<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Numbers: 0-16907
0-16908
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-1
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-2
- --------------------------------------------------------------------------------
(Exact name of Registrants as specified in their charters)
72-1081782
Delaware 72-1098039
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Nos.)
114 Northpark Boulevard, Covington, Louisiana 70433
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(Address of principal executive office) (Zip Code)
Registrants' telephone number, including area code (504) 867-1262
Indicate by check mark CK whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes _CK_ No __
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-1
STATEMENTS OF NET ASSETS
(In process of liquidation)
(In thousands, except depositary unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 4,812 $4,259
Capital investments -- 6,470
------------- ------------
Total assets 4,812 10,729
------------- ------------
Liabilities
Estimated liquidation costs 374 487
Due to affiliates 54 96
Accrued expenses -- 416
------------- ------------
Total liabilities 428 999
------------- ------------
Contingencies
Net assets $ 4,384 $9,730
------------- ------------
------------- ------------
Total depositary units authorized and outstanding 90,000 90,000
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(In process of liquidation)
(In thousands, except depositary unit amount)
(Unaudited)
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
Net assets in liquidation, December 31, 1994 $ 9,730
Changes in estimated liquidation values of assets and liabilities (76)
Cash distributions:
Limited Partner (on behalf of Unit Holders) (4,479)
General Partners (791)
------------
Net assets in liquidation, September 30, 1995 $ 4,384
------------
------------
Limited Partner distributions per $1,000 depositary unit paid during the nine months ended
September 30, 1995 were $49.77.
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</TABLE>
The accompanying notes are an integral part of these statements
2
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PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-1 AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(going concern basis)
(In thousands, except per depositary unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, 1994 September 30, 1994
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
REVENUES
Income from capital investments, net $ 9 $ 52
Sales of oil and gas 5 14
Natural gas gathering sales 475 2,691
Compression and transportation fees 53 154
Interest income from temporary cash investments 13 42
-------- --------
Total revenues 555 2,953
-------- --------
EXPENSES
Natural gas purchases 201 1,100
Lease and pipeline operating costs 404 1,305
General and administrative 112 334
Depreciation, depletion and amortization of property,
plant and equipment -- 149
-------- --------
Total expenses 717 2,888
-------- --------
NET INCOME (LOSS) FROM OPERATIONS (162) 65
LIQUIDATING ACTIVITIES:
Natural gas gathering facilities 1,440 1,440
Liquidation costs (525) (525)
-------- --------
NET INCOME $ 753 $ 980
-------- --------
-------- --------
ALLOCATION OF NET INCOME:
Limited Partner (on behalf of Unit Holders) $ 713 $ 266
General Partners 40 714
-------- --------
$ 753 $ 980
-------- --------
-------- --------
UNIT HOLDERS' NET INCOME PER DEPOSITARY UNIT $ 7.92 $ 2.95
-------- --------
-------- --------
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements
3
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<PAGE>
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-1 AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(going concern basis)
NINE MONTHS ENDED SEPTEMBER 30, 1994
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from operations $ 65
Adjustments to reconcile net income from operations to net
cash provided by operating activities:
Depreciation, depletion and amortization of property,
plant and equipment 149
Decrease in accounts receivable and other current assets 645
Decrease in accounts payable and
accrued liabilities (821)
--------------
Net cash provided by operating activities 38
--------------
CASH FLOWS FROM LIQUIDATING ACTIVITIES:
Net income from liquidating activities 915
Natural gas gathering facilities (1,440)
Increase in accrued liabilities due to liquidation costs 525
--------------
Net cash provided by liquidating activities --
--------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of natural gas gathering facility 2,801
Loan principal reductions, cost recoveries
and proceeds from sales 267
--------------
Net cash provided by investing activities 3,068
--------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to partners (4,760)
--------------
Decrease in cash and cash equivalents (1,654)
Cash and cash equivalents at beginning of period 5,293
--------------
Cash and cash equivalents at end of period $ 3,639
--------------
--------------
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The accompanying notes are an integral part of this consolidated statement
</TABLE>
4
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PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-2
STATEMENTS OF NET ASSETS
(In process of liquidation)
(In thousands, except depositary unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 4,589 $ 2,746
Capital investments -- 4,593
------------- ------------
Total assets 4,589 7,339
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Liabilities
Estimated liquidation costs 501 418
Due to affiliates 50 147
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Total liabilities 551 565
------------- ------------
Contingencies
Net assets $ 4,038 $ 6,774
------------- ------------
------------- ------------
Total depositary units authorized and outstanding 118,290 118,290
------------- ------------
------------- ------------
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</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(In process of liquidation)
(In thousands, except depositary unit amount)
(Unaudited)
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
Net assets in liquidation, December 31, 1994 $ 6,774
Changes in estimated liquidation values of assets and liabilities (297)
Cash distributions:
Limited Partner (on behalf of Unit Holders) (2,072)
General Partners (367)
------------
Net assets in liquidation, September 30, 1995 $ 4,038
------------
------------
Limited Partner distributions per $1,000 depositary unit paid during the nine months ended
September 30, 1995 were $17.52.
