ARKLA INC, S-3, 1994-03-28

ARKLA INC
S-3, 1994-03-28
NATURAL GAS TRANSMISISON & DISTRIBUTION

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 1994

REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------------

ARKLA, INC.
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of incorporation or organization)
72-0120530
(I.R.S. Employer Identification No.)

1600 SMITH STREET
11TH FLOOR
HOUSTON, TEXAS 77002
(713) 654-5100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
HUBERT GENTRY, JR.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
1600 SMITH STREET
11TH FLOOR
HOUSTON, TEXAS 77002
(713) 654-5100
(Name, address, including zip code, and telephone
number, including area code, of agent for service)

------------------------

Copies to:

GERRY D. OSTERLAND, ESQ.
JONES, DAY, REAVIS & POGUE
2300 TRAMMELL CROW CENTER
2001 ROSS AVENUE
DALLAS, TEXAS 75201
(214) 220-3939

ARNOLD H. TRACY, ESQ.
MUDGE ROSE GUTHRIE ALEXANDER & FERDON
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 510-7000

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following: / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following: / /
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT AGGREGATE OFFERING AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED TO BE REGISTERED(1) PRICE PER SHARE(2) PRICE(1) REGISTRATION FEE
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Common stock, $.625 par
value per share...... 14,950,000 shares $7.4375 $111,190,625.00 $38,342.00
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</TABLE>

(1) Includes 1,950,000 shares issuable upon the exercise of the Underwriters'
option to purchase shares solely to cover over-allotments.

(2) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(c), on the basis of the average of the high and low
prices of the Common Stock reported in the consolidated reporting system for
March 23, 1994.

------------------------

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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<PAGE> 2

EXPLANATORY NOTE

This Registration Statement contains a Preliminary Prospectus relating to a
public offering in the United States and Canada (the "U.S. Offering") of an
aggregate of 11,050,000 shares of Common Stock, par value $.625 per share (the
"Common Stock"), of the Registrant, together with separate prospectus pages
relating to a concurrent offering outside the United States and Canada (the
"International Offering") of an aggregate of 1,950,000 shares of Common Stock.
The completed Preliminary Prospectus for the U.S. Offering follows immediately
after this Explanatory Note. After such Preliminary Prospectus are the alternate
pages for the International Offering: a front cover page, an "Underwriting"
section and a back cover page. All other pages of the Preliminary Prospectus for
the U.S. Offering are to be used for both the U.S. Offering and the
International Offering.
<PAGE> 3

******************************************************************************
*Information contained herein is subject to completion or amendment. A *
*registration statement relating to these securities has been filed with the *
*Securities and Exchange Commission. These securities may not be sold nor *
*may offers to buy be accepted prior to the time the registration statement *
*becomes effective. This prospectus shall not constitute an offer to sell or *
*the solicitation of an offer to buy *
*nor shall there be any sale of these securities in any State in which such *
*offer, solicitation or sale would be unlawful prior to registration or *
*qualification under the securities laws of any such State. *
******************************************************************************

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 28, 1994

PROSPECTUS

13,000,000 SHARES

(Arkla Logo)

COMMON STOCK
------------------------
Of the 13,000,000 shares of Common Stock, par value $.625 per share (the
"Common Stock"), of Arkla, Inc. (the "Company") offered hereby, 11,050,000
shares are being offered in the United States and Canada by the U.S.
Underwriters (the "U.S. Offering") and 1,950,000 shares are concurrently being
offered for sale outside the United States and Canada by the International
Managers (the "International Offering"). Such offerings are collectively
referred to as the "Offerings." The public offering price and the aggregate
underwriting discount per share of the U.S. Offering and the International
Offering are identical and the closings of the U.S. Offering and the
International Offering are conditioned upon each other. See "Underwriting."

The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "ALG." On March 25, 1994, the last reported sale price of the Common
Stock on the New York Stock Exchange Composite Tape was $7 1/8. See "Price Range
of Common Stock and Dividends."
------------------------

<TABLE>
<CAPTION>
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNT(1) COMPANY(2)
PUBLIC
<S> <C> <C> <C>
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Per Share............................. $ $ $
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Total(3).............................. $ $ $
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</TABLE>

(1) The Company has agreed to indemnify the several U.S. Underwriters and the
several International Managers against certain liabilities, including
liabilities under the Securities Act of 1933. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $200,000.

(3) The Company has granted the U.S. Underwriters and the International Managers
30 day options to purchase up to 1,657,500 and 292,500 additional shares of
Common Stock, respectively, solely to cover over-allotments, if any. If
such options are exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to the Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------

The shares of Common Stock are offered hereby by the several U.S.
Underwriters, subject to prior sale, when, as and if issued to and accepted by
them, subject to certain conditions. The U.S. Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of shares of Common Stock will be made in New York,
New York on or about May , 1994.
------------------------

MERRILL LYNCH & CO.
CS FIRST BOSTON
KIDDER, PEABODY & CO.
INCORPORATED
------------------------

The date of this Prospectus is May , 1994.
<PAGE> 4

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

------------------------

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission, at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission, at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Company's Common Stock is listed on, and
reports, proxy statements and other information concerning the Company can be
inspected at the offices of, the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.

This Prospectus does not contain all of the information set forth in the
Registration Statement on Form S-3, of which this Prospectus is a part, and
exhibits relating thereto which the Company has filed with the Commission under
the Securities Act of 1933, as amended (the "Act"). Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Common Stock. Statements
contained herein concerning the provisions of documents are necessarily
summaries of such documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company hereby incorporates by reference herein its Annual Report on
Form 10-K for the fiscal year ended December 31, 1993 (the "Form 10-K"), which
has been filed previously with the Commission under File No. 1-3751.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock shall be deemed to be
incorporated by reference in this Prospectus. The documents incorporated herein
by reference are sometimes hereinafter called the "Incorporated Documents." Any
statement contained herein or in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The information relating to the Company contained in this Prospectus does
not purport to be comprehensive and is based upon information contained in the
Incorporated Documents. Accordingly, the information contained herein should be
read together with the information contained in the Incorporated Documents.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any and all of the Incorporated Documents, other than the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests should be directed to the Office of
the Secretary, Arkla, Inc., 1600 Smith Street, 11th Floor, Houston, Texas 77002,
telephone number (713) 654-5100.

2
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements included elsewhere in this Prospectus and
in the Incorporated Documents. Unless otherwise indicated, the information in
this Prospectus assumes that the U.S. Underwriters and the International
Managers do not exercise their over-allotment option. See "Underwriting." As
used herein, the term "Company" refers to Arkla, Inc. together with its
subsidiaries.

THE COMPANY

The Company is principally engaged in the distribution and transmission of
natural gas including gathering, storage and marketing. To reflect the natural
division of the Company's operations, the Company is organized into two
operating units, natural gas distribution and natural gas pipeline.

The Company operates its gas distribution business through its Arkansas
Louisiana Gas division ("ALG"), its Entex division ("Entex") and its Minnegasco
division ("Minnegasco"). ALG, Entex and Minnegasco provide service in seven
states to more than 1,300 communities and adjacent rural areas, serving
approximately 2.7 million customers. The largest cities served are the
metropolitan areas of Houston, Texas; Minneapolis, Minnesota; Little Rock,
Arkansas and Shreveport, Louisiana.

The gas transmission operations of the Company are conducted by the Arkla
Pipeline Group ("APG"). APG includes Arkla Energy Resources Company ("AER Co."),
Mississippi River Transmission Corporation ("MRT"), and Arkla Energy Marketing
Company ("AEM"). AER Co. operates an interstate natural gas pipeline system
located in Arkansas, Louisiana, Mississippi, Missouri, Kansas, Oklahoma,
Tennessee and Texas consisting of approximately 3,500 miles of gathering lines
and approximately 6,600 miles of transmission lines. MRT operates an approximate
2,200 mile interstate natural gas pipeline system serving principally the
greater St. Louis area in Missouri and Illinois. AEM serves as the Company's
principal natural gas supply aggregator and marketer.

