Texoil, Inc.        

Corporate Profile – August 2000

Contact Information:
Mr. Frank A. Lodzinski, Chief Executive Officer
Mr. Jerry M. Crews, Executive Vice President

110 Cypress Station Dr., Suite #220, Houston, Texas 77090
Phone (281) 537-9920 - Fax (281) 537-8324
Website: www.texoil.com

TEXOIL, INC., (NASDAQ Small Cap: “TXLI”), is an independent energy company that acquires and develops oil and gas reserves through an active and diversified program which includes purchases of reserves, re-engineering, development and exploration activities, currently focused in South Texas, South Louisiana and the Texas Gulf Coast.  A comprehensive change in the Board of Directors, management and capitalization occurred on December 31, 1997, as a result of a reverse merger with Cliffwood Oil & Gas Corp.  Since then, the management team (comprised of the founders and management of Cliffwood), continues to implement a growth-oriented strategy.  (See “Management” below.)

Business Strategy

The Company’s business strategy is to achieve profitable growth through a program which includes the purchase, re-engineering and development of proved oil and gas properties as core business activities, along with an active exploration and drilling program.  Typically, the Company has been able to acquire producing fields from major and larger independent oil and gas companies and enhance production and lower recurring operating costs.  The Company conducts field studies to isolate development opportunities and implements development programs to increase production and proved producing reserves.  In addition, Texoil utilizes its engineering geological and geophysical expertise to conduct an exploration program on acquire properties and separately generated prospects in Texas and Louisiana.

Recent Developments

During 1999 and 2000, the Company continued to and implemented development programs.  In addition, Texoil expanded its exploration capabilities.  Texoil’s acquisitions and related remedial operations, re-engineering and development activities have produced substantial production increases with resultant increases in proved reserve quantities, revenues, cash flows and earnings.

 

Statistics

($ Millions, except as otherwise indicated)

 

Six Months

June 2000

 

 

1999

 

 

1998

Revenues

$       22.7

 

$    23.7

 

 

EBITDDA

         13.9

 

$    12.1

 

 

Cash flow (EBITDDA less interest)

         13.2

 

$      9.6

 

 

Net income

           6.5

 

$      2.9

 

 

Common shares

           6.7

 

        6.6

 

 

 

 

 

 

 

 

 

 

Production:

               

 

 

 

 

 

Natural Gas (Bcf)

           2.7

 

        4.2

 

 

 

Oil and liquids (MMBbls)

             .6

 

          .8

 

 

 

 

 

 

 

 

 

 

Average price:

 

 

 

 

 

 

Natural gas

         2.99

 

      2.39

 

 

 

Oil

       23.43

 

    16.32

 

 

 

 

 

 

 

 

Per share:

 

 

 

 

 

 

EBITDDA

         2.09

 

      1.84

 

 

 

Cash flow

         1.98

 

      1.46

 

 

 

Earnings

 

 

$      .44

 

 

Proved reserves:

 

 

 

 

 

 

Natural gas (Bcf)

         71.4

 

      63.0

 

 

 

Oil & liquids

         12.6

 

      13.6

 

 

 

PV 10%

$     187.0

 

$  152.1

 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

Debt

$       19.0

 

$     22.0

 

 

 

Equity

$       41.3

 

$    34.7

 

 

 

 

Corporate Focus

Management

Senior Officers

Frank A. Lodzinski has been Chairman of the Board, President, Chief Executive Officer and a Director of the Company since December 31, 1997.  He has been President and a Director of Cliffwood since he founded a predecessor entity and commenced operations in February 1996.  From January 1992 to February 1995, he served as President and a Director of Hampton Resources Corporation, a public corporation which he also co-founded.  From February 1995, when Hampton was sold to Bellwether Exploration Company, to February 1996, he was self-employed and was a consultant to Bellwether Exploration Company. From 1984 to 1992 Mr. Lodzinski was engaged in the oil and natural gas business through Energy Resource Associates, Inc., a closely-held Texas corporation which he owned and controlled.  Prior to 1984 he was employed in public accounting with Arthur Andersen LLP and in various capacities with independent oil and gas companies.  He is a Certified Public Accountant and holds a BSBA degree from Wayne State University.

