TRANSTEXAS GAS CORP, POS AM, 1997-10-15

TRANSTEXAS GAS CORP
POS AM, 1997-10-15
CRUDE PETROLEUM & NATURAL GAS

Previous: STONE ENERGY CORP, 8-K/A, 1997-10-15

Next: MARRIOTT INTERNATIONAL INC, 8-A12B/A, 1997-10-15

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1997
REGISTRATION NO. 33-91494
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________

POST EFFECTIVE AMENDMENT NO. 6
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____________________________________

TRANSTEXAS GAS CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 76-0401023
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

1300 NORTH SAM HOUSTON PARKWAY EAST, SUITE 310, HOUSTON, TEXAS 77032-2949,
(281) 987-8600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

ED DONAHUE, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
1300 NORTH SAM HOUSTON PARKWAY EAST, SUITE 310, HOUSTON, TEXAS 77032-2949,
(281) 987-8600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
____________________________________

copy to:

C. ROBERT BUTTERFIELD
GARDERE & WYNNE, L.L.P.
3000 THANKSGIVING TOWER
DALLAS, TEXAS 75201
(214) 999-3000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable 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. [ ]

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> 2
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1997

PROSPECTUS
46,788,664 SHARES

TRANSTEXAS GAS CORPORATION

COMMON STOCK
____________________________________

This Prospectus relates to the sale from time to time of (i) up to
39,648,517 shares of common stock, $0.01 par value ("Common Stock"), of
TransTexas Gas Corporation ("TransTexas" or the "Company"), by TransAmerican
Energy Corporation ("TEC"), (ii) up to 1,940,147 shares of Common Stock by
TransAmerican Refining Corporation ("TARC"), (iii) up to 5,000,000 shares of
Common Stock by TransAmerican Natural Gas Corporation ("TransAmerican") and
(iv) up to 200,000 shares of Common Stock by Southeast Marine, Inc. ("SEM,"
and, together with TEC, TARC and TransAmerican, the "Selling Security
Holders"). The Company will not receive any of the proceeds from the sale of
such shares by the Selling Security Holders. See "Use of Proceeds" and
"Selling Security Holders."

Of the 46,788,664 shares (collectively, the "Shares") of Common Stock
that may be sold pursuant to this Prospectus, 46,588,664 Shares have been
pledged as security for obligations of the Selling Security Holders. The
persons to whom the Shares have been pledged may sell hereunder the Shares that
have been pledged to them only upon the occurrence of certain events, as set
forth in the various pledge agreements, including the failure to pay principal
or interest when due or other failure to satisfy the obligations for which such
Shares have been pledged as security. Upon the fulfillment of such
obligations, or under certain other circumstances, Shares may be released from
such pledges and may then be sold hereunder by the owner thereof.

The Shares represent 81.4% of the outstanding Common Stock as of
October 15, 1997. The Company is unable to predict the effect, if any, that
future sales of the shares of Common Stock covered hereby would have on the
market price of the Common Stock prevailing from time to time. However, the
sale of a significant portion of the Shares could have an adverse effect on the
market price of the Common Stock. See "Risk Factors."

It is anticipated that the Selling Security Holders or pledgees may
sell the Shares in underwritten offerings or in open market or block
transactions or otherwise on The Nasdaq Stock Market or a national securities
exchange or automated interdealer quotation system on which shares of Common
Stock are then listed, in the over-the-counter market, or in private
transactions, at prices related to prevailing market prices or at negotiated
prices. Some or all of the Shares may be sold to or through broker-dealers and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions. In effecting sales, participating broker-dealers
or purchasers of the Shares may arrange for other broker-dealers to
participate. Upon any sale of the Common Stock offered hereby, the Selling
Security Holder, any underwriter and any participating broker-dealers or
selling agents may be deemed to be "underwriters" under the Securities Act of
1933, as amended (the "Securities Act"), and any compensation received by a
Selling Security Holder or any such underwriter or broker-dealer in connection
with such sale, such as a discount, concession or commission, may be deemed
underwriting compensation. TARC, TEC, SEM and TransAmerican have agreed to pay
all costs, fees and expenses incurred in connection with this offering, other
than, in the case of sales by pledgees or other transferees, discounts or
commissions to broker-dealers and fees and expenses of counsel or other
advisors to such pledgees or transferees. See "Plan of Distribution."

The Common Stock is traded on the National Market tier of The Nasdaq
Stock Market ("NNM") under the symbol "TTXG." On October 14, 1997, the closing
sale price of the Common Stock as reported by the NNM was $16.00 per share.
See "Price Range of Common Stock."

SEE "RISK FACTORS" ON PAGE 4 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
_________________________________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_________________________________
THE DATE OF THIS PROSPECTUS IS ______________, 1997
<PAGE> 3
TABLE OF CONTENTS

<TABLE>
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SELLING SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>

__________________________

No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus or
any Prospectus Supplement and, if given or made, such information or
representation may not be relied upon as having been authorized by the Company
or any underwriter or agent. This Prospectus and any Prospectus Supplement do
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction where, or to any person to whom,
it is unlawful to make such offer or solicitation. Neither the delivery of
this Prospectus or any Prospectus Supplement nor any sale made hereunder or
thereunder shall, under any circumstances, create any implication that the
information herein or therein is correct as of any time subsequent to their
respective dates.

ii
<PAGE> 4
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at its
offices at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's Regional Offices at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, New York, New York 10048. Copies of such materials can also be
obtained by mail from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains an Internet Web site that contains reports,
proxy and information statements and other information regarding the Company
and other registrants that file electronically with the Commission. The
Internet address of the Commission's Web site is http://www.sec.gov. The
Company's Common Stock is listed on the National Market tier of The Nasdaq
Stock Market and reports, proxy and information statements and other
information regarding the Company can be inspected at the offices of the
National Association of Securities Dealers, Inc., 1935 K Street, N.W.,
Washington, D.C. 20006.

The Company has filed with the Commission a registration statement on
Form S-3 under the Securities Act (the "Registration Statement") with respect
to the Common Stock described in this Prospectus. This Prospectus does not
contain all the information set forth in the Registration Statement and
exhibits and schedules thereto. For further information with respect to the
Company and such Common Stock, reference is made to the Registration Statement
and the exhibits and schedules filed as part thereof. Statements contained in
this Prospectus as to the contents of any contract or any other document
referred to are not necessarily complete and, in each instance, reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement. The Registration Statement, including exhibits and
schedules thereto, may be inspected without charge at the Commission's
principal offices, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of all or any part thereto may be obtained from such office
upon payment of prescribed fees.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's annual report on Form 10-K for the fiscal year ended
January 31, 1997; quarterly reports on Form 10-Q for the fiscal quarters ended
April 30, 1997 and July 31, 1997; current reports on Form 8-K dated May 14,
1997, May 29, 1997 and June 13, 1997; and the Company's Registration Statement
on Form 8-A, and Amendment No. 1 thereto, each as filed with the Commission,
are incorporated by reference herein. All reports and other documents filed by
the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the offering
of Common Stock hereunder shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the filing date of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein, or in any
other subsequently filed document that is also incorporated or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

The Company will provide a copy of the documents incorporated by
reference herein (other than exhibits to such documents) without charge to each
person to whom this Prospectus is delivered, upon written or oral request by
such person. Requests should be addressed to: TransTexas Gas Corporation, 1300
North Sam Houston Parkway East, Suite 310, Houston, Texas 77032-2949,
Attention: Investor Relations (telephone number (281) 987-8600).

iii
<PAGE> 5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: The forward-looking statements included throughout this document
(collectively, "Forward-Looking Statements") are based on the Company's
historical operating trends, its proved reserves as of the date of its most
recent reserve report and other information available to the management of the
Company. Forward-Looking Statements involve certain risks and uncertainties
that could cause actual results to differ materially from those projected in
the Forward-Looking Statements. These statements assume that market conditions
for the Company's oil and gas production are comparable to those experienced
during recent fiscal periods. These statements also assume that no significant
changes will occur in the operating environment for the Company's oil and gas
properties. Finally, the Forward-Looking Statements assume no material changes
in the composition of the Company's property base as the result of any material
acquisitions or divestitures and that no material changes will occur in the
Company's financial facilities, except as disclosed herein. The Company
cautions that the Forward-Looking Statements are subject to all the risks and
uncertainties discussed under the captions "Risk Factors" and "The Company."
Without limiting the foregoing, potential risks and uncertainties include such
factors as fluctuations in natural gas and crude oil prices, the ultimate
success of drilling programs, the competitive nature of the oil and gas
exploration, development and production industry and uncertainties associated
with the drilling, completion and operation of natural gas and oil wells.
Moreover, the Company may make material acquisitions, execute new contracts or
terminate existing contracts, or enter into new financing transactions that may
affect the accuracy of the Forward-Looking Statements. None of these events
can be predicted with certainty and, accordingly, are not taken into
consideration in the Forward-Looking Statements made herein. For all of the
foregoing reasons, actual results may vary materially from the Forward-Looking
Statements and there is no assurance that the assumptions used are necessarily
the most likely to occur.

iv
<PAGE> 6
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more
detailed information and the financial statements (including notes thereto)
appearing elsewhere in this Prospectus or incorporated herein by reference.
Unless the context indicates otherwise, references in this Prospectus to the
"Company" or to "TransTexas" are to TransTexas Gas Corporation and the business
and assets transferred to TransTexas on August 24, 1993 by TransAmerican
Natural Gas Corporation ("TransAmerican").

