TRINITY GAS CORPORATION
OFFICIAL SHAREHOLDERS COMMITTEE
June 1, 1998
Shareholder Committee's Fourth Release
1. Prior Releases. Based upon an October, 1997 stockholder list generated by Trinity Gs Corporation's stock transfer agent, the Official Equity (Shareholders) Committee distributed releases concerning the status of the Chapter 11 proceedings, the Shareholders Committee's activities an the drilling activity being conducted in Colombia in order to preserve the rights under the Colombia oil an gas concession (thereinafter referred to as the "Farallones Contract") obtained from Ecopetrol, the Colombian oil and gas company. Recently, the Shareholders Committee has obtained a more comprehensive and updated listing of the shareholder pool. We anticipate this release will reach most shareholders.
2. Settlement Negotiations concerning the Farallones Contract. The Shareholders Committee has undertaken through its chairman, Dennis Hedke, to initiate negotiations with Mr. Sidney Sers, the former president of Trinity USA concerning what ownership interest and rightsTrinity USA has with respect to the Farallones Contract and any oil and gas produced therefrom. Those discussions included several face to face to face meetings between Mr. Hedke and Mr. Sers upon Mr. Hedke's visit to Bogota and Cali, Colombia several weeks ago. Recently, the Committee has attempted through another member, also well experienced in oil and gas matters, to continue and hopefully accelerate those negotiations.
Numerous issues have to be resolved, including:
(a) What ownership interest does Trinity USA have in the Farallones Contract and its potential oil and gas production proceeds;
(b) What involvement and rights will Trinity USA have in future drilling, completion, pipeline and important operational decisions, cost and control of the Farallones Contract and the Colombia oil and gas operations;
(c) What, if any, recognition should Trinity USA give to Trincol and Mr. Sers for funds expended post-bankruptcy toward the drilling and completion of the Patacore #1, Salsa #1 and Yumbo #1 wells (the second through forth wells drilled under the farallones Contract) in light of the Securities & Exchange Commission's view that all funds obtained from the sale of Trinity USA Common Stock by Mr. Sers, his affiliates and family members ("Sers Group"0 are rightfully belonging to Trinity USA for the benefit of shareholders, and Mr. Sers contrary position that those proceeds belong to him or others within the Sers Group;
(d) What rights will Trinity USA ad, accordingly its shareholders, will have to the approximate $4 million frozen by the SEC in its enforcement Acton brought before the Honorable Terry Means, U.S. District Court Judge, in Fort Worth, Texas styled Securities & Exchange Commission, Plaintiff v. Trinity Gas Corporation and Sidney W. Sers, Defendants and Trinity Gas Colombia, Patricia Ruth Sers, Amanda Burton Sers, Timothy Allan Sers and the Nakatosh Hotel, Inc.; Civil Action No. 4-97CV-1018);
(e) Will Mr. Sers be required to honor and pay into the registry of Judge Means' court the sum of approximately $850,000 and other funds, representing his required repatriation of monies formerly deposited in U.S. band accounts in accordance with Judge Means' "Order of Repatriation" dated January 6, 1998. Without such repayment of these funds, Mr. Sers faces the continuing prospect of being arrested upon his attempted return to the United States; and
(f) In light of the foregoing, what rights, if any, should the Sers Group retain in approximately 30 million shares of common stock I Trinity USA, including 15 million shares of purported freely trading stock issued to Mr. Sers under a Stock Agreement last October 28, 1997, and what portion, if any, of that stock should be recognized in a reorganization of Trinity USA.
With respect to the foregoing matters, the Shareholders Committee is committed solely to represent and advance the economic interest of all shareholders other than the Sers Group, which is represented by separate counsel. The Shareholders Committee feels constrained not to disclose the specific status of the current negotiations with Mr. Sers, other than to say a substantial void exists between Mr. Sers and the Committee.
3. Trustee's Efforts to Date. Once the Bankruptcy Court directed the appointment of a Trustee in this case, the United States Trustee's office appointed Mr. Henery Seals of Fort Worth, Texas as the Chapter 11 Trustee ("Trustee") of this case. The Trustee has previously issued three reports of his undertakings as well as those of his professionals in the bankruptcy case. Included in those effort are two adversary proceedings (lawsuits) he filed in the Chapter 11 case, the first of which seeks to determine that various assets, including ranches located in or around Brownwood, Texas were fraudulently conveyed to Mr. Sers or family members and rightfully belong to Trinity USA for the benefit of creditors and shareholders' and the second of which seeks to determine that Trinity USA and Mr. Sers, or relatives, own certain oil and gas leases, related vehicles and equipment located in Brown and Coleman Counties, Texas. As of this date, no dispositive motions have been filed and the Trustee has not requested any definitive trial dates for the determination of those rights. Relatedly, the Trustee's counsel has taken the sworn testimony of Mr. Timothy Sers and Mr. Matthew Sers in connection with those matters.
