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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-01851
P R O S P E C T U S
[PLAINS RESOURCES LOGO]
798,143 SHARES
COMMON STOCK
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This Prospectus has been prepared for use in connection with the
proposed sale by the holders thereof (the "Selling Stockholders") of an
aggregate of 798,143 shares (the "Shares") of common stock, par value $.10 per
share (the "Common Stock"), of Plains Resources Inc. (the "Company"). The
Shares may be sold from time to time by or for the account of the Selling
Stockholders in the over-the-counter market, on the American Stock Exchange
("AMEX") or otherwise at prices and on terms then prevailing or at prices
related to the then current market price, directly or through agents designated
from time to time, or through dealers or underwriters to be designated or in
negotiated transactions. The Shares may be sold by any one or more of the
following methods: (a) a block trade (which may involve crosses) in which the
broker or dealer so engaged will attempt to sell the securities as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) exchange
distributions and/or secondary distributions in accordance with the rules of
the AMEX; (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (e) through the writing of options on Shares
(whether such options are listed on an options exchange or otherwise); or (f)
privately negotiated transactions. To the extent required by applicable law,
the specific Shares to be sold, the names of the Selling Stockholders, the
respective purchase prices and public offering prices, the names of any such
agent, dealer or underwriter and any applicable commissions or discounts with
respect to a particular offer will be set forth in an accompanying Prospectus
Supplement. See "Plan of Distribution."
The Common Stock is traded on the AMEX under the symbol "PLX". On
April 22, 1996, the last reported sale price for the Common Stock on the
American Stock Exchange was $10 5/8 per share.
The Company will receive no portion of the proceeds of the sale of the
Shares offered hereby and will bear certain of the expenses incident to their
registration. See "Plan of Distribution" and "Selling Stockholders."
The Shares have not been registered for sale under the securities laws
of any state or jurisdiction as of the date of this Prospectus. Brokers or
dealers effecting transactions in the Shares should confirm the registration
thereof under the securities laws of the states in which such transactions
occur, or the existence of any exemption from registration.
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PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET
FORTH IN THIS PROSPECTUS ON PAGES 6-8 UNDER THE CAPTION "RISK FACTORS."
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MAY 1, 1996
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered by this Prospectus.
Certain of the information contained in the Registration Statement is omitted
from this Prospectus, and reference is hereby made to the Registration
Statement and exhibits and schedules relating thereto for further information
with respect to the Company and the securities offered by this Prospectus. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information are available for
inspection at, and copies of such materials may be obtained upon payment of the
fees prescribed therefor by the rules and regulations of the Commission from
the Commission at its principal offices located at Judiciary Plaza, 450 Fifth
Street, Room 1024, Washington, D.C. 20549, and at the Regional Offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and at 7 World Trade Center, Suite
1300, New York, New York 10048. In addition, the Common Stock of the Company
("Common Stock") is traded on the American Stock Exchange, and such reports,
proxy statements and other information may be inspected at the offices of the
American Stock Exchange, Inc., 86 Trinity Place, New York, New York 10006.
INCORPORATION OF CERTAIN DOCUMENTS
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "Form 10-K"), the Company's Current Report on Form 8-K
filed with the Commission on January 4, 1996, as amended by Amendment No.1 on
Form 8-K/A filed with the Commission on February 21, 1996, and the Company's
Current Report on Form 8-K filed with the Commission on March 5, 1996, are
hereby incorporated herein by reference.
The description of the Common Stock, which is contained in a
registration statement on Form 8-A filed under the Exchange Act, including any
amendment or reports filed for the purpose of updating such description, is
incorporated herein by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act, after the date of this Prospectus and prior to
the termination of the Registration Statement of which this Prospectus is a
part with respect to registration of the Shares, shall be deemed to be
incorporated by reference in this Prospectus and be a part hereof from the date
of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus, or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference, modifies or replaces such statement.
The Company undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of any such person, a copy of any or
all of the documents incorporated by reference herein, other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into the information that this Prospectus incorporates. Written or oral
requests for such copies should be directed to: Plains Resources Inc., 1600
Smith Street, Houston, Texas 77002, Attention: Investor Relations Department,
telephone (713) 654-1414.