Jerry M. Crews has been an Officer and Director of the Company since  December 31, 1997, and was an Officer and Director of Cliffwood since April 1996. For the preceding 12 years he was an Officer of Citation Oil & Gas Corp., and was responsible for all production operations. His experience includes acquisitions, drilling and development operations in most of the producing basins of the United States. Prior experience was with Conoco and Lear Petroleum.  He is a registered Professional Engineer in the state of Texas and holds a B.S. in petroleum engineering from Texas A&M University.

Francis M. Mury has been employed in the oil and gas industry since 1974. Mr. Mury began his career with Texaco, Inc., and has also worked for Wainoco Oil and Gas Company. He joined Energy Resource Associates in 1989 and assisted Mr. Lodzinski in the formation of Hampton Resources Corporation, where he served as Vice-President, Operations. His experience extends to all facets of reservoir, drilling and production operations. Geographical areas of experience include the Gulf Coast (land and state waters), east and west Texas, Florida, New Mexico, Oklahoma, Wyoming, Pennsylvania and Michigan. Mr. Mury is a 1974 graduate of Nicholls State University, Thibodeaux, Louisiana.

Peggy C. Simpson is a Vice President and Controller of the Company and is responsible for all accounting and reporting activities. Ms. Simpson has substantive direct experience in joint interest accounting, billing and revenue/royalty distribution, along with all related general ledger operations, management and financial reporting. In addition, her experience includes partnership administration and tax, budgets and forecasts and cash management. Prior to joining Energy Resource Associates in 1989 and assisting Mr. Lodzinski in the formation of Hampton Resources, she served in various accounting capacities leading to Controller for a major division of a $400 million company and was an accounting instructor at North Harris Community College. She is a CPA and holds a MBA and BBA from Lamar University.

Directors
Michael A. Vlasic has been a Director of the Company since the Merger and was a Director of Cliffwood since July 1996. For more than the past five years, he has been a principal with Vlasic Investments L.L.C. He is a graduate of Brown University.

T. W. Hoehn, III has been a Director of the Company since 1984. He is President and General Manager of Hoehn Motors, Inc., a multi-line automobile agency located in Carlsbad, California, where he has been employed since 1975. He is a graduate of Stanford University.

Robert E. LaJoie has been a Director of the Company since the Merger and was a Director of Cliffwood since July 1996. Mr. LaJoie retired in 1977 and is a private investor with almost 50 years experience in the oil and natural gas, real estate and food services industries. He is a graduate of the University of Michigan.

Thomas A. Reiser has been a Director the Company since the Merger and was a Director of Cliffwood since April 1996. For more than the past five years he has served as Chairman and President of Technical Risks, Inc., a private insurance brokerage firm which he founded. He is a graduate of the College of William and Mary.

S. Wil VanLoh, Jr. has been a Director of the Company since November 1999.  He is a co-founder and principal of Quantum Energy Partners, L.P., a Houston-based private equity fund focused on making corporate equity investments in North American exploration, acquisition and exploitation companies.  Mr. VanLoh is also a Director of Windrock Capital, Ltd., an energy investment banking firm he co-founded in 1994.  He is a former investment banker with Kidder, Peabody & Co. and NCNB/NationsBank.  Mr. VanLoh also currently serves on the board of directors of several private companies engaged in various oil and gas activities.  He holds a Finance degree from New York University.

Toby R. Neugebauer has been a Director of the Company since November 1999.  He is a co-founder and principal of Quantum Energy Partners, L.P., and is also a co-founder and Director of Windrock Capital, Ltd.  Mr. Neugebauer is a former investment banker with Kidder, Peabody & Co., and also currently serves on a board of directors of several private companies engaged in various oil and gas activities.  He holds a Finance degree from New York University.

Jeffrey A. Jones has been a Director of the Company since November 1999.  He is a co-founder and principal of Quantum Energy Partners, L.P., and has been the lead geologist/geophysicist of the West Texas based energy companies, Jones Company Ltd. and JHJ Exploration, Ltd. since 1978.  Mr. Jones is a graduate of West Texas State University with a degree in Geology.

 

Major Common Shareholders

 

Shares

(Thousands)

Frank A. Lodzinski..........................................................................................

300

V & C Energy L.P............................................................................................

1,058

Other Officers and Directors..............................................................................

742

RIMCO............................................................................................................

804

EnCap..............................................................................................................

428

First Union Securities, Inc..................................................................................

375

Lincoln National Life Insurance Company..........................................................

587

Other................................................................................................................

2,366

Total.................................................................................................................

