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TRGC Shareholders Committee 4th Release
Committee
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TRINITY GAS CORPORATION
Official Shareholders Committee
May 14, 1998
Shareholder Committee*s Fourth Release
1. Prior Releases. Based upon an October, 1997
stockholder list generated by Trinity Gas 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 and the
drilling activity being conducted in Colombia in order to
preserve the rights under the Colombia oil and gas
concession (hereinafter 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. If you would like a copy of prior releases,
please indicate so on the Questionnaire attached hereto.
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 interests and rights
Trinity USA has with respect to the Farallones Contract and
any oil and gas produced therefrom. Those discussions
included several 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, costs and control of the Farallones
Contract and the Colombian 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 fourth 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*) 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 and, accordingly its
shareholders, will have to the approximate $4 million frozen by
the SEC in its Enforcement Action 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 Allen 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. bank
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 in Trinity USA, including 15 million shares of
purported freely trading stock issued to Mr. Sers under a
Stock Option 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 interests 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. Henry 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 efforts 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 through 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
wells 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 with respect to the Salsa #1 and
Yumbo #1 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 costs associated with oil and gas operations in
the present Colombian environment. Typically, those costs
are considerably higher than costs 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 costs vary depending upon the particular
subsurface conditions and surface infrastructure
requirements for each prospect. The Committee believes that
future Farallones Contract operations 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 believes 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
fully 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.
In structuring its efforts, the Shareholders Committee
request that each shareholder, to the extent you have neither
received nor responded to the previously solicited
questionnaire information, do so in and return it in the
Envelope enclosed for that purpose. The Shareholders
Committee requests that all shareholders fill out the following
Additional Questionnaire and return it to the Committee at
Trinity Gas Corporation, c/o Andrews & Kurth, Suite 3700, 1717
Main St., Dallas, Texas 75201 attn: V. Oliver. PLEASE NOTE
THAT IF YOU HAVE PREVIOUSLY FILLED OUT AND RETURNED
THE ORIGINAL TRINITY SHAREHOLDER QUESTIONNAIRE, YOU
DO NOT NEED TO AGAIN COMPLETE THE STOCKHOLDINGS
PORTION ON PAGE 5, UNLESS YOU HAVE ADDITIONAL
INFORMATION REGARDING YOUR STOCKHOLDINGS YOU
WOULD LIKE TO SHARE WITH THE COMMITTEE.
STRATEGY PREFERENCE QUESTIONNAIRE
(to be filled out by all Shareholders)
1. The undersigned shareholder of Trinity Gas
Corporation agrees with the following as marked:
* That the Shareholders Committee should
proceed with its efforts to 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 shareholders will
receive nothing in the bankruptcy case.)
* Other (please describe)
Date:
Name :
Address:
Holdings:
ORIGINAL 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 Bought
Number of Shares Presently Holding
Average Purchase Price
Average Selling Price (if applicable)
Number of Restricted Shares Held
Number of Free Trading Shares Held
Identify Problems 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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