The Company previously conducted operations in the intrastate pipeline
business and in the exploration and production business. On June 30, 1993, and
December 31, 1992, respectively, the Company completed the sale of its
intrastate transmission subsidiary, Louisiana Intrastate Gas Corporation ("LIG")
and its exploration and production subsidiary, Arkla Exploration Company
("AEC").

On January 12, 1994, the Board of Directors adopted an amendment to the
Company's Restated Certificate of Incorporation to change the Company name to
NorAm Energy Corp., subject to approval by the stockholders of the Company at
the annual meeting to be held on May 10, 1994. The purpose of the name change is
to more accurately describe the geographical area served by the Company.

The Company's principal executive offices are located at 1600 Smith Street,
11th Floor, Houston, Texas 77002, telephone number (713) 654-5100.

THE OFFERINGS

<TABLE>
<S> <C>
Common Stock offered:
U.S. Offering................................................ 11,050,000 shares
International Offering....................................... 1,950,000 shares
Total..................................................... 13,000,000 shares
Common Stock to be outstanding after the Offerings............. 135,369,914 shares
Use of proceeds by the Company................................. To reduce the Company's
outstanding indebtedness as
described under "Use of
Proceeds."
New York Stock Exchange symbol................................. ALG
</TABLE>

3
<PAGE> 6

Page 4 of the Prospectus will contain a map of the Company's distribution
system and a map of its pipeline system. The distribution map displays each of
the seven states in which the Company has distribution operations. A gas flame
symbol is used to indicate a concentration of customers and the general location
of the concentration. The largest number of symbols appear on the areas
attributable to Houston, Texas, Minneapolis, Minnesota, Little Rock, Arkansas
and Shreveport, Louisiana.

The pipeline map displays the Company's interstate pipeline system located
in Arkansas, Louisiana, Mississippi, Missouri, Kansas, Oklahoma and Illinois.
Additional unaffiliated third party pipelines are also displayed. Generally,
these third party pipelines are "long-line" pipes that provide the Company with
pipeline access to the markets in the Northeast.

[SYSTEM MAP]

4
<PAGE> 7

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

The following summary consolidated financial data concerning the Company
for each of the five years ended December 31, 1993 has been derived from the
Company's audited consolidated financial statements and should be read in
conjunction with the financial statements and the notes thereto.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1993 1992 1991 1990(1) 1989(1)
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues
Natural Gas Sales............................................... $2,759.7 $2,518.0 $2,495.6 $2,106.0 $2,045.8
Gas Transportation.............................................. 108.4 119.5 139.9 138.3 102.7
Other........................................................... 81.5 106.3 88.9 105.7 74.3
-------- -------- -------- -------- --------
Total..................................................... 2,949.6 2,743.8 2,724.4 2,350.0 2,222.8
-------- -------- -------- -------- --------
Operating Expenses
Cost of Natural Gas Purchased, Net.............................. 1,900.9 1,758.4 1,730.4 1,439.0 1,379.9
Operation, Maintenance, Cost of Sales and Other................. 552.0 545.3 525.6 434.6 451.3
Depreciation and Amortization................................... 151.0 150.7 145.7 107.0 95.8
Taxes Other Than Income Taxes................................... 104.5 100.8 98.8 78.4 76.1
Contract Termination Charge..................................... 34.2 -- -- -- --
Regulatory Settlement........................................... -- -- 15.0 -- --
Special Charge.................................................. -- -- -- -- 269.0
-------- -------- -------- -------- --------
Total..................................................... 2,742.6 2,555.2 2,515.5 2,059.0 2,272.1
-------- -------- -------- -------- --------
Operating Income (Loss)........................................... 207.0 188.6 208.9 291.0 (49.3)
Interest Expense, Net............................................. 172.4 185.2 169.8 142.3 130.4
Income (Loss) From Continuing Operations.......................... 39.9 6.2 16.5 100.8 (31.6)
Net Income (Loss)................................................. $ 36.1 $ (228.5) $ (54.8) $ 99.7 $ (47.3)
Preferred Dividend Requirement.................................... 7.8 7.8 7.8 7.8 7.8
Average Common Shares Outstanding................................. 122.3 121.8 116.0 89.3 85.7
Income (Loss) From Continuing Operations per Common Share......... $ 0.26 $ (0.01) $ 0.08 $ 1.04 $ (0.46)
Earnings per Common Share......................................... 0.23 (1.94) (0.54) 1.03 (0.64)
Dividends per Common Share........................................ 0.28 0.48 1.08 1.08 1.08

BALANCE SHEET DATA:
Net Property, Plant and Equipment................................. $2,357.1 $2,523.9 $2,668.1 $2,547.9 $1,928.0
Total Assets...................................................... 3,727.8 4,059.0 4,806.9 4,785.6 3,457.0
Short-term Debt, Including Current Maturities..................... 192.4 120.0 772.6 712.4 602.3
Long-term Debt.................................................... 1,629.4 1,783.1 1,551.5 1,450.2 1,162.3
Total Stockholders' Equity........................................ 708.0 712.9 948.0 1,115.4 546.1

OPERATING DATA:
Natural Gas Distribution (Billions of cubic feet)
Residential Sales............................................... 193.6 185.7 187.1 123.2 129.7
Commercial Sales................................................ 126.7 123.9 124.2 77.2 75.8
Industrial Sales................................................ 111.7 99.5 77.9 57.8 61.8
Sales for Resale................................................ 10.2 3.6 12.8 13.5 --
-------- -------- -------- -------- --------
Total Sales............................................... 442.2 412.7 402.0 271.7 267.3
Transportation.................................................. 75.8 79.0 72.1 57.2 53.4
-------- -------- -------- -------- --------
Total Throughput.......................................... 518.0 491.7 474.1 328.9 320.7
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average Number of Customers (000's)............................. 2,648.5 2,709.9 2,675.5 2,638.8 1,975.6
Natural Gas Pipeline(2) (Millions of MMBtu)
Sales to Distribution........................................... 71.2 73.5 91.9 77.2 68.5
Sales for Resale................................................ 103.6 76.5 137.2 158.1 223.1
-------- -------- -------- -------- --------
Total Sales............................................... 174.8 150.0 229.1 235.3 291.6
Transportation.................................................. 780.1 752.5 629.8 513.4 342.1
-------- -------- -------- -------- --------
Total Throughput.......................................... 930.7 902.5 858.9 748.7 633.7
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

- ---------------
(1) Amounts have been restated to reflect the disposition of AEC on December 31,
1992 as a discontinued operation. Accordingly, certain amounts differ from
those previously reported in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990.

(2) Excludes LIG for all periods presented.

5
<PAGE> 8

THE COMPANY

BACKGROUND AND STRATEGY

The Company is principally engaged in the distribution and transmission of
natural gas including gathering, storage and marketing. On January 12, 1994,
the Board of Directors adopted an amendment to the Company's Restated
Certificate of Incorporation to change the Company name to NorAm Energy
Corp., subject to approval by the stockholders of the Company at the Annual
Meeting to be held on May 10, 1994. The purpose of the name change is to more
accurately describe the geographical area served by the Company.

In 1992, the Company initiated a strategic action plan designed to narrow
the focus of its operations and increase long-term stockholder value. In this
regard, the Company has (1) significantly reduced its ongoing costs through
staff reductions and other cost control measures, (2) sold its exploration and
production operations which were conducted by AEC, (3) sold its intrastate
pipeline business as conducted by LIG and subsidiaries, (4) completed or is in
the process of completing the sale and exchange of several of its distribution
properties, and (5) disposed of certain other non-core businesses.

