<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
BARGO ENERGY COMPANY
(Exact name of small business issuer as specified in its charter)
Texas 0-8609 87-0239185
(State or other jurisdiction of (Commission file number) (I.R.S. Employer
incorporation or organization) Identification No.)
700 Louisiana, Suite 3700
Houston, Texas 77002
(Address of principal executive offices, including zip code)
(713)236-9792
(Issuer's telephone number, including area code)
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 [x] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The Company had approximately 87,932,726 shares of common stock, par value $0.01
per share, issued and outstanding as of May 10, 2000.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
<PAGE> 2
PART I
FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
However, in the opinion of management, all adjustments (which consist only of
normal recurring adjustments) necessary to present fairly the financial position
and results of operations for the periods presented have been made. These
condensed consolidated financial statements should be read in conjunction with
financial statements and the notes thereto included in the Company's Form 10-KSB
filing for the year ended December 31, 1999.
<PAGE> 3
BARGO ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,328,000 $ 2,375,000
Trade accounts receivable, no allowance for
doubtful accounts considered necessary:
Joint interest billings 60,000 210,000
Accrued oil and gas sales 5,946,000 7,629,000
Due from affiliates 16,000 19,000
------------- -------------
TOTAL CURRENT ASSETS 9,350,000 10,233,000
------------- -------------
PROPERTY AND EQUIPMENT
Oil and gas properties, full cost method 219,556,000 76,107,000
Other 776,000 696,000
------------- -------------
TOTAL PROPERTY AND EQUIPMENT 220,332,000 76,803,000
------------- -------------
Less accumulated depletion, depreciation
and amortization (8,209,000) (6,220,000)
------------- -------------
NET PROPERTY AND EQUIPMENT 212,123,000 70,583,000
OTHER ASSETS
Goodwill, net of accumulated amortization of
$258,000 and $208,000 respectively 1,742,000 1,792,000
Loan costs, net of accumulated amortization of
$15,000 and $436,000 respectively 12,120,000 1,890,000
Other 341,000 41,000
------------- -------------
TOTAL OTHER ASSETS 14,203,000 3,723,000
------------- -------------
TOTAL ASSETS $ 235,676,000 $ 84,539,000
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
BARGO ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 4,000 $ 6,000
Trade accounts payable 4,335,000 2,623,000
Accrued oil and gas proceeds payable 1,743,000 1,805,000
Accrued interest payable 48,000 84,000
Accrued income taxes payable 361,000 -0-
Due to affiliates 427,000 199,000
------------- -------------
TOTAL CURRENT LIABILITIES 6,918,000 4,717,000
------------- -------------
LONG TERM DEBT, less current portion 168,650,000 20,780,000
DEFERRED TAX LIABILITY 3,266,000 3,085,000
------------- -------------
REDEEMABLE PREFERRED STOCK, 10% cumulative; $.01 par
value; 10,000,000 and 5,000,000 shares authorized as of
March 31, 2000 and December 31, 1999, respectively and
5,000,000 shares outstanding as of March 31, 2000 and
December 31, 1999, net of unamortized issuance costs 53,079,000 51,664,000
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 200,000,000 and
120,000,000 shares authorized as of March 31, 2000 and
December 31, 1999, respectively, and 87,932,726 shares
issued and outstanding as of March 31, 2000 and
December 31, 1999, respectively 922,000 921,000
Additional paid-in capital 6,878,000 6,878,000
Treasury stock (2,041,000) (2,040,000)
Retained earnings (deficit) (1,996,000) (1,466,000)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 3,763,000 4,293,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 235,676,000 $ 84,539,000
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
BARGO ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
2000 1999
------------- -------------
<S> <C> <C>
REVENUES
Oil and gas sales $ 10,805,000 $ 2,201,000
------------- -------------
TOTAL REVENUES 10,805,000 2,201,000
------------- -------------
COSTS AND EXPENSES
Lease operations and production taxes 3,732,000 936,000
General and administrative 1,013,000 863,000
Depletion, depreciation and amortization 2,039,000 991,000
------------- -------------
TOTAL EXPENSES 6,784,000 2,790,000
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OTHER INCOME (EXPENSE)
Interest income 26,000 4,000
Interest expense (925,000) (871,000)
------------- -------------
TOTAL OTHER INCOME AND (EXPENSE) (899,000) (867,000)
------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 3,122,000 (1,456,000)
DEFERRED INCOME TAX BENEFIT (EXPENSE)
Current (1,006,000) -0-
Deferred (181,000) 495,000
------------- -------------
TOTAL INCOME TAX BENEFIT (EXPENSE) (1,187,000) 495,000
NET INCOME(LOSS)BEFORE EXTRAORDINARY ITEM 1,935,000 (961,000)
------------- -------------
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF
DEBT (NET OF TAX OF $645,000) 1,051,000 -0-
------------- -------------
NET INCOME (LOSS) 884,000 (961,000)
REDEEMABLE PREFERRED STOCK DIVIDENDS,
INCLUDING ACCRETION 1,416,000 -0-
------------- -------------
NET(LOSS)ALLOCABLE TO COMMON SHAREHOLDERS $ (532,000) $ (961,000)
============= =============
EARNINGS (LOSS) PER COMMON SHARE - BASIC
AND DILUTED
Net income (loss) per common share before
extraordinary item $ .01 $ (.02)
Net (loss) per common share from
extraordinary item (.02) -0-
------------- -------------
Net (loss) per common share $ (.01) $ (.02)
============= =============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
Basic 87,933,000 48,339,000
Diluted 103,428,000 48,339,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
BARGO ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 884,000 $ (961,000)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depletion, depreciation, and amortization 2,039,000 991,000
Amortization of debt issue costs 209,000 50,000
Extraordinary loss on extinguishments of debt 1,696,000 -0-
Deferred income taxes 181,000 (495,000)
------------- -------------
5,009,000 (415,000)
Change in working capital items:
Decrease in accounts receivable 1,832,000 400,000
Decrease (increase) in due from affiliates 4,000 (29,000)
Increase in accounts payable and accrued
liabilities 1,976,000 476,000
Increase (decrease) in due to affiliates 228,000 (210,000)
Other (300,000) (8,000)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,749,000 214,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of oil and gas properties (143,449,000) (549,000)
Additions to property and equipment (80,000) (15,000)
------------- -------------
NET CASH (USED IN) INVESTING ACTIVITIES (143,529,000) (564,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 192,050,000 655,000
Repayment of long-term debt (44,182,000) (2,000)
Stock issuance costs -0- (291,000)
Loan costs (12,135,000) -0-
Proceeds from exercise of stock options -0- 10,000
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 135,733,000 372,000
------------- -------------
NET INCREASE IN CASH 953,000 22,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,375,000 1,241,000
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,328,000 $ 1,263,000
============= =============
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest $ 753,000 $ 460,000
============= =============
NONCASH ITEMS:
Dividends on redeemable preferred stock $ 1,416,000 $ -0-
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: THE COMPANY
Bargo Energy Company (the "Company" or "Bargo") is engaged primarily in the
acquisition, development and production of oil and gas reserves and operation of
oil and gas wells. The accompanying financial statements include the accounts of
the Company and its wholly owned subsidiaries, Bargo Petroleum Corporation (BPC)
and Future Cal-Tex Corporation (FCT). Intercompany accounts and transactions are
eliminated in consolidation. All material adjustments, consisting only of normal
recurring adjustments that, in the opinion of management are necessary for a
fair statement of the results for the interim periods, have been reflected.
These interim financial statements should be read in conjunction with the annual
consolidated financial statements of the Company.
On February 16, 2000, Bargo's wholly-owned subsidiaries and partnerships, Future
Energy Corporation (FEC), BMC Development No. 1, Ltd. (BMC), Future Acquisition
1995, Ltd. (FAQ) and NCI Shawnee Limited Partnership (NCI) merged into Future
Petroleum Corporation (FPC). In conjunction with the merger, the name of Future
Petroleum Corporation was changed to Bargo Petroleum Corporation. Additionally,
Alaska Eldorado Gold Company (AEG), a wholly owned dormant subsidiary of Bargo,
has been dissolved.
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Significant assumptions are
required in the valuation of proved oil and gas reserves which, as described
above, may affect the amounts at which oil and gas properties are recorded.
Actual results could differ from these estimates.
NOTE 2: PROPERTY ACQUISITIONS
On March 31, 2000, the Company acquired interests in oil and gas properties from
Texaco Exploration and Production, Inc., Four Star Oil and Gas Company and
McFarland Energy, Inc. ("Texaco Acquisition") for a gross purchase price of
$161.1 million, before closing adjustments. Such amount has been included as an
addition to oil and gas properties. The final determination of the purchase
price and its allocation is subject to adjustment over the current fiscal year.
The effective date of the purchase is January 1, 2000. The properties are
located in the Permian Basin, East Texas, Oklahoma and Kansas. The Company
utilized a new credit facility to acquire the properties (see Note 3.)
<PAGE> 8
The following Bargo Energy Company pro forma information gives effect to the
Texaco Acquisition referred to above and the East Texas properties (as reported
on Form 8-K filed on November 19, 1999) as if they had been acquired January 1,
1999:
Three months ended
March 31,
2000 1999
------- -------
(amounts in thousands except per share amount)
Revenues $34,755 $18,485
Net income (loss) before extraordinary item $ 6,569 $(2,963)
Net income (loss) $ 5,518 $(2,963)
Earnings per share:
Basic - Net income (loss) per common share
before extraordinary item $ .07 $ (.06)
Net income (loss) per common share $ .05 $ (.06)
Diluted - Net income (loss) per common share
before extraordinary item $ .06 $ (.06)
Net income (loss) per common share $ .04 $ (.06)
NOTE 3: CREDIT AGREEMENT
Effective March 31, 2000, the Company entered into a new syndicated credit
agreement ("Credit Agreement") with Chase Bank of Texas ("Chase") and several
other energy lending banks (all banks shall be referred to collectively as the
"Banks"), with Chase serving as administrative agent. Proceeds from the new
Credit Agreement were used to fully refinance the Company's previous bank
indebtedness and make the Texaco Acquisition. Borrowings under the Credit
Agreement are secured by mortgages covering substantially all of the Company's
producing oil and gas properties. As required by the Credit Agreement, the
Company has hedged 75% of estimated oil production generated from the Texaco
Acquisition through 2001 (see Note 4). In accordance with the Credit Agreement
the Banks were paid various underwriting, administrative and advisory fees
totaling $4.38 million. The Credit Agreement provides for a total commitment
amount of $245 million, comprised of a revolving and a term facility.
