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FILE NUMBER 333-__________
As filed with the Securities and Exchange Commission on November 30, 1998
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GOTHIC ENERGY CORPORATION
(Exact Name of Registrant as specified in its Charter)
OKLAHOMA 22-2663839
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
5727 SOUTH LEWIS AVENUE, SUITE 700, TULSA, OKLAHOMA 74105
(918) 749-5666
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
MICHAEL PAULK, PRESIDENT
5727 SOUTH LEWIS AVENUE, SUITE 700, TULSA, OKLAHOMA 74105
(918) 749-5666
(Name, address, including zip code, and telephone number, including area code,
of Agent for service)
With a Copy to:
WILLIAM S. CLARKE, ESQUIRE
457 NORTH HARRISON STREET, SUITE 103, PRINCETON, NEW JERSEY 08540
(609) 921-3663
Approximate date of commencement of proposed sale to public:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value (1) 1,737,452 $2.59 (2) $4,500,000 $1,251.00 (2)
- -----------------------------------------------------------------------------------------------
TOTAL $1,251.00
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</TABLE>
_______________________________
(1) Shares of Common Stock issuable on exercise of Common Stock Purchase
Warrants.
(2) The Registration Fee has been calculated pursuant to Rule 457(g) based on
the exercise price of the warrants of $2.59 per share, reflecting anti-
dilution adjustments.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Subject to Completion, dated November 30, 1998
PROSPECTUS
Gothic Energy Corporation
Gothic Energy Corporation acquires, develops, exploits, explores for and
produces natural gas and oil. We further describe these activities beginning on
page 6 and certain of the risks relating to an investment in our shares of
common stock beginning on page 11.
This Prospectus relates to the resale by Amoco Corporation of up to
1,737,452 shares of our common stock issuable on exercise of warrants to
purchase shares of our common stock held by Amoco Corporation. The warrants are
exercisable at $2.59 per share. The exercise price for the warrants is payable
either in cash or by surrender of shares of common stock having a current market
value equal to the exercise price. The warrants expire on November 24, 2002.
Our common stock is traded on the Nasdaq SmallCap Market with a trading
symbol of "GOTH." On November 19, 1998, the last sale price of our common stock
as reported on the Nasdaq SmallCap Market was $0.375. We have provided the high
and low bid prices for our common stock by calendar quarter commencing January
1, 1996 on page 20.
The shares of common stock may be sold by Amoco Corporation from time to
time by or for its account through underwriters or dealers, through brokers or
other agents, or directly to one or more purchasers, including pledgees, at
market prices prevailing at the time of sale or at otherwise negotiated prices.
We will receive no portion of the proceeds from the sale of the shares and will
bear certain expenses related to the preparation of this Prospectus. We have
provided more information on Amoco Corporation as a selling securityholder on
page 23 and the manner in which it may sell its shares of common stock on page
24.
WE ASK THAT YOU CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 11 OF
THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
November [_____], 1998
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT AND
INCORPORATED BY REFERENCE TO THE DOCUMENTS LISTED ON PAGES 4 AND 5. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. YOU SHOULD
NOT ASSUME THAT BY DELIVERING THIS PROSPECTUS TO YOU OR BY YOU PURCHASING ANY OF
THE SHARES OF COMMON STOCK THAT THERE HAS BEEN NO CHANGE IN THE FACTS CONTAINED
IN THIS PROSPECTUS OR OUR AFFAIRS SINCE THE DATE ON THE COVER OF THIS
PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
Table of Contents......................................................... 3
Where You Can Find More Information....................................... 4
About Gothic Energy Corporation........................................... 6
Our Business Strategy..................................................... 7
Some of Our Recent Developments........................................... 8
Risk Factors.............................................................. 11
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995..................... 18
Capitalization............................................................ 19
Price Range of Common Sock; Dividends Policy.............................. 20
Use of Proceeds........................................................... 21
Selling Securityholder.................................................... 22
Plan of Distribution...................................................... 23
Description of Capital Stock.............................................. 24
Legal Matters............................................................. 24
Independent Public Accountants............................................ 25
Glossary.................................................................. 26
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and its rules and regulations. This means that we file
reports, proxy and information statements and other information with the
Securities and Exchange Commission. The reports, proxy and information
statements and other information that we file can be read and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, Northwest, Washington, DC 20549; and at the Commission's regional
offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and at Seven World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can also be obtained from the Commission at prescribed rates
through its Public Reference Section at 450 Fifth Street, Northwest, Washington,
DC 20549. The Commission maintains a Web site that contains the reports, proxy
and information statements and other information that we file electronically
with the Commission and the address of that Web site is http://www.sec.gov. Our
common stock is traded on the Nasdaq SmallCap Market ("Nasdaq"). Information
filed by us with Nasdaq may be inspected at the offices of Nasdaq at 1735 "K"
Street, Northwest, Washington, DC 20006.
This Prospectus is part of a registration statement we filed with the
Commission. You should rely only on the information or representations provided
in this Prospectus and incorporated by reference. We have authorized no one to
provide you with any information other than that provided in this Prospectus.
We have authorized no one to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this Prospectus is
accurate as of any date other than the date on the front of the document
The Commission allows us to "incorporate by reference" into this Prospectus
the information we file with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this Prospectus, and
information that we file later with the Commission will automatically update and
supersede the information in this Prospectus. We incorporate by reference the
documents listed below and any future filings we will make with the Commission
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
(a) Our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997;
(b) Our Quarterly Reports on Form 10-QSB for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998;
(c) Our Current Reports on Form 8-K dated May 16, 1996, Form 8-K/A
filed July 30, 1996, Form 8-K dated December 27, 1996, Form 8-K dated
February 18, 1997, Form 8-K/A filed June 6, 1997, Form 8-K dated April 16,
1997, Form 8-K dated June 30, 1997, Form 8-K dated September 9, 1997 and
Form 8-K/A filed on October 3, 1997, Form 8-K dated November 25, 1997, Form
8-K dated January 23, 1998, Form 8-K/A filed January 30, 1998, Form 8-K/A
filed February 6, 1998, Form 8-K/A filed February 25, 1998, Form 8-K/A
filed April 8, 1998, Form 8-K dated March 31, 1998, and Form 8-K dated
April 27, 1998.
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You may obtain a free copy of these filings by writing or telephoning our
Investor Relations Department at the following address:
Gothic Energy Corporation
5727 South Lewis Avenue - Suite 700
Tulsa, Oklahoma 74105
(918) 749-5666
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Unless otherwise indicated, all financial and quantitative information
provided in this Prospectus on a "pro forma basis" give effect, on the date and
for the periods indicated, to certain acquisitions we effected during 1997, the
Amoco Acquisition (as we have defined it in this Prospectus) effective in
January 1998 and related financings, the completion of the Recapitalization (as
we have defined it in this Prospectus) in April 1998 and the application of the
estimated net proceeds therefrom. We believe that certain terms relating to the
natural gas and oil business used in this Prospectus may be understood only by
persons who are industry experts. Therefore, to aid other readers, we have
defined these terms in the "Glossary" beginning on page 27.
ABOUT GOTHIC ENERGY CORPORATION
We are an independent energy company primarily engaged, through our wholly
owned subsidiary, Gothic Production Corporation, in the acquisition,
development, exploitation, exploration and production of natural gas and oil. We
commenced natural gas and oil operations in 1994 with a business strategy
emphasizing acquisitions of long-lived, proved producing natural gas properties
with significant development and exploitation potential. As a result of this
strategy, we have grown primarily through 14 acquisitions of producing natural
gas and oil properties (including the Amoco Acquisition we describe below) for
total consideration of $337.8 million. Reflecting this successful growth, we
are currently pursuing a business strategy emphasizing the development and
exploitation of its existing asset base, maintenance of low cost operations and
selective strategic acquisitions. As of September 30, 1998, we had proved
reserves of 328.4 Bcfe, of which approximately 94% were natural gas, with a PV-
10 of approximately $241.2 million. These reserves, of which 83% were classified
as proved developed, had an estimated Reserve Life of approximately 11.2 years.
