Filed pursuant to Rule 424(b)(3)
Registration No. 333-89620
PROSPECTUS
[MERIDIAN LOGO]
14,073,684 SHARES
COMMON STOCK, PAR VALUE $.01 PER SHARE
This prospectus relates to the offering of up to 14,073,684 shares of
our common stock, par value $.01 per share, by the selling security holders
listed on pages 9 and 10.
The common stock offered by this prospectus is issuable to the selling
security holders upon the conversion of shares of our Series C Redeemable
Convertible Preferred Stock, which we refer to as the Convertible Preferred
Stock, issued to them in a private placement.
We will not receive any of the proceeds from the sale of the shares by
the selling shareholders. We have agreed to bear all expenses, including
registration and filing fees and printing expenses (other than selling
discounts, commissions and transfer taxes) in connection with the registration
and sale of the shares being offered by the selling shareholders. We have agreed
to indemnify the selling shareholders against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities Act").
Our common stock is listed on the New York Stock Exchange (the "NYSE")
under the trading symbol "TMR". Any common stock sold pursuant to this
prospectus or any prospectus supplement will be listed on that exchange, subject
to official notice of issuance. On July 15, 2002 the last reported sales price
for our common stock was $3.03 per share.
YOU SHOULD CAREFULLY REVIEW AND CONSIDER THE INFORMATION UNDER THE
HEADING "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS AND UNDER THE SAME
HEADING IN ANY APPLICABLE PROSPECTUS SUPPLEMENT BEFORE INVESTING IN THE COMMON
STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE DISTRIBUTED UNDER
THIS PROSPECTUS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THE COMMON STOCK AND IT IS NOT
SOLICITING AN OFFER TO BUY THE COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
JULY 18, 2002
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS............................................................................................1
ABOUT THE MERIDIAN RESOURCE CORPORATION..........................................................................1
FORWARD-LOOKING STATEMENTS.......................................................................................2
RISK FACTORS.....................................................................................................3
USE OF PROCEEDS..................................................................................................8
SELLING SHAREHOLDERS.............................................................................................8
PLAN OF DISTRIBUTION............................................................................................11
LEGAL MATTERS...................................................................................................12
EXPERTS.........................................................................................................12
RESERVE ENGINEERS...............................................................................................12
WHERE YOU CAN FIND MORE INFORMATION.............................................................................13
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................................................13
i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed
with the Securities and Exchange Commission using a "shelf" registration
process. Under the shelf registration process, the selling shareholders may,
from time to time, offer shares of our common stock that are owned by them. Each
time the selling shareholders offer common stock under this prospectus, they
will provide a prospectus supplement, if required, that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with additional
information described in "Where You Can Find More Information" on page 13.
The selling shareholders may offer the common stock in amounts, at
prices, and on terms determined at the time of offering. The selling
shareholders may sell the common stock directly to you or through underwriters
they select. If the selling shareholders use underwriters to sell the common
stock, we will name them and describe their compensation in a prospectus
supplement.
ABOUT THE MERIDIAN RESOURCE CORPORATION
We are an independent oil and natural gas company that explores for,
acquires and develops oil and natural gas properties utilizing 3-D seismic
technology. Our operations are focused on the onshore oil and gas regions in
south Louisiana, the Texas Gulf Coast and offshore in the Gulf of Mexico.
We have achieved substantial growth in reserves, production, revenues
and cash flow since our inception. From the beginning of 1992 (when the Company
had no proved reserves or production of oil or natural gas) through December 31,
2001, we have achieved a compound annual growth rate in production of 40% and an
average annual reserve replacement rate of 297%.
Our reserves and strategic acreage position provide us with a
significant presence in our area of focus, enabling us to manage a large asset
base to add successful exploratory and development wells at relatively low
incremental costs. As of December 31, 2001, we had proved reserves of
approximately 323 Bcfe with a present value of future net cash flows before
income taxes of approximately $429 million. Approximately 55% of our proved
reserves were natural gas and approximately 51% were classified as proved
developed. We currently have interests in leases and options to lease acreage
totaling approximately 383,000 gross acres in Louisiana, Texas and the Gulf of
Mexico.
We have a large, balanced inventory of exploration, exploitation and
development drilling prospects in our producing region. In addition to a solid
reserve base and acreage position in our area of focus, we believe we possess
the technical knowledge and information necessary to sustain the successful
growth we have experienced year after year. With licenses and rights to over
7,100 square miles of 3-D seismic data and 155,000 linear miles of 2-D seismic
data, our technical and professional staff is in a unique position to continue
to generate future prospects for our growth.
