<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NO. 0-22892
TATHAM OFFSHORE, INC.
(Exact name of Registrant as specified in its charter)
Delaware 76-0269967
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
600 TRAVIS
SUITE 7400
HOUSTON, TEXAS 77002
(Address of principal executive offices, including zip code)
(713) 224-7400
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
-----
As of May 14, 1996, there were outstanding 25,120,948 shares of common
stock, par value $0.01 per share, of the Registrant.
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TATHAM OFFSHORE, INC. AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet as of March 31, 1996 (unaudited) and June 30, 1995 . . . . . 3
Unaudited Consolidated Statement of Operations for the Three and Nine Months
Ended March 31, 1996 and 1995, respectively . . . . . . . . . . . . . . . . . . . . . 4
Unaudited Consolidated Statement of Cash Flows for the Nine Months
Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity (Deficit) for the
Nine Months Ended March 31, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 14
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Legal Proceedings
Changes in Securities
Defaults Upon Senior Securities
Submission of Matters to a Vote of Security Holders
Other Information
Exhibits and Reports on Form 8-K
</TABLE>
2
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TATHAM OFFSHORE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,472 $ 3,864
Accounts receivable from joint venture partners 367 3,462
Receivable from affiliates 1,676 16,271
Prepaid expenses 2,070 204
------------ -----------
Total current assets 8,585 23,801
------------ -----------
Oil and gas properties:
Oil and gas properties, at cost, using
successful efforts method 75,837 66,986
Less - accumulated depreciation, depletion,
amortization and impairment 4,349 3,544
------------ -----------
Oil and gas properties, net 71,488 63,442
------------ -----------
Oil and gas properties held for sale (Note 3) - 7,387
Prepaid expenses 12,233 -
Other assets 90 90
------------ -----------
Total assets $ 92,396 $ 94,720
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 2,959 $ 9,744
Accounts payable to affiliates 6,851 2,298
Notes payable - 10,468
Note payable to affiliate 1,734 -
Other current liabilities 3,026 718
------------ -----------
Total current liabilities 14,570 23,228
Deferred income (Note 3) - 30,000
Long-term debt to affiliate 60,000 60,000
Other noncurrent liabilities 9,009 1,512
------------ -----------
83,579 114,740
------------ -----------
Stockholders' equity (deficit):
Preferred stock, $0.01 par value, 110,000,000 and
10,000,000 shares authorized as of March 31, 1996
and June 30, 1995, respectively, 7,500 shares issued
and outstanding at March 31, 1996 - -
Common stock, $0.01 par value, 250,000,000 and 100,000,000
shares authorized as of March 31, 1996 and June 30, 1995,
respectively, 25,120,948 and 25,000,000 shares issued and
outstanding at March 31, 1996 and June 30, 1995, respectively 251 250
Warrants outstanding to purchase shares of Convertible
Exchangeable Preferred Stock 11,292 -
Additional paid-in capital 52,691 44,987
Accumulated deficit (55,417) (65,257)
------------ -----------
8,817 (20,020)
------------ -----------
Total liabilities and stockholders' equity (deficit) $ 92,396 $ 94,720
============ ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
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TATHAM OFFSHORE, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
--------------------- ---------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Oil and gas sales $ 5,900 $ 2,742 $ 11,109 $ 4,909
--------- -------- -------- --------
Costs and expenses:
Production and operating expenses 2,313 4,366 11,068 9,713
Exploration expenses 101 2,331 333 10,005
Depreciation, depletion and amortization 460 149 840 802
Management fee and general and administrative
expenses allocated from affiliate 916 733 3,476 3,473
General and administrative expenses 562 1,334 1,980 1,299
--------- -------- -------- --------
4,352 8,913 17,697 25,292
--------- -------- -------- --------
Operating income (loss) 1,548 (6,171) (6,588) (20,383)
Interest income 32 151 75 790
Gain on sale of oil and gas properties (Note 3) 11,322 (4) 22,641 1,496
Interest and other financing costs - (483) (256) (1,471)
Interest expense - affiliate (2,239) (1,739) (6,032) (5,303)
--------- -------- -------- --------
Net income (loss) $ 10,663 $ (8,246) $ 9,840 $(24,871)
========= ======== ======== ========
Net income (loss) available
to common shareholders $ 10,551 $ (8,246) $ 9,728 $(24,871)
========= ======== ======== ========
Net income (loss) per share:
Primary $ 0.42 $ (0.33) $ 0.39 $ (0.99)
========= ======== ======== ========
Fully diluted $ 0.33 $ (0.33) $ 0.36 $ (0.99)
========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
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TATHAM OFFSHORE, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 9,840 $ (24,871)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation, depletion and amortization 840 802
Amortization of debt issue costs - 591
Gain on sale of oil and gas properties (22,641) (1,496)
Other 997 -
Changes in operating working capital:
Decrease (increase) in accounts receivable from joint
venture partners 3,095 (2,810)
Increase in receivable from affiliates (404) (509)
Decrease (increase) in prepaid expenses 71 (83)
(Decrease) increase in accounts payable,
accrued liabilities and other current liabilities (6,477) 17,620
Increase (decrease) in accounts payable to affiliates 6,287 (5,301)
--------- ----------
Net cash used in operating activities (8,392) (16,057)
--------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (6,823) (26,614)
Proceeds from sale of oil and gas properties 15,000 1,619
--------- ----------
Net cash provided by (used in) investing activities 8,177 (24,995)
--------- ----------
Cash flows from financing activities:
Proceeds from notes payable to affiliate 8,000 -
Repayment of notes payable to affiliate (8,000) -
Repayment of notes payable (10,468) (3,333)
Proceeds of offering of Warrants, net of
underwriting fees and commissions 12,060 -
Offering costs of Warrants (769) -
Debt issue costs - (183)
--------- ----------
Net cash provided by (used in) financing activities 823 (3,516)
--------- ----------
Net increase (decrease) in cash and cash equivalents 608 (44,568)
Cash and cash equivalents at beginning of year 3,864 48,875
--------- ----------
Cash and cash equivalents at end of period $ 4,472 $ 4,307
========= ==========
Cash paid for interest $ 6,100 $ 6,184
</TABLE>
The accompanying notes are on integral part of this financial statement.
5
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TATHAM OFFSHORE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands)
<TABLE>
<CAPTION>
Warrants
outstanding
to purchase shares
Preferred Stock Common Stock of Convertible
---------------------- ---------------------- Exchangeable Additional
Number of Number of Preferred paid-in Accumulated
Shares Par Value Shares Par Value Stock capital deficit Total
--------- --------- --------- --------- --------------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995 - $ - 25,000 $ 250 $ - $ 44,987 $ (65,257) $ (20,020)
Issuance of preferred stock
(unaudited) 8 - - - - 7,500 - 7,500
Issuance of common
stock (unaudited) - - 121 1 - 204 - 205
Offering of Warrants,
net (unaudited) - - - - 11,292 - - 11,292
Net income for the nine
months ended March 31,
1996 (unaudited) - - - - - - 9,840 9,840
---- ------- ------- ------ -------- -------- --------- --------
Balance, March 31, 1996
(unaudited) 8 $ - 25,121 $ 251 $ 11,292 $ 52,691 $ (55,417) $ 8,817
==== ======= ====== ====== ======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
6
<PAGE> 7
TATHAM OFFSHORE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION:
Tatham Offshore, Inc. ("Tatham Offshore" or the "Company") is an independent
energy company engaged in the development, exploration and production of oil
and gas reserves located primarily offshore the United States in the Gulf of
Mexico (the "Gulf"). The Company is an approximately 40% owned subsidiary of
DeepTech International Inc. ("DeepTech"), a diversified energy company, which,
through its affiliates, has operations and services in oil and gas gathering
and transmission, technology and engineering services, geological and
geophysical technology, gas processing and liquids marketing, oil and gas
marketing and, through the Company and other affiliates, oil and gas
exploration, development and production.
In August 1995, the Company formed a wholly-owned subsidiary, Tatham Offshore
(Jersey) Ltd. ("TOJ"), incorporated in the Island of Jersey, to pursue certain
international opportunities.
The accompanying consolidated financial statements have been prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). Accordingly, the statements reflect all normal
recurring adjustments which are, in the opinion of management, necessary for a
fair statement of the results of operations for the period covered by such
statements. These interim consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto contained
in the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1995.
NOTE 2 -- EARNINGS PER SHARE:
Primary earnings (loss) per share is computed by dividing common equity in net
income (loss) by the weighted average number of shares and common stock
equivalents outstanding during the period. The weighted average number of
shares outstanding for purposes of computing primary earnings (loss) per share
were 25,120,948 shares and 25,000,000 shares for the three months ended March
31, 1996 and 1995, respectively. The weighted average number of shares
outstanding for purposes of computing primary earnings (loss) per share for the
nine months ended March 31, 1996 and 1995 were 25,061,134 shares and 25,000,000
shares, respectively. Fully diluted earnings per share assumes the exercise of
certain outstanding warrants and other convertible securities. The weighted
average number of shares outstanding for purposes of computing fully diluted
earnings (loss) per share for the three months ended March 31, 1996 and 1995
were 31,790,296 shares and 25,000,000 shares, respectively. The weighted
average number of shares outstanding for purposes of computing fully diluted
earnings (loss) per share for the nine months ended March 31, 1996 and 1995
were 27,268,081 shares and 25,000,000 shares, respectively. See Note 5.
