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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
RULE 13e-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
AMENDMENT NO. 2
SUMMIT PETROLEUM CORPORATION
(Name of Issuer)
MRI ACQUISITION CORP.
MIDLAND RESOURCES, INC.
SUMMIT PETROLEUM CORPORATION
DEAS H. WARLEY III
(Name of Persons filing Statement)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
866228 307
(CUSIP Number of Class of Securities)
Deas H. Warley III, President
MRI Acquisition Corp.
16701 Greenspoint Park Drive, Suite 200
Houston, Texas 77060
713-873-4828
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Person Filing Statement)
Copy:
Wayne M. Whitaker
Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer, Reynolds & Chalk, L.L.P.
301 Commerce Street
3500 City Center Tower II
Fort Worth, Texas 76102
817-878-0530
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This statement is filed in connection with (check the appropriate box):
c.[X] A tender offer.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [ ]
1
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CROSS REFERENCE SHEET
Pursuant to Instruction F, answers to the items required by this Schedule 13e-3
are incorporated by reference from the Amendment No. 2 to Schedule 14D-1 filed
by MRI Acquisition Corp.("Purchaser"), Midland Resources, Inc. ("Parent") and
Deas H. Warley III, dated August 30, 1996. Listed below is the item required by
Schedule 13e-3 and the location in Amendment No. 2 to Schedule 14D-1 of the
information required to be included in response to the items of this statement.
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<S> <C>
Schedule 13e-1 Item Location of Response in Schedule 14D-1
Item 1. Issuer and Class of Security Subject to
the Transaction
(a) Item 1. Security and Subject Company
(b) Item 11. Material to be Filed as Exhibits,
Exhibit (a)(1) the "Offer to Purchase"--
Introduction and Paragraph 7.
(c), (d) Item 11. Material to be Filed as Exhibits,
Exhibit (a)(1) the "Offer to Purchase"--
Introduction and Paragraph 6.
(e) n/a
(f) Item 3. Past Contacts, Transactions or
Negotiations with the Subject Company
Item 2. Identity and Background Item 2. Identity and Background
See also Item 2 below.
Item 3. Past Contracts, Transactions or Item 3. Past Contracts, Transactions or
Negotiations Negotiations with the Subject Company.
Item 11. Material to be Filed as Exhibits,
Exhibit (a)(1) the "Offer to Purchase"
Item 4. Terms of the Transaction
(a) Item 11. Material to be Filed as Exhibits,
Exhibit (a)(1) the "Offer to Purchase"
(b) Item 11. Material to be Filed as Exhibits,
Exhibit (a)(1) the "Offer to Purchase"-- Paragraph 10.
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<TABLE>
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Item 5. Plans or Proposals of the Issuer or Item 5. Purpose of the Tender Offer and Plans
Affiliate or Proposals of the Bidder.
Item 6. Source and Amounts of Funds or Other Item 4. Source and Amount of Funds or Other
Consideration Consideration.
Item 7. Purpose(s), Alternatives, Reasons and Item 5. Purpose of the Tender Offer and Plans
Effects or Proposals of the Bidder.
Item 8. Fairness of the Transaction None. Item 8 is answered herein.
Item 9. Reports, Opinions, Appraisals and None. Item 9 is answered herein.
Certain Negotiations
Item 10. Interest in Securities of the Issuer Item 6. Interest in Securities of the Subject
Company
Item 11. Contracts, Arrangements or Item 7. Contracts, Arrangement,
Understandings with Respect to the Understandings or Relationships with respect
Issuer's Securities to the Subject Company's Securities.
Item 12. Present Intention and None. Item 12 is answered herein.
Recommendation of Certain Persons
with Regard to the Transaction
Item 13. Other Provisions of the Transaction. None. Item 13 is answered herein.
Item 14. Financial Information None. Item 14 is answered herein.
Item 15. Persons and Assets Employed, None. Item 15 is answered herein
Retained or Utilized
Item 16. Additional Information None. Item 16 is answered herein.
Item 17. Material to Be Filed as Exhibits None. Item 17 is answered herein.
Item 2. Identity and Background.
One of the parties filing this statement is the issuer, Summit Petroleum
Corporation ("Company")
Item 8. Fairness of the Transaction.
</TABLE>
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(a) The Company, Purchaser, Parent and Warley reasonably believe that the
Rule 13e transaction is fair to unaffiliated security holders.
