History
Sheridan Energy rose from the 1997 recapitalization of bankruptcy-era TGX Corporation, bought gas properties with Enron and Calpine backing, and was acquired by Calpine in 1999.
1996-1997: Rebuilding TGX
Sheridan Energy began as a fix for TGX Corporation, an oil and gas producer that emerged from a 1992 bankruptcy reorganization. TGX owed its Series A Senior Preferred stockholders about $86.8 million in liquidation value, plus tens of millions more in unpaid dividends it had no way to redeem. In August 1996 GeoStrat Resources filed to register new common stock for a recapitalization merger. Each Senior Preferred share would become half a new common share, and the old preferred and common stock would be cancelled.
The merger into a wholly owned subsidiary, Sheridan Energy, was completed on June 12, 1997. It eliminated roughly $143 million of preferred liquidation value and accrued dividends. The effect showed in the accounts: the preferred dividends and accretion charges fell by about half from 1996 to 1997, though the loss applicable to common stock was still $11.0 million, or $2.51 a share, for 1997.
1997-1998: Buying production
With the balance sheet cleared, Sheridan started buying. In December 1997 it agreed to buy 436 wells (179 net) from Pioneer Natural Resources for $49.9 million, and closed on December 15. Enron Capital & Trade Resources put in $20 million, split between new senior preferred and common stock. A new Bank One credit facility of up to $100 million, with an initial borrowing base of $37.9 million, covered the rest. On December 31 it also acquired Louisiana properties from Grand Gulf Production and JEDI Hydrocarbon Investments I, paying with 850,000 common shares plus five-year warrants for 150,000 more at $5.50 each.
Legacy disputes followed. In September 1998 a Louisiana court awarded a $2.4 million summary judgment against TGX in the Edwards lawsuit, and Sheridan said it would seek a rehearing and appeal. In October 1998 it settled the Tomcat Exploration lawsuit, over corrosion damage to a well and gas plant, for $1.5 million.
1998-1999: California and Calpine
In November 1998 Sheridan signed a letter of intent with Amerada Hess to develop natural gas jointly in California. The deal closed on January 25, 1999 as an outright $58 million purchase of Sacramento Basin gas properties holding 82 billion cubic feet of reserves. An 80%-owned subsidiary, Sheridan California Energy, made the purchase. Funding came from a new Bank One credit line and $15 million from Calpine Corporation, which received 20% of the subsidiary's common stock plus $13 million of its preferred stock.
The 1998 results were weak. The net loss widened to $10.6 million from $1.9 million, driven by a $3.2 million property impairment and a $2.3 million litigation provision covering the Tomcat settlement and the Edwards reserve. The loss applicable to common stock was $12.0 million, or $1.78 a share. Weighted average shares rose to 6.7 million from 4.4 million because of the shares issued in the Enron and Grand Gulf deals.
1999: Sold to Calpine
On August 25, 1999, Sheridan agreed to be acquired by Calpine for $5.50 a share in cash, the same company that had taken the California subsidiary stake seven months earlier. The board unanimously recommended the offer. The tender offer, run through Calpine's subsidiary CPN Sheridan, began August 31 and expired on September 28 with about 94% of shares, 6,340,722, tendered and accepted. A second-step merger was expected around October 1, making Sheridan a wholly owned Calpine subsidiary renamed Calpine Natural Gas Company. On October 1, 1999, Sheridan's common stock was deregistered, ending its life as an independent SEC registrant.
Written from the 15 story beats below (1996 to 1 Oct 1999), which come from the company's own announcements and filings.