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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[root] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
- ---------
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
____ TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From.................... to....................
Commission File Number 1-8287
RIO GRANDE, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 74-1973357
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10101 Reunion Place, Suite 210, San Antonio, Texas 78216-4156
(Address of Principal Executive Office) (Zip Code)
Issuer's Telephone Number Including Area Code: 210-308-8000
-----------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[root] No .
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
At November 12, 1998 there were 6,177,550 shares of the registrant's common
stock outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
RIO GRANDE, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (unaudited)
October 31, 1998
Assets ----------------
Current assets:
Cash and cash equivalents $ 433,711
Trade receivables 500,363
Prepaid expenses 49,505
------------
Total current assets 983,579
Property and equipment, at cost:
Oil and gas properties, successful efforts method 26,889,058
Transportation equipment 71,395
Other depreciable assets 411,055
27,371,508
Less accumulated depreciation, depletion and ------------
amortization (19,124,111)
Net property and equipment 8,247,397
------------
Other assets:
Platform abandonment fund 360,857
Other assets, net 393,048
753,905
Total Assets $ 9,984,881
============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 759,080
Accrued expenses 913,259
Current installments of long-term debt 13,141,807
------------
Total current liabilities 14,814,146
Other accrued expenses 526,344
Minority interest in limited partnership 157,334
Redeemable preferred stock, $0.01 par value; $10
redemption value. Authorized 1,700,000 shares;
issued and outstanding 1,017,500 shares 11,225,396
Common stock of $0.01 par value. Authorized
10,000,000 shares; issued and outstanding
6,177,550 shares 61,774
Deficit (16,800,113)
------------
Contingent liabilities
Total Liabilities and Stockholders' Equit $ 9,984,881
============
See accompanying notes to consolidated financial statements.
-2-
Item 1. FINANCIAL STATEMENTS (continued)
RIO GRANDE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited)
Three Months Nine Months
Ended Ended
October 31, October 31,
------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Oil and gas sales $ 1,072,329 1,685,636 3,379,391 5,424,201
---------- ---------- ---------- ----------
Costs and expenses:
Lease operating and
other production expense 328,248 936,317 1,617,489 2,708,941
Dry hole costs and
lease abandonments 0 0 89,304 63
Depletion of oil and gas
producing properties 294,748 490,417 924,678 1,718,873
Depreciation and other
amortization 29,748 55,473 50,708 173,371
Provisions for abandonment
expense 14,800 10,500 37,000 31,500
General and administrative 368,346 344,400 1,113,769 1,148,993
---------- ---------- ---------- ----------
Total costs and expenses 1,035,890 1,837,107 3,832,948 5,781,741
---------- ---------- ---------- ----------
Gain (loss) from operations 36,439 (151,471) (453,557) (357,540)
---------- ---------- ----------- ----------
Other income (expense):
Interest expense (125,309) (299,554) (880,096) (845,804)
Interest income 6,397 20,343 11,380 71,312
Gain on sale of assets (57,830) 273,614 194,243 285,389
Other, net (2,118) 781 596 10,715
Minority interest in earnings
of limited
partnership (21,371) (15,300) (38,695) (46,244)
---------- ---------- ----------- ----------
Total other expenses (200,231) (20,116) (712,572) (524,632)
---------- ---------- ----------- ----------
Loss before income taxes (163,792) (171,587) (1,166,129) (882,172)
Income taxes 1,755 24,256 7,768 83,274
---------- ---------- ----------- ----------
Net loss (165,547) (195,843) (1,173,897) (965,446)
Dividends on preferred stock 266,979 220,393 873,386 620,751
---------- ---------- ----------- ----------
Net loss applicable to
common stock $ (432,526) (416,236) (2,047,283)(1,586,197)
========== ========== =========== ==========
Loss per share,
Basic and diluted $ (0.07) (0.07) (0.33) (0.27)
========== ========== =========== ==========
Common shares outstanding,
Basic and diluted 6,177,550 5,973,735 6,177,550 5,817,044
========== ========== =========== ==========
See accompanying notes to consolidated financial statements.
-3-
Item 1. FINANCIAL STATEMENTS (continued)
RIO GRANDE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
Nine Months
Ended
October 31,
-------------------
1998 1997
---- ----
Cash flows from operating activities:
Loss from continuing operations $ (1,173,897) (965,446)
Adjustments to reconcile loss from continuing
operations to net cash provided by operating
activities:
Depreciation and other amortization 50,708 173,371
Depletion of oil and gas producing
properties 924,677 1,718,873
Provision for abandonment expense 37,000 31,500
Gain on sale of assets (194,243) (285,389)
Minority interest in earnings of limited
partnership 38,695 46,244
Decrease (increase) in trade receivables 336,480 864,154
Decrease (increase) in prepaid expenses (32,651) (33,990)
Increase (decrease) in accounts payable
and accrued expenses 124,246 519,640
Increase (decrease) in other accrued
expenses (2,638) (152,246)
----------- -----------
Net cash provided by (used in)
continuing operating activities 108,377 1,916,711
----------- -----------
Cash flows from investing activities:
Purchase of oil and gas producing properties (490,279) (3,993,598)
Purchase of other property and equipment 0 (75,595)
Deletions from (additions to) platform
abandonment fund 2,761 123,267
Deletions from (additions to) other assets 88,993 (22,863)
Proceeds from sale of property and equipment 526,791 397,984
----------- -----------
Net cash provided by (used in) investing activities 128,266 (3,570,805)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 0 1,152,619
Repayment of long-term debt (110,065) (251,838)
Cash dividends on preferred stock 0 (220,377)
Proceeds from issuance of common stock 0 104,112
Contributions from limited partners 0 95,570
Distributions to limited partners (33,000) (66,600)
----------- -----------
Net cash provided by (used in) financing activities (143,065) 813,486
----------- -----------
Net increase (decrease) in cash and cash equivalents 93,578 (840,608)
Cash and cash equivalents at beginning of period 340,133 1,045,331
----------- -----------
Cash and cash equivalents at end of period $ 433,711 204,723
=========== ===========
See accompanying notes to consolidated financial statements.
-4-
RIO GRANDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Accounting Policies
-------------------
The accounting policies of Rio Grande, Inc. and Subsidiaries as set
forth in the notes to the Company's audited financial statements in the
Form 10-KSB Report filed for the year ended January 31, 1998 are
incorporated herein by reference. Refer to those notes for additional
details of the Company's financial condition, results of operations and
cash flows. All material items included in those notes have not changed
except as a result of normal transactions in the interim, or any items
which are disclosed in this report.
The consolidated financial statements include the accounts of Rio
Grande, Inc. (the "Company") and its subsidiaries and majority-owned
limited partnerships as follows:
Form of Ownership
Name Organization Interest
---- ------------ ---------
Rio Grande Drilling Company Texas Corporation 100%
("Drilling")
Rio Grande Desert Oil Company Nevada Corporation 100%
("Desert")
Rio Grande Offshore, Ltd. Texas Limited Partnership 100%
("Offshore")
Rio Grande GulfMex, Ltd. Texas Limited Partnership 80%
("GulfMex")
As a result of the Company's 80% ownership interest, GulfMex's financial
statements are consolidated with the Company's financial statements. The
minority interests of the outside limited partners are set forth
separately in the balance sheet and the statements of operations of the
Company.
All intercompany balances and transactions have been eliminated in the
consolidation.
In the opinion of management, the consolidated financial statements
reflect all adjustments which are necessary for a fair presentation of
the financial position and results of operations. Adjustments made for
the nine months ended October 31, 1998 are considered normal and
recurring in nature.
The Company utilizes the successful efforts method of accounting for its
oil and gas properties. Under this method, the acquisition costs of oil
and gas properties acquired with proven reserves are capitalized and
amortized on the unit-of-production method as produced. Development
costs or exploratory costs are capitalized and amortized on the
unit-of-production method if proved reserves are discovered, or expensed
if the well is a dry hole.
Capitalized costs of proved properties are periodically reviewed for
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impairment on a property by property basis, and, if necessary, an
impairment provision is recognized to reduce the net carrying amount of
such properties to their estimated fair values. Fair values for the
properties are based on future net cash flows as reflected by the year
end reserve report.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings Per Share", which establishes standards
for computing and presenting earnings per share. This standard,
effective for financial statements issued for periods ending December
15, 1997, replaces the presentation of primary earnings per share with a
presentation of basic earnings per share. This standard required dual
presentation of basic and diluted earnings per share on the face of the
statement of operations.
Basic net earnings (loss) per common share is computed by dividing net
loss by the weighted average number of common shares outstanding.
Diluted earnings (loss) per share is computed by assuming the issuance
of common shares for all dilutive potential common shares outstanding.
Impairment of Long-Lived Assets
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
This new pronouncement was adopted effective February 1, 1996.
The Company recognized an $8.6 million non-cash writedown of oil and gas
properties for the year ended January 31, 1998. The impairment loss was
due primarily as a result of the shift in the reserve classification of
Righthand Creek from proved to probable and possible based upon the
determination that the field's primary source of energy is fluid
expansion and not water drive. The decline in oil prices also
contributed to the present value of future cash flows of proved oil
reserves declining. No adjustment for impairment has been made to the
carrying value of the oil and gas properties during the nine months
ended October 31, 1998. The Company believes that the carrying value of
the oil and gas properties approximates the current market value.
Year 2000
The Company has not addressed the impact of the Year 2000 on its
computer systems and applications. The Company does not expect the cost
of becoming Year 2000 compliant to be significant; however, due to its
current financial condition, no Year 2000 plans has been developed.
Recently Issued Accounting Pronouncement
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" which establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments
in interim financial reports issued to shareholders. It also establishes
-6-
standards for related disclosures about products and services,
geographical areas, and major customers. The Company believes that SFAS
No. 131 will not have a material impact on its financial statements and
disclosures.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which established standards of
accounting and reporting for derivative instruments and for hedging
activities. It requires that all derivatives be recognized as either
assets and liabilities in the statement of financial position and
measures these instruments at fair value. This statement is effective
for financial statements for periods beginning June 15, 1999. The
Company believes that SFAS No. 133 will not have a material impact on
its financial statements and disclosures.
(2) Acquisition of Oil and Gas Properties
-------------------------------------
The business of acquiring producing oil and gas properties is an
inherently speculative activity that involves a high degree of business
and financial risk. Property acquisition decisions generally are based
on various assumptions and subjective judgments relating to achievable
production and price levels which are inherently uncertain and
unpredictable. Although available geological and geophysical information
can provide information on the potential for previously overlooked or
untested formations, it is impossible to determine accurately the
ultimate production potential, if any, of a particular well. Actual oil
and gas production may vary considerably from anticipated results.
Moreover, the acquisition of a property or the successful recompletion
of an oil or gas well does not assure a profit on the investment or
return of the cost thereof.
(3) Changes in Registrant's Certifying Accountant.
----------------------------------------------
On November 4, 1998, the Company dismissed KPMG Peat Marwick LLP
("KPMG") as its independent accountants. The dismissal was approved by
the Audit Committee and the Company's Board of Directors. KPMG's reports
on the financial statements for the two most recent fiscal years did not
contain an adverse opinion, disclaimer of opinion, qualification or
modification as to uncertainty, audit scope or accounting principles,
except that such reports included an explanatory paragraph expressing
substantial doubt as to the Company's ability to continue as a going
concern. Furthermore, during the two most recent fiscal years and
through November 4, 1998, there have been no disagreements with KPMG on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of KPMG, would have caused that firm to
make reference to the subject matter of such disagreements in its
reports on the financial statements for such years. The Company
requested KPMG to furnish it with a letter addressed to the Securities
and Exchange Commission ("SEC") stating whether it agreed with the above
statements, which was confirmed by KPMG to the SEC on November 9, 1998.
On November 4, 1998, the Company appointed Ernst & Young LLP as its
independent accountants. During the two most recent fiscal years and
through November 4, 1998, the Company has not consulted with Ernst &
Young LLP regarding the application of accounting principles to a
specific transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's financial statements.
-7-
(4) Voting Agreement and Plan of Reorganization.
