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EXHIBIT 99.6
[HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL LETTERHEAD]
INVESTMENT BANKERS
June 16, 2000
{Salutation1}{FirstName1}{LastName1}
{CompanyName}
{CompanyAddress}
{City_State_Zip}
RE: PETSEC ENERGY INC.
Dear{Salutation1}{LastName1}:
Houlihan Lokey Howard & Zukin Capital, L.P. ("Houlihan Lokey") has been
retained, subject to approval by the Bankruptcy Court presiding over the
Chapter 11 proceedings of Petsec Energy Inc. ("Petsec" or the "Company"), as
the exclusive transaction broker to facilitate the sale of the assets of
Petsec. We are approaching you and other potential buyers who may have an
interest in purchasing all or some of Petsec's oil and gas assets. The
acquisition of Petsec presents an opportunity to acquire producing properties
as well as several exploitation and exploration properties that hold
significant opportunity for future production in the shallow offshore waters of
the Gulf of Mexico ("GOM"). Petsec's focused GOM presence affords investors an
attractive, concentrated, producing asset base with significant upside
potential.
o The Company's reserves are estimated at 98.6 Bcfe proved, 61.8 Bcfe
probable, and 34.6 Bcfe possible as of July 1, 2000.
o Current daily production from the properties is averaging 34.1 MMcfe per
day on a net revenue interest basis (43.0 MMcfe per day on a net working
interest basis).
COMPANY BACKGROUND
Petsec is an independent oil and gas exploration and production company with
its operations based in Lafayette, Louisiana. Petsec is the principal operating
subsidiary of Petsec Energy Ltd., an Australian public company with its
ordinary shares traded on the Australian Stock Exchange (ASX: PSA), and ADRs
traded on the OTC Bulletin Board (ticker: PSJEY.OB). The Company is engaged
primarily in the exploration and development drilling of U.S. oil and gas
properties and the production and sales of natural gas, crude oil and natural
gas liquids. The Company focuses on the GOM with current operations and
prospects on the continental shelf in relatively shallow waters.
LOS ANGELES
1930 Century Park West
Los Angeles, California 90067-6802
Tel: 310.553.8871 Fax: 310.553.4024
Broker/dealer services through Houlihan Lokey Howard & Zukin Capital
NEW YORK CHICAGO SAN FRANCISCO MINNEAPOLIS
WASHINGTON, D.C. DALLAS ATLANTA TORONTO
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Petsec Energy Inc. Page - 2 -
June 16, 2000
RECENT EVENTS
Due to its inability to fund its bond indebtedness, the Company began
negotiating with the holders of approximately $100 million in unsecured bond
debt in early 2000. In order to preserve the value of its assets, the Company
voluntarily filed a petition for protection under Chapter 11 of the United
States Bankruptcy Code on April 13, 2000 (the "Petition Date"). Since the
Petition Date, the Company has continued to operate its properties in the
ordinary course of business. The Company and its unsecured creditors committee
have determined that a sale of the Company's assets is in the best interests of
the Company and its creditors. We presently anticipate that any sale
transaction will be free and clear of all liens and encumbrances pursuant to
Section 363 of the United States Bankruptcy Code or a plan of reorganization
filed by the Company.
GENERAL DESCRIPTION OF ASSETS
The Company began its activity in the GOM in 1990 and currently has interests
in 40 state and federal lease blocks with 45 wells either producing or capable
of producing on 21 leases, and over 31 prospects identified on both the
producing acreage and the remaining leasehold inventory. As shown on the
following map, Petsec's operations are concentrated in key GOM areas.
===============================================================================
PETSEC ENERGY INC.
LOCATION OF LEASES
[Map depicting location of Petsec's properties in the GOM.]
===============================================================================
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Petsec Energy Inc. Page - 3 -
June 16, 2000
The Company has estimated net proved, probable, and possible reserves
(collectively the "Petsec Reserves") on existing producing and proven
undeveloped leases, as well as potential volumes associated with exploitation
and exploration drilling opportunities on both their producing and primary term
leasehold. In addition, estimates of net proved, probable and possible reserves
as of July 1, 2000 (the "Ryder Scott Reserve Component") were prepared by the
independent engineering firm of Ryder Scott Company L.P., Petroleum Consultants
("Ryder Scott"). The difference between the Petsec Reserves and the Ryder Scott
Reserve Component is referred to as the "Incremental Reserves". Estimated
future net cash flows were prepared using pricing assumptions of $22 per barrel
for oil and $2.75 per Mcf for gas, without pricing or cost escalations. Oil and
gas equivalency calculations were prepared using 6 Mcf of gas per barrel of
oil.
