425 1 h85510e425.txt BELLWETHER EXPLORATION CO FOR BARGO ENERGY CO 1 Filed by Bellwether Exploration Company Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934 Subject Company: Bargo Energy Company File No. 333-54798 The following slide presentation was made by Bellwether Exploration Company [Slide 1] [Slide depicts the logo of Mission Resources centered on the page followed by the text "Mission Resources"] Lehman Brothers 2001 High Yield Bond and Leveraged Loan Conference March 2001 [Slide 2] Safe Harbor Disclosure -------------------------------------------------------------------------------- This presentation includes "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements are those concerning the companies' merger and strategic plans, expectations and objectives for future operations. All statements included in this presentation that address activities, events or developments that the companies expect, believe or anticipate will or may occur in the future are forward-looking statements. This includes completion of the proposed merger, completion of reserve estimates, production, cash flow and EBITDA estimates, future financial performance, future equity issuance and other matters. These statements are based on certain assumptions made by the companies based on their experience and perception of historical trends, current conditions, expected future developments and other factors they believe are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the companies. Statements regarding future production are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Investors and security holders are urged to read the proxy statement/prospectus that will be included in the Registration Statement on Form S-4 filed with the SEC in connection with the proposed merger. Bellwether Exploration Company ("Bellwether") and Bargo Energy Company ("Bargo") have filed the proxy statement/prospectus with the SEC. Investors and security holders may obtain a free copy of the proxy statement/prospectus (when available) and other documents filed by Bellwether and Bargo with the SEC at the SEC's web site at www.sec.gov. The proxy statement/prospectus and such other documents (relating to Bellwether) may also be obtained for free from Bellwether by directing such request to: Bellwether Exploration Company, 1331 Lamar, Suite 1455, Houston, Texas 77010, Attention: Lance Weaver; telephone: (713) 495-3061; e-mail: weaverl@bellwetherexp.com. The proxy statement/prospectus and such other documents (relating to Bargo) may also be obtained for free from Bargo by directing such request to: Bargo Energy Company, 700 Louisiana, Suite 3700, Houston, Texas 77002, Attention: Jerry Sears; telephone: (713) 236-9792; e-mail: jsears@bargo.com. Bellwether, its directors, executive officers and certain members of management and employees may be considered "participants in the solicitation" of proxies from Bellwether's shareholders in connection with the merger. Information regarding such persons and a description of their interests in the merger is contained in the Registration Statement on Form S-4. Bargo, its directors, executive officers and certain members of management and employees may be considered "participants in the solicitation" in connection with the merger. Information regarding such persons and a description of their interests in the merger is contained in the Registration Statement on Form S-4. 1 2 [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 3] SITUATION - BELLWETHER & BARGO -------------------------------------------------------------------------------- Bellwether (2000) o Issues -- Scattered assets, low reserve life index, 30% operated, 85% hedged, debt to book capital of 70%, inexperienced management, too small o Actions -- Sold $49 MM of properties -- Paid down debt -- Bought back 15,000 MMBTU/Day of hedges -- Acquired new management expertise - engineering, budget control, finance -- Commenced acquisition/merger discussions [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 4] SITUATION - BELLWETHER & BARGO -------------------------------------------------------------------------------- Bargo 2000 o Strong results in executing acquisition strategy, and subsequent optimization of operations -- Texaco acquisition quadrupled reserves o Focus on maximization of return on investments in long-life oil properties -- Sold >$100 MM of assets for well above acquisition cost o Minimal access to capital markets for further growth o Shareholders desiring tax efficient liquidity - Decided against IPO or addition of private equity [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 5] MERGER DETAILS -------------------------------------------------------------------------------- o Bellwether acquiring Bargo, deal announced Jan 25th o New Name: Mission Resources Corporation 2 3 o $1.26 per share for Bargo common ($140 MM, approximately 40% in cash, 60% in Bellwether stock) o Bargo preferred stockholders receive cash ($61 MM) o Amendment No. 1 to S-4 filed with the SEC Mar 19th o Anticipate Bellwether Shareholder meeting in late April [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 6] MERGER DETAILS -------------------------------------------------------------------------------- o Total deal (Pro Forma at December 31, 2000) -- $200 MM for common and preferred stock ($120 MM Cash, $80MM stock) -- $29 MM assumed debt -- 46.9 MMBOE proved reserves - Less than $5.00/BOE direct acquisition cost [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 7] Transaction Timetable -------------------------------------------------------------------------------- Sign merger agreement Jan 25 Preliminary S-4 proxy filed Feb 1 Bank Financing Committed Mar 16 Amended S-4 proxy filed Mar 19 Meeting for Equity & High Yield analysts Mar 30 SEC approval Apr 1* Rating agency upgrade request - Senior and subordinated debt Apr 6* Shareholder meeting Apr 30* Close May 1*
