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UNITED STATES
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 (Date of earliest event reported): SEPTEMBER 12, 1997
THE MERIDIAN RESOURCE CORPORATION
(Exact name of registrant as specified in charter)
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TEXAS 001-10671 76-0319553
(State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.)
15995 N. BARKER'S LANDING, SUITE 300
HOUSTON, TEXAS 77079
(Address of Principal Executive Offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 558-8080
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
LITIGATION
In June 1996, Amoco filed suit against TMRC in Louisiana State Court in
Calcasieu Parish with respect to a dispute involving the drilling by TMRC of
TMRC's Ben Todd No. 1 (TMR) well in the Southwest Holmwood Field in which TMRC
and Amoco each hold a 50% leasehold interest. The case was removed to the United
State District Court for the Western District of Louisiana in July 1996. The Ben
Todd No. 1 (TMR) well was drilled by TMRC under a participation agreement
between TMRC and Amoco in which Amoco had a right to participate in the well.
The well was drilled by TMRC after providing notice to Amoco pursuant to the
participation agreement of TMRC's intent to drill the well and Amoco's failure
to take action to elect to participate in the well. Prior to the drilling the
well, TMRC had been advised by its advisors that the drilling of the well by
TMRC was permitted under the participation agreement by virtue of Amoco's
refusal to reasonably consent to the well following TMRC's request to do so.
Amoco also did not seek to enjoin the drilling of the well and accepted the
benefits of the well following the drilling thereof as well as other benefits
under the participation agreement and lease. Amoco has alleged in its suit that
the well was not permitted to be drilled under the agreement and is seeking to
recover the revenues from the well or have the production from the well stopped.
Amoco is also requesting a cancellation of the participation agreement and
TMRC's leasehold interests in the prospect, which includes TMRC's 50% interest
in the Ben Todd No. 2 (Amoco) well that was drilled prior to the Ben Todd No. 1
(TMR) well on an agreed basis. TMRC has filed a counterclaim for breach of
contract, unfair practices and other claims.
On September 9, 1997, the Federal District Court entered a summary
judgment finding that TMRC was not permitted under the participation agreement
to drill the Ben Todd No. 1 (TMR) well and that the participation agreement and
related lease had been terminated by virtue of TMRC's drilling of the well. The
trial court's summary judgment was based on a finding that the participation
agreement was an unambiguous contract and that agreement allowed Amoco to
withhold its consent to the drilling of the Ben Todd No. 1 (TMR) well for any
reason. As a result, the Court found that TMRC was precluded from drilling the
Ben Todd No. 1 (TMR) well by virtue of Amoco's failure to grant an express
consent and that the drilling of the well constituted a breach and termination
of the agreement and related
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lease. The potential effect of this judgment if it is not reversed or modified
is that TMRC's rights with respect to the Ben Todd No. 1 (TMR) well and the Ben
Todd No. 2 (Amoco) well would revert to Amoco and Amoco would have a claim for
damages for production from those wells. The judgment did not address the date
on which the participation agreement and lease were purportedly terminated or
damages. A trial on the remaining issues in the case is scheduled for mid
September 1997.
TMRC is currently reviewing the recent summary judgment and intends to
vigorously contest the remaining issues at the trail court level. Further,
subject to the outcome of the trial on such issues, TMRC currently intends to
appeal the summary judgment regarding the termination of the participation
agreement and leases. In this regard, TMRC believes that a termination of the
participation agreement should not have affected the validity of the lease, in
particular its rights with respect to the Ben Todd No. 2 (Amoco) well. TMRC
also believes that with respect to any damage claims by Amoco, TMRC should be
entitled to a recoupment of its expenses, including approximately $7.3 million
in seismic, drilling and other exploration and development expenses.
The proved reserves attributable to TMRC's interests in the Ben Todd No. 1
(TMR) well and Ben Todd No. 2 (Amoco) well were approximately 3.6 BCFE and .5
BCFE, respectively, at December 31, 1996, and 1.1 BCFE and .4 BCFE,
respectively, at August 1, 1997. The net present value of the reserves (using
a 10% discount rate) attributable to TMRC's interest in the Ben Todd No. 1
(TMR) well and Ben Todd No. 2 (Amoco) well was $13.3 million and $1.9 million,
respectively, at December 31, 1996, and $2.2 million and $.7 million,
respectively, at August 1, 1997. These reserve valuations reflect the
prevailing prices of oil of $23.96 and $19.00 per bbl at December 31, 1996, and
August 1, 1997, respectively, and a price per Mcf of natural gas of $4.48 and
$2.49 at December 31, 1996, and August 1, respectively. Total production from
the Ben Todd No. 1 (TMR) well attributable to TMRC's interest through August 1,
1997, was 1.4 BCFE, with TMRC having received revenues net of taxes and
production costs from such production of $3.7 million. TMRC has also received
production from the Ben Todd No. 2 (Amoco) well since the date of drilling the
drilling of the Ben Todd No. 1 (TMR) well of approximately .4 BCFE, with TMRC
having received revenues net of taxes and production costs from such production
of $1.3 million.
Although TMRC believes that it was entitled to drill the Ben Todd No. 1
(TMR) well and that the leases relating to such well and the Ben Todd No. 2
(Amoco) well should have not been validly terminated, there can be no assurance
as to the outcome of this litigation. Further, unfavorable outcome on this
litigation could result in the loss of the reserves attributable to the wells
in question as well as damages for the production received by TMRC therefrom.
In such event, TMRC would be required to record a charge for the amount of such
losses as they may ultimately be determined.
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SIGNATURES
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.
THE MERIDIAN RESOURCE CORPORATION
Dated: September 12, 1997 /s/ LLOYD V. DELANO
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Lloyd V. Delano
Vice President
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