<PAGE> 1
MIDDLE BAY OIL COMPANY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 31, 1996
To the Shareholders of Middle Bay Oil Company, Inc.
You are cordially invited to attend the Annual Meeting of Shareholders
of Middle Bay Oil Company, Inc., an Alabama corporation (the "Company"), to
be held at the offices of the Company, 115 South Dearborn Street, Mobile,
Alabama 36602, on May 31, 1996 at 10:00 a.m. Central Daylight Time, for the
following purposes:
1. To elect five directors to serve until the next Annual Shareholder
Meeting;
2. To approve the selection of Schultz, Watkins & Company as independent
accountants to audit the accounts of the Company for 1996; and
3. To transact such other business as may properly come before the
meeting or any adjournment.
All shareholders of record as of May 1, 1996 are entitled to notice of
and to vote at the Annual Meeting or any adjournments thereof.
Whether or not you plan to attend this meeting, we urge you to please
sign and date the accompanying form of proxy and return it promptly in the
enclosed, postage prepaid envelope. This will ensure that your shares will
be represented. If you attend the meeting, you may vote in person regardless
of whether you have given your proxy. Any proxy may be revoked at any time
before it is exercised, as indicated in the Proxy Statement.
By Order of the Board of Directors
/s/ John J. Bassett
--------------------------------------
John J. Bassett, President
May 10, 1996
Mobile, Alabama
Annual Reports to shareholders, including financial statements,
are being mailed to shareholders, together with these proxy
materials, commencing on or about May 10, 1996.
Your vote is important.
Please complete, sign and return the accompanying
Proxy Form in the envelope provided, which
requires no postage if mailed in the United States.
<PAGE> 2
MIDDLE BAY OIL COMPANY, INC.
115 South Dearborn Street
Mobile, Alabama 36602
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 31, 1996
This Proxy Statement is furnished to shareholders of Middle Bay Oil
Company, Inc., an Alabama corporation (the "Company"), in connection with the
solicitation, at the Company's expense, on behalf of the Board of Directors
of the Company of proxies to be used at an Annual Meeting of Shareholders of
the Company to be held at 10:00 a.m. Central Daylight Time on May 31, 1996
and all adjournments thereof (the "Annual Meeting"). This Proxy Statement
and the enclosed form of proxy are being mailed to shareholders on or about
May 10, 1996.
The Annual Meeting will be held at the principal offices of the Company
at 115 South Dearborn Street, Mobile, Alabama 36602. Proxies in the form
enclosed will be voted at the Annual Meeting if properly executed, returned
to the Company before the meeting and not revoked. Any shareholder giving
such proxy may revoke it at any time before it is voted by written revocation
delivered to the Company's Secretary, by voting in person at the Annual
Meeting or by giving a later proxy.
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to vote at the Annual Meeting
is the close of business on May 1, 1996. At the close of business on that
date, the Company had issued, outstanding and entitled to vote at the meeting
1,318,917 shares of common stock, $.02 par value.
MATTERS TO BE ACTED UPON AT THE MEETING
The election of directors and the approval of the selection of
independent public accountants are the only matters which the Board of
Directors knows will be presented for consideration at the meeting. As to
any other business that may properly come before the meeting, it is intended
that proxies in the enclosed form will be voted in respect thereof in
accordance with the judgment of the person voting the proxy.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of shares of common
stock entitled to vote at the Annual Meeting representing a majority of the
votes entitled to be cast is necessary to constitute a quorum at the Annual
Meeting. Each holder of shares of common stock is entitled to one vote, in
person or by proxy, for each share held in such shareholder's name on the
record date. Assuming the presence of a quorum, the affirmative votes equal
to at least a majority of the votes of holders of common stock entitled to
vote at the Annual Meeting, in person or by proxy, are required for the
election of directors and the approval of the selection of independent public
accountants. As to any other matters which may come before the meeting, a
majority of the votes of holders of common stock cast at the Annual Meeting
generally is required for approval. Abstentions will be included in vote
totals and, as such, will have the same effect on the matter voted upon as a
negative vote. Where nominee recordholders do not vote on directors or the
other proposals because they did not receive specific instructions on such
proposal from the beneficial owners of such shares ("broker nonvotes"), such
broker nonvotes will not be included in vote totals and, as such, will have
no effect on the action taken at the Annual Meeting.
