industry.
Jack D. Hightower
George G. Staley
David R. Albin
Kenneth A. Hersh
William J. Vaughn, Jr.
SECTION 162(m) OF THE INTERNAL REVENUE CODE.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally limits (to $1 million per covered executive) the deductibility for
federal income tax purposes of annual compensation paid to a company's chief
executive officer and each of its other four most highly compensated executive
officers. All options granted under the Company's Long-term Incentive Plan in
1996 will qualify for an exemption from the application of Section 162(m) of
the Code, thereby preserving the deductibility for federal income tax purposes
of compensation that may be attributable to the exercise of such options.
EMPLOYMENT AGREEMENTS
The Company and Jack Hightower are parties to an Employment Agreement
(the "Employment Agreement") that provides for the employment of Mr. Hightower
as President, Chief Executive Officer and Chairman of the Board of the Company
for a two year period. The agreement provides for an annual salary of
$160,000, subject to any increases that may be approved by the Compensation
Committee of the Board of Directors from time to time during the term of the
Employment Agreement. Under the Employment Agreement, Mr. Hightower shall be
entitled to participate in any employee benefit programs which the Company
provides to its executive officers. As of the date hereof, the employee
benefit programs offered by the Company to its officers and employees include
group insurance coverage, participation in the Company's 401 (k) Retirement
Plan and the 1996 Incentive Plan. Under the Employment Agreement, Mr.
Hightower will be entitled to receive up to one year's base salary if his
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<PAGE> 10
employment is terminated other than for cause prior to the expiration of his
employment term. The agreement also provides that Mr. Hightower will not
compete with the Company for a certain period of time following any termination
of his employment for any reason.
Each of the other executive officers of the Company is a party to a
confidentiality and noncompete agreement with the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a compensation committee during the past fiscal
year and all determinations concerning executive compensation for such period
for the Company's executive officers were made by the Board of Directors. The
directors abstained from participation in compensation determinations
concerning their own compensation. None of the executive officers of the
Company has served on the board of directors or on the compensation committee
of any other entity, any of whose officers served on the Board of Directors of
the Company.
CERTAIN TRANSACTIONS
The Company has entered into an administrative services contract with
Staley Operating Co. ("Staley Operating"), an affiliate of Mr. Staley.
Pursuant to the agreement, the Company provided certain administrative,
accounting and other office and technical services on behalf of Staley
Operating, in its capacity as the operator of certain producing oil and gas
properties, in return for which the Company received the amounts charged by
Staley Operating for providing such services under the applicable operating
agreements for such properties. The total amount of payments received by the
Company under such agreement was approximately $144,000 for the year ended
December 31, 1996.
Mr. Hightower and certain of his affiliates have a common ownership
interest in the Haley 1302 gas well located in Winkler County, Texas. The well
is operated by the Company and, in accordance with a standard industry
operating agreement, Mr. Hightower and certain of his affiliates make payments
to the Company of leasehold costs and lease operating and supervision charges.
These payments aggregated approximately $229,000 for the year ended December
31, 1996. Revenue received in connection with this well was approximately
$7,000 in 1996. The fees charged by the Company to Mr. Hightower are the same
as those charged to unaffiliated third parties that are also party to the
operating agreement.
The Company was a party to separate financial advisory services contracts
with ECT Securities Corp. ("ECT") (an affiliate of JEDI) and NGP. In 1996, the
Company paid ECT fees of approximately $95,000, plus expense reimbursements,
and NGP fees of approximately $91,000, plus expense reimbursements. Both
agreements terminated upon the completion of the Company's initial public
offering in December 1996.
In November 1995, the Company entered into a master agreement for energy
price swaps with Enron Capital & Trade Resources Corp. ("ECTRC"), an affiliate
of JEDI. Pursuant to the terms of this agreement and as a result of costs
attributable to natural gas hedges, during the year ended December 31, 1996,
the Company paid approximately $544,000 to ECTRC.
For the year ended December 31, 1996, sales to Enron Corp. (an affiliate
of JEDI), its subsidiaries and affiliates were approximately 43% of the
Company's oil and gas revenues.
The Company's offices are in Fasken Center located at 500 West Texas,
Suite 500, in Midland, Texas and are leased from Fasken Center Ltd., an
affiliate of Mr. Hightower. The lease, which was amended in March 1997, is a
noncancellable operating lease that terminates on March 15, 2002, and requires
monthly rent payments of $16,024, subject to increase as the Company assumes
additional space.
8
<PAGE> 11
PERFORMANCE GRAPHS
The following graph shows a comparison of cumulative total stockholder
returns for the Common Stock of the Company, the Standard & Poor's 500 Index
and the composite peer group since December 17, 1996.