THE COMPANY

TransTexas is engaged in the exploration for and development and
production of natural gas, primarily in South Texas. Since 1973, TransTexas has
drilled over 1,400 wells and discovered over 3.5 Tcfe of natural gas.
TransTexas' business strategy is to utilize its extensive experience gained
from over 20 years of drilling and operating wells in South Texas, to continue
to find, develop and produce reserves at a low cost. TransTexas has
traditionally performed most of its own well site preparation, drilling,
workover, completion, pipeline and production services.

In 1994, as part of its strategy to expand its productive reserves
beyond the Lower Wilcox Lobo Trend (the "Lobo Trend") in Webb and Zapata
counties in South Texas, TransTexas began evaluating prospects that exhibited
the potential to add proved reserves of at least 50 Bcfe of natural gas per
development area. Since that time, TransTexas has evaluated over 300 potential
areas and its development of certain of these areas has resulted in substantial
additions to its reserves and production.

On May 29, 1997, TransTexas consummated a stock purchase agreement
with an unaffiliated buyer (the "Lobo Sale Agreement"), with an effective date
of March 1, 1997, to effect the sale (the "Lobo Sale") of the stock of
TransTexas Transmission Corporation ("TTC"), its subsidiary that owned
substantially all of TransTexas' Lobo Trend producing properties and related
pipeline transmission system, for a sales price of approximately $1.1 billion,
subject to adjustments as provided for in the Lobo Sale Agreement. Purchase
price adjustments were made for, among other things: the value of certain NGLs
and stored hydrocarbons; the value of gas in TTC's pipeline; prepaid expenses
relating to post-effective date operations; post-closing expenses related to
pre-closing operations; the value of oil and gas produced and sold between the
effective date of the Lobo Sale Agreement and closing (approximately $44
million); property defects; and estimated costs associated with liabilities
incurred before closing. Purchase price adjustments made at the closing of
the Lobo Sale are subject to a review, reconciliation and resolution process.
With proceeds from the Lobo Sale, TransTexas repaid certain indebtedness and
other obligations, including production payments, in an aggregate amount of
approximately $84 million. The remaining net proceeds were used for the
repurchase or redemption of the Company's 11 1/2% Senior Secured Notes due 2002
(the "TransTexas Senior Secured Notes") and for general corporate purposes.

As of February 1, 1997, TransTexas' net proved reserves in properties
remaining after the Lobo Sale (the "Continuing Operations"), as estimated by
Netherland, Sewell & Associates, Inc. ("Netherland, Sewell"), were 404 Bcfe.
As of July 31, 1997, after giving effect to the Lobo Sale, TransTexas owned
approximately 650,000 gross (475,000 net) acres of mineral interests.

TransTexas' average net daily natural gas production for the year
ended January 31, 1997, was approximately 420 MMcfd, for a total net production
of 153.6 Bcf of natural gas. After giving effect to the Lobo Sale, TransTexas'
average net daily production for the six months ended July 31, 1997 was
approximately 164 MMcfd of natural gas and 2,013 Bpd of crude oil and
condensate, for a total net production of 31.1 Bcfe.

TransTexas' integrated drilling services division provides oil field
services including drilling, oil and natural gas well workover, stimulation and
completion, drilling fluids provision, pipeline construction and equipment
repair and maintenance to TransTexas. As of September 30, 1997, the assets of
this division included 25 land drilling rigs, nine workover rigs and two
fracture stimulation fleets. Complementary drilling, completion and workover
service equipment

1
<PAGE> 7
includes a ready-mix concrete plant, twin cementing trucks, a coiled tubing
unit, a snubbing unit, electric line and logging units, slickline units, tag
units and an extensive fleet of construction, inspection and other rolling
stock.

TransTexas may contribute the assets of its drilling services division
to its wholly owned subsidiary, TransTexas Drilling Services, Inc. ("TTXD").
TransTexas is evaluating alternatives to maximize stockholder value with
respect to TTXD, including options such as a spin-off, a sale to a third party,
a merger or another business combination. In connection with the Lobo Sale,
TransTexas entered into a long-term agreement, which can be transferred to
TTXD, pursuant to which it will provide drilling and certain other services to
the new operator of the Lobo Trend properties divested in the Lobo Sale.
TransTexas has also recently begun to provide drilling services to other third
parties.

The address of the Company's principal executive offices is 1300 North
Sam Houston Parkway East, Suite 310, Houston, Texas 77032-2949 and its
telephone number at that address is (281) 987-8600.

RECENT EVENTS

On June 13, 1997, TransAmerican Energy Corporation ("TEC"), which
directly and indirectly owns approximately 72.3% of the Company's outstanding
common stock, completed a private offering (the "TEC Notes Offering") of $475
million aggregate principal amount of 11 1/2% Senior Secured Notes due 2002
(the "TEC Senior Secured Notes") and $1.13 billion aggregate principal amount
of 13% Senior Secured Discount Notes due 2002 (the "TEC Senior Secured Discount
Notes" and, together with the TEC Senior Secured Notes, the "TEC Notes") for
net proceeds of approximately $1.3 billion.

With the proceeds of the TEC Notes Offering, TEC made intercompany
loans to TransTexas of $450 million (the "TransTexas Intercompany Loan") and to
TEC's wholly owned subsidiary, TransAmerican Refining Corporation ("TARC"), of
$676 million (the "TARC Intercompany Loan" and, together with the TransTexas
Intercompany Loan, the "Intercompany Loans"). The TransTexas Intercompany Loan
bears interest at a rate of 10 7/8% per annum, payable semi-annually in cash in
arrears, and the TARC Intercompany Loan accretes principal at 16% per annum,
compounded semi-annually, to a final accreted value of $920 million, and
thereafter pays interest semi-annually in cash in arrears on the accreted value
thereof, at a rate of 16% per annum. The Intercompany Loans will mature on
June 1, 2002. The Intercompany Loan agreements contain certain restrictive
covenants, including, among others, limitations on incurring additional debt,
asset sales, dividends and transactions with affiliates.

On June 13, 1997, the Company completed a tender offer (the "Tender
Offer") for the TransTexas Senior Secured Notes for 111 1/2% of their principal
amount (plus accrued and unpaid interest). Approximately $785.4 million
principal amount of TransTexas Senior Secured Notes were tendered and accepted
by the Company. The TransTexas Senior Secured Notes remaining outstanding were
called for redemption on June 30, 1997 pursuant to the terms of the indenture
governing such notes.

On June 19, 1997, the Company completed an exchange offer (the "June
Exchange Offer") in which it issued $115.8 million aggregate principal amount of
its 13 3/4% Series C Senior Subordinated Notes due 2001 (the "Subordinated
Exchange Notes") in exchange for all of its outstanding 13 1/4% Senior
Subordinated Notes due 2003. On October 10, 1997, the Company completed a
registered exchange of its 13 3/4% Series D Senior Subordinated Notes due 2001
(the "Subordinated Notes") for all of its Subordinated Exchanges Notes. The
indenture governing the Subordinated Notes (the "Subordinated Note Indenture")
includes certain restrictive covenants including, among others, limitations on
incurring additional debt, asset sales, dividends and transactions with
affiliates.

As a result of the Lobo Sale, the Tender Offer and the June Exchange
Offer, TransTexas recorded a pretax gain of approximately $533 million and an
after-tax extraordinary charge of approximately $72 million during the quarter
ended July 31, 1997.

