UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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: MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission file number: 1-10671
THE MERIDIAN RESOURCE CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0319553
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15995 N. BARKERS LANDING, SUITE 300, HOUSTON, TEXAS 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 281-558-8080
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares of common stock outstanding at May 7, 1998 33,689,978
Page 1 of 17
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THE MERIDIAN RESOURCE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations (unaudited) for the
Three Months Ended March 31, 1998 and 1997 ................. 3
Consolidated Balance Sheets as of March 31, 1998 (unaudited)
and December 31, 1997 ...................................... 4
Consolidated Statements of Cash Flows (unaudited) for the
Three Months Ended March 31, 1998 and 1997 ................. 6
Notes to Consolidated Financial Statements (unaudited) ......... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ... 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .............................. 16
Item 6. Exhibits and Reports on Form 8-K ................ 16
SIGNATURE ...................................................... 17
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
---------- ---------
(in thousands, except for
per share information)
REVENUES:
Oil and natural gas ............... $ 11,766 $16,421
Interest and other ................ 131 239
-------- -------
11,897 16,660
-------- -------
COSTS AND EXPENSES:
Oil and natural gas operating ..... 1,518 1,133
Severance and ad valorem taxes .... 460 662
Depletion and depreciation ........ 6,259 6,231
General and administrative ........ 1,977 2,114
Interest .......................... 2,332 876
Impairment of long-lived assets ... 40,278 --
-------- -------
52,824 11,016
NET INCOME (LOSS) .................... ($40,927) $ 5,644
======== =======
NET INCOME (LOSS) PER SHARE:
Basic ............................. ($ 1.22) $ 0.17
======== =======
Diluted ........................... ($ 1.22) $ 0.16
======== =======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES:
Outstanding ....................... 33,451 33,363
======== =======
Assuming dilution ................. 33,451 35,832
======== =======
See notes to consolidated financial statements.
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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1998 1997
---- ----
(unaudited)
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 6,532 $ 8,083
Accounts receivable ................................. 12,051 10,920
Due from affiliates ................................. 3,256 3,038
Prepaid expenses and other .......................... 791 1,130
--------- ---------
Total current assets ........................ 22,630 23,171
--------- ---------
PROPERTY AND EQUIPMENT:
Oil and natural gas properties, full cost
method (including $55,745,000 [1998] and
$51,883,000 [1997] not subject to depletion) ...... 433,103 409,310
Land ................................................ 478 478
Equipment ........................................... 4,864 4,618
--------- ---------
438,445 414,406
Less accumulated depletion and depreciation ......... (192,256) (145,719)
--------- ---------
246,189 268,687
--------- ---------
OTHER ASSETS ........................................... 842 700
--------- ---------
$ 269,661 $ 292,558
========= =========
See notes to consolidated financial statements.
4
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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
MARCH 31, DECEMBER 31,
1998 1997
---- ----
(unaudited)
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ......................... $ 7,845 $ 7,735
Revenues and royalties payable ........... 4,543 5,991
Accrued liabilities ...................... 21,149 20,330
Current maturities of long-term debt ..... 122 110
--------- ---------
Total current liabilities ........ 33,659 34,166
--------- ---------
LONG TERM DEBT .............................. 124,951 107,085
--------- ---------
LITIGATION LIABILITIES ...................... 6,205 6,205
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value
(25,000,000 shares authorized,
none issued and outstanding) ........... -- --
Common stock, $0.01 par value
(100,000,000 shares authorized,
33,496,217 [1998] and
33,481,261 [1997] issued ............... 337 336
Additional paid-in capital ............... 172,164 172,023
Accumulated deficit ...................... (67,033) (26,106)
Unamortized deferred compensation ........ (321) (309)
--------- ---------
105,147 145,944
Treasury stock, at cost (16,703 [1998] and
46,792 [1997] shares) .................. (301) (842)
--------- ---------
Total stockholders' equity ............... 104,846 145,102
--------- ---------
$ 269,661 $ 292,558
========= =========
See notes to consolidated financial statements.
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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
-------- -------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................... ($40,927) $ 5,644
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depletion and depreciation ........................ 6,259 6,231
Amortization of other assets ...................... 23 143
Non-cash compensation ............................. 599 454
Impairment of long-lived assets ................... 40,278 --
Changes in operating assets and liabilities:
Accounts receivable ............................... (1,131) 1,427
Due from affiliates ............................... (218) (219)
Accounts payable .................................. 110 2,917
Revenues and royalties payable .................... (1,448) (468)
Accrued liabilities and other ..................... (4,475) (603)
-------- --------
Net cash (used in) provided by operating activities . (930) 15,526
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net ............ (18,406) (31,908)
Other ............................................... (165) --
-------- --------
Net cash (used in) investing activities ............. (18,571) (31,908)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ........................ 17,897 1,000
Reductions in long-term debt ........................ (19) --
Exercise of stock options ........................... 72 --
Deferred loan costs and other ....................... -- (122)
-------- --------
Net cash provided by financing activities ........... 17,950 878
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS ................. (1,551) (15,504)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD .............................. 8,083 23,705
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ 6,532 $ 8,201
======== ========
See notes to consolidated financial statements.
6
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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements reflect the accounts of The Meridian
Resource Corporation and its subsidiaries (the "Company") after elimination of
all significant intercompany transactions and balances. On November 5, 1997,
Cairn Energy USA, Inc. ("Cairn") merged with a subsidiary of the Company. The
merger was accounted for as a pooling of interests and accordingly, the
accompanying March 31, 1997 financial statements have been restated to include
the financial position and results of operations of Cairn. The financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997, as filed with the Securities and
Exchange Commission.
Certain items in the first quarter of 1997 have been reclassed to conform to the
first quarter of 1998 presentation.
The financial statements included herein as of March 31, 1998, and for the three
months ended March 31, 1998 and 1997 are unaudited, and, in the opinion of
management, the information furnished reflects all material adjustments,
consisting of normal recurring adjustments, necessary for a fair statement of
the results for the interim periods presented.