Further, the Company has set several objectives to improve future
profitability. These objectives include (1) increasing the profitability of its
natural gas pipeline operations through improved rate design, aggressive
marketing of its services and continued reduction of its overall costs, (2)
maintaining the profitability of its natural gas distribution operations through
timely and well designed rate filings, increasing its customer base through
aggressive marketing and controlling costs in order to remain competitive and
offset regulatory lag, (3) developing and expanding the Company's unregulated
natural gas marketing business through the acquisition of new markets and the
provision of services at a unit cost which will allow it to compete effectively
with industry leaders, and (4) reducing the Company's overall leverage and
related interest expense, thus increasing the Company's flexibility to pursue
future opportunities for attractive investment. The Company believes that the
proposed Offerings are an important element in its plan to achieve these
objectives.

NATURAL GAS DISTRIBUTION

The Company's natural gas distribution business is conducted through three
divisions, ALG, Entex and Minnegasco, and their affiliates. Through these
divisions and their affiliates, the Company engages in both the natural gas
sales and transportation businesses. In the aggregate, the Company owns and
operates approximately 53,500 miles of gas distribution mains which range in
size from one-half inch to 24 inches in diameter. The Company currently provides
gas distribution services to approximately 2.7 million customers in 1,330
communities. The following table summarizes the location, the number of
communities and the number of customers served by the Company as of December 31,
1993.

<TABLE>
<CAPTION>
NUMBER OF
SERVICE AREA LOCATIONS COMMUNITIES CUSTOMERS
--------------------------------------------------- ----------- ---------
<S> <C> <C>
Texas.............................................. 365 1,160,947
Minnesota.......................................... 204 599,067
Arkansas........................................... 383 422,187
Louisiana.......................................... 179 261,456
Oklahoma........................................... 94 115,523
Mississippi........................................ 91 115,841
Kansas............................................. 14 23,001
----------- ---------
Total.................................... 1,330 2,698,022
----------- ---------
----------- ---------
</TABLE>

ALG. ALG provides distribution service in approximately 624 communities in
the states of Arkansas, Louisiana, Oklahoma, Texas and Kansas. The largest
communities served through ALG are the metropolitan areas of Little Rock,
Arkansas, and Shreveport, Louisiana. During 1993, approximately 71% of ALG's
total

6
<PAGE> 9

throughput was composed of retail gas sales and approximately 29% was
attributable to transportation services. In May of 1993, ALG, AER Co. and
UtiliCorp United Inc. ("UtiliCorp", an affiliate of Peoples Natural Gas Company)
entered into a definitive agreement pursuant to which the Company expects to
sell to UtiliCorp, subject to Federal Energy Regulatory Commission ("FERC")
approval, the Kansas distribution properties of ALG together with certain
related pipeline assets of AER Co. Upon completion, this sale will terminate the
Company's distribution and transmission operations in Kansas.

ENTEX. Entex provides distribution service in approximately 502
communities in the states of Texas, Louisiana and Mississippi. The largest
community served by Entex is the metropolitan area of Houston, Texas. During
1993, approximately 87% of Entex's total throughput was composed of retail gas
sales and approximately 13% was attributable to transportation services.

MINNEGASCO. Minnegasco provided distribution service in approximately 285
communities in the states of Minnesota, Nebraska and South Dakota during 1993.
The largest communities served by Minnegasco in 1993 included Minneapolis,
Minnesota and its suburbs; Lincoln, Nebraska; and Sioux Falls, South Dakota. In
February 1993, Minnegasco completed the sale of its Nebraska distribution system
to UtiliCorp for $75.3 million in cash. In August of 1993, Minnegasco acquired
the Minnesota distribution properties of Midwest Gas, a division of Midwest
Power System, Inc. ("Midwest"), in exchange for all of the Company's
distribution properties located in South Dakota and $38 million in cash. The
UtiliCorp and Midwest transactions terminated Minnegasco's distribution
operations outside Minnesota. During 1993, approximately 95% of Minnegasco's
total throughput was composed of retail gas sales and approximately 5% was
attributable to transportation services.

NATURAL GAS PIPELINE

The Company's transmission activities are conducted by APG. In March 1993,
the Company transferred assets, liabilities and service obligations of Arkla
Energy Resources, a division of the Company, into a newly-formed wholly-owned
subsidiary of the Company, AER Co., pursuant to FERC approval. As a result, APG
now includes AER Co., an interstate pipeline subsidiary of the Company, MRT, an
interstate pipeline subsidiary of the Company and AEM, a subsidiary which serves
as the Company's principal natural gas supply aggregator and marketer, and
affiliate companies associated with each. Through these subsidiaries, APG
engages in both the transportation and sale of natural gas, including gathering,
storage and marketing.

AER CO. AER Co. owns and operates an interstate natural gas pipeline
system located in portions of Arkansas, Louisiana, Mississippi, Missouri,
Kansas, Oklahoma, Tennessee and Texas. In May of 1993, AER Co. entered into a
definitive agreement pursuant to which it expects to sell to UtiliCorp its
pipeline assets in Kansas, including the Winfield, Kansas storage field
described below, subject to FERC approval. At December 31, 1993, the AER Co.
system consisted of approximately 6,600 miles of transmission lines and
approximately 3,500 miles of gathering lines. The AER Co. pipeline system
extends generally in an easterly direction from the Anadarko Basin area of the
Texas Panhandle and western Oklahoma through the Arkoma Basin area of eastern
Oklahoma and Arkansas to the Mississippi River. The system also extends from
east Texas to north Louisiana and central Arkansas, and from the mainline system
in Oklahoma and Arkansas to south central Kansas and southwest Missouri. The
system has extensive gas gathering facilities throughout the Anadarko and Arkoma
Basins, and in east Texas and north Louisiana and also operates various product
extraction plants and compressor facilities related to its gas transmission
business. AER Co.'s peak day gas handled during the 1993-1994 heating season was
approximately 2.4 billion cubic feet ("Bcf"). The system transports gas for
third parties as an "open access" transporter, makes sales of gas directly to
end users located along its system and delivers gas to the Company's
distribution divisions for retail sales. During 1993, AER Co.'s total throughput
consisted of 91% transportation service and 9% sales service. Approximately 21%
of total throughput was attributable to services provided to ALG, 10% was
attributable to services provided to MRT and 27% was attributable to gas
marketed by AEM to other parties. No other customer or supplier accounted for
more than 10% of AER Co.'s throughput.

7
<PAGE> 10

Four storage fields are associated with AER Co.'s pipeline and have a
combined maximum deliverability of approximately 600 million cubic feet
("MMcf ") per day and a working gas capacity of approximately 20.3 Bcf. AER Co.
also owns a 10% interest in Koch Gateway Pipeline Company's Bistineau storage
field which provides an additional 100 MMcf per day of deliverability and
additional working gas capacity of approximately 8 Bcf. The two largest AER Co.
storage fields are located in Oklahoma: the Ada field -- capable of delivering
approximately 330 MMcf per day, and the Chiles Dome field -- capable of
delivering approximately 200 MMcf per day. The other two AER Co. storage fields
are located near Ruston, Louisiana and Winfield, Kansas.

In October 1993, the Company made a filing with FERC which, if approved,
would allow the Company to transfer the natural gas gathering assets of AER Co.
into a wholly-owned subsidiary to be called Arkla Gathering Services Company
("Arkla Gathering"). Arkla Gathering, if authorized by FERC, will own and
operate approximately 3,500 miles of gathering pipelines which collect gas from
more than 200 separate systems in major producing fields in Arkansas, Oklahoma,
Louisiana and Texas. While the scope of FERC's jurisdiction over Arkla Gathering
is unclear, the Company believes that it would not generally be subject to
traditional cost-of-service rate regulation.