TransTexas has implemented a stock repurchase program (the "Stock
Repurchase Program") pursuant to which it plans to repurchase common stock from
its public stockholders and from its affiliates, including TEC and

2
<PAGE> 8
TARC, in an aggregate amount of approximately $399 million in value of stock
purchased. It is anticipated that TransTexas will acquire approximately four
times the number of shares from its affiliated stockholders that it acquires
from its public stockholders. Shares may be purchased through open market
purchases, negotiated transactions or tender offers, or combination of the
above. It is anticipated that the price paid to affiliated stockholders will
equal the weighted average price paid to purchase shares from the public
stockholders. As of September 30, 1997, approximately 3.9 million shares had
been repurchased from public stockholders for an aggregate purchase price of
approximately $61.4 million and approximately 12.6 million shares had been
repurchased from TARC and TEC for an aggregate purchase price of approximately
$201 million.

Pursuant to a disbursement agreement (the "Disbursement Agreement")
among TransTexas, TEC and Firstar Bank of Minnesota, N.A., as trustee (the
"Trustee") under the indenture governing the TEC Notes (the "Indenture" or the
"TEC Notes Indenture") and disbursement agent, approximately $399 million of
the proceeds of the TransTexas Intercompany Loan was placed in an account (the
"Disbursement Account") to be held and invested by the disbursement agent until
disbursed. Funds in the Disbursement Account have been and will be disbursed
to TransTexas as needed to fund the Stock Repurchase Program. TransTexas may
at any time request disbursement of interest earned on the funds in the
Disbursement Account.

3
<PAGE> 9
RISK FACTORS

In addition to the other information set forth elsewhere in this
Prospectus, the following factors relating to the Company should be considered
by prospective investors when evaluating an investment in the Shares offered
hereby.

SIGNIFICANT LEVERAGE

At July 31, 1997, the Company's short- and long-term debt, including
the TransTexas Intercompany Loan, the Subordinated Notes, the BNY Facility
(defined below) and certain equipment financing was approximately $596.1
million, which represented approximately 70.2% of the Company's total
capitalization. On a pro forma basis, giving effect to the completion of the
Stock Repurchase Program, total liabilities of the Company would have been
greater than the book value of its assets by approximately $96 million at July
31, 1997. The Company's high degree of leverage has significant consequences,
including (i) a substantial portion of the Company's net cash provided by
operations will be committed to the payment of the Company's interest expense
and principal repayment obligations, (ii) the Company's cash flow is more
sensitive to fluctuations in natural gas prices than less highly leveraged
companies and (iii) the Company is more highly leveraged than other large
companies in the gas exploration, production and transmission business, which
may place it at a competitive disadvantage. These consequences could adversely
affect the Company's ability to meet its obligations. Further, the Company's
ability to fund its current capital expenditures and debt service requirements
and, ultimately, to pay the principal amounts of its indebtedness upon maturity
from its cash flows from operations would require significant increases in
production. The Company may have available to it sources of liquidity other
than cash flow from operations, including asset sales, equity offerings or debt
financings, to retire or otherwise refinance the principal amount of its
indebtedness on or prior to maturity. However, there can be no assurance that
such sources will be available if and when needed on terms acceptable to the
Company, or at all.

SUBSTANTIAL CAPITAL REQUIREMENTS

TransTexas makes substantial capital expenditures for the exploration,
development and production of its natural gas reserves. Historically,
TransTexas has financed capital expenditures and serviced its debt with cash
from operations, public and private offerings of debt and equity securities,
the sale of production payments, asset sales and other financings. TransTexas
intends to use cash flow from operations and proceeds received pursuant to the
transactions described in "Prospectus Summary -- Recent Events," as well as cash
from asset sales or other financings to fund its capital requirements in fiscal
1998. If capital expenditures are higher than anticipated, cash flow from
operations is lower than anticipated or certain contingent obligations of
TransTexas become fixed, TransTexas may not have sufficient funds for capital
expenditures necessary to replace its reserves, to maintain production at
current levels or to attain increased production levels and, as a result,
production from operations may decrease over time. No assurance can be given
that TransTexas' cash flow from operating activities will be sufficient to meet
actual capital expenditures, contingent liabilities and debt service in the
future. Furthermore, no assurance can be given that additional sources of
capital will be available.

POTENTIAL TAX LIABILITIES

Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provisions (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended, and has reduced its tax attributes (including its net
operating loss and credit carry forwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this
transaction, however, and TransAmerican has not obtained a ruling from the
Internal Revenue Service (the "IRS") regarding this transaction. TransTexas
believes that there is substantial legal authority to support the position that
the COD Exclusion applies to the cancellation of TransAmerican's indebtedness.
However, due to factual and legal uncertainties, there can be no assurance that
the IRS will not challenge this position, or that such challenge would not be
upheld. Under an agreement between TransTexas, TransAmerican and certain of
TransAmerican's subsidiaries (the "Tax Allocation Agreement"), TransTexas has
agreed to pay an amount equal to any federal tax liability (which would be
approximately $25.4 million)

4
<PAGE> 10
attributable to the inapplicability of the COD Exclusion. Any such tax would
be offset in future years by alternative minimum tax credits and retained loss
and credit carryforwards to the extent recoverable from TransAmerican. As a
member of the TNGC Consolidated Group (defined below), each of TransTexas, TEC
and TARC will be severally liable for any tax liability resulting from the
above-described transactions. The IRS has commenced an audit of the
consolidated federal income tax returns of the TNGC Consolidated Group for its
taxable years ended July 31, 1994 and 1995. Because the audit is in its
initial stages, it is not possible to predict the scope of the IRS' review or
whether any tax deficiencies will be proposed by the IRS as a result of its
review.

Based upon independent legal advice, TransTexas has determined that it
will not report any significant federal income tax liability as a result of the
Lobo Sale. There are, however, significant uncertainties regarding TransTexas'
tax position and no assurance can be given that TransTexas' position will be
sustained if challenged by the IRS. TransTexas is part of an affiliated group
for tax purposes (the "TNGC Consolidated Group"), which includes TNGC Holdings
Corporation, the sole stockholder of TransAmerican. No letter ruling has been
or will be obtained from the IRS regarding the Lobo Sale by any member of the
TNGC Consolidated Group. If the IRS were to successfully challenge TransTexas'
position, each member of the TNGC Consolidated Group would be severally liable
under the consolidated tax return regulations for the resulting taxes, in the
estimated amount of up to $250 million (assuming the use of existing tax
attributes of the TNGC Consolidated Group), possible penalties equal to 20% of
the amount of the tax, and interest at the statutory rate (currently 9%) on the
tax and penalties (if any). The Tax Allocation Agreement has been amended so
that TransAmerican is obligated to fund the entire tax deficiency (if any)
resulting from the Lobo Sale. There can be no assurance that TransAmerican
would be able to fund any such payment at the time due and the other members of
the TNGC Consolidated Group, thus, may be required to pay the tax. TransTexas
has reserved approximately $75 million with respect to the potential tax
liability for financial reporting purposes to reflect a portion of the federal
tax liability that TransAmerican might not be able to pay. If TransTexas or
any of the other related companies were required to pay this tax deficiency, it
is likely that it would be required to sell significant assets or raise
additional debt or equity capital to fund the payment.

DECONSOLIDATION FOR FEDERAL INCOME TAX PURPOSES

Under certain circumstances, TransAmerican, TARC or TEC may sell or
otherwise dispose of shares of common stock of TransTexas. If, as a result
of any sale or other disposition of TransTexas' common stock, the aggregate
ownership of TransTexas by members of the TNGC Consolidated Group (excluding
TransTexas) is less than 80% (measured by voting power and value), TransTexas
will no longer be a member of the TNGC Consolidated Group for federal tax
purposes ("Deconsolidation") and, with certain exceptions, will no longer be
obligated under the terms and conditions of, or entitled to the benefits of,
the Tax Allocation Agreement. Further, if TEC or TARC sells or otherwise
transfers any stock of TARC, or issues any options, warrants or other similar
rights relating to such stock, outside of the TNGC Consolidated Group, which
represents more than 20% of the voting power or equity value of TARC, then a
Deconsolidation of TARC would occur. A Deconsolidation of TARC would result
in a Deconsolidation of TransTexas if members of the TNGC Consolidated Group,
excluding TARC, does not then own at least 80% of the voting power and equity
value of TransTexas. Upon a Deconsolidation of TransTexas, members of the TNGC
Consolidated Group that own TransTexas common stock could incur a substantial
amount of federal income tax liability. If such Deconsolidation occurred
during the fiscal year ending January 31, 1998, the aggregate amount of this
tax liability is estimated to be between $50 million and $100 million, assuming
no reduction for tax attributes of the TNGC Consolidated Group. However, such
tax liability generally would be substantially reduced or eliminated in the
event that the IRS successfully challenged TransTexas' position on the Lobo
Sale. Each member of a consolidated group filing a consolidated federal income
tax return is severally liable to the IRS for the consolidated federal income
tax liability of the consolidated group. There can be no assurance that each
TNGC Consolidated Group member will have the ability to satisfy any tax
obligation attributable to the foregoing transactions at the time due and,
therefore, other members of the group, including TEC, TransTexas or TARC, may
be required to pay the tax.