Our natural gas and oil reserves and acreage are principally located in the
Anadarko, Arkoma and Permian/Delaware basins, which are historically prolific
basins with multiple producing horizons and long-lived reserves. These basins
generally provide significant development and exploitation potential through
low-risk infill drilling and the implementation of new workover, drilling and
recompletion technologies. We have initiated a comprehensive development and
exploitation program designed to increase our natural gas and oil reserves,
production, earnings, cash flow and net asset value by enhancing proved
producing reserves and converting proved undeveloped reserves to proved
producing reserves. In addition, we entered into a participation agreement
involving the drilling of substantially all of our undeveloped acreage with
Chesapeake Energy Corporation ("Chesapeake") which will support our
comprehensive development and exploitation program. During the fifteen months
ended September 30, 1998, since the inception of this program and entering into
the agreement with Chesapeake, we have drilled 24 wells, 23 of which have been
completed and are producing, and, at September 30, 1998, we had an additional 11
wells in various stages of completion. We have not engaged in any material
exploration activities, but intend to devote a limited amount of capital in the
future to pursue "controlled-risk" exploration opportunities.
At September 30, 1998, we held an interest in approximately 620,000 gross
acres (310,000 net acres) and had an interest in 1,254 gross wells (559 net
wells). We serve as operator of approximately 635 of the wells in which it has
an interest. Operated wells account for approximately 70% of the PV-10 of our
proved reserves as of September 30, 1998.
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<PAGE>
OUR BUSINESS STRATEGY
Our business objective is to increase our reserves, production, earnings,
cash flow and net asset value through a growth strategy that includes:
. developing, exploiting and exploring our natural gas and oil
properties,
. maintaining a low operating cost structure, and
. acquiring strategic natural gas and oil properties in a disciplined
manner.
WE FURTHER DESCRIBE THIS STRATEGY AS FOLLOWS:
Development, Exploitation and Exploration. We seek to maximize the
value of our natural gas and oil properties through development drilling,
workovers, recompletions, reductions in operating costs and enhanced operating
efficiencies. Our core areas are characterized by properties with multiple pay
zones that allow for integrated analysis of stratigraphic, seismic and well
control data to identify development and exploitation opportunities. Through
such analysis, we have, as of September 30, 1998, identified 224 development and
exploitation projects within our properties, of which 104 have been assigned
proved undeveloped reserves. Our development drilling program includes plans to
spend approximately $6.0 to $8.0 million to drill approximately 10 to 15
additional wells during the remainder of 1998 and to spend approximately $25.0
million to drill approximately 35 to 45 wells, many of which are infill
development wells or proved undeveloped locations, in 1999. We also continually
evaluate and pursue exploitation opportunities, including workover and
recompletion projects. We intend to devote a limited amount of capital in the
future to pursue "controlled-risk" exploration opportunities by drilling on
undeveloped acreage in areas in close proximity to producing properties. We
believe geological and geophysical data, including 3-D and 2-D seismic surveys
acquired in the Amoco Acquisition, will enable us to reduce costs and risks
associated with drilling activities throughout its core areas.
Maintain Low Cost Operations. We are able to directly control operating and
drilling costs as the operator of wells comprising approximately 70% of the PV-
10 of our proved reserves as of September 30, 1998. In addition, we have been
able to reduce per unit operating costs by eliminating unnecessary field and
corporate overhead costs and by divesting marginal and non-strategic properties
with limited development potential. Our lease operating expenses have decreased
69%, from $1.29 per Mcfe of production in 1995 to $0.40 per Mcfe for the nine
months ended September 30, 1998. Further, our general and administrative
expenses per Mcfe of production have decreased 90%, from $1.15 per Mcfe to$0.12
per Mcfe over the same period. We intend to further improve our efficiency of
and reduce the operating costs associated with well operations through the use
of advanced wireless technology we licensed as part of the Amoco Acquisition.
This technology enables us to remotely monitor well operations, thereby reducing
the need for on-site monitoring personnel. We intend to deploy this technology
throughout many of our producing properties in the Anadarko and Arkoma basins.
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<PAGE>
Strategic Acquistions. We intend to pursue additional strategically
attractive acquisitions to the extent our capital structure allows. With the
completion of the Amoco Acquisition, however, we have reduced the emphasis on
acquisitions in our current business strategy. We have increased our reserves
through acquisitions, having added 424.9 Bcfe through 14 acquisitions, since
November 1994, at a total acquisition cost of $337.8 million, or an average cost
of $0.80 per Mcfe. We utilize a disciplined acquisition strategy, focusing our
acquisition efforts on producing natural gas properties within our core areas
with:
. relatively long-lived natural gas production,
. quantifiable development and exploitation potential,
. low risk exploration potential,
. historically low operating expenses or the potential to reduce
operating expenses,
. close proximity to our existing production or in areas where we have
the ability to develop operating economies of scale and
. geological, geophysical and other technical and operating
characteristics with which our management has expertise.
We apply strict economic and reserve risk criteria in evaluating
acquisitions of natural gas and oil properties and companies.
SOME OF OUR RECENT DEVELOPMENTS
OUR RECAPITALIZATION.
On April 27, 1998, we completed a series of transactions intended to
recapitalize us through the following:
. the creation of Gothic Production Corporation and transfer of all of
our natural gas and oil assets to our wholly owned subsidiary (we
refer to Gothic Production Corporation as "GPC" when we want to
distinguish it from the parent corporation),
. the issuance of shares of our Series B Preferred Stock,
. the sale of certain of our assets for $20.0 million, subject to
closing adjustments,
. the execution of a participation agreement granting a 50% interest
in substantially all of our undeveloped acreage,
. the issuance by GPC of its Senior Secured Notes due 2005,
. the issuance of our 14-1/8% Discount Notes due 2006, and
. the repayment and/or refinancing of substantially all of our then
existing debt and preferred securities (we refer to all these
transactions in this Prospectus as the "Recapitalization").
Certain transactions undertaken in the Recapitalization are described in
greater detail below:
Corporate Restructuring. GPC was organized as our wholly owned subsidiary.
At the closing of the Recapitalization, we transferred to GPC our ownership of
all our natural gas and oil properties. We hold all of the outstanding capital
stock of GPC which is pledged to secure our obligations under our Discount
Notes. The natural
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<PAGE>
gas and oil assets owned by GPC secure its obligations under a credit facility
with Bank One, Texas, N.A. as well as its Senior Secured Notes.
The Chesapeake Transaction. On April 27, 1998, we completed several
agreements with Chesapeake Energy Corporation pursuant to which we:
. sold a 50% interest in substantially all of our undeveloped acreage,
. sold for $20.0 million, subject to closing adjustments, a 50%
interest in our natural gas and oil properties in the Arkoma basin,
and
. sold 50,000 shares of Series B Preferred Stock, having a liquidation
value of $50.0 million, and ten-year warrants to purchase, at an
exercise price of $0.01 per share, 2,439,246 shares of our common
stock.
In addition to providing us with additional capital to facilitate the
completion of the Recapitalization, the transaction with Chesapeake was intended
to provide technical expertise, a historic drilling track record and the
financial resources to implement our comprehensive development and exploitation
program in the Mid-Continent region.
Financing Transactions. The following financing transactions were completed
as part of the Recapitalization:
14-1/8% Senior Secured
Discount Notes.................. We sold approximately $60.2 million
initial principal amount ($104.0 million
principal amount at maturity) of our
Discount Notes secured by the outstanding
capital stock of GPC we hold, together with
warrants to purchase an aggregate of 825,000
shares of our common stock..
11-1/8% Senior Secured Notes.... GPC sold $235.0 million principal amount of
its Senior Secured Notes.
Series B Preferred Stock
and Warrants.................... We sold 50,000 shares of Series B
Preferred Stock, having a liquidation
preference of $50.0 million, and ten-year
common stock purchase warrants exercisable
at $0.01 per share to purchase 2,439,246
shares of common stock.
Arkoma Property Sales........... We sold for $20.0 million, subject to
closing adjustments, a 50% interest in our
natural gas and oil properties in the Arkoma
basin.