MRT. The MRT system consists of approximately 2,200 miles of pipeline
serving principally the greater St. Louis area in Missouri and Illinois. This
pipeline system includes the "Main Line System," the "East Line," and the "West
Line." The Main Line System includes three transmission lines extending
approximately 435 miles from Perryville, Louisiana, to the greater St. Louis
area. The East Line, also a main transmission line, extends approximately 94
miles from southwestern Illinois to St. Louis. The West Line extends
approximately 140 miles from east Texas to Perryville, Louisiana. The system
also includes various other branch, lateral, transmission and gathering lines
and compressor stations. During 1993, MRT's throughput totaled 317.6 Bcf which
consisted of 81% transportation service and 19% sales service. Approximately
half of MRT's total 1993 volumes were delivered to its traditional markets along
the system in Missouri, Illinois and Arkansas with the remaining volumes
delivered to off-system customers. MRT's peak day delivery during the 1993-1994
heating season was approximately 950,000 million British Thermal Units, which
was comprised entirely of transportation volumes. MRT's largest customer is
Laclede Gas Company, which serves metropolitan St. Louis and to which MRT
provides service under several long-term firm transportation and storage
agreements and an agency agreement. Three storage fields are associated with
MRT's pipeline and have a combined maximum aggregate deliverability of
approximately 750 MMcf per day and a working gas capacity of approximately 31
Bcf. The substantial portion of such capacity is located in two fields in north
central Louisiana, near Ruston. The other MRT storage field is located at St.
Jacob, Illinois.

AEM. AEM markets gas on both a short-term (spot) and long-term basis.
Sales prices may be market based or fixed. Fixed priced sales or purchases are
hedged using gas futures contracts or other derivative hedging tools. AEM gas
supplies are purchased from third parties on both a short-term and long-term
basis, with most gas supplies purchased at market sensitive prices. Gas sales
for 1993 totaled 245 Bcf, of which approximately 72% was sold to unaffiliated
parties. Customers are located both in areas served by AER Co. and other
pipelines. Gas is transported to customers using both firm and interruptible
transportation.

LITIGATION

On October 15, 1992, the Resolution Trust Corporation filed a suit against
the Company, as a successor-in-interest to Entex, Inc., alleging harm resulting
from the failure of University Savings Association, a thrift institution in
Houston, Texas. For a discussion of this litigation, see Item 3 of the Form
10-K.

8
<PAGE> 11

USE OF PROCEEDS

The net proceeds from the sale of the shares of Common Stock offered hereby
will be used to retire a portion of the Company's long-term debt.

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at December 31, 1993, and as adjusted to give effect to the sale of the
Common Stock offered hereby and the application of the net proceeds therefrom as
described in "Use of Proceeds."

<TABLE>
<CAPTION>
DECEMBER 31, 1993
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN MILLIONS)
<S> <C> <C>
Short-term Debt:
Notes Payable.................................................. $ 95.0 $ 95.0
Long-term Debt Due Within One Year............................. 97.4 97.4
-------- --------------
Total Short-term Debt.................................. $ 192.4 $ 192.4
-------- --------------
-------- --------------
Long-term Debt .................................................. $1,629.4 $1,544.4
-------- --------------
Stockholders' Equity:
Preferred Stock................................................ 130.0 130.0
Common Stock................................................... 76.5 84.6
Paid-in Capital................................................ 867.6 950.3
Accumulated Deficit............................................ (366.1) (369.6)
-------- --------------
Total Stockholders' Equity............................. 708.0 795.3
-------- --------------
Total Capitalization................................... $2,337.4 $2,339.7
-------- --------------
-------- --------------
</TABLE>

- ---------------

(1) Reflects the proceeds from the sale of 13,000,000 shares of Common Stock at
an assumed market price of $7.375, reduced by expenses incurred in
connection with the sale estimated to total approximately $5 million. The
net proceeds from the sale of the shares of Common Stock will be used to
retire $85 million of long-term debt outstanding at December 31, 1993, and
fund the premium of $5.8 million on the retirement of the debt securities
prior to their maturity.

9
<PAGE> 12

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "ALG". The following table sets forth for the periods indicated the
high and low sales prices on the New York Stock Exchange Composite Tape and the
amount of cash dividends paid per share of Common Stock.

<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
---- --- --------
<S> <C> <C> <C>
1992
First Quarter.............................................. $12 3/8 $9 $ 0.27
Second Quarter............................................. 9 3/4 6 7/8 0.07
Third Quarter.............................................. 11 1/2 9 0.07
Fourth Quarter............................................. 10 3/4 7 1/2 0.07
1993
First Quarter.............................................. 9 7 3/8 0.07
Second Quarter............................................. 10 5/8 8 3/4 0.07
Third Quarter.............................................. 10 1/8 8 1/8 0.07
Fourth Quarter............................................. 8 7/8 7 3/8 0.07
1994
First Quarter (through March 25, 1994)..................... 9 7 0.07
</TABLE>

On March 25, 1994, the last reported sales price of the Common Stock on the
New York Stock Exchange Composite Tape was $7.125 per share.

The most recent quarterly dividend of $0.07 per share was declared by the
Board of Directors on February 9, 1994, and was paid on March 15, 1994, to
stockholders of record on February 22, 1994. The payment of dividends in the
future and the amount of such payments, if any, will depend upon the Company's
earnings and such other factors as the Board of Directors deems relevant.

Under the provisions of the Company's revolving credit facility, the
Company's total debt capacity is limited and it is required to maintain a
minimum level of stockholders' equity, which requirements may limit the
Company's ability to pay dividends. See Note 14 of the Notes to Consolidated
Financial Statements incorporated by reference into Item 8 of the Form 10-K.

10
<PAGE> 13

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK

GENERAL

The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and disposition
of Common Stock by a holder who is not a United States person (a "Non-U.S.
Holder"). For this purpose, the term "Non-U.S. Holder" means any corporation,
individual or partnership that is, as to the United States, a foreign
corporation, a non-resident alien individual or a foreign partnership, or an
estate or trust other than one the income of which is subject to United States
federal income tax. This discussion does not address all aspects of United
States federal income and estate taxes and does not deal with foreign, state and
local consequences that may be relevant to Non-U.S. Holders in light of their
specific circumstances. Furthermore, this discussion is based on provisions of
the United States Internal Revenue Code of 1986, as amended, existing and
proposed regulations promulgated thereunder and administrative and judicial
interpretations thereof as of the date hereof, all of which are subject to
change. EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS URGED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE UNITED STATES FEDERAL,
STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX CONSEQUENCES OF
ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK.

DIVIDENDS

In the event that dividends are paid on shares of the Common Stock, such
dividends paid to a Non-U.S. Holder of Common Stock will be subject to
withholding of United States federal income tax at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty, unless the dividends are
effectively connected with the conduct of a trade or business of the Non-U.S.
Holder within the United States. Dividends that are effectively connected with
the conduct of a trade or business within the United States are subject to
United States federal income tax on a net income basis at applicable graduated
individual or corporate rates. Any such effectively connected dividends received
by a foreign corporation may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.

Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed above and, under the current
interpretation of United States Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. However, under proposed
United States Treasury regulations not currently in effect, a Non-U.S. Holder of
Common Stock who wishes to claim the benefit of an applicable treaty rate would
be required to satisfy applicable certification and other requirements. Certain
certification and disclosure requirements must be complied with in order to be
exempt from withholding under the effectively connected income exemption.