The shares represented by proxies solicited by the Board of Directors
will be voted in accordance with the recommendations of the Board of
Directors unless otherwise specified in the proxy, and where the person
solicited specifies a choice with respect to any matter to be acted upon, the
shares will be voted in accordance with the specification so made.
The enclosed proxy is revocable at any time prior to its being voted by
filing an instrument of revocation or a duly executed proxy bearing a later
date. A proxy may also be revoked by attendance at the meeting and voting in
person. Attendance at the meeting will not by itself constitute a revocation.
Any such revocation or later dated proxy should be mailed or delivered
to Middle Bay Oil Company, Inc., 115 South Dearborn Street, Mobile, Alabama
36602, Attention: Lynn M. Davis, Secretary.
The Company will bear the cost of soliciting proxies from shareholders.
In addition to the use of the mails, proxies may be solicited by directors
and officers of the Company by personal solicitation, telephone or telegram.
Such directors and officers will not be additionally compensated for such
solicitation but may be reimbursed for reasonable out-of-pocket expenses
incurred in connection therewith.
The Company has not and will not engage any investment banking or
brokerage firm or any professional proxy solicitation firm to solicit
proxies. No fees, commissions or other compensation will be paid to anyone
for proxy votes solicited by the Company.
Arrangements will be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of the common stock. The Company may reimburse such
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred in connection therewith.
The enclosed form of proxy allows shareholders to grant or withhold
discretionary authority to the persons named to vote on any other matters
that may properly come before the Annual Meeting. The Company is not aware
of any other proposals planned to be made at the Annual Meeting and has no
current intention of making any additional proposals. The chairman of the
meeting shall determine the order of business at the Annual Meeting and the
voting and other procedures to be observed. The chairman is authorized to
declare whether any business is properly brought before the meeting, and
business not properly brought before the meeting may not be transacted.
CORPORATE GOVERNANCE
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, taking
into consideration the interests of all shareholders. Members of the Board
are kept informed of the Company's business by various reports sent or
communicated to them regularly, as well as by operating and financial reports
made at Board and Committee meetings by the President and other officers.
During 1995, the full Board met one time. The Board has two Committees, an
Audit Committee and a Compensation Committee. Each Committee has met one time
in 1995.
The Audit Committee's duties include recommending to the Board the
selection of a firm of independent public accountants for approval by the
shareholders at their Annual Meeting. In addition, the Committee confers
with the Company's independent public accountants to review the plan and
scope of their proposed audit, as well as their findings and recommendations
upon the completion of the audit. The Committee meets with the independent
public accountants and with appropriate Company financial personnel regarding
the Company's internal controls and financial policies. The Audit Committee
currently consists of Frank C. Turner, II, Frank E. Bolling, Jr. and C. Noell
Rather. Neither Mr. Bolling nor Mr. Rather is an officer or employee of the
Company.
The Compensation Committee is responsible for establishing and reviewing
policies governing executive salaries, bonus and incentive compensation and
the terms and conditions of employment of executives of the Company. In
addition, the Committee is responsible for the oversight of the Company's
1995 Stock Option and Stock Appreciation Rights Plan and similar or other
plans which may be maintained from time to time by the Company and has
authority to grant options and awards under the Company's 1995 Stock Option
and Stock Appreciation Rights Plan, and oversees the Company's SEP/IRA
retirement plan and the net profits interest incentive compensation plan
recently established by the Company (see "Corporate Governance - Executive
Compensation"). The Committee coordinates with the appropriate financial,
legal and administrative personnel of the Company, as well as outside experts
retained in connection with the administration of these plans. The
Compensation Committee currently consists of John J. Bassett and Messrs.
Edward P. Turner, Jr. and Frank E. Bolling, Jr., neither of whom is an
officer or employee of the Company.