(b) Reference is made to the Section 6 "Price Range of Shares; Dividends",
Section 11 "Background of the Offer" and Section 17 "Special Factors" in the
Offer to Purchase filed as Exhibit (a)(1) to Amendment No. 2 of Schedule 14D-1
filed by Purchaser, Parent and Warley.
(c) The transaction has not been structured to require the approval of a
majority of unaffiliated Company security holders.
(d) The board of the Company has not retained an unaffiliated
representative to act solely on behalf of unaffiliated security holders for the
purposes of negotiating the terms of the 13e-3 transaction and/or preparing a
report concerning the fairness of such transaction. Parent did make available
the report prepared by SMG to the board of the Company.
(e) The Rule 13e-3 transaction was approved by the entire board of the
Company. All of the members of the Board, IE. Messrs. Deas H. Warley III,
Darrell Dillard and Wayne Whitaker, are members of the Parent's Board, and Mr.
Warley is the sole director of Purchaser. Mr. Warley is the President and
chairman of Purchaser, Parent, and the Company. Mr. Dillard is the Chief
Financial Officer of the Parent. Mr. Whitaker through his law firm provides
legal services to both the Purchaser, Parent and the Company.
(f) The Company has not received any firm offers during the eighteen months
preceding the commencement of the tender offer by Purchaser regarding a merger
or consolidation, the sale or other transfer of all or any substantial part of
the assets of the Company. Except for discussions disclosed in Section 11
"Background of the Offer" in the Offer to Purchase filed as Exhibit (a)(1) to
Amendment No. 2 of Schedule 14D-1 filed by Purchaser, Parent and Warley, the
Company has not received any firm offers during the eighteen months preceding
the commencement of the tender offer by Purchaser regarding the sale of
securities of the Company which would enable the holder thereof to exercise
control of the Company.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a) Parent retained SMG to provide a fairness opinion regarding the price
to offer the shareholders of the Company. SMG reached an opinion that $0.70 per
share for the Company's common stock and for each share subject to a stock
option less the exercise price thereof was fair, from a financial point of view
to Parent.
(b) SMG is a small investment banking firm, whose principals have a
combined 40 years investment banking experience that included advising companies
on the value and fairness of transactions similar to the offer by Parent. Parent
chose SMG based upon their experience and willingness to provide the opinion in
a timely manner. SMG has an investment banking agreement entered into on June
3, 1996 with Parent relating to representing Parent in securing new financing
sources, as well as seeking potential acquisition targets. SMG will not receive
any finders or other fee in connection with the offer by Parent other than for
the rendering of it fairness opinion. SMG was requested to independently
determine a fair price to offer for the shares of the Company. Parent did not
place any limitations on SMG in making its determination. For a further
discussion of the methods and procedures followed by SMG reference is made to
Section 17 "Special Factors" of the Offer to Purchase filed as Exhibit (a)(1) to
Amendment No. 2 of Schedule 14D-1 filed by Purchaser, Parent and Warley,
4
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(c) The report by SMG is available for inspection and copying at the
principal executive offices of Parent, 16701 Greenspoint Park Drive, Suite 200,
Houston, Texas 77060, during its regular business hours by any interested equity
security holder of the Company or his representative who has been so designated
in writing.
Item 12. Present Intention and Recommendation of Certain Persons with Regard to
the Transaction.
(a) Those current members of the Company's board, and those employees and
officers of Parent who own shares of the Company's common stock have orally
indicated to the Parent that they will tender their Company shares pursuant to
the offer by Parent.
(b) Messrs. Warley and Whitaker, who are each directors of the Company and
own shares of the Company, voted to approve the Merger Agreement with Purchaser
and recommend the acceptance of the offer to the Company's shareholders. After
reviewing the report by SMG and discussing such report with the representative
of SMG, reviewing the financial records of the Company, participating in the
board of directors meeting of Parent in the capacity of a member of such board
and discussing the relative value of the proposed offer in light of the general
knowledge of the members of the Company's board with respect to transactions for
oil and gas properties and operations, Messrs. Warley and Whitaker as well as
Mr. Dillard voted to recommend the offer to the Company's security holders.
Item 13. Other Provisions of the Transaction.
(a) Appraisal rights under Colorado law are available to the Company's
shareholders who do not tender or vote to approve the merger. A description of
such rights is contained in Exhibit (e) to this Statement.
(b) No provision has been made by Parent in connection with the tender
offer to allow an unaffiliated security holder to obtain access to the corporate
files of the Company or Parent or to obtain counsel or appraisal services at the
expense of the Company or Parent.