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</TABLE>
The accompanying notes are an integral part of these statements
5
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<PAGE>
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-2 AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(going concern basis)
(In thousands, except per depositary unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, 1994 September 30, 1994
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
REVENUES
Income from capital investments, net $ -- $ 13
Natural gas gathering and processing sales (13) 1,280
Compression and transportation fees 96 278
Gain on sale of leases 52 105
Interest income from temporary cash investments 16 69
-------- ----------
Total revenues 151 1,745
-------- ----------
EXPENSES
Natural gas purchases (16) 945
Lease and pipeline operating costs 143 435
General and administrative 103 351
Depreciation, depletion and amortization of property,
plant and equipment -- 68
-------- ----------
Total expenses 230 1,799
-------- ----------
NET LOSS FROM OPERATIONS (79) (54)
LIQUIDATING ACTIVITIES:
Natural gas gathering facilities 74 74
Liquidation costs (426) (426)
-------- ----------
NET LOSS $ (431) $ (406)
-------- ----------
-------- ----------
ALLOCATION OF NET LOSS:
Limited Partner (on behalf of Unit Holders) $ (483) $ (1,605)
General Partners 52 1,199
-------- ----------
$ (431) $ (406)
-------- ----------
-------- ----------
UNIT HOLDERS' NET LOSS PER DEPOSITARY UNIT $(4.08) $ (13.57)
-------- ----------
-------- ----------
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The accompanying notes are an integral part of these consolidated statements
</TABLE>
6
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PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-2 AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(going concern basis)
NINE MONTHS ENDED SEPTEMBER 30, 1994
(In thousands)
(Unaudited)
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from operations $ (54)
Adjustments to reconcile net loss from operations to net cash used in operating
activities:
Depreciation, depletion and amortization of property, plant and equipment 68
Gain on sale of leases (105)
Accretion of unearned lease revenue and loan origination fees (13)
Decrease in accounts receivable 580
Decrease in accounts payable and accrued liabilities (960)
--------------
Net cash used in operating activities (484)
--------------
CASH FLOWS FROM LIQUIDATING ACTIVITIES:
Net loss from liquidating activities (352)
Natural gas gathering facility (74)
Increase in accrued liabilities due to liquidation costs 426
--------------
Net cash provided by liquidating activities --
--------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of direct financing leases receivable 132
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (7,991)
--------------
Decrease in cash and cash equivalents (8,343)
Cash and cash equivalents at beginning of period 9,723
--------------
Cash and cash equivalents at end of period $ 1,380
--------------
--------------
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</TABLE>
The accompanying notes are an integral part of this consolidated statement
7
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<PAGE>
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-1
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-2
(In process of liquidation)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) General
Prudential-Bache Energy Growth Fund, L.P. G-1 (``G-1 Partnership'') and
Prudential-Bache Energy Growth Fund, L.P. G-2 (``G-2 Partnership''),
collectively referred to herein as the ``Partnerships,'' were organized under
Delaware law by Prudential-Bache Properties, Inc. (``PBP'') and Graham Energy,
Ltd. (``GEL'') as ``General Partners,'' and a limited partner (the
``Depositary''). The Depositary is the sole limited partner in the Partnerships
and serves in such capacity on behalf of ``Unit Holders'' who purchased
Depositary Units. Depositary Units represent the assignment of substantially all
of the attributes of limited partner interests. PBP and GEL are both
subsidiaries of Prudential Securities Group Inc. (``PSGI''). GEL has contracted
out certain of its functions, including certain administrative functions, to
certain companies affiliated with GEL.
