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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 9, 1999
SOUTHERN MINERAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
NEVADA 0-8043 36-2068676
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1201 Louisiana Street,
Suite 3350
Houston, Texas 77002-5609
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 658-9444
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ITEM 5. OTHER EVENTS.
On July 21, 1999, Southern Mineral Corporation (the "Company")
announced a proposed financial restructuring by either an exchange offer or a
prepackaged plan of reorganization under Chapter 11 of the United States
Bankruptcy Code of 1978, as amended (the "Bankruptcy Code"). The proposed
restructuring would (a) reduce the Company's debt by eliminating at least 98% of
its 6.875% Convertible Subordinated Debentures due 2007 (the "Debentures"), (b)
significantly adjust the Company's capitalization and (c) modify the terms of
the Company's secured debt.
The exchange offer involves the exchange of at least 98% of each
$1,000 principal amount of Debentures (including all accrued but unpaid interest
thereon) for (a) 377.8 shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), (b) a warrant to purchase 188.9 shares of Common
Stock for a period of three years at an exercise price of $1.50 per share and
(c) $241.50 in cash (the "Exchange Offer").
The prepackaged plan involves the elimination of 100% of the
Debentures on terms similar to the Exchange Offer by the Company's filing a
petition for a prepackaged plan of reorganization under Chapter 11 of the
Bankruptcy Code with the United States Bankruptcy Court (the "Prepackaged
Plan").
In addition to a number of other conditions to the Exchange Offer and
the Prepackaged Plan, (a) the Company must either modify its current domestic
credit facility or enter into a new domestic credit facility on terms such that
(i) the initial borrowing base will be at least $20.0 million, (ii) it will bear
at the lender's prime or index rate and (iii) it will not mature before June 1,
2002 (to date, the lenders under the Company's current domestic credit facility
have not agreed to the Company's requested modification) and (b) pursuant to an
agreement with EnCap Energy Capital Fund III, L.P. ("EnCap") and certain of its
affiliates, the Company must sell 43,829,787 shares of Common Stock for
$20,600,000 (the EnCap Investment"). In connection the EnCap Investment, the
Company will pay a fee of $600,000 and 2,127,660 shares of Common Stock to an
affiliate of EnCap.
The Company has also entered into an agreement to sell its Brushy
Creek Field and Texan Gardens Field interests to ANR Production Company for
$16,280,000 (the "ANR Sale").
The consummation of each of the Exchange Offer, the Prepackaged Plan,
the EnCap Investment and the ANR Sale are subject to a number of conditions
which are described with greater particularity in the Company's Preliminary
Proxy Statement/Prospectus/Disclosure Statement, as filed with the Securities
and Exchange Commission on July 21, 1999 (Registration No. 333-83345). For more
information concerning (a) the EnCap Investment (including the conditions to the
consummation of the EnCap Investment) see Exhibit 10.32 to the Company's
Preliminary Proxy Statement/Prospectus /Disclosure Statement and (b) the ANR
Sale (including the conditions to the consummation of the ANR Sale) see Exhibit
10.34 to the Company's Preliminary Proxy Statement/Prospectus/Disclosure
Statement.
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The foregoing summary is qualified in its entirety by the Company's
Preliminary Proxy Statement/Prospectus/Disclosure Statement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Acquired Business. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits.
99.1 Press Release, dated July 21, 1999, announcing the Exchange Offer, the
Prepackaged Plan, the EnCap Investment and the ANR Sale.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SOUTHERN MINERAL CORPORATION
Date: July 26, 1999 By: /s/ MICHAEL E. LUTTRELL
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Michael E. Luttrell
Vice President-Finance and
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER
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99.1 Press Release, dated July 21, 1999, announcing the Exchange Offer, the
Prepackaged Plan, the EnCap Investment and the ANR Sale.