2. IMPAIRMENT OF LONG-LIVED ASSETS
The Company recognized a $40.3 million non-cash write down of its oil and
natural gas properties under the full cost method of accounting, primarily as a
result of declines in both oil and natural gas prices which significantly
lowered the present value of proved oil and natural gas reserves as of March 31,
1998 and nonproductive investments in oil and gas properties.
Because the carrying value of oil and natural gas properties have been reduced
due to the full cost ceiling limitation such that the present value of the
Company's proved oil and natural gas reserves do not exceed the Company's net
oil and natural gas properties recorded on its balance sheet, there is an
increased risk of future write-downs due to factors which may negatively affect
the present value of proved oil and natural gas reserves and the carrying value
of oil and natural gas properties, including volatile oil and natural gas
prices, downward revisions in estimated proved oil and natural gas reserve
quantities and unsuccessful drilling activities.
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3. NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
(loss) per share:
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
------ ------
(in thousands, except per share)
Numerator:
Net income (loss) ............................. ($40,927) $ 5,644
Denominator:
Denominator for basic net income (loss) per
share - weighted-average shares outstanding 33,451 33,363
Effect of potentially dilutive common shares:
Employee and director stock options ........... N/A 943
Warrants ...................................... N/A 1,526
-------- -------
Denominator for diluted net income (loss) per
share - weighted average shares outstanding
and assumed conversions ................... 33,451 35,832
======== =======
Basic net income (loss) per share ................. ($ 1.22) $ 0.17
======== =======
Diluted net income (loss) per share ............... ($ 1.22) $ 0.16
======== =======
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following is a discussion of the Company's financial operations for the
three months ended March 31, 1998 and 1997. The notes to the Company's
consolidated financial statements included in this report, as well as the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 (and
the notes attached thereto), should be read in conjunction with this discussion.
OVERVIEW
INDUSTRY CONDITIONS AND FIRST QUARTER OPERATIONS. The Company's revenues,
profitability and future rate of growth are substantially dependent upon
prevailing prices for natural gas and, to a lesser extent, oil. Oil and natural
gas prices have been extremely volatile in recent years and are affected by many
factors outside the control of the Company. Since 1992, prices for West Texas
Intermediate ("WTI") crude have ranged from $23.39 to $11.00 per Bbl and the
monthly average of the Gulf Coast spot market natural gas price at Henry Hub,
Louisiana, has ranged from $3.97 to $1.08 per Mcf. In 1997, WTI crude oil prices
ranged between $23.39 to $16.18 per Bbl, and spot natural gas prices at Henry
Hub, Louisiana, ranged between $3.97 to $1.68 per Mcf. Prices received by the
Company for its oil production have been significantly depressed since the
fourth quarter of 1997 and the WTI posting reached an eight year low of $11.00
on March 16, 1998. Natural gas prices have also declined, but on a less dramatic
basis. These declines in prices of oil and natural gas have affected the results
and associated cash flow of the Company's properties during the first quarter of
1998. During the quarter, natural gas prices were lower by 26% over the
corresponding period of 1997 due to, among other things, lower demand and higher
storage levels to satisfy supply needs. Oil prices also decreased by 39% over
prices for the first quarter of 1997.
The decrease in revenues caused by price declines was partially offset by an
increase in production, which increased on a natural gas equivalent basis by 2%
over production levels during the corresponding quarter of 1997. East Cameron
Block 349 production was curtailed during most of the first quarter of 1998 due
to a damaged pipeline servicing the exploration block. The Company estimates
that, had production from the East Cameron Block 349 been at full capacity for
the entire quarter, the Company's overall production on a natural gas equivalent
basis would have increased an additional 7%.
The volatile nature of the energy markets makes it difficult to estimate future
prices of oil and natural gas; however, any prolonged period of depressed prices
could have a material adverse effect on the Company's results of operations and
financial condition. Results of operations for the second quarter of 1998 are
expected to reflect a decrease in oil and gas revenues over the corresponding
period in 1997 due to significant decreases in average prices over 1997 levels.
The Company expects the decrease in revenues over 1997 levels to be partially
offset by production increases over first quarter 1998 levels, as well as
production levels during the second quarter of
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1997 due to the fact that the Company expects the East Cameron Block 349 to
produce at full capacity during the second quarter 1998 and the fact that the
Company successfully completed a well during the first quarter of 1998 that will
be producing throughout the second quarter of 1998.
MERGER AND ACQUISITION OF OIL AND GAS INTERESTS. On March 27, 1998, the Company
and affiliates of Shell Oil Company (collectively, "Shell") executed a
definitive merger agreement which, together with a separate purchase and sale
agreement (collectively referred to herein as the "Shell Agreements" and the
transactions contemplated by the Shell Agreements are referred to herein as the
"Shell Transactions"), will result in the Company acquiring all of Shell's
producing and exploration properties in South Louisiana in exchange for shares
of common and convertible preferred stock representing 39.9% of the common stock
of the Company as of the closing, assuming exercise of all stock options,
warrants and conversion of the preferred stock, and $42.5 million in cash,
respectively .
Following the Shell Transactions, the Company is expected to control over
329,000 gross onshore acres in Louisiana and Texas with approximately 2,800
square miles of onshore 3-D seismic data, which the Company believes to be one
of the largest positions held by a company with TMRC's market capitalization.
The Company estimates that its current production base following the Shell
Transactions will be approximately 22,000 equivalent barrels of oil per day and
that proved reserves will total over 51.0 million equivalent barrels of oil
having an estimated reserve life of approximately six years.