NOTE 3 -- OIL AND GAS PROPERTIES:
Pursuant to a purchase and sale agreement dated June 30, 1995 (the "Purchase and
Sale Agreement"), Tatham Offshore assigned, subject to certain reversionary
interests, a 75% working interest in its Phar Lap (Shallow) (Viosca Knoll Block
817), a 50% working interest in its Spectacular Bid (Garden Banks Block 72) and
a 50% working interest in its Spend A Buck (Garden Banks Block 117) properties
(the "Assigned Properties") to Flextrend Development Company, L.L.C. ("Flextrend
Development"). Flextrend Development is an operating subsidiary of Leviathan Gas
Pipeline Partners, L.P. (the "Partnership") which is an effective 23.2% owned
affiliate of DeepTech. Pursuant to the terms of the Purchase and Sale
Agreement, the Company received $15.0 million at closing and an additional $15.0
million on August 15, 1995. Additionally, Flextrend Development has committed,
subject to obtaining financing, to pay all of its working interest share of
costs associated with the drilling and, if successful, completion of a minimum
of five new wells, two on Phar Lap (Shallow), two on Spectacular Bid and one on
Spend A Buck, and the completion and tie-back of one existing well located on
Spend A Buck. Flextrend Development is entitled to retain all of the revenues
attributable to such working interests until it has received net revenues equal
to the Payout Amount (as defined below), whereupon the Company is entitled to
receive a reassignment of its working interests, subject to reduction and
conditions as discussed below. "Payout Amount" is defined as an amount equal to
all costs incurred by Flextrend Development with respect to the working interest
(including the $30.0 million paid to the Company) plus interest thereon at a
rate of 15% per annum. Tatham Offshore and the Partnership have agreed that in
the
7
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TATHAM OFFSHORE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
event the Company furnishes the Partnership with a financing commitment from a
lender with a credit rating of BBB- or better covering 100% of the then
outstanding Payout Amount, the interest rate utilized to compute the Payout
Amount shall be adjusted from and after the date of such commitment to the
interest rate specified in such commitment, whether utilized or not. After
having an opportunity to review the initial production history from the
properties, Flextrend Development may exercise either of the following options:
(i) to permanently retain 50% of the assigned working interest in either the
Phar Lap (Shallow) property or the Spectacular Bid/Spend A Buck properties in
exchange for forgiving 25% of the then existing Payout Amount, or (ii) to
permanently retain 50% of the assigned working interest in all three properties
in exchange for forgiving 50% of the then existing Payout Amount. In the event
Flextrend Development elects to reduce the Payout Amount, it will become
obligated to fund any further development costs attributable to the Company's
portion of the working interests, such costs to be added to the Payout Amount.
Otherwise, any further development costs will be funded by Flextrend
Development on a discretionary basis, such costs to be added to the Payout
Amount. Further, in the event Flextrend Development forgoes its right to
permanently retain a working interest in all or a portion of the Assigned
Properties, it will be entitled to recover from working interest revenues all
future demand charges payable for platform access and processing, in their
inverse order of maturity, prior to any reassignment to the Company. Tatham
Offshore had the option at any time prior to the date the first well was spud
to repay the initial amounts advanced plus transaction costs, with interest,
and receive a reassignment of 100% of its working interests. As of June 30,
1995, the Company still had the option to repay the then outstanding Payout
Amount and receive a reassignment of its working interests. Accordingly, the
accompanying consolidated balance sheet as of June 30, 1995 reflects (i) a
$15.0 million receivable from Flextrend Development, (ii) $7.4 million of oil
and gas properties held for sale which represents the carrying basis of the
subject properties and (iii) $30.0 million of deferred income which represents
total cash proceeds to be received by the Company pursuant to the Purchase and
Sale Agreement. During each of the quarters ended September 30, 1995 and
March 31, 1996, the Company waived certain of its options to prepay the then
existing Payout Amount and receive a reassignment of its working interests. As
such, the Company recognized $22.6 million as a gain on the sale of oil and gas
properties during the nine months ended March 31, 1996. Effective February 1,
1996, the Company entered into an agreement with the Partnership regarding
certain transportation agreements that increased the amount recoverable from
the Payout Amount by $7.5 million plus interest. See Note 6.
In December 1995, Flextrend Development initiated production from the Viosca
Knoll Block 817 lease. In addition, Flextrend Development has drilled and is
in the process of placing on production two wells on the Garden Banks Block 72
lease and is in the process of completing and placing on production an existing
well at Garden Banks Block 117. As of March 31, 1996, the Payout Amount was
approximately $65.8 million, comprised of (i) initial acquisition and
transaction costs of $32.1 million, (ii) development and operating costs of
$31.4 million, (iii) prepaid demand charges of $7.5 million and (iv) interest
of $4.7 million, reduced by revenues of $9.9 million.
During the nine months ended March 31, 1996, the Company conducted remedial
operations to dislodge a pigging device from the flow lines at its Ewing Bank
914 #2 well and installed chemical injection lines at an aggregate cost of $3.2
million. Production from the Ewing Bank 914 #2 well was suspended for
approximately six weeks during the remedial operations. In the month of
January 1996, the Ewing Bank 914 #2 well produced an average of approximately
2,300 barrels of oil and 4.3 million cubic feet ("MMcf") of gas per day. In
February 1996, the Ewing Bank 914 #2 well started to produce some water
(increasing to approximately 48% of total production by May 10, 1996) resulting
in a reduction of the hydrocarbon production. During the three months ended
March 31, 1996, the Ewing Bank 914 #2 well produced an average of approximately
1,600 barrels of oil and 3.3 MMcf of gas per day. The well was producing at a
rate of approximately 1,240 barrels of oil and 2.7 MMcf of gas per day on May
10, 1996.
In September 1995, the Company acquired an aggregate 25% working interest in
Phar Lap (Shallow) (Viosca Knoll Block 817) and an approximate 12.5% working
interest in the remainder of the Phar Lap Unit (collectively, the "Phar Lap
Working Interest") from two industry partners for a total of $16.0 million in
convertible production payments payable from 25% of the net cash flow from the
Phar Lap Working Interest so acquired. The unpaid portion of the production
payments is convertible into Tatham Offshore common stock at any time during
the first five years at $8.00 per share. Under certain circumstances, the
industry partners may require DeepTech to purchase
8
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TATHAM OFFSHORE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
the convertible production payments for an amount equal to 50% of the
unrecovered portion thereof. Included in oil and gas properties and accounts
payable and accrued liabilities on the accompanying consolidated balance sheet
at March 31, 1996 is the estimated net present value of the convertible
production payments payable of $2.0 million. In December 1995, production
commenced from the Viosca Knoll 817 #A-1 well, the initial well for the Phar
Lap (Shallow) project, which had been drilled and completed at a cost of
approximately $6.7 million, $1.7 million net to the Company's 25% working
interest. In January 1996, production commenced from the Viosca Knoll 817 #A-2
well which was drilled and completed at an estimated cost of $3.3 million, $0.8
million net to the Company's 25% working interest.
In February 1996, the operator of the Viosca Knoll 817 #A-3 well encountered
difficulty in completing the drilling operations with respect to the well. The
operator had substantially completed the drilling of the high angle production
well bore when the drill pipe became lodged. Remedial efforts to remove the
drill pipe were unsuccessful and the operator elected to temporarily abandon
the well while preserving the unobstructed portion of the well bore for future
completion in the 2,400 foot zone. A replacement well, the Viosca Knoll 817
#A-5 well, was drilled to access the Text. X-1 reservoir in which the operator
had encountered approximately 108 feet of net gas pay in the Viosca Knoll 817
#A-3 well. In March 1996, the Viosca Knoll #A-5 well was completed at an
estimated cost of $2.7 million, $0.7 million net to the Company's 25% working
interest. Approximately $1.1 million of costs were incurred with respect to
the Company's 25% working interest in the Viosca Knoll 817 #A-3 well.
NOTE 4 -- INDEBTEDNESS:
Notes payable
Prior to June 30, 1995, the Company converted approximately $12.8 million of
its accounts payable into short-term promissory notes (the "Creditor Notes") of
which $10.5 million remained outstanding at June 30, 1995. Of the amounts
outstanding at June 30, 1995, $8.6 million bore interest at 12% per annum with
the remaining portion bearing interest at 18% per annum. In August 1995, the
Company paid all outstanding principal and interest due under the Creditor
Notes. Interest expense related to the Creditor Notes totaled $0.3 million for
the nine months ended March 31, 1996.
