National Energy Group, Inc. Announces Commencement of Final Liquidation Process and Liquidation Payment Procedures

DALLAS, April 8, 2011 /PRNewswire/ -- National Energy Group, Inc. ("NEGI" or the "Company") (formerly OTC Bulletin Board: NEGI) hereby announces the commencement of its final liquidation process and the procedures for making final liquidation distributions to the stockholders of NEGI who held their shares as of the Final Record Date (defined below).

History and Background Information Regarding the Liquidation and Dissolution of NEGI

• On November 12, 2007, the Company's Board of Directors (the "Board) approved the Company's liquidation and dissolution (the "Dissolution") pursuant to the Company's plan of complete liquidation and dissolution (the "NEGI Liquidation Plan"), subject to the approval thereof by the stockholders of the Company.
• On March 14, 2008, the Company's Dissolution was approved by the requisite vote of the Company's stockholders at a special meeting thereof called for such purpose.
• On March 14, 2008, (i) the Board fixed 5:00 p.m., Eastern Time, on March 25, 2008 as the final record date (the "Final Record Date") for determination of those Company stockholders entitled to receive liquidation distributions under the NEGI Liquidation Plan, as and when authorized by the Board, and (ii) the Company noticed the Final Record Date to the OTC Bulletin Board Coordinator, Nasdaq Market Operations pursuant to SEC Rule 10b-17 and Nasdaq Marketplace Rule IM-4120-1.
• On March 25, 2008, NEGI filed its certificate of dissolution (the "Certificate of Dissolution") with the Delaware Secretary of State and the Dissolution of the Company pursuant to such filing became effective as of 5:00 p.m., Eastern Time, on that date.
• On March 26, 2008, the Company submitted its Certification and Notice of Termination of Registration on Form 15 (the "Form 15") to the SEC for the purpose of deregistering its securities under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and, as a result of the Form 15 filing, the Company immediately suspended the filing of any further periodic reports under the 1934 Act and its status as a 1934 Act reporting company terminated within 90 days thereafter.
• Effective as of the Final Record Date, the Company's stock transfer books were closed and the Company's transfer agent, Wells Fargo Bank, National Association ("Wells Fargo"), was instructed by NEGI to no longer process any subsequent stock transfer requests.
• Pursuant to the NEGI Liquidation Plan and the Certificate of Dissolution, distributions to Company stockholders pursuant to such plan, as and when made by the Company, are deemed to be in complete cancellation of all outstanding shares of the Company's Common Stock.
• As a result, from and after the Final Record Date, and subject to applicable law, the Company's Common Stock has no longer been treated by the Company as outstanding and each holder of the Company's Common Stock as of the Final Record Date ceased to have any rights in respect thereof, except the right to receive liquidation distributions pursuant to and in accordance with the NEGI Liquidation Plan, as and when authorized by the Board.
• As of the Final Record Date, 11,172,117 shares of NEGI Common Stock were then outstanding and are eligible to participate in any liquidation distributions under the NEGI Liquidation Plan.
• Since March 25, 2008, the Company has delayed any liquidation payments under the NEGI Liquidation Plan pending its resolution of Company liabilities and obligations.
• During that period, it has been necessary for the Company to resolve several ordinary course of business litigation matters and to satisfy other ordinary course of business liabilities and obligations.
• Also during that period, it has been necessary for the Company to defend against the previously announced stockholder derivative and class action lawsuit styled Scott Harrington v. Icahn Enterprises LP, et al. (Delaware Chancery Court Case No. 3522-VCS), in which the Company was one of several named defendants.  That lawsuit has been settled through the payment of an agreed upon settlement amount by a named defendant other than the Company.  In September 2010, the Company, through Wells Fargo, as the Company's paying agent, distributed the settlement proceeds to eligible class members.
• In addition, during the fall of 2010, the Company determined that it would be necessary for it to fund its share of anticipated obligations regarding the restoration of a certain oilfield site known as the Bayou Sorrel Field located in the State of Louisiana in which the Company had a prior ownership interest.  The Louisiana Commissioner of Conservation had determined that such site was "orphaned" pursuant to its authority under the Louisiana Oilfield Site Restoration Law (LSA - RS 30:80 et seq.).  As a result, pursuant to agreements with other additionally responsible parties, in January 2011 NEGI contributed $6.0 million into an escrow account that would be used to fund the necessary restoration work.  The other additionally responsible parties either contributed cash to that escrow account or agreed to conduct the work necessary to restore the site as required by the State of Louisiana.  The Company believes that through these arrangements it has made adequate provision for its respective share of the aforementioned restoration obligations and is now proceeding to complete its liquidation process.