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EXHIBIT 99.1
CONTACT:
Michael E. Luttrell
Vice President-Finance
and Chief Financial Officer
(713) 658-9444
July 21, 1999
SOUTHERN MINERAL ANNOUNCES RESTRUCTURING PLANS
Houston, Texas--Southern Mineral Corporation (NASDAQ: SMIN) announced that its
Board of Directors has approved a restructuring of the Company that involves a
$20.6 million equity infusion, the sale of certain properties in Texas and an
exchange offer for its 6.875% Convertible Subordinated Debentures due 2007. The
restructuring plan comes after an extensive process by the Company to evaluate
strategic opportunities for the Company to maximize shareholder value. The
Company expects that the restructuring, including the equity infusion, and the
asset sale will improve the Company's financial condition and allow the Company
to pursue new opportunities for growth in the future.
The sale of the Company's properties consists of the sale of certain proven and
unproven property interests in Texas to ANR Production Company, for $16.28
million, subject to certain adjustments. The properties include all of the
Company's interest in the Brushy Creek and Texan Gardens Fields in Dewitt,
Lavaca and Hidalgo counties of Texas. The transaction is expected to close by
early August 1999, following the satisfaction of certain conditions, but is not
conditioned on the restructuring transactions described below. The Company
expects that the proceeds from the sale will be used primarily for reduction of
its domestic bank indebtedness with the remainder, if any, for general corporate
purposes.
The financial restructuring involves a $20.6 million equity investment by
affiliates of EnCap Investments L.L.C. (EnCap) in exchange for 43,829,787 newly
issued shares of the Company's Common Stock pursuant to a Stock Purchase
Agreement, which number of shares will represent a controlling interest in the
Company. With over $1 billion in funds under management, EnCap Investments L.C.
is an institutional funds management firm specializing in financing the upstream
and midstream sectors of the oil and gas industry. EnCap is a wholly-owned
subsidiary of El Paso Energy Corporation (NYSE:EPG).
The EnCap transaction is conditioned upon, among other things, exchange of at
least 98% of the Company's outstanding Convertible Debentures for a combination
of cash, Common Stock and warrants to purchase Common Stock and receipt of
certain third party consents. For each $1,000 principal amount of Convertible
Debentures (including
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accrued interest), the Company will offer to exchange (1) 377.8 shares of Common
Stock, (2) warrants to purchase 188.9 shares of Common Stock for a period of
three years for an exercise price of $1.50 per share, and (3) $241.50 in cash.
Consummation of the restructuring is also conditioned upon shareholder approval
of the issuance of the additional shares to EnCap and the shares and warrants to
the debenture holders. Certain fees will be payable to EnCap in connection with
the transactions.
If the exchange offer is unsuccessful, but certain other conditions are met, the
Company may proceed with the EnCap investment and the restructuring of its
capital structure through a prepackaged plan of reorganization under Chapter 11
of the U. S. Bankruptcy Code.
This news release is neither an offer to purchase, sell or exchange any
securities of Southern Mineral nor a solicitation of an offer to purchase, sell
or exchange securities. Solicitations and acceptance of the exchange offer and
the prepackaged plan will only be made by a proxy statement/ prospectus/
disclosure statement. Copies of the preliminary proxy/statement/ prospectus/
disclosure statement may be obtained from the Company.
Southern Mineral Corporation is an oil and gas acquisition, exploration and
production company that owns interests in oil and gas properties located along
the Texas Gulf Coast, the Mid-Continent, Canada and Ecuador. The Company's
principal assets include interests in the Big Escambia Creek field in Alabama
and the Pine Creek field in Alberta, Canada. The Company's Common Stock is
listed on the NASDAQ National Market under the symbol SMIN, and its Convertible
Debentures are listed on the NASDAQ Smallcap Market under the symbol SMING.
This news release contains forward-looking statements within the meaning of the
Securities Litigation Reform Act. The projections and statements reflect the
Company's current views with respect to future events and financial performance
that involve risks and uncertainties including uncertainties related to
successful negotiations with other parties, price volatility, production levels,
closing of the transaction, capital availability, operational and other risks,
uncertainties and factors described from time to time in the Company's publicly
available SEC reports. Actual results may differ materially from those
projected.