We are a Texas corporation, and the address of our principal executive
offices is 1401 Enclave Parkway, Suite 300, Houston, Texas 77077. Our telephone
number is (281) 597-7000, and we maintain a web site on the Internet at
http://www.tmrc.com. The information contained on our web site does not
constitute a part of this prospectus and is not incorporated herein.
1
FORWARD-LOOKING STATEMENTS
We believe that some statements contained in this prospectus or in the
documents incorporated by reference into this prospectus relate to results or
developments that we anticipate will or may occur in the future and are not
statements of historical fact. Those statements are "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934 (the "Exchange Act"). Words such as
"anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan",
"predict", "project", "will" and similar expressions identify forward-looking
statements. Examples of forward looking statements include statements about the
following:
o our future operating results,
o our repayment of debt,
o our future capital expenditures,
o our expansion and growth of operations, and
o our future investments in and acquisitions of oil and natural gas
properties.
We have based these forward-looking statements on assumptions and
analyses made in light of our experience and our perception of historical
trends, current conditions, and expected future developments. However, you
should be aware that these forward-looking statements are only our predictions
and we cannot guarantee any such outcomes. Future events and actual results may
differ materially from the results set forth in or implied in the
forward-looking statements. Factors that might cause such a difference include:
o general economic and business conditions,
o exposure to market risks in our financial instruments,
o fluctuations in worldwide prices and demand for oil and natural
gas,
o the direct or indirect effects on our business resulting from
recent terrorist incidents,
o fluctuations in the levels of our oil and natural gas exploration
and development activities,
o risks associated with oil and natural gas exploration and
development activities,
o competition for raw materials and customers in the oil and natural
gas industry,
o technological changes and developments in the oil and natural gas
industry,
o regulatory uncertainties and potential environmental liabilities,
o potential for and uncertainty of the outcome of pending or
threatened litigation, and
o additional matters discussed under "Risk Factors".
2
RISK FACTORS
In addition to the information contained in this prospectus, in any
prospectus supplement, and in the documents incorporated by reference into this
prospectus, you should carefully consider the following information before
making an investment decision. If any of the following risks actually occur, our
financial condition and our results of operations could be materially and
adversely affected. Additional risks and uncertainties not presently known to us
may also impair our business operations.
This prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ from those anticipated in
these forward-looking statements as a result of both the risks described below
and factors described elsewhere in this prospectus. You should read the section
above entitled "Forward-Looking Statements" for further discussion of these
matters.
RISKS RELATED TO OUR DEBT
We have incurred a high level of debt.
As of March 31, 2002, we had long-term indebtedness of approximately
$235 million (including approximately $10 million of current maturities of
long-term indebtedness) compared to approximately $187 million of stockholders'
equity, we had a working capital deficit of approximately $8 million and we had
no additional borrowing capacity available under our credit facility. If we are
unable to generate sufficient cash flows from operations in the future to
service our debt, we may need to refinance all or a portion of our existing debt
or to obtain additional financing. We cannot assure you that any such
refinancing or additional financing would be possible. Our ability to meet our
debt service obligations and to reduce our total indebtedness will depend on our
future performance and our ability to maintain or increase cash flows from our
operations. These outcomes are subject to general economic conditions and to
financial, business and other factors affecting our operations, many of which we
do not control, including the prevailing market prices for oil and natural gas.
We cannot assure you that our business will continue to generate cash flows at
or above current levels.
Borrowing limits under our credit facility are subject to
redetermination.
As of the date of this prospectus, we have outstanding indebtedness of
$170 million under our revolving credit facility, which is the current limit
to our borrowings under that facility. The borrowing base under that facility is
subject to semi-annual redeterminations by our lenders, with the next such
redetermination currently scheduled for September 2002. Our borrowing base is
determined primarily by our oil and gas reserve amounts. Our lenders can
redetermine the borrowing base to a lower level than the current borrowing base
if they determine that our oil and gas reserves at the time of redetermination
are inadequate to support the borrowing base then in effect. If we are required
to repay debt under our credit facility as a result of a downward borrowing base
redetermination, we cannot assure you that we would be able to obtain alternate
borrowing sources at commercially reasonable rates.
Our lenders impose restrictions on us that limit our ability to conduct
business.
Our credit facility contains restrictive covenants. The restrictive
covenants impose significant operating and financial restraints that could
impair our ability to obtain future financing, to make capital expenditures, to
pay dividends, to engage in mergers or acquisitions, to withstand future
downturns in our business or in the general economy or to otherwise conduct
necessary corporate activities. Furthermore, we have pledged substantially all
of our oil and natural gas properties and the stock of all of our principal
operating subsidiaries as collateral for the indebtedness under our credit
facility. If we are in material default of our obligations under that credit
facility, the lenders are entitled to liens on additional oil and natural gas
properties. This pledge of collateral to our credit facility lenders could
impair our ability to obtain additional financing on favorable terms.