6,660

Oil & Gas Properties

Property Acquisitions, Re-Engineering and Development Drilling
Purchases of proved reserves, re-engineering fields to enhance production and lower operating costs, and development drilling are a significant part of the Company’s strategy for growth. Re-engineering and development projects are based on detailed engineering and geological studies compiled by the Company’s internal staff. With respect to field development, the Company utilizes computer aided engineering systems and 3-D seismic technology, where applicable, as  significant development tools, used with other engineering production and sub-surface data to maximize reserve additions and production. An important focus is to exploit exploration opportunities associated with acquired properties. The Company solicits and promotes industry partners to leverage its upside exposure.

Prospect Generation and Drilling
The Company has assembled and intends to maintain a diversified inventory of exploratory and development prospects. The current portfolio includes lower risk development and exploratory prospects, as well as higher risk deep exploratory prospects with significant upside potential. The Company actively solicits and promotes industry partners to maximize economics and reduce risk. The exploration approach is to fully define prospect leads (whether generated separately or as part of an acquisition) with 3-D seismic and comprehensive integration of sub-surface and engineering data.  Depending on the prospect, the Company will retain a direct working interest in each prospect, plus any carried or reversionary interest retained as part of sales to industry partners.

Technical Staffing
The Company has developed an expert technical staff with significant experience including engineers, geologists and geophysicists and required support staffing. Management intends to retain its core technical staff, but management also expects to develop strategic alliances and/or joint ventures to expand its capabilities without significant increased overhead.

Acquisitions
Following is a summary of major acquisitions (net of divestitures) made by the Company since commencement of operations in February, 1996.

1996 Acquisitions

County

Working

Interest

Revenue

Interest

Texas

Day Dome.....................................

Madison

          47%

            38%

Northeast Madisonville..................

Madison

          50%

            43%

Fort Stockton................................

Pecos

          40%

            32%

Goldsmith-Landreth.......................

Ector

          34%

            30%

New Diana....................................

Upshur

        100%

            82%

1997 Acquisitions

 

 

 

Texas

 

 

 

 

Huff-McFaddin.............................

Victoria

             60%

           45%

Magnet Withers.............................

Wharton

             60%

           50%

Fort Stockton (1)......................................

Pecos

             20%

           16%

Goldsmith - Landreth (1).......................

Ector

             16%

           14%

Loma Alta.....................................

McMullen

             57%

           43%

N. E. Madisonville.........................

Madison

             71%

           57%

Fall City........................................

Karnes

          100%

           89%

 

1998 Acquisitions

 

Louisiana

Garrison Gas Unit..........................

Cameron

             75%

            50%

North Crowley..............................

Acdia

    41%-60%

   35%-54%

Neale............................................

Beauregard

          100%

            83%

Texas

Guerra Field..................................

Webb & Duval

   52%-99%

   39%-69%

Goldsmith Landreth (1)...................

Ector

            33%

           29%

Fort Stockton (1)...........................

Pecos

            40%

           32%

Huff-McFaddin (1).........................

Victoria

            40%

           30%

Magnet Withers (1)........................

Wharton

            40%

           33%

Loma Alta (1).................................

McMullen

            38%

           30%

DCRC(2).......................................

Duval

          100%

  71%-75%

Laredo..........................................

Webb & Zapata

     96-100%

     8%-80%

Vaquillas Ranch.............................

Webb

   39%-40%

  31%-32%

Yorktown......................................

Dewitt

          100%

           71%

N. Chocolate Bayou(4)..................

Brazoria

            49%

           35%

S. Pocoso.....................................

Webb

           100%

            73%

S. Kasper......................................

Dewitt

            65%

            51%

 

1999 Acquisitions

 

Texas

Hagist Ranch.................................

Duval

            100%

    75%-87%

Vaquillas Ranch(1)........................

Webb

      36%-60%

    29%-48%

 

 

 

 

Louisiana

 

 

 

Eloi Bay........................................

St. Bernard

            100%

   71%-88%

Eloi Bay (S.L. 4039).....................

St. Bernard

              24%

            18%

Garrison Gas Unit (1)....................

Cameron

              25%

            16%

 

 

 

 

2000 Acquisitions

 

 

 

Ben Bolt Field...............................

 

             100%

 

 

 

 

 

(1)     Incremental interests in previous acquisitions.

(2)     Majority of wells are 100%, however, one at 30% W.I., 22.5% of NRI.

(3)     Table does not include subsequent divestitures.

(4)     Non-operated.

 

The Company also owns interests in numerous non-operated properties and in several smaller operated properties.