--------------------------------------------
On November 2, 1998, the Company, EXCO Resources, Inc, ("EXCO") and Koch
Exploration Company ("Koch") entered into a Voting Agreement (the
"Agreement") contemporaneously with the purchase by EXCO of a certain
Promissory Note ("Note") dated January 15, 1997, which was executed by
Rio Grande, Inc. ("RGI") and Rio Grande Drilling Company ("RGD") as
co-makers with Comerica Bank - Texas ("Comerica"). The Note, in the
original face amount of $50,000,000, had a corresponding principal
amount outstanding of $13,127,666 and related accrued interest payable
of $486,227 on November 2, 1998. Repayment of the Note is secured by a
first lien deed of trust, mortgage and security interest in
substantially all of the Company's assets, primarily oil and gas
leasehold interests and tangible well equipment (the "Properties"). EXCO
aquired all of Comerica's rights pursuant to the Note and certain
Loan Agreement dated March 8, 1996 between Comerica, RGI and RGD.
The Agreement provided that the parties to the Agreement implement
a Financial Restructuring with regards to the Note, the Preferred
Stock Interests of Koch and any such other claims against the Company,
and specifically,that the Company shall file Chapter 11 cases and seek
to have the cases administratively consolidated pursuant to Rule
1015(b) of the Bankruptcy Rules. In accordance with the Agreement, the
Joint Chapter 11 Plan of Reorganization ("Plan") for RGI, RGD, Rio
Grande Desert Oil Company ("Desert"), Rio Grande Offshore, Ltd.
("Offshore") and Rio Grande GulfMex, Ltd. ("GulfMex") was filed with the
bankruptcy court for the Western District of Texas on December 11,
1998. The Plan provides that RGD, Offshore and Desert shall merge into
RGI (the RGI Group") upon consummation of the Plan. RGI was
incorporated pursuant to the corporate regulations for the State of
Delaware. After the approved merger, the Reorganized RGI will own and
have the right to dispose of all the Properties, including its 80%
partnership interest in GulfMex.
As a condition of the merger, all equity interests in the entities to be
merged into Reorganized RGI shall be canceled. Thereafter, Reorganized
RGI will issue shares of common stock to EXCO as the holder of the Note.
The Plan provides for certain class ("Class") definitions for each group
of creditors or parties that may have claims against the Company. The
Class definitions are set out as follows:
Class 1 The Allowed Secured Claim in respect of the Note.
Class 2 Any Allowed Secured Claims Against any of the
RGI Group other than the Allowed Secured Claim
in Class 1.
Class 3 Any Allowed Claims against any of the RGI Group
entitled to priority pursuant to the
Bankruptcy Code, other than priority claims
specified in sections 507(a)(1), 507(a)(2)
and 507(a)(8) of the Bankruptcy Code.
Class 4 Any Allowed Unsecured, Nonpriority Claims against
any of the RGI Group not classified elsewhere
including any deficiency claim under the Note.
Class 5 Allowed Preferred Stock Interests in RGI, and all
rights to dividends and any other rights
associated therewith, held by Koch Exploration
Company.
-8-
Class 6 Allowed Limited Partnership Interests in GulfMex.
Class 7 Allowed RGI Common Stock Interests,and any
options, warrants, or other rights or Claims in
respect of such Common Stock, and all other
equity interests of the RGI Group, excluding
those equity interests classified in Classes 5
and 6.
Class 8 Intercompany claims.
The Plan provides that holders of "Allowed Administrative Claims" shall
be paid cash in full on the day after the confirmation of the Plan by
the bankruptcy court and the Final Order is issued ("Effective Date").
Any holders of claims must have their claim approved by the bankruptcy
court and if approved, shall be paid immediately after the claim is
approved by Final Order.
The Plan provides that holders of Allowed Priority Tax Claims shall be
paid in full on the later of (i) the Effective Date, (ii) 11 days after
the date such tax claim becomes an Allowed Claim, or (iii) on such other
terms as acceptable to the holders of such claims in full satisfaction
of their claims.
Under the Plan, all executory and unexpired leases of the RGI Group,
which have not previously been (i) assumed, (ii) rejected, or (iii)
assumed or assigned by the RGI Group pursuant to an order extended
during the Chapter 11 case and which are not specified as being a
"Rejected Contract" or "Rejected Lease" shall be deemed to be assumed
under the Plan. In addition, the prepetition employment agreements of
Guy Bob Buschman and Gary Scheele shall be rejected effective upon the
last day of the calendar month in which "Substantial Consummation" of
the Plan occurs. Any claims of damages for the breach of termination of
such agreements shall be extinguished and discharged pursuant to the
Plan. Effective upon the first day of the calendar month following
Substantial Consummation of the Plan, Guy Bob Buschman and Gary Scheele
shall execute 12-month Retention Agreements with EXCO.
The Bankruptcy Court set the deadline for the filing of "proof of
claims" in this Chapter 11 case as January 11, 1999. If the Effective
Date of the Plan does not occur by March 31, 1999, the Plan shall
automatically terminate unless EXCO, Koch and the RGI Group consent to
an extension which will not be more than 90 days.
The Plan provides that on the Effective Date of the issuance of the
Final Order by the bankruptcy court, the present and former officers,
directors, employees, subsidiaries, affiliates, predecessors,
successors, assigns, agents, representatives, guarantors, sureties,
insurers and the respective professional advisors for the RGI Group,
EXCO and Koch, to the extent they are or may be liable for any actions
or inactions shall be released unconditionally from any and all claims,
obligations, suits, judgements, damages, rights, causes of action and
liabilities whatsoever, whether known as unknown before, on or after
the Effective Date. The releases as described above shall not apply
to any action or omission that constitutes actual fraud or criminal
behavior.
The Agreement shall automatically terminate upon the occurrence of
defined "Agreement Termination Event" unless the parties to the
Agreement waive the specific Agreement Termination Event in writing. An
Agreement Termination Event as defined by the Agreement shall mean any
of the following:
-9-
(a) The Chapter 11 Cases shall not have been commenced and the Plan
and supporting disclosure statement shall not have been filed by
December 11, 1998;
(b) The RGI Group fails to comply in all material respects with its
obligations specified in paragraph 11 of the Agreement and in
Exhibit "A" of the Agreement;
(c) The RGI Group shall not have filed a motion to assume this
Agreement within the first ten (10) days of the Chapter 11 Cases
(d) The order of the Bankruptcy Court confirming the Plan shall not
have been entered and the effective date of the Plan shall not
have occurred by March 31, 1999;
(e) Any member of the RGI Group shall file or support confirmation,
or fail to actively oppose confirmation, of a plan of
reorganization embodying terms materially different from those
contemplated by this Agreement;
(f) The Plan shall not have been substantially consummated pursuant
to section 1101(2) of the Bankruptcy Code by April 21, 1999;
(g) The Bankruptcy Court shall have entered an order pursuant to
Section 1104 of the Bankruptcy Code appointing a trustee
with respect to one or more of the RGI Group;
(h) The Bankruptcy Court shall have entered an order dismissing the
Chapter 11 Cases or an order pursuant to Section 1112 of the
Bankruptcy Code converting the Chapter 11 Cases to cases under
Chapter 7 of the Bankruptcy Code;
(i) An injunction, judgment, order, decree, ruling or charge shall
have been entered which prevents consummation of the Plan;
(j) An event or circumstance which has, or could reasonably be
expected to have, a Materially Adverse Effect shall have
occurred;
(k) The (i) proofs of claim as of the claims bar date set
forth in Exhibit "A" to the Agreement and (ii)requests for
payment of administrative expenses that are on file in the
Chapter 11 Cases, together with (iii) the expenses set forth in
Exhibit "B" to the Agreement and (iv) those claims listed in the
Schedules filed by the RGI Group in the Chapter 11 Cases that
are not designated as disputed, contingent or unliquidated,
exceed the limitation on "allowed claims" set out in Part IV.G.
of Exhibit "A" to the Agreement and the amounts set forth in
Exhibit "B" to the Agreement by more than 5% in the
aggregate; or
(l) The RGI Group or any of its individual members shall fail to
promptly remit to EXCO the net proceeds of any sales of the
Properties that might be consummated between the time of the
execution of this Agreement and the Effective Date.
-10-
Under terms of the Agreement, the Company has agreed that all of its
cash and cash equivalents shall be deposited to a collateral account
controlled by EXCO and that any amounts to be received from product
sales subsequent to the Agreement date shall also be deposited to that
account. The Company will provide a monthly budget to EXCO which will
provide for payment of the Company's operating expenses and general and
administrative expenses.
(5) Capital Resources and Liquidity
-------------------------------
The Plan RGI, RGD, Desert, Offshore and GulfMex was filed with the
bankruptcy court on December 11, 1998. The Plan provides that RGD,
Offshore and Desert shall merge into RGI(the "RGI Group") upon
consummation of the Plan. RGI was incorporated pursuant to the corporate
regulations for the State of Delaware. After the approved merger, the
Reorganized RGI will own and have the right to dispose of all the
Properties, including its 80% partnership interest in GulfMex.
As a condition of the merger, all equity interests in the entities to be
merged into Reorganized RGI shall be canceled. Thereafter, Reorganized
RGI will issue shares of common stock to EXCO as the holder of the Note.
See Note (3),supra.
- -11-
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
1. Material Changes in Financial Condition
---------------------------------------
For the nine months ended October 31,1998, the Company incurred a
net loss from operations before dividends on preferred stock of
approximately $1,174,000 compared to a net loss of approximately
$965,000 for the nine months ended October 31,1997. The continued
losses incurred by the Company are due primarily to lower prices
received by the Company for the sale of its oil and gas and the
reduced production level of Righthand Creek. Dividends of
approximately $873,000 have been accrued for the benefit of
preferred stockholders during the nine months ended October 31,
1998. The quarterly dividends payable to Koch for August 1, 1997
thru November 1,1998 on the Series A , Series B and Series C
Preferred Stock have not been paid.
For the three months ended October 31,1998, the Company incurred
a net loss before dividends on preferred stock of approximately
$166,000 versus approximately $196,000 for the three months ended
October 31,1997. Lease operating expenses and depletion for these
properties were approximately $328,000 as compared to
approximately $936,000 for the same three month period the
previous fiscal year.
2. Material Changes in Results of Operations
-----------------------------------------
Revenues and Lease Operating Expenses
Oil and gas sales decreased from approximately $5,424,000
for the nine months ended October 31, 1997 to approximately
$3,379,000 for the nine months ended October 31,1998. This
decrease is due primarily to the lower level of production from
Righthand Creek and lower oil and gas prices. Oil and gas sales
from the Company's properties have decreased from approximately
$1,686,000 for the three months ended October 31, 1997 to
approximately $1,072,000 for the three months ended October 31,
1998.
Dry Hole Costs and Lease Abandonments
For the nine months ended October 31, 1998, the Company
incurred approximately $89,000 dry hole expenses relative to
the drilling of an exploratory well in Mississippi. No
significant dry hole expenses were incurred during the nine
months ended October 31, 1997.
Depletion of Oil and Gas Producing Properties
Depletion expense decreased from approximately $1,719,000 for
the nine months ended October 31, 1997 to approximately
$925,000 for the nine months ended October 31, 1998. The
decrease in depletion expense is primarily due to the reduced
unit amortization rate of depletion applied to the net
capitalized acquisition costs of Righthand Creek and the
Company's other properties as a result of the impairment
-12-
charge of approximately $8.6 million incurred during the
fiscal year ended January 31, 1998.
General and Administrative
General and administrative expenses for the nine months ended
October 31, 1998 was approximately $1,114,000 as compared to
$1,149,000 for the nine months ended October 31, 1997.
Interest Expense
Interest expense for the nine months ended October 31, 1998
was approximately $880,000 as compared to $846,000 for the
nine months ended October 31, 1997.
Sales Contract
In August 1997, the Company, on behalf of Offshore, entered
into a commodity futures oil swap agreement ("Oil Swap
Agreement") with Koch Oil Company. That Oil Swap Agreement was
made pursuant to an existing Master Commodity Swap Agreement
between the Company and Koch, at no current cost to the
Company, and is termed a "Costless Put/Call Collar Option,"
covering the period between February 1, 1998 and January 31,
1999. The Oil Swap Agreement is based upon 400 barrels oil per
day and establishes settlement dates on the last day of each
calendar month during the contract period. It sets a floating
price equal to Koch Oil Company's monthly average LLS posting
plus $1.50, and strike prices of $18.20 for put options and
$19.97 for call options. On any settlement date, if the
floating price is less than the put option strike price, then
Koch must pay the Company the price difference, multiplied by
the determination quantity for the month. On any settlement
date, if the floating price exceeds the call option strike
price, the Company must pay Koch the difference, multiplied by
the determination quantity for the month.
