-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lncfhtq/sSJgkIJrnWEKoAVO3rcdNyLzyazzUg47KI2z0NydLFGVpZVPZAr/0O6S ZbrMD+hyU5YfuZNrkYpu2w== 0001013594-06-000450.txt : 20060725 0001013594-06-000450.hdr.sgml : 20060725 20060725105043 ACCESSION NUMBER: 0001013594-06-000450 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20060725 DATE AS OF CHANGE: 20060725 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HOUSTON EXPLORATION CO CENTRAL INDEX KEY: 0001015293 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 222674487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-48519 FILM NUMBER: 06978032 BUSINESS ADDRESS: STREET 1: 1100 LOUISIANA STREET STREET 2: SUITE 2000 CITY: HOUSTON STATE: TX ZIP: 77002-5219 BUSINESS PHONE: 713-830-6800 MAIL ADDRESS: STREET 1: 1100 LOUISIANA STREET STREET 2: SUITE 2000 CITY: HOUSTON STATE: TX ZIP: 77002-5219 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SANDELL ASSET MANAGEMENT CORP CENTRAL INDEX KEY: 0001140474 IRS NUMBER: 000000000 STATE OF INCORPORATION: E9 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 40 WEST 57TH STREET STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2126035700 MAIL ADDRESS: STREET 1: 40 WEST 57TH STREET STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 SC 13D 1 houston13d-072406.txt JULY 24, 2006 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 - ------------------------------------------------------------------------------- The Houston Exploration Company (Name of Issuer) - ------------------------------------------------------------------------------- Common Stock (Title of Class of Securities) 442120101 ----------------------------- (CUSIP Number) Sandell Asset Management Corp. 40 West 57th Street 26th Floor New York, NY 10019 Attention : Richard Gashler, General Counsel 212-603-5700 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 18, 2006 ----------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box |_|. SCHEDULE 13D CUSIP No 84403016 - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Castlerigg Master Investments Ltd. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X| (b) |_| 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| 6 CITIZENSHIP OR PLACE OF ORGANIZATION British Virgin Islands 7 SOLE VOTING POWER NUMBER OF SHARES 0 BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH REPORTING 1,405,840 PERSON WITH 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 1,405,840 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,405,840 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.04% 14 TYPE OF REPORTING PERSON CO 1 NAME OF REPORTING PERSON Sandell Asset Management Corp. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X| (b) |_| 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands 7 SOLE VOTING POWER NUMBER OF SHARES 0 BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH REPORTING 1,405,840 PERSON WITH 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 1,405,840 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,405,840 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.04% 14 TYPE OF REPORTING PERSON CO 1 NAME OF REPORTING PERSON Castlerigg International Limited 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X| (b) |_| 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| 6 CITIZENSHIP OR PLACE OF ORGANIZATION British Virgin Islands 7 SOLE VOTING POWER NUMBER OF SHARES 0 BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH REPORTING 1,405,840 PERSON WITH 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 1,405,840 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,405,840 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.04% 14 TYPE OF REPORTING PERSON CO 1 NAME OF REPORTING PERSON Castlerigg International Holdings Limited 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X| (b) |_| 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| 6 CITIZENSHIP OR PLACE OF ORGANIZATION British Virgin Islands 7 SOLE VOTING POWER NUMBER OF SHARES 0 BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH REPORTING 1,405,840 PERSON WITH 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 1,405,840 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,405,840 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.04% 14 TYPE OF REPORTING PERSON CO 1 NAME OF REPORTING PERSON Thomas E. Sandell 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X| (b) |_| 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| 6 CITIZENSHIP OR PLACE OF ORGANIZATION Sweden 7 SOLE VOTING POWER NUMBER OF SHARES 0 BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH REPORTING 1,405,840 PERSON WITH 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 1,405,840 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,405,840 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.04% 14 TYPE OF REPORTING PERSON IN Item 1. Security and Issuer This statement on Schedule 13D relates to the common stock, par value $0.01 per share (the "Common Stock"), of The Houston Exploration Company, a Delaware corporation ("Issuer"). The principal executive offices of Issuer are located at: 1100 Louisiana, Suite 2000 Houston, Texas 77002 Item 2. Identity and Background (a). NAME The names of the persons filing this statement on Schedule 13D are: Castlerigg Master Investments Ltd., a British Virgin Islands company ("Castlerigg Master Investments"), Sandell Asset Management Corp., a Cayman Islands company ("SAMC"), Castlerigg International Limited, a British Virgin Islands company ("Castlerigg International"), Castlerigg International Holdings Limited, a British Virgin Islands company ("Castlerigg Holdings" and, collectively with Castlerigg Master Investments and Castlerigg International, the "Fund"), and Thomas E. Sandell, a citizen of Sweden ("Sandell") (together, the "Reporting Persons"). The shares of common stock beneficially owned by the Reporting Persons are owned directly by Castlerigg Master Investments. Castlerigg Holdings is the controlling shareholder of Castlerigg Master Investments and Castlerigg International is the controlling shareholder of Castlerigg Holdings. SAMC is the investment manager of the Fund. The controlling shareholder of SAMC is Sandell. (b). RESIDENCE OR BUSINESS ADDRESS The principal business address for each of Castlerigg Master Investments, Castlerigg International and Castlerigg Holdings is c/o Citco Fund Services (Curacao) N.V., Kaya Flamboyan 9, P.O. Box 812, Curacao, Netherlands, Antilles. The principal business address for each of SAMC and Sandell is 40 West 57th Street, 26th Floor, New York, New York, 10019. (c). PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND THE NAME, PRINCIPAL BUSINESS AND ADDRESS OF ANY CORPORATION OR OTHER ORGANIZATION IN WHICH SUCH EMPLOYMENT IS CONDUCTED The Fund is a private investment fund whose investment objective is to achieve superior investment returns, focusing primarily on a global, event-driven investment strategy, including global, event-driven risk arbitrage, reorganizations, mergers, spin-offs, liquidations and distressed securities and other situations. The principal business of SAMC is providing investment management services. Information regarding the directors, executive officers and/or control persons of Castlerigg Master Investments, Castlerigg International, Castlerigg Holdings, SAMC, and Sandell (collectively, the "Instruction C Persons") is set forth in Appendix III attached hereto. (d), (e). CRIMINAL CONVICTIONS; CIVIL PROCEEDINGS During the last five years, none of the Reporting Persons have: (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations or prohibiting activities subject to federal or state securities laws or finding any violation of such laws. (f). CITIZENSHIP Castlerigg Master Investments, Castlerigg International and Castlerigg Holdings are British Virgin Islands companies. SAMC is a Cayman Islands company. Sandell is a citizen of Sweden. Item 3. Source and Amount of Funds or Other Consideration Castlerigg Master Investments acquired the 1,405,840 shares of the Common Stock at an aggregate cost of $84,835,389.32. The funds used to purchase the shares of Common Stock were obtained from a combination of the general working capital of the investment entities managed by the Reporting Persons and margin account borrowings made in the ordinary course of business. Item 4. Purpose of Transaction The Reporting Persons acquired the shares of Common Stock for investment purposes in the ordinary course of business because they believed the shares to be undervalued in the market. Following up on a meeting the Reporting Persons attended with the Issuer on July 13, 2006, SAMC sent on July 25, 2006 a letter (the "Letter") to the Board of Directors of the Issuer. In the Letter, the Reporting Persons expressed their view that the most efficient way to maximize shareholder value is through a sale of the Issuer. SAMC also stated its belief that the Issuer should not use any of the proceeds it received from the Gulf of Mexico asset sales or the use of its significantly underlevered balance sheet to acquire any additional onshore reserves. Instead, SAMC advocates that the Issuer deploy its overcapitalized balance sheet to undertake a Dutch tender at a meaningful premium for the Issuer's undervalued Common Stock in conjunction with a sale of the Issuer immediately thereafter. A copy of the letter is attached hereto as Exhibit A. Except as described above, none of the Reporting Persons has any plans or proposals which relate to, or could result in, any of the matters referred to in paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule 13D. The Reporting Persons may, at any time and from time to time, review or reconsider their position and/or change their purpose and/or formulate plans or proposals with respect thereto. Representatives of SAMC may engage in discussions with members of the Issuer's board of directors as well as with other shareholders of the Issuer regarding the suggestions contained in the Letter and other matters of interest to the Issuer's shareholders. Although none of the Reporting Persons has any specific plan or proposal to acquire or dispose of the shares of Common Stock, each Reporting Person at any time and from time to time may (i) acquire additional shares or securities of the Issuer, (ii) dispose of any or all of its securities of the Issuer, or (iii) enter into privately negotiated derivative transactions with institutional counterparties to hedge the market risk of some or all of their positions in its securities of the Issuer, depending upon an ongoing evaluation of the investment in such securities, prevailing market conditions, other investment opportunities, liquidity requirements of the Reporting Persons, and/or other investment considerations. Item 5. Interest in Securities of the Issuer (a). The Reporting Persons as a group beneficially own 1,405,840 shares of Common Stock, representing 5.04% of the outstanding shares of Common Stock. (b). None of the Reporting Persons has sole power to vote or to direct the vote or sole power to dispose or to direct the disposition of the Shares. Each of the Reporting Persons has shared power to vote and to direct