A default under a restrictive covenant could result in a lender
accelerating the payment of all borrowed funds, together with accrued and unpaid
interest. We cannot assure you that we would be able to remit such an
accelerated payment or to access sufficient funds from alternative sources to
remit any such payment. Even if we could obtain additional financing, we cannot
assure you that the terms of that financing would be favorable or acceptable to
us.
3
RISKS OF OUR BUSINESS
The oil and natural gas market is volatile and exposes us to financial
risks.
Our profitability and cash flow are highly dependent on the market
prices of oil and natural gas. Historically, the oil and natural gas markets
have proven cyclical and volatile as a result of factors that are beyond our
control. These factors include changes in tax laws, the level of consumer
product demand, weather conditions, the price and availability of alternative
fuels, the price and level of imports and exports of oil and natural gas,
worldwide economic, political and regulatory conditions, and action taken by the
Organization of Petroleum Exporting Countries.
Any significant decline in oil and natural gas prices or any other
unfavorable market conditions could have a material adverse effect on our
financial condition and on the carrying value of our proved reserves.
Consequently, we may not be able to generate sufficient cash flows from
operations to meet our obligations and to make planned capital expenditures.
Price declines may also affect the measure of discounted future net cash flows
of our reserves, a result that could adversely impact the borrowing base under
our credit facility and may increase the likelihood that we will incur
additional impairment charges on our oil and natural gas properties for
financial accounting purposes.
Our hedging transactions may not adequately prevent losses.
We cannot predict future oil and natural gas prices with certainty. To
manage our exposure to the risks inherent in such a volatile market, from time
to time, we have entered into commodities futures, swap or option contracts to
hedge a portion of our oil and natural gas production against market price
changes. Hedging transactions are intended to limit the negative effect of
further price declines, but may also prevent us from realizing the benefits of
price increases above the levels reflected in the hedges.
Our reserve estimates may prove to be inaccurate and future net cash
flows are uncertain.
Our estimates of the quantities of proved reserves and our projections
of both future production rates and the timing of development expenditures are
uncertain and may prove to be inaccurate. You should not construe these reserve
estimates as the current market value of our oil and natural gas reserves. Any
downward revisions of these estimates could adversely affect our financial
condition and our borrowing base under the credit facility.
Our reserves must be estimated by our reserve engineers, T.J. Smith &
Company, Inc. The accuracy of those reserve estimates depends in large part on
the quality of available data and on the engineering and geological
interpretation of our engineers. Our engineers may calculate estimates that vary
widely from estimates calculated by another team of independent engineers. Our
engineers may even make material changes to reserve estimates based on the
results of actual drilling, testing and production. Consequently, our reserve
estimates often differ from the quantities of oil and natural gas we ultimately
recover.
We also make certain assumptions regarding future oil and natural gas
prices, production levels, and operating and development costs that may prove
incorrect when judged against our actual experience. Any significant variance
from these assumptions could greatly affect our estimates of reserves, future
net cash flows and our ability to borrow under our credit facility.
We depend on key personnel to execute our business plans.
The loss of any key executives or any other key personnel could have a
material adverse effect on our operations. We depend on the efforts and skills
of our key executives, including Joseph A. Reeves, Jr., Chairman of the Board
and Chief Executive Officer, and Michael J. Mayell, President and Chief
Operating Officer. Moreover, as we continue to grow our asset base and the scope
of our operations, our future profitability will depend on our ability to
attract and retain qualified personnel.
We compete against significant players in the oil and natural gas
industry.
The oil and natural gas industry is highly competitive. Our ability to
acquire additional properties and to discover additional reserves depends on our
ability to consummate transactions in this highly competitive environment. We
compete with major oil companies, other independent oil and natural gas
companies, and individual producers and operators. Many of these competitors
have access to greater financial and personnel
4
resources than those to which we have access. Moreover, the oil and natural gas
industry competes with other industries in supplying the energy and fuel needs
of industrial, commercial and other consumers. Increased competition causing
oversupply or depressed prices could materially adversely affect our revenues.
The oil and natural gas market is heavily regulated.
We are subject to various federal, state and local laws and
regulations. These laws and regulations govern safety, exploration, development,
taxation and environmental matters that are related to the oil and natural gas
industry. To conserve oil and natural gas supplies, regulatory agencies may
impose price controls and may limit our production. Certain laws and regulations
require drilling permits, govern the spacing of wells and the prevention of
waste, and limit the total number of wells drilled or the total allowable
production from successful wells. Other laws and regulations govern the
handling, storage, transportation and disposal of oil and natural gas and any
byproducts produced in oil and natural gas operations. These laws and
regulations could materially adversely impact our operations and our revenues.