CERTAIN DEFINITIONS
As used in this Prospectus, "Mcf" means thousand cubic feet, "BOE"
means net barrel of oil equivalent and "MCFE" means Mcf of natural gas
equivalent. Natural gas equivalents and crude oil equivalents are determined
using the ratio of six Mcf of natural gas to one barrel of crude oil,
condensate or natural gas liquids. "Present Value of Proved Reserves" means
the present value (discounted at 10%) of estimated future net cash flows
(before income taxes) of proved oil and natural gas reserves based on product
prices in effect on the date of determination. "EBITDA" means earnings before
interest, taxes, depreciation, depletion and amortization.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements and notes set forth and
incorporated by reference in this Prospectus. As used herein, the terms
"Company" and "Plains" mean Plains Resources Inc. and its subsidiaries, except
as the context may otherwise require.
THE COMPANY
Plains is an independent energy company engaged in the acquisition,
exploitation, development, exploration and production of oil and natural gas
and the marketing, transportation, terminalling and storage of crude oil. The
Company's upstream oil and natural gas activities are focused in the Los
Angeles Basin of California (the "LA Basin"), the Sunniland Trend of South
Florida (the "Sunniland Trend"), the Illinois Basin and the Gulf Coast area of
Louisiana. The Company's downstream marketing activities are concentrated in
Oklahoma, where it owns a two million barrel, above ground crude oil
terminalling and storage facility, Texas and the Gulf Coast area of Louisiana.
Plains' upstream operations contributed approximately 90% of the Company's pro
forma EBITDA for the fiscal year ending December 31, 1995, while the Company's
downstream activities accounted for the remainder.
The Company has experienced significant growth over the last four
years. The Company's proved reserves, Present Value of Proved Reserves, and
the standardized measure of discounted future net cash flows determined in
accordance with generally accepted accounting principles (the "Standardized
Measure"), have increased from 13.7 million BOE, $71.7 million, and $69.9
million, respectively, at December 31, 1991 to 101.6 million BOE, $366.8
million and $304.8 million, respectively, at December 31, 1995. Over the same
period, the Company's average reserve replacement ratio was 617%, EBITDA
increased over 400% from $9.0 million for 1991 to $45.3 million for 1995, pro
forma for the Illinois Basin Acquisition (as defined below), and cash provided
by operating activities increased from $6.1 million in 1991 to $27.5 million in
1995, pro forma for the Illinois Basin Acquisition. Such additional proved
reserves were added at an aggregate average finding and development cost of
$2.38 per BOE ($0.40 per MCFE). During 1995, pro forma for the Illinois Basin
Acquisition, the Company's net production averaged approximately 16,657 BOE per
day and its unit gross profit (gross margin less upstream general and
administrative expense) averaged $6.75 per BOE ($1.13 per MCFE). On a BOE
basis, the Company's proved reserves are approximately 93% crude oil,
condensate and natural gas liquids and 71% of its total proved reserves are
classified as proved developed. The Company's reserve base is long-lived with
an average reserve life, or reserves to production ratio, of 16.7 years (11.9
years based on proved developed reserves only), pro forma for the Illinois
Basin Acquisition. Net cash flows used in investing activities were $76.5
million, $40.2 million and $64.4 million for 1993, 1994 and 1995, respectively.
Net cash flows provided by financing activities were $44.7 million, $19.3
million and $52.3 million for 1993, 1994 and 1995, respectively.
The Company's significant increase in proved reserves, production and
cash flow from oil and natural gas producing activities is attributable to the
acquisition and subsequent exploitation of its LA Basin Properties and
Sunniland Trend Properties and the recent acquisition of the Illinois Basin
Properties. These three core areas are comprised primarily of crude oil
properties with established production histories and together account for
approximately 96% of the Company's year-end 1995 proved reserves. The Company
believes these properties include a significant inventory of lower risk, high
return exploitation and development projects that are expected to contribute to
the Company's future growth in production and reserves. During 1996, the
Company estimates it will spend approximately $40 million on the development
and exploitation of its LA Basin, Sunniland Trend and Illinois Basin
Properties. The Company operates and owns a 100% working interest in its major
fields in each of these areas, which enables the Company to control the
exploitation of such properties.
