425 1 h86480e425.txt BELLWETHER EXPLORATION COMPANY 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] [MISSION RESOURCES LOGO] BEAR STEARNS 10th ANNUAL GLOBAL CREDIT CONFERENCE 2001 APRIL 2001 2 [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. =========================== [MISSION RESOURCES LOGO] =========================== 3 [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 =========================== [MISSION RESOURCES LOGO] =========================== 4 [Slide 4] SITUATION - BELLWETHER & BARGO ================================================================================ Bellwether (2000) o Desired position was: - Focused assets - 8 year reserve life index - 70% operated - Less than 50% hedged - Debt to book capitalization less than 50% - Strong management - Billion dollar market capitalization with extensive market coverage o Strategy - Base - Exploitation and low risk exploration, farm-out high risk exploration - Growth - Corporate consolidation and acquisition - Looking for strategic corporate acquisition =========================== [MISSION RESOURCES LOGO] =========================== 5 [Slide 5] SITUATION - BELLWETHER & BARGO ================================================================================ Bargo (2000) o Strong results in executing acquisition strategy, and subsequent optimization of operations - Texaco acquisition quadrupled reserves to 75 MMBOE 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 =========================== [MISSION RESOURCES LOGO] =========================== 6 [Slide 6] MISSION RESOURCES - THE COMBINATION ================================================================================ o Bellwether plus Bargo - Asset overlap - Increased reserve life index - Increased operated production - Hedge dilution - Completed management team - Increased market capitalization o Pro forma asset statistics - 78.5 MMBOE, net of January property sale - R/P 9 years - 23 MBOE/day production - Three focus areas: Permian, Onshore Gulf Coast, Gulf of Mexico =========================== [MISSION RESOURCES LOGO] =========================== 7 [Slide 7] MERGER DETAILS ================================================================================ 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 Anticipate Bellwether Shareholder meeting in mid May o Total deal (Pro Forma at December 31, 2000) - $200 MM for common and preferred stock ($120MM Cash, $80MM stock) - $29 MM assumed debt - 46.9 MMBOE proved reserves - Less than $5.00/BOE direct acquisition cost =========================== [MISSION RESOURCES LOGO] =========================== 8 [Slide 8] TRANSACTION TIME TABLE ================================================================================ 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 Rating agency upgrade request - Senior and subordinated debt Apr 11 SEC approval Mid April* Shareholder meeting Mid May* Close Mid May* * Projected =========================== [MISSION RESOURCES LOGO] =========================== 9 [Slide 9] MISSION RESOURCES - STATUS & GOALS ================================================================================ o Integration of Bellwether and Bargo is well underway 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 =========================== [MISSION RESOURCES LOGO] =========================== 10 [Slide 10] EXECUTIVE MANAGEMENT ================================================================================ [Slide depicts a picture of the executive management & 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] =========================== [MISSION RESOURCES LOGO] =========================== 11 [Slide 11] AREAS OF OPERATION ================================================================================ [MAP] [This slide depicts a map showing New Mexico, Texas, Louisiana and the Gulf of Mexico with a map showing Ecuador inserted in the lower left corner. The map contains circles indicating the location of the following areas of operation: Permian, East Texas, Onshore/Offshore Gulf of Mexico and Ecuador.] =========================== [MISSION RESOURCES LOGO] =========================== 12 [Slide 12] RESERVES BY REGION ================================================================================ o Pro Forma reserves at December 31, 2000 of 78.5 MMBOE [PIE CHART] [This slide depicts a pie chart. The text of the chart is as follows: PERMIAN 39% EAST TEXAS 14% GULF COAST ONSHORE 20% GULF COAST OFFSHORE 8% GULF COAST COMBINED 28% ECUADOR 10% OTHER 9%]
=========================== [MISSION RESOURCES LOGO] =========================== 13 [Slide 13] RESERVE PROFILE ================================================================================ o Production approximately 23,000 BOE per day, reserve life index 9 years [PIE CHART] [PIE CHART] [PIE CHART] RESERVE CATEGORIES OIL vs. GAS OPERATED vs. NON-OPERATED [This slide depicts 3 pie charts. The pie chart titled Reserve Categories contains the following text: PUD 20% PDP 70% PDN 10% The pie chart titled Oil vs. Gas contains the following text: Gas 32% Oil 68% The pie chart titled Operated vs. Non-operated contains the following text: Non-Op 54% Operated 46%] =========================== [MISSION RESOURCES LOGO] =========================== 14 [Slide 14] 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 =========================== [MISSION RESOURCES LOGO] =========================== 15 [Slide 15] BARGO ACQUISITION HISTORY ================================================================================