The total commitment amount under the term facility is $45 million. The term
facility matures December 31, 2000. Borrowings under the term facility as of
March 31, 2000 were $45 million. The Company has received commitments from
several of its current stockholders to purchase preferred stock and has also
received a commitment from one of its lenders to convert a portion of the loan
into preferred stock, in an amount sufficient in the aggregate to repay the term
facility in full at maturity (see Note 5). The term facility bears interest
under the Base Rate plus an applicable margin of 2.0% or interest under the LIBO
Rate at the LIBO rate (reserve adjusted) plus 3.5%. The Company may convert any
portion of the outstanding debt from one interest rate type to another in
increments of $1 million. As the Company has both the ability and intent to
refinance its term facility, the amounts have been classified as long term in
the balance sheet at March 31, 2000.
<PAGE> 9
The total commitment amount under the revolving facility is $200 million with an
initial $160 million borrowing base ("Borrowing Base"). The revolving facility
matures March 31, 2003. Borrowings under the revolving facility as of March 31,
2000 were $123.65 million. Under the revolving facility, the Company has a
choice of two different interest rates; the Base Rate or the LIBO Rate. While
the term facility is outstanding, the debt under the revolving credit facility
bears interest under the Base Rate (which is the higher of the lender's "Prime
Rate" or the Federal Funds Rate plus .5%) plus an applicable margin of 1.0% or
interest under the LIBO Rate at the LIBO rate (reserve adjusted) plus 2.5%. The
Company may convert any portion of the outstanding debt from one interest rate
type to another in increments of $1 million. Upon repayment of the term
facility, the applicable margin is computed based on Borrowing Base utilization
ranging from 0%-.75% for Base Rate loans and 1.5%-2.25% for LIBO Rate loans.
In connection with the new Credit Agreement, the Company wrote off $1,696,000 of
loan costs related to the previously existing revolving credit agreement. Such
amounts are shown separately, net of tax, as an extraordinary item.
NOTE 4: HEDGING AND DERIVATIVE ACTIVITIES
The Company engages in certain hedging activities related to the purchase and
delivery of oil and gas in the future. Such activities are accounted for in
accordance with Statement of Financial Accounting Standard No. 80, "Accounting
for Futures Contracts" (SFAS 80). The losses on hedging contracts are included
as a reduction of net revenues.
In addition to the hedges in place at December 31, 1999, the Company entered
into additional derivative contracts in the first quarter of 2000 in relation to
the Texaco Acquisition. The instruments cover approximately 75% (or
approximately 190,000 BBLS per month) of estimated oil production related to the
Texaco Acquisition through calendar year 2001. The contracts related to the
Texaco Acquisition production consist of a floor of $22 per BBL for April
through December 2000 and a floor of $21 per BBL for January through December
2001. The Company was required to hedge a portion of its production under the
terms of their new Credit Agreement (see Note 3). Accordingly, the cost of the
instrument ($6.22 million, paid in full during the first quarter of 2000), has
been capitalized as loan costs and will be amortized over the three year term of
the revolving credit facility.
NOTE 5: EQUITY BACKSTOP
The Company has received commitments from several of its current stockholders to
purchase preferred stock, and has also received a commitment from one of its
lenders ("Converting Lender") to convert a portion of the term facility into
preferred stock, in an amount sufficient in the aggregate to repay the term
facility (see Note 3) in full at maturity (the purchase of additional preferred
stock and conversion of a portion of the term facility into preferred stock in
order to retire the term facility at maturity shall be known as the "Equity
Backstop"). If the Equity Backstop is invoked, new common stock will also be
issued to the preferred shareholders and the Converting Lender. In order to
secure the Equity Backstop the Company paid an Equity Backstop fee of $1.35
million to the preferred stockholders and the Converting Lender. Additionally,
the Company initiated a Consent Action to increase the Company's outstanding
capital stock, in preparation for the potential issuance of additional shares as
a result of the Equity Backstop. This Consent Action was approved by a majority
of the Company's stockholders on March 13, 2000 and became effective April 10,
2000. The Company's articles of incorporation have been amended to increase the
authorized common shares to 200 million and authorized preferred shares to 10
million. It is the Company's intent to repay the term facility prior to its
maturity.
NOTE 6: EARNINGS PER SHARE
Net income or loss per common share is based on the weighted average number of
common shares outstanding. In accordance with SFAS 128, "Earnings Per Share,"
income available to common stockholders is reduced by the amount of dividends
on cumulative preferred stock and accretion of related stock issuance costs.
The Company's common stock equivalents consisted of stock options and warrants.
<TABLE>
<S> <C>
Weighted average basic common shares outstanding 87,933,000
Options and warrants outstanding (Treasury Stock Method) 15,495,000
------------
Weighted average fully diluted common and common
equivalent shares outstanding 103,428,000
============
</TABLE>
<PAGE> 10
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
This report includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements
other than statements of historical fact included in the Report (and the
exhibits hereto), including without limitation, statements regarding the
Company's financial position and estimated quantities and net present values of
reserves, are forward looking statements. The Company can give no assurances
that the assumptions upon which such statements are based will prove to have
been correct. Important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements") are
disclosed in the section "Risk Factors" included in the Company's Forms 10-KSB
and other periodic reports filed under the Exchange Act, which are herein
incorporated by reference. All subsequent written and oral forward looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified by the Cautionary Statements.
THE COMPANY
Bargo Energy Company (the "Company" or "Bargo") is engaged in the
acquisition and exploitation of oil and natural gas properties located onshore
primarily in the Gulf Coast Region (Texas and Louisiana), Permian Basin,
MidContinent, and California. The Company's principal business strategies
include (i) maximizing the value of its existing high-quality, long-life
reserves through efficient operating and marketing practices, (ii) conducting
detailed field studies using the latest technology to identify additional
reserves and exploration potential, and (iii) seeking acquisitions of producing
properties, with exploration and development potential in areas where the
Company has operating experience and expertise. Bargo intends to continue its
efforts to aggressively grow the Company's resource base both through oil and
gas property acquisitions and corporate consolidations.
STRATEGIC DEVELOPMENTS
On February 22, 2000, the Company agreed to purchase oil and gas properties
from subsidiaries of Texaco, Inc. for $161.1 million (the "Texaco acquisition").
The effective date of the purchase is January 1, 2000 and closing occurred on
March 31, 2000. The properties are located in the Permian Basin, East Texas,
Oklahoma and Kansas. Aggregate current net production from the properties totals
approximately 9,000 barrels of oil and 11 million cubic feet of gas per day.
Following the acquisition, Bargo has proven reserves of approximately 75 million
equivalent barrels of oil. The purchase price paid for the properties was
subject to reduction for the joint working interest owners exercise of
preferential rights to purchase certain properties and for title and other
environmental defects identified before closing.
The Company received commitments from commercial banks to loan the Company
sufficient amounts to finance the entire acquisition and refinance existing bank
indebtedness. Up to $45 million of these loans will mature nine months following
the closing date. The Company has received commitments from several of its
current stockholders to purchase preferred stock, and has also received a
commitment from one of its lenders to convert a portion of the loan into
preferred stock, in an amount sufficient in the aggregate to repay this nine
month loan in full. These commitments to purchase preferred stock at maturity of
the nine-month loan also provide for the issuance of new common stock. The
Company intends to repay this loan from proceeds from asset sales and cash flow
prior to its maturity.
On May 8, 2000 the Company entered into a contract to sell all of its
Ardmore Basin producing oil and gas properties in southern Oklahoma to Le Norman
Partners, LLC for $31.9 million, prior to closing adjustments. The effective
<PAGE> 11
date of the sale is May 1, 2000 and closing is expected to occur at the end of
May. Proceeds from this sale will be used to paydown existing indebtedness. In
addition, the Company intends to sell other non-core properties from the Texaco
acquisition, of which a portion of the proceeds would be available to repay the
term loan and revolving credit facility. The Company may also issue new debt or
equity securities to refinance part or all of the bank loans.
GENERAL
The Company's revenues, profitability and future growth and the carrying
value of its oil and gas properties are substantially dependent on prevailing
prices of oil and gas and its ability to find, develop and acquire additional
oil and gas reserves that are economically recoverable. The Company's ability to
maintain or increase its borrowing capacity and to obtain additional capital on
attractive terms is also influenced by oil and gas prices.
Prices for oil and gas are subject to large fluctuations in response to
relatively minor changes in the supply of and demand for oil and gas, market
uncertainty and a variety of additional factors beyond the control of the
Company. These factors include weather conditions in the United States, the
condition of the United States economy, the actions of the Organization of
Petroleum Exporting Countries, governmental regulation, political stability in
the Middle East and elsewhere, the foreign supply of crude oil and natural gas,
the price of foreign imports and the availability of alternate fuel sources. Any
substantial and extended decline in the price of crude oil or natural gas would
have an adverse effect on the Company's carrying value of its proved reserves,
borrowing capacity, revenues, profitability and cash flows from operations.