The following table summarizes Petsec's estimated net reserves and pre-tax cash
flows discounted at 10% ("PV@10%") by category as of July 1, 2000.
<TABLE>
<CAPTION>
===============================================================================================================================
PETSEC ENERGY INC.
JULY 1, 2000 RESERVE SUMMARY (NRI)
TOTAL PETSEC RESERVES RYDER SCOTT PETSEC INCREMENTAL
RESERVE COMPONENT RESERVE COMPONENT
TOTAL
Reserve RESERVE ESTIMATE PV@10% Reserve Estimate PV@10% Reserve Estimate PV@10% ($MM)
Category (BCFE) ($MM) (Bcfe) ($MM) (Bcfe)
-------------- ---------------- ------- ---------------- ------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
PDP 28.5 56 18.0 39 10.4 17
PDNP 25.6 31 17.1 21 8.5 10
PUD 44.5 48 36.7 38 7.9 10
---------------- ------- ---------------- ------ ---------------- ------------
TOTAL PROVED 98.6 135 71.8 98 26.8 37
TOTAL PROBABLE 61.8 86 46.7 81 15.1 5
TOTAL POSSIBLE 34.6 47 25.2 39 9.4 8
---------------- ------- ---------------- ------ ---------------- ------------
GRAND TOTAL 195.0 268 143.7 218 51.3 50
===============================================================================================================================
</TABLE>
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Petsec Energy Inc. Page - 4 -
June 16, 2000
KEY INVESTMENT CONSIDERATIONS
o ATTRACTIVE CONCENTRATED RESERVE BASE
The Company has accumulated an oil and gas reserve position in several
key operating areas in the GOM. Petsec estimated proved reserves,
including Incremental Reserves, are 98.6 net Bcfe, with estimated
probable and possible reserves totaling an additional 96.4 net Bcfe. The
following table summarizes the Petsec estimated proved, probable and
possible reserves and PV@10%, as well as identified undrilled exploration
opportunities, in each of its major operating areas.
<TABLE>
<CAPTION>
======================================================================================================================
PETSEC ENERGY INC.
PETSEC RESERVE SUMMARY BY REGION (NRI)
West Other
Cameron Main Ship Properties Undeveloped
Region Pass Region Shoal Region Region Properties TOTAL
<S> <C> <C> <C> <C> <C> <C>
PROVED RESERVES
Natural Gas (Bcf) 16.3 15.3 5.5 4.2 21.2 62.5
Liquids (MBbbls) 940 425 2,670 110 1,873 6,018
-------------- ------------- ------------- ------------- ------------ --------
PROVED EQUIVALENT (BCFE) 22.0 17.9 21.5 4.8 32.4 98.6
PV@10% ($MM) 31.4 27.8 30.3 7.1 38.2 134.8
PROBABLE EQUIVALENT (BCFE) 20.8 10.9 15.7 4.3 10.1 61.8
PV@10% ($MM) 24.8 17.5 22.4 5.6 15.8 86.1
POSSIBLE EQUIVALENT (BCFE) 2.7 4.7 18.0 5.4 3.8 34.6
PV@10% ($MM) 3.6 7.7 27.4 5.6 2.7 47.0
EXPLORATION POTENTIAL (RISKED) (BCFE) 140 25 69 116 152 502
=======================================================================================================================
</TABLE>
o GAS FOCUSED OPPORTUNITY
Given the current price of natural gas, Petsec's properties offer a
strong source of current cash flow. Approximately 63% of the proved
Petsec Reserves, and 62% of the proved, probable, and possible Petsec
Reserves are natural gas.
o SIGNIFICANT EXPLOITATION/EXPLORATION OPPORTUNITIES
The Company's inventory of drilling prospects on both primary term ("PT")
and held by production ("HBP") leases creates an opportunity for
continued reserve growth. Technical analyses supported by 3-D seismic,
subsurface control and offset analogies indicate a risked reserve
potential in excess of 500 Bcfe on 31 prospects.