The accompanying unaudited financial statements were prepared in accordance
with the rules and regulations of the Securities and Exchange Commission and
reflect all adjustments which, in the opinion of the General Partners, are
necessary for a fair presentation of net assets as of September 30, 1995, the
results of operations for the nine and three months ended September 30, 1994 and
cash flows for the nine months ended September 30, 1994. It is suggested that
these financial statements be read in conjunction with the financial statements
(and notes thereto) included in the Partnerships' Annual Report on Form 10-K for
the year ended December 31, 1994.
Unit Holders' net income (loss) per $1,000 Depositary Unit for G-1
Partnership and G-2 Partnership for the nine and three months ended September
30, 1994 was based upon 90,000 and 118,290 Depositary Units outstanding,
respectively. Results of operations are not presented for the Partnerships for
the nine and three months ended September 30, 1995 as the Partnerships are in
process of liquidation, as described below.
Certain balances for prior periods have been reclassified to conform with
current financial statement presentation.
Plan of liquidation
In June 1994, the General Partners distributed to the Unit Holders a Consent
Solicitation Statement for consideration and voting upon a Plan of Dissolution
and Liquidation (``the Plan''). Consent Solicitation Statements were filed on
behalf of both Partnerships with the Securities and Exchange Commission on June
24, 1994 and were mailed to Unit Holders on July 5, 1994. Supplements to the
Consent Solicitation Statements, dated August 23, 1994, were filed with the
Securities and Exchange Commission and were mailed to Unit Holders on August 25,
1994.
In accordance with the procedures described in the Consent Solicitation
Statements, the General Partners accepted consent forms from Unit Holders which
were postmarked on or before August 31, 1994. As of September 8, 1994, the
General Partners had received consent forms from Unit Holders representing the
majority of the outstanding Units in both Partnerships. Of the consent forms
received by the General Partners, Depositary Units representing 60% and 62% of
the total Units outstanding for G-1 and G-2 Partnerships, respectively, voted to
consent to the Plan and approve the liquidation of the Partnerships.
Accordingly, the Plan was adopted effective as of August 31, 1994.
As a result of the approval of the Plan, the Partnerships were dissolved
effective as of August 31, 1994. In accordance with the terms of the Plan, the
General Partners, acting as liquidating agents, are proceeding with the
liquidation and termination of the Partnerships. In accordance with the terms of
the Plan, the General Partners, acting as liquidating agents, commenced the
liquidation of the Partnerships' remaining assets and liabilities. Since that
date, the General Partners have sold all of the investments of each of the
Partnerships.
The Partnerships' ability to make further distributions will depend upon the
amounts required to pay costs to be incurred in connection with certain
litigation surrounding the operations of investments previously
8
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owned by G-1 and G-2 Partnerships, general and administrative and other costs to
be incurred in connection with the liquidation and termination of the
Partnerships, as well as any other liabilities which may arise prior to the
Partnerships' termination. The estimated remaining liquidation costs have been
accrued as of September 30, 1995 and are reflected in G-1 and G-2 Partnerships'
statements of net assets. These liquidation costs are estimated for the period
ended June 30, 1996; however, the General Partners are unable to predict the
exact time the final liquidation will take place. No estimate of final
litigation costs is included because the General Partners are unable to estimate
such costs at the present time. The Partnership will distribute any remaining
cash upon final liquidation.