Notes payable to affiliates
In October 1995, DeepFlex Production Services, Inc. ("DeepFlex Services"), a
wholly-owned subsidiary of DeepTech, entered into a bridge loan agreement (the
"Bridge Loan") with Tatham Offshore. Pursuant to the terms of the Bridge Loan,
DeepFlex Services agreed to make $12.5 million of interim bridge financing
available for borrowing by the Company to fund a portion of the Company's
working capital and capital requirements. All indebtedness outstanding under
the Bridge Loan accrued interest at a rate of 15% per annum. Interest expense
related to borrowings under the Bridge Loan totaled $0.2 million for the nine
months ended March 31, 1996. The terms of the Bridge Loan required the Company
to undertake the Offering (discussed in Note 5) or to implement another
refinancing or asset disposition sufficient to repay the outstanding
indebtedness under the Bridge Loan. In connection with the Bridge Loan (the
"Bridge Commitment"), DeepTech agreed to defer until July 15, 1996 the payment
of up to $4.0 million in management fees payable by Tatham Offshore under its
management agreement with DeepTech. In addition, Tatham Offshore agreed to
amend the Subordinated Notes to increase the interest rate from 11 3/4% to 13%
per annum, effective July 1, 1997. Tatham Offshore borrowed a total of $8.0
million under the Bridge Loan. On January 31, 1996, DeepFlex Services
subscribed for the purchase of 10,000,000 Warrants in connection with the
Offering (Note 5) at a cost of $5.0 million, which was paid through the
forgiveness of $5.0 million of principal and interest due under the Bridge
Loan. In February 1996, Tatham Offshore used $3.1 million of Offering proceeds
to repay in full the remaining principal and accrued interest outstanding under
the Bridge Loan.
On November 1, 1995, the Company converted $1.7 million of its accounts payable
to an affiliate into an unsecured promissory note (the "Affiliate Note") which
bears interest at 14.5% per annum. Interest on the Affiliate Note is
9
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TATHAM OFFSHORE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
payable quarterly, beginning March 31, 1996. The principal is due and payable
in six monthly installments, beginning on a date which is the earlier to occur
of (i) November 1, 1997 or (ii) the last day of the calendar month in which the
Company receives proceeds from the issuance of any preferred stock described in
the Offering (Note 5) in a net total amount equal to or greater than $20.0
million. Interest expense related to the Affiliate Note totaled $0.1 million
for the nine months ended March 31, 1996.
Long-term debt - affiliates
As of March 31, 1996, the Company had $60.0 million aggregate principal amount
of Subordinated Notes outstanding, all of which was held by DeepTech. The
Subordinated Notes are subordinate to all senior indebtedness of the Company,
which would include any indebtedness outstanding under the Affiliate Note. The
Subordinated Notes bear interest from the date of issuance at a rate of 11 3/4%
per annum, payable quarterly in arrears; provided, however, that effective July
1, 1997, interest shall accrue at a rate of 13% per annum. Interest expense
related to this borrowing totaled $5.3 million for the nine months ended March
31, 1996. The principal amount of the Subordinated Notes is payable in seven
equal annual installments of approximately $8.6 million commencing August 1,
1999. At any time after August 1, 1999, Tatham Offshore may redeem in full, or
may from time to time redeem in part, the Subordinated Notes, without penalty
or premium, upon 90 days' prior written notice to the holders thereof. The
holders of the Subordinated Notes have the option, at any time and from time to
time, to convert all or any portion of the principal and accrued interest
outstanding thereunder into common stock of Tatham Offshore at $10.00 per
share, subject to adjustment under certain circumstances.
NOTE 5 -- STOCKHOLDERS' EQUITY:
On August 28, 1995, the Company filed a registration statement on Form S-8 with
the Commission for the registration of 4,000,000 shares of common stock
authorized for issuance upon exercise of options under the Company's Equity
Incentive Plan (the "Incentive Plan") and 1,000,000 shares of common stock
authorized for issuance upon exercise of options under the Company's
Non-Employee Director Stock Option Plan. The Incentive Plan provides the
Company the ability to issue a variety of awards pursuant to the plan including
stock options, restricted stock and stock value equivalent awards.
In November 1995, the Company issued 120,948 shares of common stock to certain
senior executives of DeepTech in connection with their deferred compensation
arrangement discussed in Note 6.
The Company filed a registration statement with the Commission (the
"Offering"), which was declared effective on December 26, 1995, relating to the
granting to all holders of Tatham Offshore's common stock, on the record date,
December 26, 1995, rights (the "Rights") to purchase up to 25,120,948 warrants
(the "Warrants"). Each Right entitled the holder to subscribe to purchase one
Warrant at the purchase price of $.50 per Warrant. Each Warrant entitles the
holder thereof to purchase one share of any of (i) Series A 12% Convertible
Exchangeable Preferred Stock, which has a liquidation preference of $1.50 per
share ("Series A Preferred Stock") at any time prior to 5:00 p.m., New York
time on July 1, 1996, (ii) Series B 8% Convertible Exchangeable Preferred
Stock, which has a liquidation preference of $1.00 per share ("Series B
Preferred Stock") at any time prior to 5:00 p.m., New York time on October 1,
1996 or (iii) Series C 4% Convertible Exchangeable Preferred Stock, which has a
liquidation preference of $0.50 per share ("Series C Preferred Stock" and
together with the Series A Preferred Stock and Series B Preferred Stock, the
"Convertible Exchangeable Preferred Stock") at any time prior to 5:00 p.m., New
York time on January 1, 1997 at the purchase price of $1.00 per share. Each
Warrant remaining unexercised at 5:00 p.m., New York time on January 1, 1997
shall be automatically converted, without any action on the part of the holder
thereof, into one share of Mandatory Redeemable Preferred Stock, which shall
have a liquidation preference of $0.50 per share and shall be mandatorily
redeemable by the Company under certain circumstances. At any time from July
1, 1996 until December 31, 1998, each share of Convertible Exchangeable
Preferred Stock may be exchanged for four warrants (the "Exchange Warrants" and
together with the Rights, the Warrants, the Convertible Exchangeable Preferred
Stock and the Mandatory Redeemable Preferred Stock, the "Securities") entitling
the holder thereof to purchase one share of Tatham Offshore common stock at a
price equal to the lowest average closing price of the Company's common stock
on the Nasdaq National Market for a five consecutive day trading period from
and after
10
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TATHAM OFFSHORE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
the record date, December 26, 1995, and through and including June 30, 1996
(the "Trading Reference Price"). The Exchange Warrants will expire July 1,
1999. Alternatively, at any time after July 1, 1996, the holder of any shares
of Convertible Exchangeable Preferred Stock will have the right, at the
holder's option, to convert the liquidation value of such stock and accrued and
unpaid dividends into shares of Tatham Offshore common stock at the Trading
Reference Price. At March 31, 1996, assuming that (a) all the Warrants were
exercised to acquire Series A Preferred Stock, (b) all of the shares of Series
A Preferred Stock were immediately converted into shares of Tatham Offshore
common stock at the current Trading Reference Price and (c) no other issuances
of common stock, the Company would have had approximately 82.8 million shares
of common stock outstanding. On and after July 1, 1997, the Convertible
Exchangeable Preferred Stock will be redeemable at the option of the Company.
As of January 31, 1996 (the expiration date of the Rights), the Offering was
over-subscribed. The Company issued 25,120,948 Warrants and received $12.6
million in gross proceeds (approximately $11.3 million, net) pursuant to the
exercise of Rights.
On October 26, 1995, the Board of Directors proposed an amendment to the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares of the Company's common stock, $0.01 par value per share,
from 100,000,000 shares to 250,000,000 shares and the number of shares of
preferred stock, $0.01 par value per share, from 10,000,000 shares to
110,000,000 shares. This increase in authorized capital was necessary in order
for the Company to effect the Offering. The amendment to the Company's
Restated Certificate of Incorporation had to be approved by holders of a
majority of the outstanding shares of common stock of the Company. Stockholders
holding a majority of the issued and outstanding shares of common stock have
consented in writing to the amendment. The amendment was effective on February
8, 1996.
Effective February 1, 1996, Tatham Offshore issued 7,500 shares of its 9%
senior convertible preferred stock (the "Senior Preferred Stock") to the
Partnership as partial consideration for the satisfaction of certain demand
charge obligations as further described in Note 6. The Senior Preferred Stock
accrues dividends at 9% per annum as of February 1, 1996, which are payable
quarterly and shall cumulate to the extent not paid. Each share of the Senior
Preferred Stock has a liquidation preference value of $1,000 and is senior to
all other classes of Tatham Offshore preferred and common stock in the case of
liquidation, dissolution or winding up of Tatham Offshore. The Partnership has
made an irrevocable offer to Tatham Offshore to sell all or any portion of the
Senior Preferred Stock to Tatham Offshore or its designee at a price equal to
$1,000 per share, plus interest thereon at 9% per annum less the sum of any
dividends paid thereon. In the event Tatham Offshore does not purchase the
Senior Preferred Stock on or before September 30, 1998, then for a period of 90
days thereafter it shall be convertible into Series A Preferred Stock. The
conversion ratio shall be equal to (i) the liquidation preference amount plus
accumulated but unpaid dividends divided by (ii) the arithmetic average of
closing prices for the 20 trading days following October 1, 1998 of the Series
A Preferred Stock. As of March 31, 1996, dividends in arrears on the Senior
Preferred Stock totaled $0.1 million.