Credit Facility................ GPC entered into a credit facility with Bank
One, Texas, N.A. which provides, among other
things, for an initial borrowing
availability to GPC of approximately $25.0
million. There were no borrowings
outstanding under this credit facility as of
September 30, 1998.
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Repayments and Redemptions. The net proceeds of approximately $350.5
million from the Recapitalization described above were applied to repay or
redeem the following:
12 1/4% Senior Notes............ These notes, outstanding in the principal
amount of approximately $99.3 million, were
redeemed for approximately $102.3 million,
inclusive of a 1% redemption premium and
accrued interest.
Series A Preferred Stock........ These shares were redeemed for $38.7
million, inclusive of a 1% redemption
premium and payment-in-kind dividends
through the redemption date.
Former Bank Credit Facility..... We repaid an aggregate of $206.4 million of
bank indebtedness.
OUR ACQUISITION OF NATURAL GAS AND OIL PROPERTIES FROM AMOCO CORPORATION
On January 23, 1998, we purchased from Amoco Production Company, a
subsidiary of Amoco Corporation, natural gas producing properties located in the
Anadarko and Arkoma basins of Oklahoma. The consideration we paid consisted of
$237.5 million in cash, subject to certain post-closing adjustments, warrants to
purchase 1.5 million shares of our common stock exercisable at $3.00 per share
(before reflecting subsequent anti-dilution adjustments), and the transfer of
certain producing properties we owned having a value of approximately $1.8
million. The purchase had an effective date of December 1, 1997. The Amoco
Acquisition involved interests in 821 gross wells, operation of 291 of the
properties and approximately 240.0 Bcfe of proved reserves with a PV-10 of
approximately $230.1 million as of December 31, 1997. Of the proved reserves we
acquired, 96% were natural gas and 71% were producing with net daily production
of approximately 60 Mmcfe. The cash portion of the consideration for the Amoco
Acquisition was financed with approximately $216.4 million of borrowings under
our former credit facility, including $156.4 million borrowed under a three-year
revolving loan and $60.0 million borrowed under a six-month bridge loan. In
addition, we issued 37,000 shares of Series A Preferred Stock with an aggregate
liquidation preference of $37.0 million both to pay a portion of the cash
consideration for the Amoco Acquisition and to pay related fees and expenses.
The shares issuable on exercise of the warrants issued in the Amoco Transaction,
after reflecting anti-dilution adjustments, are the subject of this Prospectus.
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RISK FACTORS
You should consider, in addition to the other information in this
Prospectus and incorporated by reference, the following risk factors to when
deciding whether to make an investment in our common stock.
RISKS WE FACE IN OUR BUSINESS
SUBSTANTIAL INDEBTEDNESS
At September 30, 1998, we had $298.9 million of long-term indebtedness as
compared to a negative stockholders' equity of $36.1 million. This level of
indebtedness may pose substantial risks to us and the holders of our securities.
These risks would include the possibility that we may not generate sufficient
cash flow to pay the principal of and interest on our indebtedness and the risk
of default thereunder. Our historical earnings were insufficient to cover our
fixed charges, including preferred dividends, by $5.7 million and $3.9 million
for the years ended December 31, 1996 and 1997, respectively, and by $59.0
million for the nine months ended September 30, 1998. On a pro forma basis, our
earnings were insufficient to cover fixed charges by $19.4 million for the year
ended December 31, 1997. If we are unsuccessful in increasing our proved
reserves or realizing production from our proved undeveloped reserves, our
future net revenue from existing proved reserves may not be sufficient to pay
the principal of and interest on our indebtedness in accordance with their
terms. Our levels of indebtedness may also adversely affect our ability to
incur additional indebtedness and finance our future operations and capital
needs, and may limit our ability to pursue other business opportunities. The
agreements under which our indebtedness is outstanding contain financial and
other restrictive covenants which could limit our operating and financial
flexibility and, if violated, would result in an event of default which could
preclude our access to credit under our bank credit facility or otherwise have a
material adverse effect on us. A default under the credit facility could lead
to a foreclosure against the assets that collateralize such indebtedness. In
addition, the terms of our indebtedness contain provisions whereby a default
under one loan agreement may also constitute a default under other indebtedness.
If we should default under the terms of one loan agreement such default could
also constitute an event of default under other indebtedness which could result
in all of such indebtedness becoming immediately due and payable. There are
currently no defaults under any of our outstanding indebtedness.
VOLATILITY OF NATURAL GAS AND OIL PRICES; FULL COST WRITE DOWN
Our revenues, profitability, cash flow, ability to service debt and future
growth will be substantially dependent on prevailing prices for natural gas and
oil. The amounts of and prices obtainable for our natural gas and oil production
will be affected by market factors beyond our control. These include the extent
of domestic production, the level of imports of foreign natural gas and oil, the
general level of market demand on a regional, national and worldwide basis,
domestic and foreign economic conditions that determine levels of industrial
production, political events in foreign oil producing regions, and variations in
governmental regulations and tax laws or the imposition of new governmental
requirements upon the natural gas and oil industry, among other factors. Prices
for natural gas and oil are subject to worldwide fluctuation in response to
relatively minor changes in supply of and demand for natural gas and oil, market
uncertainty and a variety of additional factors that are beyond our control. Any
significant decline in natural gas and oil prices would have a material adverse
effect on us, including our inability to fund planned operations and capital
expenditures, write downs of the carrying value of its natural gas and oil
properties, and our inability to meet debt service requirements resulting in
defaults under bank loans and other indebtedness. In addition, the marketability
of our natural gas and oil production will depend in part upon the availability,
proximity and capacity of gathering systems, pipelines and processing
facilities.
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On September 30, 1998, the prices of natural gas and oil we received and
upon which our reserves were determined had decreased to $1.95 per mcf and
$13.55 per barrel, resulting in a full cost ceiling write-down of $34.0 million
for the period ended September 30, 1998. Subsequent to September 30, 1998 the
natural gas industry experienced a further decline in natural gas prices. At
October 30, 1998 the natural gas price we received fell to approximately $1.65
per Mcf. Had the October 30, 1998 prices been used in the evaluation, the
decline in natural gas prices would have resulted in an additional provision to
reduce our natural gas and oil properties by approximately $40.0 million. Based
on rules promulgated by the Commission, we evaluate any impairment of our
natural gas and oil properties, based on prevailing prices as of the end of each
quarter, and accordingly, the actual amount of additional impairment if any,
will not be determinable until the end of the fourth quarter.
RESTRICTIONS IMPOSED BY LENDERS
The instruments governing our indebtedness impose significant operating and
financial restrictions on us. Such restrictions will affect, and in many
respects significantly limit or prohibit, among other things, our ability to
incur additional indebtedness, pay dividends, repay indebtedness prior to its
stated maturity, sell assets or engage in mergers or acquisitions. These
restrictions could also limit our ability to effect future financings, make
needed capital expenditures, withstand a future downturn in our business or the
economy in general, or otherwise conduct necessary corporate activities. Our
failure to comply with these restrictions could lead to a default under the
terms of such indebtedness. In the event of default, the holders of such
indebtedness could elect to declare all of those funds borrowed to be due and
payable together with accrued and unpaid interest. In such event, there can be
no assurance that we would be able to make such payments or borrow sufficient
funds from alternative sources to make any such payment. If GPC were unable to
repay all amounts declared due and payable under the credit facility or its
Senior Secured Notes, the lenders thereunder could proceed against the
collateral granted to satisfy the indebtedness and other obligations due and
payable. If the bank credit facility indebtedness or the Senior Secured Notes
of GPC were to be accelerated, there can be no assurance that the assets of GPC
would be sufficient to repay in full such indebtedness and our other
indebtedness. Even if additional financing could be obtained, there can be no
assurance that it would be on terms that are favorable or acceptable to us. In
addition, the obligations under the bank credit facility and GPC's Senior
Secured Notes are secured by substantially all of the assets of GPC. The pledge
of such collateral to existing lenders could impair our ability to obtain
favorable financing from other sources.