The Company uses the full cost method of accounting for the Company's
investment in oil and gas properties. Under the full cost method of accounting,
all costs of acquisition, exploration and development of oil and gas reserves
are capitalized into a "full cost pool." Oil and gas properties in the pool,
plus estimated future expenditures to develop proved reserves and future
abandonment, site remediation and dismantlement costs, are depleted and charged
to operations using the unit of production method based on the portion of
current production to total estimated proved recoverable oil and gas reserves.
To the extent that such capitalized costs (net of depreciation, depletion and
amortization) exceed the discounted future net cash flows on an after-tax basis
of estimated proved oil and gas reserves, such excess costs are charged to
operations. Once incurred, the write down of oil and gas properties is not
reversible at a later date even if oil or natural gas prices increase.
The Company does not have a specific acquisition budget because of the
unpredictability of the timing and size of forthcoming acquisition activities.
There is no assurance that the Company will be able to identify suitable
acquisition candidates in the future, or that the Company will be successful in
the acquisition of producing properties. In order to finance any possible future
acquisitions, the Company will either use borrowings available under the its
credit facility or the Company may seek to obtain additional debt or equity
financing in the public or private capital markets. Further, there can be no
assurances that any future acquisitions made by the Company will be integrated
successfully into the Company's operations or will achieve desired profitability
objectives.
In June 1998 the Financial Accounting Standards Board issued SFAS 133"
Accounting for Derivative Instruments and Hedging Activities" (as amended by
SFAS 137). This standard is effective for fiscal years beginning after June 15,
2000 (January 1, 2001 for the Company). SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The Company
has not yet completed its evaluation of the impact of the adoption of this new
standard.
<PAGE> 12
The Company implements oil and gas hedges as it deems appropriate to ensure
minimum levels of cash flow or as market conditions are believed to create an
opportunity to increase cash flows. At December 31, 1999 collars were in place
for portions of the Company's oil production for October 1 through September
2000 at floors of $18.00 and ceilings of $20.75 and $23.08. Contracted volumes
total 50,200 barrels per month declining each month to 42,000 barrels
representing approximately 14% of the Company's projected oil production.
Beginning October 2000 through September 2001 the Company has two swaps in place
at $17.55 and $18.05. Contracted volumes total 41,350 barrels per month
declining to 34,300 barrels per month representing approximately 13% of the
Company's projected oil production for that period.
Floors are in place for April 2000 through December 2000 at a price of
$22.00 per bbl on 1,791,672 bbls. Additionally, the Company has secured a $21.00
per bbl floor for 2001 on a volume of 2,197,728 bbls. These floors protect
approximately 60% of the Company's current projected oil production.
The Company currently has no outstanding natural gas hedges.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of capital are its cash flows from
operations, borrowings and issuance of debt and equity securities.
The Company reported consolidated net income of $884,000 for the quarter
ended March 31, 2000 compared to a consolidated net loss of $961,000 for the
quarter ended March 31, 1999. At March 31, 2000, the Company had working capital
of $2,432,000, which was a $3,084,000 decrease from the $5,516,000 of working
capital that the Company had as of December 31, 1999. This decrease in working
capital was due primarily to increased accounts payable as of March 31, 2000.
Effective March 31, 2000, the Company entered into a new credit agreement
with Chase Bank of Texas ("Chase")and several other energy lending bank, with
Chase serving as the administrative agent(the "Credit Agreement"). Borrowings
under the Credit Agreement are secured by mortgages covering substantially all
of the Company's producing oil and gas properties as well as by certain pledges
of the Company's Common Stock. The Credit Agreement provides a commitment amount
of $200 million and an initial $160 million borrowing base ("Borrowing Base").
In addition to the $200 million commitment, the Credit Agreement also provides
for a $45 million Term Loan which matures 9 months from the closing date. The
Company has received commitments from several of its current stockholders to
purchase preferred stock, and has also received a commitment from one of its
lenders to convert a portion of the loan into preferred stock, in an amount
sufficient in the aggregate to repay this nine month loan in full. These
commitments to purchase preferred stock at maturity of the nine-month loan also
provide for the issuance of new common stock.
The Company has a choice of two different interest rates; the Base Rate or
the LIBO Rate. While the Term Loan is outstanding, the debt under the Borrowing
Base loan bears interest under the Base Rate (which is the higher of the
lender's "Prime Rate" or the Federal Funds Rate plus .5%) plus an applicable
margin of 1.0% or interest under the LIBO Rate at the LIBO rate (reserve
adjusted) plus 2.5%. The Term Loan bears interest under the Base Rate plus an
applicable margin of 2.0% and under the LIBO Rate plus 3.5%. The Company may
convert any portion of the outstanding debt from one interest rate type to
another in increments of $1,000,000 with a minimum transfer amount of
$1,000,000.
As of March 31, 2000 borrowings under the Credit Agreement were $45 million
and $123.65 million for the term loan and the revolving credit facility,
respectively.
<PAGE> 13
CASH FLOW TO OPERATING ACTIVITIES
Operating activities of the Company during the three months ended March 31,
2000 provided net cash of $8,749,000. In the same period during 1999, operations
provided net cash of $214,000. Investing activities in the three months ended
March 31, 2000, used net cash of $143,529,000, primarily due to the Texaco
acquisition. Financing activities in the three months ended March 31, 2000
provided net cash of $135,733,000 primarily due to proceeds from the issuance of
debt in connection with the Texaco acquisition.
RESULTS OF OPERATIONS
Comparison of Quarters Ended March 31, 2000 and 1999.
Production for the quarter ended March 31, 2000 increased by 289.4 MBOE, or
132%, to 507.8 MBOE versus the same period in 1999. This increased production is
due to two significant acquisitions made in May and October, 1999 which are not
included in the first quarter of 1999 operating results.
Total revenues for the three months ended March 31, 2000 increased to
$10,805,000 from $2,201,000 for the same period in 1999, primarily due to an
increase in production from the Company's oil and gas property acquisitions.
This represents a 391% increase over 1999. Production costs increased from
$936,000 in the three months ended March 31, 1999 to $3,732,000 in the three
months ended March 31, 2000 due to the purchase of proved reserves. General and
administrative expenses increased to $1,013,000 from $863,000 in 1999 due to
overhead associated with the Company's increased acquisition activity. The
Company had net income of $884,000 for the three months ended March 31, 2000
compared to a net loss of $961,000 for the same period in 1999. Income before
income taxes and extraordinary items increased by $4,578,000 to $3,122,000 for
the three months ended March 31, 2000 compared to a net loss of $1,456,000 for
the comparable period in 1999. Interest expense for the three months ended March
31, 2000 was $925,000 compared to $871,000 for the same period in 1999.
Depreciation, depletion and amortization for the three months ended March 31,
2000 was $2,039,000. For the same period in 1999, the total was $991,000. This
increase is primarily a result of increased production volumes resulting from
the 1999 acquisitions.
INFLATION
The Company's activities have not been, and in the near term are not
expected to be, materially affected by inflation or changing prices in general.
The Company's oil exploration and production activities are generally affected
by prevailing prices for oil.
<PAGE> 14
- --------------------------------------------------------------------------------
PART II
OTHER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF DOCUMENT
<S> <C>
2. Plan of acquisition, reorganization, arrangement, liquidation
or succession
2.1 Purchase and Sale Agreement between Texaco Exploration &
Production Inc. and Bargo Petroleum Corporation (Incorporated
by reference from Exhibit 2.1 to the Company's Current Report
on Form 8-K dated March 31, 2000, filed with the Securities and
Exchange Commission on April 17, 2000)*
2.2 Asset Purchase Agreement between Four Star Oil & Gas Company
and Bargo Petroleum Corporation (Incorporated by reference from
Exhibit 2.2 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)*
2.3 Asset Purchase Agreement between McFarland Energy, Inc. and
Bargo Petroleum Corporation (Incorporated by reference from
Exhibit 2.3 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)*
3. Articles of Incorporation and By-laws
3.1 Articles of Incorporation of Bargo Energy Company (Incorporated
by reference from Exhibit 3.1 to the Company's Current Report
on Form 8-K dated April 26, 1999, filed with the Securities and
Exchange Commission on April 29, 1999)
3.2 Agreement and Plan of Merger, dated as of April 6, 1999 between
Future Petroleum Corporation and FPT Corporation (Incorporated
by reference from Exhibit 2.1 to the Company's Current Report
on Form 8-K dated April 26, 1999, filed with the Securities and
Exchange Commission on April 29, 1999)
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF DOCUMENT
<S> <C>
3.3 By-laws of Bargo Energy Company (Incorporated by reference from
Exhibit 3.2 to the Company's Current Report on Form 8-K dated
April 26, 1999, filed with the Securities and Exchange
Commission on April 29, 1999)
3.4 Amendment to Bargo Energy Company By-laws (Incorporated by
reference from Exhibit 3.4 to the Company's Quarterly Report on
Form 10-QSB for the period ended March 31, 1999, filed with the
Securities and Exchange Commission on May 21, 1999)
3.5 Articles of Amendment to the Articles of Incorporation of Bargo (2)
Energy Company
4. Instruments defining the rights of security holders
4.1 Certificate of Designations of Cumulative Redeemable Preferred
Stock, Series B (Incorporated by reference from Exhibit 4.1 to
the Company's Quarterly Report on Form 10-QSB for the period
ended March 31, 1999, filed with the Securities and Exchange
Commission on May 21, 1999)
4.2 Certificate of Designations of Cumulative Redeemable Preferred (2)
Stock, Series C
10. Material Contracts
10.1 Subscription Agreement dated March 31, 2000, among Bargo Energy
Company, Energy Capital Investment Company PLC, EnCap Energy
Capital Fund III-B, L.P., BOCP Energy Partners, L.P., EnCap
Energy Capital Fund III, L.P., Kayne Anderson Energy Fund,
L.P., BancAmerica Capital Investors SBIC I, L.P., Eos Partners,
L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II, L.P., and
SGC Partners II LLC. (Incorporated by reference from Exhibit
10.1 to the Company's Current Report on Form 8-K dated March
31, 2000, filed with the Securities and Exchange Commission on
April 17, 2000)
10.2 First Amendment to Second Amended and Restated Shareholders'
Agreement, dated March 31, 2000, among Bargo Energy Company, B.