NOTE 6 -- RELATED PARTY TRANSACTIONS:
Effective July 1, 1993, the management agreement between the Company and
DeepTech provided for an annual management fee equal to 40% of DeepTech's
overhead. The management fee is intended to reimburse DeepTech for the
estimated costs of its operational, financial, accounting and administrative
services provided to the Company. In an effort to minimize the Company's
projected operating cash shortfall, the Company and DeepTech agreed to decrease
the amount of managerial and administrative services provided by DeepTech to
the Company and amend the management fee agreement effective November 1, 1995.
The amended management agreement provides for an annual management fee of 27.4%
of DeepTech's overhead expenses. During the nine months ended March 31, 1996,
DeepTech charged Tatham Offshore $3.5 million under this management agreement.
As of March 31, 1996, the Company owed DeepTech $4.0 million for expenses and
general and administrative costs allocated under the management agreement,
payment of which has been deferred until July 15, 1996 pursuant to the terms of
the Bridge Commitment.
Effective July 1, 1995, DeepTech established three deferred compensation
arrangements: (i) a mandatory arrangement for DeepTech's Chief Executive
Officer (the "DeepTech CEO"), (ii) a mandatory arrangement for
11
<PAGE> 12
TATHAM OFFSHORE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
certain senior executives of DeepTech and (iii) an optional arrangement for all
other employees of DeepTech. Pursuant to the terms of each arrangement,
participants will defer all or a portion of their cash salary until no later
than July 1, 1996. During each month in the deferral period, each participant
is entitled to receive options to purchase a number of shares of either
DeepTech or Tatham Offshore or Preference Units of the Partnership equal to a
percentage (ranging from 100% to 300% times their cash salary) divided by the
lesser of the closing price on June 30, 1995 (DeepTech - $4.00, Tatham Offshore
- - $3.50 and the Partnership - $23.75) or the average closing price for the
applicable month. Options are exercisable only by cancellation of the
participant's cash salary. Each participant will earn credits equal to a
multiple, based on the option elected, of their deferred cash salary. Any
participant except the DeepTech CEO can receive all or a portion of their
salary in cash if they do not elect to exercise any options. To the extent
that the Company issues its common stock under these arrangements, it will
receive an offsetting credit against its management fees payable to DeepTech.
In November 1995, the Company issued 120,948 shares of its common stock in
connection with the mandatory arrangement for certain senior executives of
DeepTech. As a result of issuing its common stock under this arrangement,
Tatham Offshore received a $0.2 million credit against its management fees
payable to DeepTech. In addition, in November 1995, DeepTech terminated the
deferred compensation arrangement for all but three employees of DeepTech.
The Company was obligated to make demand charge payments to the Partnership
under certain transportation agreements. These demand charges were payable
whether or not any production was actually transported. In addition to the
demand charges, Tatham Offshore is obligated to pay commodity charges, based on
the volume of oil and gas transported or processed, under these agreements.
Also, for the year ended June 30, 1996, the Company is obligated to pay $1.6
million in platform access fees. Production problems at Ship Shoal Block 331
and reduced oil production from the Ewing Bank 914 #2 well have affected Tatham
Offshore's ability to pay the demand charge obligations under these agreements.
Effective February 1, 1996, Tatham Offshore entered into an agreement with the
Partnership to prepay its remaining demand charge obligations under the
transportation agreements covering its Ewing Bank and Ship Shoal properties.
Under the agreement, Tatham Offshore's demand charge obligations relative to
the Ewing Bank Gathering System and the pipeline facilities constructed by the
Partnership for its Ship Shoal property have been prepaid in full. In
exchange, effective February 1, 1996, Tatham Offshore has (i) issued to the
Partnership 7,500 shares of Senior Preferred Stock with a liquidation
preference of $1,000 per share, (ii) added the sum of $7.5 million to the
Payout Amount under the Purchase and Sale Agreement with Flextrend Development
and (iii) granted to the Partnership certain rights to use and acquire the Ship
Shoal Block 331 platform. If the Senior Preferred Stock is not purchased by
Tatham Offshore on or before September 30, 1998, it will be convertible into
shares of Tatham Offshore's Series A Preferred Stock based on the liquidation
preference amount of the Senior Preferred Stock plus accumulated but unpaid
dividends and the equivalent market value of the Series A Preferred Stock as of
the date of conversion (see Note 5). The increase in the Payout Amount will
defer the reversion of Tatham Offshore's working interest in its Viosca Knoll
Block 817, Garden Banks Block 72 and Garden Banks Block 117 properties under
the Purchase and Sale Agreement but will be excluded for purposes of computing
the amount of the Payout Amount to be extinguished if Flextrend Development
exercises its option to permanently retain a portion of the working interests
in the Assigned Properties. In addition, Tatham Offshore agreed to grant the
Partnership the right to utilize the Ship Shoal Block 331 platform and related
facilities at a rental rate of $1.00 per annum for such period as the platform
is owned by Tatham Offshore and located on the Ship Shoal Block 331, provided
such use, at the time proposed, does not interfere with lease operations or
other activities of Tatham Offshore. Tatham Offshore has also granted the
Partnership a right of first refusal relative to a sale of the platform. The
agreement with the Partnership will result in a reduction in demand charge
payments of approximately $4.1 million for the fiscal year ended June 30, 1996,
$7.8 million for the fiscal year ended June 30, 1997 and $5.9 million for
fiscal years thereafter. Tatham Offshore remains obligated to pay the
commodity charges under these agreements as well as all platform access and
processing fees associated with the Viosca Knoll Block 817 lease. At March 31,
1996, the total present value of the unamortized demand charge obligations of
$14.2 million is reflected in the accompanying consolidated balance sheet as
prepaid expenses. The $7.5 million addition to the Payout Amount, including
accrued interest of $0.2 million, is classified as a production payment and
included in other noncurrent liabilities on the accompanying consolidated
balance sheet.
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<PAGE> 13
TATHAM OFFSHORE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
The Company had agreed to sell all of its production to Offshore Gas Marketing,
Inc. ("Offshore Marketing"), an affiliate of the Company, at contractually
agreed upon posted prices through October 1995. In November 1995, Tatham
Offshore renegotiated its agreement with Offshore Marketing to provide Offshore
Marketing marketing fees equal to 2% of the sales value of crude oil and
condensate and $0.015 per dekatherm of natural gas for selling the Company's
production. During the nine months ended March 31, 1996, substantially all of
the Company's oil and gas sales were derived from sales to Offshore Marketing.
Pursuant to the amended technology services agreement with Dover Technology,
Inc. ("Dover"), which is 50% owned by DeepTech, Tatham Offshore incurred $0.4
million of exploration expenses during the nine months ended March 31, 1996.
NOTE 7 -- COMMITMENTS AND CONTINGENCIES:
The Company has substantial future capital requirements associated with the
full development of its oil and gas properties. Realization of the full
potential of the Company's properties is dependent upon the ability to obtain
sufficient additional equity capital or project financing.
The Company has experienced liquidity problems resulting primarily from
substantial negative cash flow from operations. A portion of the proceeds from
the sale of Warrants was used to repay outstanding indebtedness under the
Bridge Loan. The remaining proceeds are being used to fund a portion of the
Company's anticipated cash flow shortfall and estimated capital requirements.
In March 1996, the Company prepaid certain of its demand charge obligations
through the assignment of certain assets pursuant to an agreement with the
Partnership (Note 6). The Company continues to pursue other financing
alternatives including the sale or farmout of a selected portion of its
remaining principal properties.
On November 28, 1995, a federal law was enacted that offers deepwater royalty
relief for certain federal leases located in 200 meters or greater of water
depth in the Gulf. It is projected interim regulations addressing the
implementation of the new law will be published by May 28, 1996 and the Company
intends to promptly apply for relief once these regulations are promulgated.
The Company believes that many of its properties will qualify for royalty
relief and that if the requested royalty abatement is granted, the resulting
improved economics will be sufficient to obtain development financing or an
industry farmout arrangement.
On October 16, 1995, the Company received notification from the Nasdaq National
Market that because the Company had reported losses in the past three fiscal
years and had a net tangible asset value of less than $4.0 million as of June
30, 1995, the Company no longer met the listing requirements for continued
inclusion on the Nasdaq National Market. On December 20, 1995 and March 1,
1996, the Nasdaq National Market granted the Company exceptions to the net
tangible assets requirement. The exceptions extended until March 31, 1996 and
were conditioned upon, among other things, the completion of the Offering on or
before January 31, 1996 and the Company's satisfaction of all requirements
necessary for continued listing, including the net tangible assets requirement,
on or before March 31, 1996. The Company has complied with the net tangible
assets requirement and other conditions which has allowed the Company to
continue its listing on the Nasdaq National Market.