(2) Related party transactions
In conjunction with the adoption of the liquidation basis of accounting, the
Partnerships have recorded an accrual as of September 30, 1995 for the estimated
costs expected to be incurred to liquidate the Partnerships, as discussed in
Note 1 above. Included in these liquidation cost estimates are amounts expected
to be charged by the General Partners and their affiliates during the
anticipated remaining liquidation period, as provided for in the partnership
agreements. The actual charges to be incurred by the Partnerships will depend
primarily upon the length of time required to liquidate the Partnerships, and
may differ from the amounts accrued as of September 30, 1995. PBP and its
affiliates charged G-1 and G-2 Partnerships $164,000 and $206,000, respectively,
during the nine months ended September 30, 1995 and $80,000 and $71,000,
respectively, during the three months ended September 30, 1995 for the
reimbursement of indirect general and administrative costs expected to be
incurred during the six months ended June 30, 1996. GEL and its affiliates
charged G-1 and G-2 Partnerships $15,000 each during the nine months ended
September 30, 1995 and $3,000 each during the three months ended September 30,
1995 for the reimbursement of indirect general and administrative costs expected
to be incurred during the six months ended June 30, 1996.
Estimated liquidation costs payable to the General Partners and their
affiliates as of September 30, 1995 and December 31, 1994 are $240,000 and
$192,000, respectively, for G-1 Partnership and $325,000 and $205,000,
respectively, for G-2 Partnership.
As of September 30, 1995, Prudential Securities Incorporated (``PSI''), an
affiliate of the General Partners, owns 1,153 and 1,667 Depositary Units of the
G-1 and G-2 Partnerships, respectively.
(3) Legal Proceedings
The Partnerships and their General Partners and/or certain affiliates have
been named co-defendants in a number of lawsuits arising out of the offer and
sale of the Partnerships' and certain affiliated partnerships' Depositary Units
or Partnership Units. These proceedings allege violations of the federal
securities laws and similar violations under certain state laws and involve
claims by investors that material misrepresentations and omissions of material
facts were made in connection with the offer and sale of Depositary Units or
Partnership Units. Mismanagement of funds is also alleged in certain suits.
These proceedings seek monetary damages or, alternatively, a return of the
amount of the original investment, plus interest, costs and attorneys' fees. A
number of the proceedings also seek exemplary damages. In a number of these
actions, discovery has commenced. The Partnerships and their General Partners
also have been named as defendants in two derivative suits. In addition, the
General Partners and their affiliates have also been the subject of several
state and federal administrative actions and investigations.
a. Growth Fund Suits Pending in Texas State Court
(i) James W. Gibbons, et al. v. Graham Energy, Ltd., Graham Securities Corp.,
Graham Resources, Inc., Graham Depositary Company II, Prudential Securities,
Inc., Prudential-Bache Properties, Inc., Prudential Insurance Company of
America, and certain individuals, No. 91-040456-A in the District Court of
Harris County, Texas, 190th Judicial District.
This suit is on behalf of those plaintiffs originally party to a prior Growth
Fund suit who declined to participate in the settlement between all defendants
and the majority of plaintiffs in the prior case. The Gibbons action was created
by an August 21, 1992 order entered by the court in the prior suit severing the
claims of the non-settling plaintiffs. The Gibbons plaintiffs, all alleged
investors in G-2 Partnership, seek compensatory and punitive damages, plus
damages equalling not more than two times the amount of each plaintiff's actual
damages, together with costs, interest and attorneys' fees for the defendants'
alleged wrongdoing in connection with the offer and sale of Depositary Units in
G-2 Partnership as well as for the
9
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alleged mismanagement of G-2 Partnership. Plaintiffs allege violation of common
law and state law. There has been no significant activity in the suit since
entry of the severance order. The defendants intend to defend the action
vigorously.
(ii) Robert I. Kaminsky, et al. v. Graham Energy, Ltd., Graham Securities
Corp., Graham Resources, Inc., Graham Depositary Company II, Prudential
Securities, Inc., Prudential-Bache Properties, Inc., Prudential Insurance
Company of America, and certain individuals, No. 90-01796 in the District Court
of Harris County, Texas, 55th Judicial District. Filed on or about April 24,
1991.
Plaintiffs, all alleged investors in G-2 Partnership, commenced suit seeking
compensatory and punitive damages, plus damage equalling not more than two times
the amount of each plaintiff's actual damages, together with costs, interest and
attorneys' fees for the defendants' alleged wrongdoing in connection with the
offer and sale of Depositary Units in G-2 Partnership as well as for the alleged
mismanagement of G-2 Partnership. Plaintiffs alleged violation of common law and
state law.