A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the "IRS").

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder will generally not be subject to United States federal
income tax with respect to a gain recognized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with a trade or
business carried on by the Non-U.S. Holder within the United States or is
attributable to an office or other fixed place of business maintained by the
Non-U.S. Holder within the United States, (ii) in the case of a Non-U.S. Holder
who is an individual and holds the Common Stock as a capital asset, such holder
is present in the United States for 183 or more days in the taxable year of the
sale or other disposition and certain other conditions are met, (iii) the
Non-U.S. Holder is subject to tax pursuant to the provisions of the United
States federal tax law applicable to certain United States expatriates, or (iv)
the Company is or has been a "U.S. real property holding corporation" for United
States federal income tax purposes and either the

11
<PAGE> 14

Non-U.S. Holder held, directly or indirectly, at any time during the five-year
period ending on the date of disposition, more than 5 percent of the Common
Stock or the Common Stock is not regularly traded on an established securities
market. The Company believes that it is at present, and is likely to remain, a
"U.S. real property holding corporation" for United States federal income tax
purposes.

FEDERAL ESTATE TAX

Common Stock owned or treated as owned by an individual Non-U.S. Holder at
the time of death will be included in such holder's gross estate for United
States federal estate tax purposes and may be subject to United States estate
tax, unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

Under current United States Treasury regulations, the Company must report
annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to
such holder and the tax withheld with respect to such dividends. These
information reporting requirements apply even if withholding was not required
because the dividends were effectively connected with a trade or business in the
United States of the Non-U.S. Holder or withholding was reduced or eliminated by
an applicable income tax treaty. Copies of the information returns reporting
such dividends and withholding may also be made available to the tax authorities
in the country in which the Non-U.S. Holder resides under the provisions of an
applicable income tax treaty.

United States information reporting and backup withholding (which generally
is a withholding tax imposed at the rate of 31% on certain payments to persons
that fail to furnish certain information under the United States information
reporting requirements) will generally not apply to dividends paid to Non-U.S.
Holders outside the United States that are either subject to the 30% withholding
discussed above or that are not so subject because a tax treaty applies that
reduces or eliminates such 30% withholding. In that regard, under temporary
United States Treasury regulations, backup withholding will not apply to
dividends paid on Common Stock to a Non-U.S. Holder at an address outside the
United States unless the payer has knowledge that the payee is a United States
person. Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the United States on shares of Common Stock
to beneficial owners that are not "exempt recipients" and that fail to provide
certain identifying information in the manner required.

In general, backup withholding and information reporting will not apply to
a payment of the proceeds of a sale of Common Stock by or through a foreign
office of a broker. If, however, such broker is, for United States federal
income tax purposes a United States person, a controlled foreign corporation, or
a foreign person that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, such
payments will not be subject to backup withholding but will be subject to
information reporting, unless (1) such broker has documentary evidence in its
records that the beneficial owner is a Non-U.S. Holder and certain other
conditions are met, or (2) the beneficial owner otherwise establishes an
exemption. Temporary United States Treasury regulations provide that the United
States Treasury Department is considering whether backup withholding will apply
with respect to such payments that are not currently subject to backup
withholding under the current regulations. Under proposed United States Treasury
regulations not currently in effect, backup withholding will not apply to such
payments absent actual knowledge that the payee is a United States person.

Payment by a United States office of a broker of the proceeds of a sale of
Common Stock is subject to both backup withholding and information reporting
unless the beneficial owner certifies under penalties of perjury that it is a
Non-U.S. Holder or otherwise establishes an exemption.

Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.

The backup withholding and information reporting rules are currently under
review by the United States Treasury Department and their application to shares
of Common Stock is subject to change.

12
<PAGE> 15

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of (i) 150,000,000
shares of Common Stock, and (ii) 10,000,000 shares of Preferred Stock, $.10 par
value ("Preferred Stock"), of which 122,369,914 shares of Common Stock and
2,600,000 shares of $3.00 Convertible Exchangeable Preferred Stock, Series A
("Series A Preferred"), were issued and outstanding at March 15, 1994. The
following summary description of these securities is qualified in its entirety
by reference to the Restated Certificate of Incorporation of the Company which
is filed as an exhibit to the Registration Statement of which this Prospectus is
a part.

COMMON STOCK

Holders of the Common Stock are entitled to one vote for each share held of
record. The Company's Restated Certificate of Incorporation provides for
cumulative voting in the election of directors. Subject to the preferential
rights of the holders of Preferred Stock, the holders of Common Stock are
entitled to receive any dividends which may be declared by the Company's Board
of Directors out of funds legally available therefor and to share pro rata in
the net assets of the Company upon liquidation. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other securities and there are no redemption provisions with respect to such
shares. All outstanding shares of Common Stock are fully paid and not subject to
further calls or assessments.

PREFERRED STOCK

Holders of Preferred Stock are entitled to such dividends, liquidation
preferences, redemption rights, voting rights, conversion and exchange
privileges, and other rights and preferences as the Board of Directors of the
Company may determine in each resolution authorizing a series of Preferred
Stock. The Preferred Stock ranks prior to the Common Stock with respect to both
dividends and distribution of assets on liquidation, dissolution or winding up.
At the date hereof, the only shares of Preferred Stock issued and outstanding
are the shares of Series A Preferred which have a liquidation value of $50 per
share, are entitled to cumulative quarterly dividends when and as declared by
the Company's Board of Directors at an annual rate of $3.00 per share and are
convertible at the option of the holder at any time into shares of Common Stock
at a conversion price of $28 5/8 per share of Common Stock, subject to certain
adjustments. The holders of Series A Preferred do not have voting rights.
However, in the event that the Company fails to pay dividends on shares of
Series A Preferred for six consecutive quarters, the holders thereof have the
right to elect two directors to the Company's Board. Holders of Series A
Preferred have no preemptive rights.

13
<PAGE> 16

UNDERWRITING

Subject to the terms and conditions set forth in the U.S. Purchase
Agreement (the "U.S. Purchase Agreement") among the Company and each of the
underwriters named below (the "U.S. Underwriters"), the Company has agreed to
sell to each of the U.S. Underwriters, and each of the U.S. Underwriters for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS First Boston
Corporation and Kidder, Peabody & Co. Incorporated are acting as representatives
(the "U.S. Representatives"), has severally agreed to purchase from the Company
the number of shares of Common Stock set forth below opposite their respective
names. Under certain circumstances, the commitments of non-defaulting U.S.
Underwriters may be increased as set forth in the U.S. Purchase Agreement.

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
----------------- -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................
CS First Boston Corporation......................................
Kidder, Peabody & Co. Incorporated...............................

----------
Total............................................ 11,050,000
----------
----------
</TABLE>

The Company has also entered into an International Purchase Agreement (the
"International Purchase Agreement") with certain underwriters outside the United
States and Canada (the "International Managers"), for whom Merrill Lynch
International Limited, CS First Boston Limited, Kidder, Peabody International
Limited and UBS Limited are acting as representatives (the "Lead Managers").
Subject to the terms and conditions set forth in the International Purchase
Agreement, and concurrently with the sale of 11,050,000 shares of Common Stock
to the U.S. Underwriters, the Company has agreed to sell to the International
Managers, and the International Managers have severally agreed to purchase from
the Company, an aggregate of 1,950,000 shares of Common Stock. Under certain
circumstances as set forth in the International Purchase Agreement, the
commitments of non-defaulting International Managers may be increased. The
initial public offering price per share and the total underwriting discount per
share are identical under the U.S. Purchase Agreement and the International
Purchase Agreement.