the vote and shared power to dispose and to direct the disposition of the 1,405,840 shares of Common Stock held by Castlerigg Master Investments. (c). A list of the transactions in the Issuer's Common Stock that were effected by the Reporting Persons during the past sixty days is attached as Appendix I. (d). N/A (e). N/A Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer See Item 5(c) for information regarding certain options. Item 7. Material to Be Filed as Exhibits The following documents are filed as exhibits: Appendix I: List of the transactions in the Issuer's Common Stock that were effected by the Reporting Persons during the past sixty days. Appendix II: Joint Filing Agreement. Appendix III: Instruction C Person Information. Signature After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 25, 2006 CASTLERIGG MASTER INVESTMENTS LTD. By: /s/Thomas E. Sandell ------------------------------------ Thomas E. Sandell, Director SANDELL ASSET MANAGEMENT CORP. By: /s/Thomas E. Sandell ------------------------------------ Thomas E. Sandell, Director CASTLERIGG INTERNATIONAL LIMITED By: /s/Thomas E. Sandell ------------------------------------ Thomas E. Sandell, Director CASTLERIGG INTERNATIONAL HOLDINGS LIMITED By: /s/Thomas E. Sandell ------------------------------------ Thomas E. Sandell, Director /s/Thomas E. Sandell ----------------------------------------- Thomas E. Sandell APPENDIX I TRANSACTIONS EFFECTED DURING THE PAST SIXTY DAYS - --------------------- ------------------ ------------------- ------------------ ------------------- Date of transaction Person effecting Amount of Price per share Where and how the transaction securities or unit transaction was Bought/ effected (Sold) - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg 80,240 $52.95460 Privately 6/6/2006* Master negotiated Investments transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg Privately 6/8/2006* Master negotiated Investments 100,000 52.50080 transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg Privately 7/18/2006**** Master negotiated Investments 100,000 52.97 transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg Privately 7/18/2006**** Master negotiated Investments 80,240 53.45 transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg Privately 7/18/2006**** Master negotiated Investments 4,300 62.60 transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg Privately 7/18/2006**** Master negotiated Investments 93,600 62.15 transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg Privately 7/18/2006**** Master negotiated Investments 100,000 62.88 transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg Privately 7/18/2006**** Master negotiated Investments 15,700 62.35 transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg Privately 7/18/2006**** Master negotiated Investments 100,000 62.57 transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ ------------------- Castlerigg Privately 7/18/2006**** Master negotiated Investments 30,400 61.56 transaction - --------------------- ------------------ ------------------- ------------------ ------------------- - --------------------- ------------------ ------------------- ------------------ -------------------
* These transactions represent privately negotiated back-to-back call and put transactions with a financial institution through which the Reporting Persons acquired an economic interest in such shares of Common Stock and as a result they were subject to the same economic gain or loss as if they had purchased the underlying shares. **** These transactions represent the exercise of call options and the termination of the related put options with the same counterparty. APPENDIX II JOINT FILING AGREEMENT The undersigned hereby agree that the statement on Schedule 13D with respect to the common stock of The Houston Exploration Company dated as of July 25, 2006 is, and any further amendments thereto signed by each of the undersigned shall be, filed on behalf of each of the undersigned pursuant to and in accordance with the provisions of Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended. Dated: July 25, 2006 CASTLERIGG MASTER INVESTMENTS LTD. /s/Thomas E. Sandell By: ----------------------------------- Thomas E. Sandell, Director SANDELL ASSET MANAGEMENT CORP. By: /s/Thomas E. Sandell ------------------------------------ Thomas E. Sandell, Director CASTLERIGG INTERNATIONAL LIMITED By: /s/Thomas E. Sandell ------------------------------------ Thomas E. Sandell, Director CASTLERIGG INTERNATIONAL HOLDINGS LIMITED By: /s/Thomas E. Sandell ------------------------------------ Thomas E. Sandell, Director /s/Thomas E. Sandell ------------------------------------------ Thomas E. Sandell Appendix III Information Regarding The Instruction C Persons Castlerigg Master Investments Ltd. Executive Officers Name Title ---------------------------------- ------------------------------ NONE ---------------------------------- ------------------------------ Castlerigg Master Investments Ltd. Directors The following table sets forth the name and mailing address (business or residence) of each of the directors of Castlerigg Master Investments Ltd., and the principal occupation and citizenship of each of those directors who are natural persons. - ---------------------------- ----------------------- -------------------------------- -------------------------------- Name and Title Principal Occupation Address Citizenship - ---------------------------- ----------------------- -------------------------------- -------------------------------- - ---------------------------- ----------------------- -------------------------------- -------------------------------- Thomas