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Petsec Energy Inc. Page - 5 -
June 16, 2000
o RECENT JOINT VENTURE EXPLORATION & DEVELOPMENT ACTIVITY
In 1999, the Company entered into strategic joint venture partnerships
with Apache Corporation ("Apache") and other industry partners to
effectively leverage the Company's resources. As a result of
disappointing drilling results in the first half of 1998, limited
drilling activity in the second half of 1998 and first half of 1999, and
natural decline in production rates from existing wells, production
declined in 1998 and 1999. The Company's 1999 to 2000 drilling program
was formulated utilizing joint venture partnerships which allowed the
Company to resume activity with reduced CAPEX exposure. The result was 10
of 12 commercially successful wells on Petsec generated prospects.
Production from six of these wells is now online contributing over 12
MMcfe/d of additional net production. Petsec's interests in the other
four wells were sold effective in the first quarter 2000.
<TABLE>
<CAPTION>
=====================================================================================================================
PETSEC ENERGY INC.
WORKING INTEREST AND PARTNERS
Working Interest Average NRI% Status Partner/Operator
---------------- ------------ ------ ----------------
<S> <C> <C> <C> <C>
West Cameron Region
WC 237 50% 41.67% HBP Apache
WC 543/544 50% 40.25% HBP Apache
WC 461 100% 80.33% HBP Petsec
WC 653 50% 41.67% PT Apache
WC 145, HI 33 (State), HI 33 (Federal), 100% 83.33% PT Petsec
HI A307/A308, VR 258
Main Pass Region
MP 6, 7, 90, 91, 93 50% 40.67% HBP/PT Apache
MP 84 50% 38.50% HBP Apache
MP 104 50% 40.17% HBP Apache
MP 105 50% 41.67% HBP Apache
Ship Shoal Region
SS 192/193/194 50% 40.17% HBP Apache
GI 45 50% 41.67% HBP Apache
GI 45-#A2 well 20% 14.67% HBP Apache
SMI 7 50% 40.17% HBP Apache
SS 180 100% 83.33% PT Petsec
Other Properties Region
California - Armstrong Area 50% 33.69% HBP Sheridan California
Energy, Inc.
California - Petsec Area 25% 19.46% HBP California
Hydrocarbons, Inc.
/ Petsec
MU 883s S/2 33 1/3% 26.66% HBP LLOG Exploration
Offshore, Inc.
MU 748L, 749L, 795L, 797L, 940s, 941s 100% 77.50% PT Petsec
Undeveloped Properties
SMI 189/190, SP 22 100% 83.33% PT Petsec
=====================================================================================================================
</TABLE>
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Petsec Energy Inc. Page - 6 -
June 16, 2000
o PROVEN RECORD OF PRODUCTION GROWTH
The Company was successful in achieving significant growth in daily net
production levels (net to Petsec's revenue interest, i.e., "NRI") from an
average of 13 MMcfe/d in 1993 to an average of 130 MMcfe/d in 1997.
However, the combination of disappointing drilling results, lack of
drilling activity, natural decline, and the joint venture with Apache
resulted in a decrease in daily net production to 26 MMcfe/day at year
end 1999. The resumption of drilling and workover activity during the
second half of 1999 has resulted in an increase in current daily net
production levels to approximately 34 MMcfe/day. The following graph
summarizes the Company's net working interest ("NWI") production history.
===============================================================================
PETSEC ENERGY INC.
TOTAL PRODUCTION TIME LINE (NWI)
JANUARY 1992 TO MAY 2000
[Chart depicting Petsec's production history between January 1992 and May 2000.]
===============================================================================
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Petsec Energy Inc. Page - 7 -
June 16, 2000
The current NRI production from the Company's producing fields is
approximately 22 MMcf/d and 2,050 BOPD. In addition, recompletions
scheduled for July/August 2000 are estimated to add net production of
more than 14 MMcf/d and 120 BOPD. Current production by region for the
week ending June 12, 2000 is summarized in the following table.
<TABLE>
<CAPTION>
============================================================================================================
PETSEC ENERGY INC.