In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Managers
(collectively, the "Underwriters"), respectively, have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Common
Stock being sold pursuant to each such Purchase Agreement if any of such shares
of Common Stock being sold pursuant to each such Purchase Agreement are
purchased. The closing with respect to the sale of the shares of Common Stock
sold pursuant to each Purchase Agreement is a condition to the closing with
respect to the sale of the Common Stock pursuant to the other Purchase
Agreement.

14
<PAGE> 17

The U.S. Underwriters and the International Managers have entered into an
Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Under the terms of the Intersyndicate
Agreement, the Underwriters are permitted to sell shares of Common Stock to each
other for purposes of resale.

The U.S. Representatives have advised the Company that the U.S.
Underwriters propose to offer the shares of Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus, and
to certain selected dealers at such price less a concession not in excess of
$ per share. The U.S. Underwriters may allow, and such dealers may
re-allow, a discount not in excess of $ per share on sales to certain
other dealers. After the initial public offering, the public offering price,
concession, reallowance and discount may be changed.

The Company has granted the U.S. Underwriters an option, exercisable by the
U.S. Representatives, to purchase up to 1,657,500 additional shares of Common
Stock at the public offering price, less the underwriting discount. In addition,
the Company has granted the International Managers an option, exercisable by the
Lead Managers, to purchase up to 292,500 additional shares of Common Stock at
the initial public offering price, less the underwriting discount. Such options,
which expire 30 days after the date of this Prospectus, may be exercised solely
to cover over-allotments. To the extent that the U.S. Representatives and the
Lead Managers exercise such options, each of the U.S. Underwriters and the
International Managers, as the case may be, will be obligated, subject to
certain conditions, to purchase approximately the same percentage of the option
shares that the number of shares of Common Stock to be purchased initially by
that Underwriter bears to the total number of shares of Common Stock to be
purchased initially by the U.S. Underwriters or the International Managers,
respectively.

The Company has agreed that, for a period of 120 days from the date of this
Prospectus, they will not offer, sell, grant any option for sale of, or
otherwise dispose of any shares of Common Stock or securities convertible into
or exchangeable or exercisable for, or any rights to purchase or acquire, any
shares of Common Stock, except for issuances pursuant to the Company's employee
benefit plans or pursuant to executive compensation arrangements, without the
prior written consent of the U.S. Representatives and the Lead Managers.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Act, or to contribute to payments
that the Underwriters may be required to make in respect thereof.

The Company has been informed that, under the terms of the Intersyndicate
Agreement, and subject to certain exceptions, the U.S. Underwriters and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to non-United States or non-Canadian persons or to
persons they believe intend to resell to non-United States or non-Canadian
persons, and the International Managers and any bank, broker or dealer to whom
they sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to United States or Canadian persons or to persons they believe intend to
resell to United States or Canadian persons, except in each case for
transactions pursuant to the Intersyndicate Agreement, which, among other
things, permits the Underwriters to purchase from each other and offer for
resale such number of shares of Common Stock as the selling Underwriter or
Underwriters and the purchasing Underwriter or Underwriters may agree.

From time to time, the U.S. Representatives have performed financial
advisory and other investment banking services for the Company.

LEGAL OPINIONS

The validity of the Common Stock will be passed upon for the Company by
Hubert Gentry, Jr., Senior Vice President, General Counsel and Secretary of the
Company, 1600 Smith Street, 11th Floor, Houston, Texas 77002 and for the
Underwriters by Mudge Rose Guthrie Alexander & Ferdon, 180 Maiden Lane, New
York, New York 10038. Mudge Rose Guthrie Alexander & Ferdon will rely upon the
opinion of Mr. Gentry as to all matters involving state regulatory consents and
approvals. As of February 28, 1994, Mr. Gentry

15
<PAGE> 18

beneficially owned 23,138 shares of Common Stock acquired pursuant to various
employee benefit plans of the Company.

EXPERTS

The consolidated financial statements and related financial statement
schedules of the Company as of December 31, 1993 and 1992, and for the years
ended December 31, 1993, 1992 and 1991, included or incorporated by reference in
the Form 10-K, which is incorporated by reference in this Prospectus, have been
so included in reliance on the reports of Coopers & Lybrand, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.

16
<PAGE> 19

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................ 2
Incorporation of Certain Documents
by Reference....................... 2
Prospectus Summary................... 3
The Company.......................... 6
Use of Proceeds...................... 9
Capitalization....................... 9
Price Range of Common Stock and
Dividends.......................... 10
Certain United States Federal Tax
Consequences to Non-United States
Holders of Common Stock............ 11
Description of Capital Stock......... 13
Underwriting......................... 14
Legal Opinions....................... 15
Experts.............................. 16
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

13,000,000 SHARES

[Arkla Logo]

COMMON STOCK

- ---------------------------

PROSPECTUS
- ---------------------------
MERRILL LYNCH & CO.

CS FIRST BOSTON

KIDDER, PEABODY & CO.
INCORPORATED

MAY , 1994

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 20
*****************************************************************************
*Information contained herein is subject to completion or amendment. A *
*registration statement relating to these securities has been filed with the*
*Securities and Exchange Commission. These securities may not be sold nor *
*may offers to buy be accepted prior to the time the registration statement *
*becomes effective. This prospectus shall not constitute an offer to sell or*
*the solicitation of an offer to buy *
*nor shall there be any sale of these securities in any State in which such *
*offer, solicitation or sale would be unlawful prior to registration or *
*qualification under the securities laws of any such State. *
*****************************************************************************
[ALTERNATE COVER PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 28, 1994

PROSPECTUS

13,000,000 SHARES

(Arkla Logo)

COMMON STOCK
------------------------

Of the 13,000,000 shares of Common Stock, par value $.625 per share (the
"Common Stock"), of Arkla, Inc. (the "Company") offered hereby, 1,950,000 shares
are being offered outside the United States and Canada by the International
Managers (the "International Offering") and 11,050,000 shares are concurrently
being offered for sale in the United States and Canada by the U.S. Underwriters
(the "U.S. Offering"). Such offerings are collectively referred to as the
"Offerings." The public offering price and the aggregate underwriting discount
per share of the International Offering and the U.S. Offering are identical and
the closings of the International Offering and the U.S. Offering are conditioned
upon each other. See "Underwriting."

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNT(1) COMPANY(2)
PUBLIC
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Per Share............................. $ $ $
- -----------------------------------------------------------------------------------------------------------
Total(3).............................. $ $ $
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the several International Managers and
the several U.S. Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $200,000.

(3) The Company has granted the International Managers and the U.S. Underwriters
30 day options to purchase up to 292,500 and 1,657,500 additional shares of
Common Stock, respectively, solely to cover over-allotments, if any. If
such options are exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to the Company will be $ , $ and
$ , respectively. See "Underwriting."

------------------------

The shares of Common Stock are offered hereby by the several International
Managers, subject to prior sale, when, as and if issued to and accepted by them,
subject to certain conditions. The International Managers reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of shares of Common Stock will be made in New York,
New York on or about May , 1994.

------------------------

MERRILL LYNCH INTERNATIONAL LIMITED

CS FIRST BOSTON
KIDDER, PEABODY INTERNATIONAL
LIMITED

UBS LIMITED
------------------------

The date of this Prospectus is May , 1994.
<PAGE> 21

[ALTERNATE UNDERWRITING SECTION FOR INTERNATIONAL PROSPECTUS]

UNDERWRITING

Subject to the terms and conditions set forth in the International Purchase
Agreement (the "International Purchase Agreement") among the Company and each of
the underwriters named below (the "International Managers"), the Company has
agreed to sell to each of the International Managers, and each of the
International Managers for whom Merrill Lynch International Limited, CS First
Boston Limited, Kidder, Peabody International Limited and UBS Limited are acting
as representatives (the "Lead Managers"), has severally agreed to purchase from
the Company the number of shares of Common Stock set forth below opposite their
respective names. Under certain circumstances, the commitments of non-defaulting
International Managers may be increased as set forth in the International
Purchase Agreement.