Except as described above, the Company is not obligated to
provide a fixed or determinable quantity of oil and gas in the
future under any existing contracts, agreements, hedge or swap
arrangements.
Liquidity and Capital Resources
On November 2, 1998, the Company, EXCO Resources, Inc, ("EXCO")
and Koch Exploration Company ("Koch") entered into a Voting
Agreement (the "Agreement") contemporaneously with the purchase
by EXCO of a certain Promissory Note ("Note") dated January 15,
1997, which was executed by Rio Grande, Inc. ("RGI") and Rio
Grande Drilling Company ("RGD") as co-makers with Comerica
Bank - Texas ("Comerica"). The Note, in the original face
amount of $50,000,000, had a corresponding principal amount
outstanding of $13,127,666 and related accrued interest payable
of $486,227 on November 2, 1998. Repayment of the Note is
secured by a first lien deed of trust, mortgage and
security interest in substantially all of the Company's
assets, primarily oil and gas leasehold interests and
-13-
tangible well equipment (the "Properties").
The Agreement provided that the Company shall file Chapter 11
cases to be administratively consolidated pursuant to Rule
1015(b) of the Bankruptcy Rules. The Joint Chapter 11 Plan of
Reorganization ("Plan") for RGI, RGD, Rio Grande Desert Oil
Company ("Desert"), Rio Grande Offshore, Ltd. ("Offshore") and
Rio Grande GulfMex, Ltd. ("GulfMex") was filed with the
bankruptcy court for the Western District of Texas on December
11, 1998. The Plan provides that RGD, Offshore and Desert shall
merge into RGI (the RGI Group") upon consummation of the Plan.
RGI was incorporated pursuant to the corporate regulations
for the State of Delaware. After the approved merger, the
Reorganized RGI will own and have the right to dispose of all
the Properties, including its 80% partnership interest in
GulfMex.
As a condition of the merger, all equity interests in the
entities to be merged into Reorganized RGI shall be canceled.
Thereafter, Reorganized RGI will issue shares of common stock
to EXCO as the holder of the Note. EXCO secured all of Comerica's
rights pursuant to the Note and certain Loan Agreement dated
March 8, 1996 between Comerica, RGI and RGD.
The Agreement provides that parties to the Agreement
implement a Financial Restructuring with regards to the Note,
the Preferred Stock Interests of Koch and any such other claims
against the Company.
The Plan provides for certain class ("Class") definitions for
each group of creditors or parties that may have claims against
the Company. The Class definitions are set out as follows:
Class 1 The Allowed Secured Claim in respect of the Note.
Class 2 Any Allowed Secured Claims Against any of the
RGI Group other than the Allowed Secured Claim
in Class 1.
Class 3 Any Allowed Claims against any of the RGI Group
entitled to priority pursuant to the
Bankruptcy Code, other than priority claims
specified in sections 507(a)(1), 507(a)(2)
and 507(a)(8) of the Bankruptcy Code.
Class 4 Any Allowed Unsecured, Nonpriority Claims against
any of the RGI Group not classified elsewhere
including any deficiency claim under the Note.
Class 5 Allowed Preferred Stock Interests in RGI, and all
rights to dividends and any other rights
associated therewith, held by Koch Exploration
Company.
Class 6 Allowed Limited Partnership Interests in GulfMex.
-14-
Class 7 Allowed RGI Common Stock Interests,and any
options, warrants, or other rights or Claims in
respect of such Common Stock, and all other
equity interests of the RGI Group, excluding
those equity interests classified in Classes 5
and 6.
Class 8 Intercompany claims.
The Plan provides that holders of "Allowed Administrative Claims"
shall be paid cash in full on the day after the confirmation of
the Plan by the bankruptcy court and the Final Order is issued
("Effective Date"). Any holders of claims must have their claim
approved by the bankruptcy court and if approved, shall be
paid immediately after the claim is approved by Final Order.
The Plan provides that holders of Allowed Priority Tax Claims
shall be paid in full on the later of (i) the Effective Date,
(ii) 11 days after the date such tax claim becomes an Allowed
Claim, or (iii) on such other terms as acceptable to the holders
of such claims in full satisfaction of their claims.
Under the Plan, all executory and unexpired leases of the RGI
Group, which have not previously been (i) assumed, (ii)
rejected, or (iii)assumed or assigned by the RGI Group
pursuant to an order extended during the Chapter 11 case and
which are not specified as being a "Rejected Contract" or
"Rejected Lease" shall be deemed to be assumed under the Plan.
In addition, the prepetition employment agreements of Guy Bob
Buschman and Gary Scheele shall be rejected effective upon the
last day of the calendar month in which "Substantial
Consummation" of the Plan occurs. Any claims of damages for the
breach of termination of such agreements shall be extinguished
and discharged pursuant to the Plan. Effective upon the first
day of the calendar month following substantial consummation
of the Plan, Guy Bob Buschman and Gary Scheele shall execute
12-month Retention Agreements with EXCO.
The Bankruptcy Court set the deadline for the filing of
"proof of claims" in this Chapter 11 case as January 11, 1999.
If the Effective Date of the Plan does not occur by March
31, 1999, the Plan shall automatically terminate unless EXCO,
Koch and the RGI Group consent to an extension which will not be
more than 90 days.
On the Effective Date of the issuance of the Final Order
by the bankruptcy court, the present and former officers,
directors, employees, subsidiaries, affiliates, predecessors,
successors, assigns, agents, representatives, guarantors,
sureties, insurers and the respective professional advisors
for the RGI Group, EXCO and Koch, to the extent they are or may
be liable for any actions or inactions shall be released
unconditionally from any and all claims, obligations, suits,
judgements, damages, rights, causes of action and liabilities
whatsoever, whether known as unknown before, on or after the
Effective Date. The releases as described above shall not
apply to any action or omission that constitutes actual
fraud or criminal behavior.
-15-
The Agreement shall automatically terminate upon the
occurrence of defined "Agreement Termination Event" unless
the parties to the Agreement waive the specific Agreement
Termination Event in writing. An Agreement Termination Event as
defined by the Agreement shall mean any of the following:
(a) The Chapter 11 Cases shall not have been commenced and
the Plan and supporting disclosure statement shall not
have been filed by December 11, 1998;
(b) The RGI Group fails to comply in all material respects
with its obligations specified in paragraph 11 of the
Agreement and in Exhibit "A" of the Agreement;
(c) The RGI Group shall not have filed a motion to assume
this Agreement within the first ten (10) days of the
Chapter 11 Cases
(d) The order of the Bankruptcy Court confirming the Plan
shall not have been entered and the effective date of
the Plan shall not have occurred by March 31, 1999;
(e) Any member of the RGI Group shall file or support
confirmation, or fail to actively oppose confirmation,
of a plan of reorganization embodying terms materially
different from those contemplated by this Agreement;
(f) The Plan shall not have been substantially consummated
pursuant to section 1101(2) of the Bankruptcy Code by
April 21, 1999;
(g) The Bankruptcy Court shall have entered an order
pursuant to Section 1104 of the Bankruptcy Code
appointing a trustee with respect to one or more of
the RGI Group;
(h) The Bankruptcy Court shall have entered an order
dismissing the Chapter 11 Cases or an order pursuant
to Section 1112 of the Bankruptcy Code converting the
Chapter 11 Cases to cases under Chapter 7 of the
Bankruptcy Code;
(i) An injunction, judgment, order, decree, ruling or
charge shall have been entered which prevents
consummation of the Plan;
(j) An event or circumstance which has, or could reasonably
be expected to have, a Materially Adverse Effect shall
have occurred;
(k) The (i) proofs of claim as of the claims bar date
set forth in Exhibit "A" to the Agreement and
(ii)requests for payment of administrative expenses
that are on file in the Chapter 11 Cases, together with
(iii) the expenses set forth in Exhibit "B" to the
Agreement and (iv) those claims listed in the Schedules
filed by the RGI Group in the Chapter 11 Cases that are
-16-
not designated as disputed, contingent or unliquidated,
exceed the limitation on "allowed claims" set out in
Part IV.G. of Exhibit "A" to the Agreement and the
amounts set forth in Exhibit "B" to the Agreement
by more than 5% in the aggregate; or
(l) The RGI Group or any of its individual members shall
fail to promptly remit to EXCO the net proceeds of any
sales of the Properties that might be consummated
between the time of the execution of this Agreement
and the Effective Date.
Under terms of the Agreement, the Company has agreed that all of
its cash and cash equivalents shall be deposited to a collateral
account controlled by EXCO and that any amounts to be received
from product sales subsequent to the Agreement date shall also be
deposited to that account. The Company will provide a monthly
budget to EXCO which will provide for payment of the Company's
operating expenses and general and administrative expenses.
The Company's future results of operations and the other
forward looking statements contained in this Quarterly Report
involve a number of risks and uncertainties. Statements in
this Quarterly Report including those contained in the
foregoing discussion and other items herein, concerning the
Company which are (a) statements of plans and objectives for
future operations, (b) statements of future economic
performance, or (c) statements of assumptions or estimates
underlying or supporting the foregoing or (d) statements
regarding the treatment of various classes of creditors pursuant
to the Plan,are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The ultimate accuracy of
forward-looking statements is subject to a wide range of
business risks and changes in circumstances, and actual
results and outcomes often differ from expectations. Any number
of important factors could cause actual results to differ
materially from those in the forward-looking statements
herein, including without limitation actions of third parties,
parties to the Agreement or the bankruptcy court relating to the
Plan.
-17-
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Series A Preferred Stock
The cash dividends of $187,500 each due August 1, 1997 thru
November 1, 1998 on Series A Preferred Stock have not been paid.
Series B Preferred Stock
The stock dividends of 17,500 shares of Series C Preferred Stock each
due August 1, 1997 thru November 1, 1998 on the Series B Preferred
Stock have not been issued.
Series C Preferred Stock
The cash dividends for Series C Preferred Stock due August 1, 1997 thru
November 1, 1998, have not been paid.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed on the accompanying Index to Exhibits on
page E-1 are filed as part of this Form 10-QSB. The Company
will furnish a copy of any exhibit to a requesting shareholder
upon payment of a fee of $.25 per page.
-18-
(b) Reports on Form 8-K
-------------------
The Company filed a Form 8-K on November 12,1998, which
describes the Voting Agreement entered into between EXCO
Resources, Inc. and the Company and the discharge of KPMG as the
Company's auditors.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
--------------------
Not applicable.
(b) Exhibits
--------
Number Document
------ --------
99(f) Joint Chapter 11 Plan of Reorganization
of Rio Grande, Inc., Rio Grande
Drilling Company, Rio Grande Desert Oil
Company, Rio Grande Offshore,Ltd. and
Rio Grande GulfMex,Ltd. filed
December 11, 1998. (E-5).
-19-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RIO GRANDE, INC.
Date: December 21, 1998 By:__________________________________
Guy R. Buschman, President
Date: December 21, 1998 By: _________________________________
Gary Scheele, Secretary and Treasurer
(principal financial officer)
-20-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RIO GRANDE, INC.
Date: December 21, 1998 By: /s/ Guy R. Buschman
----------------------
Guy R. Buschman, President
Date: December 21, 1998 By: /s/ Gary Scheele
-------------------
Gary Scheele, Secretary and Treasurer
(principal financial officer)
-21-
INDEX TO EXHIBITS
-----------------
The following exhibits are numbered in accordance with Item 601 of Regulation
S-B::
3(a) Certificate of Incorporation of the Company (incorporated by reference
to Exhibit 3(a) to Form 8-K dated December 29, 1986 [File No. 1-8287]).
3(b) Bylaws of the Company (incorporated by reference to Exhibit 3(b) to Form
8-K dated December 29, 1986 [File No. 1-8287]).