E. Sandell Portfolio Manager 40 West 57th Street, Sweden 26th Floor New York, NY 10019 - ---------------------------- ----------------------- -------------------------------- -------------------------------- - ---------------------------- ----------------------- -------------------------------- -------------------------------- Daniel Mignon Executive of an Le Prince de Galles Belgium investment manager 10 Avenue de Grande-Bretagne MC-98000 Monte-Carlo Monaco - ---------------------------- ----------------------- -------------------------------- -------------------------------- - ---------------------------- ----------------------- -------------------------------- -------------------------------- InterCaribbean Services N/A c/o Citco BVI Limited N/A Ltd. Citco Building Wickhams Cay PO Box 662 Road Town, Tortola British Virgin Islands - ---------------------------- ----------------------- -------------------------------- --------------------------------
Castlerigg International Limited Executive Officers ---------------------------------- ------------------------------ Name Title ---------------------------------- ------------------------------ Thomas E. Sandell President ---------------------------------- ------------------------------ Castlerigg International Limited Directors The following table sets forth the name and mailing address (business or residence) of each of the directors of Castlerigg International Limited, and the principal occupation and citizenship of each of those directors who are natural persons. - ---------------------------- ----------------------- -------------------------------- -------------------------------- Citizenship Name Principal Occupation Address - ---------------------------- ----------------------- -------------------------------- -------------------------------- - ---------------------------- ----------------------- -------------------------------- -------------------------------- Thomas E. Sandell Portfolio Manager 40 West 57th Street, Sweden 26th Floor New York, NY 10019 - ---------------------------- ----------------------- -------------------------------- -------------------------------- - ---------------------------- ----------------------- -------------------------------- -------------------------------- Daniel Mignon Executive of an Le Prince de Galles Belgium investment manager 10 Avenue de Grande-Bretagne MC-98000 Monte-Carlo Monaco - ---------------------------- ----------------------- -------------------------------- -------------------------------- - ---------------------------- ----------------------- -------------------------------- -------------------------------- InterCaribbean Services N/A c/o Citco BVI Limited N/A Ltd. Citco Building Wickhams Cay PO Box 662 Road Town, Tortola British Virgin Islands - ---------------------------- ----------------------- -------------------------------- --------------------------------
Castlerigg International Holdings Limited Executive Officers ---------------------------------- ------------------------------ Name Title ---------------------------------- ------------------------------ NONE ---------------------------------- ------------------------------ Castlerigg International Holdings Limited Directors The following table sets forth the name and mailing address (business or residence) of each of the directors of Castlerigg International Holdings Limited, and the principal occupation and citizenship of each of those directors who are natural persons. - ---------------------------- ----------------------- -------------------------------- -------------------------------- Citizenship Name Principal Occupation Address - ---------------------------- ----------------------- -------------------------------- -------------------------------- - ---------------------------- ----------------------- -------------------------------- -------------------------------- Thomas E. Sandell Portfolio Manager 40 West 57th Street, Sweden 26th Floor New York, NY 10019 - ---------------------------- ----------------------- -------------------------------- -------------------------------- - ---------------------------- ----------------------- -------------------------------- -------------------------------- Daniel Mignon Executive of an Le Prince de Galles Belgium investment manager 10 Avenue de Grande-Bretagne MC-98000 Monte-Carlo Monaco - ---------------------------- ----------------------- -------------------------------- -------------------------------- - ---------------------------- ----------------------- -------------------------------- -------------------------------- InterCaribbean Services N/A c/o Citco BVI Limited N/A Ltd. Citco Building Wickhams Cay PO Box 662 Road Town, Tortola British Virgin Islands - ---------------------------- ----------------------- -------------------------------- --------------------------------