In February 1996, TOJ entered into agreements to acquire a minority equity
interest in Gas Participacoes Ltda. ("GASPART"). GASPART in turn owns a
minority equity interest (approximately 41.5%) in seven local natural gas
distribution companies in Brazil. The remaining equity interest in each local
distribution company is owned by Petrobras, the Brazilian state-owned oil
company and the state government for the state in which its operations are
conducted. TOJ's interest in GASPART will be financed on a non-recourse basis
under an arrangement by which title to TOJ's shares in GASPART will be
transferred to the lender subject to an option to reacquire the shares at a
price equal to the original cost thereof plus interest thereon at the London
Interbank Offer Rate ("LIBOR"). The option will be exercisable at any time
until the expiration of 375 days from the closing date. All approvals and
consents for these transactions have been obtained and applicable rights of
first refusal have expired. The consummation of these transactions remains
subject to the negotiation, preparation and execution of final closing
documents with respect to TOJ's participation in the transaction.
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<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in Part I of the
quarterly report.
GENERAL
Tatham Offshore is an independent energy company engaged in the development and
production of, and the exploration for, offshore oil and gas reserves, with
activities concentrated in the Flextrend (water depths of 600 to 1,500 feet)
and Deepwater (water depths greater than 1,500 feet) areas of the Gulf. The
Company's current portfolio of mineral leaseholds consists of 15 offshore oil
and gas leases in the Gulf which include producing properties and undeveloped
acreage.
Tatham Offshore's principal producing well, the Ewing Bank 914 #2 well,
commenced production in late August 1993. Production from the Ewing Bank 914
#2 well was either impaired or shut-in during the first two quarters of fiscal
1995 as a result of a paraffin build-up problem in the flow lines that connect
the subsea wellhead to a shallow water platform. The flow lines were replaced
and production resumed in December 1994. During the nine months ended March
31, 1996, the Company conducted remedial operations to dislodge a pigging
device from the flow lines at its Ewing Bank 914 #2 well and installed chemical
injection lines at an aggregate estimated cost of $3.2 million. In the month
of January 1996, the Ewing Bank 914 #2 well produced an average of
approximately 2,300 barrels of oil and 4.3 MMcf of gas per day. In February
1996, the Ewing Bank 914 #2 well started to produce some water (increasing to
approximately 48% of total production by May 10, 1996) resulting in a reduction
of the hydrocarbon production. During the three months ended March 31, 1996,
the Ewing Bank 914 #2 well produced an average of approximately 1,600 barrels
of oil and 3.3 MMcf of gas per day. The well was producing at a rate of
approximately 1,240 barrels of oil and 2.7 MMcf of gas per day on May 10, 1996.
The Company estimates that it has produced approximately 67% of the proved
reserves originally estimated for the current producing zone, the PA-4
reservoir, by Ryder Scott & Company in their report as of June 30, 1995. Given
the current state of operations, it is difficult to predict future production
rates from the well. The Company's current revenue is dependent, in large
part, on production from this well.
The Company's Silent Beauty field at West Delta Block 35, in which Tatham
Offshore owns a 38% working interest, commenced production in July 1993 and
currently contains two producing wells. For the nine months ended March 31,
1996, the Company's interest in production from these wells totaled 292 MMcf of
gas and 7,745 barrels of oil.
In July 1994, Tatham Offshore commenced production from its Genuine Risk
project located at Ship Shoal Block 331. Although Tatham Offshore has
completed three wells at Genuine Risk, completion and production problems have
caused production from such wells to be shut-in.
In September 1995, the Company acquired the Phar Lap Working Interest in the
Phar Lap Unit from two industry partners for a total of $16.0 million in
convertible production payments payable from 25% of the net cash flow from the
Phar Lap Working Interest so acquired. The unpaid portion of the production
payments is convertible into Tatham Offshore common stock at any time during
the first five years at $8.00 per share. Under certain circumstances, the
industry partners may require DeepTech to purchase the convertible production
payments for an amount equal to 50% of the unrecovered portion thereof. In
December 1995, the Viosca Knoll 817 #A-1 well, the initial well for the Phar
Lap (Shallow) project, was completed and placed on production at a cost of
approximately $6.7 million, $1.7 million net to the Company's 25% working
interest. In January 1996, the Viosca Knoll 817 #A-2 well was completed at an
estimated cost of $3.3 million, $0.8 million net to the Company's 25% working
interest.
In February 1996 the operator of the Viosca Knoll 817 #A-3 well encountered
difficulty in completing the drilling operations with respect to the well. The
operator had substantially completed the drilling of the high angle production
well bore when the drill pipe became lodged. Remedial efforts to remove the
drill pipe were unsuccessful and the operator has elected to temporarily
abandon the well while preserving the unobstructed portion of the well bore for
future completion in the 2,400 foot zone. A replacement well, the Viosca Knoll
#A-5 well, was
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<PAGE> 15
drilled to access the Text. X-1 reservoir in which the operator had encountered
approximately 108 feet of net gas pay in the Viosca Knoll 817 #A-3 well. In
March 1996, the Viosca Knoll 817 #A-5 well was completed at an estimated cost of
$2.7 million, $0.7 million net to the Company's 25% working interest.
Approximately $1.1 million in costs were incurred with respect to the Company's
25% working interest in the Viosca Knoll 817 #A-3 well. The Viosca Knoll 817
project is currently producing an aggregate of approximately 90 MMcf of gas per
day from three producing wells when platform drilling activities permit. The
well deliverability from the Viosca Knoll 817 project is in excess of 90 MMcf
per day but is limited to such amount by the production equipment currently
located on the production platform.
The Company uses the successful efforts method of accounting for its oil and
gas exploration and production activities. Under this method, costs of
successful exploratory wells, development wells and acquisition of mineral
leasehold interests are capitalized. Production, exploratory dry hole and
other exploration costs, including geological and geophysical costs and delay
rentals, are expensed as incurred. Unproved properties are assessed
periodically and any impairment in value is recognized in the current period as
depreciation, depletion, amortization and impairment expense.
The following discussion is intended to assist in the understanding of the
Company's financial condition and results of operations for the three and nine
months ended March 31, 1996.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared with Three Months Ended March 31,
1995
Revenue from oil and gas sales totaled $5.9 million for the three months ended
March 31, 1996 as compared with $2.7 million for the three months ended March
31, 1995. During the three months ended March 31, 1996, the Company sold 1,285
MMcf of gas and 110,116 barrels of oil at average prices of $2.92 per thousand
cubic feet ("Mcf") and $19.57 per barrel, respectively. During the same period
in 1995, the Company sold 447 MMcf of gas and 123,815 barrels of oil at average
prices of $1.57 per Mcf and $16.48 per barrel, respectively. The increase in
oil and gas revenue is due primarily to production initiated from three wells
at the Company's Viosca Knoll 817 project and higher oil and gas prices
partially offset by lower oil production at the Company's Ewing Bank 914 #2
well.
Production and operating expenses for the three months ended March 31, 1996
totaled $2.3 million as compared with $4.4 million for the same period in 1995.
The decrease in production and operating expenses primarily reflected (i) a
$1.4 million decrease in demand charges related to transportation agreements
with the Partnership, (ii) a $1.1 million decrease in lease operating,
transportation and workover expenses related to the Company's Ewing Bank, Ship
Shoal, West Delta and West Cameron properties and (iii) a $0.4 million increase
in platform access and operating expenses related to the Company's Viosca Knoll
Block 817 project.
Exploration expenses for the three months ended March 31, 1996 totaled $0.1
million as compared with $2.3 million for the three months ended March 31,
1995. Exploration costs during the three months ended March 31, 1996 and 1995
include expenses incurred under the amended technology services agreement with
Dover. During the three months ended March 31, 1995, the Company reserved the
costs incurred associated with the drilling of its Ewing Bank 915 #4 well of
$2.2 million.
Depreciation, depletion and amortization expense totaled $0.5 million for the
three months ended March 31, 1996 as compared with $0.1 million for the three
months ended March 31, 1995. Depreciation, depletion and amortization for the
three months ended March 31, 1996 reflected costs applicable to the Company's
investment in the West Delta 35 project, the Ewing Bank 914 #2 well and the
Viosca Knoll 817 project whereas depreciation, depletion and amortization for
the three months ended March 31, 1995 reflected costs applicable to the
Company's investment in the West Delta 35 project and the Ewing Bank 914 #2
well.
General and administrative expenses, including the management fee and general
and administrative expenses allocated from DeepTech, for the three months ended
March 31, 1996 were $1.5 million as compared with $2.1 million for the same
period in 1995. The decrease in general and administrative expenses for the
three months ended March 31, 1996 reflected a decrease in direct general and
administrative expenses of $0.2 million and a decrease in staff and overhead
expenses allocated to the Company under its management agreement with DeepTech
of $0.4 million. As a result of DeepTech's reduction of services provided to
the Company, the Company and
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<PAGE> 16
DeepTech amended the management agreement effective November 1, 1995 to provide
for a 27.4% overhead allocation as compared to a 40% overhead allocation during
the three months ended March 31, 1995.