The terms of the Shell Agreements call for Shell to receive a fixed 39.9% of the
post-transaction common stock of the Company, assuming exercise of all stock
options, warrants and conversion of the preferred stock, comprised of 12.082
million shares of Common Stock and shares of a new series of preferred stock
(the "Preferred Stock") convertible into approximately 12.827 million shares of
Common Stock. The Preferred Stock will have a stated value of $135 million, a 4%
annual dividend for a period of five years (with the dividend reducing in amount
by one-third on the third, fourth and fifth anniversary so that no dividends
will be payable after the fifth anniversary of the Shell Transactions and a
conversion price of approximately $10.52 per share. The Preferred Stock will
convert automatically into Common Stock if the market price of the Common Stock
is greater than or equal to 150% of the conversion price for 75 consecutive
trading days. Terms of the Shell Transactions are not subject to changes in the
market price of the Common Stock.
To insure the Company's ability to function as an independent oil and gas
company, Shell has agreed to restrict its discretionary voting rights on
non-extraordinary corporate issues requiring a shareholder vote to 23% of the
outstanding voting shares, with the remainder of its holdings to be voted in the
same ratio as the shares voted by other shareholders and Shell's unrestricted
shares. Shell also has agreed to restrictions on its ability to sell shares and
will be provided with certain rights to purchase additional shares to the extent
necessary to maintain at least a 21% beneficial ownership interest in the
Company. Shell will be entitled to one seat on the Company's Board of Directors.
The consummation of the Shell Transactions is subject to approval of the
shareholders of the Company and certain other customary conditions. The Company
currently
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anticipates that a closing of the Shell Transactions will occur during the third
quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL. During the three months ending March 31, 1998, the Company's
liquidity needs were met from cash from operations and borrowings under the
Company's credit facility. As of March 31, 1998, the Company had a cash balance
of $6.5 million and negative working capital of $11 million. The decrease in
both the cash balance and working capital reflects capital expenditures related
to the Company's increasing exploration and development activities and reduced
operating cash flows in the face of lower oil and natural gas prices.
AMENDED CREDIT FACILITY. The Company has amended it's credit facility to
increase the maximum amount of borrowings thereunder from $125 million to $150
million. In addition, the Company has received an underwritten commitment from
its banking group to amend and restate the Company's existing credit facility
(the "Amended Credit Facility") to provide for maximum borrowings, subject to
borrowing base limitations, of up to $250 million. The Company currently is in
the process of negotiating the definitive terms of the Amended Credit Facility.
The Amended Credit Facility will provide for a borrowing base of $150 million
prior to consummation of the Shell Transactions. Following consummation of the
Shell Transactions, the borrowing base will be redetermined and is expected to
be $200 million. In the event the Shell Transactions are not consummated by
September 30, 1998, the borrowing base will be redetermined on October 1, 1998.
Borrowings under the Amended Credit Facility will be secured by pledges of the
outstanding capital stock of the Company's material subsidiaries and a mortgage
of the Company's offshore oil and gas properties. The Amended Credit Facility
will contain various restrictive covenants substantially similar to those
currently contained in the existing credit facility, including, among other
things, maintenance of certain financial ratios and restrictions on cash
dividends on the Company's common stock. Borrowings under the Amended Credit
Facility will mature five years from the date of execution of the definitive
agreements governing the Amended Credit Facility.
Under the Amended Credit Facility, the Company may secure either an alternative
base rate loan, which bears interest at a rate per annum equal to (i) the
greater of Chase's prime rate, a CD-based rate of federal funds based rate, or
(ii) a eurodollar based rate loan that bears interest, generally, at a rate per
annum equal to the London interbank offered rate (determined by reference to
automated quotation system) plus 1.0% to 2.0% depending on the Company's ratio
of the aggregate outstanding loans to the borrowing base. The Amended Credit
Facility also provides for commitment fees ranging from .3% to .5% per annum.
At May 12, 1998, the Company had outstanding $130 million under its existing
credit facility.
CAPITAL EXPENDITURES. Capital expenditures during the three months ended
March 31, 1998
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consisted of $23.5 million for property and equipment additions related to
exploration and development of various prospects, including leases, seismic data
acquisitions, and drilling and completion costs. The Company currently expects
capital expenditures for the remainder of 1998 to be approximately $76 million.
In addition, if the Shell Transactions are consummated, the Company expects to
expand its onshore exploration program to take advantage of opportunities
associated with the properties to be acquired. Capital expenditures associated
with this expansion are expected to be approximately $25 million during 1998.
These capital expenditures are expected to be funded through a combination of
cash flow from the acquired properties and borrowings under the New Credit
Facility or other debt or equity financings.
In management's opinion, the Company will have sufficient capital resources to
fund its operations. Future requirements, however, will depend upon the success
of the Company's drilling program and the nature and extent of capital
expenditures required for development of discoveries. In that regard, the
Company anticipates that it may obtain additional capital through the issuance
of debt, equity or convertible securities.
It is the policy of the Company to retain its existing cash for reinvestment in
the businesses of the Company and not to pay dividends with respect to its
common stock in the foreseeable future.
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RESULTS OF OPERATIONS
OPERATING REVENUES. First quarter 1998 oil and natural gas revenues decreased
$4.7 million as compared to first quarter 1997 revenues due to a decrease in
average prices. Oil and natural gas production on an equivalent basis rose by 2%
due in large part to the successful completion of several new wells. East
Cameron Block 349 production was curtailed during most of the first quarter of
1998 due to a damaged pipeline servicing the exploration block. Had East Cameron
Block 349 been at full capacity, the Company's quarterly production would have
increased an additional 7%. Natural gas prices were lower by 26% over the same
time period due to, among other things, lower demand and higher storage levels
to satisfy supply needs. Oil prices also decreased by 39% over prices for the
first quarter of 1997.