Generally, under the Tax Allocation Agreement, if net operating losses
of TransTexas or TARC are used by other members of the TNGC Consolidated
Group, then TransTexas and TARC are entitled to the benefit (through reduced
current taxes payable) of such losses in later years to the extent TransTexas
or TARC has taxable income,

5
<PAGE> 11
remains a member of the TNGC Consolidated Group and the other group members
have the ability to pay such taxes. If TransAmerican, TEC or TARC transfers
shares of common stock of TransTexas or TARC (or transfers options or other
rights to acquire such shares) and, as a result of such transfer,
Deconsolidation of TransTexas or TARC occurs, TransTexas and TARC would not
thereafter receive any benefit pursuant to the Tax Allocation Agreement for net
operating losses of TransTexas and TARC used by other members of the TNGC
Consolidated Group prior to the Deconsolidation of TransTexas or TARC.

TransTexas is required, under the Tax Allocation Agreement, to pay
any Texas franchise tax (which is estimated not to exceed $11.4 million)
attributable to prior year transactions. TransTexas paid approximately $5.4
million of such tax as of the closing of the Lobo Sale and will pay a
substantial amount of the remaining tax within the ensuing 12-month period.

POTENTIAL EFFECTS OF A CHANGE OF CONTROL.

The Subordinated Notes Indenture provides that, upon the occurrence of
a change of control (as defined therein), each holder of the Subordinated Notes
will have the right to require TransTexas to repurchase such holder's notes at
101% of the principal amount thereof plus accrued and unpaid interest. Pursuant
to the terms of the Intercompany Loans, upon the occurrence of a change of
control, TEC would have the right to require TransTexas and TARC to repay the
principal of the TransTexas Intercompany Loan in an amount equal to a pro rata
share of the amount TEC is required to pay under the Indenture. Such pro rata
share would be calculated using the ratio of the outstanding principal amount of
the TransTexas Intercompany Loan (or, for TARC, the accreted value of the
outstanding principal amount of the TARC Intercompany Loan) to the sum of (i)
the outstanding principal amount of the TransTexas Intercompany Loan plus (ii)
the accreted value of the outstanding principal amount of the TARC Intercompany
Loan. A change of control would be deemed to occur under the Subordinated Notes
Indenture in the case of certain changes or other events in respect of the
ownership of TransTexas, including any circumstances pursuant to which any
person or group other than John R. Stanley (or his heirs, his estate or any
trust in which he or his immediate family members have, directly or indirectly,
a beneficial interest in excess of 50%) and his subsidiaries or the Trustee is
or become the beneficial owner of more than 50% of the total voting power of
TransTexas' then outstanding voting stock and during the 90-day period
thereafter the rating on the notes is downgraded or withdrawn. A change of
control would be deemed to occur under the Indenture and the Intercompany Loans
in the case of certain changes or other events in respect of the ownership or
control of TEC, TransTexas, or TARC including any circumstance pursuant to which
(i) any person or group, other than John R. Stanley (or his heirs, his estate or
any trust in which he or his immediate family members have, directly or
indirectly, a beneficial interest in excess of 50%) and his subsidiaries or
the Trustee is or becomes the beneficial owner of more than 50% of the total
voting power of TEC's then outstanding voting stock or (ii) TEC or any of its
subsidiaries own some of TransTexas' or TARC's capital stock, respectively, but
less than 50% of the total voting stock or economic value of TransTexas or TARC,
respectively, unless the TEC Notes have an investment grade rating for the
period of 120 days thereafter. The term "person," as used in the definition of
change of control, means a natural person, company, government or political
subdivision, agency or instrumentality of a government and also includes a
"group," which is defined as two or more persons acting as a partnership,
limited partnership or other group. In addition, certain changes or other
events in respect of the ownership or control of TransTexas that do not
constitute a "change of control" under the Subordinated Notes Indenture or the
Indenture may result in a "change of control" of TransTexas under the terms of
TransTexas' credit facility (the "BNY Facility") and certain equipment
financing. Such an occurrence could create an obligation for TransTexas to
repay such other indebtedness. At July 31, 1997, TransTexas had approximately
$26.6 million of indebtedness (excluding the TransTexas Intercompany Loan and
the Subordinated Notes) subject to such right of repayment or repurchase. In
the event of a change of control under the Indenture or a "change of control"
under the terms of the Subordinated Notes Indenture or other outstanding
indebtedness, there can be no assurance that TransTexas or TARC will have
sufficient funds to satisfy any such payment obligations.

A change of control or other event that results in Deconsolidation of
TransTexas and TransAmerican for federal income tax purposes could result in
acceleration of a substantial amount of federal income taxes. See
"--Deconsolidation for Federal Income Tax Purposes."

6
<PAGE> 12
INTERCOMPANY LOAN AND INDENTURE RESTRICTIONS

The TransTexas Intercompany Loan documents and the Subordinated Notes
Indenture limit the Company's ability to incur additional indebtedness,
transfer or sell assets, transfer assets to subsidiaries, pay dividends or make
other restricted payments, create liens, enter into certain transactions with
affiliates or consummate a merger, consolidation or sale of all or
substantially all of its assets. There can be no assurance that these
limitations will not adversely affect the Company's results of operations or
financial condition.

LIMITED OPERATING HISTORY IN CONTINUING OPERATIONS

Prior to the Lobo Sale, TransTexas derived a substantial amount of its
revenues from gas produced from its Lobo Trend producing properties.
TransTexas' experience in the drilling and operation of wells in areas outside
of the Lobo Trend is limited, its completion rate in such areas is
substantially lower and its average lifting costs in such areas are higher.
Accordingly, results of operations from the Continuing Operations or from
properties acquired in the future might differ materially from those in the
Lobo Trend.

ABILITY TO REPLACE SHORT-LIVED RESERVES

TransTexas' principal producing properties are characterized by high
initial production followed by a steep decline in production rates, with wells
typically having a half-life of less than two years and an economic life of
approximately ten years. As a result, TransTexas must find and develop or
acquire new natural gas reserves to replace those being depleted by production.
Without successful drilling and exploration or acquisition activities,
TransTexas' reserves and production will decline rapidly. TransTexas' business
strategy is to add reserves by pursuing an active drilling program on its
existing undeveloped properties and on properties that it may acquire in the
future. There can be no assurance that production from new wells will be
sufficient to replace production from existing wells.

NATURAL GAS PRICE FLUCTUATIONS AND MARKETS

TransTexas' results of operations and the value of its gas and oil
properties are highly dependent upon the prices TransTexas receives for its
natural gas. Substantially all of TransTexas' sales of natural gas are made in
the spot market, or pursuant to contracts based on spot market prices, and not
pursuant to long-term, fixed-price contracts. Accordingly, the prices received
by TransTexas for its natural gas production are dependent upon numerous
factors beyond the control of TransTexas, including the level of consumer
product demand, the North American supply of natural gas, government
regulations and taxes, the price and availability of alternative fuels, the
level of foreign imports of oil and natural gas, and the overall economic
environment. Demand for natural gas is seasonal, with demand typically higher
during the summer and winter, and lower during the spring and fall, with
concomitant changes in price. During the quarter ended July 31, 1997, the
average gas price for the Continuing Operations was $2.04 per Mcf.

Any significant decline in current prices for natural gas could have a
material adverse effect on TransTexas' financial condition, results of
operations and quantities of reserves recoverable on an economic basis. In
order to mitigate its vulnerability to natural gas price volatility, TransTexas
has entered into and may continue to enter into commodity price swap agreements
to reduce its exposure to price risk in the spot market for natural gas.
However, all of TransTexas' current production remains subject to natural gas
price fluctuations. Based on an assumed average daily net production level of
230 MMcfd (after giving effect to the Lobo Sale), TransTexas estimates that a
$0.10 per MMBtu change in average gas prices received would change annual
operating income by approximately $6.4 million.