Operating income for the three months ended March 31, 1996 was $1.5 million as
compared with an operating loss of $6.2 million for the three months ended
March 31, 1995. The change in operating income (loss) was due to the items
discussed above.
During the three months ended March 31, 1996, the Company recognized an $11.3
million gain related to the sale of its working interests in the Assigned
Properties to Flextrend Development as a result of the Company waiving its
remaining options to prepay the existing Payout Amount and receive a
reassignment of its working interests.
Interest expense, net of interest income, for the three months ended March 31,
1996 totaled $2.2 million as compared with $2.1 million for the three months
ended March 31, 1995. For the three months ended March 31, 1996 and 1995, $1.8
million of the interest expense was attributable to interest payable to
DeepTech under the Subordinated Notes.
After considering $0.1 million of preferred stock dividends in arrears, the
Company's net income available to common shareholders for the three months
ended March 31, 1996 was $10.6 million as compared with a net loss available to
common shareholders for the three months ended March 31, 1995 of $8.2 million.
Nine Months Ended March 31, 1996 Compared with Nine Months Ended March 31, 1995
Revenue from oil and gas sales totaled $11.1 million for the nine months ended
March 31, 1996 as compared with $4.9 million for the nine months ended March
31, 1995. During the nine months ended March 31, 1996, the Company sold 1,999
MMcf of gas and 331,548 barrels of oil at average prices of $2.58 per Mcf and
$17.97 per barrel, respectively. During the same period in 1995, the Company
sold 1,128 MMcf of gas and 185,300 barrels of oil at average prices of $1.64
per Mcf and $16.20 per barrel, respectively. The increase in oil and gas
revenue is due primarily to increased production from the Company's Ewing Bank
914 #2 well, the initiation of production from the Company's Viosca Knoll 817
project and higher oil and gas prices. During the nine months ended March 31,
1995, the Ewing Bank 914 #2 well was shut-in for approximately four months to
allow the Company to replace the flow lines from the subsea wellhead to a fixed
platform. During the nine months ended March 31, 1996, the Ewing Bank 914 #2
well was shut-in approximately six weeks during which the Company completed
repair operations on the flow lines.
Production and operating expenses for the nine months ended March 31, 1996
totaled $11.1 million as compared with $9.7 million for the same period in
1995. The increase in production and operating expenses is primarily comprised
of $2.3 million of costs associated with the repair of the flow lines that
connect the Ewing Bank 914 #2 well to a fixed platform and $0.5 million of
costs associated with the Company's Viosca Knoll Block 817 project which began
in July 1995 offset by a decrease of $1.4 million in demand charges related to
transportation agreements with the Partnership.
Exploration expenses for the nine months ended March 31, 1996 totaled $0.3
million as compared with $10.0 million for the nine months ended March 31,
1995. Both periods include costs incurred under the amended technology
services agreement with Dover. During the nine months ended March 31, 1995,
the Company reserved the costs incurred through March 31, 1995 of $9.9 million
associated with the drilling of its Ewing Bank 915 #4 well.
Depreciation, depletion and amortization for the nine months ended March 31,
1996 and 1995 was $0.8 million. Depreciation, depletion and amortization for
the nine months ended March 31, 1996 reflected costs applicable to the
Company's investment in the West Delta 35 project, the Ewing Bank 914 #2 well
and the Viosca Knoll 817 project whereas depreciation, depletion and
amortization for the nine months ended March 31, 1995 reflected costs
applicable to the Company's investment in the West Delta 35 and Ship Shoal 331
projects and the Ewing Bank 914 #2 well.
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<PAGE> 17
General and administrative expenses, including the management fee and general
and administrative expenses allocated from DeepTech, for the nine months ended
March 31, 1996 were $5.5 million as compared with $4.8 million for the same
period in 1995. The increase in general and administrative expenses for the
nine months ended March 31, 1996 reflected a $0.7 million increase in direct
general and administrative expenses incurred by the Company primarily due to
increases in legal and other professional fees and the accounting treatment
afforded a portion of the Company's deferred compensation arrangement.
The operating loss for the nine months ended March 31, 1996 was $6.6 million as
compared with an operating loss of $20.4 million for the nine months ended
March 31, 1995. The change in operating loss was due to the items discussed
above.
During the nine months ended March 31, 1996, the Company recognized a $22.6
million gain primarily related to the sale of its working interests in the
Assigned Properties to Flextrend Development as a result of the Company waiving
its options to prepay the existing Payout Amount and receive a reassignment of
its working interests. During the nine months ended March 31, 1995, the
Company recognized a $1.5 million gain primarily related to a farmout agreement
on its five block Phar Lap project located in the Viosca Knoll area.
Interest expense, net of interest income, for the nine months ended March 31,
1996 totaled $6.2 million as compared with $6.0 million for the nine months
ended March 31, 1995. For the nine months ended March 31, 1996 and 1995, $5.3
million of the interest expense was attributable to interest payable to
DeepTech under the Subordinated Notes.
After considering $0.1 million of preferred dividends in arrears, the Company's
net income available to common shareholders for the nine months ended March 31,
1996 was $9.7 million as compared with a net loss available to common
shareholders for the nine months ended March 31, 1995 of $24.9 million.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF CASH. The Company's current revenue is dependent, in large part, on
production from the Ewing Bank 914 #2 well, from its interest in the Viosca
Knoll Block 817 project and to a lesser extent, from its interest in the West
Delta Block 35 field. The Company has experienced production problems at its
Ewing Bank 914 #2 well. These production problems have resulted in
significantly lower production and revenue levels than had originally been
anticipated. As a result of a paraffin build up problem, the subsea flow lines
at the Ewing Bank 914 #2 well were replaced in December 1994. In an effort to
minimize the paraffin build-up in the new flow lines, the Company has been
conducting periodic pigging and other remedial operations and is injecting
chemical paraffin inhibitors in the flow lines. In the third calendar quarter
of 1995, the Company conducted remedial operations to dislodge a pigging device
from the flow lines at its Ewing Bank 914 #2 well and installed chemical
injection lines at an aggregate estimated cost of $3.2 million. In the month
of January 1996, the Ewing Bank 914 #2 well produced an average of
approximately 2,300 barrels of oil and 4.3 MMcf of gas per day. In February
1996, the Ewing Bank 914 #2 well started to produce some water (increasing to
approximately 48% of total production by May 10, 1996) resulting in a reduction
of the hydrocarbon production. During the three months ended March 31, 1996,
the Ewing Bank 914 #2 well produced an average of approximately 1,600 barrels
of oil and 3.3 MMcf of gas per day. The well was producing at a rate of
approximately 1,240 barrels of oil and 2.7 MMcf of gas per day on May 10, 1996.
In December 1995, January 1996 and March 1996, the Viosca Knoll 817 #A-1, #A-2
and #A-5 wells at the Phar Lap (Shallow) project were completed and placed on
production and are currently producing an aggregate of approximately 90 MMcf of
gas per day, when platform drilling activities permit. The well deliverability
from the Viosca Knoll 817 project is in excess of 90 MMcf per day but is
limited to such amount by the production equipment currently located on the
production platform. The Company owns a 25% working interest in these wells
which interest is subject to a production payment equal to 25% of the net
operating cash flow from this project.
In October 1995, DeepFlex Services entered into the Bridge Loan with the
Company. Under the terms of the Bridge Loan, DeepFlex Services agreed to make
$12.5 million of interim bridge financing available for borrowing by the
Company to fund a portion of the Company's working capital and capital
requirements. All indebtedness outstanding under the Bridge Loan accrued
interest at a rate of 15% per annum. The terms of the Bridge Loan
17
<PAGE> 18
required the Company to undertake the Offering or to implement another
refinancing or asset disposition sufficient to repay the outstanding
indebtedness under the Bridge Loan. Under the terms of the Bridge Commitment,
DeepTech agreed to defer until July 15, 1996, the payment of up to $4.0 million
in management fees payable by the Company under its management agreement with
DeepTech. In addition, the Company agreed to amend the Subordinated Notes to
increase the interest rate from 11 3/4% to 13% per annum, effective July 1,
1997. The Company borrowed $8.0 million under the Bridge Loan. On January 31,
1996, DeepFlex Services subscribed for the purchase of 10,000,000 Warrants in
connection with the Offering at a cost of $5.0 million, which was paid through
the forgiveness of $5.0 million of principal and interest due under the Bridge
Loan. Tatham Offshore used $3.1 million of Offering proceeds to repay the
remaining principal and accrued interest outstanding under the Bridge Loan.