Sandell Asset Management Corp. Executive Officers The following table sets forth the name, title, principal occupation and citizenship of each of the executive officers of Sandell Asset Management Corp.. The business address of each person named below is 40 West 57th Street, 26th Floor, New York, N.Y. 10019. In each case, the principal occupation is represented by the person's title. - ------------------ ---------------------------------- ------------------------- Name Title Citizenship - ------------------ ---------------------------------- ------------------------- - ------------------ ---------------------------------- ------------------------- Thomas E. Sandell Chairman of the Board of Directors Sweden Chief Executive Officer and Portfolio Manager - ------------------ ---------------------------------- ------------------------- - ------------------ ---------------------------------- ------------------------- Timothy O'Brien Chief Financial Officer United States of America - ------------------ ---------------------------------- ------------------------- - ------------------ ---------------------------------- ------------------------- Richard Gashler General Counsel United States of America - ------------------ ---------------------------------- ------------------------- Sandell Asset Management Corp. Directors The following table sets forth the name, mailing address (business or residence), present principal occupation or employment and citizenship of each of the directors of Sandell Asset Management Corp. - --------------------- ----------------------- -------------------------------- -------------------------------- Name Principal Occupation Address Citizenship - --------------------- ----------------------- -------------------------------- -------------------------------- - --------------------- ----------------------- -------------------------------- -------------------------------- Thomas E. Sandell Portfolio Manager 40 West 57th Street, Sweden 26th Floor New York, NY 10019 - --------------------- ----------------------- -------------------------------- -------------------------------- - --------------------- ----------------------- -------------------------------- -------------------------------- Daniel Mignon Executive of an Le Prince de Galles Belgium investment manager 10 Avenue de Grande-Bretagne MC-98000 Monte-Carlo Monaco - --------------------- ----------------------- -------------------------------- --------------------------------
EXHIBIT A [Sandell Asset Management Letterhead] July 25, 2006 VIA FACSIMILE Board of Directors The Houston Exploration Company 1100 Louisiana Street Suite 2000 Houston, TX 77002 Attention: Mr. William Hargett Chairman, President and Chief Executive Officer Dear Sirs: Sandell Asset Management Corp. ("Sandell") and the private investment funds advised by Sandell (the "Sandell Funds" or we) are the beneficial owners of 1,405,840 shares of common stock of The Houston Exploration Company ("THX" or the "Company"), representing approximately 5.04% of THX's outstanding shares. We are writing to follow up on our meeting with senior management on Thursday, July 13, 2006. Like you, we continue to believe that the Company's assets remain significantly undervalued and are encouraged by the Board's decision to engage Lehman Brothers to explore strategic alternatives. However, among the options that are being considered, we want to reiterate unequivocally our view that given the large disparity between public market trading and strategic transaction valuations, the most efficient way to maximize and realize shareholder value is through a sale of the Company. During our meeting, management took great effort to lay out details of the Company's onshore operations and highlighted the unrecognized value enhancing opportunities of various projects particularly those associated with THX's properties in the Rockies. All of that reinforces our view that the Company is a highly attractive acquisition target. We believe the complexity of the various resource plays also makes it more likely that the value of these assets would be better recognized by strategic and financial buyers, rather than in the public markets. We also want to register our strong opposition to any deployment of proceeds from THX's recent Gulf of Mexico asset sales or the use of the significantly underlevered balance sheet(1), to acquire additional onshore reserves. In our opinion, such a move not only runs counter to the sizeable future high-impact drilling inventory THX already owns (as highlighted in management's presentation), it is also fraught with execution risks. The - ------------- (1) Pro forma 1Q06 total debt of $318.3MM less $324.9MM of cash held in 1031 Trust. Source: THX 8-K dated July 10, 2006. Company's stock currently trades around $61.87(2) which from the Board's perspective obviously reflects a substantial discount to fair value given your recent decision to reject a fully financed $62.00 cash offer. In this regard, rather than making additional onshore acquisitions, shareholder interests are much better served by using the overcapitalized balance sheet to undertake a Dutch tender at a meaningful premium for THX's undervalued stock in conjunction with a sale of the Company immediately thereafter. As a major institutional shareholder, we expect our views to be given serious consideration by the Board. We believe that a majority of shareholders would support our call to the Board to undertake an auction process to sell the Company in order to maximize shareholder value. As we have stated before, time is of the essence and it is neither prudent nor responsible of the Board to take a protracted strategic review of alternatives. We remain available to discuss the issues raised in this letter and will continue to monitor the actions of the Company and the Board. The absence of any decisive measures to deliver value would only necessitate action by shareholders at the next Annual Meeting. Very truly yours, SANDELL ASSET MANGEMENT CORP. /s/ Thomas E. Sandell Thomas E. Sandell Chief Executive Officer - -------------- (2) THX closing price as of July 24, 2006. -----END PRIVACY-ENHANCED MESSAGE-----