During 1995, all incumbent directors attended all of the meetings of the
Board of Directors. Attendance at those meetings was 100%. Attendance at
the Committee meetings was 100%.
Compensation of Directors
Each director is paid an attendance fee of $500 for each meeting of the
Board and of each Committee of the Board, and the Company reimburses
directors' documented travel and lodging expenses.
Each nonemployee director is eligible for incentive awards under the
1995 Stock Option and Stock Appreciation Rights Plan. No options or rights
have been issued under such plan to any nonemployee director, and none are
presently contemplated.
Security Ownership of Certain Beneficial Owners
The following table sets forth the shares of the Company's common stock
beneficially owned by those persons known by the Company to be the beneficial
owner of more than five percent of the Company's issued and outstanding
common stock as of February 28, 1996:
<TABLE>
<CAPTION>
Title of Name and Address of Number Percent of
Class Beneficial Owner(1) of Shares Total
----- ----------------- --------- -----
<C> <C> <C> <C>
Common Bay City Energy Group, Inc. 385,602 29.24%
115 So. Dearborn Street
Mobile, Alabama 36602
</TABLE>
(1) Bay City Energy Group, Inc. ("BCEG") through a merger effective
September 26, 1995, acquired all of the capital stock of Bay City
Minerals, Inc. , the former owner of the Company's stock. BCEG is
controlled by Edward P. Turner, Jr., a director of the Company, by
virtue of his 28.4% equity ownership in BCEG. Through such control, he
can exercise effective voting and dispositive powers over Shares held by
BCEG.
Security Ownership of Management
The following table sets forth the shares of the Company's common stock
beneficially owned by each director and executive officer and all directors
and executive officers as a group, all as of April 30, 1996:
<TABLE>
<CAPTION>
Title of Name and Address of Number Percent of
Class Beneficial Owner of Shares Total
----- ---------------- --------- -----
<S> <C> <C> <C>
Common Edward P. Turner, Jr. 400,640(1) 30.34%
100 Central Avenue
Chatom, AL 36518
Common John J. Bassett 8,256 0.63%
3400 Peyton Court
Mobile, AL 36609
Common All executive officers and
directors as a group
(5 persons)(2) 414,180 31.40%
</TABLE>
(1) Includes 385,602 shares owned by BCEG over which Mr. Turner, through his
effective voting control of BCEG, exercises voting and dispositive
powers with regard to such shares but does not hold a direct beneficial
interest, and 15,038 shares over which Mr. Turner has sole voting and
dispositive powers.
(2) Except as shown above, no other officer or director beneficially owns
more than two-tenths of 1% of the Company's common stock.
The following table sets forth the percentages of BCEG's voting stock
beneficially owned by each director and executive officer and all directors
and executive officers of the Company as a group, all as of April 30, 1995:
<TABLE>
<CAPTION>
Title of Name and Address of Percent of
Class Beneficial Owner Class
----- ---------------- -----
<S> <C> <C>
Common Edward P. Turner, Jr. 28.4%
100 Central Avenue
Chatom, AL 36518
Common John J. Bassett 2.8%
3400 Peyton Court
Mobile, AL 36609
Common Frank C. Turner, II 1.2%
6201 Laurelwood Drive
Satsuma, AL 36572
Common All executive officers and 32.4%
directors of the Company
as a group
</TABLE>
Changes in Control
There are no arrangements known to management which may result in a
change in control of the Company.
Executive Compensation
Summary Compensation Table. The following table sets forth the
aggregate cash compensation paid to the Company's executive officers for the
periods ended December 31, 1993 through December 31, 1995:
<TABLE>
<CAPTION>
Annual Compensation All
Fiscal ------------------- Other
Name and Principal Position Year Salary Bonus Compensation
--------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
John J. Bassett 1995 $56,250 $ ---- $11,371
President and CEO 1994 54,000 200 --
1993 54,000 1,125 8,269
Frank C. Turner, II 1995 $50,083 $ ---- $10,775
Vice President and CFO 1994 48,000 200 --
1993 48,000 1,000 7,350
Robert W. Hammons 1995 $56,250 $ ---- $11,360
Vice President-Engineering 1994 54,000 200 --
1993 54,000 1,125 8,269
Lynn M. Davis 1995 $31,667 $ ---- $ 6,238
Secretary/Treasurer 1994 30,000 200 --
1993 30,000 625 4,593
</TABLE>
Compensation Under Plans. The Company established a SEP/IRA retirement
plan (the "Plan") in 1993 which allows for a maximum discretionary Company
contribution of 15% of total wages paid to employees for the year. No
contribution was made to the Plan in 1994. For the years ended December,
1995 and 1993, the Company contributed a total of $30,000 and $45,980,
respectively, to the Plan, including $18,505 and $28,481 for all executive
officers as a group.