Shortly after his appointment in January 1998, the Trustee assembled (from the funds sequestered by the SEC) approximately $600,000. The Trustee's primary counsel recently submitted a statement for services rendered in connection with the Trustee's efforts though March 31, 1998 for approximately $345,000, including expenses. The Trustee's counsel agreed to defer its request for compensation of 15% of its fees. Pursuant to a procedural order entered by the Bankruptcy Court, the Trustee has issued payment to his counsel for all expenses incurred and 80% of fees and expenses incurred less the 15% deferred amounts - approximating $250,000. The Shareholders Committee is very concerned about the amount of professional fees incurred to date by the Trustee's professionals. As a result of that substantial fee request, which does not include Trustee's counsel's fees and expenses incurred during the months of April and May, the Shareholders Committee has decided to file a plan of reorganization for Trinity USA and seek to have it emerge from Chapter 11 as soon as practicable. To that end, the Shareholders Committee is presently working to assemble a comprehensive plan of reorganization and disclosure statement for the shareholders' consideration.
4. Farallones Contract Status. As previously reported, the Shareholders Committee understands that four wills have been drilled under the farallones Contract. If those wells are perforated and completed by May 28, 1998, the last extension day currently known to be granted by Ecopetrol to Trincol, the Farallones Contract will remain intact. As of this date, the Equity Committee anticipates that Trincol and Mr. Sers will undertake timely those completion efforts. The Shareholders Committee also understands that two additional wells (the fifth and sixth respectively under the Farallones Contract are required by Ecopetrol to be drilled by the end of October of this year.
The Committee has sent Mr. Sers a detailed schedule of recommended intervals to be tested in the completion efforts of the Patacore #1 Well. The Committee hopes that Mr. Sers will follow, or at least seriously consider, this schedule as one which the Committee, after reviewing the available open-hole and mud log characteristics, believes will efficiently evaluate those zones (well depths) that offer the most favorable chances of commercial production. The Shareholders Committee has also offered to review available data and make similar recommendations wit respect to the Salsa #1 and Yumbo #! Wells. Thus far, the Shareholders Committee has received no response as to its Patacore #1 recommendations and no additional information related to the Salsa #1 and Yumbo #1 Wells.
The Shareholders Committee has continued in its efforts to develop information and assess the exploration and development cost associated with oil and gas operations in the present Colombian environment. Typically, those cost are considerably higher than cost associated with standard onshore efforts involving domestic oil and gas basins. The Shareholders Committee's research reflects somewhat higher general-drilling costs than those preliminarily determined and reported in its last release. In substantial part, such cost vary depending upon the particular subsurface conditions and surfaceinfrastructure requirements for each prospect. The Committee believes that future Farallones Contract operation can be achieved in a more economic way and that a significant level of management supervision will be required.
5. Domestic Assets. The Committee has recently requested and obtained substantial information from the Trustee with respect to Trinity USA's oil and gas properties in Brown and Coleman County, Texas; Pecos County, Texas, as well as those in Colorado and Wyoming which were acquired in the Nova Energy transactions. As yet, the Committee has not fully determined the prospects for future operations and further development but anticipates those preliminary assessments will be included in its plan of reorganization and disclosure statement.
6. Sixty Day Critical Period and Shareholder Questionnaire. The shareholders Committee believe that the next 60 days will be critical in determining the future of Trinity Gas USA and the prospects for its shareholders. The Shareholders Committee is focused on attempting to restore the Company and establish forward-looking opportunities with a view to creating the maximum shareholder value under the circumstances. In the event this month's completion efforts actually take place and demonstrate significant oil or gas reserves in commercial quantities under the Farallones Contract, the Shareholders Committee will seek to evaluate full all available data relevant to the Concession's geological characteristics, reservoir engineering and long-term asset management. The Shareholders Committee is equally committed to defining and negotiating an acceptable agreement between Trincol, Trinity USA, Mr. Sers and others at the earliest possible date. The Shareholders Committee also contemplates involvement of new management and/or board of director members by individuals highly knowledgeable in oil and gas industry practices, finance and other characteristics that will hopefully strengthen the position and efforts of Trinity USA going forward.
STRATEGY PREFERENCE QUESTIONNAIRE
(To be filled out by all Shareholders)
1. The undersigned shareholder of Trinity Gas Corporation agrees with the following as Marked: Check one of the below
That the Shareholders Committee should proceed with its efforts file a plan of reorganization and disclosure statement for Trinity Gas Corporation and achieve as prompt as reasonably possible emergence from bankruptcy.
The Shareholders Committee should not endeavor to reorganize Trinity Gas Corporation and, instead, allow the Chapter 11 Trustee, Mr. Henry Seals, to liquidate the corporation. (It is Mr. Seals stated belief the shareholder will receive nothing in the bankruptcy case.)
Other (please describe)________________________________________
Date: _________________________________
Name: _________________________________
Address: ________________________________
Holdings: __________________________
Mail to: Official Equity Committee for Trinity Gas Corporation
C/o Van Oliver
Andrews & Kurth
Suite 3700, 1717 Main St.
Dallas, TX 75201
ORGINAL TRINITY GAS CORPORATION SHAREHOLDER QUESTIONNAIRE
(To be filled out by shareholders who have not previously responded)
Name Address and Telephone No. Of Shareholder______________________________________________
Number of shares bouught_________________________________________________________
Number of Shares presently holding_________________________________________________________
Average Selling price__________________________________________________________
Number of restricted share held____________________________________________________________
Number of free trading shares held__________________________________________________________
Identify Problem with obtaining Certificates, etc._______________________________________________
If restricted shares, give name, address and telephone number of broker/seller________________________
Date of purchase or, if applicable, largest purchase_____________________________________________
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