7
<PAGE> 13
COMPETITION

TransTexas competes in the highly competitive areas of natural gas
exploration, development and production. Many of TransTexas' competitors have
substantially larger financial resources, staffs and facilities than
TransTexas.

DRILLING RISK

Drilling activities are subject to numerous risks, including
mechanical risk and the risk that no commercially productive reservoirs will be
encountered. There can be no assurance that new wells drilled by TransTexas
will be productive or that TransTexas will recover all or any portion of its
investment. The cost of drilling, completing and operating wells is often
uncertain. TransTexas' drilling operations may be curtailed, delayed or
canceled as a result of numerous factors, many of which are beyond TransTexas'
control, including title problems, weather conditions, compliance with
governmental requirements and shortages or delays in the delivery of equipment
and services.

TRANSPORTATION

As a result of the Lobo Sale, TransTexas no longer owns the pipeline
assets held by TTC, which assets are used to transport natural gas from certain
of the Continuing Operations. Although TransTexas has entered into a
transportation agreement to provide it access to such pipeline, there can be no
assurance that this agreement will provide sufficient access or capacity or
that the terms thereof will remain competitive with market rates.

RISKS RELATED TO LOBO SALE

The Lobo Sale Agreement contains representations and warranties by
TransTexas typical for the sale of an oil and gas exploration, production and
transmission company, including the following: representations and warranties
relating to the accuracy of financial information; liabilities under employee
benefit plans; payment of taxes; existence of litigation or other claims;
compliance with laws, including environmental laws; condition of personal
property; existence of contracts, commitments and contingent liabilities; and
title to properties. TransTexas has indemnified the buyer for certain
liabilities related to the assets of TTC, including judgment liens, costs to
remediate conditions that may result in environmental liability and liabilities
and costs related to inaccuracies in representations and warranties (without
regard to TransTexas' knowledge of such inaccuracy) with respect to which no
purchase price adjustment was made at the closing or as part of the
post-closing reconciliation. TransTexas does not anticipate that it will be
responsible for any material amount of post-closing indemnity obligations under
the Lobo Sale Agreement, but there can be no assurance that such liabilities
will not significantly reduce the benefits to be obtained by TransTexas from
the Lobo Sale.

OPERATING HAZARDS AND UNINSURED RISKS

TransTexas' operations are subject to hazards and risks inherent in
drilling for, and the production, processing and transportation of, natural
gas, such as fires, explosions, encountering formations with abnormal
pressures, blowouts, cratering, pipeline ruptures and spills, any of which can
result in loss of hydrocarbons, environmental pollution, personal injury claims
and other damage to properties of TransTexas and others. TransTexas' insurance
coverage includes, among other things, operator's extra expense, physical
damage on certain assets, employer's liability, comprehensive general
liability, automobile and workers' compensation insurance. TransTexas believes
that its insurance is adequate and customary for companies of a similar size
engaged in operations similar to those of TransTexas, but losses can occur for
uninsurable or uninsured risks or in amounts in excess of existing insurance
coverage.

GOVERNMENT REGULATIONS

TransTexas' business is subject to certain federal, state and local
laws and regulations relating to the exploration for and the development,
production and transportation of natural gas, as well as environmental and
safety matters. Many of these laws and regulations have become more stringent
in recent years, often imposing greater liability on a larger number of
potentially responsible parties. Because the requirements imposed by such laws
and regulations

8
<PAGE> 14
are frequently changed, TransTexas is unable to predict the ultimate cost of
compliance with these requirements or their effect on its operations.

MATERIAL PROCEEDINGS AND CONTINGENT LIABILITIES

The Company is involved in many legal proceedings. The litigation and
contingent liabilities of the Company, individually and in the aggregate,
amount to significant potential liability and, if adjudicated adversely, could
have a material adverse effect on the Company. The adverse resolution in any
reporting period of one or more of these matters could have a material adverse
impact on the results of operations or cash flow of the Company for that
period. Although the outcome of these lawsuits cannot be predicted with
certainty, the Company does not expect these matters to have a material adverse
effect on its financial position.

SUBSTANTIVE CONSOLIDATION; BANKRUPTCY

An investment in the Shares involves certain insolvency and bankruptcy
considerations including substantive consolidation issues. A financial failure
by John R. Stanley, TNGC, TransAmerican, TransAmerican Exploration Corporation
("TEXC") or TARC could have adverse consequences for holders of the Shares if a
bankruptcy court were to "substantively consolidate" the Company with Mr.
Stanley or any of such entities. If a bankruptcy court substantively
consolidated the Company with Mr. Stanley, TNGC, TransAmerican, TEXC, TEC or
TARC, the assets of each entity so consolidated would be subject to the claims
of creditors of each other such entity. TransAmerican filed for bankruptcy
protection under the federal bankruptcy laws in 1975 and 1983. As a result of
the bankruptcy proceedings, creditors of TransAmerican received less than the
amount to which they would otherwise have been entitled.

CONTROL BY TRANSAMERICAN AND TNGC; POTENTIAL CONFLICTS OF INTEREST

TransAmerican is the indirect controlling stockholder of the Company.
TransAmerican is wholly owned by TNGC. As a member of the board of directors
and chief executive officer of TransAmerican and the Company and sole
stockholder, sole director and chief executive officer of TNGC, John R. Stanley
is in a position to control or significantly influence the management and
operations of the Company, including actions with respect to pending and any
future litigation. There can be no assurance that conflicts will not arise
between TNGC, TransAmerican, TNGC's other subsidiaries and Mr. Stanley, on one
hand, and the other stockholders of the Company, on the other. In addition, Mr.
Stanley has guaranteed certain indemnity obligations of TransAmerican and the
Company and certain debt of the Company. The Company's response to any
litigation or any indemnification demand may be influenced by TransAmerican or
Mr. Stanley in a manner that could be adverse to the holders of the Shares.
TNGC, TransAmerican and its existing subsidiaries, including the Company, are
parties to the Tax Allocation Agreement, the general terms of which provide for
TNGC and all of its subsidiaries to file federal income tax returns as members
of a consolidated group. The Tax Allocation Agreement requires the Company, TEC
and TARC to make certain payments to TNGC to enable TNGC to pay its federal or
alternative minimum tax. In the event of an IRS audit or examination, the Tax
Allocation Agreement generally gives TNGC the authority to compromise or settle
disputes and to control litigation, subject to the approval of the Company, TEC
or TARC, as the case may be, where such compromise or settlement affects the
determination of the separate tax liability of that company.

RELIANCE ON ESTIMATES OF PROVED RESERVES

There are numerous uncertainties inherent in estimating quantities of
proved reserves, including many factors beyond the control of the Company. The
reserve data included and incorporated by reference in this Prospectus
represent only estimates prepared by Netherland, Sewell & Associates, Inc. Gas
reserve assessment is a subjective process of estimating the recovery from
underground accumulations of gas that cannot be measured in an exact way, and
estimates of other persons might differ materially from those of Netherland,
Sewell & Associates, Inc. Certain events, including production, acquisitions
and future drilling and development could result in increases or decreases in
estimated quantities of proved reserves. In addition, estimates of the
Company's future net revenues from proved

9
<PAGE> 15
reserves and the present value thereof are based on certain assumptions
regarding future natural gas prices, production levels, production and ad
valorem taxes and operating and development costs that may not prove to be
correct over time.

FUTURE SALES OF COMMON STOCK

As of October 15, 1997, 10,726,902 shares of Common Stock
(representing approximately 18.7% of the outstanding Common Stock) are owned by
the public. The Company is unable to predict the effect, if any, that future
sales of shares of Common Stock covered hereby would have on the market price
of the Common Stock prevailing from time to time. However, the sale of a
substantial portion of the Shares could have an adverse effect on the market
price of the Common Stock. Although the Company does not currently contemplate
a primary offering of Common Stock, the Company may sell shares of Common Stock
in a public or private offering in the future.

In January 1996, the Company entered into a reimbursement agreement
with an unaffiliated third party pursuant to which the third party caused a $20
million letter of credit to be issued to secure a supersedeas bond on behalf of
the Company in a legal proceeding. If there is a draw under the letter of
credit, the Company is required to reimburse the third party within 60 days.
The Company has agreed to issue up to 8.6 million shares of Common Stock to the
third party if this contingent obligation to such third party becomes fixed and
remains unpaid for 60 days. The Company does not believe that this contingency
will occur. If the obligation becomes fixed, and alternative sources of
capital are not available, the Company could elect to sell shares of Common
Stock prior to the maturity of the obligation and use the proceeds of such sale
or repay the third party. If these shares are issued, their sale could have an
adverse effect on the market price of the Common Stock.

