SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 20, 1997
PRIDE COMPANIES, L.P.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of Incorporation or Organization)
1-10473 75-2313597
(Commission file number) (I.R.S. Employer Identification No.)
1209 North Fourth
Abilene, Texas 79601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (915) 674-8000<PAGE>
Item 1. Changes in Control of Registrant
None
Item 2. Acquisition or Disposition of Assets
None
Item 3. Bankruptcy or Receivership
None
Item 4. Changes in Registrant's Certifying Accountant
None
Item 5. Other Events
Pride Companies, L.P. ("Pride" or the "Company") announced on
June 20, 1997 that it had executed a long-term product supply
agreement (the "Agreement") with Texaco Trading & Transportation
("TTTI"), a wholly-owned subsidiary of Texaco, Inc. The Agreement
has a 10-year primary term beginning upon completion of TTTI's
recently announced new system of pipelines and terminals and has
renewal provisions for up to an additional 10 years. It provides
that Pride will purchase all gasoline and middle distillates
(principally diesel and jet fuel), which it may desire to purchase,
exclusively from TTTI. Pride will purchase gasoline, diesel and
jet fuel from TTTI for delivery to Pride's existing customer base,
which includes wholesale customers, exchange partners, and military
bases, primarily using Pride's existing pipelines and terminals.
Pride's strategic crude and product marketing assets include 105
trucks, over 40 crude oil injection stations, 1,122 miles of
pipeline including two common carrier product pipelines, product
terminals in Abilene, Aledo, and San Angelo, Texas and district
offices in Abilene, Dallas, Graham, Lubbock, Midland and San
Angelo, Texas.
The Agreement calls for a sharing of margins between TTTI and
Pride with a floor based on product prices at the U.S. Gulf Coast
and an operative price referenced to local delivery point market
prices. The Agreement includes provisions for price
redetermination under certain circumstances after the first five
years of the primary term. It provides for exclusivity in Pride's
trade territory, with possible increased volume opportunities in
Pride's trade territory, and future expansion into other adjacent
locations. It is anticipated, but not required, that volumes to be
purchased by Pride will exceed 20,000 barrels per day in the
future. The Agreement includes provisions for early termination in
certain circumstances including ongoing force majeure events and
inability of the parties to agree on price redeterminations in
certain circumstances.
Pride is not required by the Agreement to discontinue its
refining operations, but it is anticipated that such operations
may, if the banks in its credit facility consent, as discussed
below, be phased into a products and crude oil terminal operations
within the next 12 months. Pride is in the process of evaluating
the cost of such transition, costs of decommissioning equipment and
related environmental compliance costs, and the Company currently
estimates such costs at no more than $1.75 million. The Agreement
with TTTI will allow Pride to expand its crude gathering
operations, conducted under the name Pride Pipeline Company. It is
contemplated that the arrangement with TTTI will enable Pride to
transport crude oil it now gathers to attractive markets, including
Cushing, Oklahoma. Currently a large portion of Pride Pipeline
Company gathered crude oil is restricted to use as refinery feed
stock. The Company anticipates that the new arrangement will
produce operating cash flows similar to the level that Pride has
experienced for the last four years. However, the Company believes
that cash flows should be less volatile since the Agreement will
result in more stable product margins and eventually decrease
Pride's exposure to volatility in refining margins. The Company
also believes that the Agreement will better enable Pride to remain
competitive as environmental standards change and the industry
trends toward consolidation and realignments in the future.
Pride has not received approval from the banks in its credit
facility to discontinue or phase down refinery operations, and the
banks may or may not grant that consent. Such consent is required
under the current loan agreement prior to discontinuance or phase
down of the refinery. Pride will continue its previously announced
efforts to refinance with additional third party creditors its
letter of credit facility, revolving loan, term and senior secured
notes ("Phase III"). Pride does not plan to accelerate any phase
down of refinery operations until the refinancing is completed or
the banks' consent is obtained which, until that time, will limit
Pride's ability to fully realize the benefits of the Agreement. If
the refinancing is completed or the banks' consent is obtained and
the company holds these assets for disposal, it is possible a loss
would be recognized on such assets.
Forward Looking Statements
This Form 8-K contains certain forward looking statements.
Such statements are indicated by words or phrases such as
"anticipate," "estimate," "believes," "contemplates" and words or
phrases of similar import. Such statements are subject to certain
risks, uncertainties or assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated or projected. Among the key
factors that may have a direct bearing on the anticipated impact of
the Agreement discussed above are (i) the timely completion of
TTTI's new system of pipelines and terminals, (ii) the margins on
the gasoline and middle distillates subject to the Agreement, (iii)
the ultimate term of the Agreement, (iv) the impact of current and
future laws and governmental regulations affecting the
Partnership's operations, and (v) the Partnership's ability to
obtain necessary bank consents or refinance with additional third
party creditors.
Item 6. Resignations of Registrant's Directors
None
Item 7. Financial Statements and Exhibits
None
Item 8. Change in Fiscal Year
None
Item 9. Sales of Equity Securities Pursuant to Regulation S.
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned hereunto duly authorized.
PRIDE COMPANIES, L.P.
(Registrant)
By: Pride Refining, Inc.
its Managing General Partner
Date: June 20, 1997 By: ______________________________
Brad Stephens
Chief Executive Officer