COMPARISON OF CUMULATIVE STOCKHOLDER TOTAL RETURN (1)
AMONG THE COMPANY, S&P 500 INDEX AND COMPOSITE PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
December 17, 1996 December 31, 1996
----------------- -----------------
<S> <C> <C>
Titan . . . . . . . . . . . . . . . . 100 109
S&P 500 Index . . . . . . . . . . . . 100 106
Peer Group (2) . . . . . . . . . . . 100 102
</TABLE>
- - ------------------
(1) Total return assuming reinvestment of dividends. Assumes $100 invested
on December 17, 1996 in Common Stock of Titan, the Standard & Poor's 500
Index and the composite peer group.
(2) Composite peer group includes the following companies: Barrett Resources
Corp., Belden & Blake Corp., Berry Petroleum Co., Chesapeake Energy
Corp., Coho Energy Inc., Cross Timbers Oil Co., Devon Energy Corporation,
Flores & Rucks, Inc., Forcenergy, Inc., Forest Oil Corp., Helmerich &
Payne, Inc., HS Resources, Inc., KCS Energy, Inc., Lomak Petroleum, Inc.,
Louis Dreyfus Natural Gas Corp., Mitchell Energy & Development Corp.,
Newfield Exploration Co., Nuevo Energy Co., Patina Oil & Gas Corp.,
Plains Resources, Inc., Pogo Producing Co., Snyder Oil Corp., United
Meridian Corp., Vintage Petroleum, Inc. and Wiser Oil Company.
9
<PAGE> 12
PROPOSAL 2
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed, and recommends the approval of the
appointment of, KPMG Peat Marwick LLP, who have been the Company's auditors
since the Company's formation on September 30, 1996, as independent auditors
for the year ending December 31, 1997. Representatives of KPMG Peat Marwick
LLP are expected to be present at the Annual Meeting and will be given the
opportunity to make a statement, if they desire to do so, and to respond to
appropriate questions.
Unless stockholders specify otherwise in the proxy, proxies solicited by
the Board of Directors will be voted by the persons named in the proxy at the
Annual Meeting to ratify the selection of KPMG Peat Marwick LLP as the
Company's auditors for 1997. The affirmative vote of a majority of the votes
cast at the Annual Meeting will be required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP.
OTHER MATTERS
The Board of Directors of the Company does not intend to present any
other matters at the meeting and knows of no other matters which will be
presented. However, if any other matters come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote in accordance with
their judgment on such matters.
STOCKHOLDER PROPOSALS
It is contemplated that the 1998 annual meeting of stockholders of the
Company will take place during the fourth week of May 1998. Stockholder
proposals for inclusion in the Company's proxy materials for the 1998 annual
meeting of stockholders must be received at the Company's principal executive
office in Midland, Texas, addressed to the Secretary of the Company, not less
than 60 days prior to such meeting; provided that if the 1998 annual meeting of
stockholders is changed by more than 30 days from the presently contemplated
date, proposals must be so received a reasonable time in advance of the
meeting.
FORM 10-K ANNUAL REPORT
The Company will provide without charge to each person from whom a proxy
is solicited by this proxy statement, upon the written request of any such
person, a copy of the Company's annual report on Form 10-K, including the
financial statements and the schedules thereto, required to be filed with the
Securities and Exchange Commission pursuant to Section 13(a)-1 under the 1934
Act for the Company's most recent fiscal year. Requests should be directed to
the Vice President, Administration and Secretary, Titan Exploration, Inc., 500
West Texas, Suite 500, Midland, Texas 79701.
By Order of the Board of Directors
Susan D. Rowland, Secretary
April 30, 1997
Midland, Texas
10
<PAGE> 13
TITAN EXPLORATION, INC.
500 WEST TEXAS, SUITE 500
MIDLAND, TEXAS 79701
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jack D. Hightower and William K.
White, and each of them, as the undersigned's attorneys and proxies, each with
the power to appoint his substitute, and hereby authorizes them to represent
and to vote, as directed below, all the shares of common stock of TITAN
EXPLORATION, INC. (the "Company") held of record by the undersigned on April
21, 1997, at the annual meeting of stockholders of the Company to be held on
May 30, 1997, at 10:00 a.m., local time, at the Midland Room, Tower Two, Fasken
Center, 550 West Texas, Midland, Texas 79701, and at any adjournment(s)
thereof.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed above
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote
for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW.)
Jack D. Hightower George G. Staley David R. Albin
Kenneth A. Hersh William J. Vaughn, Jr.
2. PROPOSAL TO RATIFY APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1997
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote with respect
to any other matter which may properly come before the meeting or any
adjournment(s) thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR MANAGEMENT'S NOMINEES FOR ELECTION AS DIRECTORS AND FOR THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
Dated: , 1997
----------------------------
-----------------------------------------------------
Signature
-----------------------------------------------------
Signature
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name
by President or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