In June of 1992, definitive settlement agreements were executed by all
defendants and the majority of plaintiffs in Kaminsky. Pursuant to those
agreements, a Corrected Final Judgment dismissing the settling plaintiffs'
claims was entered on or about September 24, 1992. A motion to sever the claims
of the non-settling plaintiffs remains pending. There has been no further
significant activity in the suit. The defendants intend to defend the action
vigorously.
(iii) Rowell F. Lawson, et al. v. Prudential Securities, Inc., Prudential
Insurance Company of America, Prudential-Bache Properties, Inc.,
Prudential-Bache Energy Growth Fund, L.P. G-1, Prudential-Bache Energy Growth
Fund, L.P. G-2, Prudential-Bache Energy Growth Fund, L.P. G-3, Prudential-Bache
Energy Growth Fund, L.P. G-4, Graham Energy Ltd., Graham Securities Corp.,
Graham Resources, Inc., Graham Depositary Company II, and certain individuals,
No. 94-16852, in the District Court of Harris County, Texas, 164th Judicial
District. The plaintiffs allege fraud, breach of fiduciary duty, negligence and
state statutory claims in connection with the offer, sale and management of the
Growth Funds. The plaintiffs seek compensatory, punitive and treble damages,
together with costs, interest and attorneys' fees. A Memorandum of Understanding
providing for the settlement of the Lawson case, as well as a number of other
cases, was executed by counsel for the parties on December 28, 1994. In excess
of eighty percent (80%) of the plaintiffs have executed releases and the motions
to dismiss their claims are currently pending before the court. The remaining
plaintiffs have not executed releases because, among other reasons: (1) they
opposed the settlement, (2) they could not be located, (3) the plaintiffs'
claims could not be verified, or (4) the plaintiffs had already settled their
claims in other litigation. The plaintiffs who did not execute releases may
pursue their claims further. If necessary, the defendants intend to defend the
action vigorously.
b. Growth Fund Derivative Suit Pending in New Jersey State Court
Gary Starr, Cathy and David Lipton v. Graham Energy, Ltd., Graham Depositary
Company II, Graham Securities Corp., Prudential-Bache Properties, Inc.,
Prudential Securities Group, Inc., Prudential Securities Inc., Prudential Life
Insurance Company of America, certain individuals, Prudential-Bache Energy
Growth Fund, L.P. G-1 and Prudential-Bache Energy Growth Fund, L.P. G-2,
MID-L-1165-92 in the Superior Court of New Jersey, Middlesex County. Filed
February 3, 1992.
This is a derivative action brought on behalf of the Prudential-Bache Energy
Growth Funds, L.P. G-1 and G-2. G-1 and G-2 Partnerships are named as nominal
defendants only. The complaint alleges breach of fiduciary duty and fraud in the
management and marketing of investments in G-1 and G-2 Partnerships. Plaintiffs
seek compensatory and punitive damages, costs and attorneys' fees.
In January of 1993, counsel for the parties in Starr executed a Memorandum of
Understanding providing for settlement of the case. The consummation of this
settlement is subject to a number of conditions, including final court approval,
and no assurance can be given that the settlement will be consummated. Notice
was sent October 7, 1994 to Unit Holders describing the action and the terms of
the proposed settlement. The hearing on the final approval of the settlement was
held on November 9, 1994. In an opinion dated May 10, 1995, the New Jersey
Superior Court approved the settlement and awarded certain attorney's fees and
expenses. The Consent Order and Final Judgment dismissing the action was filed
on September 20, 1995. The settlement is not yet effective as the Consent Order
and Final Judgement is not final.
10
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c. Growth Fund Derivative Suits Pending in Delaware State Court
In re Prudential-Bache Energy Growth Fund Litigation, Consolidated Civil
Action No. 13677, in the Court of Chancery of the State of Delaware in and for
New Castle County.