Item 14. Financial Information.
(a) The Company's audited financial statements for fiscal 1994 and 1995
are incorporated by reference from the Company's Form 10-KSB for its years ended
July 31, 1994 and 1995. The Company's unaudited balance sheets and comparative
year-to-date income statements and statements of cash flows and related earnings
per share amounts contained in the Company's Form 10-QSB for the quarter ended
April 30, 1996 is incorporated herein by reference. The ratio of earnings to
fixed charges is not provided since the Company does not have an outstanding
issue of debt other than routine bank debt. Book value per share as of July 31,
1994, 1995 and April 30, 1996 is $0.228, $0.241, and $0.260, respectively.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) The Company's oil and gas assets will be pledged to secure Parent's
current bank
5
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credit agreement in the normal course as any acquisition of oil and gas
properties.
(b) Parent has not specially employed anyone to solicit or recommend the
tender offer. Parent will utilize its current employees to respond to inquiries
from Company shareholders, brokers or other nominees as well as contact such
individuals or firms with respect to tendering Company shares.
Item 16. Additional Information.
None.
Item 17. Material to Be Filed as Exhibits.
99.(a)* Loan Agreement between Parent and First Union National Bank of
North Carolina dated December 29, 1994 (Previously filed as the
same exhibit number in Parent's Form 10-KSB dated December 31,
1994 and incorporated herein by such reference).
99.(b)(1) Report by Southwest Merchant Group, dated July 14, 1996.
99.(b)(2) Description of Southwest Merchant Group
99.(b)(3) Summit Petroleum Corporation Valuation, by Southwest Merchant
Group
99.(b)(4) Consent by Southwest Merchant Group
99.(c)* Plan and Agreement of Merger among the Company and Purchaser,
dated July 17, 1996.(Filed as Exhibit (a)(3) to Schedule 14D-1
of MRI Acquisition Corp, and Midland Resources, Inc. dated
July 18,1996 and incorporated herein by reference)
99.(d)(1)* The Offer to Purchase (Filed as Exhibit (a)(1) to Schedule 14D-1
of MRI Acquisition Corp, and Midland Resources, Inc. date July
18, 1996 and incorporated herein by reference)
99.(d)(2)* The Letter of Transmittal (Filed as Exhibit (a)(2) to Schedule
14D-1 of MRI Acquisition Corp, and Midland Resources, Inc. date
July 18, 1996 and incorporated herein by reference)
99.(d)(3)* Letter from The Company to Shareholders dated July 18, 1996
recommending acceptance of Offer
99.(d)(4)* Press Release by Midland Resources and MRI Acquisition Corp.
announcing the extension of the tender offer until September 5,
1996 (Filed as Exhibit (a)(4) to Amendment No.1 to Schedule
14D-1 of MRI Acquisition Corp. and Midland Resources, Inc. dated
August 14, 1996.).
99.(d)(5) Letter to Summit Petroleum Corporation stockholders transmitting
amended offer dated September, 1996
99.(e)* A statement describing the appraisal rights under Colorado Law
- -----------------------------
* Incorporated herein by reference
** Previously filed
6
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
August 30, 1996 /s/ Deas H. Warley III
---------------------------------------
Deas H. Warley III, President
MRI Acquisition Corp.
Midland Resources, Inc.
August 30, 1996 /s/ Deas H. Warley III
---------------------------------------
Deas H. Warley III, President
Summit Petroleum Corporation
August 30, 1996 /s/ Deas H. Warley III
---------------------------------------
Deas H. Warley III
7
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INDEX TO EXHIBITS
Exhibit Page No.
99.(a)* Loan Agreement between Parent and First Union National Bank of
North Carolina dated December 29, 1994 (Previously filed as the
same exhibit number in Parent's Form 10-KSB dated December 31,
1994 and incorporated herein by such reference).
99.(b)(1) Report by Southwest Merchant Group, dated July 14, 1996.