Laws and regulations that affect us may change from time to time in
response to economic or political conditions. Thus, we must also consider the
impact of future laws and regulations that may be passed in the jurisdictions
where we operate. We anticipate that future laws and regulations related to the
oil and natural gas industry will become increasingly stringent and cause us to
incur substantial compliance costs.
The nature of our operations exposes us to environmental liabilities.
Our operations create the risk of environmental liabilities. We may
incur liability to governments or to third parties for any unlawful discharge of
oil, gas or other pollutants into the air, soil or water. We could potentially
discharge oil or natural gas into the environment in any of the following ways:
o from a well or drilling equipment at a drill site,
o from a leak in storage tanks, pipelines or other gathering and
transportation facilities,
o from damage to oil or natural gas wells resulting from accidents
during normal operations, or
o from blowouts, cratering or explosions.
Environmental discharges may move through the soil to water supplies or
to adjoining properties, giving rise to additional liabilities. Some laws and
regulations could impose liability for failure to obtain the proper permits for,
to control the use of, or to notify the proper authorities of a hazardous
discharge. Such liability could have a material adverse effect on our financial
condition and our results of operations and could possibly cause our operations
to be suspended or terminated on such property.
We may also be liable for any environmental hazards created either by
the previous owners of properties that we purchase or lease or by acquired
companies prior to the date we acquire them. Such liability would affect the
costs of our acquisition of those properties. In connection with any of these
environmental violations, we may also be charged with remedial costs. Pollution
and similar environmental risks generally are not fully insurable.
Although we do not believe that our environmental risks are materially
different from those of comparable companies in the oil and natural gas
industry, we cannot assure you that environmental laws will not result in
decreased production, substantially increased costs of operations or other
adverse effects to our combined operations and financial condition.
We require substantial capital requirements to finance our operations.
We have substantial anticipated capital requirements. Our ongoing
capital requirements consist primarily of the need to fund our 2002 capital and
exploration budget and the acquisition, development, exploration, production and
abandonment of oil and natural gas reserves.
We plan to finance anticipated ongoing expenses and capital
requirements with funds generated from the following sources:
o cash provided by operating activities,
o available cash and cash investments,
o capital raised through debt and equity offerings and
o funds received under our bank line of credit.
5
Although we believe the funds provided by these sources will be
sufficient to meet our 2002 cash requirements, the uncertainties and risks
associated with future performance and revenues will ultimately determine our
liquidity and our ability to meet anticipated capital requirements. If declining
prices cause our revenues to decrease, we may be limited in our ability to
replace our reserves, to maintain current production levels and to undertake or
complete future drilling programs. As a result, our production and revenues
would continue to decrease over time and may not be sufficient to satisfy our
projected capital expenditures. We cannot assure you that we will be able to
obtain additional debt or equity financing in such a circumstance.
Our operations entail inherent casualty risks for which we may not have
adequate insurance.
We must continually acquire, explore and develop new oil and natural
gas reserves to replace those produced and sold. Our hydrocarbon reserves and
our revenues will decline if we are not successful in our drilling, acquisition
or exploration activities. Although we have historically maintained our reserve
base primarily through successful exploration and development operations, we
cannot assure you that future efforts will be similarly successful. Casualty
risks and other operating risks could cause reserves and revenues to decline.
Our onshore and offshore operations are subject to inherent casualty
risks such as fires, blowouts, cratering and explosions. Other risks include
pollution, the uncontrollable flows of oil, natural gas, brine or well fluids,
and the hazards of marine and helicopter operations such as capsizing, collision
and adverse weather and sea conditions. These risks may result in injury or loss
of life, suspension of operations, environmental damage or property and
equipment damage, all of which would cause us to experience substantial
financial losses.
Our drilling operations involve risks from high pressures and from
mechanical difficulties such as stuck pipes, collapsed casings and separated
cables. Our offshore properties involve higher exploration and drilling risks
such as the cost of constructing exploration and production platforms and
pipeline interconnections as well as weather delays and other risks. Although we
carry insurance that we believe is in accordance with customary industry
practices, we are not fully insured against all casualty risks incident to our
business. We do not carry business interruption insurance. Should an event occur
against which we are not insured, that event could have a material adverse
effect on our financial position and our results from operations.
Our operations also entail significant operating risks.
Our drilling activities involve risks, such as drilling non-productive
wells or dry holes, which are beyond our control. The cost of drilling and
operating wells and of installing production facilities and pipelines is
uncertain. Cost overruns are common risks that often make a project
uneconomical. The decision to purchase and to exploit a property depends on the
evaluations made by our reserve engineers, the results of which are often
inconclusive or subject to multiple interpretations. We may also decide to
reduce or cease our drilling operations due to title problems, weather
conditions, noncompliance with governmental requirements or shortages and delays
in the delivery or availability of equipment or fabrication yards.