This action consolidates Abrahamson et al. v. Graham Energy, Ltd. et al.,
Civil Action No. 13677, and Elman v. Graham Energy, Ltd., et al., Civil Action
No. 13899. These cases are purported derivative actions brought on behalf of
G-1, G-2, G-3 and G-4 Partnerships against the Partnerships, PSGI, PBP and a
number of other defendants. The complaints allege breach of fiduciary duty and
corporate waste, breach of contract, and a claim for aiding and abetting against
affiliates of the General Partners. The suits seek, among other things,
unspecified damages, liquidation of assets or appointment of a Receiver, costs
and attorneys' fees. The General Partners and PSGI believe that they have
meritorious defenses to the complaints and moved to dismiss complaints in the
Abrahamson case prior to consolidation. They intend to vigorously defend
themselves in the consolidated action.
d. New York Multidistrict Litigation, MDL 1005
By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, a number of purported class actions then pending in various federal
courts, were transferred to a single judge of the United States District Court
for the Southern District of New York and consolidated for pretrial proceedings
under the caption in re Prudential Securities Incorporated Limited Partnerships
Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs in the transferred
cases filed a complaint that consolidated the previously filed complaints and
named as defendants, among others, GEL, PSI, certain of their present and former
employees and PBP. The Partnerships are not named as defendants in the
consolidated complaint, but the names of the Partnerships are listed as being
among the limited partnerships at issue in the case.
The consolidated complaint alleges violations of the federal and New Jersey
RICO statutes, fraud, negligent misrepresentation, breach of fiduciary duties,
breach of third-party beneficiary contracts and breach of implied covenants in
connection with the marketing and sales of limited partnership interests.
Plaintiffs request relief in the nature of rescission of the purchase of
securities and recovery of all consideration and expenses in connection
therewith, as well as compensation for lost use of money invested less cash
distributions; compensatory damages; consequential damages; treble damages for
defendants' RICO violations (both federal and New Jersey); general damages for
all injuries resulting from negligence, fraud, breaches of contract, and
breaches of duty in an amount to be determined at trial; disgorgement and
restitution of all earnings, profits, benefits and compensation received by
defendants as a result of their unlawful acts; costs and disbursements of the
action; reasonable attorneys' fees; and such other and further relief as the
court deems just and proper.
PSI and PBP, along with various other defendants, filed a motion to dismiss
the consolidated complaint on December 20, 1994. By order dated August 29, 1995
the transferee court granted plaintiffs' motion for temporary class
certification, preliminarily approved a settlement entered into between
plaintiffs and GEL, PBP and PSI, scheduled a fairness hearing for November 17,
1995, approved the form and content of notice to be provided to class members
and directed that it be provided to class members. The full amount due under the
settlement agreement has been paid by PSI.
e. Other Actions Involving Prudential-Bache Energy Growth Fund Partnerships
(i) G-1 and G-2 Partnerships and GEL are parties to an action entitled Plains
Resources Inc. v. Northstar Gas Co., Inc., Northstar Resources, Inc.,
Prudential-Bache Energy Growth Fund, L.P. G-1, Prudential-Bache Energy Growth
Fund, L.P., G-2, Prudential-Bache Properties, Inc., Graham Energy, Ltd., Mesa
Pipeline Co., Natural Gas Clearinghouse, Inc., NGC Energy Resources Limited
Partnership, NGC Energy, Inc. and a certain individual filed in the 125th
Judicial District Court, Harris County, Texas on November 15, 1994. Plaintiff in
this case alleges that the defendants breached various contracts and conspired
to misrepresent the production of certain oil and gas properties and the
operation of a natural gas pipeline and processing facilities in connection with
the sale of these properties. Plaintiff seeks damages, attorneys' fees and
punitive damages. G-1 and G-2 Partnerships and GEL intend to defend themselves
vigorously in this action.