The Company's marketing effort entails purchasing crude oil from
producers and marketing it to the refining sector. The Company aggregates
these volumes at major crude oil interchanges and trading locations and is
therefore able to obtain higher prices for its own production while realizing
profits on the production purchased from others. The Company owns and operates
a two million barrel, above ground crude oil storage and terminalling facility
in Cushing, Oklahoma (the "Cushing Terminal"), the United States' largest
inland crude oil interchange and trading location. This facility enhances the
competitive marketing ability of the Company by enabling it to take crude oil
from different sources and make physical delivery of crude oil in Cushing, the
NYMEX designated delivery location. The Company's downstream activities have
expanded significantly over the last four years, with downstream gross margin
(revenues less direct expenses of purchases, transportation, storage and
terminalling) increasing over 400% from $1.2 million in 1991 to $6.4 million in
1995. Based
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on additional capacity available at the Cushing Terminal, the Company believes
it can increase its downstream gross profit without expending substantial
additional capital.
The Company's upstream and downstream business activities focus on
crude oil as the primary product. As a result of inefficiencies inherent in
the crude oil markets and the U.S. pipeline and transportation infrastructure,
management believes its competitive abilities are enhanced by the alternatives
afforded it by its proprietary access to the Cushing Terminal. The Company's
crude oil marketing expertise further provides it with a competitive advantage
in obtaining higher prices for the Company's existing production and
identifying potential crude oil price enhancements for properties targeted for
acquisition.
BUSINESS STRATEGY
The Company's business strategy is to increase its proved reserves and
cash flow by exploiting and producing oil and natural gas from its existing
properties, acquiring additional underdeveloped oil properties and exploring
for significant new sources of reserves. The Company concentrates its
exploitation efforts on mature but underdeveloped crude oil producing
properties in areas that meet the Company's targeted criteria. Generally, such
properties were previously owned by major integrated oil and gas companies or
large independent oil and gas companies. Management believes that it has
developed a proven record in acquiring and exploiting underdeveloped crude oil
properties where it believes substantial reserve additions and cash flow
increases can be made through improved production practices and recovery
techniques and relatively low risk development drilling. An integral component
of the Company's exploitation efforts is to increase unit operating margins,
and therefore cash flow, by reducing unit production expenses and increasing
wellhead price realizations. The Company also seeks to capitalize on
downstream opportunities that complement its oil producing activities. The
Company's marketing of its crude oil production takes advantage of the
marketing expertise and economies of scale attributable to its downstream
activities. As part of its business strategy, the Company periodically
evaluates, and from time to time has elected to sell, certain of its fully
developed producing properties. Such sales enable the Company to maintain
financial flexibility, control overhead and redeploy the sales proceeds to
activities that have potentially higher financial returns.
In order to manage its exposure to commodity price risk, the Company
has routinely hedged a portion of its crude oil production. For 1996, the
Company has committed an average of approximately 8,500 Bbls of oil per day to
fixed price arrangements that expire at various times throughout 1996. Such
arrangements represent approximately 55% of the Company's pro forma average
daily oil production for 1995 and partially mitigate the adverse impact of
potential oil price declines on the Company's operating results.
RECENT ACQUISITION
On December 22, 1995, the Company acquired all of Marathon Oil
Company's upstream oil and gas assets in the Illinois Basin (the "Illinois
Basin Properties"). The acquisition of the Illinois Basin Properties (the
"Illinois Basin Acquisition") was effective as of November 1, 1995. As a
result of such acquisition, the Company added approximately 17.3 million
barrels of oil to its proved reserve base at an aggregate cost of approximately
$51.5 million, or an average of $2.98 per BOE ($0.50 per MCFE). The Company
intends to aggressively exploit these properties to evaluate additional reserve
potential identified during its acquisition analysis. In addition, the
Company's exploitation plan for the Illinois Basin Properties targets improving
the unit gross margin by decreasing unit production expenses and increasing
price realizations as well as increasing production volumes by conducting
production enhancement activities similar to those employed in its LA Basin
Properties and Sunniland Trend Properties.