We may not be able to market effectively our oil and natural gas
production.
We may encounter difficulties in the marketing of our oil and natural
gas production. Effective marketing depends on factors such as the existing
market supply and demand for oil and natural gas and the limitations imposed by
governmental regulations. The proximity of our reserves to pipelines and the
available capacity of such pipelines and other transportation, processing and
refining facilities also affect our marketing efforts. Even if we discover
hydrocarbons in commercial quantities, a substantial period of time may elapse
before we begin commercial production. If pipeline facilities in an area are
insufficient, we may have to wait for the construction or expansion of pipeline
capacity before we can market production from that area. Another risk lies in
our ability to negotiate commercially satisfactory arrangements with the owners
and operators of production platforms in close proximity to our wells. Also,
natural gas wells may be shut in for lack of market demand or because of the
inadequate capacity or unavailability of natural gas pipelines or gathering
systems.
6
We are dependent on other operators who influence our productivity.
We have limited influence over the nature and timing of exploration and
development on oil and natural gas properties we do not operate, including
limited control over the maintenance of both safety and environmental standards.
The operators of those properties may:
o refuse to initiate exploration or development projects (in which
case we may propose desired exploration or development
activities),
o initiate exploration or development projects on a slower schedule
than we prefer, or
o drill more wells or build more facilities on a project than we can
adequately finance, which may limit our participation in those
projects or limit our percentage of the revenues from those
projects.
The occurrence of any of the foregoing events could have a material
adverse effect on our anticipated exploration and development activities.
Our working interest owners face cash flow and liquidity concerns.
If oil and natural gas prices decline, many of our working interest
owners may experience liquidity and cash flow problems. These problems may lead
to their attempting to delay the pace of drilling or project development in
order to conserve cash. Any such delay may be detrimental to our projects. In
most cases, we can influence the pace of development by enforcing our joint
operating agreements. Some working interest owners, however, may be unwilling or
unable to pay their share of the project costs as they become due. A working
interest owner may declare bankruptcy and refuse or be unable to pay its share
of the project costs and we would be obligated to pay that working interest
owner's share of the project costs.
Our inability to acquire or integrate acquired companies or to develop
new exploration prospects may inhibit our growth.
From time to time and under certain circumstances, our business
strategy may include acquisitions of businesses that complement or expand our
current business and acquisition and development of new exploration prospects
that complement or expand our prospect inventory. We cannot assure you that we
will be able to identify attractive acquisition or prospect opportunities. Even
if we do identify attractive opportunities, we cannot assure you that we will be
able to complete the acquisition of the business or prospect or to do so on
commercially acceptable terms. If we do complete an acquisition, we must
anticipate difficulties in integrating its operations, systems, technology,
management and other personnel with our own. These difficulties may disrupt our
ongoing operations, distract our management and employees and increase our
expenses. Even if we are able to overcome such difficulties, we cannot assure
you that we will realize the anticipated benefits of any acquisition.
Furthermore, we may incur additional debt or issue additional equity securities
to finance any future acquisitions. Any issuance of additional securities may
dilute the value of shares currently outstanding.
Terrorist attacks and threats or actual war may negatively affect our
business, financial condition and results of operations.
Our business is affected by general economic conditions and
fluctuations in consumer confidence and spending, which can decline as a result
of numerous factors outside of our control, such as terrorist attacks and acts
of war. Recent terrorist attacks in the United States, as well as events
occurring in response to or in connection with them, including future terrorist
attacks against U.S. targets, rumors or threats of war, actual conflicts
involving the United States or its allies, or military or trade disruptions
impacting our suppliers or our customers, may adversely impact our operations.
Strategic targets such as energy-related assets may be at greater risk of future
terrorist attacks than other targets in the United States. These occurrences
could have an adverse impact on energy prices, including prices for our natural
gas and crude oil production. In addition, disruption or significant increases
in energy prices could result in government-imposed price controls. It is
possible that any or a combination of these occurrences could have a material
adverse effect on our business, financial condition and results of operations.
7
ADDITIONAL RISK FACTORS
Please see the prospectus supplement, if any, and our filings with the
Securities and Exchange Commission incorporated herein for additional risk
factors that may be applicable to our common stock or to us in the future.
USE OF PROCEEDS
All sales of the common stock under this prospectus will be by or for
the account of the selling shareholders listed in the following section. We will
not receive any proceeds from the sale of the common stock by any of the selling
shareholders.