The following table summarizes production volumes, average sales prices and
gross revenues for the three months ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998
--------------------------- 1998 PERCENTAGE
1998 1997 CHANGE OF CHANGE
---- ---- ------ ---------
<S> <C> <C> <C> <C>
Production Volumes:
Oil (Mbbl) ............... 210 223 (13) (6%)
Natural Gas (Mmcf) ....... 3,858 3,669 189 5%
MMCFE .................... 5,118 5,007 111 2%
Average Sales Prices:
Oil (Bbl) ................ $ 13.65 $ 22.44 ($ 8.79) (39%)
Natural Gas (Mcf) ........ $ 2.29 $ 3.10 ($ 0.81) (26%)
MMCFE .................... $ 2.29 $ 3.27 ($ 0.98) (30%)
Gross Revenues (000's):
Oil ...................... $ 2,867 $ 5,004 ($2,137) (43%)
Natural Gas .............. 8,850 11,360 (2,510) (22%)
Pipeline ................. 49 57 (8) (14%)
------- ------- ---
Total ............. $11,766 $16,421 ($4,655) (28%)
======= ======= ===
</TABLE>
OPERATING EXPENSES. Oil and natural gas operating expenses increased $0.4
million to $1.5 million for the three months ended March 31, 1998, compared to
$1.1 million for the three months ended March 31, 1997. The increase was
primarily due to added operating expenses related to the additional wells
brought on production during the last twelve months.
SEVERANCE AND AD VALOREM TAXES. Severance and ad valorem taxes decreased $0.2
million for the current quarter as compared to the same period in 1997. This
decrease is primarily the result of the lower oil and natural gas revenues.
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INTEREST AND OTHER INCOME. Interest and other income during the first quarter
1998 decreased $0.1 million from the comparable period in 1997. This decrease
was the result of lower average cash balances reflective of capital expenditures
during 1997 and 1998.
DEPLETION AND DEPRECIATION. Depletion and depreciation expense increased during
the first quarter of 1998 to $6.3 million from $6.2 million for the same period
of 1997. This increase was primarily a result of increased capital expenditures
subject to depletion and a slight increase in total production on a natural gas
equivalent basis.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense of $2
million was relatively flat for the first quarter of 1998 as compared to the
first quarter of 1997.
INTEREST EXPENSE. Interest expense increased to $2.3 million for the first
quarter of 1998 compared to $0.9 million during the same period in 1997. This
increase was primarily due to increased borrowings under the Company's credit
facility to finance the Company's on-going exploration and development
activities.
IMPAIRMENT OF LONG-LIVED ASSETS. The Company follows the full cost method of
accounting for its investments in oil and natural gas properties, which requires
that the net carrying value of oil and natural gas properties is limited to the
sum of the present value (10% discount rate) of the estimated future net cash
flows from proved reserves, based on the current prices and costs, plus the
lower of cost or estimated value of unproved properties. Due to prevailing
market conditions as of March 31, 1998, the average prices utilized by the
Company in determining the net carrying value of its oil and natural gas
properties were $2.44 per Mcf and $14.38 per Bbl, compared to $2.53 per Mcf and
$17.31 per Bbl utilized to calculate such value at December 31, 1997. As a
result of this significant decline in oil and natural gas prices and
nonproductive investments, the Company recognized a $40.3 million non-cash
write-down of its oil and natural gas properties under the full cost method of
accounting. Since the net carrying value of the Company's oil and natural gas
properties have been reduced due to the full cost ceiling limitation such that
the present value of the Company's proved oil and gas reserves do not exceed the
Company's net oil and gas properties recorded on its balance sheet, there is an
increased risk of future property write-downs due to factors that negatively
affect the present value of proved oil and gas reserves, including volatile oil
and gas prices, downward revisions in estimated proved oil and natural gas
quantities and unsuccessful exploratory operations.
FORWARD-LOOKING INFORMATION
From time-to-time, the Company may make certain statements that contain
"forward-looking" information as defined in the Private Securities Litigation
Reform Act of 1995 and that involves risk and uncertainty. These forward-looking
statements may include, but are not limited to exploration and seismic
acquisition plans, anticipated results from current and future exploration
prospects, the anticipated results of wells based on logging data and production
tests, future sales of production, earnings, margins, production levels and
costs, market trends in the oil and natural
14
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gas industry and the exploration and development sector thereof, environmental
and other expenditures and various business trends. Forward-looking statements
may be made by management orally or in writing including, but not limited to,
the Management's Discussion and Analysis of Financial Condition and Results of
Operations section and other sections of the Company's filings with the
Securities and Exchange Commission under the Securities Act of 1933 and the
Securities Exchange Act of 1934.
Actual results and trends in the future may differ materially depending on a
variety of factors including, but not limited to, the success of the Company's
exploration and development program, changes in the price of oil and natural
gas, world-wide political stability and economic growth, the Company's
successful execution of internal exploration, development and operating plans,
environmental regulation and costs, regulatory uncertainties and legal
proceedings.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As previously disclosed in the Company's Annual Report on Form 10-K,
the Company is involved in litigation with AMOCO Production Company
("AMOCO") relating to the Company's right to drill the Company's Ben
Todd No. 1 well. The Company expects a judgment to be entered in the
near future. The Company believes that it has fully accrued for such
judgment during the fourth quarter of 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.1 First, Second and Third Amendments to the Credit Agreement dated
November 5, 1997
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
(b) Reports on Form 8-K.
On April 7, 1998, the Company filed its Current Report on Form 8-K dated
April 6, 1998 reporting its first quarter 1998 drilling results and
future drilling activities.
On April 21, 1998, the Company filed its Current Report on Form 8-K
dated April 21, 1998 reporting that it had successfully bid for five
Louisiana lease tracts located within the Rockefeller Refuge.
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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 thereunto duly authorized.