In March 1995, the Board of Directors adopted an employee incentive
compensation plan whereby the proceeds equivalent to 1% net profits interest
(the "net profits interest") in all oil and gas properties, drilling
prospects and divestitures acquired or made after January 1, 1994 are paid
into a fund for incentive compensation awards to employees. The net profits
interest is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee has sole authority to establish the
eligibility requirements for and amount of each award, if any, to employees.
To qualify for an award as an "Eligible Employee," as presently established
by the Compensation Committee, an employee must be employed by the Company on
October 1 and December 31 of the calendar year and have been recommended by
the Compensation Committee to receive an award. For the year ended December
31, 1995, a total of $30,000 was paid to eligible employees under the 1% net
profits interest incentive compensation plan. The approximate number of
Eligible Employees for 1995 was eight. The Company has no other retirement,
pension/profit sharing or other deferred compensation plan for its employees.
The Company does not presently have any options, warrants or other rights
outstanding to purchase shares of its common or preferred stock, and no
options are presently contemplated for issuance under the 1995 Stock Option
and Stock Appreciation Rights Plan.
The net profits interest on property acquisitions and drilling prospects
will be calculated on the monthly gross profit which is defined as revenues
from oil and gas sales, less direct operating expenses, attributable to the
Company's working or royalty interest in an individual property. Direct
operating expenses include landowner's royalty, overriding royalty and all
costs of production, equipment, operating expenses and taxes. On drilling
prospects, the net profits interest will not include costs of drilling,
testing and completing the well, the costs of acreage and costs of geological
or geophysical work. For divestitures, the net profits interest will be
calculated on the gross sales price, less any direct costs of the sale of an
individual property.
There are no employment agreements with any officer or employee of the
Company.
ELECTION OF DIRECTORS
Nominees for Election as Directors
The following table sets forth information concerning the present
directors and executive officers of the Company. All of the directors are
nominees for election at the Annual Meeting. All directors serve for a
one-year term or until the annual meeting of shareholders of the Company held
following their election:
<TABLE>
<CAPTION>
Director
Name Age Position(s) Held Since(1)
---- --- ---------------- -----
<S> <C> <C> <C>
Edward P. Turner, Jr.(2) 66 Director 1989
John J. Bassett 37 President and Director 1989
Frank C. Turner, II(2) 35 Vice President and Director 1989
Lynn M. Davis 46 Secretary and Treasurer
Frank E. Bolling, Jr. 36 Director 1992
C. Noell Rather 60 Director 1995
</TABLE>
(1) All directors, except Mr. Rather, were elected upon the reorganization
of the Company into corporate form in December, 1992. Prior to that
time, the Company was organized as a limited partnership (the "predecessor
partnership"). Each director, except for Frank E. Bolling, Jr., had
served as a director of Bay City Minerals, Inc., the general partner of
the predecessor partnership, since prior to the formation of the
predecessor partnership in May, 1989.
(2) Edward P. Turner, Jr. and Frank C. Turner, II, are father and son.
Edward P. Turner, Jr. served as President of Bay City Minerals,
Inc. from 1975 to 1987. He is a member of the Alabama State Bar and a
managing partner of the law firm of Turner, Onderdonk, Kimbrough & Howell,
P.A., in Chatom, Alabama. A substantial amount of his practice is devoted to
oil and gas law.
John J. Bassett currently serves as President and director of Bay
City Minerals, Inc. He was initially employed by the corporation in 1980 as
land manager. Mr. Bassett was elected Vice President in 1985 and has served
as President of the Company since 1987 and has been a director since 1984.