10
<PAGE> 16
THE COMPANY

GENERAL

In 1994, as part of its strategy to expand its productive reserves
beyond the Lobo Trend, TransTexas began evaluating prospects that exhibited the
potential to add proved reserves of at least 50 Bcfe of natural gas per
development area. Since that time, TransTexas has evaluated over 300 potential
areas and its development of certain of these areas has resulted in substantial
additions to its reserves and production.

In May 1997 TransTexas consummated the sale of TTC, its subsidiary
that owned substantially all of TransTexas' Lobo Trend producing properties and
related pipeline transmission system, for a sales price of approximately $1.1
billion. As of February 1, 1997, the Lobo Trend producing properties divested
by the sale of the stock of TTC had proved reserves of approximately 550 Bcfe.
As of February 1, 1997 TransTexas' net proved reserves for the Continuing
Operations, as estimated by Netherland, Sewell & Associates, were 404 Bcfe. As
of July 31, 1997, after giving effect to the Lobo Sale, TransTexas owned
approximately 650,000 gross (475,000 net) acres of mineral interests.

TransTexas' average net daily natural gas production for the year
ended January 31, 1997, was approximately 420 MMcfd, for a total net production
of 153.6 Bcf of natural gas. After giving effect to the Lobo Sale, TransTexas'
average daily net production for the six months ended July 31, 1997 was
approximately 164 MMcfd of natural gas and 2,013 Bpd of crude oil and
condensate, for a total net production of 31.1 Bcfe.

OPERATING AREAS

TransTexas' primary areas of operations are discussed below:

BOB WEST NORTH. In late 1994, TransTexas made a natural gas discovery
in the Bob West North area of southern Zapata County, Texas. As of July 31,
1997, TransTexas has drilled 51 wells and completed 47 wells in the area.
TransTexas' mineral interests in Bob West North consist of a 98% working
interest in 17,700 gross (14,810 net) acres and a 90% net profits interest in
660 gross acres. The Bob West North area surpassed the Lobo Trend in net daily
natural gas production to TransTexas by the end of fiscal 1997. On July 31,
1997, TransTexas was drilling two wells in Bob West North and was in the
process of completing one well. For the six months ended July 31, 1997,
TransTexas produced 31.3 Bcf (22.7 net Bcf) from the Bob West North area for
average net daily production of 126 MMcfd. For the twelve months ended January
31, 1997, TransTexas produced 45.7 Bcf (32.6 net Bcf) from the Bob West North
area. Recent drilling results indicate the potential for a new productive fault
block of the structure that previously had not been drilled.

FANDANGO SOUTH. TransTexas is developing an additional natural gas
discovery located in the Lower Wilcox sands in Jim Hogg County, Texas known as
the Fandango South area. As of July 31, 1997, TransTexas had drilled five
wells, and completed three wells in Fandango South. TransTexas was also
completing a fourth well and drilling two additional wells in the area.
TransTexas' Fandango South properties are currently producing primarily from
the Travis Ward sands of the Wilcox formation. As a result of carbon-dioxide
levels in the natural gas from this formation, production is currently
constrained by transmission pipeline carbon-dioxide standards. TransTexas is
installing amine treatment facilities to lower carbon-dioxide levels.
TransTexas is also drilling wells to the Hinnant sands of the Wilcox formation,
from which natural gas is of higher quality, and blending the production. For
the six months ended July 31, 1997, TransTexas produced 2.4 Bcf gross (1.7 Bcf
net) of natural gas from Fandango South, at an average net daily rate

11
<PAGE> 17
of 9.4 MMcfd. As of July 31, 1997, TransTexas held a 97% working interest in
approximately 5,430 gross (5,430 net) acres in Fandango South.

GALVESTON BAY. In November 1996, TransTexas reached agreement with an
unaffiliated third party to jointly conduct exploration of geological
prospects. The parties have identified six prospects in Galveston Bay that they
intend to drill and have commenced drilling on two of these prospects.

On September 16, 1997, TransTexas announced that it had concluded
drilling of the State Tract 331#1 well on the Eagle Point prospect in Galveston
Bay, located approximately one mile off the coast of San Leon, Texas, in a
water depth of less than ten feet. Electric logs indicated the presence of high
quality hydrocarbon-bearing pay. TransTexas had previously encountered
difficulties with controlling the wellbore pressure when drilling through the
potential pay zone, and recovered low gravity condensate in the drilling
returns from the zone. TransTexas intends to conduct a flow test of the State
Tract 331#1 well as soon as practicable. TransTexas owns a 75% working interest
covering approximately 2,800 gross acres (2,640 net acres) in the area.

TransTexas is also drilling a second well, the State Tract 88A#1, in
Galveston Bay on the Virginia Point Prospect. TransTexas owns a 75% working
interest in approximately 2,760 gross acres (2,490 net acres) in the Virginia
Point prospect.

TransTexas owns a 75% working interest in a total of 9,430 gross acres
(6,890 net acres) in four other prospects in the Galveston Bay area that it
intends to drill.

GOLIAD & VICTORIA COUNTIES. TransTexas entered into an agreement with
an unaffiliated third party to develop 3- D seismic prospects in Goliad and
Victoria Counties, Texas. The discovery well, the Strong #1, which logged 82
net feet of pay from five zones between the depths of 10,800 and 13,800 feet,
has been flowing into a third-party pipeline since August 16, 1997. The well,
which is temporarily constrained by pipeline capacity to 5 MMcfd, has flowed at
a rate of 7.6 MMcfd.

Recently, drilling of a key delineation well, the Dorris #2, was
completed and electric logs have indicated the presence of multiple pay zones.
TransTexas expects to complete this well and commence production by early
October 1997. An earlier well, the Dorris #1, was lost due to mechanical
problems that resulted from a tubular failure. TransTexas expects to complete
two additional wells in Goliad County, the Strong #2 and Dorris #3, in October.
TransTexas is also drilling the Huber #1 in adjacent Victoria County, in what
is believed to be an extension of the prospect. TransTexas owns a 100% working
interest in approximately 4,240 gross acres (3,180 net acres) in Goliad and
Victoria Counties.

WHARTON COUNTY. In 1995, TransTexas entered into an agreement with an
unaffiliated third party to jointly develop the mineral rights in Frio and
Miocene sands in Wharton County, Texas. TransTexas is not the operator of this
interest but interprets data from a dedicated 3-D seismic program to select
drilling locations in which prior production has not depleted the shallow
reservoirs. As of July 31, 1997, 51 wells had been drilled in shallow
formations in the area, 22 of which had been completed. For the six months
ended July 31, 1997, TransTexas' Wharton County properties produced 2.1 Bcf
(1.4 Bcf net) of natural gas at an average gross daily rate of 11.6 MMcfd (7.5
MMcfd net).

TransTexas also acquired mineral rights covering deep prospective
production of the Wilcox formation in Wharton County. TransTexas has drilled
and completed two wells, the Joel Hudgins #1 and the Guenther #1, and is
finalizing pipeline transmission arrangements. The Joel Hudgins #1 well began
production on August 25, 1997 at a rate of 4.0 MMcfd. The Guenther #1, located
three miles northwest of the Joel Hudgins #1, has flow tested at a rate of 5.3
MMcfd from 65 feet of net pay and is awaiting a pipeline connection to a
carbon-dioxide treatment plant. A third well, the Rees-Gifford #1, is located
approximately 14 miles southwest of the Joel Hudgins #1, and has logged a total
of 75 feet of net Wilcox pay. As of July 31, 1997, TransTexas held a 75%
working interest in the shallow mineral rights in approximately 43,110 gross
(34,570 net) acres in Wharton County and a 100% working interest in the deep
mineral rights in approximately 2,580 gross (2,570 net) acres.

12
<PAGE> 18
LODGEPOLE, NORTH DAKOTA. In late 1996, TransTexas announced the
discovery of a Lodgepole carbonate reef oil field in Dickinson, North Dakota
with the Heart River #1, which flow tested at a daily rate of 6,836 Bpd.
TransTexas has conducted or participated in a series of 3-D seismic surveys
covering more than 270 square miles in Stark and Dunn counties, North Dakota.
TransTexas holds an average working interest of 80% in approximately 198,800
gross (98,400 net) acres in the Lodgepole. As of July 31, 1997, TransTexas had
drilled a total of eleven wells in the Lodgepole, three of which had been
completed. Effective March 1997, all producing wells in the field are
restricted to a State-mandated allowable daily rate of approximately 500 Bpd
per well. In the six months ended July 31, 1997, TransTexas' Lodgepole
properties produced 481,450 barrels of crude oil (308,130 barrels net) at a
gross average daily rate of 2,660 Bpd (1,702 Bpd net).