99.(b)(2) Description of Southwest Merchant Group
99.(b)(3) Summit Petroleum Corporation Valuation, by Southwest Merchant
Group
99.(b)(4) Consent by Southwest Merchant Group
99.(c)* Plan and Agreement of Merger among the Company and Purchaser,
dated July 17, 1996.(Filed as Exhibit (a)(3) to Schedule 14D-1
of MRI Acquisition Corp, and Midland Resources, Inc. dated
July 18,1996 and incorporated herein by reference)
99.(d)(1)* The Offer to Purchase (Filed as Exhibit (a)(1) to Schedule 14D-1
of MRI Acquisition Corp, and Midland Resources, Inc. date July
18, 1996 and incorporated herein by reference)
99.(d)(2)* The Letter of Transmittal (Filed as Exhibit (a)(2) to Schedule
14D-1 of MRI Acquisition Corp, and Midland Resources, Inc. date
July 18, 1996 and incorporated herein by reference)
99.(d)(3)* Letter from The Company to Shareholders dated July 18, 1996
recommending acceptance of Offer
99.(d)(4)* Press Release by Midland Resources and MRI Acquisition Corp.
announcing the extension of the tender offer until September 5,
1996 ( Filed as Exhibit (a)(4) to Amendment No.1 to Schedule
14D-1 of MRI Acquisition Corp. and Midland Resources, Inc. dated
August 14, 1996.).
99.(d)(5) Letter to Summit Petroleum Corporation stockholders transmitting
amended offer dated September, 1996
99.(e)* A statement describing the appraisal rights under Colorado Law
- -----------------------------
* Incorporated herein by reference
** Previously filed
8
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July 14, 1996
Board of Directors
Midland Resources, Inc.
16701 Greenspoint Park Drive, Suite 200
Houston, TX 77060
Gentlemen:
You have asked Southwest Merchant Group to express an opinion from a financial
point of view of the fairness of the price paid to purchase of all of the common
stock of Summit Petroleum, Inc. by Midland Resources, Inc.
Southwest Merchant Group is an investment banking and management consulting firm
located in Dallas, Texas. As an element of our business activities, we value
the shares and assets of both publicly held and privately held businesses for a
number of reasons, including mergers, acquisitions, public offerings, employee
stock ownership plans, valuation for estate tax purposes, etc. Information
pertaining to the experience of the principals of Southwest Merchant Group is
attached.
In arriving at our opinion, we reviewed such documents (including various Summit
Petroleum, Inc. filings with the Securities and Exchange Commission), considered
such questions, and conducted such analysis as we deemed appropriate. Also, we
visited the common headquarters facilities of Summmit Petroleum, Inc. and
Midland Resources, Inc. and discussed the operations of the business, including
future prospects and potential problem areas with various management personnel.
In addition to reviewing documents and visiting the management offices, in
reaching our opinion we considered the nature and history of the business of
Summit Petroleum, Inc., the economic outlook for the economy in general, and for
the oil and gas exploration industry in particular. We also considered the
financial condition of Summit Petroleum, Inc., its oil and gas reserves, cash
flows derived from operation of wells, tax loss carryforward, as well as the
earnings and cash flow history and our estimate of the company's potential.
No limitations were placed on our investigation, and we were given full access
to all material requested on a timely basis. However, we have relied upon and
assumed the accuracy and completeness of the financial and other data provided
to us, particularly the audited and unaudited financial statements, and
estimates of oil and gas reserves of Summit Petroleum, Inc. prepared by the
company. We have not attempted independent verification of such data.
Based on our analysis of the factors deemed relevant, it is our opinion that the
proposed
<PAGE>
purchase of all of the common shares of Summit Petroleum, Inc. by Midland
Resources, Inc., at a cash price of $0.70 per share, and the purchase of
option shares at a price of $0.70 per share, less the exercise price thereof, is
fair from a financial point of view to the shareholders of Midland Resources,
Inc.
Sincerely,
Southwest Merchant Group
5735 Pineland Drive, Suite 215
Dallas, Texas 75231
/s/Michael D. Riggs
Michael D. Riggs
Managing Director
<PAGE>
OUR PEOPLE
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SOUTHWEST MERCHANT GROUP has built a core team of senior professionals with
differing backgrounds and areas of expertise. Although clients may work
primarily with one or another team member, they benefit from the combined
education, experience, and expertise of the entire group.
MICHAEL D. RIGGS
MANAGING DIRECTOR
Mike is one of the senior investment bankers in the Southwest, and is our
specialist in capital funding. He has managed over 20 public offerings of
Southwestern based companies, raising over $200,000,000. He has also
consulted with client companies regarding mergers and acquisitions and
arranged the private placement of both debt and equity totaling an additional
$500,000,000.