He also serves as a director and President of three affiliated corporations--
Bay City Energy Group, Inc., Bay City Properties, Inc. and Carlson Petroleum
Company.
Frank C. Turner, II has been a director of Bay City Minerals, Inc.
since 1986 and has served as Vice President of Finance since his employment
as Controller in 1990. From 1987 to 1990, Mr. Turner was employed by Sonat,
Inc. as a financial analyst. He also serves as a director and Vice President
of Bay City Energy Group, Inc., Bay City Properties, Inc. and Carlson
Petroleum Company.
Lynn M. Davis has been employed as an accountant for Bay City
Minerals, Inc. and its affiliated companies since 1984. She has served as
Secretary-Treasurer of Bay City Minerals, Inc. since 1984 and as a director
since 1988. Prior to her association with Bay City, she was employed as an
assistant controller for Crawford Wholesale, Inc. Mrs. Davis also serves as
a director and Secretary-Treasurer for Bay City Energy Group, Inc. Mrs.
Davis is not a nominee for director.
Frank E. Bolling, Jr. since February, 1995 has served as Vice
President of Midstream Fuel Services, Inc. and Manager of the Dantzler-Pepco
Division of Midstream. From 1989 to January, 1995, he served as General
Manager of Dantzler Bulk Plant, Inc., a distributor for Chevron U.S.A., Inc.
with annual sales in excess of $25 million. Mr. Bolling served as sales
manager for Dantzler from 1987 to 1989. Prior to 1987, Mr. Bolling was
employed by Bay City Minerals, Inc.
C. Noell Rather was appointed director of the Company in March 1995
to serve the unexpired term of Robert W. Hammons, who resigned to allow a
nonemployee director to be appointed to the Board. Mr. Rather has been
President of Janex Oil Co., Inc. and Exexco, Inc., both independent oil and
gas companies based in Texas which Mr. Rather helped organize, since 1981.
Certain Relationships and Related Transactions
Edward P. Turner, Jr., a director, parent and promoter of the Company,
is managing partner of the law firm of Turner, Onderdonk, Kimbrough & Howell,
P.A., the Company's general counsel for certain corporate and oil and gas
matters. For years ended December 31, 1995 through 1993, the Company and the
predecessor partnership paid legal fees to Mr. Turner's firm of $787, $1,454,
and $4,772, respectively, for legal services. Mr. Turner's firm charged the
predecessor partnership and charges the Company for its services on the same
basis as it charges other business clients for similar services rendered.
The Company intends to continue to use Mr. Turner's firm as its primary legal
counsel and will pay reasonable fees for such future services.
On December 15, 1993, the Company acquired 11.50 acres of unimproved
real estate in McIntosh, Alabama and 1,720 net (18,543 gross) fee mineral
acres from Bay City Minerals, Inc. for $125,000 and $150,000, respectively.
The purchase price for the mineral interest and real estate was based upon
the appraised value.
Bay City Energy Group, Inc., is presently indebted to the Company in the
amount of $132,547 ($118,249 of principal and $14,298 of accrued interest).
The amount owed represents the balance remaining on the advance to purchase
predecessor partnership units in 1991 and advances for general corporate
purposes. The note payable, including accrued interest, of Bay City Energy
Group, Inc. to the Company was renegotiated on December 31, 1995 and is due
in full on January 1, 2001 plus interest at an annual fixed rate of 5%. The
note payable is secured by 75,000 shares of Company common stock. The
Company does not anticipate advancing or lending money to Bay City Energy
Group, Inc. in the future. The note was formerly the obligation of Bay City
Minerals, Inc. until the merger of Bay City Minerals, Inc. into its parent,
Bay City Energy Group, Inc. effective September 26, 1995.
On December 31, 1994, Bay City Minerals, Inc. contributed oil and gas
reserves valued at $186,938 to the Company as partial payment on the amount
owed. The value of the reserves were calculated by the Company's petroleum
engineer on a basis similar to the method used by Lee Keeling & Associates,
Inc. on the evaluation of the Company's reserves at year-end.