TransTexas believes that its interests in the Lodgepole do not fit its
long term strategic plan as a core producing property. In September 1997
TransTexas engaged First Union Corporation to solicit interest in its Lodgepole
properties, with the ultimate intent of divesting its producing properties in
North Dakota.

OTHER AREAS. TransTexas has also made discoveries of natural gas and
oil in other prospects that, as of July 31, 1997, have undergone less
development drilling, but which management believes could add material reserves
and production.

TransTexas has entered into a separate venture with its Galveston Bay
co-venturer covering prospects in South Louisiana. TransTexas owns a 25%
working interest in a discovery well in Vermillion Parish that is currently
being completed for production. TransTexas' strategy in South Louisiana is to
interpret 3-D seismic data and develop exploration prospects for drilling.
TransTexas expects eventually to participate in more than 350 square miles of
3-D data. As of September 25, 1997, TransTexas believes that it has identified
eight individual exploration prospects in South Louisiana that it intends to
drill and as of July 31, 1997, owned a 69% working interest in 13,180 gross
acres (9,840 net acres).

TransTexas owns an 82% working interest in 1,320 gross acres (790 net
acres) in Brazoria County, Texas. As of July 31, 1997, TransTexas was drilling
a test well in an area adjacent to existing production areas.

TransTexas owns a 100% working interest in 5,180 gross acres (2,690
net acres) in Chambers County. Texas. As of July 31, 1997, TransTexas had
drilled two wells in Chambers County that it was completing and was in the
process of drilling two additional wells.

TransTexas owns a 94% working interest in approximately 6,960 gross
(3,190 net) acres in Wayne County, Mississippi, in which it has drilled and
completed two wells. As of July 31, 1997, TransTexas was completing a third
well. For the six months ended July 31, 1997, TransTexas' properties in
Mississippi produced 2,480 barrels of condensate (1,740 barrels net) at a gross
average daily rate of 14 Bpd (10 Bpd net).

TransTexas holds a 92% working interest in approximately 35,270 gross
(32,370 net) acres in the Cuba Libre area of Webb County, Texas. For the six
months ended July 31, 1997, TransTexas produced 1.3 Bcf (.8 Bcf net) at an
average daily rate of 7.0 MMcfd (4.7 MMcfd net) from a total of 20 wells
drilled in Cuba Libre, of which 10 wells had been completed by TransTexas.

In 1996 TransTexas implemented a strategy consisting of the evaluation
of the potential for horizontal drilling in the Austin Chalk Formation. As of
July 31, 1997, TransTexas had drilled two horizontal wells in Walker County,
Texas and held a 100% working interest in approximately 54,390 gross (52,210
net) acres in the Austin Chalk.

TransTexas holds a 95% working interest in approximately 103,460 gross
(81,890 net) acres in the La Grulla area of Starr County, Texas. As of July 31,
1997, TransTexas had drilled a total of 34 wells in La Grulla, of which 17
wells had been completed. For the six months ended July 31, 1997, TransTexas'
La Grulla properties produced 1.3 Bcf (1.0 Bcf net) at an average rate of 7.0
MMcfd (5.4 MMcfd net).

13
<PAGE> 19
USE OF PROCEEDS

The Company will not receive any proceeds from the sale of the Shares
offered hereby.

SELLING SECURITY HOLDERS

The Selling Security Holders are TEC, TARC, SEM and TransAmerican.
TEC and SEM are subsidiaries of TransAmerican, and TARC is a subsidiary of TEC.
Through its interests in TEC, TARC and SEM, TransAmerican is the indirect
controlling stockholder of the Company. Prior to the Company's initial public
offering of Common Stock in March 1994, TransAmerican held all of the
outstanding Common Stock of the Company. Mr. John R. Stanley is the founder,
Chairman of the Board, Chief Executive Officer and sole stockholder of TNGC,
which is the sole stockholder of TransAmerican. Mr. Stanley, who has operated
TransAmerican for the past 35 years, is the Chief Executive Officer and a
director of the Company.

As of October 15, 1997, TEC owns 39,648,517 shares of Common Stock,
TARC owns 1,940,147 shares of Common Stock, TransAmerican owns 5,000,000 shares
of Common Stock and SEM owns 200,000 shares of Common Stock, representing
approximately 68.9%, 3.4%, 8.7% and 0.4%, respectively, of the total number of
shares of Common Stock outstanding on October 15, 1997. All of the shares of
Common Stock owned by the Selling Security Holders may be offered hereby. All
of the Shares have been pledged as security for obligations of the Selling
Security Holders and may, under certain circumstances, be sold by the pledgees
of such Shares. See "Plan of Distribution."

Because each of the Selling Security Holders may offer some or all of
the Shares, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Shares, no estimate can
be given as to the number of shares of Common Stock that will be held by any of
the Selling Security Holders upon completion of this offering.

PLAN OF DISTRIBUTION

The Shares may be sold from time to time by the Selling Security
Holders or by pledgees, donees, transferees or other successors in interest
(collectively, "Transferees"). Such sales may be made in underwritten
offerings or in open market or block transactions or otherwise on the NNM, or
such other national securities exchange or automated interdealer quotation
system on which shares of Common Stock are then listed, in the over-the-counter
market, or in private transactions, at prices related to prevailing market
prices or at negotiated prices. Some or all of the Shares may be sold to or
through broker-dealers and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Security Holders
or any Transferee or purchasers of shares for whom such broker-dealers may act
as agent or to whom they sell as principal or both. In effecting sales,
participating broker-dealers or purchasers of the Shares may arrange for other
broker-dealers to participate. In addition, any of the Shares covered by this
Prospectus that qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than pursuant to this Prospectus.

If underwriters are used in an offering of Shares, the Shares will be
acquired by the underwriters for their own accounts and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or prices, at prices related to the prevailing
market prices at the time of sale or at negotiated prices. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time. Underwriters may sell Shares to or
through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters or
commissions from the purchasers.

Upon any sale of the Shares offered hereby, the Selling Security
Holder, any Transferee, any underwriter and any participating broker-dealers or
selling agents may be deemed to be "underwriters" as that term is defined in
the Securities Act, in which event any discount, concession or commissions
received by them, which are not expected to exceed those customary in the types
of transactions involved, or any profit on resales of the Shares by them, may
be

14
<PAGE> 20
deemed to be underwriting commissions or discounts under the Securities Act.
The Company will not receive any of the proceeds from the sale by the Selling
Security Holders of the Common Stock offered hereby. The Selling Security
Holders have agreed to pay all expenses in connection with the registration and
sale of the Shares other than, in the case of sales by any Transferee,
discounts or commissions to brokers or dealers and fees and expenses of counsel
or other advisors to the Transferee. Underwriters, broker-dealers and agents
may be entitled, under the agreements entered into with the Company or any
Selling Security Holder or Transferee, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act.

At the time a particular offer of Common Stock is made, to the extent
required, a Prospectus Supplement will be distributed which will set forth the
aggregate amount of Common Stock being offered and the terms of the offering,
including shares being offered and the terms of the offering, including the
name or names of any underwriters, broker-dealers or selling agents, any
discounts, commissions and other items constituting compensation from the
Selling Security Holder or Transferee and any discounts, commissions or
concessions allowed or reallowed or paid to underwriters, broker-dealers or
selling agents.

All of the 1,940,147 shares of Common Stock owned by TARC have been
pledged to the trustee under the indenture governing TARC's Guaranteed First
Mortgage Discount Notes due 2002 and Guaranteed First Mortgage Notes due 2002,
of which $15.7 million in aggregate carrying value remained outstanding as of
July 31, 1997. All of the 39,648,517 shares of Common Stock owned by TEC have
been pledged to the trustee under the Indenture. TransAmerican has pledged
5,000,000 of the Shares to support contingent obligations of TARC under certain
tax benefit transfer agreements, which obligations will arise only if the other
parties to such agreements do not receive the tax benefits anticipated
thereunder. The persons to whom the Shares have been pledged may sell hereunder
the Shares that have been pledged to them only upon the occurrence of certain
events, as set forth in the various pledge agreements, including the failure to
pay principal or interest when due or other failure to satisfy the obligations
for which such Shares have been pledged as security. Upon the fulfillment of
such obligations, or under certain other circumstances, Shares may be released
from such pledges and may then be sold hereunder by the owner hereof.

