UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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):
June 2, 2006 (May 31, 2006)
THE HOUSTON EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
| |
|
|
|
|
| Delaware
|
|
001-11899
|
|
22-2674487 |
| (State or other jurisdiction of
|
|
(Commission File Number)
|
|
(I.R.S. Employer Identification No.) |
| incorporation) |
|
|
|
|
| |
|
|
|
|
| 1100 Louisiana, Suite 2000 |
|
|
|
|
| Houston, Texas
|
|
|
|
77002-5215 |
| (Address of principal executive offices)
|
|
|
|
(Zip Code) |
(713) 830-6800
(Registrant’s telephone number, including area code)
Not Applicable
(Former names or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
| o |
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
| o |
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
| o |
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b)) |
| |
| o |
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c)) |
TABLE OF CONTENTS
Item 2.01 Completion of Acquisition or Disposition of Assets.
On June 1, 2006, The Houston Exploration Company (“Houston Exploration”) completed the sale of
substantially all of our Louisiana Gulf of Mexico assets for a gross purchase price of $590 million
pursuant to a purchase and sale agreement dated April 7, 2006 between Houston Exploration, as
seller, and various partnerships affiliated with Merit Energy Company (collectively, the “Merit
Affiliates”), as buyer. A substantial majority of such assets was sold to the Merit Affiliates on
May 31, 2006, and certain working interests were sold to Nippon Oil Exploration U.S.A. Ltd. and
Chevron USA Inc. on June 1, 2006 pursuant to the exercise of preferential purchase rights. The
aggregate net cash proceeds received from the sale of these assets totaled approximately $530.8
million after customary closing items, including the preliminary adjustment for operations related
to the properties after January 1, 2006, the effective date of the transactions. Of the total net
proceeds, approximately $510.2 million was received for assets acquired by the Merit Affiliates,
and approximately $16.6 million and $4.0 million was received from Nippon Oil Exploration U.S.A.
Ltd. and Chevron USA Inc., respectively.
At December 31, 2005, proved reserves associated with these assets were estimated at 186.1 Bcfe,
and production associated with these assets accounted for approximately 22% of our 2005 production
and 21% of our production during the first three months of 2006. The sale transactions did not
include 18 Louisiana offshore blocks to be retained by Houston Exploration. Of these 18 blocks, 16
are undeveloped and two have exploratory wells currently in progress.
Of the $530.8 million in net cash proceeds received from the sale of the Louisiana portion of our
Gulf of Mexico assets, $314.2 million was paid directly to a qualified intermediary to facilitate
like-kind exchange transactions under Section 1031 of the Internal Revenue Code, and substantially
all of the $216.6 million balance, associated with properties sold outside the like-kind exchange
arrangement, was used to reduce outstanding borrowings under our revolving credit facility. As of
June 1, 2006, outstanding borrowings under our revolving credit facility, after application of the
proceeds, totaled $50 million.
The sale of certain of our Gulf of Mexico properties triggered the acceleration of a net profits
payment to the predecessor owner of properties acquired by us in October 2003. We expect to make a
cash payment of approximately $30 million to the predecessor owner to satisfy
the net profits interest, which payment we plan to fund with borrowings under our revolving
credit facility.
The foregoing description of the material terms of the purchase and sale agreement is qualified by
reference to the purchase and sale agreement filed herewith as Exhibit 99.1.
The unaudited proforma condensed consolidated financial statements of Houston Exploration are
attached to this current report as Exhibit 99.2 as described in Item 9.01 below.
Item 7.01. Regulation FD Disclosure.
A copy of the June 1, 2006 press release announcing completion of the sale of the Louisiana Gulf of
Mexico assets is being furnished pursuant to Regulation FD as Exhibit 99.3 to this Current Report
on Form 8-K. The information in the press release shall not be deemed to be incorporated by
reference into Houston Exploration’s filings under the Securities Act of 1933, as amended, except
as set forth with respect thereto in any such filing. In addition, this Current Report on Form 8-K
and the press release contain “forward-looking statements” which are subject to the cautionary
statements about forward-looking statements set forth in the press release.
Item 8.01. Other Events.
Effective May 31, 2006, and in connection with the closing of the sale of substantially all of our
Louisiana Gulf of Mexico assets, the borrowing base on our revolving credit facility was reduced
from $550 million to $500 million. At June 1, 2006, outstanding borrowings under our revolving
credit facility totaled $50 million.
Item 9.01. Financial Statements and Exhibits
(b) Pro forma financial information