The Company filed a registration statement with the Commission, which was
declared effective on December 26, 1995, relating to the granting to all
holders of Tatham Offshore's common stock, on the record date, December 26,
1995, Rights to purchase up to 25,120,948 Warrants. Each Right entitled the
holder to subscribe to purchase one Warrant at the purchase price of $.50 per
Warrant. Each Warrant entitles the holder thereof to purchase one share of any
of (i) Series A Preferred Stock, which has a liquidation preference of $1.50
per share, at any time prior to 5:00 p.m., New York time on July 1, 1996, (ii)
Series B Preferred Stock, which has a liquidation preference of $1.00 per share
at any time prior to 5:00 p.m., New York time on October 1, 1996 or (iii)
Series C Preferred Stock, which has a liquidation preference of $0.50 per share
at any time prior to 5:00 p.m., New York time on January 1, 1997 at the
purchase price of $1.00 per share. Each Warrant remaining unexercised at 5:00
p.m., New York time on January 1, 1997 shall be automatically converted,
without any action on the part of the holder thereof, into one share of
Mandatory Redeemable Preferred Stock, which shall have a liquidation preference
of $0.50 per share and shall be mandatorily redeemable by the Company under
certain circumstances. At any time from July 1, 1996 until December 31, 1998,
each share of Convertible Exchangeable Preferred Stock may be exchanged for
four Exchange Warrants each of which shall entitle the holder thereof to
purchase one share of Tatham Offshore common stock at the Trading Reference
Price. The Exchange Warrants will expire July 1, 1999. Alternatively, at any
time after July 1, 1996, the holder of any shares of Convertible Exchangeable
Preferred Stock will have the right, at the holder's option, to convert the
liquidation value of such stock and accrued and unpaid dividends into shares of
Tatham Offshore common stock at the Trading Reference Price. On and after July
1, 1997, the Convertible Exchangeable Preferred Stock will be redeemable at the
option of the Company. As of January 31, 1996 (the expiration date of the
Rights), the Offering was over-subscribed. The Company issued 25,120,948
Warrants and received $12.6 million in gross proceeds (approximately $11.3
million, net) pursuant to the exercise of Rights.
USES OF CASH. The Company's primary uses of cash consist of (i) platform
access fees and processing and commodity charges payable to the Partnership,
(ii) amounts due under the Subordinated Notes, (iii) other expenses associated
with operating its producing properties, including its production payment and
leasehold abandonment liabilities, (iv) capital expenditures necessary to fund
its portion of the development costs attributable to its working interests, (v)
interest and principal on the Affiliate Note and (vi) payments due under the
Dover technology services agreement and management agreement with DeepTech.
The Company was obligated to make demand charge payments to the Partnership
under certain transportation agreements. These demand charges were payable
whether or not any production was actually transported. In addition to the
demand charges, Tatham Offshore is obligated to pay commodity charges, based on
the volume of oil and gas transported or processed, under these agreements.
Also, for the fiscal year ended June 30, 1996, the Company is obligated to pay
$1.6 million in platform access fees. Production problems at Ship Shoal Block
331 and reduced oil production from the Ewing Bank 914 #2 well have affected
Tatham Offshore's ability to pay the demand charge obligations under these
agreements.
Effective February 1, 1996, Tatham Offshore entered into an agreement with the
Partnership to prepay its remaining demand charge payments under the
transportation agreements covering its Ewing Bank and Ship Shoal properties.
Under the agreement, Tatham Offshore's demand charge obligations relative to
the Ewing Bank Gathering System and the pipeline facilities constructed by the
Partnership for its Ship Shoal property have been prepaid in full. In
exchange, effective February 1, 1996, Tatham Offshore has (i) issued the
Partnership 7,500 shares of 9% Senior
18
<PAGE> 19
Preferred Stock with a liquidation preference of $1,000 per share, (ii) added
the sum of $7.5 million to the Payout Amount under the Purchase and Sale
Agreement with Flextrend Development and (iii) granted to the Partnership
certain rights to use and acquire the Ship Shoal Block 331 platform. The
Partnership has made an irrevocable offer to Tatham Offshore to sell all or any
portion of the Senior Preferred Stock to Tatham Offshore or its designee at a
price equal to $1,000 per share, plus interest thereon at 9% per annum less
the sum of any dividends paid thereon. If the Senior Preferred Stock is not
purchased by Tatham Offshore on or before September 30, 1998, it will be
convertible into shares of Tatham Offshore's Series A Preferred Stock based on
the liquidation preference amount of the Senior Preferred Stock and the
equivalent market value of the Series A Preferred Stock as of the date of
conversion. The increase in the Payout Amount will defer the reversion of
Tatham Offshore's working interest in its Viosca Knoll Block 817, Garden Banks
Block 72 and Garden Banks Block 117 properties under the Purchase and Sale
Agreement but will be excluded for purposes of computing the amount of the
Payout Amount to be extinguished if Flextrend Development exercises its options
to permanently retain a portion of the working interests in the Assigned
Properties. Tatham Offshore and the Partnership have also agreed that in the
event Tatham Offshore furnishes the Partnership with a financing commitment
from a lender with a credit rating of BBB- or better covering 100% of the then
outstanding Payout Amount, the interest rate utilized to compute the Payout
Amount shall be adjusted from and after the date of such commitment to the
interest rate specified in such commitment, whether utilized or not. In
addition, Tatham Offshore agreed to grant the Partnership the right to utilize
the Ship Shoal Block 331 platform and related facilities at a rental rate of
$1.00 per annum for such period as the platform is owned by Tatham Offshore and
located on the Ship Shoal Block 331, provided such use, at the time proposed,
does not interfere with lease operations or other activities of Tatham
Offshore. Tatham Offshore has granted the Partnership a right of first refusal
relative to a sale of the platform. The agreement with the Partnership will
result in a reduction in demand charge payments of approximately $4.1 million
for the fiscal year ended June 30, 1996, $7.8 million for the fiscal year ended
June 30, 1997 and $5.9 million for fiscal years thereafter. Tatham Offshore
remains obligated to pay the commodity charges under these agreements as well
as all platform access and processing fees associated with the Viosca Knoll
Block 817 lease.
As of March 31, 1996, the Company had $60.0 million aggregate principal amount
of Subordinated Notes outstanding, all of which was held by DeepTech. The
Subordinated Notes are subordinate to all senior indebtedness of the Company,
which would include any indebtedness outstanding under the Affiliate Note. The
Company does not have any outstanding indebtedness ranking senior to the
Subordinated Notes, except for outstanding indebtedness under the Affiliate
Note. The Subordinated Notes bear interest from the date of their issuance at
a rate of 11 3/4% per annum, payable in arrears (approximately $1.8 million per
quarter commencing September 30, 1994); provided, however, that effective July
1, 1997, interest shall accrue at a rate of 13% per annum. The principal
amount of the Subordinated Notes is payable in seven equal annual installments
of approximately $8.6 million each commencing August 1, 1999. For the nine
months ended March 31, 1996, the Company incurred interest on the Subordinated
Notes of $5.3 million.
In March 1996, the Company began incurring abandonment costs related to its
West Cameron 436 property, in which it owns a 47% working interest. The West
Cameron 436 property ceased producing in 1994. The total estimated abandonment
obligation, net to the Company's working interest, of $1.2 million was fully
accrued as of June 30, 1995. Through May 10, 1996, the Company has paid
approximately $0.2 million of the estimated abandonment costs.
Effective July 1, 1993, the management agreement between the Company and
DeepTech provided for an annual management fee equal to 40% of DeepTech's
overhead. The management fee is intended to reimburse DeepTech for the
estimated costs of its operational, financial, accounting and administrative
services provided to Tatham Offshore. In an effort to minimize the Company's
projected operating cash shortfall, the Company and DeepTech agreed to decrease
the amount of managerial and administrative services provided by DeepTech
to the Company and amend the management agreement effective November 1, 1995.
The amended management agreement provides for an annual management fee of 27.4%
of DeepTech's overhead expenses. The Company anticipates that this amendment
will result in a reduction of approximately $2.5 million, on an annualized
basis, in the management fee that would have otherwise been paid to DeepTech.
As of March 31, 1996, the Company owed DeepTech $4.0 million for costs
allocated under the management agreement; however, payment of up to $4.0
million of management fees has been deferred until July 15, 1996 pursuant to
the terms of the Bridge Commitment.
19
<PAGE> 20
On November 1, 1995, the Company converted $1.7 million of its accounts payable
to an affiliate into the Affiliate Note which bears interest at 14.5% per
annum. Interest on the Affiliate Note is payable quarterly, beginning March
31, 1996. The principal is due and payable in six monthly installments,
beginning on a date which is the earlier to occur of (i) November 1, 1997 or
(ii) the last day of the calendar month in which the Company receives proceeds
from the issuance of any preferred stock described in the Offering in a net
total amount equal to or greater than $20.0 million. Interest expense related
to the Affiliate Note totaled $0.1 million for the nine months ended March 31,
1996.