ABILITY TO MANAGE GROWTH
Although individual members of our management have significant experience
in the natural gas and oil industry, we have been engaged in the natural gas and
oil business for less than four years and have a limited operating history upon
which investors may base their evaluation of our performance. As a result of our
brief operating history and rapid growth, our operating results from historical
periods are not readily comparable and, as a consequence of the Amoco
Acquisition, are not expected to be indicative of future results. There can be
no assurance that we will continue to experience growth in, or maintain our
current level of, revenues, natural gas and oil reserves or production. Our
natural gas and oil operations to date have focused on the acquisition of
producing natural gas and oil properties. Our business plan and reserve reports
include the drilling of approximately 35 to 45 development wells during 1999.
The Amoco Acquisition and any future growth of our natural gas and oil
reserves, production and operations will place significant demands on our
operational, administrative and financial resources, and the increased scope of
operations will present challenges to us due to increased management time and
resources required. Our future performance and profitability will depend in part
on our ability to successfully integrate the
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operational, financial and administrative functions of acquired properties into
our operations, to hire additional personnel and to implement necessary
enhancements to our management systems to respond to changes in our business.
There can be no assurance that we will be successful in these efforts. Our
inability to integrate acquired properties, to hire additional personnel or to
enhance our management systems could have a material adverse effect on our
results of operations.
LIMITATION ON THE PAYMENT OF FUNDS TO US BY GPC
Our cash flow, and consequently our ability to pay dividends and to service
our debt, is dependent upon the cash flows of GPC and the payment of funds by
GPC to us, as its parent corporation, in the form of loans, dividends, or
otherwise. The terms of our outstanding indebtedness impose, and agreements
entered into in the future may impose, significant restrictions on the payment
of dividends and the making of loans by GPC to us. Under the terms of our
outstanding indebtedness, subject to certain restrictions, GPC is permitted to
pay dividends to us equal to the semi-annual interest payments due on our
Discount Notes; provided that upon a notice of default or event of default under
the terms of our outstanding indebtedness, GPC will be prohibited from paying
such dividends until the date such default or event of default is cured or
waived. Accordingly, in such an event, repayment of the Discount Notes may
depend upon our ability to effect an offering of capital stock or to refinance
the Discount Notes. A default under the Discount Notes or any other outstanding
indebtedness would have a material adverse effect on holders of our common
stock.
RISK OF HEDGING ACTIVITIES
In an attempt to reduce our sensitivity to energy price volatility, we use
swap arrangements that generally result in a fixed price for sales of its
natural gas and oil production over periods of up to 12 months. If our reserves
are not produced at rates equivalent to the hedged position, we would be
required to satisfy our obligations under hedging contracts on potentially
unfavorable terms without the ability to hedge that risk through sales of
comparable quantities of our own production. Hedging contracts limit the
benefits we will realize if actual prices rise above the contract prices. In
addition, hedging contracts are subject to the risk that the other party may
prove unable or unwilling to perform its obligations under such contracts. Any
significant non-performance could have a material adverse financial effect on
us. These arrangements provide for us to exchange a floating market price for a
fixed contract price. Payments are made by us when the floating price exceeds
the fixed price for a contract month and payments are received when the fixed
price exceeds the floating price. Settlements on these swaps are based on the
difference between the approximate average closing NYMEX price for a contract
month and the fixed contract price for the same month.
We were required under the terms of our credit facility in effect prior to
the Recapitalization to enter into hedging agreements covering a portion of our
natural gas production. Because of this hedging activity, our financial risk
resulting from possible declines in the price of natural gas was reduced;
however, our ability to benefit from increases in the price of natural gas was
limited. While we are no longer required under the terms of our bank loan
agreement to maintain any minimum amounts of hedging agreements, we expect we
will continue to enter into such agreements in the future. Any reduction in our
hedging activity will subject us to more significant fluctuations in production
revenues resulting from price volatility.
During 1998, we had swap agreements relating to the sale of 5,000 Mcf per
day at a price of $2.55 per Mcf and 15,000 Mcf per day at a price of $2.45 per
Mcf during the period January 1, 1998 through March 31, 1998. In February 1998,
we entered into swap agreements relating to the sale of 62,000 Mcf per day
during the period
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April 1, 1998 through October 31,1998 at an average price of $2.09 per Mcf. Swap
agreements relating to 7,000 Mcf per day were effectively cancelled in June 1998
when we entered into opposing contracts with respect to the 7,000 Mcf per day.
Of the remaining 55,000 Mcf per day, 25,000 Mcf per day is subject to a "call
spread" agreement which provides that we will receive additional payments if the
actual sales price of natural gas is between $2.30 and $2.70 per Mcf during the
period. The swap agreements for the period April through October 1998 covered
approximately 80% of Gothic's current natural gas production. In addition, we
have entered into a swap agreement relating to the sale of 60,000 Mcf per day at
a "floor" price of $2.10 per Mcf during the period November 1998 through March
1999, and we have entered into a swap agreement for the month of December 1998
relating to the sale of 40,000 MMBTU per day at a price of $2.345 per MMBTU.
NEED TO REPLACE OUR RESERVES
Our success is substantially dependent on our ability to replace and expand
our natural gas and oil reserves through the acquisition of producing properties
and the exploitation and development of our properties. These activities
involve substantial risk. Without successful acquisition or drilling ventures,
we will be unable to replace the reserves being depleted by production, and our
assets and revenues, including the reserves, will decline. Our strategy
includes increasing our reserve base through continued exploitation of our
existing properties, exploration of new and existing properties and acquisitions
of producing properties. There can be no assurance that our acquisition and
development activities will result in the replacement of, or additions to, our
reserves. Similarly, there can be no assurance that we will have sufficient
capital to engage in our acquisition or development activities. Successful
acquisition of producing properties generally requires accurate assessments of
recoverable reserves, future natural gas and oil prices, operating costs,
potential environmental and other liabilities and other factors. Such
assessments are necessarily inexact, and as estimates their accuracy is
inherently uncertain.
ACQUISITION RISKS
Our rapid growth since we commenced natural gas and oil operations has been
largely the result of acquisitions of producing properties. We expect to
continue to evaluate and pursue acquisition opportunities available on terms our
management considers favorable. The successful acquisition of producing
properties requires an assessment of recoverable reserves, future natural gas
and oil prices, operating costs, potential environmental and other liabilities
and other factors beyond our control. This assessment is necessarily inexact
and its accuracy is inherently uncertain. In connection with such an
assessment, we perform a review of the subject properties we believe to be
generally consistent with industry practices. This review, however, will not
reveal all existing or potential problems, nor will it permit a buyer to become
sufficiently familiar with the properties to assess fully their deficiencies and
capabilities. Inspections may not be performed on every well, and structural and
environmental problems are not necessarily observable even when an inspection is
undertaken. We generally assume pre-closing liabilities, including
environmental liabilities, and generally acquire interests in the properties on
an "as is" basis. With respect to our acquisitions to date, we have no material
commitments for capital expenditures to comply with existing environmental
requirements. There can be no assurance that our acquisitions will be
successful. Any unsuccessful acquisition could have a material adverse effect
on us.
DRILLING AND OPERATING RISKS
Drilling activities are subject to many risks, including the risk that no
commercially productive reservoirs will be encountered. There can be no
assurance that new wells we drill will be productive or that we will recover all
or any portion of our investment. Drilling for natural gas and oil may involve
unprofitable efforts, not only from
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dry wells, but from wells that are productive but do not produce sufficient net
revenues to return a profit after drilling, operating and other costs. The cost
of drilling, completing and operating wells is often uncertain. Our drilling
operations may be curtailed, delayed or canceled as a result of numerous
factors, many of which are beyond our control. These include economic
conditions, mechanical problems, title problems, weather conditions, compliance
with governmental requirements and shortages or delays of equipment and
services. Our future drilling activities may not be successful and, if
unsuccessful, such failure may have a material adverse effect on our future
results of operations or financial condition.
In addition to the substantial risk that wells drilled will not be
productive, hazards such as unusual or unexpected geologic formations,
pressures, downhole fires, mechanical failures, blowouts, cratering, explosions,
uncontrollable flows of natural gas, oil or well fluids, pollution and other
physical and environmental risks are inherent in natural gas and oil exploration
and production. These hazards could result in substantial losses to us due to
injury and loss of life, severe damage to and destruction of property and
equipment, pollution and other environmental damage and suspension of
operations. As a protection against operating hazards, we maintain insurance
coverage against some, but not all, potential losses, as is common in the
natural gas and oil industry. We do not fully insure against all risks
associated with our business either because such insurance is not available or
because the cost thereof is considered prohibitive. The occurrence of an event
that is not covered, or not fully covered, by insurance could have a material
adverse effect on our financial condition and results of operations.