He has been associated with four regional investment banking firms, all of
which were members of the New York Stock Exchange: Eppler, Guerin & Turner,
Inc., Schneider, Bernet & Hickman, Inc., Institutional Equity Corporation and
Rotan-Mosle, Inc. Mike was a major shareholder, director and head of
corporate finance at two of these firms, and a senior member of the corporate
finance department at the other two. He is a graduate of the University of
Arkansas and the Harvard Business School.
STEVEN J. COOK
MANAGING DIRECTOR
Steve Cook has many years experience in trading and analyzing both fixed
income and equity securities, as well as in private placements of debt and
equity. He started in the securities business at Scudder, Stevens & Clark,
where he managed institutional portfolios including both debt and equity
investments ranging from $500,000 to $100,000,000. He then spent several
years at Bear, Stearns & Co., where he was Limited Partner in charge of
Institutional Sales, and also founded and managed the Risk Arbitrage Desk.
During the last several years Mr. Cook founded and managed an investment
program for individuals, and a merchant bank for small and middle market
companies, where he managed well over $100,000,000 in debt and equity
placements.
He graduated MAGNA CUM LAUDE and Phi Beta Kappa from the University of
Oklahoma, and then received an MBA from Harvard Business School. In addition,
Mr. Cook has completed certification as a Chartered Financial Analyst.
M. RICHARD MARCUS
MANAGING DIRECTOR
Richard Marcus is our expert on financial risk management, derivatives, and
other complex financial instruments. After receiving a B.S. in Economics from
the University of Pennsylvania Wharton School of Finance, Mr. Marcus joined
his family business which he eventually took public. After that business was
sold, he began using his expertise in finance to manage money for friends and
colleagues. During this time he developed extremely sophisticated hedging
techniques, which he has refined and incorporated into the proprietary system
which he calls statistical arbitrage.
In addition to using his specialized knowledge for funds management, Mr.
Marcus works closely with our investment bankers as a consultant to
corporations to stablize future material costs, or to meet capital
requirements. He has recently been working with Morgan Stanley on a sizable
and complex financing project.
Mr. Marcus is licensed by the Commodities and Futures Trading Commission
(CFTC) as a Commodities Pool Operator, and he executes trades on the Chicago
Board Options Exchange.
<PAGE>
SUMMIT PETROLEUM CORPORATION
VALUATION
Page 1
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SUMMIT PETROLEUM CORPORATION
SUMMARY BALANCE SHEET INFORMATION
April 30, April 30,
1996 1996
---------- ---------
Actual Adjusted
ASSETS
Current Assets $ 198,268 $ 198,268
Property Plant & Equipment (Net) $ 847,652 $ -
Other $ 144,196 $ 144,196
---------- ---------
Total Assets $1,190,116 $ 342,464
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities $ 320,930 $ 320,930
Long Term Debt $ 186,652 $ 186,652
Stockholders' Equity $ 682,534 $(165,118)
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Total Liabilities &
Stockholders' Equity $1,190,116 $ 342,464
Page 2
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KEY FACTORS
Net Stockholders' $ 682,534
Less: PP&E $(847,652)
---------
Net Equity without PP&E $(165,118)
Fully Diluted Shares 2,700,184
Page 3
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METHOD 1
$/BBL & $/MCF IN GROUND
ALL RESERVES
UNESCALATED WITH 3D SEISMIC DEVELOPMENT
OIL-BBL PRICE VALUE GAS-MCF PRICE VALUE
------- ----- -------- --------- ----- --------
220,503 $3.00 $661,509 1,291,000 $0.40 $516,400
$3.50 $771,761 $0.50 $645,500
$4.00 $882,012 $0.60 $774,600
$4.50 $992,264 $0.70 $903,700
Page 4