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1996 NOTE OFFERING
On March 19, 1996, the Company sold $150 million in aggregate
principal amount of its 10 1/4% Senior Subordinated Notes due 2006 (the "10
1/4% Notes") pursuant to a Rule 144A private placement. These notes were sold
to investors at approximately 99.38% of the principal amount resulting in a
yield to maturity of 10.35%. Net proceeds from the sale of such Notes (after
deducting expenses of the sale) were approximately $144.9 million. An aggregate
of $111.6 million was used to redeem all of the Company's 12% Senior
Subordinated Notes due 1999 (the "12% Notes") at 106% of the $100 million
principal amount outstanding plus accrued and unpaid interest through the
redemption date. The remaining $33.3 million, together with an additional
$8.3 million borrowed under the Company's revolving credit facility, was used
to retire outstanding bank indebtedness incurred to fund the Illinois Basin
Acquisition (the "Illinois Basin Acquisition Indebtedness"). The Illinois Basin
Acquisition Indebtedness bore an interest rate of LIBOR plus 2% (approximately
7.35% at December 31, 1995) through September 30, 1996 and LIBOR plus 3%
thereafter and required monthly payments of interest and principal equal to 85%
of the Field Level Net Revenues (as defined in the credit agreement). The sale
of the 10 1/4% Notes, the redemption of the 12% Notes and the retirement of the
Illinois Basin Acquisition Indebtedness enhanced the Company's financial
flexibility by increasing the average life of its subordinated debt from
approximately three years to 10 years and eliminating amortization payments of
$50 million in each of the years 1998 and 1999 and also by enabling the Company
to use the cash flow from the Illinois Basin Properties to further exploit and
develop such properties.
The indenture under which the 10 1/4% Notes were issued contains
covenants, including but not limited to, covenants with respect to the
following matters: (i) limitations on the incurrence of additional
indebtedness: (ii) limitations on certain investments; (iii) limitations on
restricted payments; (iv) limitations of dispositions of assets; (v) limitation
on dividends and other payment restrictions affecting subsidiaries; (vi)
limitations on transactions with affiliates; (vii) limitations on liens; and
(viii) restrictions on mergers, consolidations and transfers of assets.
SALES BY SELLING STOCKHOLDERS
The Shares to be sold pursuant to this Prospectus are owned by the
Selling Stockholders. The Company will not receive any of the proceeds from
the sale of the Shares. See "Selling Stockholders."
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RISK FACTORS
Each investor should carefully examine this entire Prospectus and
should give particular attention to the risk factors set forth below.
SUBSTANTIAL CAPITAL REQUIREMENTS
The Company makes, and will continue to make, substantial capital
expenditures for the acquisition, exploitation, development, exploration and
production of oil and gas reserves. Historically, the Company has financed
these expenditures primarily with cash generated by operations, bank
borrowings, the offering of the 12% Notes and the sale of common stock and
preferred stock. The Company intends to make an aggregate of approximately $48
million in capital expenditures in 1996. The Company believes that it will
have sufficient cash provided by operating activities and borrowings under its
revolving credit facility to fund such planned capital expenditures. If
revenues or the Company's borrowing base decrease as a result of lower oil and
gas prices, operating difficulties or declines in reserves, the Company may
have limited ability to expend the capital necessary to undertake or complete
future drilling programs. There can be no assurance that additional debt or
equity financing or cash generated by operations will be available to meet
these requirements.
MARKET CONDITIONS AND VOLATILITY OF OIL AND NATURAL GAS PRICES
The revenues generated by the Company's operations are highly
dependent upon the prices of, and demand for, oil and natural gas.
Historically, the prices for oil and natural gas have been volatile and are
likely to continue to be volatile in the future. The price received by the
Company for its oil and natural gas production and the level of such production
are subject to wide fluctuations and depend on numerous factors beyond the
Company's control, including seasonality, the condition of the United States
economy (particularly the manufacturing sector), foreign imports, political
conditions in other oil-producing and natural gas-producing countries, the
actions of the Organization of Petroleum Exporting Countries and domestic
government regulation, legislation and policies. Decreases in the prices of
oil and natural gas have had, and could have in the future, an adverse effect
on the carrying value of the Company's proved reserves and the Company's
revenues, profitability and cash flow. Although the Company is not currently
experiencing any significant involuntary curtailment of its natural gas
production, market, economic and regulatory factors may in the future
materially affect the Company's ability to sell its natural gas production.
In order to manage its exposure to price risks in the marketing of its
oil and natural gas, the Company from time to time enters into fixed price
delivery contracts, financial swaps and oil and natural gas futures contracts
as hedging devices. To ensure a fixed price for future production, the Company
may sell a futures contract and thereafter either (i) make physical delivery of
its product to comply with such contract or (ii) buy a matching futures
contract to unwind its futures position and sell its production to a customer.
These same techniques are also utilized to manage price risk for certain
production purchased from customers of the Company's marketing subsidiary,
Plains Marketing & Transportation Inc. Such contracts may expose the Company
to the risk of financial loss in certain circumstances, including instances
where production is less than expected, the Company's customers fail to
purchase or deliver the contracted quantities of oil or natural gas, or a
sudden, unexpected event materially impacts oil or natural gas prices. Such
contracts may also restrict the ability of the Company to benefit from
unexpected increases in oil and natural gas prices.