SELLING SHAREHOLDERS
We have filed a registration statement on Form S-3 with the SEC, of
which this prospectus forms a part, pursuant to registration rights we granted
to the selling shareholders upon the issuance of their respective shares of our
Convertible Preferred Stock.
The selling shareholders may acquire the common stock offered by this
prospectus if they convert their shares of Convertible Preferred Stock into our
common stock. The selling shareholders will have the right to convert each share
of Convertible Preferred Stock into a number of shares of our common stock equal
to $100 divided by the conversion price of $4.75. The conversion price is
subject to certain adjustments in the event we make a dividend or distribution
of common stock to our stockholders and in certain other circumstances more
fully described in the statement of designation relating to the Convertible
Preferred Stock.
In addition to a selling shareholder's right to convert its shares of
Convertible Preferred Stock into our common stock, we have the option to convert
up to one-third of the outstanding shares of Convertible Preferred Stock into
common stock at the conversion price described above if the closing price for
our common stock, as reported on the New York Stock Exchange, exceeds 150% of
the conversion price for 30 out of 40 consecutive trading days. We may similarly
convert, no earlier than 12 months after the initial conversion, up to one-half
of the remaining shares of Convertible Preferred Stock then outstanding if our
common stock price similarly exceeds 150% of the conversion price. No earlier
than 12 months after the second conversion, we may similarly convert all
remaining shares of Convertible Preferred Stock outstanding into common stock if
the common stock price similarly exceeds 150% of the conversion price.
As of May 31, 2002, if the selling shareholders or we, at our option,
converted all the shares of Convertible Preferred Stock into our common stock,
the selling shareholders would own approximately 14,073,684 shares of our common
stock, which would represent approximately 22% of our common stock outstanding,
including the shares issued on conversion.
We have the option to redeem the Convertible Preferred Stock at any
time after March 28, 2005 at a redemption price of $100 per share plus any
dividends declared but unpaid as of the date of redemption. We must redeem each
outstanding share of Convertible Preferred Stock on March 31, 2009, provided
that no event of default under our credit facility exists at that time or would
result from the mandatory redemption.
The following table sets forth the name of each selling shareholder,
the number of shares of Convertible Preferred Stock beneficially owned by each
selling shareholder as of May 31, 2002, and the number of shares of our common
stock which may be offered by each selling shareholder pursuant to this
prospectus.
No offer or sale under this prospectus may be made by a holder of the
shares of common stock, unless that holder is listed in the table below. We
prepared the table based on the information supplied to us by the selling
shareholders named in the table.
Except as disclosed in the footnotes to the table, no selling
shareholder has held any position, office or other material relationship with us
or our affiliates during the past three years.
8
CONVERTIBLE PREFERRED SHARES OF COMMON STOCK
SHARES OWNED AS OF TO BE OFFERED PURSUANT TO
MAY 31, 2002(1) THIS PROSPECTUS
--------------------- -------------------------
Halifax Fund, L.P. 25,000 526,316
DeAM Convertible Arbitrage Funds, Ltd. 25,000 526,316
Kayne Anderson Energy Fund, L.P.(3) 125,000 2,631,579
Kayne Anderson Capital Income 15,000 315,789
Partners (QP), L.P.(3)
Arbco Associates, L.P. FBO Kayne 20,000 421,053
Living Trust(3)
Arbco Associates, L.P. FBO Rudnick 10,000 210,526
Living Trust(3)
Hallco, Inc. 5,000 105,263
Bedford Oak Partners, L.P. 20,000 421,053
Arbco Associates, L.P. FBO Michael 20,000 421,053
Targoff
Coastal Convertibles Ltd 5,000 105,263
Newberg Family Trust UTA DTD 12-18-90 10,000 210,526
Otato Limited Partnership 5,000 105,263
JMG Triton Offshore Fund, Ltd. 26,700 562,105
JMG Capital Partners, L.P. 13,300 280,000
The Jay Goldman Master Limited 10,000 210,526
Partnership
Bear Stearns Securities Corp. C/F 8,000 168,421
Robert Schnell IRA
Riverview Group, LLC 50,000 1,052,632
David J. Walsh 500 10,526
Albert O. Nicholas 20,000 421,053
Omicron Partners, L.P. 25,000 526,316
Duke Capital Partners, LLC 80,000 1,684,211
Jeffrey Thorp IRA 10,000 210,526
R.L. Essakow 2001 Revocable Trust DTD 2,500 52,632
5/23/01
Midsummer Investment Ltd. 10,000 210,526
White River Securities L.L.C. 10,000 210,526
AIG DKR SoundShore Private Investors 5,000 105,263
Holding Fund Ltd.
9
CONVERTIBLE PREFERRED SHARES OF COMMON STOCK
SHARES OWNED AS OF TO BE OFFERED PURSUANT TO
MAY 31, 2002(1) THIS PROSPECTUS
--------------------- -------------------------
AIG DKR SoundShore Strategic Holding 2,500 52,632
Fund Ltd.