Carl Price, Don Wm. Reynolds, Energy Capital Investment Company
PLC, EnCap Equity 1994 Limited Partnership, BER Partnership
L.P., TJG Investments, Inc., BEC Partnership, BOC Operating
Corporation, Inc., Tim J. Goff, Thomas Barrow, James E. Sowell,
EnCap Energy Capital Fund III-B, L.P., BOCP Energy Partners,
L.P., EnCap Energy Capital Fund III, L.P., Kayne Anderson
Energy Fund, L.P., BancAmerica Capital Investors SBIC I, L.P.,
Eos Partners, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC
II, L.P., and SGC Partners II LLC. (Incorporated by reference
from Exhibit 10.2 to the Company's Current Report on Form 8-K
dated March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF DOCUMENT
<S> <C>
10.3 Third Amendment to Registration Rights Agreement dated March
31, 2000 among Energy Capital Investment Company PLC, EnCap
Equity 1994 Limited Partnership, EnCap Energy Capital Fund
III-B, L.P., BOCP Energy Partners, L.P., EnCap Energy Capital
Fund III, L.P., Kayne Anderson Energy Fund, L.P., BancAmerica
Capital Investors SBIC I, L.P., Eos Partners, L.P., Eos
Partners SBIC, L.P., Eos Partners SBIC II, L.P., and SGC
Partners II LLC. (Incorporated by reference from Exhibit 10.3
to the Company's Current Report on Form 8-K dated March 31,
2000, filed with the Securities and Exchange Commission on
April 17, 2000)
10.4 First Amendment to Stock Purchase Agreement dated March 31,
2000, among Energy Capital Investment Company PLC, EnCap Energy
Capital Fund III-B, L.P., BOCP Energy Partners, L.P., EnCap
Energy Capital Fund III, L.P., Kayne Anderson Energy Fund,
L.P., BancAmerica Capital Investors SBIC I, L.P., Eos Partners,
L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II, L.P., and
SGC Partners II LLC and Bargo Energy Company. (Incorporated by
reference from Exhibit 10.4 to the Company's Current Report on
Form 8-K dated March 31, 2000, filed with the Securities and
Exchange Commission on April 17, 2000)
10.5 Assignment, Acknowledgment, Consent and Waiver dated March 31,
2000, among Bargo Energy Company, Energy Capital Investment
Company PLC, EnCap Energy Capital Fund III-B, L.P., BOCP Energy
Partners, L.P., EnCap Energy Capital Fund III, L.P., Kayne
Anderson Energy Fund, L.P., BancAmerica Capital Investors SBIC
I, L.P., Eos Partners, L.P., Eos Partners SBIC, L.P., Eos
Partners SBIC II, L.P., SGC Partners II LLC, and Chase Bank of
Texas, National Association. (Incorporated by reference from
Exhibit 10.5 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)
10.6 Escrow Agreement dated March 31, 2000, among Bargo Energy
Company, Energy Capital Investment Company PLC, EnCap Energy
Capital Fund III-B, L.P., EnCap Equity 1994, L.P., BOCP Energy
Partners, L.P., EnCap Energy Capital Fund III, L.P., Kayne
Anderson Energy Fund, L.P., BancAmerica Capital Investors SBIC
I, L.P., Eos Partners, L.P., Eos Partners SBIC, L.P., Eos
Partners SBIC II, L.P., SGC Partners II LLC, and Chase Bank of
Texas, National Association. (Incorporated by reference from
Exhibit 10.6 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF DOCUMENT
<S> <C>
10.7 Acknowledgment and Consent dated March 31, 2000, among Bargo
Energy Company, Energy Capital Investment Company PLC, EnCap
Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P.,
EnCap Energy Capital Fund III, L.P., Kayne Anderson Energy
Fund, L.P., BancAmerica Capital Investors SBIC I, L.P., Eos
Partners, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II,
L.P., and SGC Capital Partners II LLC. (Incorporated by
reference from Exhibit 10.7 to the Company's Current Report on
Form 8-K dated March 31, 2000, filed with the Securities and
Exchange Commission on April 17, 2000)
10.8 Indemnification Agreement dated March 31, 2000, among Bargo
Energy Company, Energy Capital Investment Company PLC, EnCap
Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P.,
EnCap Energy Capital Fund III, L.P., Kayne Anderson Energy
Fund, L.P., BancAmerica Capital Investors SBIC I, L.P., Eos
Partners, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II,
L.P., SGC Partners II LLC, and Bankers Trust Company.
(Incorporated by reference from Exhibit 10.8 to the Company's
Current Report on Form 8-K dated March 31, 2000, filed with the
Securities and Exchange Commission on April 17, 2000)
10.9 Consent to Amendment to Registration Rights Agreement by TJG
Investments, Inc., BEC Partnership, BER Partnership, L.P., BOC
Operating Corporation, Tim J. Goff, Thomas Barrow, James E.
Sowell, B. Carl Price, Don Wm. Reynolds, Christie Price, Robert
Price and Charles D. Laudeman. (Incorporated by reference from
Exhibit 10.9 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)
10.10 Credit Agreement dated March 31, 2000, among Bargo Energy
Company, Chase Bank of Texas National Association, as
administrative agent, Bankers Trust Company, as syndication
agent and the other agents and lenders signatory thereto.
(Incorporated by reference from Exhibit 10.10 to the Company's
Current Report on Form 8-K dated March 31, 2000, filed with the
Securities and Exchange Commission on April 17, 2000)
11. Statement regarding computation of per share earnings (1)
15. Letter on unaudited interim financial information (1)
18. Letter on change in accounting principles (1)
21. Subsidiaries of the Registrant (2)
22. Published report regarding matters submitted to vote (1)
23. Consents of experts and counsel (1)
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF DOCUMENT
<S> <C>
24. Power of attorney (1)
27. Financial data schedule (2)
99. Additional exhibits (1)
</TABLE>
- -----------------------------------
(1) Inapplicable to this filing.
(2) Included herewith.
* Confidential treatment has been requested.
<PAGE> 19
(b) Reports on Form 8-K.
The following reports on From 8-K were filed during the quarterly period ended
March 31, 2000:
1) Current Report on Form 8-K dated February 22, 2000, filed February 28, 2000
reporting Item 5. Other Events.
2) Current Report on Form 8-K dated March 31, 2000, filed April 17, 2000
reporting Item 2. Acquisition or Disposition of Assets.
<PAGE> 20
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BARGO ENERGY COMPANY
(Registrant)
Dated: May 15, 2000 By: /s/ Kimberly G. Seekely
Kimberly G. Seekely,
On behalf of the Registrant and
as Vice President - Treasurer
The following exhibits are included as part of this report:
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF DOCUMENT
<S> <C>
2. Plan of acquisition, reorganization, arrangement, liquidation
or succession
2.1 Purchase and Sale Agreement between Texaco Exploration &
Production Inc. and Bargo Petroleum Corporation (Incorporated
by reference from Exhibit 2.1 to the Company's Current Report
on Form 8-K dated March 31, 2000, filed with the Securities and
Exchange Commission on April 17, 2000)*
2.2 Asset Purchase Agreement between Four Star Oil & Gas Company
and Bargo Petroleum Corporation (Incorporated by reference from
Exhibit 2.2 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)*
2.3 Asset Purchase Agreement between McFarland Energy, Inc. and
Bargo Petroleum Corporation (Incorporated by reference from
Exhibit 2.3 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)*
3. Articles of Incorporation and By-laws
3.1 Articles of Incorporation of Bargo Energy Company (Incorporated
by reference from Exhibit 3.1 to the Company's Current Report
on Form 8-K dated April 26, 1999, filed with the Securities and
Exchange Commission on April 29, 1999)
3.2 Agreement and Plan of Merger, dated as of April 6, 1999 between
Future Petroleum Corporation and FPT Corporation (Incorporated
by reference from Exhibit 2.1 to the Company's Current Report
on Form 8-K dated April 26, 1999, filed with the Securities and
Exchange Commission on April 29, 1999)
3.3 By-laws of Bargo Energy Company (Incorporated by reference from
Exhibit 3.2 to the Company's Current Report on Form 8-K dated
April 26, 1999, filed with the Securities and Exchange
Commission on April 29, 1999)
3.4 Amendment to Bargo Energy Company By-laws (Incorporated by
reference from Exhibit 3.4 to the Company's Quarterly Report on
Form 10-QSB for the period ended March 31, 1999, filed with the
Securities and Exchange Commission on May 21, 1999)
3.5 Articles of Amendment to the Articles of Incorporation of Bargo
Energy Company
4. Instruments defining the rights of security holders
4.1 Certificate of Designations of Cumulative Redeemable Preferred
Stock, Series B (Incorporated by reference from Exhibit 4.1 to
the Company's Quarterly Report on Form 10-QSB for the period
ended March 31, 1999, filed with the Securities and Exchange
Commission on May 21, 1999)
4.2 Certificate of Designations of Cumulative Redeemable Preferred
Stock, Series C
10. Material Contracts
10.1 Subscription Agreement dated March 31, 2000, among Bargo Energy
Company, Energy Capital Investment Company PLC, EnCap Energy
Capital Fund III-B, L.P., BOCP Energy Partners, L.P., EnCap
Energy Capital Fund III, L.P., Kayne Anderson Energy Fund,
L.P., BancAmerica Capital Investors SBIC I, L.P., Eos Partners,
L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II, L.P., and
SGC Partners II LLC. (Incorporated by reference from Exhibit
10.1 to the Company's Current Report on Form 8-K dated March
31, 2000, filed with the Securities and Exchange Commission on
April 17, 2000)
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF DOCUMENT
<S> <C>
10.2 First Amendment to Second Amended and Restated Shareholders'
Agreement, dated March 31, 2000, among Bargo Energy Company, B.