(ii) Richard Barnes, et al. v. Graham Energy, Ltd., Graham Resources, Inc.,
Graham Securities, Inc., Graham Depository Company II, Prudential Securities,
Inc., Prudential-Bache Properties, Inc., Prudential-Bache Energy Growth Fund,
L.P. G-1, Prudential-Bache Energy Growth Fund, L.P. G-2, Northstar Gas Company,
Inc., Northstar Resources, Inc., and Kenneth M. McKinney, No. 95-43321 in the
District Court of
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Harris County, Texas, filed on or about August 31, 1995. Plaintiffs, all
claiming to be investors in G-1 Partnership and/or G-2 Partnership, commenced a
class action lawsuit seeking compensatory and punitive damages and attorney's
fees for the defendants' alleged wrongdoing in connection with breaches of the
Definitive Stipulation and Agreement of Compromise and Settlement dated June 30,
1992, and breaches of fiduciary duty, negligence, and mismanagement with respect
to the sale of partnership properties by G-1 and G-2 to Northstar Gas Company,
Inc. The defendants intend to defend this action vigorously.
In addition to the litigation described above, there are a number of actions
pending in various state and federal courts and/or arbitration pending before
various arbitration tribunals relating to the Partnerships brought by individual
investors or groups of investors. These actions generally name PSI,
Prudential-Bache Properties, Inc., Graham Resources, Inc., Graham Royalty, Ltd.,
and/or related entities, along with certain current and former employees of
these entities. The defendants intend to defend each of these cases vigorously.
12
<PAGE>
<PAGE>
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-1
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(In process of liquidation)
General
It is suggested that the accompanying Financial Statements and this
discussion be read in conjunction with the Financial Statements (including the
notes thereto) and Management's Discussion and Analysis of Financial Condition
and Results of Operations, included in the Partnerships' Annual Report on Form
10-K for the year ended December 31, 1994. Unless otherwise specifically defined
herein, all terms are intended to have the meanings given to them in the Notes
to Financial Statements included herein.
As a result of the approval of the Plan, the Partnerships were dissolved
effective as of August 31, 1994. In accordance with the terms of the Plan, the
General Partners, acting as liquidating agents, are proceeding with the winding
up of the Partnerships' business and affairs through the liquidation of their
assets and liabilities. Since the adoption by both Partnerships of the Plan, the
Partnerships have sold all of their respective investments. Effective September
1, 1994, the Partnerships adopted the liquidation basis of accounting, whereby
assets are presented at their estimated net realizable values and liabilities at
their estimated settlement amounts. Accruals were recorded for the estimated
costs of liquidating the Partnerships, including $342,000 and $414,000 for G-1
Partnership and G-2 Partnership, respectively, recorded during the nine months
ended September 30, 1995. These costs include the estimated costs of completing
the dissolution of the Partnerships and estimated general and administrative
costs through the expected conclusion of liquidation.
Liquidity and Capital Resources
The net asset positions as of September 30, 1995 and December 31, 1994 for
G-1 Partnership and G-2 Partnership are shown below (in thousands).
<TABLE>
<CAPTION>
9/30/95 12/31/94
------- --------
<S> <C> <C>
G-1 Partnership $4,384 $9,730
G-2 Partnership 4,038 6,774
</TABLE>
All of the Partnerships' net assets at September 30, 1995 were attributable
to cash which was generated primarily from the sale of investments since
December 31, 1994. The decreases in the Partnerships' September 30, 1995 net
asset positions from their levels as of December 31, 1994 are primarily
attributable to the amounts distributed to the partners in February and April
1995.
The Partnerships have historically paid cash distributions from available
cash on a quarterly basis during the month following each quarter. Since the
adoption of the Plan, the Partnerships have paid distributions to the partners
from cash generated primarily from the sale of their remaining investments. In
February 1995, G-1 Partnership made a special distribution in connection with
the sale of its AES Deepwater coke-fired co-generation facility investment. In
April 1995, G-2 Partnership made a special distribution in connection with the
sale of its interests in its preferred stock of Walter International Inc. and
its common stock of J. Ray McDermott, S.A. The following table summarizes cash
distributions to Unit Holders for G-1 and G-2 Partnerships (in thousands).