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
(Registrant)
Date: MAY 15, 1998 By: P. RICHARD GESSINGER
P. RICHARD GESSINGER
(Executive Vice President and
Chief Financial Officer)
By: LLOYD V. DELANO
Lloyd V. DeLano
Vice President
(Chief Accounting Officer)
17
FIRST AMENDMENT AND WAIVER
FIRST AMENDMENT AND WAIVER, dated as of March 11, 1998 (this "AMENDMENT"),
to the Credit Agreement, dated as of November 5, 1997, (the "CREDIT AGREEMENT"),
among the Meridian Resource Corporation , a Texas corporation (the "BORROWER"),
the several lenders from time to time parties thereto (the "LENDERS") and The
Chase Manhattan Bank, as the Administrative Agent for the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, the Borrower has agreed to consummate the Shell Transaction (as
defined below and as further explained Annex I);
WHEREAS, the Borrower has requested, and, upon this Amendment becoming
effective, the Administrative Agent and the Lenders have agreed to enter into
this Amendment in connection with the consummation of the Shell Transaction; and
WHEREAS, the parties hereto wish to amend and waive certain provisions of
the Credit Agreement on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements have contained, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Terms defined in the Credit Agreement and used herein
shall, unless otherwise indicated, have the meanings given to them in the Credit
Agreement.
2. AMENDMENTS AND WAIVER TO THE CREDIT AGREEMENT
(a) SUBSECTION 1.1. Subsection 1.1 of the Credit Agreement is hereby
amended by adding the following definitions thereto in appropriate alphabetical
order:
"ASSET PURCHASE AGREEMENT": the Asset Purchase Agreement to be
entered into between the Borrower and SWEPI, the material terms of which
are described on Annex I hereto.
"LOPI": Louisiana Onshore Properties, Inc., a Delaware corporation.
"LOPI MERGER": the merger of a wholly-owned subsidiary of the
Borrower with and into LOPI pursuant to the terms and conditions of the
Merger Agreement.
<PAGE>
"MAKE-WHOLE PAYMENTS": the payments by the Borrower in cash or
shares of Common Stock pursuant to its obligations described in Section
III (F) of Annex I.
"MERGER AGREEMENT": the Agreement and Plan of Merger among the
Borrower, TMR-Sub, LOPI and SLOPI, the material terms of which are
described on Annex I hereto.
"PREFERRED STOCK": the preferred stock to be issued pursuant to the
terms and conditions of the Shell Transaction.
"PREFERRED STOCK DESIGNATION": the Certificate of Designation
describing the terms and conditions of the Preferred Stock, the material
terms of which are summarized on Annex I.
"REGISTRATION RIGHTS AGREEMENT": the Registration Rights Agreement
among the Borrower and SLOPI, the material terms of which are summarized
on Annex I.
"SHELL PROPERTIES": the oil and gas properties to be acquired by the
Borrower in the Shell Transaction.
"SHELL TRANSACTION": the LOPI Merger and the SWEPI Purchase, and the
transactions contemplated by the Merger Agreement, Asset Purchase
Agreement, the Stock Rights and Restrictions Agreement, Registration
Rights Agreement and Preferred Stock Designation.
"SLOPI": South Louisiana Onshore Properties, Inc., a wholly-owned
subsidiary of Shell Oil Company and the parent company of LOPI.
"STOCK RIGHTS AND RESTRICTIONS AGREEMENT": the Stock Rights and
Restrictions Agreement between the Borrower and SLOPI, the material terms
of which are summarized on Annex I.
"SWEPI PURCHASE": the purchase for approximately $42 million of
certain oil and gas properties owned by SWEPI.
"SWEPI": Shell Western E&P, Inc., a wholly-owned subsidiary of Shell
Oil Company.
"TMR-SUB": the wholly-owned subsidiary of the Borrower formed for
the purpose of consummating the Shell Transaction.
(b) SUBSECTION 4.9(B). The Administrative Agent and the Lenders hereby
waive the Borrower's noncompliance with the provisions of subsection 4.9(b) of
the Credit Agreement (and any Default or Event of Default resulting therefrom)
to the
-2-
<PAGE>
extent (but only to the extent) that the failure to so comply is due to the fact
that the December 31, 1997 Reserve Report furnished to the Administrative Agent
and the Lenders was prepared by the Borrower and audited by Ryder Scott Company.
(c) SUBSECTION 8.1(C). Subsection 8.1(c) of the Credit Agreement is hereby
amended by deleting said subsection in its entirety and substituting in lieu
thereof the following:
"(c) Consolidated Net Worth. Permit the Consolidated Net Worth of
the Borrower and its Subsidiaries during any period to be less than
$110,000,000."
(d) SUBSECTIONS 8.2(H), 8.5(C), 8.7, 8.8(G), 8.10 AND 9(M). The
Administrative Agent and the Lenders hereby waive (i) the Borrower's
noncompliance with the provisions of subsection 8.2(h) of the Credit Agreement
(and any Default or Event of Default resulting therefrom) resulting solely from
the making of Make-Whole Payments not to exceed $10,000,000 in cash or an
unlimited amount in common stock, (ii) the Borrower's noncompliance with the
provisions of subsection 8.5(c) and subsection 8.8(g) of the Credit Agreement
(and any Default or Event of Default resulting therefrom) resulting solely from
the Shell Transaction, (iii) the Borrower's noncompliance with the provisions of
subsection 8.7 of the Credit Agreement (and any Default or Event of Default
resulting therefrom) resulting solely from the payment of dividends on the
Preferred Stock while there is no Default or Event of Default, (iv) the
Borrower's noncompliance with the provisions of subsection 8.10 of the Credit
Agreement (and any Default or Event of Default resulting therefrom) resulting
solely from the transactions contemplated by the Stock Rights and Resolutions
Agreement, Registration Rights Agreement and Preferred Stock Designation, and
(v) any Default or Event of Default under subsection 9(m) of the Credit
Agreement resulting solely from the Shell Transaction PROVIDED that, on or prior
to the consummation of the Shell Transaction, (A) the Shell Transaction shall
have been consummated on the terms outlined on Annex I hereto and with such
changes as are not materially adverse to the Borrower (unless consented to by
the Administrative Agent); (B) all governmental and third party approvals
necessary in connection with the Shell Transaction shall have been obtained and
be in full force and effect, and all applicable waiting periods shall have
expired without any action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on the
Shell Transaction; and (C) the Administrative Agent and the Lenders shall have
received (I) a PRO FORMA consolidated balance sheet of the Borrower, adjusted to
give effect to the consummation of the Shell Transaction, (II) a business plan
for two years, (III) the results of a recent lien search in each relevant
jurisdiction with respect to the Shell Properties, (IV) such legal opinions
(including opinions from counsel to the Borrower and its Subsidiaries and from
such special and local counsel as may be required by the Administrative Agent),
documents and other instruments as are customary for transactions of this type
or as they may reasonably request, (V) a Reserve Report and other reserve
information with respect to the Shell Properties. (VI) a pledge of the capital
stock of LOPI to take effect immediately following the Shell Transaction and
(VII) a certificate of a Responsible Officer of the Borrower dated the date of
the Shell Transaction to the
-3-
<PAGE>
effect that after giving effect to this Amendment and the consummation of the
Shell Transaction there is no Default or Event of Default under the Credit
Agreement and all representations and warranties made by it in Section 5 of the
Credit Agreement are true and correct on and as of such date (except to the
extent such representations and warranties are stated to relate to a specific
earlier date).