UNCERTAINTY OF ESTIMATES OF RESERVES AND FUTURE NET REVENUES; SIGNIFICANT
UNDEVELOPED RESERVES
There are numerous uncertainties inherent in estimating quantities of
proved reserves, including many factors beyond our control. Information as to
our reserves represents estimates based on reports prepared by our independent
petroleum engineers, as well as internally generated reports. Petroleum
engineering is not an exact science. Information relating to proved natural gas
and oil reserves is based upon engineering estimates derived after analysis of
information we furnished or the operator of the property furnished. Estimates of
economically recoverable natural gas and oil reserves and of future net cash
flows necessarily depend upon a number of variable factors and assumptions.
These include historical production from the area compared with production from
other producing areas, the assumed effects of regulations by governmental
agencies and assumptions concerning future natural gas and oil prices, future
operating costs, severance and excise taxes, capital expenditures and workover
and remedial costs. All of these may in fact vary considerably from actual
results. Natural gas and oil prices, which fluctuate over time, may also affect
proved reserve estimates. For these reasons, estimates of the economically
recoverable quantities of natural gas and oil attributable to any particular
group of properties, classifications of such reserves based on risk of recovery
and estimates of the future net cash flows expected from the properties which
are prepared by different engineers or by the same engineers at different times
may vary substantially. Actual production, revenues and expenditures with
respect to our reserves will likely vary from estimates, and such variances may
be material. Approximately 17% of our estimated PV-10 of proved reserves as of
September 30, 1998 are classified as undeveloped. Either changes in estimates of
proved undeveloped reserves or the inability to fund development could result in
substantially reduced reserves. In addition, the timing of receipt of estimated
future net revenues from proved undeveloped reserves will be dependent upon the
timing and implementation of drilling and development activities estimated by us
for purposes of the reserve report.
FUTURE CAPITAL REQUIREMENTS
We have made, and will continue to make, substantial capital expenditures
for the acquisition, development and production of natural gas and oil reserves,
particularly since a portion of our proved reserves consists of proved
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undeveloped reserves which require significant capital expenditures to develop.
We have budgeted capital expenditures of approximately $25.0 million for the
year ending December 31, 1999. We are not contractually committed to expend
these funds. We currently expect that available cash, cash flows from
operations, proceeds from the private or public sale of debt or equity
securities, borrowings under the bank credit facility, and sales of certain
natural gas and oil properties will be sufficient to fund our debt service
requirements and planned capital expenditures for our existing properties
through 1999. However, we may need to raise additional capital to fund
acquisitions and the development of properties acquired, which capital may not
be available to us.
Under the terms of our transaction with Chesapeake Energy Corporation
entered into in April 1998, both Chesapeake and we are permitted to designate
acreage for development drilling by giving written notice to the other party. In
order for us to participate in any drilling proposals submitted by Chesapeake in
the acreage which is the subject of our participation agreement, we will need to
have available sufficient funds or borrowing availability to participate in the
proposed drilling activity. Certain terms of the participation agreement limit
the number of wells to be proposed by either party to the amount that would
require capital expenditures by us of $15.0 million in 1998 and $25.0 million in
1999. In the event we should not have funds available at the time, our interest
in the well could be forfeited.
We may seek additional capital, if required, from traditional reserve base
borrowing, equity and debt offerings or joint ventures to further develop and
exploit our properties and to acquire additional properties, subject to the
limitations contained in the terms of our outstanding indebtedness. Our ability
to access additional capital will depend on our continued success in developing
our natural gas and oil reserves and the status of the capital markets at the
time such capital is required. Accordingly, there can be no assurance that
capital will be available to us from any source or that, if available, it will
be at prices or on terms acceptable to us. Should we be unable to access the
capital markets or should sufficient capital not be available, the development
and exploitation of our properties could be delayed or reduced and, accordingly,
natural gas and oil revenues and operating results may be adversely affected.
RISKS WE OTHERWISE FACE
POSSIBLE DELISTING OF COMMON STOCK FROM THE NASDAQ SMALLCAP MARKET
In order for our common stock to continue to be traded on the Nasdaq Small
Cap Market, we must continue to meet the listing requirements of the Nasdaq
SmallCap Market and maintain certain minimum financial and corporate governance
requirements. Continued inclusion on the SmallCap Market generally requires that
(i) we maintain (A) at least $2.0 million in net tangible assets ("net tangible
assets" equals total assets less total liabilities and goodwill) or (B) a $35.0
million market capitalization or (C) generate net income of at least $500,000 in
two of the three prior years; (ii) there be at least 500,000 shares in the
public float valued at $1.0 million or more; (iii) the minimum bid price of the
common stock be $1.00 per share; (iv) the common stock have at least two active
market makers; (v) the common stock be held by at least 300 holders; and (vi) we
have at last two independent directors.
As of September 30, 1998, our common stock had traded at a price below
$1.00 per share for the prior thirty (30) consecutive trade dates. Therefore,
our shares of common stock are subject to delisting. We must demonstrate
compliance with the minimum $1.00 bid price on or before December 11, 1998 and
if we fail to do so, our shares will be delisted. In addition, our net tangible
assets at September 30, 1998 were below $2.0 million which can be expected to
result in a delisting of our common stock from the SmallCap Market. If our
shares are delisted, trading, if any, in the common stock would thereafter be
conducted in the over-the-counter markets in the so-called "pink sheets" or the
NASD's "Electronic Bulletin Board." Consequently, the liquidity of our
securities
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could be impaired through a more limited market for our securities, possible
delays in the timing of the transactions and lower prices for our securities
than might otherwise be attained.
RELIANCE ON KEY PERSONNEL
We are dependent upon the services of our Chief Executive Officer and
President, Michael Paulk. The loss of his services could have a material
adverse effect on us. We have entered into an employment agreement with Mr.
Paulk, expiring on December 31, 1999. In addition, we have obtained a policy of
life insurance on Mr. Paulk in the amount of $1.0 million, naming GPC as
beneficiary.
GOVERNMENTAL REGULATION
Our operations are affected by extensive regulation under various federal,
state and local laws and regulations relating to the exploration for and
development, production, gathering and marketing of natural gas and oil and the
release of materials into the environment. In particular, our natural gas and
oil exploration, development and production and our activities in connection
with storage and transportation of liquid hydrocarbons are subject to stringent
environmental regulation by governmental authorities. Such regulations have
increased the costs of planning, designing, drilling, installing, operating and
abandoning natural gas and oil wells and other related facilities.
Although we believe that our operations are in general compliance with all
such laws and regulations, including applicable environmental laws and
regulations, risks of substantial costs and liabilities are inherent in natural
gas and oil operations. There can be no assurance that significant costs and
liabilities will not be incurred in the future. Moreover, it is possible that
other developments, such as increasingly strict environmental laws, regulations
and enforcement policies thereunder, and claims for damages to property,
employees, other persons and the environment resulting from our operations,
could result in substantial costs and liabilities in the future.
The discharge of natural gas, oil or other pollutants into the air, soil or
water may give rise to significant liabilities on our part to the government and
third parties, It may require us to incur substantial costs of remediation.
Moreover, we have agreed to indemnify sellers of producing properties purchased
by us, including Amoco Corporation, among others, against environmental claims
associated with such properties. No assurance can be given that existing
environmental laws or regulations, as currently interpreted or reinterpreted in
the future, or future laws or regulations will not materially adversely affect
our results of operations and financial condition or that material indemnity
claims will not arise against us with respect to properties we acquired.
COMPETITION
The natural gas and oil industry is highly competitive. We compete with
other companies in acquisitions and the development, production and marketing of
natural gas and oil with major oil companies, other independent natural gas and
oil concerns, and individual producers and operators. Many of these competitors
have substantially greater financial and other resources than we have.