3(c) Certificate of Amendment of Certificate of Incorporation of the Company
(incorporated herein by reference from January 31, 1997 Form 10-KSB).
4(a) Specimen stock certificate (incorporated by reference to Exhibit 4(a) to
Form 8-K dated December 29, 1986 [File No. 1-8287]).
4(b) Specimen Stock Purchase Warrant (incorporated by reference to Exhibit
4(b) to form 8-K dated December 29, 1986 [File No. 1- 8287]).
4(c) Note Purchase Agreement, dated September 27, 1995, by and among the
Company, Rio Grande Drilling Company, and the various purchasers of
11.50% Subordinated Notes due September 30, 2000 (incorporated herein by
reference from October 31, 1995 Form 10-QSB).
4(d) Form of Common Stock Purchase Warrant issued in connection with the
Offering described in this report (incorporated herein by reference from
October 31, 1995 Form 10-QSB).
4(e) Amendments to Note Purchase Agreement, by and among the Company,
Drilling and the Holders (incorporated herein by reference from March
26, 1996 Form 8-K).
4(f) Amendments to Notes, by and among the Company and the Holders
(incorporated herein by reference from March 26, 1996 Form 8-K).
4(g) Consents to Proposed Transactions by the Holders to the Company
(incorporated herein by reference from March 26, 1996 Form 8-K).
4(h) Amendment to Warrant Agreement among the Company and the Holders
(incorporated herein by reference from March 26, 1996 Form 8-K).
4(i) Certificate of Designation, Preferences and Rights of Series A Preferred
Stock, Series B Preferred Stock, and Series C Preferred Stock of Rio
Grande, Inc. dated January 15, 1997 (incorporated herein by reference
from January 31, 1997 Form 8-K).
4(j) Preferred Stock Purchase Agreement between Koch Exploration Company and
Rio Grande, Inc. dated January 16, 1997 (incorporated herein by
reference from January 31, 1997 Form 8-K).
4(k) Registration Rights Agreement between Rio Grande, Inc. and Koch
Exploration Company dated January 16, 1997 (incorporated herein by
reference from January 31, 1997 Form 8-K).
E-1
4(l) Stockholders Agreement between Robert A. Buschman, Guy Bob Buschman, Rio
Grande, Inc., and Koch Exploration Company dated January 16, 1997
(incorporated herein by reference from January 31, 1997 Form 8-K).
10(a) Asset Purchase Agreement dated June 26, 1992 by and between SHV Oil and
Gas Company and Rio Grande Drilling Company (incorporated herein by
reference from July 31, 1992 Form 10-Q).
10(b) Agreement of Limited Partnership dated June 25, 1992 for Rio Grande
Offshore, Ltd. between Rio Grande Drilling Company, Robert A. Buschman,
H.Wayne Hightower and H. W. Hightower, Jr. (incorporated herein by
reference from July 31, 1992 Form 10-Q).
10(c) Loan Agreement by and between International Bank of Commerce and Rio
Grande Drilling Company dated June 26, 1992 (incorporated herein by
reference from July 31, 1992 Form 10-Q).
10(d) Purchase and Sale Agreement dated May 24, 1995, between Newfield
Exploration Company and Rio Grande Offshore, Ltd. for the sale of Ewing
Bank Blocks 947/903 and Ship Shoal Block 356 at a sales price of
$1,200,000 (incorporated by reference from July 31, 1995 Form 10-QSB).
10(e) Consulting Agreement dated August 10, 1995, between Hobby A. Abshier and
Rio Grande, Inc. (incorporated by reference from July 31, 1995 Form
10-QSB).
10(f) Closing Agreement between Fortune Petroleum Corporation, Pendragon
Resources, L.L.C. and Rio Grande Offshore, Ltd. dated March 6, 1996 for
the acquisition of South Timbalier Block 76 (incorporated by reference
from March 26, 1996 Form 8-K).
10(g) Loan Agreement between Comerica Bank-Texas, Rio Grande, Inc. and Rio
Grande Drilling Company dated March 8, 1996 for a senior credit facility
of $10,000,000 (incorporated herein by reference from March 26, 1996
Form 8-K).
10(h) Purchase and Sale Agreement between Belle Oil, Inc., Belle Exploration,
Inc., Louisiana Well Service Co., Alton J.Ogden, Jr.,Alton J.Ogden, Sr.,
Jeff L. Burkhalter and Rio Grande Offshore, Ltd. (incorporated herein
by reference from April 29, 1996 Form 8-K).
10(i) Engagement letter between Reid Investment Corporation and Rio Grande,
Inc. dated August 28, 1996, as exclusive agent to sell equity in Rio
Grande, Inc. (incorporated herein by reference from October 31, 1996
Form 10-QSB).
10(j) Purchase and Sale Agreement between Brechtel Energy Corporation, et al
and Rio Grande Offshore, Ltd. dated November 20, 1996 for the
acquisition of oil and gas properties located in the Righthand Creek
Field, Allen Parish, Louisiana (incorporated herein by reference from
October 31, 1996 Form 10-QSB).
10(k) First Amendment to Loan Agreement between Rio Grande, Inc., Rio Grande
Drilling Company and Comerica Bank - Texas dated January 15, 1997
(incorporated herein by reference from January 31, 1997 Form 8-K).
10(l) Employment Agreement between Rio Grande, Inc., Rio Grande Drilling
Company and Guy Bob Buschman dated January 16, 1997 (incorporated herein
by reference from January 31, 1997 Form 8-K).
E-2
10(m) Employment Agreement between Rio Grande, Inc., Rio Grande Drilling
Company and Gary Scheele dated January 16, 1997 (incorporated herein by
reference from January 31, 1997 Form 8-K).
10(n) Master Commodity Swap Agreement between Rio Grande, Inc. and Koch Oil
Company dated January 16, 1997 (incorporated herein by reference from
January 31, 1997 Form 8-K).
10(o) Participation Agreement between Mortimer Exploration Company and Rio
Grande Offshore, Ltd. for the Texas/Louisiana Yegua Project dated March
10, 1997 with attached amended letter agreement (incorporated herein by
reference from Form 10-KSB from January 31, 1997).
10(p) Confirmation of Costless Collar Put/Call Option subject to Master
Commodity Swap Agreement between Koch Oil Company and Rio Grande, Inc.,
dated August 15, 1997 (incorporated herein by reference from July 31,
1997 Form 10-QSB).
10(q) Letter Agreement between Comerica Bank - Texas and Rio Grande, Inc. and
Rio Grande Drilling Company dated December 22, 1997 (incorporated herein
by reference from October 31, 1997 Form 10-QSB).
16 Letter from KPMG Peat Marwick (incorporated herein by reference from
November 12, 1998, Form 8-K).
22 The following list sets forth the name of each subsidiary or affiliate
of the Company, with the State of incorporation as noted which are
wholly-owned by the Company (except as noted):
Rio Grande Drilling Company, Texas corporation
Rio Grande Desert Oil Company, Nevada corporation
Rio Grande Offshore, Ltd., a Texas limited partnership
Rio Grande GulfMex, Ltd., a Texas limited partnership (80% interest)
27 Financial Data Schedule(F-30).
99(a) Private Offering Memorandum of the Company dated August 27, 1995
(incorporated herein by reference from October 31, 1995 Form 10-QSB).
99(b) Comerica Bank - Texas letter dated February 18, 1998, regarding waiver
letter concerning non-compliance with working capital covenant for month
of November (incorporated herein by reference from March 25, 1998 Form
8-K).
99(c) Comerica Bank - Texas letter dated March 5, 1998, regarding Borrowing
Base Deficiency Deferral/Waiver Letter concerning non-compliance with
working capital covenant for month of December (incorporated herein by
reference from March 25, 1998 Form 8-K).
99(d) Thompson & Knight, attorneys for Comerica Bank - Texas, letter dated
July 8, 1998 regarding notice of default of Company to terms of the
Senior Credit Facility and notice that all outstanding indebtedness is
immediately due and payable (incorporated herein by reference from July
23, 1998 Form 8-K).
E-3
99(e) Voting Agreement dated October 30, 1998 between Rio Grande, Inc., Rio
Grande Drilling Company, Rio Grande Offshore, Ltd. Rio Grande Desert Oil
Company and Rio Grande GulfMex, Ltd. and Exco Resources, Inc.
(incorporated herein by reference from November 12, 1998, Form 8-K).
E-4
IN THE UNITED STATES BANRUPTCY COURT
FOR THE WESTERN DISTRICT FO TEXAS
SAN ANTONIO DIVISION
IN RE: ss.
ss.
RIO GRANDE, INC., ss. CASE NO. 98-55619-C
RIO GRANDE DRILLING COMPANY, ss. CASE NO. 98-55620-C
RIO GRANDE DESERT OIL COMPANY ss. CASE NO. 98-55621-K
RIO GRANDE OFFSHORE, LTD., AND ss. CASE NO. 98-55622-C
RIO GRANDE GULFMEX, LTD. ss. CASE NO. 98-55623-C
ss.
ss. (CHAPTER 11)
DEBTORS. ss. (Jointly Administered)
JOINT CHAPTER 11 PLAN OF REORGANIZATION OF
------------------------------------------
RIO GRANDE, INC., RIO GRANDE DRILLING COMPANY, RIO GRANDE DESERT OIL COMPANY,
-----------------------------------------------------------------------------
RIO GRANDE OFFSHORE, LTD.AND RIO GRANDE GULFMEX, LTD.
-----------------------------------------------------
December 11, 1998
San Antonio, Texas
COX & SMITH INCORPORATED
Deborah D. Williamson
112 East Pecan Street, Suite 1800
San Antonio, Texas 78205
(210) 554-5500
ATTORNEYS FOR DEBTORS
E-5
TABLE OF CONTENTS
ARTICLE I Definitions and Interpretation........................... 1
ARTICLE II Provisions For Payment of Administrative
and Priority Tax Claims.................................. 7
2.1 Allowed Administrative Claims............................ 7
2.2 Priority Tax Claims...................................... 8
ARTICLE III Classification of Claims................................. 8
3.1 Class 1.................................................. 8
3.2 Class 2.................................................. 8
3.3 Class 3.................................................. 8
3.4 Class 4.................................................. 8
3.5 Class 5.................................................. 9
3.6 Class 6.................................................. 9
3.7 Class 7.................................................. 9
3.8 Class 8.................................................. 9
ARTICLE IV Identification of Impaired Classes of Claims and Equity
Interests.............................................. 9
4.1 Unimpaired Classes of Claims............................. 9
4.2 Impaired Classes of Claims and Equity Interests.......... 9
4.3 Impairment Controversies................................. 9
ARTICLE V Provisions for Treatment of Classified Claims and
Interests.............................................. 9
5.1 Class 1 - EXCO Secured Claims............................ 9
5.2 Class 2 - Other Secured Claims........................... 10
5.3 Class 3 - Priority Non-Tax Claims........................ 10
5.4 Class 4 - Other Unsecured Claims......................... 10
5.5 Class 5 - Claims and Interests of Koch Exploration
Company........................................ 10
5.6 Class 6 - Allowed Limited Partnership Interests in
GulfMex........................................ 10
5.7 Class 7 - Common Stock................................... 11
5.8 Class 8 - Intercompany Claims............................ 11
ARTICLE VI Acceptance or Rejection of Plan.......................... 11
6.1 Classes Entitled to Vote................................. 11
6.2 Class Acceptance Requirement............................. 11
ARTICLE VII Means for Implementation of Plan of Reorganization....... 12
7.1 Merger................................................... 12
7.2 Cash Payments on the Effective Date...................... 12
7.3 Restated Charter......................................... 12
7.4 Common Stock and Preferred Stock......................... 12
7.5 Corporate Governance..................................... 12
7.6 Record Date.............................................. 13
7.7 Means of Cash Payment............................ ....... 13
7.8 Delivery of Distributions................................ 13
7.9 Time Bar to Cash Payments................................ 13
7.10 Vesting of Assets........................................ 14
7.11 Effectuating Documents................................... 14
7.12 Avoidance Actions........................................ 14
7.13 Effect of Confirmation: Discharge........................ 14
7.14 Exemption from Securities Laws........................... 14
E-6
ARTICLE VIII Conditions to Consummation of Plan....................... 15
8.1 Conditions to Confirmation............................... 15
8.2 Conditions to Occurrence of Effective Date............... 15
8.3 Waiver of Conditions..................................... 15
8.4 Effect of Nonoccurrence of Conditions to the
Effective Date........................................... 15
ARTICLE IX Treatment of Executory Contracts and Unexpired
Leases................................................... 16
9.1 Assumed if Not Rejected.................................. 16
9.2 Employee Agreements...................................... 16
9.3. Rejection of Specified Contracts and Leases.............. 16
9.4 Assumption of Contracts and Leases ...................... 16
9.5 Bar to Rejection Damages................................. 16
9.6 Bar to "Cure" Claims..................................... 17
ARTICLE X Procedures for Resolving and Treating Contested
Claims................................................... 17
10.1 Objection Deadline....................................... 17
10.2 Prosecution of Objections................................ 17
10.3 No Distributions Pending Allowance....................... 17
10.4 Time for Filing Administrative Claims.................... 17
10.5 Time for Filing of Reimbursement Claims.................. 18
ARTICLE XI Miscellaneous Provisions................................. 18
11.1 Limitations of Liability/Releases........................ 18
11.2 Compliance with Tax Requirements......................... 19
11.3 Compliance with All Applicable Laws...................... 19
11.4 Setoffs.................................................. 19
11.5 Maintenance of Causes of Action.......................... 19
11.6 Request for Cramdown under Section 1129(b) of
the Bankruptcy Code...................................... 20
ARTICLE XII Consummation of Plan..................................... 20
12.1 Retention of Jurisdiction................................ 20
12.2 Substantial Consummation ................................ 21
12.3 Modification of Plan..................................... 21
12.4 Inconsistencies.......................................... 21
12.5 U.S. Trustee Fees........................................ 21
EXHIBITS
6. Restated Charter
7. Voting Agreement
E-7
JOINT CHAPTER 11 PLAN OF
------------------------
RIO GRANDE, INC., RIO GRANDE DRILLING COMPANY, RIO GRANDE DESERT OIL
--------------------------------------------------------------------
COMPANY, RIO GRANDE OFFSHORE, LTD.,
-----------------------------------
RIO GRANDE GULFMEX, LTD.