AIG DKR SoundShore Holdings Fund Ltd. 2,500 52,632
Keane Securities Co., Inc. 1,000 21,053
The Tail Wind Fund Ltd. 4,000 84,211
Solomon Strategic Holdings, Inc. 2,000 42,105
David Shladovsky(3) 500 10,526
Charlie Norris 5,000 105,263
White Box Convertible Arbitrage 5,000 105,263
Partners, L.P.
Whitebox Convertible Artibrage 10,000 210,526
Partners, L.P.
Feshbach Family Trust 2,500 52,632
JMB Capital Partners, L.P. 15,000 315,789
John Collins(2) 2,000 42,105
Gryphon MasterFund, LP 40,000 842,105
Quantico Partners, L.P. 10,000 210,526
LibertyView Funds, L.P. 4,250 89,474
LibertyView Fund, LLC 750 15,789
GATA Fund, L.P. 5,000 105,263
Mark and Michelle Majeske 500 10,526
-------- -----------
Total 668,500 14,073,684
----------
(1) Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with respect to
securities. Unless otherwise indicated below, the persons and entities named in
the table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
(2) Employee of Meridian.
(3) Affiliates have the right to acquire an aggregate of 3,000,000
shares of Common Stock upon conversion of our 9 1/2% Convertible
Subordinated Notes.
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PLAN OF DISTRIBUTION
To our knowledge, no selling shareholder has entered into any
agreement, arrangement or understanding with any particular broker, dealer,
market maker or underwriter with respect to the shares of common stock offered
hereby, nor do we know the identity of the brokers, dealer, market makers or
underwriters that will participate in the sale of the shares. As used in this
prospectus, the term "selling shareholders" includes donees and pledgees selling
shares received from a named selling shareholder after the date of this
prospectus.
Who may sell, how much and applicable restrictions. The selling
shareholders may from time to time offer the shares of common stock they receive
upon conversion of the Convertible Preferred Stock listed in the preceding
section through brokers, dealers or other agents who may receive compensation in
the form of discounts, concessions or commissions from the selling shareholders
and/or the purchasers of the shares of common stock for whom they may act as
agent. In effecting sales, broker-dealers that are engaged by the selling
shareholders may arrange for other broker-dealers to participate. The selling
shareholders and any such brokers, dealers or other agents who participate in
the distribution of the shares of common stock may be deemed to be underwriters,
and any profits on the sale of the shares of common stock by them and any
discounts, commissions or concessions received by any such brokers, dealers or
other agents might be deemed to be underwriting discounts and commissions under
the Securities Act. To the extent the selling shareholders may be deemed to be
underwriters, the selling shareholders may be subject to certain statutory
liabilities of, including but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Exchange Act.
Manner of sales and applicable restrictions. The selling shareholders
will act independently of Meridian in making decisions with respect to the
timing, manner and size of each sale. These sales may be made over the New York
Stock Exchange or otherwise, at then prevailing market prices, at prices related
to prevailing market prices or at negotiated prices. The shares of common stock
may be sold according to one or more of the following methods:
o a block trade in which the broker or dealer so engaged will
attempt to sell the shares of common stock as agent but may
position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
o an over-the-counter distribution in accordance with the Nasdaq
rules;
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
o privately negotiated transactions.
A selling shareholder may decide not to sell any shares. We cannot
assure you that any selling shareholder will use this prospectus to sell any or
all of the shares. Any shares covered by this prospectus that qualify for sale
pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus. In addition, a selling shareholder may
transfer, devise or gift the shares by other means not described in this
prospectus.
Some persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of our common stock,
including the entry of stabilizing bids or syndicate covering transactions or
the imposition of penalty bids. The selling shareholders and any other person
participating in such distribution will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder including Regulation
M, which may limit the timing of purchases and sales of any of the shares of
common stock by the selling shareholders and any other person. The
anti-manipulation rules under the Exchange Act may apply to sales of shares of
common stock in the market and to the activities of the selling shareholders and
their affiliates. Furthermore, Regulation M may restrict the ability of any
person engaged in the distribution of the shares of common stock to engage in
market-making activities with respect to the particular shares of common stock
being distributed for a period of up to five business days prior to the
commencement of such distribution. All of the foregoing may affect the
marketability of the shares of common stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
common stock.
Rules 101 and 102 of Regulation M, among other things, generally
prohibit certain participants in a distribution from bidding for or purchasing
for an account in which the participant has a beneficial interest in any of
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the securities that are the subject of the distribution. Rule 104 of Regulation
M governs bids and purchases made to stabilize the price of a security in
connection with a distribution of the security.