Furthermore, the natural gas and oil industry competes with other industries in
supplying the energy and fuel needs of industrial, commercial and other
consumers.
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CAUTIONARY STATEMENT FOR PURPOSES OF THE
"SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed in this
Prospectus are "forward-looking statements" as defined under the Securities
Exchange Act of 1934, as amended, that involve risks and uncertainties. The
words "anticipate," "believe," "expect," "plan," "intend," "estimate,"
"project," "forecasts," "will, "could," "may" and similar expressions are
intended to identify forward-looking statements. Forward-looking statements
include, but are not limited to, statements under the following headings:
"Business Strategy," "Risk Factors;" "- Ability to Manage Growth," "-
Volatility of Oil and Natural Gas Prices and Markets," "- Risk of Hedging
Activities," "- Replacement of Reserves," "Acquisition Risks," "- Uncertainty of
Estimates of Reserves and Future Net Revenues; Significant Undeveloped Reserves"
and "- Future Capital Requirements." Such forward-looking statements relate to
our capital requirements, business strategy, ability to attain and maintain
profitability and cash flow, dependence upon the acquisition of and ability to
acquire additional oil and gas properties or entering into joint oil and gas
well development arrangements, access to debt and equity capital and
availability of joint venture development arrangements, estimates as to our
needs for additional capital and the times at which such additional capital will
be required, expectations as to the sources of this capital and funds, ability
to successfully implement our business strategy, ability to identify and
integrate successfully any additional producing oil and gas properties we
acquire and whether such properties can be operated profitably, ability to
maintain compliance with covenants of our various loan documents and other
agreements pursuant to which securities have been issued, ability to borrow
funds or maintain levels of borrowing availability under credit arrangements,
statements about proved reserves or borrowing availability based on proved
reserves and future net cash flows and the present value thereof and
Supplementary Oil and Gas Information in Note 10 to Notes to Consolidated
Financial Statements. We caution readers that various risk factors referred to
above and described in this Prospectus could cause our operating results to
differ materially from those expressed in any forward-looking statements made by
us and could adversely affect our ability to pursue our business strategy.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and our
capitalization at September 30, 1998. The data should be read in conjunction
with our historical financial statements incorporated herein by reference.
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS)
------------------------
Cash and cash equivalents $ 16,722
========================
Total debt, including current portion
Credit Facility $ -
11-1/8% Senior Secured Notes due 2005 235,000
14-1/8% Senior Secured Discount Notes due 2006 63,943
------------------------
TOTAL DEBT $ 298,943
Stockholders' equity
Series B preferred stock, par value $0.05,
authorized 165,000 shares; 51,052 shares
issued and outstanding 34,892
Common Stock, $0.01 par value, 100,000,000
shares authorized; 16,261,640 shares
issued and outstanding 162
Additional paid-in capital 42,997
Accumulated deficit (113,969)
Note receivable (169)
------------------------
TOTAL STOCKHOLDERS' EQUITY (36,087)
------------------------
TOTAL CAPITALIZATION $ 262,856
========================
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PRICE RANGE OF COMMON STOCK; DIVIDEND POLICY
Our Common Stock is quoted on the NASDAQ SmallCap Market under the symbol
GOTH. The following table sets forth the high and low bid quotations on the
NASDAQ SmallCap Market for our Common Stock by calendar quarter for the period
January 1, 1996 through November 19, 1998. See "Risk Factors - Possible
Delisting of Common Stock from the Nasdaq SmallCap Market."
BID
------------------------------------
CALENDAR QUARTER HIGH LOW
- -------------------------------------------------------------------------
1996
First Quarter 2-3/4 1-9/16
Second Quarter 3 2-1/4
Third Quarter 2-3/4 2
Fourth Quarter 2-13/16 2-1/8
1997
First Quarter 3 2-3/8
Second Quarter 2-1/2 1-3/4
Third Quarter 2-11/16 1-7/8
Fourth Quarter
1998
First Quarter 3-1/16 1-13/16
Second Quarter 2-3/8 1-3/16
Third Quarter 1-19/32 9/16
Fourth Quarter 23/32 5/16
(through November 19)
The foregoing amounts, represent inter-dealer quotations without adjustment
for retail markups, markdowns or commissions and do not represent the prices of
actual transactions. On November 19, 1998, the closing bid quotations for our
common stock, as reported on the NASDAQ SmallCap Market, was $0.375.
As of September 30, 1998, we had approximately 125 shareholders of record
and believe that we have in excess of 500 beneficial holders.
We do not intend to pay any dividends on our common stock for the
foreseeable future. Any determination as to the payment of dividends on the
common stock in the future will be made by the Board of Directors and will
depend on a number of factors, including future earnings, capital requirements,
financial condition and future prospects as well as restrictions in our current
or future financing agreements and such other factors as the Board of Directors
may deem relevant. Under the terms of our bank credit facility we are prohibited
from paying cash
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dividends on our common stock and the terms of the Senior Secured Notes and the
Discount Notes impose restrictions on our ability to pay cash dividends.
We are an Oklahoma corporation incorporated on October 11, 1996. Our
predecessor was incorporated on November 19, 1985 under the laws of the State of
New Jersey and was thereafter reincorporated as a Delaware corporation on June
23, 1994. On October 22, 1996, we were reincorporated as an Oklahoma corporation
by merger of the Delaware predecessor into the Oklahoma corporation. Our
principal office is at 5727 South Lewis Avenue, Suite 700, Tulsa, Oklahoma
74105, and our telephone number is (918) 749-5666.
USE OF PROCEEDS
This Prospectus relates solely to the securities being offered and sold for
the account of Amoco Corporation. We will not receive any of the proceeds from
the sale of the securities being offered, but will pay all expenses related to
the registration of the securities. The proceeds, if any, received from the
exercise of the warrants will be used for general corporate purposes. If all the
warrants were exercised, we would receive proceeds of approximately $4,500,000.
There can be no assurance that any of such warrants will be exercised.
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SELLING SECURITYHOLDER
The only selling securityholder of the Common Stock to which this
Prospectus relates is Amoco Corporation. Because Amoco Corporation may sell all
or a portion of the securities at any time and from time to time after the date
hereof, no estimate can be made of the number of shares of common stock that
Amoco Corporation may retain upon the completion of the sale of the securities
pursuant to this Prospectus. The securities have been included in this
Prospectus pursuant to contractual rights granted to Amoco Corporation to have
its shares of common stock issuable on exercise of its warrants registered under
the Securities Act, which contractual rights contain, mutual indemnification
provisions.
NAME OF RECORD HOLDER SHARES OF COMMON STOCK
--------------------------------------- ---------------------------
Amoco Corporation 1,737,452
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PLAN OF DISTRIBUTION
Amoco Corporation may sell or distribute some or all of the shares of
Common Stock from time to time through underwriters or dealers or brokers or
other agents or directly to one or more purchasers, including pledgees, in
transactions (which may involve block transactions) on the Nasdaq SmallCap
Market, in the over-the-counter market or in privately negotiated transactions
(including sales pursuant to pledges), or in a combination of such transactions.
Such transactions may be effected by Amoco Corporation at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed.
Brokers, dealers, agents or underwriters participating in such transactions as
agent may receive compensation in the form of discounts, concessions or
commissions from Amoco Corporation (and, if they act as agent for the purchaser
of such shares, from such purchaser). Such discounts, concessions or commissions
as to a particular broker, dealer, agent or underwriter might be in excess of
those customary in the type of transaction involved.
Amoco Corporation and any such underwriters, brokers, dealers or agents
that participate in such distribution may be deemed to be "underwriters" within
the meaning of the Securities Act, and any discounts, commissions or concessions
received by any such underwriters, brokers, dealers or agents might be deemed to
be underwriting discounts and commissions under the Securities Act. Neither
Gothic nor Amoco Corporation can presently estimate the amount of such
compensation. Gothic knows of no existing arrangements between Amoco Corporation
and any underwriter, broker, dealer or other agent relating to the sale or
distribution of the shares.
Under applicable rules and regulations currently in effect under the
Exchange Act, any person engaged in a distribution of any of the shares may not
simultaneously engage in market activities with respect to the common stock, for
a period of nine business days prior to the commencement of such distribution.