------------------------
Rio Grande, Inc., Rio Grande Drilling Company, Rio Grande Desert Oil
Company, Rio Grande Offshore, Ltd., and Rio Grande GulfMex, Ltd. propose the
following plan of reorganization.
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 "Administrative Claim" shall mean a Claim or portion of a Claim
that is a cost or expense of administration of the Chapter 11 Case allowed under
section 503(b) or 507(b) of the Bankruptcy Code that is entitled to priority
under section 507(a)(1) of the Bankruptcy Code, including, without limitation,
(a) any actual and necessary costs and expenses of preserving the estate of the
Debtors, (b) any actual and necessary costs and expenses of operating the
business of the Debtors, (c) any indebtedness or obligations incurred or assumed
by the Debtors, in accordance with section 364, in connection with the conduct
of their business or for the acquisition or lease of property or the rendition
of services, (d) any allowances of compensation and reimbursement of expenses to
the extent allowed by Final Order under section 330 of the Bankruptcy Code,
whether arising before or after the Effective Date, and (e) any fees or charges
assessed against the estate of the Debtors under section 1930, chapter 123,
title 28, United States Code.
1.2 "Allowed" when used with respect to a Claim shall mean (a) a claim
against the Debtors, proof of which was filed on or before the date designated
by the Bankruptcy Court as the last date for filing that category of proof of
claim (or late-filed with leave of Court), as to which no Objection has been
interposed; or (b) if no proof of claim was filed, a Claim that has been or
hereafter is listed by the Debtors as liquidated in amount and not disputed or
contingent, as to which no Objection has been interposed; or (c) a Claim as to
which any Objection has been interposed, to the extent the Objection has been
overruled by a Final Order no longer subject to being modified or reversed on
reconsideration or appeal.
1.3 "Avoidance Action" shall mean a cause of action assertable by the
Debtors or their successors pursuant to sections 542, 543, 544, 545, 547, 548,
549, 550, or 553 of the Bankruptcy Code.
1.4 "Bankruptcy Code" shall mean Title II of the Bankruptcy Reform Act
of 1978, as amended, and codified at title 11 of the United States Code, as
applicable to the Chapter 11 Cases and as in effect as of the date hereof or as
hereafter amended.
1.5 "Bankruptcy Court" shall mean the Bankruptcy Court unit of the
United States District Court for the Western District of Texas, San Antonio
Division, or such other court having jurisdiction over all or any part of the
Chapter 11 Cases.
E-8
1.6 "Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy
Procedure, as promulgated by the United States Supreme Court pursuant to 28
U.S.C. ss. 2075 and, to the extent not inconsistent therewith, the local rules
of the Bankruptcy Court, as amended from time to time.
1.7 "Business Day" shall mean any day other than a Saturday, a Sunday,
or a day on which commercial banks in the City of San Antonio, State of Texas,
are required or authorized to close.
1.8 "Cash" shall mean and include United States currency on hand,
United States currency on deposit in any bank account, and cash equivalents,
including but not limited to any check or other similar negotiable instrument
denominated in United States currency, shares in any money market or similar
fund that are actively traded on any established securities market located
within the United States, commercial paper having a maturity of 90 days or less
and denominated in United States currency, and any obligation of the United
States of America (or any agency or instrumentality thereof) denominated in
United States currency.
1.9 "Chapter 11 Cases" shall mean the cases commenced by the Debtors
under the Bankruptcy Code by voluntary chapter 11 petitions filed on the
Petition Date.
1.10 "Claim" shall mean any right to payment from one or more of the
Debtors, whether or not the right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, contested, uncontested,
legal, equitable, secured, or unsecured; or any right to an equitable remedy for
breach of performance if the breach gives rise to a right of payment from one or
more of the Debtors, whether or not the right to an equitable remedy is reduced
to judgment, fixed, contingent, matured, unmatured, contested, uncontested,
secured, or unsecured, or any Derivative Claim.
1.11 "Class" shall mean a category or group of holders of Claims or
Equity Interests as designated pursuant to Article III of this Plan.
1.12 "Comerica" shall mean Comerica Bank - Texas.
1.13 "Common Stock" shall mean the shares of common stock, $0.01 par
value per share, issued by RGI.
1.14 "Company" shall mean, collectively, Rio Grande,Inc., Rio Grande
Drilling Company, Rio Grande Offshore, Ltd., Rio Grande GulfMex, Ltd., and Rio
Grande Desert Oil Company.
1.15 "Confirmation Date" shall mean the date of entry of the
Confirmation Order.
1.16 "Confirmation Order" shall mean the order of the Bankruptcy
Court confirming this Plan.
1.17 "Contested Claim" shall mean a Claim against one or more of the
Debtors, as to which an Objection to all or any part of the Claim is timely
interposed.
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1.18 "Contested Claim Amount" with respect to any Contested Claim,
shall mean the asserted amount of a Claim that is filed on or before the date
designated by the Bankruptcy Court as the last date for filing that category of
proof of Claim, which is a Contested Claim, and which has not been Allowed or
Disallowed before the Effective Date.
1.19 "Creditor" shall mean the holder of a Claim.
1.20 "Creditors Committee" shall mean any Official Committee of
Unsecured Creditors appointed in the Chapter 11 Case pursuant to section 1102 of
the Bankruptcy Code, as reconstituted from time to time pursuant to order of the
Bankruptcy Court or determination of the United States Trustee for the Western
District of Texas.
1.21 "Debtors" shall mean Rio Grande, Inc., Rio Grande Drilling
Company, Rio Grande Desert Oil Company, Rio Grande Offshore, Ltd., and Rio
Grande GulfMex, Ltd.
1.22 "Debtors in Possession" shall mean the Debtors in their
capacities as Debtors-in-possession under section 1101(1) of the Bankruptcy
Code.
1.23 "Derivative Claim" shall mean any Claim for damages by Option
Holders or Warrant Holders arising out of cancellation of any right to purchase
Common Stock outstanding prior to the Effective Date. Debtors believe that, due
to the exercise price of such rights to purchase Common Stock, no Option Holder
or Warrant Holder will incur any damages as a result of the cancellation of such
rights to purchase Common Stock outstanding prior to the Effective Date.
1.24 "Desert" shall mean Rio Grande Desert Oil Company.
1.25 "Deficiency Amount" shall mean the amount by which the total
amount of a Secured Claim exceeds the value of the collateral securing the Claim
as of the date the determination is made.
1.26 "Deficiency Claim under the Note" shall mean the deficiency claim
of EXCO which, for purposes of this Plan only, shall be waived and shall be
deemed to be zero, but may be allowed in an undetermined amount if any party
objects to the Class 1 treatment or secured claim amount.
1.27 "Disallowed," when used with respect to all or any part of a
Claim, shall mean the status of that portion of a Contested Claim as to which a
Final Order of the Bankruptcy Court is entered sustaining the Objection.
1.28 "Disclosure Statement" shall mean the Disclosure Statement filed
under Bankruptcy Code section 1125 in support of this Plan.
1.29 "Effective Date" shall mean the first Business Day after which
the Confirmation Order is a Final Order.
1.30 "Employee Agreement" shall mean an employment contract between
the Debtors and any of their employees as of either the Petition Date or the
Effective Date.
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1.31 "Equity Interests" shall mean holders of Common Stock and any
rights arising out of or related to Common Stock including, without limitation
all issued and outstanding unexercised warrants and options to acquire Common
Stock.
1.32 "EXCO" shall mean EXCO Resources, Inc., successor in interest to
Comerica.
1.33 "Final Order" shall mean an order or judgment of the Bankruptcy
Court or any other court or adjudicative body of competent jurisdiction: (1) as
to which the time to appeal or seek rehearing or petition for certiorari shall
have expired and (2) with respect to which there is no stay on its execution or
enforcement in effect.
1.34 "GulfMex" shall mean Rio Grande GulfMex, Ltd.
1.35 "Indemnification Claims" shall mean the Claims of the Debtors'
present and former directors and officers arising out of the Debtors'
Indemnification Obligations.
1.36 "Indemnification Obligations" shall mean the obligations of the
Debtors to indemnify their respective present and former directors and officers
pursuant to any provisions of the Debtors' charter and/or other organizational
documents and/or applicable state law.
1.37 "Koch" shall mean Koch Exploration Company.
1.38 "Lien" shall mean any lien, charge, encumbrance, or interest in
or against property to secure payment of a debt or enforcement of an obligation.
1.39 "Note" shall mean that certain secured promissory note dated as
of January 15, 1997, payable to the order of Comerica Bank-Texas in the original
face amount of $50,000,000.00, the principal balance on such Note currently
being $13,127,666.06.
1.40 "Objection" shall mean an objection to the allowance of a Claim
interposed within the applicable period of limitation fixed by this Plan, the
Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court.
1.41 "Offshore" shall mean Rio Grande Offshore, Ltd.
1.42 "Option Holders" shall mean the holder of any right issued by the
Debtors to purchase Common Stock, other than the Warrant Holders.
1.43 "Person" shall mean an individual, corporation, partnership,
joint venture, trust, estate, unincorporated association, unincorporated
organization, governmental entity or unit or political subdivision thereof, or
any other entity.
1.44 "Petition Date" shall mean November 12, 1998.
1.45 "Plan" shall mean this plan of reorganization for the Debtors, as
it may be modified from time to time, and all exhibits and schedules thereto.
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1.46 "Plan Ballot Deadline" shall mean the date fixed by the
Bankruptcy Court by which the ballot that accompanies this Plan, validly
executed by the holder of an Allowed Claim, must be received by the Debtors or
its solicitation agent, which date is set forth in the Disclosure Statement.
1.47 "Plan Documents" shall mean Exhibits 1 through ____ to this Plan,
which Exhibits will be filed in the Bankruptcy Court not later than the
conclusion of the hearing on confirmation of this Plan, unless specifically
provided otherwise in this Plan.
1.48 "Plan Proponents" shall mean the Debtors.