* Projected [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 8] 3 4 DISTRIBUTED BY REGION -------------------------------------------------------------------------------- [Slide depicts pie chart entitled: Pro Forma reserves at December 31, 2000 of 78.5 MMBOE. It contains the following text:] East Texas 14% Gulf Coast Onshore 20% Gulf Coast Offshore 8% Gulf Coast Combined 28% Ecuador 10% Permian 39% Other 9%
[Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 9] RESERVE INFORMATION -------------------------------------------------------------------------------- o Pro Forma reserves at December 31, 2000 of 78.5 MMBOE o Production approximately 23,000 BOE per day, reserve life index 9 years [Slide depicts three pie charts horizontally across the page. The one on the left side of the page is entitled Reserve Categories. It contains the following text:] PUD 20% PDN 10% PDP 70%
[The middle pie chart is entitled Oil vs. Gas. It contains the following text:] Gas 32% Oil 68%
[To the right of both of those pie charts is a pie chart entitled Operated vs. Non-Operated. It contains the following text:] Non-Op 54% Operated 46%
[Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 10] 4 5 PROPERTY OVERVIEW -------------------------------------------------------------------------------- [Slide depicts a map of New Mexico, Texas, the Gulf of Mexico and Louisiana with a map of Ecuador inserted in the lower left corner. The map contains numbers from 1-20 indicating the top twenty fields. The text to the right of the map is as follows:] TOP TWENTY FIELDS 1 East Texas TX Oil 2 Leroy North LA Gas 3 Waddell TX Oil 4 Levelland/Slaughter TX Oil 5 Cross Creek TX Gas 6 Bright Falcon TX Gas 7 Tiguino EC OIl 8 Eugene Island Block 292 FO Gas 9 Wasson TX Oil 10 Raccoon Bend TX Oil 11 Second Bayou LA Gas 12 Goldsmith OBO TX Oil 13 Ship Shoal Block 246 FO Gas 14 Charapa EC Oil 15 Giddings TX Mix 16 TXL TX Oil 17 High Island Block 552 FO Gas 18 Porter's Creek TX Gas 19 Bedford TX Oil 20 Reddell LA Gas
[Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 11] STRATEGIC DIRECTION -------------------------------------------------------------------------------- o Fully exploit existing asset base -- Focus on costs, full cycle economics o Divest non-core, non-strategic properties -- Reduce Company's operating cost/BOE o Growth through acquisition -- Corporate transactions via "unadvertised" opportunities, public and private companies -- Property transactions in focus areas, potential addition of new core area [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 12] BARGO ACQUISITION HISTORY --------------------------------------------------------------------------------
ACQ. COST INCL. PROVED DEVELOPED COST DEV. RESERVES COST DEAL PROPERTIES $MM $MM MMBOE $ / BOE ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- Conoco I St. Martinville $7.5 $10.6 1.9 $5.58 Conoco II Conroe, Etc 11.0 11.7 4.9 2.37 Phillips Permian Basin 10.5 11.4 3.3 3.41 Texaco Odem 8.7 10.3 1.6 6.65 Cody Misc. Package 8.4 10.6 5.5 1.91 Exxon Raccoon Bend 10.0 13.6 4.2 3.26 ARCO East Texas 16.0 17.0 3.9 4.40 Texaco Permian, Etc. 153.7 168.0 45.3 3.71 Aera Coles Levee 10.1 10.1 4.8 2.13 All others Various 38.4 52.9 14.9 3.53 -------- -------- ---- ------ Total $274.3 $316.2 90.3 $3.50
[Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] 5 6 [Slide 13] BALANCE SHEET COMPARISON ($ in millions) --------------------------------------------------------------------------------
December 31, 2000 ---------------------------------- MISSION MISSION MAY 1, 2001 BELW BARGO PRO FORMA EST. CLOSING ---- ----- --------- ------------ Current Assets 45 29 74 Property, Plant & Equipment 151 155 411 Goodwill -- 2 27 Other Assets 26 10 13 ---- ---- ---- Total Assets 222 196 525 ==== ==== ==== Current Liabilities 37 25 73 Bank Debt 25 85 170 150 Sub Debt 100 -- 100 100 Deferred Tax & Other Liabilities 3 6 46 Preferred Stock -- 58 -- Stockholders' Equity 57 22 136 ---- ---- ---- Total Liabilities & Equity 222 196 525 ==== ==== ====
[Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 14] FINANCIAL STRATEGY -------------------------------------------------------------------------------- o Maintain liquidity and balance sheet capacity -- Limit capex in 2001 and 2002, free cash flow used to pay down bank debt -- Utilize high yield debt to increase liquidity under senior revolver -- Long term objective of 50% debt to book capital and $100 MM of unused bank capacity o Reduce cost of capital -- Increased liquidity and analyst coverage - equity and high yield -- Lower cost of debt capital o Focus on reducing G&A and LOE per BOE - divestitures, outsourcing o Use equity to fund acquisition transactions [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 15] 6 7 HEDGING STRATEGY -------------------------------------------------------------------------------- o Hedge to protect downside - plan to use floors and/or collars through 2002 o Hedges currently in place cover about 55% of total equivalent production OIL HEDGES