OPERATING HAZARDS AND UNINSURED RISKS
The Company's operations are subject to all of the risks normally
incident to the exploration for and the production of oil and natural gas,
including blowouts, cratering, oil spills and fires, each of which could result
in damage to or destruction of oil and natural gas wells, production facilities
or other property, or injury to persons. The relatively deep drilling
conducted by the Company from time to time involves increased drilling risks of
high pressures and mechanical difficulties, including stuck pipe, collapsed
casing and separated cable. The Company's operations in the LA Basin,
including transportation of crude oil by pipelines within the city of Los
Angeles, are especially susceptible to damage from earthquakes and involve
increased risks of personal injury, property damage and marketing interruptions
because of the population density of the area. Although the Company maintains
insurance coverage considered to be customary in the industry, it is not fully
insured against certain of these risks, including, in certain instances,
earthquake risk in the LA Basin, either because such insurance is not available
or because of high premium costs. The occurrence of a significant event that
is not fully insured against could have a material adverse effect on the
Company's financial position.
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BUSINESS RISKS
The Company must continually acquire, explore for, develop or exploit
new oil and natural gas reserves to replace those produced or sold. Without
successful drilling, acquisition or exploitation operations, the Company's oil
and natural gas reserves and revenues will decline. Drilling activities are
subject to numerous risks, including the risk that no commercially viable oil
or natural gas production will be obtained. The decision to purchase, explore,
exploit or develop an interest or property will depend in part on the
evaluation of data obtained through geophysical and geological analyses and
engineering studies, the results of which are often inconclusive or subject to
varying interpretations. The cost of drilling, completing and operating wells
is often uncertain. Drilling may be curtailed, delayed or canceled as a result
of many factors, including title problems, weather conditions, compliance with
government permitting requirements, shortages of or delays in obtaining
equipment, reductions in product prices or limitations in the market for
products. The availability of a ready market for the Company's oil and natural
gas production also depends on a number of factors, including the demand for
and supply of oil and natural gas and the proximity of reserves to pipelines or
trucking and terminal facilities. Natural gas wells may be shut in for lack of
a market or due to inadequacy or unavailability of natural gas pipeline or
gathering system capacity.
Substantially all of the Company's California crude oil production and
all of the Company's South Florida crude oil production is transported by two
pipelines owned by third parties. The inability of either one of these
pipelines to provide transportation services to the Company in the future could
result in the involuntary curtailment of a significant portion of the Company's
crude oil production.
UNCERTAINTIES IN ESTIMATING RESERVES AND FUTURE NET CASH FLOWS
There are numerous uncertainties inherent in estimating quantities and
values of proved reserves and in projecting future rates of production and
timing of development expenditures, including many factors beyond the control
of the Company. Reserve engineering is a subjective process of estimating the
recovery from underground accumulations of oil and natural gas that cannot be
measured in an exact manner, and the accuracy of any reserve estimate is a
function of the quality of available data and of engineering and geological
interpretation and judgment. Because all reserve estimates are to some degree
speculative, the quantities of oil and natural gas that are ultimately
recovered, production and operating costs, the amount and timing of future
development expenditures and future oil and natural gas sales prices may all
differ from those assumed in these estimates. In addition, different reserve
engineers may make different estimates of reserve quantities and cash flows
based upon the same available data. Therefore, the Present Value of Proved
Reserves set forth in this Prospectus represents estimates only and should not
be construed as the current market value of the estimated oil and natural gas
reserves attributable to the Company's properties. In this regard, the
information set forth in this Prospectus includes revisions of certain reserve
estimates attributable to proved properties included in the preceding year's
estimates. Such revisions reflect additional information from subsequent
activities, production history of the properties involved and any adjustments
in the projected economic life of such properties resulting from changes in
product prices. Any downward revisions could adversely affect the Company's
financial condition, borrowing base under its revolving credit facility, future
prospects and market value of its securities.