1.49 "Preferred Stock Interests" shall mean such rights and remedies
which arise out of or are related to the Certificate of Designation, Preferences
and Rights of Series A Preferred Stock, Series B Preferred Stock, and Series C
Preferred Stock of RGI dated January 15, 1997 designating the Preferred Stock
issued by RGI to Koch pursuant to the terms of that certain Preferred Stock
Purchase Agreement between Koch and RGI dated January 16, 1997, and all of the
500,000 shares of Series A Preferred Stock and the 500,000 shares of Series B
Preferred Stock issued by RGI to Koch pursuant to the terms thereof, and the
17,500 shares of Series C Preferred Stock subsequently issued by RGI to Koch
pursuant to the terms thereof.
1.50 "Priority Non-Tax Claims" shall mean all the Allowed Claims that
are unsecured claims entitled to priority, other than Priority Tax Claims and
priority claims specified in ss.ss. 507(a)(1), 507(a)(2) and 507(a)(8) of the
Bankruptcy Code.
1.51 "Priority Tax Claim" shall mean a Claim entitled to priority
pursuant to section 507(a)(8) of the Bankruptcy Code.
1.52 "Pro Rata" shall mean the proportion that the amount of a Claim
in a particular Class bears to the aggregate amount of all Claims in the Class.
1.53 "Reorganized Company" shall mean RGI from and after the merger
contemplated by this Plan on the Effective Date, as described in Section 7.1
herein below.
1.54 "Rejected Contracts" shall mean all contracts rejected prior to
entry of the Confirmation Order and the contracts of the Debtors listed in a
pleading to be filed by the Debtors with the Bankruptcy Court on or before ten
(10) calendar days prior to the hearing date for Confirmation of the Plan.
1.55 "Rejected Leases" shall mean all leases rejected prior to entry
of the Confirmation Order and the leases of the Debtors listed in a pleading to
be filed by the Debtors with the Bankruptcy Court on or before ten (10) calendar
days prior to the hearing date for Confirmation of the Plan.
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1.56 "Reorganized RGI Common Stock" shall mean the shares of stock of
Reorganized RGI as set forth in the Reorganized RGI Certificate of Incorporation
which Reorganized RGI will issue pursuant to the terms of the Plan.
1.57 "Restated Charter" shall mean the amended and restated
certificate of incorporation of RGI to be filed with the Secretary of State of
Delaware to be effective on the Effective Date, which shall be in substantially
the form attached as Exhibit 1 to this Plan.
1.58 "RGD" shall mean Rio Grande Drilling Company.
1.59 "RGI" shall mean Rio Grande, Inc.
1.60 "RGI Group" shall mean, collectively, Rio Grande, Inc., Rio
Grande Drilling Company, Rio Grande Offshore Ltd., Rio Grande GulfMex, Ltd., and
Rio Grande Desert Oil Company.
1.61 "Secured Claim" shall mean any Claim secured by a valid,
perfected, and enforceable Lien on or against property of one or more of
Debtors, but only to the extent of the value of the collateral securing the
Claim.
1.62 "Security Instruments" shall mean all documents, instruments,
guarantees, security agreements, financing statements, mortgages, deeds of
trust, assignments of production, pledge agreements, certificates and agreements
executed and delivered in connection with the Note.
1.63 "Tax Code" shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of any subsequent federal revenue act.
1.64 "Tax Return" shall mean any consolidated federal income tax
return filed by the Debtors or the Reorganized Company.
1.65 "Unsecured Claim" shall mean a Claim, other than an
Administrative Claim, a Priority Tax Claim, a Priority Non-Tax Claim, or a
Secured Claim.
1.66 "Voting Agreement" shall mean that certain Voting Agreement made
effective November 2, 1998 by and among EXCO, Koch, and the Debtors, a copy of
which is attached hereto as Exhibit 2 to the Plan.
1.67 "Warrant Holders" shall mean the holder of any rights to purchase
Common Stock pursuant to the Common Stock Purchase Warrants issued by RGI in
connection with the Note Purchase Agreement, dated September 27, 1995, by and
among RGI, Drilling, and the various purchasers of 11.50% Subordinated Notes,
none of which Subordinated Notes remain outstanding at the Petition Date.
1.68 "Interpretation." Unless otherwise specified, all section,
article, and exhibit references in this Plan are to the respective section in,
article of, or exhibit to, this Plan, as the same may be amended, waived, or
modified from time to time. The exhibits annexed to this Plan and each of the
Plan Documents are incorporated into and are part of this Plan as if fully set
forth in this Plan. The headings in this Plan are for convenience of reference
only and shall not limit or otherwise affect the provisions hereof. Words
denoting the singular number shall include the plural number and vice versa, and
words denoting one gender shall include the other gender.
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ARTICLE II
PROVISIONS FOR PAYMENT
OF ADMINISTRATIVE AND PRIORITY TAX CLAIMS
2.1 Allowed Administrative Claims: The holders of Allowed
Administrative Claims shall be paid in Cash in full on the Effective Date, or on
such other terms as are acceptable to the holders of such Claims, in full
satisfaction of their Claims, except to the extent any holder of any such Claim
must have its Claim approved by the Court, in which case such Claim shall be
paid immediately after such Claim is approved by Final Order, which Final Order
is no longer subject to being modified or reversed on reconsideration or appeal.
Holders of these Claims are unclassified under the Code and the Debtors will not
solicit acceptances of the Plan from holders of these Claims.
2.2 Priority Tax Claims.
(a) Except as set forth in subsection (b) below, the holders of Allowed
Priority Tax Claims shall be paid in Cash in full on the later of (i) the
Effective Date; (ii) eleven (11) days after the date any such Claim becomes an
Allowed Claim; or (iii) on such other terms as are acceptable to the holders of
such Claims, in full satisfaction of their Claims.
(b) At the option of the Debtors, any holder of an Allowed Priority Tax
Claim may receive, in lieu of the cash consideration set forth in subsection (a)
above, a promissory note in the principal amount of any such holder's Allowed
Priority Tax Claim. Interest shall accrue under the note from and after the
Effective Date at the rate of 5% or such higher or lower rate as is determined
by the Bankruptcy Court to be appropriate under section 1129(a)(9)(C) of the
Code and shall be paid semiannually in arrears. The principal amount of the note
shall be paid in full on a date or dates six (6) years after the date of
assessment of such Allowed Priority Tax Claim.
(c) Holders of these Claims are unclassified under the Code and the
Debtors will not solicit acceptances of the Plan from holders of these Claims.
ARTICLE III
CLASSIFICATION OF CLAIMS
Claims and Equity Interests in the Debtors other than Administrative
and Priority Tax Claims are classified as follows:
3.1 Class 1.Class 1 shall contain the Allowed Secured Claim of EXCO.
3.2 Class 2.Class 2 shall contain all Allowed Secured Claims other
than the Allowed Secured Claim of EXCO.
3.3 Class 3.Class 3 shall contain all the Allowed Claims that are
unsecured claims entitled to priority, other than Priority Tax Claims and
priority claims specified in ss.ss.507(a)(1),507(a)(2) and 507(a)(8) of the
Bankruptcy Code.
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3.4 Class 4.Class 4 shall contain any Allowed, Nonpriority,
Unsecured Claims not otherwise classified, including the Deficiency Claim under
the Note.
3.5 Class 5.Class 5 shall contain all claims and interests of Koch
Exploration Company.
3.6 Class 6.Class 6 shall contain the Allowed Limited Partnership
Interests in GulfMex.
3.7 Class 7.Class 7 shall contain the Common Stock and any
Derivative Claims or other rights or Claims in respect of such Common Stock,
and all other Equity Interests of the RGI Group, excluding those Equity
Interests classified in Classes 5 or 6.
3.8 Class 8.Class 8 shall contain any and all claims by and between
any of the Debtors.
ARTICLE IV
IDENTIFICATION OF IMPAIRED CLASSES OF
CLAIMS AND EQUITY INTERESTS
4.1 Unimpaired Classes of Claims. Classes 2, 3, and 4 are not
impaired under this Plan.
4.2 Impaired Classes of Claims and Equity Interests. With the
exception of the Unimpaired Classes specified in Section 4.1 of this Plan, all
Classes of Claims and all Equity Interests are impaired under this Plan.
4.3 Impairment Controversies. If a controversy arises as to whether
any Class of Claims or Equity Interests is impaired under this Plan, the
Bankruptcy Court shall, after notice and a hearing, determine the controversy.
ARTICLE V
PROVISIONS FOR TREATMENT OF
CLASSIFIED CLAIMS AND INTERESTS
5.1 Class 1 - EXCO Secured Claims. The Allowed Secured Claim of EXCO
shall be Allowed in full in the amount of $13,127,666.06 plus prepetition
interest, and satisfied in full by delivery, on the Effective Date, of all of
the Reorganized RGI Common Stock, free and clear of all claims, liens, or
encumbrances. Class 1 shall be impaired and entitled to vote with regard to the
Plan.
5.2 Class 2 Other Secured Claims. Each Holder of an Allowed Secured
Claim, other than the Class 1 Claim, shall be paid in Cash in full on the later
of (i) the Effective Date; (ii) eleven (11) days after the date any such Claim
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becomes an Allowed Claim; or (iii) on such other terms as are acceptable to the
holder of any such Claim, in full satisfaction of such Claim. The Plan leaves
unaltered the legal, equitable and contractual rights to which such Claim
entitles the holder of such Claim. Upon payment in full pursuant to the Plan,
the lien(s) of any holder of an Allowed Secured Claim shall be extinguished and
any holder of an Allowed Secured Claim shall execute such documentation as is
reasonably necessary to facilitate the release of its lien(s) against the
Debtors or the Debtors' property. This Class is deemed to have accepted the Plan
under the provisions of section 1126(f) of the Code and the Debtors will not
solicit acceptances of the Plan from this Class.
5.3 Class 3 Priority Non-Tax Claims. Each Holder of an Allowed Priority
Non-Tax Claim shall be paid in Cash in full on the later of (i) the Effective
Date; (ii) eleven (11) days after the date any such Claim becomes an Allowed
Claim; or (iii) on such other terms as are acceptable to the holder of any such
Claim, in full satisfaction of such Claim. The Plan leaves unaltered the legal,
equitable and contractual rights to which such Claim entitles the holder of such
Claim. This Class is deemed to have accepted the Plan under the provisions of
section 1126(f) of the Code and the Debtors will not solicit acceptances of the
Plan from this Class.
5.4 Class 4 Other Unsecured Claims. Each Holder of an Allowed Unsecured
Claim that is not in any other Class shall be paid in Cash in full on the later
of (i) the Effective Date; (ii) eleven (11) days after the date any such Claim
becomes an Allowed Claim; or (iii) on such other terms as are acceptable to the
holder of any such Claim, in full satisfaction of such Claim. The Plan leaves
unaltered the legal, equitable and contractual rights to which such Claim
entitles the holder of such Claim. This Class is deemed to have accepted the
Plan under the provisions of section 1126(f) of the Code and the Debtors will
not solicit acceptances of the Plan from this Class.
5.5 Class 5 - Claims and Interests of Koch Exploration Company. The
Allowed Class 5 claims and interests, including all rights to dividends and any
other rights associated with the Preferred Stock Interests in RGI, shall be
canceled, extinguished and deemed discharged upon distribution of an option to
acquire up to 24.5% of the working interest owned by the RGI Group in the
Righthand Creek Properties for $698,250 (assuming the full 24.5% is acquired,
which amount will be adjusted downward proportionately if Koch exercises its
option to acquire less than 24.5 %). The option shall remain open for 30 days
after the Effective Date of the Plan. If Koch chooses to exercise such option,
the effective date of Koch's acquisition of this working interest shall be
deemed to be November 1, 1998. Class 5 shall be impaired and entitled to vote
with regard to the Plan.
5.6 Class 6 Allowed Limited Partnership Interests in GulfMex. If any
Interest holder in Class 6 contributes capital (in the form of Cash) in an
amount equal to his pro rata share of 20% of the prepetition Claims against
GulfMex, then such Interest holder will retain his Interests in GulfMex and the
Plan will be deemed to leave unaltered the legal, equitable and contractual
rights associated with his limited partnership Interests. Such capital
contribution will be due to be paid on the Effective Date to RGI (which will be
the new general partner of GulfMex as of the Effective Date). If any Interest
holder in Class 6 chooses not to make such a capital contribution, then such
Interest holder's Interests will be discharged, extinguished and canceled as of
the Effective Date and there will be no distribution of any kind to such
Interest holder on account of his limited partnership Interests in GulfMex.