NYMEX NYMEX BBLS Price Price Period Per Day Floor Ceiling ----------------------------------------------------------------------- ------------ ------------ ----------- Jan. 2001 - Dec. 2001 1,500 $24.00 $30.00 Jan. 2001 - Dec. 2001 6,000 $21.00
GAS HEDGES
NYMEX NYMEX MCF Price Price Period Per Day Floor Ceiling ----------------------------------------------------------------------- ------------ ------------ ----------- Jan. 2001 - Mar. 2001 25,000 $2.30 $3.37 Apr. 2001 - Oct. 2001 35,000 $2.30 $2.92
[Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 16] FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
REPORTED PRO FORMA BELW MISSION 2001 2000 EST. --------------- ---------------- Production (MBOE/D) 15.8 23.0 Spot WTI Price ($/BBL) $30.14 $26.53 Spot Henry Hub Price ($/MCF) 3.91 5.47 Total Revenue ($MM) 119 190 - 200 EBITDA 68 125 - 140 Discretionary Cash Flow 63 90 - 100 DCF/Share 4.42 3.85 - 4.30 Recurring Net Income 18 25 - 35 Recurring NI/Share 1.25 1.10 - 1.50
[Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] 7 8 [Slide 17] FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
REPORTED PRO FORMA BELW MISSION 2001 2000 EST. --------------- ---------------- Proved Reserves (MMBOE) 31.6 (Jan 01) 76.5 Reserve Life (R/P) 6 9 Cash Interest Expense ($MM) $14.8 $25 - 30 Total Debt - Year End 125.5 200 - 225 Stockholders Equity 57.0 160 - 180* Total Book Capitalization 182.5 360 - 405 EBITDA/Interest Expense 4.6x 4.7x - 5.0x Total Debt/EBITDA 1.8x 1.4x - 1.8x Total Debt/Book Capitalization 69% 55% - 60%
*Excludes potential non-cash loss items (FAS 133, etc.) [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 18] PRICE SENSITIVITIES --------------------------------------------------------------------------------
2001 PRICE CHANGE ---------------------------------------- $1.00 / BBL $.10 / MCF ----------- ---------- Net Income $2.5 MM $0.7 MM Per Share - Diluted $.11 $.03 Discretionary Cash Flow $3.7 MM $1.0 MM Per Share - Diluted $.16 $.04 EBITDA $4.1 MM $1.1 MM
[Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 19] BELLWETHER SENIOR SUBORDINATED NOTES -------------------------------------------------------------------------------- Issue: $100 million Senior Subordinated Notes, issued April 1997 Coupon: 10 7/8% Maturity: 10 years (2007) Optional Redemption: 5 year non-call (callable April 2002 @ 105.4) Ratings (Moody's / S&P) B3 / B- [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] 8 9 [Slide 20] EXECUTIVE MANAGEMENT -------------------------------------------------------------------------------- [Slide depicts a flow chart of the management structure. The text of the flow chart from top to bottom is as follows:] Doug Manner Chairman & CEO [lines connect Doug Manner to Jon Clarkson, Kent Williamson, and Joe Nicknish] Jon Clarkson President & CFO [the following are on the same level and each is connected by a line to Jon Clarkson] Ken Williamson Sr. VP-Planning & Exploration [below which is stated Portfolio Management, Budget Control, Explorations] Joe Nicknish Sr. VP-Operations & Exploitation [below which is stated Field Operations, Drilling, Land] Dan Foley Sr. VP-Corporate Finance [below which is stated Corporate M&A, Finance, Accounting & Tax, Marketing, Administration] [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 21] BOARD OF DIRECTORS (NOMINATED) Doug Manner Chairman and CEO, Mission Resources Jon Clarkson President and CFO, Mission Resources Judy Ley Allen Board Member of Federal Reserve Bank - Dallas J.P. Bryan Senior Managing Director, Torch Energy Advisors, Inc. Tim J. Goff Ranching (former Chairman and CEO, Bargo) Habib Kairouz Managing Director, Rho Management Co., Inc. D. Martin Phillips Managing Director, Encap Investments L.L.C.
[Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 22] 9 10 MISSION RESOURCES - STATUS & GOALS -------------------------------------------------------------------------------- o Major goals for 2001 -- Maintain production levels with targeted capex - predominantly exploitation, nominal exploration -- Reduce costs by managing the portfolio and improving operation efficiencies -- Increase balance sheet liquidity -- Pursue corporate consolidation opportunities, close one or more -- Improve visibility and perception in capital markets o Mission Resources is a unique mid-cap E&P investment opportunity -- New, enthusiastic management team with expertise in exploitation, M&A, and capital markets -- Growth philosophy coupled with extensive industry contacts [Slide depicts the logo of Mission Resources centered in the bottom of the page followed by the text "Mission Resources"] [Slide 23] [Slide depicts the logo of Mission Resources centered on the page followed by the text "Mission Resources".] 10