Carl Price, Don Wm. Reynolds, Energy Capital Investment Company
PLC, EnCap Equity 1994 Limited Partnership, BER Partnership
L.P., TJG Investments, Inc., BEC Partnership, BOC Operating
Corporation, Inc., Tim J. Goff, Thomas Barrow, James E. Sowell,
EnCap Energy Capital Fund III-B, L.P., BOCP Energy Partners,
L.P., EnCap Energy Capital Fund III, L.P., Kayne Anderson
Energy Fund, L.P., BancAmerica Capital Investors SBIC I, L.P.,
Eos Partners, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC
II, L.P., and SGC Partners II LLC. (Incorporated by reference
from Exhibit 10.2 to the Company's Current Report on Form 8-K
dated March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)
10.3 Third Amendment to Registration Rights Agreement dated March
31, 2000 among Energy Capital Investment Company PLC, EnCap
Equity 1994 Limited Partnership, EnCap Energy Capital Fund
III-B, L.P., BOCP Energy Partners, L.P., EnCap Energy Capital
Fund III, L.P., Kayne Anderson Energy Fund, L.P., BancAmerica
Capital Investors SBIC I, L.P., Eos Partners, L.P., Eos
Partners SBIC, L.P., Eos Partners SBIC II, L.P., and SGC
Partners II LLC. (Incorporated by reference from Exhibit 10.3
to the Company's Current Report on Form 8-K dated March 31,
2000, filed with the Securities and Exchange Commission on
April 17, 2000)
10.4 First Amendment to Stock Purchase Agreement dated March 31,
2000, among Energy Capital Investment Company PLC, EnCap Energy
Capital Fund III-B, L.P., BOCP Energy Partners, L.P., EnCap
Energy Capital Fund III, L.P., Kayne Anderson Energy Fund,
L.P., BancAmerica Capital Investors SBIC I, L.P., Eos Partners,
L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II, L.P., and
SGC Partners II LLC and Bargo Energy Company. (Incorporated by
reference from Exhibit 10.4 to the Company's Current Report on
Form 8-K dated March 31, 2000, filed with the Securities and
Exchange Commission on April 17, 2000)
10.5 Assignment, Acknowledgment, Consent and Waiver dated March 31,
2000, among Bargo Energy Company, Energy Capital Investment
Company PLC, EnCap Energy Capital Fund III-B, L.P., BOCP Energy
Partners, L.P., EnCap Energy Capital Fund III, L.P., Kayne
Anderson Energy Fund, L.P., BancAmerica Capital Investors SBIC
I, L.P., Eos Partners, L.P., Eos Partners SBIC, L.P., Eos
Partners SBIC II, L.P., SGC Partners II LLC, and Chase Bank of
Texas, National Association. (Incorporated by reference from
Exhibit 10.5 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF DOCUMENT
<S> <C>
10.6 Escrow Agreement dated March 31, 2000, among Bargo Energy
Company, Energy Capital Investment Company PLC, EnCap Energy
Capital Fund III-B, L.P., EnCap Equity 1994, L.P., BOCP Energy
Partners, L.P., EnCap Energy Capital Fund III, L.P., Kayne
Anderson Energy Fund, L.P., BancAmerica Capital Investors SBIC
I, L.P., Eos Partners, L.P., Eos Partners SBIC, L.P., Eos
Partners SBIC II, L.P., SGC Partners II LLC, and Chase Bank of
Texas, National Association. (Incorporated by reference from
Exhibit 10.6 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)
10.7 Acknowledgment and Consent dated March 31, 2000, among Bargo
Energy Company, Energy Capital Investment Company PLC, EnCap
Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P.,
EnCap Energy Capital Fund III, L.P., Kayne Anderson Energy
Fund, L.P., BancAmerica Capital Investors SBIC I, L.P., Eos
Partners, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II,
L.P., and SGC Capital Partners II LLC. (Incorporated by
reference from Exhibit 10.7 to the Company's Current Report on
Form 8-K dated March 31, 2000, filed with the Securities and
Exchange Commission on April 17, 2000)
10.8 Indemnification Agreement dated March 31, 2000, among Bargo
Energy Company, Energy Capital Investment Company PLC, EnCap
Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P.,
EnCap Energy Capital Fund III, L.P., Kayne Anderson Energy
Fund, L.P., BancAmerica Capital Investors SBIC I, L.P., Eos
Partners, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II,
L.P., SGC Partners II LLC, and Bankers Trust Company.
(Incorporated by reference from Exhibit 10.8 to the Company's
Current Report on Form 8-K dated March 31, 2000, filed with the
Securities and Exchange Commission on April 17, 2000)
10.9 Consent to Amendment to Registration Rights Agreement by TJG
Investments, Inc., BEC Partnership, BER Partnership, L.P., BOC
Operating Corporation, Tim J. Goff, Thomas Barrow, James E.
Sowell, B. Carl Price, Don Wm. Reynolds, Christie Price, Robert
Price and Charles D. Laudeman. (Incorporated by reference from
Exhibit 10.9 to the Company's Current Report on Form 8-K dated
March 31, 2000, filed with the Securities and Exchange
Commission on April 17, 2000)
10.10 Credit Agreement dated March 31, 2000, among Bargo Energy
Company, Chase Bank of Texas National Association, as
administrative agent, Bankers Trust Company, as syndication
agent and the other agents and lenders signatory thereto.
(Incorporated by reference from Exhibit 10.10 to the Company's
Current Report on Form 8-K dated March 31, 2000, filed with the
Securities and Exchange Commission on April 17, 2000)
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE OF DOCUMENT
<S> <C>
11. Statement regarding computation of per share earnings (1)
15. Letter on unaudited interim financial information (1)
18. Letter on change in accounting principles (1)
21. Subsidiaries of the Registrant (2)
22. Published report regarding matters submitted to vote (1)
23. Consents of experts and counsel (1)
24. Power of attorney (1)
27. Financial data schedule (2)
99. Additional exhibits (1)
</TABLE>
- -----------------------------------
(1) Inapplicable to this filing.
(2) Included herewith.
* Confidential treatment has been requested.
<PAGE> 1
EXHIBIT 3.5
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
BARGO ENERGY COMPANY
Bargo Energy Corporation, a Texas corporation (the "Corporation"), does hereby
certify:
Pursuant to the provisions of Article 4.04 of the Texas Business Corporation Act
(the "Act"), the Corporation adopts the following articles of amendment to its
Articles of Incorporation:
ARTICLE ONE
The name of the Corporation is Bargo Energy Corporation.
ARTICLE TWO
The following amendment of the Articles of Incorporation was adopted by the
shareholders of the Corporation on March 13, 2000. The amendment increases the
number of authorized shares of capital stock of the Corporation.
The amendment alters Section 1 of Article Four of the Articles of Incorporation
and the full text of the provision as altered is as follows:
"Section 1. The aggregate number of shares which the Corporation will have
authority to issue is 210,000,000 of which 200,000,000 will be shares of common
stock, par value $0.01 per share ("Common Stock"), and 10,000,000 will be shares
of preferred stock, par value $0.01 per share ("Preferred Stock")."
ARTICLE THREE
The total number of shares outstanding of each class or series entitled to vote
for or against such amendment is as follows:
<TABLE>
<CAPTION>
Total
Shares Class Total Voted For Total Voted Against
------ ----- --------------- -------------------
<S> <C> <C> <C>
87,932,726 Common Stock, 72,304,085 0
$0.01 par value
5,000,000 Cumulative Redeemable 5,000,000 0
Preferred Stock, Series B
$0.01 par value
</TABLE>
The holders of a number of shares greater than the minimum number of shares
necessary to vote for said amendment have signed a written consent pursuant to
Article 9.10 of the Act and Article Eight of the Articles of Incorporation and
any written notice required by Article 9.10 has been given.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed and attested by its duly authorized officers, this 10th day of April,
2000.
BARGO ENERGY COMPANY
By:
------------------------------------
Jonathan M. Clarkson, President
Attest:
- ----------------------------------
Secretary
<PAGE> 1
EXHIBIT 4.2
CERTIFICATE OF DESIGNATIONS
OF
CUMULATIVE REDEEMABLE PREFERRED STOCK, SERIES C
OF
BARGO ENERGY COMPANY
Pursuant to Article 2.13 of the
Texas Business Corporation Act
Bargo Energy Company, a corporation organized and existing under the laws
of the State of Texas (the "Corporation"), DOES HEREBY CERTIFY that, pursuant to
the authority conferred on the Board of Directors of the Corporation by the
Articles of Incorporation of the Corporation and in accordance with Article 2.13
of the Texas Business Corporation Act, on March ___, 2000, the Board of
Directors of the Corporation duly adopted, by all necessary action on the part
of the Corporation, the following resolutions establishing and designating a
series of its Preferred Stock, par value $.01 per share, designated "Cumulative
Redeemable Preferred Stock, Series C" and fixing and determining the relative
rights and preferences thereof-
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") in accordance with the provisions
of its Articles of Incorporation, a series of Preferred Stock, par value $.01
per share, of the Corporation is hereby created, and that the designation and
number of shares thereof and the preferences, limitations and relative rights
thereof are as follows:
Section 1. DESIGNATION, NUMBER OF SHARES AND STATED VALUE OF CUMULATIVE
REDEEMABLE PREFERRED STOCK, SERIES C. There is hereby authorized and established
a series of Preferred Stock that shall be designated as "Cumulative Redeemable
Preferred Stock, Series C" (hereinafter referred to as "Series C Preferred"),
and the number of shares constituting such series shall be Forty-Five Thousand
(45,000). Such number of shares may be increased or decreased, but not to a
number less than the number of shares of Series C Preferred then issued and
outstanding, by resolution adopted by the full Board of Directors. The "Stated
Value" per share of the Series C Preferred shall be equal to One Thousand
Dollars ($1,000) subject to adjustments as provided herein.