In addition, and without limiting the foregoing, Amoco Corporation will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation Regulation M thereunder,
which provisions may limit the timing of purchases and sales of any of the
securities by Amoco Corporation. All of the foregoing may affect the
marketability of the shares.
Gothic will pay substantially all of the expenses incident to this offering
of the other than commissions and discounts of underwriters, brokers, dealers or
agents. Amoco Corporation may indemnify any broker, dealer, agent or underwriter
that participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Under its Certificate of Incorporation, the total number of shares of all
classes of stock that we have authority to issue is 100,500,000 consisting of
500,000 shares of preferred stock, par value $.05 per share, and 100,000,000
shares of common stock, $.01 par value.
PREFERRED STOCK
Up to 500,000 shares of preferred stock, par value $.05 per share, may be
issued from time to time in one or more series. The Board of Directors, without
further approval of the stockholders, is authorized to fix the rights and terms
relating to dividends, conversion, voting, redemption, liquidation preferences,
sinking funds and any other rights, preferences, privileges and restrictions
applicable to each such series of preferred stock. The issuance of preferred
stock, while providing flexibility in connection with possible financings,
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of common stock and, under certain
circumstances, be used as a means of discouraging, delaying or preventing a
change in control of us. As of September 30, 1998, we have authorized the
issuance of 165,000 shares of preferred stock as Series B Preferred Stock, of
which 51,052 shares are issued and outstanding. We have no present plans to
issue any additional shares of preferred stock.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters voted on by stockholders, including elections of Directors, and, except
as otherwise required by law or provided in any resolution adopted by the Board
of Directors with respect to any series of preferred stock establishing the
powers, designations, preferences and relative, participating, option or other
special rights of such series ("Preferred Stock Designation"), the holders of
such shares exclusively possess all voting power. Our Certificate of
Incorporation does not provide for cumulative voting in the election of
directors. Subject to any preferential rights of any outstanding series of
preferred stock, the holders of common stock are entitled to such distributions
as may be declared from time to time by the Board of Directors from funds
available therefor, and upon liquidation are entitled to receive pro rata all of
our assets available for distribution to such holders. All shares of common
stock outstanding are fully paid and non-assessable and the holders thereof have
no preemptive rights.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by
William S. Clarke, P.A., 457 North Harrison Street, Suite 103, Princeton, New
Jersey 08540.
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INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheet of Gothic as of December 31, 1997, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the two years in the period ended December 31, 1997,
incorporated by reference in this Prospectus and in the Registration Statement
of which this Prospectus forms a part, have been incorporated herein in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The historical schedule of gross revenues and direct lease operating
expenses of the Comstock Properties for the year ended December 31, 1995,
incorporated by reference in this Prospectus and in the Registration Statement
of which this Prospectus forms a part, have been incorporated herein in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The historical schedule of gross revenues and direct operating expenses of
the Norse and Horizon Properties for the year ended December 31, 1996,
incorporated by reference in this Prospectus and in the Registration Statement
of which this Prospectus forms a part, have been incorporated herein in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The historical schedule of gross revenues and direct lease operating
expenses of the HS Properties for the years ended December 31, 1996 and 1995,
incorporated by reference in this Prospectus and in the Registration Statement
of which this Prospectus forms a part, have been incorporated herein in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The historical schedule of gross revenues and direct lease operating
expenses of the Amoco Properties for the years ended December 31, 1997 and 1996,
incorporated by reference in this Prospectus and in the Registration Statement
of which this Prospectus forms a part, have been incorporated herein in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
With respect to the unaudited interim financial information as of and for
the periods ended March 31, 1998, June 30, 1998 and September 30, 1998,
incorporated by reference in this Prospectus, the independent accountants have
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
report included in Gothic's quarterly reports on Form 10-QSB for the quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998, and incorporated by
reference herein, states that they did not audit and that they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of Section 11 of the Securities Act for
their report on the unaudited interim financial information because that report
is not a "report" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
-25-
<PAGE>
GLOSSARY
We believe the following terms, which primarily relate to the natural gas
and oil business, that are used in various places throughout this Prospectus may
be unfamiliar to certain readers. Therefore, wherever used in this Prospectus,
these terms have the following meanings:
Bbl - One stock tank barrel, or 42 US gallons liquid volume, used herein in
reference to crude oil or other liquid hydrocarbons.
Bcf - One billion cubic feet.
Bcfe - One billion cubic feet of natural gas equivalent.
Behind Pipe - Hydrocarbons in a potentially producing horizon penetrated by
a well bore the production of which has been postponed pending the production of
hydrocarbons from another formation penetrated by the well bore. These
hydrocarbons are classified as proved but non-producing reserves.
Boe - Barrels of oil equivalent (converting six Mcf of natural gas to one
Bbl of oil).
Developed Acreage - Acres which are allocated or assignable to producing
wells or wells capable of production.
Development Well - A well drilled within the proved area of an oil and
natural gas reservoir to the depth of a stratigraphic horizon known to be
productive.
Dry Well - A well found to be incapable of producing either oil or natural
gas in sufficient quantities to justify completion as an oil or natural gas
well.
Exploratory Well - A well drilled to find and produce oil or natural gas in
an unproved area, to find a new reservoir in a field previously found to be
productive of oil or natural gas in another reservoir, or to extend a known
reservoir.
Gross Acres or Gross Wells - The total acres or wells, as the case may be,
in which a working interest is owned.
Infill Well - A well drilled between known producing wells to better
exploit the reservoir
Mbbl - One thousand Bbl.
Mmbbl - One million Bbl.
Mboe - One thousand barrels of oil equivalent.
Mcf - One thousand cubic feet.
-26-
<PAGE>
Mcfe - One thousand cubic feet of natural gas equivalent, using the ratio
of one Bbl of crude oil to six Mcf of natural gas.
Mmcf - One million cubic feet.
Mmcfe - One million cubic feet of natural gas equivalent.
Net Acres or Net Wells - The sum of the fractional working interests owned
in gross acres or gross wells.
NYMEX- New York Mercantile Exchange.
Oil and Natural Gas Lease - An instrument by which a mineral fee owner
grants to a lessee the right for a specific period of time to explore for oil
and natural gas underlying the lands covered by the lease and the right to
produce any oil and natural gas so discovered generally for so long as there is
production in economic quantities from such lands.
Overriding Royalty Interest - A fractional undivided interest in an oil and
natural gas property entitling the owner to a share of oil and natural gas
production, in addition to the usual royalty paid to the owner, free of costs of
production.
PDNP - Proved developed, non-producing or behind the pipe reserves.
Productive Well - A well that is producing oil or natural gas or that is
capable of production.
Proved Developed Reserves - Reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
Proved Reserves - The estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
Proved Undeveloped Reserves or PUD - Reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for completion.
PV-10 - The discounted future net cash flows for proved oil and natural gas
reserves computed on the same basis as the Standardized Measure, but without
deducting income taxes, which is not in accordance with generally accepted
accounting principles. PV-10 is an important financial measure for evaluating
the relative significance of oil and natural gas properties and acquisitions,
but should not be construed as an alternative to the SEC PV-10 (as determined in
accordance with generally accepted accounting principles).
Royalty Interest - An interest in an oil and natural gas property entitling
the owner to a share of oil and natural gas production free of costs of
production.
Secondary Recovery - A method of oil and natural gas extraction in which
energy sources extrinsic to the reservoir are utilized.
-27-
<PAGE>
SEC PV-10 - The estimated future net cash flows from proved oil and natural
gas reserves computed using prices and costs. at the dates indicated, after
income taxes and discounted at 10%.
Undeveloped Acreage - Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and natural gas regardless of whether such acreage contains proved
reserves.