AVERAGE DAILY PRODUCTION BY REGION (NRI)
Near Term
Net Gas Net Liquid Net Total Recompletions
# of Wells (MMcf/d) (BOPD) (MMcfe/d) (MMcfe/d)
---------- -------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
West Cameron 12 2.6 657 6.6 14.5
Main Pass 20 11.8 251 13.3
Ship Shoal 12 5.1 1,070 11.6
Other Properties 4 2.2 74 2.6
----- ----- ----- ----- -----
Total for All Regions 48 21.7 2,052 34.1 14.5
============================================================================================================
</TABLE>
HISTORICAL FINANCIAL & OPERATING RESULTS
The following table highlights the Company's financial performance for fiscal
1998, 1999 and the last twelve month ("LTM") period ended March 31, 2000.
<TABLE>
<CAPTION>
==============================================================================================
PETSEC ENERGY INC.
FINANCIAL & OPERATIONS OVERVIEW
($ in US Millions)
FY FY LTM
1998 1999 3/31/00
------ ------ -------
<S> <C> <C> <C>
Revenue($MM) 92.0 31.0 28.9
EBITDAX ($MM) 68.6 18.4 15.9
Ryder Scott Proved Reserves (Bcfe) (1) 90.3 83.6 71.8
Annual Production (Bcfe) 39.5 13.1 11.4
(1) LTM: Ryder Scott Proved Reserves as of 7/1/00
==============================================================================================
</TABLE>
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Petsec Energy Inc. Page - 8 -
June 16, 2000
TRANSACTION PROCESS
We have selected a limited number of parties whom we think may have an interest
in pursuing a transaction with the Company and are in the process of compiling
confidential materials that describe this investment opportunity in greater
detail. If you are interested in receiving these materials, please execute the
enclosed confidentiality agreement and return it to Houlihan Lokey at your
earliest convenience by fax at (310) 553-4024 / Attention: Andy Mitchell. We
will supply qualified interested parties with additional information and
bidding procedures. We anticipate commencing data room access and due diligence
in the next few weeks.
ACCURACY AND COMPLETENESS OF INFORMATION
Neither Houlihan Lokey nor the Company makes any representation or warranty as
to the accuracy or completeness of the information presented in this letter.
You must perform your own independent evaluation and analysis of the Company
and its assets before making an investment decision.
Thank you for your consideration. We will contact you shortly to discuss this
matter; in the meantime, please feel free to contact any of the professionals
listed below at (310) 553-8871. Please do not contact the Company directly.
[HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL LOGO]
INVESTMENT BANKERS
1930 Century Park West
Los Angeles, California 90067
Telephone (310) 553-8871
Facsimile (310) 553-4024
ANDREW B. MILLER MATTHEW R. NIEMANN
Managing Director Vice President
BRETT A. LOWREY ERIC M. WINTHROP L. ANDY MITCHELL
Associate Associate Senior Financial Analyst
<PAGE> 9
[HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL LETTERHEAD]
INVESTMENT BANKERS
June 16, 2000
{Salutation1}{FirstName1}{LastName1}
{CompanyName}
{CompanyAddress}
{City_State_Zip}
RE: CONFIDENTIALITY AGREEMENT
Dear{Salutation1}{LastName1}:
In connection with your desire to explore a possible transaction (a
"Transaction") with Petsec Energy Inc. ("Petsec" or the "Company"), we will be
furnishing you with certain information which is either non-public,
confidential or proprietary in nature. For the purpose of this Confidentiality
Agreement ("Agreement"): "you" shall mean your company, its subsidiaries and
affiliates, together with your employees, directors, partners, agents and
advisors; and "Information" shall mean any and all information and data which
you receive from Houlihan Lokey Howard & Zukin Capital or the Company
concerning the Company's business, financial condition, operations, assets,
data, reserves position, geological interpretations, strategies and/or
prospects.
In consideration of granting you access to the Information, you
agree that the Information, the existence of this letter, the fact that the
Company is contemplating a transaction, and the fact these discussions are
taking place will be held by you in strictest confidence, and shall not be
disclosed by you in any manner whatsoever, in whole or in part, without the
prior written consent of the Company. You further agree to the following
undertakings.
(1) The Information will be used by you solely in connection with
the consideration of a possible consensual transaction with the Company and not
to affect, in any way, your relative competitive position to the Company, its
successors or assigns, or other entities. The Information to be disclosed to
you shall only be information which is reasonably necessary for the evaluation
of the Transaction, and information not reasonably necessary for such purposes
shall not be disclosed or exchanged.