Section 2. DEFINITIONS. In addition to the definitions set forth elsewhere
herein, the following terms shall have the meanings indicated:
ADJUSTED CURRENT LIABILITIES: shall mean, (a) the total of all items which
would appear as a current liability upon a balance sheet of the Corporation or
its consolidated subsidiaries prepared in accordance with GAAP, less (b) the
total of any such items appearing as a current liability which would be included
in the definition of Total Consolidated Indebtedness.
<PAGE> 2
ADJUSTED NET WORKING CAPITAL: shall mean (a) the total of all items which
would appear as current assets upon a balance sheet of the Corporation or its
consolidated subsidiaries prepared in accordance with GAAP less (b) Adjusted
Current Liabilities.
BUSINESS DAY: means any day other than a Saturday, Sunday or a day on which
banking institutions in Houston, Texas are authorized or obligated by law or
executive order to close.
CALCULATION DATE: means any date on which PV-10 Value (defined below) is
calculated, as follows: (i) PV-10 Value shall be calculated by independent
reserve engineers (designated by the Corporation and reasonably acceptable to
the holders of a majority of the Series C Preferred outstanding at such time) as
of each January 1, the final report for which shall be provided to the
Corporation and the holders of Series C Preferred no later than the following
March 16, (ii) PV-10 Value shall be calculated by the Corporation's reserve
engineers as of each July 1, commencing in 2001, the final report for which
shall be provided to the Corporation and the holders of Series C Preferred no
later than the following August 14, and (iii) PV-10 Value shall be calculated by
independent reserve engineers (designated by the holders of a majority of the
Series C Preferred outstanding and reasonably acceptable to the Corporation) as
of a date other than January 1 or July 1, as requested by the holders of a
majority of the Series C Preferred outstanding; provided, however, that no
Calculation Date shall occur prior to September 1, 2000. The costs and expenses
of each such report contemplated under this definition shall be borne by the
Corporation; provided, that if a report is requested and prepared under clause
(iii) of this definition more than once during any given calendar year, the
costs and expenses of the second and any subsequent report requested and
prepared during such year shall be borne by the holders of the Series C
Preferred outstanding, pro rata based on their then respective ownership of the
shares of Series C Preferred outstanding.
CAPITALIZED LEASE OBLIGATION: means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP (defined below), and, for
the purpose of this designation, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
CHANGE OF CONTROL: means (i) any merger, reorganization, purchase or sale
of voting securities, or other transaction resulting in at least fifty percent
50% of the issued and outstanding shares of voting securities of the Corporation
outstanding immediately prior to the consummation of such transaction being
"beneficially owned" by a single Person or a "group," as such terms are defined
in Rule 13d-3 and 13d-5, respectively, promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, (ii)
a sale, in one or more related transactions, of substantially all the assets of
the Corporation, or (iii) the time at which Tim Goff has ceased to serve as the
Chief Executive Officer of the Corporation for a period of 30 consecutive days;
provided that, the following shall not be deemed a Change of Control: (a) the
acquisition or beneficial ownership of voting securities by the Initial Holders,
their respective affiliates, or any group of which an Initial Holder or their
respective affiliates is a member; (b) any repurchase of voting securities by
the Corporation or any subsidiary of the Corporation; (c) any transaction
pursuant to which securities are transferred by an Initial Holder
<PAGE> 3
or an affiliate of an Initial Holder; (d) any transaction that causes a Person
to become the beneficial owner of voting securities of the Corporation as a
result of acquiring an interest in an Initial Holder, an affiliate of an Initial
Holder or a transferee of an Initial Holder, or (e) any distribution or dividend
to equity-holders made by any of the following entities: BEC Partnership, a
Texas general partnership, TJG Investments, Inc., a Texas corporation, BOC
Operating Corporation, a Texas corporation, and BER Partnership L.P., a Texas
limited partnership.
COMMON STOCK: means the common stock, $.01 par value per share, of the
Corporation.
EXCESS OFFERING PROCEEDS: means, with respect to any Qualified Public
Offering (defined below), the lesser of (i) the net proceeds received by the
Corporation from such offering (less discounts, commissions and costs directly
incurred by the Corporation in connection with the offering) and (ii) the amount
of Series C Preferred and Parity Securities that the Corporation may redeem in
compliance with all loan agreements, mortgages, indentures, guarantees, or other
evidences of indebtedness to which the Corporation is subject on the date of the
closing of such offering.
GAAP: means generally accepted accounting principles, consistently applied,
that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States of America.
INITIAL HOLDERS: means Energy Capital Investment Company PLC, an English
investment company, EnCap Energy Capital Fund III-B, L.P., a Texas limited
partnership, BOCP Energy Partners, L.P., a Texas limited partnership, EnCap
Energy Capital Fund III, L.P., a Texas limited partnership, Kayne Anderson
Energy Fund, L.P., a Delaware limited partnership, BancAmerica Capital Investors
SBIC I, L.P.. a Delaware limited partnership, Eos Partners, L.P., a Delaware
limited partnership, Eos Partners SBIC, L.P., a Delaware limited partnership,
Eos Partners SBIC II, L.P., a Delaware limited partnership, SGC Partners II LLC,
a Delaware limited liability company, and Bankers Trust Company, a New York
banking corporation.
JUNIOR SECURITIES: means the Common Stock, any preferred stock of the
Corporation issued and outstanding on the Original Issue Date (other than the
"Cumulative Redeemable Preferred Stock, Series B" ("Series B Preferred")), or
any other series of stock issued by the Corporation ranking junior as to the
Series C Preferred with respect to payment of dividends, or upon liquidation,
dissolution or winding up of the Corporation.
ORIGINAL ISSUE DATE: means the date on which shares of the Series C
Preferred are first issued.
PARITY SECURITY: means the Series B Preferred or any other class or series
of stock issued by the Corporation ranking on a parity with the Series C
Preferred with respect to payment of dividends, and upon liquidation,
dissolution or winding up of the Corporation.
<PAGE> 4
PERSON: means any individual, corporation, association, partnership, joint
venture, limited liability company, trust, estate, or other entity or
organization, other than the Corporation, any subsidiary of the Corporation, any
employee benefit plan of the Corporation or any subsidiary of the Corporation,
or any entity holding shares of Common Stock for or pursuant to the terms of any
such plan.
PREFERRED STOCK REDEMPTION VALUE: on any Calculation Date shall equal (i)
the number of shares of a series of Preferred Stock outstanding on the
Calculation Date, multiplied by the Stated Value of the series of Preferred
Stock, plus (ii) all accrued but unpaid dividends on the Calculation Date.
PROVED RESERVES: means "Proved Reserves" as defined in the Definitions for
Oil and Gas Reserves promulgated by the Society of Petroleum Engineers (or any
generally recognized successor) as in effect at the time in question.
PV-10 VALUE: means the present value, discounted at 10% per annum, of the
future net cash flow attributable to the Corporation's and its subsidiaries'
estimated Proved Reserves. Future cash flows will be calculated using (i) prices
based upon the average of the pricing assumptions then being utilized by the
three largest banks in Houston, Texas, actively involved in energy lending, (ii)
costs and production taxes derived from and consistent with those actually
incurred by the Corporation, escalated at the same rate, if any, being applied
to prices, and (iii) such other assumptions as shall be reasonably acceptable to
the holders of a majority of the Series C Preferred.
QUALIFIED PUBLIC OFFERING: means a public offering for cash by the
Corporation of securities pursuant to a registration statement declared
effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended, other than an offering on Form S-8 or successor form thereof.
REDEMPTION DATE: means the date fixed for any redemption of the Series C
Preferred as provided in Section 5 or 6.
REDEMPTION PRICE: means, for each share of Preferred Stock on any
Redemption Date, the Stated Value of such share plus all accrued and unpaid
dividends on such share to and including such Redemption Date.
SENIOR SECURITIES: means any class or series of stock issued by the
Corporation ranking senior to the Series C Preferred with respect to payment of
dividends, or upon liquidation, dissolution or winding up of the Corporation.
TOTAL CONSOLIDATED INDEBTEDNESS: means without duplication, (a) all
liabilities of the Corporation and its consolidated subsidiaries for borrowed
money or for the deferred purchase price of property or services (excluding any
trade accounts payable and other accrued current liabilities incurred in the
ordinary course of business), and all liabilities of such persons incurred in
connection with any letters of credit, bankers' acceptances or other similar
credit transactions or any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any
<PAGE> 5
capital stock, or any warrants, rights or options to acquire capital stock
outstanding, if, and to the extent, any of the foregoing would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
(b) all obligations of the Corporation and its consolidated subsidiaries
evidenced by bonds, notes, debentures or other similar instruments, if, and to
the extent, any of the foregoing would appear as a liability upon a balance
sheet prepared in accordance with GAAP, (c) all indebtedness of the Corporation
and its consolidated subsidiaries created or arising under any conditional sale
or other title retention agreement with respect to property acquired (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business
unless and until such accounts payable are outstanding more than 90 days, (d)
all Capitalized Lease Obligations, (e) all indebtedness referred to in the
preceding clauses of other Persons, the payment of which is secured by (or for
which the holder of such indebtedness has an existing right to be secured by)
any lien upon property (including, without limitation, accounts and contract
rights) owned by the Corporation or its subsidiaries (the amount of such
obligation being deemed to be the lesser of the value of such property or the
amount of the obligation so secured), (f) all guarantees by the Corporation and
its subsidiaries of indebtedness referred to in this definition, and (g) to the
extent not otherwise included in Adjusted Current Liabilities or any of the
foregoing clauses of this definition of Total Consolidated Indebtedness, all
amounts (including damages, fines, penalties, and interest thereon) owed by the
Corporation and its subsidiaries pursuant to a final, nonappealable judgment
rendered by a court or other governmental body. Notwithstanding the foregoing,
the amounts accrued to redeem the Series B Preferred or Series C Preferred or
representing dividends or other amounts payable on or with respect to the Series
B Preferred or the Series C Preferred shall not be deemed Total Consolidated
Indebtedness.