<TABLE>
<CAPTION>
NUMBER
INTERNATIONAL MANAGERS OF SHARES
---------------------- ---------
<S> <C>
Merrill Lynch International Limited..............................
CS First Boston Limited..........................................
Kidder, Peabody International Limited............................
UBS Limited......................................................

---------
Total.................................................. 1,950,000
---------
---------
</TABLE>

The Company has also entered into a U.S. Purchase Agreement (the "U.S.
Purchase Agreement") with certain underwriters in the United States and Canada
(the "U.S. Underwriters"), for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated, CS First Boston Corporation and Kidder, Peabody & Co. Incorporated
are acting as representatives (the "U.S. Representatives"). Subject to the terms
and conditions set forth in the U.S. Purchase Agreement, and concurrently with
the sale of 1,950,000 shares of Common Stock to the International Managers, the
Company has agreed to sell to the U.S. Underwriters, and the U.S. Underwriters
have severally agreed to purchase from the Company, an aggregate of 11,050,000
shares of Common Stock. Under certain circumstances as set forth in the
International Purchase Agreement, the commitments of non-defaulting U.S.
Underwriters may be increased. The initial public offering price per share and
the total underwriting discount per share are identical under the International
Purchase Agreement and the U.S Purchase Agreement.

In the International Purchase Agreement and the U.S. Purchase Agreement,
the several International Managers and the several U.S. Underwriters
(collectively, the "Underwriters"), respectively, have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Common
Stock being sold pursuant to each such Purchase Agreement if any such shares of
Common Stock being sold pursuant to each such Purchase Agreement are purchased.
The closing with respect to the sale of the shares of Common Stock
<PAGE> 22

sold pursuant to each Purchase Agreement is a condition to the closing with
respect to the sale of the Common Stock pursuant to the other Purchase
Agreement.

The International Managers and the U.S. Underwriters have entered into an
Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Under the terms of the Intersyndicate
Agreement, the Underwriters are permitted to sell shares of Common Stock to each
other for purposes of resale.

The Lead Managers have advised the Company that the International Managers
propose to offer the shares of Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus, and to
certain selected dealers at such price less a concession not in excess of
$ per share. The International Managers may allow, and such dealers may
re-allow, a discount not in excess of $ per share on sales to certain
other dealers. After the initial public offering, the public offering price,
concession, reallowance and discount may be changed.

The Company has granted the International Managers an option, exercisable
by the Lead Managers, to purchase up to 292,500 additional shares of Common
Stock at the public offering price, less the underwriting discount. In addition,
the Company has granted the U.S. Underwriters an option, exercisable by the U.S.
Representatives, to purchase up to 1,657,500 additional shares of Common Stock
at the initial public offering price, less the underwriting discount. Such
options, which expire 30 days after the date of this Prospectus, may be
exercised solely to cover over-allotments. To the extent that the Lead Managers
and the U.S. Representatives exercise such options, each of the International
Managers and the U.S. Underwriters, as the case may be, will be obligated,
subject to certain conditions, to purchase approximately the same percentage of
the option shares that the number of shares of Common Stock to be purchased
initially by that Underwriter bears to the total number of shares of Common
Stock to be purchased initially by the International Managers or the U.S.
Underwriters.

Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase, in addition to the offering price set forth on the
cover page of this Prospectus.

The Company has been informed that, under the terms of the Intersyndicate
Agreement, and subject to certain exceptions, the International Managers and any
bank, broker or dealer to whom they sell shares of Common Stock will not offer
to sell or sell shares of Common Stock to United States or Canadian persons or
to persons they believe intend to resell to United States or Canadian persons,
and the U.S. Underwriters and any dealer to whom they sell shares of Common
Stock will not offer to sell or sell shares of Common Stock to non-United States
or non-Canadian persons or to persons they believe intend to resell to
non-United States or non-Canadian persons, except in each case for transactions
pursuant to the Intersyndicate Agreement, which, among other things, permits the
Underwriters to purchase from each other and offer for resale such number of
shares of Common Stock as the selling Underwriter or Underwriters and the
purchasing Underwriter or Underwriters may agree.

Each International Manager has represented and agreed that as part of the
distribution of the shares of Common Stock offered hereby (i) it has not sold
and will not, for so long as Part III of the Companies Act of 1985 remains in
force in relation to the Common Stock, offer or sell any shares of Common Stock
in the United Kingdom by means of any document, other than to persons whose
ordinary business is to buy or sell shares or debentures (whether as principal
or agent) or in circumstances which do not constitute an offer to
<PAGE> 23

the public within the meaning of the Companies Act of 1985; (ii) it has complied
and will comply with all applicable provisions of the Financial Services Act of
1986 with respect to anything done by it in relation to the Common Stock in,
from or otherwise involving the United Kingdom; (iii) it has only issued or
passed on and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the Common Stock if that
person is of the kind described in Article 9(3) of the Financial Services Act of
1986 (Investment Advertisements) (Exemptions) Order 1988; and (iv) once the
provisions of Part V of the Financial Services Act of 1986 come into force in
relation to the Common Stock, it will not, directly or indirectly, issue or
cause to be issued in the United Kingdom any advertisement offering the Common
Stock in circumstances which would require (for the avoidance of any
contravention of those provisions) a prospectus to have been delivered to the
Register of Companies.
<PAGE> 24

[ALTERNATE BACK PAGE FOR INTERNATIONAL PROSPECTUS]

- ------------------------------------------------------
- ------------------------------------------------------

<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................ 2
Incorporation of Certain Documents
by Reference....................... 2
Prospectus Summary................... 3
The Company.......................... 6
Use of Proceeds...................... 9
Capitalization....................... 9
Price Range of Common Stock and
Dividends.......................... 10
Certain United States Federal Tax
Consequences to Non-United States
Holders of Common Stock............ 11
Description of Capital Stock......... 13
Underwriting......................... 14
Legal Opinions....................... 16
Experts.............................. 16
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

13,000,000 SHARES

[Arkla Logo]
COMMON STOCK

- ---------------------------

PROSPECTUS

- ---------------------------
MERRILL LYNCH INTERNATIONAL
LIMITED

CS FIRST BOSTON

KIDDER, PEABODY INTERNATIONAL
LIMITED

UBS LIMITED

MAY , 1994

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 25

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the various expenses to be paid by the
registrant in connection with the sale and distribution of the securities being
registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except for the Securities and Exchange Commission
registration fee.

<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
Securities and Exchange Commission Registration Fee...................... $38,342.00
Transfer Agent Fees and Expenses......................................... *
Printing and Engraving Fees.............................................. *
Accountant's Fees and Expenses........................................... *
Legal Fees and Expenses.................................................. *
Blue Sky Fees and Expenses............................................... *
Miscellaneous............................................................ *
---------
Total.......................................................... *
---------
---------
</TABLE>

- ---------------
* To be filed by Amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the General Corporation Law of Delaware (the "DGCL") gives
corporations the power to indemnify officers and directors under certain
circumstances.

Article III of the Company's By-Laws provides for indemnification of
officers and directors to the extent permitted by the DGCL. The Company also has
policies insuring its officers and directors against certain liabilities for
action taken in such capacities, including liabilities under the Act.

Article Seventh of the Company's Restated Certificate of Incorporation, as
amended, adopted the provision of Delaware law limiting or eliminating the
potential monetary liability of directors to the Company or its stockholders for
breaches of a director's fiduciary duty of care. However, the provision does not
limit or eliminate the liability of a director for disloyalty to the Company or
its stockholders, failing to act in good faith, engaging in intentional
misconduct or a knowing violation of the law, obtaining an improper personal
benefit or paying a dividend or approving a stock repurchase that was illegal
under section 174 of the DGCL.