Acq. Cost Ind. 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 Oth. Various 38.4 52.9 14.9 3.53 ------ ------ ----- ----- Total $274.3 $316.2 90.3 $3.50
=========================== [MISSION RESOURCES LOGO] =========================== 16 [Slide 16] PROJECTED CAPITAL EXPENDITURES ================================================================================ 2001 ESTIMATED CAPEX 2002 ESTIMATED CAPEX $110 MM $160 MM --------- --------- [PIE CHART] [PIE CHART] [This slide depicts two pie charts. The pie chart titled 2001 Estimated CAPEX $110MM contains the following text: *Exploratory $11MM Land/Seis./Oth $ 8MM Development $41MM Acquisition $50MM The pie chart titled 2002 Estimated CAPEX $160MM contains the following text: Acquisition $100MM Development $ 30MM *Exploratory $ 20MM Land/Seis./Oth $ 10MM * includes all non-proved drilling] =========================== [MISSION RESOURCES LOGO] =========================== 17 [Slide 17] CAPITAL PROJECT INVENTORY ================================================================================
Number Net Net Of Capital Unrisked Project Type Projects Cost Potential ------------ -------- ---- --------- Proved (Low risk exploitation) 472 $ 80 MM 26 MMBOE Other Potential (Exploitation & exploratory) 209 $142 MM Not disclosed
=========================== [MISSION RESOURCES LOGO] =========================== 18 [Slide 18] BALANCE SHEET COMPARISON ($ in millions) ================================================================================
DECEMBER 31, 2000 ------------------------- MISSION MISSION MAY 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 === === ===
=========================== [MISSION RESOURCES LOGO] =========================== 19 [Slide 19] 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 in stock 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 Hedging policy o Use equity to fund acquisition transactions =========================== [MISSION RESOURCES LOGO] =========================== 20 [Slide 20] 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 =========================== [MISSION RESOURCES LOGO] =========================== 21 [Slide 21] FINANCIAL HIGHLIGHTS ================================================================================
REPORTED PRO FORMA BELW MISSION MISSION 2000 2001 EST. 2002 EST. -------- ----------- ------------- Total Production (MMBOE) 5.8 8.3 - 8.7 10.5 - 11.5 Production (MBOE/D) 15.8 22 - 24 29 - 32 Spot WTI Price ($/BBL) 30.14 26.53 24.15 Spot Henry Hub Price ($/MCF) 3.91 5.47 4.86 Total Revenue ($MM) 119 200 - 210 255 - 265 OP. Cost (inc. prod. tax) per BOE 5.27 6.70 - 6.90 6.40 - 6.60 G&A per BOE 1.58 1.55 - 1.65 1.30 - 1.40 Recurring G&A per BOE 1.37 1.35 - 1.45 1.30 - 1.40
=========================== [MISSION RESOURCES LOGO] =========================== 22 [Slide 22] FINANCIAL HIGHLIGHTS ================================================================================
REPORTED PRO FORMA BELW MISSION MISSION 2000 2001 EST. 2002 EST. -------- ----------- ------------- Recurring EDITDA* ($MM) 68 125 - 140 170 - 185 Discretionary Cash flow ($MM) 63 95 - 105 125 - 140 DCF/share 4.42 4.10 - 4.50 4.25 - 4.70 Recurring Net Income* ($MM) 18 30 - 40 40 - 50 Recurring NI*/share 1.25 1.30 - 1.70 1.35 - 1.70
*Excludes potential one time non-cash losses in 2001 =========================== [MISSION RESOURCES LOGO] =========================== 23 [Slide 23] FINANCIAL HIGHLIGHTS ================================================================================
REPORTED PRO FORMA BELW MISSION MISSION 2000 2001 EST. 2002 EST. -------- ------------ ------------- Proved Reserves (MMBOE) 31.6 (Jan 01) 78.5 Reserve Life (R/P) 6 9 Cash Interest expense $MM 14.8 25 - 30 25 - 30 Total Assets $MM* 221.5 500 - 550 550 - 600 Total Debt $MM* 125.5 250 - 280 180 - 220 Stockholders equity $MM* 57.0 150 - 170 310 - 330 Total Book Capitalization $MM* 182.5 400 - 450 490 - 550 Recurring EBITDA **/Interest Exp. 4.6x 4.6x - 5.3x 6.0 - 6.4 Total Debt/Recurring EBITDA** 1.8x 1.8x - 2.1x 1.1x - 1.4x Total Debt/Book Capitalization 69% 60% - 64% 35% - 40%
* As of year end **Excludes potential one time non-cash losses in 2001 =========================== [MISSION RESOURCES LOGO] =========================== 24 [Slide 24] 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 =========================== [MISSION RESOURCES LOGO] =========================== 25 [Slide 25] 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 at 105.4) Ratings (Moody's / S&P) B3 / B- =========================== [MISSION RESOURCES LOGO] =========================== 26 [Slide 26] CORPORATE M&A OBJECTIVES ================================================================================ o Focus will be on uncovering opportunities before they reach the auction market - Information from Board of Directors, shareholders, industry contacts and potential sellers o Deal structures will utilize Mission Resources' common equity to the extent possible - Potential use of bridge financing or liquidity under senior revolver to bridge to secondary stock offering o Goal of at least one corporate transaction this year o Interesting areas include three current core areas (permian, Gulf Coast, Gulf of Mexico), as well as Canada, Mid continent, Rockies, and South Texas - No foreign acquisitions =========================== [MISSION RESOURCES LOGO] =========================== 27 [Slide 27] [MISSION RESOURCES LOGO]