TOTAL PROVED COVERAGE: means, on any Calculation Date, (i) the PV-10 Value
plus the lesser of (a) Adjusted Net Working Capital (or minus such amount if
negative) or (b) the total of all items which would appear as cash and cash
equivalents upon a balance sheet of the Corporation or its consolidated
subsidiaries prepared in accordance with GAAP plus (only to the extent not
already included in cash and cash equivalents under this clause (b)) all amounts
in escrow or on deposit that are transferred by the Corporation in connection
with a pending acquisition divided by (ii) the sum of (x) Total Consolidated
Indebtedness plus (y) the Preferred Stock Redemption Value for the Series B
Preferred Stock on such date plus (z) the Preferred Stock Redemption Value for
the Series C Preferred Stock on such date.
<PAGE> 6
Section 3. DIVIDENDS AND DISTRIBUTIONS.
(a) The Series C Preferred shall rank prior to the Junior Securities with
respect to dividends. The holders of shares of the Series C Preferred shall be
entitled to receive, when, as and if declared by the Board of Directors, as
legally available, cumulative dividends. The rate of dividends per share shall
be expressed as a percentage of the Stated Value in effect at the relevant time
("Dividend Rate") and shall initially be 12% per annum; provided, however, that
the Dividend Rate shall be reset as of each Calculation Date as follows: (i) if
the Total Proved Coverage on such Calculation Date is 1.5 or greater, then the
Dividend Rate for the period commencing on such Calculation Date and ending on
the day immediately prior to the next succeeding Calculation Date shall be 12%
per annum; but (ii) if the Total Proved Coverage on such Calculation Date is
less than 1.5, then the Dividend Rate for the period commencing on such
Calculation Date and ending on the day immediately before the next Calculation
Date shall be 15% per annum. However, if on any Calculation Date -- following
the first Calculation Date - (the "Measuring Date") it is the case that (a) the
Dividend Rate was at least 15% on the day before such Measuring Date, and (b)
the Total Proved Coverage is less than 1.5 on the Measuring Date, and (c) the
Total Proved Coverage was less than 1.5 on the most immediately preceding
Calculation Date that also is at least 180 days prior to the Measuring Date,
then the Dividend Rate for the period commencing on the Measuring Date and
ending on the day immediately before the next Calculation Date shall be 18% per
annum. Such dividends on shares of Series C Preferred shall be cumulative from
the date such shares are issued, whether or not in any period the Corporation
shall be legally permitted to make the payment of such dividends and whether or
not such dividends are declared, and shall be payable when, as and if declared
by the Board of Directors in cash on each January 1, April 1, July 1, and
October 1, in each year, except that if any such date is not a Business Day then
such dividends shall be payable on the next succeeding Business Day (as
applicable, each a "Dividend Payment Date"). Subject to the last sentence of
this subsection (a), cash dividends shall accrue and be payable at the Dividend
Rate in effect as of the immediately preceding Calculation Date. Such dividends
shall accrue whether or not there shall be (at the time such dividend becomes
payable or at any other time) profits, surplus or other funds of the Corporation
legally available for the payment of dividends.
(b) Dividends shall be calculated on the basis of the time elapsed from and
including the date of issuance of such shares to and including the Dividend
Payment Date or on any final distribution date relating to conversion or
redemption or to a dissolution, liquidation or winding up of the Corporation.
Dividends payable on the shares of Series C Preferred for any period of less
than a full calendar year shall be prorated for the partial year on the basis of
a 360-day year of 12 30-day months..
(c) To the extent dividends are not paid on a Dividend Payment Date, all
dividends which shall have accrued on each share of Series C Preferred
outstanding as of such Dividend Payment Date shall, for purposes of calculating
dividends thereon, be added to the Stated Value of such share of Series C
Preferred and shall remain a part thereof until paid, and dividends shall accrue
at the Dividend Rate and be paid on such share of Series C Preferred on the
basis of the Stated Value, as so adjusted. No interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or payments on
the Series C Preferred which are in arrears.
<PAGE> 7
(d) Dividends payable on each Dividend Payment Date shall be paid to record
holders of the shares of Series C Preferred as they appear on the books of the
Corporation at the close of business on the tenth Business Day immediately
preceding the respective Dividend Payment Date or on such other record date as
may be fixed by the Board of Directors of the Corporation in advance of a
Dividend Payment Date, provided that no such record date shall be less than ten
nor more than sixty calendar days preceding such Dividend Payment Date.
Dividends in arrears may be declared and paid at any time to holders of record
on a date not more than 60 days preceding the payment date as may be fixed by
the Board of Directors. Dividends paid on shares of Series C Preferred in an
amount less than the total amount of such dividends at the time payable shall be
allocated pro rata on a share by share basis among all shares outstanding.
(e) So long as any shares of Series C Preferred are outstanding, no
dividend or other distribution, whether in liquidation or otherwise, shall be
declared or paid, or set apart for payment on or in respect of, any Junior
Securities, nor shall any Junior Securities be redeemed, purchased or otherwise
acquired for any consideration prior to the stated maturity thereof (or any
money be paid to a sinking fund or otherwise set apart for the purchase or
redemption of any such Junior Securities), without the prior consent of the
holders of a majority of the outstanding shares of Series C Preferred voting
together as a separate class. So long as any shares of Series C Preferred are
outstanding and without the prior consent of the holders of a majority of the
outstanding shares of Series C Preferred voting together as a separate class, no
dividend or other distribution, whether in liquidation or otherwise, shall be
declared or paid, or set apart for payment on or in respect of, any Parity
Securities, nor shall any Parity Securities be redeemed, purchased or otherwise
acquired for any consideration prior to the stated maturity thereof (or any
money be paid to a sinking fund or otherwise set apart for the purchase or
redemption of any such Parity Securities), unless (i) if there are any accrued
and unpaid dividends on the Series C Preferred Stock or such Parity Stock, such
dividend or distribution shall be allocated to pay such accrued and unpaid
dividends the Series C Preferred and such Parity Stock, pro rata based on the
amount of such accrued and unpaid dividends and (ii) if all accrued and unpaid
dividends have been paid on the Series C Preferred and such Parity Stock, such
dividends and distributions shall be allocated pro rata to the holders of the
Series C Preferred and the Parity Stock based on the respective liquidation
preferences thereof.
Section 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation (in connection with the bankruptcy or insolvency of the Corporation
or otherwise), whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of shares of any Junior Securities, the
holders of the shares of Series C Preferred shall be entitled to receive an
amount per share equal to the Stated Value per share held by them, plus all
accrued and unpaid dividends on each share. To the extent the available assets
are insufficient to fully satisfy such amounts, then the holders of the Series C
Preferred shall share ratably in such distribution in the proportion that each
holder's shares bears to the total number of shares of Series B Preferred and
Series C Preferred outstanding. No further payment on account of any such
liquidation, dissolution or winding up of the Corporation shall be paid to the
holders of the shares of Series C Preferred or
<PAGE> 8
the holders of any Parity Securities unless there shall be paid at the same time
to the holders of the shares of Series C Preferred and the holders of any Parity
Securities proportionate amounts determined ratably in proportion to the full
amounts to which the holders of all outstanding shares of Series C Preferred and
the holders of all such outstanding Parity Securities are respectively entitled
with respect to such distribution. For purposes of this Section 4, a
consolidation or merger of the Corporation with one or more partnerships,
corporations or other entities or a sale, lease, exchange or transfer of all or
any substantial part of the Corporation's assets for cash, securities or other
property shall be deemed to be a liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary.
(b) After the payment of the full amount to the holders of Series C
Preferred pursuant to the preceding paragraph, and subject to the rights of
holders of Junior Securities other than the Common Stock, the holders of Common
Stock shall share ratably in the distribution of the remaining available assets
of the Corporation, in the proportion that each holder's shares of Common Stock,
bears to the total number of shares of Common Stock of the Corporation
outstanding.
(c) Written notice of any liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when and the place or places
where the amounts distributable in such circumstances shall be payable, shall be
given by first class mail, postage prepaid, not less than fifteen days prior to
any payment date stated therein, to the holders of record of the shares of
Series C Preferred at their respective addresses as the same shall appear in the
records of the Corporation.
Section 5. OPTIONAL REDEMPTION BY THE CORPORATION. The outstanding shares
of Series C Preferred are subject to redemption in accordance with the following
provisions:
(a) Subject to the terms hereof, the Corporation may at its option elect to
redeem the outstanding shares of Series C Preferred in multiples of not less
than One Million Dollars ($1,000,000), until such time as the aggregate
Redemption Price of the Outstanding Series C Preferred is $25,000,000;
thereafter, any redemption under this Section 5 at the election of the
Corporation must be of all shares of Series C Preferred then outstanding. The
number of shares redeemed under this Section 5 shall be allocated among the
holders of Series C Preferred according to, as measured on the date of the
notice required by Section 5(c) below, the relative number of shares owned by
each holder as compared to the total number of issued and outstanding shares of
Series C Preferred.