LEGAL MATTERS

The validity of the Common Stock offered hereby has been passed upon
for the Company by Gardere & Wynne, L.L.P., 3000 Thanksgiving Tower, Dallas,
Texas 75201.

INDEPENDENT ACCOUNTANTS

The consolidated balance sheets as of January 31, 1996 and 1997, and
the related consolidated statements of operations, stockholders' deficit and
cash flows for the year ended January 31, 1997, the six months ended January
31, 1996, and each of the two years ended July 31, 1995, and related schedules,
incorporated by reference in this prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in auditing and accounting.
With respect to the unaudited interim financial information for the periods
ended January 31, 1995, January 31, 1996, July 31, 1996 and July 31, 1997
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 reports included in the Company's quarterly reports on Form 10-Q for
the quarters ended April 30, 1997 and July 31, 1997, and incorporated by
reference herein, state that they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports 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.

15
<PAGE> 21
EXPERTS

The reserve estimates of the Company included in the Company's Form
10-K for the fiscal year ended January 31, 1997 have been incorporated by
reference in this Prospectus and the Registration Statement in reliance upon
reserve reports and summary letters prepared by Netherland, Sewell &
Associates, Inc., upon the authority of such firm as experts in estimating
proved oil and gas reserves.

16
<PAGE> 22
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

TransAmerican Energy Corporation, TransAmerican Refining Corporation,
TransAmerican Natural Gas Corporation and Southeast Marine, Inc. have agreed to
pay all expenses, other than underwriting discounts, concessions and
commissions, in connection with the issuance and distribution of the securities
being registered pursuant to this Registration Statement, on a pro rata basis,
based on the number of shares registered for the account of each. The
following table sets forth an estimate of such expenses:

<TABLE>
<CAPTION>
ITEM AMOUNT*
---- ------
<S> <C>
Securities and Exchange Commission fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . $247,209
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,500
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,500
Fees and expenses for qualification under state securities laws . . . . . . . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,791
------

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $425,000
=======
</TABLE>

______________________

* All expenses are estimated, except the Securities and Exchange Commission
fee.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company is a Delaware corporation. Section 145 of the Delaware
General Corporation Law (the "DGCL") provides that any person may be
indemnified by a Delaware corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or completed action,
suit or proceeding in which such person is made a party by reason of his being
or having been a director, officer, employee or agent of the Company. The
statute provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise.

Section nine of the Company's Certificate of Incorporation provides
that directors of the Company shall not, to the fullest extent permitted by the
DGCL, as amended from time to time, be liable to the Company or its
stockholders for monetary damages for breach of their fiduciary duty to the
Company or the Company's stockholders.

The Company has entered into indemnification agreements with its
executive officers and directors that will contractually provide for
indemnification and expense advancement and include related provisions meant to
facilitate the indemnitees' receipt of such benefits. In addition, the Company
has purchased customary directors' and officers' liability insurance policies
for its directors and officers. The Bylaws of the Company and agreements with
directors and officers also provide for indemnification for amounts (i) in
respect of the deductibles for such insurance policies and (ii) that exceed the
liability limits of such insurance policies. Such indemnification may be made
even though directors and officers would not otherwise be entitled to
indemnification under other provisions of the Bylaws or such agreements.

II-1
<PAGE> 23
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<S> <C>
3.1 -- Certificate of Incorporation (filed as an exhibit to the Company's registration statement No. 33-75050,
and incorporated herein by reference).

*4.1 -- Pledge Agreement dated as of February 23, 1995, between TransAmerican Energy Corporation and First
Fidelity Bank, National Association, as Trustee.

*4.2 -- Pledge Agreement dated as of February 23, 1995, between TransAmerican Refining Corporation and First
Fidelity Bank, National Association, as Trustee.

*4.3 -- Registration Rights Agreement dated as of February 23, 1995, among TransTexas Gas Corporation,
TransAmerican Refining Corporation and TransAmerican Energy Corporation.

*4.4 -- Pledge Agreement dated as of February 23, 1995, among TransAmerican Natural Gas Corporation, TransTexas
Gas Corporation and Halliburton Company.

*4.5 -- Pledge Agreement dated as of February 23, 1995, among TransAmerican Natural Gas Corporation, TransTexas
Gas Corporation and RECO Industries, Inc.

*4.6 -- Pledge Agreement dated as of February 23, 1995, among TransAmerican Natural Gas Corporation, TransTexas
Gas Corporation and Frito-Lay, Inc.

*4.7 -- Pledge Agreement dated as of February 23, 1995, among TransAmerican Natural Gas Corporation, TransTexas
Gas Corporation and EM Sector Holdings, Inc.

4.8 -- Indenture dated June 13, 1997 between TransTexas Gas Corporation and BankOne, NA, as Trustee (filed as
an exhibit to the Company's registration statement No. 333-33803, and incorporated herein by
reference).

4.9 -- Loan Agreement dated June 13, 1997 between the Company and TEC (filed as an exhibit to the Company's
current report on Form 8-K dated June 13, 1997, and incorporated herein by reference).

4.10 -- Security and Pledge Agreement dated June 13, 1997 between Company and TEC (filed as an exhibit to the
Company's current report on Form 8-K dated June 13, 1997, and incorporated herein by reference).

4.11 -- Disbursement Agreement dated June 13, 1997 among the Company, TEC and Firstar Bank of Minnesota, as
disbursement agent (filed as an exhibit to the Company's current report on Form 8-K dated June 13,
1997, and incorporated herein by reference).

4.12 -- First Supplemental Indenture dated September 2, 1997, between TransTexas, as issuer, and BankOne, N.A.,
as trustee (filed as an exhibit to the Company's registration statement on Form S-4 (333-33803), and
incorporated herein by reference).

4.13 -- Intercreditor and Collateral Agency Agreement dated June 13, 1997 among Firstar Bank of Minnesota, TEC
and TransTexas (filed as an exhibit to TEC's quarterly report on Form 10-Q for the quarter ended July
31, 1997, and incorporated herein by reference).
</TABLE>

II-2
<PAGE> 24
<TABLE>
<S> <C>
**4.14 -- Registration Rights Agreement dated August 12, 1997, by and among TransTexas, Firstar Bank of
Minnesota, N.A., TEC and TARC.

*5.1 -- Legal Opinion of Gardere & Wynne, L.L.P.

**15.1 -- Awareness Letter of Coopers & Lybrand, L.L.P.

**23.1 -- Consent of Coopers & Lybrand L.L.P.

*23.2 -- Consent of Gardere & Wynne, L.L.P. (set forth in Exhibit 5.1).

**23.3 -- Consent of Netherland, Sewell & Associates, Inc.

*24.1 -- Power of Attorney (set forth on page II-4 of the Registration Statement filed on April 24, 1995).

*99.1 -- Legal Opinion of Gardere & Wynne, L.L.P. regarding substantive consolidation.

- ----------------------
</TABLE>

* previously filed
** filed herewith

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended ("Act");

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement;

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;

provided, however, that paragraphs (i) and (ii) above do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by
the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")
that are incorporated by reference in the Registration
Statement.

(2) That, for the purpose of determining any liability
under the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

II-3
<PAGE> 25
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.

(4) That, for purposes of determining any liability under
the Act, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(5) That, insofar as indemnification for liabilities
arising under the Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been informed 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
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 registrant 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 Act and
will be governed by the final adjudication of such issue.

(6) That, for purposes of determining any liability under
the Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.

(7) That, for the purpose of determining any liability
under the Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 26
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this Post
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on the 15th day of October, 1997.

TRANSTEXAS GAS CORPORATION

By: /s/ Ed Donahue
------------------------------------
Ed Donahue, Vice President and
Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this Post
Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities indicated on October 15, 1997.

<TABLE>
<CAPTION>
Name Title
<S> <C>
*
- -------------------------------------------
John R. Stanley Director and Chief Executive Officer
(Principal Executive Officer)

*
- -------------------------------------------
Thomas B. McDade Director

/s/ Ed Donahue
- -------------------------------------------
Ed Donahue Vice President and Chief Financial Officer (Principal
Financial Officer and Principal Accounting Officer)
*
- -------------------------------------------
James R. Lesch Director

*
- -------------------------------------------
Robert L. May Director

*
- -------------------------------------------
Donald D. Sykora Director

*By: /s/ Ed Donahue
---------------------------------------
Ed Donahue, Attorney-in-Fact
</TABLE>

II-5
<PAGE> 27
INDEX TO EXHIBITS