In August 1995, the Company formed a wholly-owned subsidiary, TOJ, to pursue
certain international opportunities. TOJ is in the process of attempting to
obtain offshore concessions from the government of Nigeria. There are no
assurances that TOJ will be granted a concession or the terms and conditions
that would apply to a concession if granted.
In February 1996, TOJ entered into agreements to acquire a minority equity
interest in GASPART. GASPART in turn owns a minority equity interest
(approximately 41.5%) in seven local natural gas distribution companies in
Brazil. The remaining equity interest in each local distribution company is
owned by Petrobras, the Brazilian state-owned oil company and the state
government for the state in which its operations are conducted. TOJ's interest
in GASPART will be financed on a non recourse basis under an arrangement by
which title to TOJ's shares in GASPART will be transferred to the lender
subject to an option to reacquire the shares at a price equal to the original
cost thereof plus interest thereon at LIBOR. The option will be exercisable at
any time until the expiration of 375 days from the closing date. All approvals
and consents for these transactions have been obtained and applicable rights of
first refusal have expired. The consummation of these transactions remains
subject to the negotiation, preparation and execution of final closing
documents with respect to TOJ's participation in the transaction.
LIQUIDITY OUTLOOK. As described above, during calendar year 1995, the Company
experienced production problems at its Ewing Bank 914 #2 well, which has
caused this well to be shut-in periodically. In addition, production problems
at the Company's Genuine Risk property at Ship Shoal Block 331 have caused each
of the three wells at Genuine Risk to be shut-in. As a consequence, the
Company has experienced liquidity problems resulting primarily from substantial
negative cash flow from operations. A portion of the proceeds from the sale of
Warrants were used to repay outstanding indebtedness under the Bridge Loan.
The remaining proceeds are being used to fund a portion of the Company's
anticipated cash flow shortfall and estimated capital requirements.
The decline in production rates experienced at the Ewing Bank 914 #2 well since
February 1996, together with the delay and cost overrun with respect to the
drilling and completion of a third well at Viosca Knoll Block 817, have
adversely affected the Company's cash flow. In an effort to offset the effects
of these events, the Company renegotiated certain demand charge obligations
with the Partnership. Effective February 1, 1996, the Company prepaid certain
of its demand charge obligations ($4.1 million for the fiscal year ended June
30, 1996) through the assignment of certain assets pursuant to an agreement
with the Partnership. As a result, the Company believes it has sufficient
capital to finance its operations through at least June 30, 1996.
The Company currently intends to fund its operations for the period of July 1,
1996 through at least June 30, 1997 with the net proceeds from the sale of
Convertible Exchangeable Preferred Stock. The ability of the Company to do so,
however, is dependent upon Warrant holders exercising their Warrants to
purchase Convertible Exchangeable Preferred Stock at such times and in such
amounts as is necessary to meet the Company's capital needs. If Warrant
holders do not exercise their Warrants at the required times and in the
required amounts, the Company will be required to fund its operations from
alternate sources. There can be no assurance, however, that any alternate
source will be available.
The ability of the Company to fund its capital requirements in the near term
and through June 30, 1997 will depend on the timing of such requirements, the
level of its operating cash flow and the receipt of additional capital from the
exercise of the Warrants. Unless such capital requirements are funded, the
Company believes that it will be forced
20
<PAGE> 21
to seek protection from its creditors under applicable bankruptcy laws. In
such event, the Company believes that holders of its common stock and the
Securities would realize little, if any, of their investment in the Company.
Even if the proceeds from the Offering are sufficient to fund the Company's
operations through June 30, 1997, there can be no assurance that the Company
will not need substantial additional capital thereafter to fund its operations.
Although the restructuring of the Company's demand charge obligations with the
Partnership and the initiation of production from the Viosca Knoll field has
significantly reduced the Company's cash flow deficit, the Company does not
anticipate generating positive cash flow prior to the first to occur of (i)
refinancing of the Payout Amount which would enable the Company to reacquire all
or a portion of the Assigned Properties from Flextrend Development, (ii) actual
payout of the Payout Amount and the resulting reversion of all or a portion of
the Assigned Properties or (iii) the initial production from the Company's
Sunday Silence field.
In December 1995, Flextrend Development initiated production from the Viosca
Knoll Block 817 lease. In addition, Flextrend Development has drilled and is in
the process of placing on production two wells on the Garden Banks Block 72
lease and is in the process of completing and placing on production an existing
well at Garden Banks Block 117. As of March 31, 1996, the Payout Amount was
approximately $65.8 million, comprised of (i) initial acquisition and
transaction costs of $32.1 million, (ii) development and operating costs of
$31.4 million, (iii) prepaid demand charges of $7.5 million and (iv) interest of
$4.7 million, reduced by revenues of $9.9 million.
To meet these additional capital needs, the Company will continue to pursue the
implementation of its business strategy which will focus primarily on (i)
attempting to develop and initiate production from the Company's Sunday Silence
field (Ewing Bank Blocks 958, 959, 1002 and 1003) under a farmout or financing
arrangement with an industry partner or financial institution, (ii) analyzing
the results of drilling operations on the Assigned Properties in an effort to
maximize the value of its reversionary interest, (iii) attempting to sell or
farmout interests in its other properties, (iv) attempting to reinitiate
production at Genuine Risk (Ship Shoal Block 331) under a farmout arrangement
with an industry partner or, alternatively, salvaging the platform and
equipment located at Genuine Risk for sale to a third party or redeployment on
another property, (v) seeking to acquire interests in producing properties on a
carried or financed basis and (vi) pursuing the possible merger of the Company
with an industry partner with sufficient capital resources available to meet
the capital requirements for the development of the combined entity's
properties.
The ability of the Company to satisfy its capital requirements beyond those
funded with the proceeds from the sale of the Warrants and any of the
Securities offered pursuant to the Offering will depend upon its success in
implementing its business strategy, particularly its ability to develop and
initiate production from the Sunday Silence field. Although the Company has
pursued farmout and outside financing arrangements for its Sunday Silence
project, as of this date, the Company has not been able to obtain an acceptable
farmout arrangement with an industry partner or develop a financing arrangement
under the current economic conditions. On November 28, 1995, a federal law was
enacted that offers deepwater royalty relief for certain federal leases located
in 200 meters or greater of water depth in the Gulf. The relief provided for
in the new law is not automatic but must be applied for with the Secretary of
Interior (or his delegate). An applicant must demonstrate that the proposed
new production for which the royalty relief is sought would not be economic to
develop absent the royalty relief. The Company filed an initial application in
December 1995 but was advised in late January 1996 that applications could not
be accepted in advance of publication of proposed regulations. It is projected
that an advance notice of proposed regulations implementing the new law will be
published by May 28, 1996 and the Company intends to promptly reapply for
relief once implementing regulations are promulgated. Under the new
legislation, the first 52.5 million equivalent barrels of oil production from
the Sunday Silence project would be exempt from federal royalties if such
relief is granted. The Company believes that if the requested royalty
abatement is granted, the resulting improved economics for the project will be
sufficient to obtain development financing or an industry farmout arrangement.
There can be no assurance that the Company will be able to obtain the requested
royalty abatement, enter into a farmout or financing arrangement on favorable
terms, that the Sunday Silence field will be successfully developed or that
production will be initiated therefrom on a timely basis, if at all.
The Company has never paid dividends on its common or preferred stock. The
Company expects to retain all available earnings generated by its operations
for the growth and development of its business.
21
<PAGE> 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
During the fiscal quarter ended March 31, 1996, a total of 5
stockholders holding an aggregate approximate 63% of the Company's
outstanding shares of common stock consented in writing to the
establishment and issuance by the Company of 7,500 shares of 9% Senior
Preferred Stock, such action dated as of April 23, 1996. In
connection therewith, the Company will send an Information Statement
to the Company's stockholders.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K with the Securities
and Exchange Commission on March 29, 1996.
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TATHAM OFFSHORE, INC.
Date: May 14, 1996 By: /s/ DIANA J. WALTERS
--------------------------------
Diana J. Walters
Chief Financial Officer
Date: May 14, 1996 By: /s/ DENNIS A. KUNETKA
--------------------------------
Dennis A. Kunetka
Senior Vice President -
Corporate Finance
23
<PAGE> 24
INDEX TO EXHIBITS
27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) TATHAM
OFFSHORE INC. AND SUBSIDIARY'S CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31,
1996 INCLUDED IN ITS FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 4,472
<SECURITIES> 0
<RECEIVABLES> 2,043
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,585
<PP&E> 75,837
<DEPRECIATION> 4,349
<TOTAL-ASSETS> 92,396
<CURRENT-LIABILITIES> 14,570
<BONDS> 0
<COMMON> 251
0
0
<OTHER-SE> 8,566
<TOTAL-LIABILITY-AND-EQUITY> 92,396
<SALES> 11,109
<TOTAL-REVENUES> 11,109
<CGS> 11,068
<TOTAL-COSTS> 11,401
<OTHER-EXPENSES> 840
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,288
<INCOME-PRETAX> 9,840
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,728
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.36
</TABLE>