<TABLE>
<CAPTION>
Unit Holders'
Quarterly Special Distributions from
Distributions Distributions Inception through 4/95
Paid in Paid in --------------------------------
January 1995 2/95 and 4/95 Amount Percentage
------------- ------------- ----------------- ----------
<S> <C> <C> <C> <C>
G-1 $ 227 $ 4,252 $39,324 44%
G-2 298 1,774 89,150 75
</TABLE>
13
<PAGE>
<PAGE>
The Partnerships' ability to make further distributions will depend upon the
amounts required to pay costs to be incurred in connection with certain
litigation surrounding the operations of investments previously owned by G-1 and
G-2 Partnerships, general and administrative and other costs to be incurred in
connection with the liquidation and termination of the Partnerships, as well as
any other liabilities which may arise prior to the Partnerships' termination.
The estimated remaining liquidation costs have been accrued as of September 30,
1995 and are reflected in G-1 and G-2 Partnerships' statements of net assets.
These liquidation costs are estimated for the period ended June 30, 1996;
however, the General Partners are unable to predict the exact time the final
liquidation will take place. No estimate of final litigation costs is included
because the General Partners are unable to estimate such costs at the present
time. The Partnership will distribute any remaining cash upon final liquidation.
As discussed in the financial statements included herein, GEL, PBP, certain
of their affiliates and the Partnerships have been and are named in various
legal proceedings arising out of the offer and sale of the Prudential-Bache
Energy Income Fund Partnerships and the Prudential-Bache Energy Growth Fund
Partnerships and the management of these Partnerships. The defendants have
settled or agreed to settle certain of these actions and are defending all of
the remaining proceedings vigorously. See Note 3 to the financial statements for
a further discussion of these actions.
Results of Operations
As discussed previously herein, the Partnerships are in process of
liquidation and have sold all of their remaining investments. In accordance with
the liquidation basis of accounting adopted by the Partnerships, no results of
operations are presented for the nine and three months ended September 30, 1995.
During the nine months ended September 30, 1994, G-1 Partnership earned net
income of $980,000 and G-2 Partnership incurred a net loss of $406,000. During
the three months ended September 30, 1994, G-1 Partnership earned net income of
$753,000 and G-2 Partnership incurred a net loss of $431,000. These nine and
three month results were primarily due to the adoption of the liquidation basis
of accounting, whereby assets are presented at their estimated net realizable
values and liabilities, at their estimated settlement amounts.
To the extent that a Partnership sold an income-producing asset, income and
cash flow were negatively affected. As of December 31, 1994, G-1 Partnership had
only one income-producing asset remaining in its portfolio which was
subsequently sold in January 1995. G-2 Partnership's remaining investments at
December 31, 1994 were not generating operating cash flow for this Partnership.
These assets were sold in February and March 1995.
14
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
This information is incorporated by reference to Note 3 to the financial
statements filed herewith in Item 1 of Part I of the Registrant's Quarterly
Report.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Unit Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None
15
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-1
PRUDENTIAL-BACHE ENERGY GROWTH FUND, L.P. G-2
<TABLE>
<S> <C>
BY: Prudential-Bache
Properties, Inc., BY: Graham Energy, Ltd.,
General Partner General Partner
BY: /s/Barbara J. Brooks BY: /s/Russell L. Allen
Barbara J. Brooks, Russell L. Allen,
Vice President-Finance and President (Principal
Chief Financial Officer Executive Officer)
DATE: November 13, 1995 DATE: November 13, 1995
</TABLE>
16
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential-Bache Energy Growth
Fund, L.P. G-1 and is qualified in its entirety
by reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000801580
<NAME> Prudential-Bache Energy Growth Fund, L.P. G-1
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Sep-30-1995
<PERIOD-TYPE> 9-Mos
<CASH> 4,812
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,812
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,812
<CURRENT-LIABILITIES> 428
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,384
<TOTAL-LIABILITY-AND-EQUITY> 4,812
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential-Bache Energy Growth
Fund, L.P. G-2 and is qualified in its entirety
by reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000801582
<NAME> Prudential-Bache Energy Growth Fund, L.P. G-2
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Sep-30-1995
<PERIOD-TYPE> 9-Mos
<CASH> 4,589
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,589
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,589
<CURRENT-LIABILITIES> 551
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,038
<TOTAL-LIABILITY-AND-EQUITY> 4,589
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