(e) SUBSECTION 8.8(H). From the Effective Date until June 30, 1998, the
Administrative Agent and the Lenders Hereby waive the Borrower's noncompliance
with the provisions of subsection 8.8(h) of the Credit Agreement (and any
Default or Event of Default resulting therefrom) to the extent (but only to the
extent) that the failure to so comply is due to the fact that the obligations
described in subsection 8.8(h) may have been outstanding for more than 90 days
or may have been refinanced pursuant to a notes receivable bearing interest at
the prime rate.
3. ANNEX I. The Credit Agreement is hereby amended by adding hereto Annex
I, the description of the LOPSI Acquisition attached hereto.
4. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on
and as of the date that the Administrative Agent shall have received
counterparts of this Amendment, duly executed by the Borrower and the Required
Lenders.
5. REPRESENTATIONS AND WARRANTIES. The Borrower as of the date hereof and
after giving effect to the amendments and waivers contained herein, hereby
confirms, reaffirms and restates that (a) representations and warranties made by
it in Section 5 of the Credit Agreement are true and correct on and as of the
date hereof (except to the extent such representations and warranties are stated
to relate to a specific earlier date) and (b) no Default or Event of Default has
occurred and is continuing on the date hereof; PROVIDED, that each reference to
the Credit Agreement therein shall be deemed to be a reference to the Credit
Agreement after giving effect to this Amendment.
6. PAYMENT OF EXPENSES. The Borrower agrees to pay or reimburse the
Administrative Agent for all of its out-of-pocket costs and reasonable expenses
incurred in connection with the Amendment, any other documents prepared in
connection herewith and the transactions contemplated hereby, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.
7. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS; LIMITED EFFECT. ON and
after the date hereof and the satisfaction of the conditions contained in
Section 2(d) of this Amendment, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to the
Credit Agreement, and each reference in the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby. The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any Lender or the Agent under any of the Loan
Documents, nor constitute a waiver of any provisions of any of the Loan
-4-
<PAGE>
Documents. Except as expressly amended herein, all of the provisions and
covenants of the Credit Agreement and the other Loan Documents are and shall
continue to remain in full force and effect in accordance with the terms thereof
and are hereby in all respects ratified and confirmed.
8. COUNTERPARTS. This Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts (which may include
counterparts delivered by facsimile transmission) and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. Any
executed counterpart delivered by facsimile transmission shall be effective as
for all purposes hereof.
9. GOVERNING LAW. This Amendment and the rights and obligations of the
parties hereto shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respectively proper and duly authorized
officers as of the day and year first above written.
THE MERIDIAN RESOURCE CORPORATION
By: /S/ P. RICHARD GESSENGER
Title: CHIEF FINANCIAL OFFICER
THE CHASE MANHATTAN BANK
as Administrative Agent and as Lender
By: /S/ MARY J. WOODFORD
Title: VICE PRESIDENT
CREDIT LYONNAIS NEW YORK BRANCH
By: /S/ PHILIP SOUSTRA
Title: SENIOR VICE PRESIDENT
HIBERNIA NATIONAL BANK
By: /S/ COLLEEN MCEVOY
Title: HIBERNIA NATIONAL BANK
-6-
<PAGE>
MEESPIERSON CAPITAL CORPORATION
By: /S/DARRELL W. HOLLEY
Title: SENIOR VICE PRESIDENT
THE SANWA BANK LIMITED
By: /S/ C. LAWRENCE MURPHY
C. Lawrence Murphy
Title: SENIOR VICE PRESIDENT AND
MANAGER
TORONTO DOMINION (TEXAS), INC.
By: /S/ DEBBIE A. GREENE
Title: VICE PRESIDENT
-7-
<PAGE>
SECOND AMENDMENT
SECOND AMENDMENT, dated as of April 15, 1998 (this "AMENDMENT"), to the
Credit Agreement (as amended, supplemented or otherwise modified from time to
time), dated as of November 5, 1997, (the "CREDIT AGREEMENT"), among The
Meridian Resource Corporation, a Texas corporation (the "BORROWER"), the several
lenders from time to time parties thereto (the "LENDERS") and The Chase
Manhattan Bank, as the Administrative Agent for the Lenders (in such capacity,
the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, the Borrower has requested, and, upon this Amendment becoming
effective, the Administrative Agent and the Lenders have agreed to enter into
this Amendment in connection with the increase in the Revolving Credit
Commitment to $150,000,000 and the Borrowing Base to $150,000,000 and certain
other modifications set forth herein; and
WHEREAS, the parties hereto wish to amend and waive certain provisions of
the Credit Agreement on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto hereby agree as follow:
1. DEFINED TERMS. Terms defined in the Credit Agreement and used herein
shall, unless otherwise indicated, have the meanings given to them in the Credit
Agreement.