Hedging and other transactions with broker-dealers. In connection with
distributions of the shares of common stock or otherwise, the selling
shareholders may enter into hedging transactions with broker-dealers. In
connection with these transactions, broker-dealers may engage in short sales of
the shares of common stock registered hereunder in the course of hedging the
positions they assume with selling shareholders. The selling shareholders may
also sell shares of common stock short and redeliver the shares of common stock
to close out such short positions. The selling shareholders may also enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the shares of common stock registered hereunder, which the
broker-dealer may resell or otherwise transfer pursuant to this prospectus.
Selling shareholders may also loan or pledge the shares of common stock
registered hereunder to a broker-dealer and the broker-dealer may sell the
shares of common stock so loaned or, upon a default, the broker-dealer may
effect sales of the pledged shares of common stock pursuant to this prospectus.
Expenses associated with registration. We have agreed to pay the
expenses of registering the shares of common stock under the Securities Act,
including registration and filing fees, printing expenses, administrative
expenses and certain legal and accounting fees. Each of the selling shareholders
will bear its pro rata share of all discounts, commissions or other amounts
payable to underwriters, dealers or agents as well as fees and disbursements for
legal counsel retained by any selling shareholder.
Indemnification. We have agreed to indemnify each of the selling
shareholders against specified liabilities in connection with the offering of
the shares of common stock, including liabilities arising under the Securities
Act.
Prospectus updates and suspension of this offering. At any time a
particular offer of the shares of common stock is made, a revised prospectus or
prospectus supplement, if required, will be distributed. A prospectus supplement
or post-effective amendment will be filed with the SEC to reflect the disclosure
of any required additional information with respect to the distribution of the
shares of common stock. Under the terms of the agreement giving rise to the
selling shareholders being permitted to include their shares in this prospectus,
at any time when we reasonably believe that the offering, sale or distribution
of shares under this prospectus would adversely affect a pending or proposed
public offering of our securities, an acquisition, merger, recapitalization,
consolidation, reorganization or similar transaction relating to us or
negotiations, discussions or pending proposals with respect thereto or would
require premature disclosure, to our potential detriment, of information not
otherwise required to be disclosed, we may suspend the period of sale or
distribution of the shares offered under this prospectus.
LEGAL MATTERS
Unless otherwise specified in a prospectus supplement relating to the
common stock, certain legal matters with respect to the validity of the common
stock offered hereby will be passed upon for us by Fulbright & Jaworski L.L.P.,
Houston, Texas and for the underwriters, if any, by counsel to be named in the
appropriate prospectus supplement.
EXPERTS
The consolidated financial statements of The Meridian Resource
Corporation appearing in The Meridian Resource Corporation's Annual Report on
Form 10-K for the year ended December 31, 2001, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
RESERVE ENGINEERS
We have derived the estimates of proved oil and natural gas reserves
and related future net revenues and the present value thereof as of December 31,
1999, 2000 and 2001, included in Meridian's Annual Report on Form 10-K for the
year ended December 31, 2001, from the reserve report of T.J. Smith & Company,
Inc., independent
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petroleum engineers. We have incorporated all of that information by reference
herein on the authority of T.J. Smith & Company, Inc. as experts in such
matters.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and
other information with the Securities and Exchange Commission pursuant to the
Exchange Act. You may read and copy any document we file at the Securities and
Exchange Commission's public reference rooms at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms. Our
filings are also available to the public at the Securities and Exchange
Commission's web site on the Internet at http://www.sec.gov. You can also
inspect and copy such reports, proxy statements, and other information regarding
us at the offices of the New York Stock Exchange at 20 Broad Street, New York,
New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to incorporate by
reference into this prospectus the information we file with it, which means that
we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be an
important part of this prospectus. Information that we file with the Securities
and Exchange Commission after the date of this prospectus will automatically
update and supersede this information.
We incorporate by reference the following documents and any future
filings we make with the Securities and Exchange Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until the offering is complete:
o Meridian's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001;
o Meridian's Quarterly Report on Form 10-Q for the three months
ended March 31, 2001; and
o The description of common stock contained in Meridian's
Registration Statement on Form 8-A, as filed with the Commission
on March 19, 1997, including any amendment or report filed for the
purpose of updating such description.
Upon oral or written request, we will provide without charge to each
person, including any beneficial owner, to whom this prospectus is delivered a
copy of any document incorporated by reference in this prospectus, other than
exhibits to any such document not specifically described above. Send your
requests to James H. Shonsey, Vice President - Finance and Capital Markets, The
Meridian Resource Corporation, 1401 Enclave Parkway, Suite 300, Houston, Texas
77077, telephone number: 281-597-7000.
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