(2) You will restrict the dissemination of the Information to those
of your employees, directors, partners, agents and advisors (collectively,
"Advisors") who need to know such Information for the purpose of evaluating the
Transaction and who, prior to such disclosure, shall have agreed to be bound by
the provisions of this Confidentiality Agreement. You will be responsible for
your Advisors' actions.
LOS ANGELES
1930 Century Park West
Los Angeles, California 90067-6802
Tel: 310.553.8871 Fax: 310.553.4024
Broker/dealer services through Houlihan Lokey Howard & Zukin Capital
NEW YORK CHICAGO SAN FRANCISCO MINNEAPOLIS
WASHINGTON, D.C. DALLAS ATLANTA TORONTO SEOUL
<PAGE> 10
Petsec Energy Inc. Page - 2 -
June 16, 2000
(3) As a condition of the transmittal of the Information, in the
event that the Company and you do not proceed with the Transaction, you agree
to return all Information received by you, and all copies and abstracts
thereof, via overnight mail as soon as your evaluation is complete (and you
will promptly notify the Company in writing that this has occurred) or in no
event beyond such date as established in writing by the Company. You further
agree to promptly destroy all notes, analyses, compilations, studies,
interpretations, and other documents or materials prepared by you that reflect,
contain or are based upon, in whole or in part, the Information. You shall
certify that you have complied with this requirement.
(4) You will not issue or release any public announcement or
acknowledgment of discussions between you and the Company or the existence of
this Agreement or any other agreement contemplated between the parties to this
Agreement, except when and as required by law or under the rules of any stock
exchange, and then only after first disclosing to an officer of the Company the
content of such announcement or acknowledgment, so as to give the Company an
opportunity to seek an appropriate protective order or take other protective
measures. You shall give the Company as much notice as is reasonably practical
under the circumstances prior to making any such disclosure, and the disclosure
shall be limited to only that is required by law or rule.
(5) You will not acquire or attempt to acquire Information from the
Company from any source other than Houlihan Lokey Howard & Zukin Capital or the
officers of the Company. You agree not to communicate with any interested
party, including without limitation any creditor or vendor of the Company, for
any purpose related to a potential transaction with the Company without the
prior written consent of the Company. All inquiries for or about Information
shall be addressed to Houlihan Lokey Howard & Zukin Capital.
(6) You will not purchase or attempt to purchase claims against or
interests in the Company.
(7) You agree that money damages would not be a sufficient remedy
for any breach of this Agreement by you and that the Company shall be entitled
to equitable relief, including injunction and specific performance, as a remedy
for any such breach. You further agree to waive any requirement for the
securing or posting of any bond in connection with such remedy. Any such remedy
shall not be deemed to be the exclusive remedy for a breach of this Agreement
but shall be in addition to all other remedies available at law or equity. If
litigation under this letter agreement is commenced, then the non-prevailing
party shall pay to the prevailing party its reasonable expenses, including
legal fees incurred in connection with such litigation and any appeal
therefrom.
Paragraphs 1 and 2 above shall not apply to Information in your
possession which: (i) is publicly available (except by virtue of a breach of
this Agreement) or (ii) you have obtained independently of the Company without
obligation on your part or on the part of the source supplying such Information
to treat such information as confidential or limiting the purposes for which it
could be used.
Neither the Company nor Houlihan Lokey Howard & Zukin Capital, as
advisor to the Company, shall be deemed to make any representation or warranty
as to the accuracy or completeness of the Information furnished to you.
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Petsec Energy Inc. Page - 3 -
June 16, 2000
This Agreement shall expire two years from the date first written
above. This Agreement (which shall be governed as to validity, construction and
performance by the laws of the State of Louisiana) shall constitute the full
agreement by the parties hereto with respect to the Information submitted by
the Company or Houlihan Lokey Howard & Zukin Capital and shall supersede any
and all prior agreements and understandings relating thereto. No modification
or addition to any provision of this Agreement shall be binding unless in
writing and signed on behalf of the parties hereto.
This Agreement is for the benefit of the Company and Houlihan Lokey
Howard & Zukin Capital.
Very truly yours,
HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL
By: _______________________________
Matthew R. Niemann
Vice President
AGREED AND ACCEPTED,
Date: ______________________, 2000
By: _______________________________
{FirstName1}{LastName1}
{CompanyName}