Class 6 will be considered impaired and entitled to vote with regard to the
Plan.
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5.7 Class 7 - Common Stock. The existing holders of Common Stock shall
receive no distribution on account of such interests or claims arising out of
such interests and such interests shall be deemed canceled and extinguished. All
options and warrants to purchase Common Stock in the Debtors shall be canceled
as of the Effective Date. Class 7 shall be deemed to have rejected the Plan
under the provisions of section 1126(g) of the Code. The Debtors will not
solicit acceptances of the Plan from this Class.
5.8 Class 8 - Intercompany Claims. All claims between or among the
Debtors and any of their affiliates and/or shareholders shall receive nothing on
account of such claims and such claims shall be deemed discharged in full. Class
8 shall be deemed to have rejected the Plan under the provisions of section
1126(g) of the Code. The Debtors will not solicit acceptances of the Plan from
this Class.
ARTICLE VI
ACCEPTANCE OR REJECTION OF PLAN
6.1 Classes Entitled to Vote. Each Unimpaired Class shall be deemed to
have accepted the Plan. Classes 7 and 8 shall be deemed to have rejected the
Plan. As a result, only Classes 1, 5 and 6 will be solicited for voting.
6.2 Class Acceptance Requirement. Whether a Class of Claims or Equity
Interests has accepted this Plan shall be determined in accordance with section
1126 of the Bankruptcy Code.
ARTICLE VII
MEANS FOR IMPLEMENTATION OF
PLAN OF REORGANIZATION
7.1 Merger. On the Effective Date, RGD, Offshore and Desert shall merge
with and into RGI. Upon such merger, the Reorganized RGI will own and have the
right to dispose of all of the assets of RGI, RGD, Offshore and Desert,
including the 80% general partnership interest in GulfMex that currently belongs
to Offshore.
7.2 Cash Payments on the Effective Date. Payments of Cash to holders of
Administrative Claims, Secured Claims other than EXCO, Priority Tax Claims,
Priority Non-Tax Claims, and Unsecured Claims as set forth in Article V shall be
made on the Effective Date, except as otherwise herein provided.
7.3 Restated Charter. The Reorganized RGI charter shall be amended and
restated as necessary so that, on the Effective Date, the Reorganized RGI
Certificate of Incorporation shall comply with section 1123(a)(6) of the Code
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by, inter alia, providing for restrictions on issuance of nonvoting equity
securities.
7.4 Common Stock and Preferred Stock. At the close of business on the
Effective Date of the Plan, the share transfer records of the Common Stock shall
be adjusted to reflect the cancellation of all shares of Common Stock and
Preferred Stock.
On the Effective Date, the Debtors shall issue to the holders of Claims
in Class 1 the Reorganized RGI Common Stock.
7.5 Corporate Governance. Until the Effective Date, the Debtors will be
managed by, and their Boards of Directors shall consist of, substantially the
same personnel that managed, operated and directed the Debtors on the Petition
Date, subject to such changes as may be determined by the Boards of Directors of
the Debtors. Except as required by law, the Debtors shall: (a) conduct their
businesses in the usual, regular and ordinary course of business in a manner
consistent with past practice and sound practice subject to their obligations as
debtors-in-possession pursuant to the Code; (b) use their best efforts to
preserve intact their respective business organizations and goodwill, keep
available the services of their key employees, and preserve the goodwill and
business relationships with suppliers, distributors, customers, and others with
which they have business relationships; (c) not take any actions inconsistent
with this Plan; (d) use their best efforts to satisfy the conditions to the
effectiveness of the Plan; and (e) conduct cash management, in the ordinary
course of their businesses and in a manner consistent with the Agreed Cash
Collateral Order in this Case and the terms of the Plan. The names of the
members of the Board of Directors of Reorganized RGI that will serve on and
after the Effective Date will be identified in a document to be filed with the
Bankruptcy Court as part of the Plan Documents. The new officers of Reorganized
RGI that will serve on and after the Effective Date shall also be identified in
a document to be filed with the Bankruptcy Court as part of the Plan Documents.
Guy Bob Buschman and Gary Scheele shall have the retention agreements with EXCO
and/or Reorganized RGI, post-Effective Date, that are referenced in section 9.2
herein below.
7.6 Record Date. The record date for purposes of distributions to
holders of Claims or Equity Interests under this Plan shall be the close of
business on the Confirmation Date.
7.7 Means of Cash Payment. Cash payments made pursuant to this Plan
shall be in United States funds, by check drawn on a domestic bank, or by wire
transfer from a domestic bank.
7.8 Delivery of Distributions.
(a) Distributions and deliveries to holders of Allowed Claims
shall be made at the addresses set forth on the proofs of claim or proofs of
interest filed by the holders (or at the last known addresses of the holders if
no proof of claim or proof of interest is filed or if one or more of the Debtors
has been notified of a change of address).
(b) If any holder's distribution is returned as undeliverable,
no further distributions to the holder shall be made unless and until one or
more of the Debtors is notified of the holder's then current address, at which
time all missed distributions shall be made to the holder without interest.
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(c) Amounts in respect of undeliverable distributions made by
the Debtors shall be returned to the Debtors until the distributions are
claimed.
(d) All claims for undeliverable distributions shall be made
on or before the first anniversary of the Effective Date, after which time all
unclaimed property shall be treated under section 347(b) of the Bankruptcy Code,
and after which all such Claims against the Debtors or the Reorganized Company
shall be discharged and forever barred.
(e) All distributions delivered pursuant to the terms of this
Plan shall unconditionally vest in the holder of the Claim receiving such
distribution.
7.9 Time Bar to Cash Payments.
(a) Checks issued by the Reorganized Company in respect of
Administrative Claims, Priority Non-Tax Claims, Priority Tax Claims, Secured
Claims and Unsecured Claims shall be null and void if not cashed within ninety
days of the date of issuance thereof.
(b) Requests for reissuance of any check shall be made
directly to the Reorganized Company by the holder of the Allowed Claim with
respect to which the check originally was issued.
(c) Any Claim in respect of such a voided check shall be made
on or before the later of the fifth anniversary of the Effective Date or ninety
days after the date of issuance of the check, after which time all Claims in
respect of void checks shall be discharged and forever barred, and the funds or
distributions shall become the property of the Debtors pursuant to section
347(b) of the Bankruptcy Code.
7.10 Vesting of Assets. As of the Effective Date, all property of the
Debtors shall unconditionally vest in the Reorganized Company free and clear of
all Claims and interests, including but not limited to Equity Interests, liens,
security interests, and/or encumbrances of any nature except as specifically
provided in this Plan. All distributions made pursuant to the terms of the Plan
shall unconditionally vest in the recipient of such distribution.
7.11 Effectuating Documents. Prior to the conclusion of the hearing on
confirmation of the Plan, the Debtors shall file the Plan Documents with the
Bankruptcy Court.
7.12 Avoidance Actions. Avoidance Actions shall vest in the Reorganized
Company and be retained and litigated thereby as deemed appropriate by the
Reorganized Company. Notwithstanding an affirmative vote by any Person, the
Debtors reserve the right to pursue any Avoidance Action against any Person;
provided, however, that no Avoidance Action may be brought or asserted against
EXCO or Koch or any of the other Released Parties, as defined in Section 11.1(B)
herein below.
7.13 Effect of Confirmation: Discharge. Except as provided in this
Plan, on the Effective Date, the Reorganized RGI shall be discharged from any
debt that arose before the Effective Date and any debt of a kind specified in
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sections 502(g), 502(h) or 502(i) of the Code whether or not: (a) a proof of
Claim based on such debt is filed or deemed filed under section 501 of the Code;
(b) such Claim is allowed under section 502 of the Code; or (c) the holder of
such Claim has accepted the Plan. Except as otherwise expressly provided in this
Plan, the discharge of the Debtors granted pursuant to this Plan, and section
1141 of the Code, operates as an injunction against the commencement or
continuation of any action, the employment of process, or any other act, to
collect, recover or offset any Claim against or debts of the Debtors or their
property arising prior to the Effective Date.
7.14 Exemption from Securities Laws. All notes, instruments, and stock
distributed pursuant to the Plan shall be entitled to the benefits and
exemptions provided by section 1145 of the Code to the maximum extent allowed by
law and equity.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF PLAN
8.1 Conditions to Confirmation. There shall be conditions to the
Confirmation of this Plan, that prior to Confirmation, each of the following
conditions shall have been met or waived pursuant to Section 8.3 below:
A. That no "Agreement Termination Event" as defined in the Voting
Agreement, has occurred.
B. That the Confirmation Order shall be in form and substance
acceptable to EXCO and Koch.
8.2 Conditions to Occurrence of Effective Date.
A. That no "Agreement Termination Event" as defined in the Voting
Agreement, has occurred.
B. That the "Conditions to Effectiveness and Implementation"
set forth in the Voting Agreement have been met.
C. That the Confirmation Order has been issued, at least ten
(10) days have elapsed since the Confirmation Date, and no stay of the
Confirmation Order is in effect.
D. That the Reorganized RGI Articles of Incorporation shall
have been filed with the Delaware Secretary of State, if and to the extent state
law so requires.
8.3 Waiver of Conditions. The Debtors, EXCO, and Koch, without
Bankruptcy Court approval, may mutually waive all or any portion of any of the
conditions to the Confirmation Date described in Section 8.1 and to the
Effective Date described in Sections 8.2 (except 8.2.C) of the Plan.
8.4 Effect of Nonoccurrence of Conditions to the Effective Date. If
the Effective Date has not occurred by March 31, 1999, the Plan shall
automatically terminate unless the Debtors, with the consent of EXCO and Koch,
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shall extend the date by which the Effective Date must occur to a date which
is not later than ninety (90) days after March 31, 1999.
ARTICLE IX
TREATMENT OF
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
9.1 Assumed If Not Rejected. All executory contracts and unexpired
leases of the Debtors which have not previously been (a) assumed, (b) rejected,
or (c) assumed and assigned by the Debtors, pursuant to an order entered during
the Chapter 11 Case, or (d) which are not the subject of a pending motion at the
time of the confirmation hearing, or (e) which are not specified as being a
Rejected Contract (as herein defined) or Rejected Lease (as herein defined), or
other rejected in this Plan shall be deemed assumed under this Plan. Except as
set forth in section 9.2 herein below, each Person who was or is a party to an
executory contract or unexpired lease, which was or is rejected pursuant to a
separate order entered in the Debtors' Chapter 11 Case or pursuant to this Plan,
shall be entitled to file and serve on Debtors' counsel, not later than thirty
(30) days after the entry of the rejecting order (or if rejection occurs
pursuant to a specific provision in this Plan, then not later than thirty (30)
days after the Confirmation Date), a proof of Claim for damages alleged to have
arisen from the rejection of such executory contract or lease. Objections to any
such Claim shall be filed within the time limit set forth in Article X herein.
All rejection damages Claims shall be Class 4 Claims under this Plan.
9.2 Employee Agreements. Each prepetition Employee Agreement shall be
rejected effective upon the last day of the calendar month in which "substantial
consummation" of the Plan occurs (as defined in section 1101 of the Code). Any
claims for damages for the breach or termination of such prepetition Employee
Agreements shall be disallowed, extinguished, waived, and discharged pursuant to
the Plan. Effective upon the first day of the calendar month following
"substantial consummation," Guy Bob Buschman and Gary Scheele shall execute
12-month Retention Agreements with EXCO, which will be submitted as part of the
Plan Documents.
9.3 Rejection of Specified Contracts and Leases. Entry of the
Confirmation Order shall constitute authorization of the Bankruptcy Court to the
Debtors to reject the Rejected Contracts and Rejected Leases, as well as any
others specifically rejected pursuant to the terms of this Plan.
9.4 Assumption of Contracts and Leases.Entry of the Confirmation Order
shall constitute authorization of the Bankruptcy Court to the Debtors to assume
any contracts and leases deemed assumed pursuant to Section 9.1, as of the
Effective Date.