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PRICE MATRIX
$/BBL & $/MCF IN GROUND
ALL RESERVES
UNESCALATED WITH 3D SEISMIC DEVELOPMENT
TOTAL RESERVE VALUE
GAS PRICE
$0.40 $0.50 $0.60 $0.70
---------- ---------- ---------- ----------
$3.00 $1,177,909 $1,307,009 $1,436,109 $1,565,209
OIL PRICE $3.50 $1,288,161 $1,417,261 $1,546,361 $1,675,461
$4.00 $1,398,412 $1,527,512 $1,656,612 $1,785,712
$4.50 $1,508,664 $1,637,764 $1,766,864 $1,895,964
PER SHARE VALUE
GAS PRICE
$0.40 $0.50 $0.60 $0.70
---------- ---------- ---------- ----------
$3.00 $0.50 $0.55 $0.59 $0.64
OIL PRICE $3.50 $0.54 $0.59 $0.63 $0.68
$4.00 $0.58 $0.63 $0.67 $0.72
$4.50 $0.62 $0.67 $0.72 $0.76
Page 5
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$/BBL & $/MCF IN GROUND
ALL RESERVES
ESCALATED WITH NON PRODUCING RESERVES RISKED
OIL-BBL PRICE VALUE GAS-MCF PRICE VALUE
------- ----- -------- --------- ----- --------
205,389 $3.00 $616,167 1,156,534 $0.40 $462,614
$3.50 $718,862 $0.50 $578,267
$4.00 $821,556 $0.60 $693,920
$4.50 $924,251 $0.70 $809,574
Page 6
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PRICE MATRIX
$/BBL & $/MCF IN GROUND
ALL RESERVES
ESCALATED WITH NON PRODUCING RESERVES RISKED
TOTAL RESERVE VALUE
GAS PRICE
$0.40 $0.50 $0.60 $0.70
---------- ---------- ---------- ----------
$3.00 $1,078,781 $1,194,434 $1,310,087 $1,425,741
OIL PRICE $3.50 $1,181,475 $1,297,129 $1,412,782 $1,528,435
$4.00 $1,284,170 $1,399,823 $1,515,476 $1,631,130
$4.50 $1,386,864 $1,502,518 $1,618,171 $1,733,824
PER SHARE VALUE
GAS PRICE
$0.40 $0.50 $0.60 $0.70
---------- ---------- ---------- ----------
$3.00 $0.46 $0.50 $0.55 $0.59
OIL PRICE $3.50 $0.50 $0.54 $0.58 $0.63
$4.00 $0.54 $0.58 $0.62 $0.67
$4.50 $0.57 $0.62 $0.66 $0.70
Page 7
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METHOD 2
NET PROVED DEVELOPED PRODUCING
& NET DEVELOPED NON PRODUCING
UNESCALATED WITH 3D SEISMIC DEVELOPMENT
OIL-BBL PRICE VALUE GAS-MCF PRICE VALUE
------- ----- ---------- ------- ----- --------
PDP 90,558 $6.00 $ 543,348 772,454 $1.00 $772,454
PDNP 21,528 $3.00 $ 64,584 266,222 $0.50 $133,111
---------- --------
$ 607,932 $905,565
$1,513,497 Total Reserve Value
$ (165,118) Less: Net Debt
----------
$1,348,379
2,700,184 Fully Diluted Shares
----------
$ 0.50 Price per Share
Page 8
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NET PROVED DEVELOPED PRODUCING
& NET PROVED DEVELOPED NON PRODUCING
ESCALATED WITH 3D SEISMIC DEVELOPMENTS
NON PRODUCING RISKED
OIL-BBL PRICE VALUE GAS-MCF PRICE VALUE
------- ----- ---------- ------- ----- --------
PDP 91,542 $6.00 $ 549,252 797,882 $1.00 $797,882
PDNP 16,772 $3.00 $ 50,316 211,612 $0.50 $105,806
---------- --------
$ 599,568 $903,688
$1,503,256 Total Reserve Value
$ - Less: Net Debt
----------
$1,503,256
2,700,184 Fully Diluted Shares
----------
$ 0.56 Price per Share
Page 9
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METHOD 3
DISCOUNTED RESERVE VALUE
UNESCALATED WITH 3D SEISMIC DEVELOPMENT
ALL RESERVES
UNRISKED
15% 12% 10%
---------- ---------- ----------
$1,223,008 $1,402,828 $1,548,899 Reserve Value
$ (165,118) $ (165,118) (165,118) Less: Net Debt
$1,057,890 $1,237,710 $1,383,781
2,700,184 2,700,184 2,700,184 Fully Diluted Shares
$ 0.39 $ 0.46 $ 0.51 Price per Share
Page 10
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DISCOUNTED RESERVE VALUE
ESCALATED WITH 3D SEISMIC DEVELOPMENTS
ALL RESERVES
RISKED
15% 12% 10%
---------- ---------- ----------
$1,254,354 $1,452,070 $1,613,354 Reserve Value
$ (166,000) $ (166,000) (166,000) Less: Net Debt
$1,088,354 $1,286,070 $1,447,354
2,700,184 2,700,184 2,700,184 Fully Diluted Shares
$ 0.40 $ 0.48 $ 0.54 Price per Share
Page 11
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METHOD 4
PRICE PER EQUIVALENT BBL
ESCALATED WITH 3D SEISMIC DEVELOPMENTS
ALL RESERVES
RISKED
ALL RESERVES
OIL-BBL GAS-MCF
---------- ---------