Article Seventh also provides that if the DGCL is subsequently amended to
authorize further limitation or elimination of the liability of directors, such
subsequent limitation or elimination of director's liability will be
automatically implemented without further stockholder action. Furthermore,
repeal or modification of the terms of Article Seventh will not adversely affect
any right or protection of a director existing at the time of such repeal or
modification.

Reference is made to the forms of U.S. Purchase Agreement and International
Purchase Agreement, filed as Exhibits 1.1 and 1.2 hereto, respectively, which
contain provisions for indemnification of the Company, its directors, officers,
and any controlling persons against certain liabilities for information
furnished by the underwriters expressly for use in this Registration Statement.

II-1
<PAGE> 26

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------------------- ----------------------------------------------------------------------
<S> <C>
* 1.1 -- Form of U.S. Purchase Agreement, to be dated May , 1994, among
Arkla, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
CS First Boston Corporation and Kidder, Peabody & Co. Incorporated
relating to the Common Stock.
* 1.2 -- Form of International Purchase Agreement, to be dated May , 1994,
among Merrill Lynch International Limited, CS First Boston Limited,
Kidder, Peabody International Limited and UBS Limited relating to
the Common Stock.
4.1 -- Restated Certificate of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990,
Amendment No. 1 on Form 8 to such Form 10-K dated May 6, 1991, and
Amendment No. 2 on Form 8 to such Form 10-K dated June 28, 1991).
4.2 -- By-Laws of the Company (incorporated by reference to Exhibit 3.2 of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993).
* 5 -- Opinion of Hubert Gentry, Jr., Senior Vice President, General
Counsel and Secretary of the Company as to the legality of the
shares of Common Stock being offered.
23.1 -- Consent of Coopers & Lybrand.
*23.2 -- Consent of Hubert Gentry, Jr., Senior Vice President, General
Counsel and Secretary of the Company (included in Exhibit 5).
24.1 -- Powers of Attorney of each of the directors and officers of the
Company whose name appears on the signature pages hereof.
</TABLE>

- ---------------
* To be filed by Amendment.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;

(2) that, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective; and

(3) that, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

II-2
<PAGE> 27

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons for the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-3
<PAGE> 28

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on this 28th day of March,
1994.

ARKLA, INC.
(Registrant)

By /s/ MICHAEL B. BRACY
(Michael B. Bracy)
Executive Vice President and
Principal Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated

<TABLE>
<S> <C>
/s/ T. MILTON HONEA* Principal executive
(T. Milton Honea) officer and Director
Chairman of the Board and
Chief Executive Officer

/s/ MICHAEL B. BRACY Principal financial
(Michael B. Bracy) officer and Director
Executive Vice President and
Principal Financial Officer

/s/ JACK W. ELLIS,II* Principal accounting
(Jack W. Ellis, II) officer
Vice President and
Corporate Controller

/s/ JOE E. CHENOWETH* Director
(Joe E. Chenoweth)

/s/ O. HOLCOMBE CROSSWELL* Director
(O. Holcombe Crosswell)

/s/ WALTER A. DeROECK* Director
(Walter A. DeRoeck)
</TABLE>

March 28, 1994

<TABLE>
<S> <C>
/s/ DONALD H. FLANDERS* Director
(Donald H. Flanders)

/s/ JAMES O. FOGLEMAN* Director
(James O. Fogleman)

/s/ JOHN P. GOVER* Director
(John P. Gover)

/s/ ROBERT C. HANNA* Director
(Robert C. Hanna)

/s/ MYRA JONES* Director
(Myra Jones)

/s/ SIDNEY MONCRIEF* Director
(Sidney Moncrief)

/s/ LARRY C. WALLACE* Director
(Larry C. Wallace)

/s/ D. W. WEIR,SR.* Director
(D. W. Weir, Sr.)

*By /s/ MICHAEL B. BRACY
(Michael B. Bracy
Attorney-in-Fact)
</TABLE>

II-4
<PAGE> 29

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF EXHIBIT PAGE
- --------------------- ------------------------------------------------------------ ------------
<S> <C> <C>
* 1.1 -- Form of U.S. Purchase Agreement, to be dated May ,
1994, among Arkla, Inc. and Merrill Lynch, Pierce, Fenner
& Smith Incorporated, CS First Boston Corporation and
Kidder, Peabody & Co. Incorporated relating to the Common
Stock.
* 1.2 -- Form of International Purchase Agreement, to be dated May
, 1994, among Merrill Lynch International Limited, CS
First Boston Limited, Kidder, Peabody International
Limited and UBS Limited relating to the Common Stock.
4.1 -- Restated Certificate of Incorporation of the Company, as
amended (incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Amendment No. 1 on Form 8 to
such Form 10-K dated May 6, 1991, and Amendment No. 2 on
Form 8 to such Form 10-K dated June 28, 1991).
4.2 -- By-Laws of the Company (incorporated by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993.
* 5 -- Opinion of Hubert Gentry, Jr., Senior Vice President,
General Counsel and Secretary as to the legality of the
shares of Common Stock being offered.
23.1 -- Consent of Coopers & Lybrand.
*23.2 -- Consent of Hubert Gentry, Jr., Senior Vice President,
General Counsel and Secretary of the Company included in
Exhibit 5).
24.1 -- Powers of Attorney of each of the directors and officers
of the Company whose name appears on the signature pages
hereof.
</TABLE>

- ---------------

* To be filed by Amendment.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Stockholders
Arkla, Inc.

We consent to the incorporation by reference in this registration statement
on Form S-3 (File No. ) of our reports, which include explanatory
paragraphs concerning (1) the Company being named as a defendant in a lawsuit
filed by the Resolution Trust Corporation for which the ultimate outcome of the
litigation cannot presently be determined and (2) the Company's changes in
accounting methods for postemployment benefits and postretirement benefits,
dated March 24, 1994, on our audits of the consolidated financial statements and
financial statement schedules of Arkla, Inc. and Subsidiaries as of December 31,
1993 and 1992, and for the years ended December 31, 1993, 1992 and 1991. We also
consent to the reference to our firm under the caption "Experts."

/s/ COOPERS & LYBRAND

Houston, Texas
March 24, 1994

<PAGE> 1

EXHIBIT 24.1

POWER OF ATTORNEY

ARKLA, INC.

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Arkla,
Inc., a Delaware corporation (the "Company"), does hereby make, constitute and
appoint Michael B. Bracy and William H. Kelley, and each of them acting
individually, his true and lawful attorney-in-fact and agent with power to act
without the other and full power of substitution and resubstitution, to execute,
deliver and file, for and on his behalf, and in his name and in his capacity or
capacities as aforesaid, any and all instruments which said attorneys-in-fact
and agents, or any of them, may deem necessary to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with the
filing with the Securities and Exchange Commission of a Registration Statement
on Form S-3, together with any amendments and any other documents in support
thereof or supplemental thereto, relating to the offering and issuance of up to
15,000,000 shares of the Company's Common Stock, $0.625 par value per share, and
up to 2,250,000 additional shares of Common Stock pursuant to the Underwriters'
15% over-allotment option, hereby granting to said attorneys-in-fact and agents
and each of them full power and authority to do and perform each and every act
and thing whatsoever as said attorneys-in-fact and agents may deem necessary or
advisable to carry out fully the intent of the foregoing as the undersigned
might or could do personally or in the capacity or capacities as aforesaid,
hereby ratifying and confirming all acts and things which said attorneys-in-fact
and agents may do or cause to be done by virtue of these presents.