9.5 Bar to Rejection Damages. If the rejection and termination of an
executory contract or unexpired lease by the Debtors results in damages to the
other party or parties to the contracts or leases, a Claim for the damages,
shall be forever barred and shall not be enforceable against the Debtors, their
successors, or their properties unless a proof of claim is filed with the
E-21
Bankruptcy Court and served upon one or more of the Debtors or the Reorganized
Company within the time frames set forth in Section 9.1 herein above.
9.6 Bar to "Cure" Claims. Any claims, including claims for actual
pecuniary loss arising from a default in an executory contract or unexpired
lease assumed by the Debtors must be evidenced by a proof of claim filed by the
bar date specified in Section 10.1, or, if applicable, a request for payment of
administrative expense claim, filed by the bar date specified in Section 10.4,
and such claims shall be forever barred and shall not be enforceable against the
Debtors, their successors, or their properties unless a proof of claim or
request for payment of claim or administrative expense is timely filed with the
Bankruptcy Court and served upon one or more of the Debtors or the Reorganized
Company.
ARTICLE X
PROCEDURES FOR RESOLVING AND TREATING
CONTESTED CLAIMS
10.1 Objection Deadline. The bar date or deadline for the filing of
proofs of claim in this case was set by the Court as January 11, 1999.
Notwithstanding an affirmative vote, no provision of this Plan or principal of
law or equity, shall be a bar to an objection to any Claim, provided, however,
as soon as practicable, but in no event later than sixty (60) calendar days
following the Confirmation Date, the Reorganized Company shall file Objections
to Claims with the Bankruptcy Court and serve copies of the Objections in
accordance with Bankruptcy Rule 3007. This Section 10.1 shall not limit the
Reorganized Company's right to object to Claims, if any, filed or amended more
than one sixty (60) days after the Confirmation Date.
10.2 Prosecution of Objections. The Reorganized Company shall litigate
to judgment, settle, or withdraw Objections to Contested Claims.
10.3 No Distributions Pending Allowance. Notwithstanding any other
provision of this Plan, no payments or distributions shall be made to the holder
of a Contested Claim to which an Objection has been interposed or with regard to
which Debtors anticipates interposing an Objection unless and until the
Contested Claim has been Allowed.
10.4 Time for Filing Administrative Claims. Administrative Claims
against the Debtors must be filed no later than thirty (30) calendar days after
the entry of the Confirmation Order or they shall be deemed to be forever barred
and waived.
10.5 Time for Filing of Reimbursement Claims. Claims seeking
reimbursement and/or approval of fees and expenses incurred by members of the
Creditors Committee, EXCO or any other holder of a Secured Claim must be filed
no later than thirty (30) calendar days after the entry of the Confirmation
Order or they shall be deemed to be forever barred and waived.
ARTICLE XI
MISCELLANEOUS PROVISIONS
E-22
11.1 Limitations of Liability / Releases.
A. Limitation of Liability. None of the Debtors, Reorganized
RGI, EXCO, Koch, nor any of their respective officers, directors, employees,
shareholders, subsidiaries, affiliates, predecessors, successors, assigns,
agents, representatives, guarantors, sureties, insurers, members, nor any
professional Persons employed by any of them (collectively the "Exculpated
Persons"), shall have or incur any liability to any Person for any act taken or
omission made in good faith in connection with or related to formulating,
implementing, confirming or consummating the Plan, the Disclosure Statement or
any contract, instrument, release or other agreement or document created in
connection with the Plan. The Exculpated Persons shall have no liability to any
Creditors or Equity Security holders for actions taken under the Plan, in
connection therewith or with respect thereto in good faith, including, without
limitation, failure to obtain Confirmation of the Plan or to satisfy any
condition or conditions, or refusal to waive any condition or conditions
precedent to Confirmation or to the occurrence of the Effective Date. Further,
the Exculpated Persons will not have or incur any liability to any holder of a
Claim, holder of an Interest, other party-in-interest herein or any other Person
for any act or omission in connection with or arising out of their
administration of the Plan or the property to be distributed under the Plan, or
the operation of the business of the RGI Group, except for gross negligence or
willful misconduct, and in all respects such persons will be entitled to rely
upon the advice of counsel with respect to their duties and responsibilities
under the Plan.
B. Releases. On the Effective Date, Reorganized RGI, on its
own behalf and as representative of the Debtors' estates, in consideration of
services rendered in the Case and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, releases
unconditionally, and is hereby deemed to release unconditionally, each of the
Debtors' present and former officers, directors, employees, subsidiaries,
affiliates, predecessors, successors, assigns, agents, representatives,
guarantors, sureties, insurers, and their respective professional advisers, and
the entities that elected the directors to the extent they are or may be liable
for the actions or inactions of such directors, as well as EXCO, Koch, and each
of their present and former officers, directors, employees, shareholders,
subsidiaries, affiliates, predecessors, successors, assigns, agents,
representatives, guarantors, sureties, insurers, members, and their respective
professional advisers, and the entities that elected the directors to the extent
they are or may be liable for the actions or inactions of such directors
(collectively, the "Releases"), from any and all claims, obligations, suits,
judgments, damages, rights, causes of action and liabilities whatsoever
(including, without limitation, those arising under the Code), whether known or
unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity
or otherwise, based in whole or in part on any act, omission, transaction, event
or other occurrence taking place before, on or after the Petition Date up to the
Effective Date, in any way relating to the Debtors (before, on or after the
Petition Date), the Case, or the Plan (collectively, the "Released Matters");
provided, however, that the foregoing release shall not apply to any action or
omission that constitutes actual fraud or criminal behavior. The foregoing
release will be effective when the distributions required to occur on the
Effective Date have been made by the Reorganized RGI.
E-23
C. The Confirmation Order shall contain a permanent injunction
to effectuate the limitations of liability and releases granted in Sections
11.1(A) and (B) of the Plan.
11.2 Compliance with Tax Requirements. In connection with this Plan,
the Reorganized Company shall comply with all withholding and reporting
requirements imposed by federal, state, local, and foreign taxing authorities
and all distributions hereunder shall be subject to the withholding and
reporting requirements.
11.3 Compliance with All Applicable Laws. If notified by any
governmental authority that it is in violation of any applicable law, rule,
regulation, or order of the governmental authority relating to its business, the
Reorganized Company shall comply with the law, rule, regulation, or order;
provided, however, that nothing contained herein shall require such compliance
if the legality or applicability of the requirement is being contested in good
faith in appropriate proceedings and, if appropriate, for which an adequate
reserve has been set aside on the books of the Reorganized Company.
11.4 Setoffs. Except as otherwise provided in this Plan, the
Reorganized Company may, but shall not be required to, set off against any Claim
and the payments or other distributions to be made pursuant to this Plan in
respect of the Claim, claims of any nature whatsoever the estate may have
against the holder of the Claim, but neither the failure to do so nor the
allowance of any Claim hereunder shall constitute a waiver or release by the
Reorganized Company of any Claim that the estate may have against the holder;
provided, however, the Reorganized Company will not seek to set off any
obligation that is not yet due.
11.5 Maintenance of Causes of Action. Subject to Sections 7.12 and 11.1
herein, from and after the Effective Date, the Reorganized Company may litigate
any Avoidance Action or any other causes of action, rights to payments, or
claims that belong to the estate, that may be pending on the Effective Date or
timely instituted by the Reorganized Company after the Effective Date.
Notwithstanding an affirmative vote by any Person, the Debtors reserve the right
to pursue any Avoidance Action against any Person, right to payment or claim,
subject to Sections 7.12 and 11.1 herein.
11.6 Request for Cramdown under Section 1129(b) of the Bankruptcy Code.
This Plan shall be deemed a request for cramdown under section 1129(b) of the
Bankruptcy Code if any Class or Classes entitled to vote do not accept this Plan
under section 1126 of the Bankruptcy Code.
ARTICLE XII
CONSUMMATION OF PLAN
12.1 Retention of Jurisdiction. The Bankruptcy Court shall retain and
have exclusive jurisdiction over the Chapter 11 Cases for the following
purposes, except to the extent the Bankruptcy Court elects to retain concurrent
jurisdiction or decides to relinquish jurisdiction:
(a) To determine any and all required applications for
allowances of compensation and reimbursement of expenses and any other fees and
expenses incurred prior to the Effective Date and authorized to be paid or
reimbursed under the Bankruptcy Code or this Plan;
E-24
(b) To determine any applications pending on the Effective
Date for the rejection or assumption of executory contracts or unexpired leases
or for the assumption and assignment, as the case may be, of executory contracts
or unexpired leases to which one or more of the Debtors is a party or with
respect to which one or more of the Debtors may be liable, and to hear and
determine, and if need be to liquidate, any and all claims arising therefrom;
(c) To determine any and all applications, adversary
proceedings, and contested or litigated matters that may be pending on the
Effective Date;
(d) To consider any modifications of this Plan, remedy any
defect or omission or reconcile any inconsistency in any order of the Bankruptcy
Court, including the Confirmation Order, to the extent authorized by the
Bankruptcy Code;
(e) To determine all controversies, suits, and disputes that
may arise in connection with the interpretation, enforcement, or consummation of
this Plan or any person's obligations under this Plan;
(f) To issue such orders in aid of execution of this Plan to the
extent authorized by section 1142 of the Bankruptcy Code; and
(g) To allow or disallow any Objections to Claims and, to the
extent authorized by the Bankruptcy Code, to liquidate any Claim.
(h) To determine such other matters as may be set forth in the
Confirmation Order or which may arise in connection with this Plan or the
Confirmation Order.
12.2 Substantial Consummation. Substantial Consummation shall be deemed
to have occurred upon delivery of distributions due on the Effective Date to
holders of Allowed Claims as of the Effective Date.
12.3 Modification of Plan. Modifications of this Plan (including the
Plan Documents) may be proposed in writing by the Debtors at any time before
confirmation, provided that the Plan, as modified, meets the requirements of
sections 1122 and 1123 of the Bankruptcy Code, and the Debtors shall have
complied with section 1125 of the Bankruptcy Code. This Plan may be modified at
any time after confirmation and before its substantial consummation, provided
that the Plan, as modified, meets the requirements of sections 1122 and 1123 of
the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing,
confirms the Plan, as modified, under section 1129 of the Bankruptcy Code, and
the circumstances warrant the modification. If a modification is determined by
the Bankruptcy Court to materially and adversely affect a particular class, a
resolicitation of that Class will be required pursuant to section 1127 of the
Bankruptcy Code. A holder of a Claim or Equity Interest that has accepted or
rejected this Plan shall be deemed to have accepted or rejected this Plan as
modified, unless, within the time fixed by the Bankruptcy Court, the holder
changes its previous acceptance or rejection.
E-25
12.4 Inconsistencies. In the event that there is any inconsistency
between the Plan and the Disclosure Statement, any exhibit to the Plan or any
other instrument or document created or executed pursuant to the Plan, the Plan
shall govern.
12.5 U.S. Trustee Fees. The Debtors will comply with Public Law 104-99.
E-26
Dated: San Antonio, Texas, December 11, 1998.
Respectfully submitted,
RIO GRANDE, INC.
By:/s/ Guy R. Buschman
Guy R. Buschman, President
RIO GRANDE DRILLING COMPANY
By:/s/ Guy R. Buschman
Guy R. Buschman, President
RIO GRANDE DESERT OIL COMPANY
By:/s/ Guy R. Buschman
Guy R. Buschman, President
RIO GRANDE OFFSHORE, LTD.
By: RIO GRANDE DRILLING COMPANY,
General Partner
By:
RIO GRANDE GULFMEX, LTD.
By: RIO GRANDE OFFSHORE, LTD.,
General Partner
By: RIO GRANDE DRILLING
COMPANY, General Partner
By:
E-27
<PAGE>
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<LEGEND>
(This schedule contains summary financial information extracted from this
October 31,1998 Form 10-QSB)
</LEGEND>
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<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> OCT-31-1998
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<RECEIVABLES> 500363
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<CURRENT-ASSETS> 983579
<PP&E> 27371508
<DEPRECIATION> (19124111)
<TOTAL-ASSETS> 9984881
<CURRENT-LIABILITIES> 14814146
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<COMMON> 61774
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<TOTAL-LIABILITY-AND-EQUITY> 9984881
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<CGS> 2719179
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<OTHER-EXPENSES> 167524
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