LEGAL PROCEEDINGS
The Company and certain of its officers and directors and a former
director and officer were named in two class action lawsuits filed in 1992 and
1993 seeking an aggregate of approximately $90 million in compensatory damages
and punitive damages in an unspecified amount for alleged violations of the
federal securities laws and state common law arising out of certain alleged
misrepresentations and omissions in the Company's disclosure regarding its
onshore natural gas exploration activities. Both of these cases were filed in
the United States District Court for the Southern District of Texas and are
captioned respectively, Judith Rubinstein, et al. v. Collins, et al. (C.A. No.
H-92-1297) and Moroson v. Collins, et al. (C.A. No. H-93-2305). On March 6,
1996, the Company announced that it had notified the court that a settlement in
principle had been reached in such cases. Under the terms of the settlement,
the plaintiffs agree to dismiss all claims against the Company and its officers
and directors in exchange for a cash payment of approximately $6.25 million,
including approximately $4.1 million that is expected to be paid by the
Company's insurance carrier, leaving approximately $2.1 million to be
contributed by the Company. Taking into account prior costs incurred by the
Company to defend these suits, this settlement would result in a charge to its
1996 first quarter earnings of approximately $4 million. The settlement is
subject to the approval of the court. If the settlement is not consummated and
if the Company ultimately were required to pay a substantial portion of the $90
million in compensatory damages sought by the plaintiffs, it would have a
material adverse effect on the Company.
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GOVERNMENT REGULATION
The Company's business is regulated by certain federal, state and
local laws and regulations relating to the development, production, marketing,
pricing, transportation and storage of oil and natural gas. The Company's
business is also subject to extensive and changing environmental and safety
laws and regulations governing plugging and abandonment, the discharge of
materials into the environment or otherwise relating to environmental
protections. Certain of the Company's properties are located in
environmentally sensitive areas that require special permits to drill. There
can be no assurance that present or future regulation will not adversely affect
the operations of the Company.
COMPETITION
The oil and natural gas industry is highly competitive. The Company's
competitors for the acquisition, exploration, exploitation and development of
oil and natural gas properties, the purchasing and marketing of oil and the
crude oil storage and terminalling business, and for capital to finance such
activities, include companies that have greater financial and personnel
resources available to them than the Company. The Company's ability to acquire
additional properties and to discover reserves in the future will be dependent
upon its ability to evaluate and select suitable properties and to consummate
transactions in a highly competitive environment.
ISSUANCE OF ADDITIONAL SHARES
As of March 19, 1996, the Company had 2,693,391 shares of Common Stock
reserved for issuance upon the exercise of certain warrants and options.
The Board of Directors, without further action by the stockholders, is
authorized to issue up to two million shares of the Company's Preferred Stock,
par value $1.00 per share (the "Preferred Stock"), in one or more series and to
fix and determine as to any series all the relative rights and preferences of
shares in such series, including, without limitation, preferences, limitations
or relative rights with respect to redemption rights, conversion rights, if
any, voting rights, if any, dividend rights and preferences on liquidation.
The dividend, liquidation and voting rights of any such Preferred Stock issued
could be superior to the rights of the holders of Common Stock.
The issuance of additional shares of Preferred Stock, or the issuance
of rights to purchase such shares, could be used to discourage an unsolicited
acquisition proposal that some, or a majority, of the stockholders might
believe to be in the best interests of the Company or in which stockholders
might receive a premium for their stock over the then market price of such
stock. In addition, under certain circumstances, the issuance of Preferred
Stock could adversely affect the voting power of the holders of the Common
Stock.
The Company has in the past issued a number of series of preferred
stock which (i) had dividend and liquidation rights superior to the rights of
holders of Common Stock, (ii) were convertible into shares of Common Stock and
(iii) had certain voting rights including rights to vote as a class for
election of a specified number of directors.
RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Company has not paid cash dividends on shares of the Common Stock
since the Company's inception and does not anticipate paying any cash dividends
on the Common Stock in the foreseeable future. In addition, the Company is
prohibited by provisions of the indenture governing the 10 1/4% Notes and its
revolving credit facility from paying dividends on the Common Stock.
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SELLING STOCKHOLDERS
The following table sets forth the beneficial ownership of Common
Stock held by the Selling Stockholders, immediately prior to and upon
completion of this offering.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING
---------------------------- --------------------------
NUMBER PERCENTAGE SHARES TO NUMBER PERCENTAGE
NAME OF SHARES OF CLASS BE SOLD OF SHARES OF CLASS
---- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Marathon Oil Company . . . . . 537,143 3.3% 537,143 -- --
Crete Oil Company, Inc. . . . . 171,000 1.1% 171,000 -- --
Internationale Nederlanden (U.S.)