(b) The redemption price per share for Series C Preferred redeemed on any
optional Redemption Date shall be the Redemption Price. Subject to Section 5(c)
hereof, the aggregate Redemption Price on all shares shall be paid in cash from
any source of funds legally available therefor.
(c) Not less than thirty nor more than sixty days prior to the Redemption
Date fixed for any redemption of any shares of Series C Preferred under this
Section 5, a notice specifying the Redemption Date and place of such redemption
shall be given by first class mail, postage prepaid, to the holders of record of
the shares of Series C Preferred to be redeemed at their
<PAGE> 9
respective addresses as the same shall appear on the books of the Corporation,
calling upon each such holder of record to surrender to the Corporation on the
Redemption Date at the place designated in such notice the holder's certificate
or certificates representing the number of shares of Series C Preferred
designated for redemption from such holder. On or after the Redemption Date,
each holder of shares of Series C Preferred called for redemption shall
surrender his certificate or certificates for such shares to the Corporation at
the place designated in the redemption notice and shall thereupon be entitled to
receive payment of the aggregate Redemption Price for such shares. From and
after the Redemption Date, unless there shall have been a default in payment of
the Redemption Price, all rights of the shares of Series C Preferred designated
for redemption (except the right to receive the Redemption Price without
interest upon Surrender of the related certificate or certificates) shall cease
with respect to such shares, and such shares shall not thereafter be transferred
on the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever.
Section 6. MANDATORY REDEMPTION; PUT RIGHT.
(a) As soon as possible following (i) the sixth anniversary of the Original
Issue Date, or (ii) a Change of Control, the Corporation shall redeem each
Series C Preferred share for cash for the Redemption Price.
(b) Following the closing of a Qualified Public Offering, the Corporation
shall redeem for cash, in the manner provided for in subsection (c), a number of
shares of Series C Preferred calculated by dividing the Series C Excess Offering
Proceeds by the Redemption Price. The Series C Excess Offering Proceeds shall
equal the Excess Offering Proceeds multiplied by a fraction the numerator of
which is the aggregate Stated Value plus accrued and unpaid dividends of the
Series C Preferred and the denominator of which is the aggregate Stated Value
plus accrued and unpaid dividends of the Series C Preferred plus the aggregate
Stated Value plus accrued and unpaid dividends of the Series B Preferred. If the
number of shares of Series C Preferred which the Corporation is able to purchase
with the Excess Offering Proceeds is less than the aggregate number of shares
then outstanding, the Corporation shall redeem shares from each holder of Series
C Preferred pro rata based on the number of shares of Series C Preferred owned
by such holder. In either case, the price paid for each share redeemed under
this subsection (b) shall be the Redemption Price.
(c) Not less than thirty nor more than sixty days prior to the Redemption
Date fixed for any redemption of any shares of Series C Preferred under Section
6(a) or (b) (or, if no date can be predetermined, then not later than five days
following the consummation of a Qualified Public Offering or Change of Control),
a notice specifying the mandatory Redemption Date and place of such redemption
shall be given by first class mail, postage prepaid, to the holders of record of
the shares of Series C Preferred at their respective addresses as the same shall
appear on the books of the Corporation, calling upon each such holder of record
to surrender to the Corporation on the mandatory Redemption Date at the place
designated in such notice the holder's certificate or certificates representing
the number of shares of Series C Preferred owned by such holder and being
redeemed on such mandatory Redemption Date. On or after the mandatory Redemption
Date, each holder of shares of Series C Preferred shall surrender his
certificate or certificates for such shares to the Corporation at the place and
amount designated in
<PAGE> 10
the redemption notice and shall thereupon be entitled to receive payment of the
aggregate Redemption Price for such shares. From and after the mandatory
Redemption Date, unless there shall have been a default in payment of the
Redemption Price, all rights of the shares of Series C Preferred being redeemed
(except the right to receive the Redemption Price without interest upon
surrender of the related certificate or certificates) shall cease, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever.
(d) If, at any time after the third anniversary of the Original Issue Date,
the Company fails to fully make a then-current dividend payment in cash (not
including amounts representing accrued and unpaid dividends up to the third
anniversary of the Original Issue Date) at the end of any calendar quarter, then
the holders of shares of Series C Preferred (as approved by the holders of at
least two-thirds of the outstanding shares of Series C Preferred), shall have
the option to require the Corporation to redeem each outstanding share of Series
C Preferred for cash at the Redemption Price. In the event such option is
exercised, all holders of Series C Preferred shall deliver the certificates
representing the shares of Series C Preferred to the Corporation and a notice of
the election of the holders to have all of such shares redeemed. Upon receipt of
such certificate and notice, the Corporation shall, subject to any applicable
restrictions of law or regulations, promptly redeem the shares for which such
holders have elected to be redeemed and pay to or on the order of such holders
in immediately available funds the full Redemption Price for each share of
Series C Preferred then outstanding.
(e) In connection with a redemption under Section 6(a) or (d), if the
Corporation has insufficient funds (whether by legal prohibition or otherwise)
to initially redeem all shares required to be redeemed thereunder, then the
Corporation shall from time to time whenever possible use the maximum amount of
funds available (until all shares of Series C Preferred are redeemed), and in
each partial redemption the number of shares redeemed and the redemption price
therefor shall be allocated according to the relative number of Series C
Preferred shares owned by each holder as compared to the total number of shares
of Series C Preferred outstanding at such time.
Section 7. REACQUIRED SHARES. Any shares of Series C Preferred repurchased,
redeemed, converted or otherwise acquired by the Corporation shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock,
without designation as to series, and may thereafter be reissued.
Section 8. VOTING RIGHTS.
(a) Except as otherwise provided in this Section 8 or required by law or
any provision of the Articles of Incorporation of the Corporation, the shares of
Series C Preferred shall not confer any voting rights.
<PAGE> 11
(b) For so long as any shares of Series C Preferred remain issued and
outstanding, the Corporation shall not, without the affirmative vote or consent
of the holders of a majority of the shares of Series C Preferred then
outstanding, voting together as a separate class: (i) authorize, create or
issue, or increase the authorized or issued amount of, any class or series of
capital stock, or any security convertible into or exchangeable for shares of
capital stock or reclassify or modify any Junior Securities so as to become
Parity Securities or Senior Securities; (ii) amend, repeal or change any of the
provisions of the Articles of Incorporation of the Corporation (including the
Certificate of Designations relating to the Series C Preferred), (iii) authorize
or take any action resulting in the merger, reorganization, change of control,
conversion, or sale of all or substantially all of the assets of the
Corporation; (iv) redeem, repurchase or otherwise reacquire any shares of a
class or series of Junior Securities or Parity Securities (other than
redemptions from employees of the Corporation in connection with their
employment termination); (v) authorize or take any action resulting in a
transaction between the Corporation and one of its affiliates (other than a
wholly-owned subsidiary), unless on terms no less favorable than would have been
available with either a less than wholly-owned subsidiary of the Corporation or
an independent third party; or (vi) increase or decrease the size of the Board
of Directors.
Section 9. RECORD HOLDERS. The Corporation may deem and treat the record
holder of any shares of Series C Preferred as the true and lawful owner thereof
for all purposes, and the Corporation shall not be affected by any notice to the
contrary.
Section 10. NOTICE. Except as may otherwise be provided by law or provided
for herein, all notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon receipt upon the earlier of
receipt of such notice or three Business Days after the mailing of such notices
sent by Registered Mail (unless first-class mail shall be specifically permitted
for such notice under the terms hereof) with postage prepaid, addressed: If to
the Corporation, to its principal executive offices (Attention: Corporate
Secretary) or to any agent of the Corporation designated as permitted hereby; or
if to a holder of the Series C Preferred, to such holder at the address of such
holder of the Series C Preferred as listed in the stock record books of the
Corporation, or to such other address as the Corporation or holder as the case
may be, shall have designated by notice similarly given.
Section 11. SUCCESSORS AND TRANSFEREES. The provisions applicable to shares
of Series C Preferred shall bind and inure to the benefit of and be enforceable
by the Corporation, the respective successors to the Corporation, and by any
record holder of shares of Series C Preferred.
Section 12. DENIAL OF PREEMPTIVE RIGHTS. The Series C Preferred is not
entitled to any preemptive or subscription right in respect of any securities of
the Corporation.
RESOLVED FURTHER, that the appropriate officers of the Corporation be, and
they are hereby, authorized and directed from time to time to execute such
certificates, instruments or other documents and do all such things as may be
necessary, or advisable in their discretion in order to carry out the terms
hereof, including the filing with the Secretary of State for the State of Texas
of a copy of the foregoing resolution executed by an officer of the Corporation.
Dated: March __, 2000
BARGO ENERGY COMPANY
---------------------------------
Jonathan M. Clarkson
President
<PAGE> 1
SUBSIDIARIES EXHIBIT 21
Bargo Petroleum Corporation, a Texas corporation
Future Cal-Tex Corporation, a Texas corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,328,000
<SECURITIES> 0
<RECEIVABLES> 6,022,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,350,000
<PP&E> 220,332,000
<DEPRECIATION> 8,209,000
<TOTAL-ASSETS> 235,676,000
<CURRENT-LIABILITIES> 6,918,000
<BONDS> 0
53,079,000
0
<COMMON> 922,000
<OTHER-SE> 2,841,000
<TOTAL-LIABILITY-AND-EQUITY> 235,676,000
<SALES> 10,805,000
<TOTAL-REVENUES> 10,805,000
<CGS> 6,784,000
<TOTAL-COSTS> 6,784,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 925,000
<INCOME-PRETAX> 3,122,000
<INCOME-TAX> 1,187,000
<INCOME-CONTINUING> 1,935,000
<DISCONTINUED> 0
<EXTRAORDINARY> 1,051,000
<CHANGES> 0
<NET-INCOME> (532,000)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