2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) SUBSECTION 1.1. Subsection 1.1 of the Credit Agreement is hereby
amended by deleting therefrom the definitions of the following defined terms in
their entirety and substituting in lieu thereof the following definitions
thereto.
"APPLICABLE MARGIN": for any day with respect to Eurodollar Loans
and ABR Loans, the applicable per annum rate set forth below opposite the
Borrowing Base Usage in effect on such day:
Eurodollar ABR
BORROWING BASE USAGE MARGIN MARGIN
Less than or equal to 1.25% .25%
33%
Greater than 33% and 1.50% .50%
less than or equal to
66%
-8-
<PAGE>
Greater than 66% and 1.75% .75%
less than or equal to
85%
Greater Than 85% 2.00%` 1.00%
As used herein, "BORROWING BASE USAGE" on day means the percentage
equivalent of the ratio of (i) the sum of the aggregate principal
amount of the Loans then outstanding and Letter of Credit
Outstandings on such day to (ii) the Borrowing Base in effect on
such day.
"BORROWING BASE": at any time of determination, the amount then in
effect as determined in accordance with subsection 4.9; PROVIDED, HOWEVER,
that until the Borrowing Base is so redetermined in accordance with
subsection 4.9, the Borrowing Base shall be $150,000,000.
"COMMITMENT FEE RATE": for any day, a rate per annum equal to (a)
.375%if the Borrowing Base Usage in effect on such day is less than or
equal to 66% and (b) .50% if the Borrowing Base Usage in effect on such
day is greater than 66%.
"INITIAL PERIOD": the period commencing on the Closing Date and
ending on May 15, 1998.
"REVOLVING CREDIT COMMITMENT": as to any Lender, the obligation of
such Lender to make Loans to the Borrower hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount set
forth opposite such Lender's name on Schedule 1.1(a) (which amount, with
respect to the Lenders, shall equal $150,000,000 in the aggregate), as
such amount may be reduced from time to time in accordance with the
provisions of this Agreement.
(b) SECTION 5. Section 5 of the Credit Agreement is hereby amended by (i)
adding the date "December 31, 1997" after the date December 31, 1996 in
subsection 5.1(a), (ii) deleting the date December 31, 1996 appearing in
subsection 5.2(a) and substituting in lieu thereof the date "December 31, 1997",
and (iii) deleting the amount "$10,000,000" wherever the same is used and
substituting in lieu thereof "$15,000,000".
(c) SCHEDULE 1.1(A). Schedule 1.1(a) of the Credit Agreement is hereby
amended by deleting the schedule in its entirety and substituting in lieu
thereof a new Schedule 1.1(a) attached hereto as Annex A.
-9-
<PAGE>
(d) ADDITIONAL LENDER. By execution of this Amendment, Bankers Trust
Company ("BTCO") agrees to become a party to the Credit Agreement effective on
the Effective Date and agrees to be bound by the provisions of the Credit
Agreement and have the rights and obligations of a Lender thereunder.
3. CONDITIONS TO EFFECTIVENESS. The amendments provided for in this
Amendment shall become effective on April 15, 1998; PROVIDED that the
Administrative Agent shall have received (i) counterparts of this Amendment,
duly executed by the Borrower and the Lenders listed in the signature pages
hereof, (ii) a legal opinion of counsel to the borrower in form and substance
satisfactory to the Administrative Agent and (iii) resolutions, in form and
substance satisfactory to the Administrative Agent, of the Board of Directors of
the Borrower authorizing the execution and delivery of the Amendment and the
increase in the borrowing contemplated hereunder.
4. REPRESENTATIONS AND WARRANTIES. The borrower as of the date hereof and
after giving effect to the amendments contained herein, hereby confirms,
reaffirms and restates that (a) representations and warranties made by it in
Section 5 of the Credit Agreement are true and correct on and as of the date
hereof (except to the extent such representations and warranties are stated to
relate to a specific earlier date) and (b) no Default or Event of Default has
occurred and is continuing on the date hereof; PROVIDED, that each reference to
the Credit Agreement therein shall be deemed to be a reference to the Credit
Agreement after giving effect to this Amendment.
5. PAYMENT OF EXPENSES. The Borrower agrees to pay or reimburse the
Administrative Agent for all of its out-of-pocket costs and reasonable expenses
incurred in connection with the Amendment, and other documents prepared in
connection herewith and the transactions contemplated hereby, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.
6. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS; LIMITED EFFECT. On and
after the date hereof and the satisfaction of the conditions contained in
Section 3 of this Amendment, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to the
Credit Agreement, and each reference in the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby. The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any Lender or the Agent under any of the Loan
Documents, nor constitute a waiver of any provisions of any of the Loan
Documents. Except as expressly amended herein, all of the provisions and
covenants, of the Credit Agreement and the other Loan Documents are and shall
continue to remain in full force and effect in accordance with the terms thereof
and are hereby in all respects ratified and confirmed.
7. ADDITIONAL REVOLVING CREDIT COMMITMENT AND BORROWING BASE INCREASES.
The Chase Manhattan Bank ("CHASE") and BTCo by their signature below hereby
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<PAGE>
confirm that they have executed a commitment letter with the Borrower providing
for, among other things, the establishment of a Borrowing Base of $150,000,000
effective on May 15, 1998, an increase in the Revolving Credit Commitment to
$250,000,000 upon consummation of the acquisition of assets from Shell Oil
Company (the"SHELL TRANSACTION") and an increase in the Borrowing Base to
$200,000,000 upon consummation of the Shell Transaction. Chase has committed
$150,000,000 and BTCo has committed $100,000,000 in connection with such
increases. All of the foregoing are subject to the terms and conditions of such
commitment letter, the term sheet annexed thereto and the related fee letter.