Capital Corporation (1) . . . 190,000 1.2% 90,000 100,000 0.6%
</TABLE>
- ---------------
(1) Beneficial ownership includes 100,000 shares of Common Stock issuable to
Internationale Nederlanden (U.S.) Capital Corporation upon the exercise
of a warrant issued in June 1992, the exercise price of which is $9.50
per share.
In connection with the Illinois Basin Acquisition, and the financing
thereof in December 1995, the Company issued 537,143 shares of Common Stock to
Marathon Oil Company, 171,000 shares to Crete Oil Company, Inc., and 90,000
shares to Internationale Nederlanden (U.S.) Capital Corporation ("INCC").
Funding for the Illinois Acquisition was provided by a $42 million project
financing with INCC and draws under the Company's revolving credit facility
with INCC, The First National Bank of Boston, Den norske Bank, First Interstate
Bank of Texas, N.A. and Texas Commerce Bank National Association.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by or for the account of the
Selling Stockholders pursuant to this Prospectus or pursuant to Rule 144 under
the Securities Act. Sales of Shares pursuant to this Prospectus may be
effected in the over-the-counter market, on the AMEX or otherwise at prices and
on terms then prevailing or at prices related to the then current market price
(in each case as determined by the relevant Selling Stockholder), directly or
through agents designated from time to time, or through dealers or underwriters
to be designated or in negotiated transactions. The Shares may be sold by any
one or more of the following methods: (a) a block trade (which may involve
crosses) in which the broker or dealer so engaged will attempt to sell the
securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; (c) exchange distributions and/or secondary distributions in
accordance with the rules of the AMEX; (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (e) through the writing
of options on Shares (whether such options are listed on an options exchange or
otherwise); or (f) privately negotiated transactions. To the extent required
by applicable law, the specific Shares to be sold, the names of the Selling
Stockholders, the respective purchase prices and public offering prices, the
names of any such agent, dealer or underwriter and any applicable commissions
or discounts with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. Each Selling Stockholder may effect such
transactions by selling Shares directly to other purchasers, through agents or
through broker-dealers, and any such agents or broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from such Selling Stockholder, from purchasers of Shares for whom they act as
agents, or from both sources (and such compensation may be in excess of
customary commissions). The Selling Stockholders and any broker-dealers that
participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any commissions, and any profit on the resale of Shares, received by
the Selling Stockholders and any such broker-dealers may be deemed to be
underwriting discounts and commissions.
The Company will bear all costs and expenses incurred by it in
connection with the offering and sale of Shares pursuant to this Prospectus,
but will not be responsible for any commissions, underwriting discounts or
similar amounts payable in respect of any such sale.
LEGAL OPINION
The validity of the issuance of the shares of the Common Stock offered
hereby will be passed upon for the Company by Michael R. Patterson, Esq., its
general counsel. Mr. Patterson beneficially owns 114,437 shares of Common
Stock.
9
<PAGE> 10
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 1995, and the
financial statements incorporated by reference to Amendment No. 1 on Form 8-K/A
filed February 21, 1996, have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on authority of said firm
as experts in auditing and accounting.
Information relating to the estimated proved reserves of oil and
natural gas and the related estimates of future net revenues and present values
thereof for certain periods, included in the Form 10-K and in the Notes to the
Consolidated Financial Statements of the Company in such Annual Report, has
been prepared by Netherland, Sewell & Associates, Inc., H. J. Gruy and
Associates, Inc. and Ryder Scott Company, independent petroleum engineers, and
is incorporated by reference herein in reliance upon the authority of such
firms as experts in petroleum engineering.
10
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NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED 798,143 Shares
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
SELLING STOCKHOLDER OR UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY [PLAINS RESOURCES LOGO]
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME AND ANY SALE MADE
HEREUNDER DOES NOT IMPLY THAT THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
COMMON STOCK
TABLE OF CONTENTS
PAGE
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Available Information . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents . . . . . . . . . . 2 P R O S P E C T U S
Prospectus Summary . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . 6
Selling Stockholders . . . . . . . . . . . . . . . . . 9 MAY 1, 1996
Plan of Distribution . . . . . . . . . . . . . . . . . 9
Legal Opinion . . . . . . . . . . . . . . . . . . . . . 10
Experts . . . . . . . . . . . . . . . . . . . . . . . . 10
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