On January 1, 1993, Bay City Minerals, Inc. contributed computer
equipment and software, office furnishings and equipment, maps, logs and
other geological and engineering data to the Company as partial payment of
the amount owed. The value of the items contributed was estimated at
$71,458.
Bay City Minerals, Inc. acted as operator on behalf of the Company on
four oil and gas wells in which the Company owns an interest until April 1,
1994 when such operating rights were transfered to the Company. The
operating agreements and terms are substantially similar to and at least as
favorable as operating agreements between the Company and unaffiliated
operators. The amounts paid to Bay City Minerals, Inc. in 1994 and 1993 for
its services under the operating agreements were $5,985 and $14,906,
respectively.
In connection with the reorganization agreement between the Company and
the predecessor partnership in December, 1992, the Company issued shares of
its common stock to the partners of the predecessor partnership in accordance
with their respective partnership interests under the agreement of limited
partnership of the predecessor partnership. Shares were issued to certain
officers, directors and parents of the Company on the same basis as shares
were issued to the other partners of the Predecessor Limited Partnership in
exchange for their respective interests in the predecessor partnership as
follows:
<TABLE>
<CAPTION>
Shares of Common
Name of Related Party Stock Received In Exchange For
- --------------------- -------------- ---------------
<S> <C> <C>
Bay City Minerals, Inc. 563,554 General partner's 5% equity
interest and 66,876 units of
limited partnership interest
Edward P. Turner, Jr. 9,576 1,368 units of limited
partnership interest
John J. Bassett 10,661 1,523 units of limited
partnership interest
</TABLE>
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and any persons who own more than
10% of the Company's common stock to file with the Securities and Exchange
Commission reports of ownership and changes in ownership of such securities.
Based on representations from such persons, the Company believes that there
was no failure to file or delinquent filings under Section 16(a) of the
Securities Exchange Act of 1934 by any officer, director or beneficial owner
of 10% or more of the Company's common stock during 1995.
OTHER MATTERS TO BE ACTED UPON
The following proposal is expected to be acted upon at the meeting
following the election of directors:
APPROVAL OF THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has, subject to shareholder
approval, selected Schultz, Watkins & Company as the Company's independent
public accountants for the year 1996 and recommends approval of such
selection by the shareholders. Schultz, Watkins & Company served in this
capacity for the years 1994 and 1995. One or more representatives of
Schultz, Watkins & Company are expected to attend the Annual Meeting and will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
The Board of Directors recommends that the shareholders vote FOR
approval of the firm of Schultz, Watkins & Company as independent public
accountants for 1996.
MISCELLANEOUS
Shareholder Proposals
Any proposals from shareholders to be presented for consideration for
inclusion in the proxy material being prepared for the 1997 annual meeting of
shareholders of the Company must be submitted in accordance with applicable
Securities and Exchange Commission rules and received by the Company at its
principal offices, 115 South Dearborn Street, Mobile, Alabama 36602 no later
than February 28, 1997.
Financial Statements
Financial Statements, the Notes to Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
1995 with comparisons to 1994 and other relevant information are included in
the Company's 1995 Annual Report to Shareholders which accompanies this Proxy
Statement and are incorporated herein by reference.
Discretionary Authority
At the time of mailing this Proxy Statement, the Board of Directors was
not aware of any other matters which might be presented at the meeting. If
any matter not described in this Proxy Statement should properly be
presented, the persons name in the accompanying form of proxy will vote such
proxy in accordance with their judgment.
By Order of the Board of Directors
/s/ Lynn M. Davis
----------------------------------
Lynn M. Davis, Secretary
DATED this 10th day of May, 1996
A copy of the Company's 1995 Annual Report to the Securities and
Exchange Commission on Form 10-KSB referred to above may be obtained
without charge by any beneficial owner of the Company's common stock upon
written request addressed to Lynn M. Davis, Secretary, Middle Bay Oil
Company, Inc., P.O. Box 390, Mobile, Alabama 36601. Requests can be made
by telephone by calling (334) 432-7540.