8. COUNTERPARTS. This Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts (which may include
counterparts delivered by facsimile transmission) and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. Any
executed counterpart delivered by facsimile transmission shall be effective as
for all purposes hereof.
9. GOVERNING LAW. This Amendment and the rights and obligations of the
parties hereto shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
THE MERIDIAN RESOURCE CORPORATION
By: /S/P. RICHARD GESSINGER
P. Richard Gessinger
Title: P. RICHARD GESSENGER
Executive Vice President
Chief Financial Officer
THE CHASE MANHATTAN BANK,
As Administrative Agent and as Lender
By: /S/ MARY J. WOODFORD
Title: VICE PRESIDENT
BANKERS TRUST COMPANY
By: /S/ CALLI S. HAYES
Title: MANAGING DIRECTOR
CREDIT LYONNAIS NEW YORK BRANCH
By:
Title:
-12-
<PAGE>
HIBERNIA NATIONAL BANK
By: /S/ COLLEEN MCEVOY
Title: HIBERNIA NATIONAL BANK
MEESPIERSON CAPITAL CORPORATION
By: /S/ DARRELL W. HOLLEY
Title: SENIOR VICE PRESIDENT
THE SANWA BANK, LIMITED
By: /S/ KENTARO YAMAGISHI
Title: ASSISTANT VICE PRESIDENT
TORONTO DOMINION (TEXAS), INC.
By: /S/ DEBBIE GREENE
Title: VICE PRESIDENT
-13-
<PAGE>
THIRD AMENDMENT
THIRD AMENDMENT, dated as of may 15, 1998 (this "AMENDMENT"), to the
Credit Agreement (as amended, supplemented or otherwise modified from time to
time), dated as of November 5, 1997, the ("CREDIT AGREEMENT"), among The
Meridian Resource Corporation, a Texas corporation (the "BORROWER"), the several
lenders from time to time parties thereto (the "LENDERS") and The Chase
Manhattan Bank, as the Administrative Agent for the Lenders (in such capacity,
the "ADMINISTRATIVE AGENT").
W I T N E S S E T H
WHEREAS, the parties hereto wish to amend certain provisions of the Credit
Agreement on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto hereby agree as follows:
3. DEFINED TERMS Terms defined in the Credit Agreement and used herein
shall, unless otherwise indicated, have the meanings given to them in the Credit
Agreement.
4. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) SUBSECTION 1.1. Subsection 1.1 of the Credit Agreement is hereby
amended by deleting therefrom the definition of the following defined term in
its entirety and substituting in lieu thereof the following definition thereto:
"INITIAL PERIOD": the period commencing on the Closing Date and
ending on May 22, 1998.
5. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on
and as of the date that the Administrative Agent shall have received
counterparts of this Amendment, duly executed by the Borrower and the
Supermajority Lenders.
6. REPRESENTATIONS AND WARRANTIES. The Borrower as of the date hereof and
after giving effect to the amendment contained herein, hereby confirms,
reaffirms and restates the representations and warranties made by it in Section
5 of the Credit Agreement; PROVIDED, that each reference to the Credit Agreement
therein shall be deemed to be a reference to the Credit Agreement after giving
effect to this Agreement.
7. PAYMENT OF EXPENSES. The Borrower agrees to pay or reimburse the
Administrative Agent for all of its out-of-pocket costs and reasonable expenses
incurred
-14-
<PAGE>
in connection with the Amendment, any other documents prepared in connection
herewith and the transactions contemplated hereby, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.
8. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS; LIMITED EFFECT. On and
after the date hereof and the satisfaction of the conditions contained in
Section 3 of this Amendment, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to the
Credit Agreement, and each reference in the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby. The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any lender or the Agent under any of the Loan
Documents, nor constitute a waiver of any provisions of any of the Loan
Documents. Except as expressly amended herein, all of the provisions and
covenants of the Credit Agreement and the other Loan Documents are and shall
continue to remain in full force and effect in accordance with the terms thereof
and are hereby in all respects ratified and confirmed.
9. ADDITIONAL REVOLVING CREDIT COMMITMENT AND BORROWING BASE INCREASES.
The Chase Manhattan Bank ("CHASE") and Bankers Trust Company ("BTCO") by their
signature below hereby confirm that they have executed a commitment letter with
the Borrower providing for, among other things, the establishment of a Borrowing
Base of $150,000,000 effective on May 15, 1998 (which date is hereby
acknowledged and agreed by Chase and BTCo to be extended to May 22, 1998), an
increase in the Revolving Credit Commitment to $250,000,000 upon consummation of
the acquisition of assets from Shell Oil Company (the "SHELL TRANSACTION") and
an increase in the Borrowing Base to $200,000,000 upon consummation of the Shell
Transaction. Chase has committed to $150,000,000 and BTCo has committed
$100,000,000 in connection with such increases. All of the foregoing are subject
to the terms and conditions of such commitment letter, the term sheet annexed
thereto and the related fee letter.
10. COUNTERPARTS. This Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts (which may include
counterparts delivered by facsimile transmission) and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. Any
executed counterpart delivered by facsimile transmission shall be effective as
for all purposes hereof.
11. GOVERNING LAW. This Amendment and the rights and obligations of the
parties hereto shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective property and duly authorized
officers as of the day and year first above written.
THE MERIDIAN RESOURCE CORPORATION
By:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as Lender
By:
Title:
BANKERS TRUST COMPANY
By:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:
Title:
-16-
<PAGE>
HIBERNIA NATIONAL BANK
By:
Title:
MEESPIERSON CAPITAL CORPORATION
By:
Title:
THE SANWA BANK, LIMITED
By:
Title:
TORONTO DOMINION (TEXAS), INC.
By:
Title:
-17-
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1997
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<RECEIVABLES> 10,593
<ALLOWANCES> 121
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<CURRENT-ASSETS> 20,853
<PP&E> 325,345
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