PDP 91,542 797,882
PDNP 16,772 211,612
PUD 97,075 147,040
---------- ---------
205,389 Total Oil BBL 1,156,534 Total Gas MCF
DIVIDED BY 6 Conversion Ratio
192,756 Gas Equivalent BBL 192,756 Gas Equivalent BBL
----------
398,145 Total Equivalent BBL
2,700,184 Shares Outstanding
$ 0.50 Times: Price per Share
----------
$1,350,092 Total Price
398,145 Divided by: Total Equivalent BBL
----------
$ 3.39 Price Paid per Equivalent BBL
Page 12
<PAGE>
ESCALATED WITH 3D SEISMIC DEVELOPMENTS
PROVED DEVELOPED ONLY
RISKED
PROVED DEVELOPED ONLY
OIL-BBL GAS-MCF
---------- ---------
PDP 91,542 797,882
PDNP 16,772 211,612
PUD 0 0
---------- ---------
108,314 Total Oil BBL 1,009,494 Total Gas MCF
DIVIDED BY 6 Conversion Ratio
168,249 Gas Equivalent BBL 168,249 Gas Equivalent BBL
----------
276,563 Total Equivalent BBL
2,700,184 Shares Outstanding
$ 0.50 Times: Price per Share
----------
$1,350,092 Total Price
276,563 Divided by: Total Equivalent BBL
----------
$ 4.88 Price Paid per Equivalent BBL
Page 13
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VALUE OF WELL OPERATIONS
April 30,
Other Considerations 1996
---------
Property Operation Fees $134,283 = pretax income
15% 5 Year PV $450,138 15% 3 Year PV $306,598
Per Share Contribution $ 0.17 Per Share Contribution $ 0.11
10% 5 Year PV $509,038 10% 4 Year PV $425,659
Per Share Contribution $ 0.19 Per Share Contribution $ 0.16
20% 5 Year PV $401,588 20% 6 Year PV $446,559
Per Share Contribution $ 0.15 Per Share Contribution $ 0.17
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VALUE OF NET LOSS CARRYFORWARD
$200,000
Per Share Contribution
Full Value $ 0.07
75% Value $ 0.06
50% Value $ 0.04
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Other Considerations:
1 A third party non operator would incur overhead that MRI does not.
2 The cost of separate filings is eliminated.
3 A third party would probably risk reserves more, due to unfamiliarity
with the properties.
4 A third party may give little or no value to future development, since
it would not operate or control.
5 MRI has been loaning money to Summit to fund development.
6 Other parties might have different pricing assumptions.
7 Well operation revenues to MRI are almost pure profit.
We assumed expenses of three months revenues.
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Exhibit 99.(b)(4)
CONSENT
July 15, 1996
Southwest Merchant Group hereby consents to the filing with the Securities and
Exchange Commission of its fairness opinion dated July 14, 1996 in connection
with the tender offer of MRI Acquisition Corp. (a Texas corporation and a wholly
owned subsidiary of Midland Resources, Inc.) to purchase all of the shares of
common stock, including option shares, of Summit Petroleum Corporation, a
Colorado corporation.
Southwest Merchant Group
/s/ Southwest Merchant Group
Dallas, Texas
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Exhibit 99.(d)(5)
[MIDLAND RESOURCES, INC. LETTERHEAD]
August 29, 1996
Dear Summit Shareholders,
Over the past few weeks, I have had the opportunity to talk to a great
number of you. There have been quite a few questions concerning the materials
sent to you regarding the tender offer by Midland Resources to buy your Summit
stock. Enclosed is an Amended Statement of Offer to Purchase that accomplished
two important points; first, it includes additional disclosures, and second, it
extends the offer until September 18, 1996.
Mr. Deas H. Warley, Chairman of the Board for Midland Resources, commented,
"We are making every effort possible to locate lost shareholders, as well as
make it possible for all the shareholders to understand the offer."
If you have not tendered your Summit stock and would like to receive a copy
of the Letter of Transmittal or have any questions, please do not hesitate to
call me at the number above.
Sincerely,
/s/ Mark A. Kahill