Working Interest - The operating interest which gives the owner the right
to drill, produce and conduct operating activities on the property and a share
of production, subject to all royalties, overriding royalties and other burdens
and to all costs of exploration. development and operations and all risks in
connection therewith
-28-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities to be registered are as follows:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange
Commission Registration Fee $ 1,251.00
Blue Sky Fees and Expenses $ 500.00
Printing $ 500.00
Legal fees of Counsel
for the Registrant $ 2,500.00
Accounting Fees $ 3,500.00
Miscellaneous $ 1,749.00
----------
TOTAL $10,000.00
==========
</TABLE>
ITEM 15: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1031 of the Oklahoma General Corporation Act and Article VI of the
Registrant's By-Laws provide for indemnification of present and former officers,
directors, employees and agents.
ITEM 16: EXHIBITS
The information required by this Item 16 is set forth in the Index to
Exhibits accompanying this Registration Statement and is incorporated herein by
reference.
Part II - 1
<PAGE>
ITEM 17: UNDERTAKINGS
(a) The small business issuer will:
1. File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
2. For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
3. File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the provisions of the Oklahoma
General Corporation Act, the Registrant's Articles of Incorporation, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference to this Registration
Statement shall be deemed to be a new Registration Statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) The Registrant hereby undertakes to deliver, or cause to be delivered
with the Prospectus, to each person to whom the Prospectus is sent or given the
latest annual report to security holders that is incorporated by reference in
the Prospectus and proxy or information statement furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the Prospectus, to
deliver, or cause to be delivered to each person to whom the Prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the Prospectus to provide such interim financial information.
Part II - 2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Tulsa, State of Oklahoma,
on the 30th day of November , 1998.
GOTHIC ENERGY CORPORATION
By: /s/ Michael Paulk
-----------------------------------------------------
Michael Paulk, President and Chief Executive Officer
Part II - 3
<PAGE>
GOTHIC ENERGY CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned directors and
officers of Gothic Energy Corporation, an Oklahoma corporation, which is filing
a Registration Statement on Form S-3 with the Securities and Exchange
Commission, Washington, D.C. 20549 under the provisions of the Securities Act of
1933, as amended (the "Securities Act"), hereby constitutes and appoints Michael
K. Paulk and Steven P. Ensz, and each of them, the individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and re-
substitution, for the person and in his name, place and stead, in any and all
capacities, to sign such Registration Statement and any or all amendments,
including post-effective amendments, to the Registration Statement, including a
Prospectus or an amended Prospectus therein and any registration statement for
the same offering that is to be effective upon filing pursuant to Rule 462(b)
under the Securities Act, and all other documents in connection therewith to be
filed with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact as
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Michael Paulk Director, President and Chief November 27, 1998
- ------------------------------ Executive Officer
Michael Paulk (Principal Executive Officer)
/s/ Steven P. Ensz Vice-President - Finance, Chief November 27, 1998
- ------------------------------ Financial Officer (Principal
Steven P. Ensz Accounting and Financial Officer)
/s/ John J. Fleming Director November 27, 1998
- ------------------------------
John J. Fleming
/s/ Brian E. Bayley Director November 27, 1998
- ------------------------------
Brian E. Bayley
</TABLE>
Part II - 4
<PAGE>
GOTHIC ENERGY CORPORATION
REGISTRATION STATEMENT ON FORM S-3
INDEX TO EXHIBITS
EXHIBIT NUMBER
- --------------------
3.1 Certificate of Incorporation of Gothic Energy Newco,
Inc.("Gothic"), an Oklahoma corporation (filed as Exhibit
3.1 to the Registration Statement on Form S-4 filed
October 14, 1997 (file number 333-37839)).
3.2 Bylaws of Gothic (filed as Exhibit 3.2 to the
Registration Statement on Form S-4 filed October 14, 1997
(file number 333-37839)).
4.1 Common Stock Purchase Warrant dated December 30, 1997
issued to Amoco Corporation (filed as Exhibit 10.7 to the
Current Report on Form 8-K/A filed February 25, 1998).
5.1 Opinion of William S. Clarke, P.A.
15.1 Letter from PricewaterhouseCoopers LLP Regarding
Unaudited Interim Financial Statements.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of William S. Clarke, P.A. (included in Exhibit
5.1).
24.1 Power of Attorney (included on the signature pages of
this Registration Statement).
<PAGE>
Exhibit 5.1
WILLIAM S. CLARKE, P.A.
ATTORNEY-AT-LAW
457 NORTH HARRISON STREET - SUITE 103
PRINCETON, NEW JERSEY 08540
----------
Telephone: (609) 921-3663
Fax: (609) 921-3933
November 30, 1998
Gothic Energy Corporation
5727 South Lewis Avenue - Suite 700
Tulsa, Oklahoma 74105
Gentlemen:
I have acted as counsel for Gothic Energy Corporation (the "Company") in
connection with the preparation of a Registration Statement filed by the Company
under the Securities Act of 1933, as amended (File No. 333-________) relating to
a proposed public offering by certain holders thereof of 1,737,452 shares of
Common Stock, $.01 par value issuable on exercise of the Common Stock Purchase
Warrants. Herein, the shares of Common Stock issuable on exercise of the
warrants are referred to as the "Stock."
In my capacity as counsel to you, I have examined the original, certified,
conformed photostats or xerox copies of all such agreements, certificates of
public officials, certificates of officers, representatives of the Company and
others and such other documents as I have deemed necessary or relevant as a
basis for the opinions herein expressed. In all such examinations I have
assumed the genuineness of all signatures on original and certified documents
and the conformity to original and certified documents of all copies submitted
to me as conformed, photostat or duplicate copies. As to various questions of
fact material to such opinions, I have relied upon statements or certificates of
officials and representatives of the Company and others.
On the basis of such examination, I advise you that, in my opinion the
shares of Common Stock, when sold, issued and paid for in accordance with the
terms of the warrants will be legally issued, fully paid and non-assessable.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference of my firm in the prospectus forming a part of
such Registration Statement.
Very truly yours,
William S. Clarke, P.A.
By: /s/ William S. Clarke
----------------------------------
William S. Clarke
<PAGE>
EXHIBIT 15.1
GOTHIC ENERGY CORPORATION AND SUBSIDIARY
LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
Securities and Exchange Commission
450 Fifth Street, Northwest
Washington, DC 20549
Re: GOTHIC ENERGY CORPORATION AND SUBSIDIARY
REGISTRATION ON FORM S-3
Gentlemen:
We are aware that our reports dated May 15, 1998, August 10, 1998, and
November 3, 1998 on our reviews of interim financial information of Gothic
Energy Corporation for the periods ended March 31, 1998, June 30, 1998 and
September 30, 1998 and included in the Company's quarterly reports on Form 10-
QSB for the quarters then ended are incorporated by reference in this
registration statement on Form S-3 (File No. 333-______). Pursuant to Rule
436(c) under the Securities Act of 1933, these reports should not be considered
a part of the Registration Statement prepared or certified by us within the
meaning of Sections 7 and 11 of that Act.
PRICEWATERHOUSECOOPERS LLP
Tulsa, Oklahoma
November 27, 1998
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus constituting
part of this Registration Statement on Form S-3 (File No. 333-_____) of our
report dated March 13, 1998, on our audits of the consolidated financial
statements of Gothic Energy Corporation and Subsidiaries.
We also consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Gothic Energy
Corporation (File No. 333-_____) of our report dated March 4, 1998 on our audit
of the historical schedule of gross revenues and direct lease operating expenses
of the Amoco Properties for the years ended December 31, 1997 and 1996.
We also consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Gothic Energy
Corporation (File No. 333-_____) of our report dated July 11, 1997 on our audit
of the historical schedule of gross revenues and direct lease operating expenses
of the HS Properties for the years ended December 31, 1996 and 1995.
We also consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Gothic Energy
Corporation (File No. 333-_____) of our report dated April 30, 1997 on our audit
of the historical schedule of gross revenues and direct operating expenses of
the Norse and Horizon Properties for the year ended December 31, 1996.
We also consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Gothic Energy
Corporation (File No. 333-_____) of our report dated July 19, 1996 on our audit
of the historical schedule of gross revenues and direct lease operating expenses
of the Comstock Properties for the year ended December 31, 1995.
We also consent to the reference to our firm under the caption "Independent
Public Accountants."
PRICEWATERHOUSECOOPERS LLP
Tulsa, Oklahoma
November 27, 1998