Information Regarding NEGI's Remaining Cash Balances and the Amount of the Liquidation Fund

As of the date of this press release, the remaining cash balances of the Company are $40,554,784.71 (the "Liquidation Fund"), after giving effect to the prior payment and satisfaction, or the establishment of accruals, escrows and holdbacks for the future payment and satisfaction, of all known NEGI liabilities and obligations, whether liquidated or contingent.  Such remaining cash balances reflect:

• The prior payment by NEGI in January 2011, as noted above, of $6.0 million in settlement of the Company's agreed upon obligations, in conjunction with certain other involved parties, relating to the restoration of a certain "orphaned" oilfield site located in the State of Louisiana.
• The prior payment by NEGI of litigation-related legal, accounting and other defense-related fees and expenses not covered by insurance in connection with the defense and ultimate settlement of the aforementioned stockholder derivative and class action lawsuit styled Scott Harrington v. Icahn Enterprises LP, et al.
• The prior payment by NEGI, as noted above, of certain other liabilities and obligations in connection with previously pending and now settled ordinary course of business litigation.
• The prior payment by NEGI of its operating expenses during its liquidation and dissolution process, including utilities, office and storage space rentals, maintenance of the Company's computer system and website, the salaries of the Company's remaining employees, transfer and distribution agent fees and expenses, general accounting and legal fees and expenses, and various insurance premiums and holdbacks.
• Investment income earned by the Company on its periodic investment of available cash balances from time to time.
• The Company's accruals, escrows and holdbacks with respect to anticipated operating expenses in connection with the administrative process of effecting the distribution of the Liquidation Fund, including the fees and expenses of Wells Fargo, which is serving as the Company's distribution agent in connection with such distribution, anticipated remaining mailing, accounting, legal, rental, storage, utility fees and expenses, anticipated remaining insurance premiums, and anticipated remaining employee salaries and expenses.

Process for Distribution of the Liquidation Fund

The Company intends to distribute the Liquidation Fund as follows:

• On April 19, 2011, NEGI will transfer the Liquidation Fund in the amount of $40,554,784.71 to Wells Fargo for further payment or disposition in accordance with the procedures set forth below.
• Based on 11,172,117 outstanding shares of NEGI Common Stock of record as of the Final Record Date, the amount of the Liquidation Fund to be distributed per such outstanding share will be $3.63.
• On April 19, 2011, Wells Fargo, on behalf of NEGI, will mail or otherwise transmit an explanatory Company cover letter and an accompanying Letter of Transmittal to all NEGI stockholders of record as of the Final Record Date, including Cede & Co.
• In order for eligible NEGI stockholders of record as of the Final Record Date to receive their respective pro rata share of the Liquidation Fund, each such person or entity will be required to complete and return the aforementioned Letter of Transmittal (or comply with DTC's equivalent procedures), and any additional required documentation specified therein (including old NEGI share certificates under certain circumstances), to Wells Fargo in accordance with the instructions set forth therein.
• Eligible NEGI stockholders of record as of the Final Record Date can generally expect to receive payment of their respective pro rata share of the Liquidation Fund within approximately 10 business days after Wells Fargo confirms their compliance with the aforementioned Letter of Transmittal procedures (or their compliance with DTC's equivalent procedures).
• It is anticipated that eligible NEGI stockholders of record as of the Final Record Date will generally fall within the following categories:
  • Persons or entities holding their shares through a broker that participates in the DTC system.  Such persons or entities will receive their respective pro rata share of the Liquidation Fund directly from their broker (following such broker's compliance with applicable DTC procedures).  Questions regarding payment should be directed to their broker.
  • Persons or entities directly holding actual share certificates or directly holding shares in book-entry form on the records of Wells Fargo.  Such persons or entities will receive their respective pro rata share of the Liquidation Fund from Wells Fargo via U.S. Mail following their return to Wells Fargo of their properly completed and executed Letter of Transmittal, and any additional required documentation specified therein.
• Any questions regarding payment or the completion of the Letter of Transmittal should be directed to Wells Fargo at the phone number listed in the instructions to the Letter of Transmittal.
• Any unclaimed portions of the Liquidation Fund will eventually be escheated to applicable state authorities in accordance with applicable state escheatment laws.  As a result, eligible parties are urged to act promptly in complying with applicable procedures regarding payment of their respective pro rata share of the Liquidation Fund.
• After the Company's payment of the Liquidation Fund to Wells Fargo as noted above, it is not anticipated that NEGI will make any further distributions under the NEGI Liquidation Plan or the Certificate of Dissolution and the Company will cease to function except in a limited administrative role in relation to the continuing activities of Wells Fargo in its role as the Company's distribution agent with respect to the Liquidation Fund.
• To the extent that the aforementioned distribution of the Liquidation Fund is made by Wells Fargo to any bank, brokerage firm, intermediary, street name holder or other nominee who was holding shares of NEGI common stock for the account of others as of the Final Record Date, it will be the responsibility of such bank, brokerage firm, intermediary, street name holder or other nominee to further distribute such funds to the underlying beneficial owners entitled to receive such funds.  NEGI and Wells Fargo will not be responsible for the proper distribution of such funds to parties other than the holders of record of NEGI shares as of the Final Record Date and to the addresses of such parties appearing on the stock transfer records maintained by Wells Fargo.

Anticipated U.S. Tax Treatment of Payments from the Liquidation Fund

With respect to eligible NEGI stockholders of record as of the Final Record Date who are U.S. persons, distributions received by them from the Liquidation Fund generally will be treated for U.S. federal income tax purposes as full remaining payments in exchange for their stock in NEGI.  As a result, any such U.S. persons generally will recognize gain or loss in an amount equal to the amount of the distribution received by them from the Liquidation Fund, minus their remaining adjusted tax basis in their NEGI stock.  Any such gain or loss will be capital gain or loss if the NEGI stock is held by them as a capital asset.  Eligible NEGI stockholders of record as of the Final Record Date should consult with their own tax advisors regarding the tax treatment of distributions from the Liquidation Fund.  NEGI takes no responsibility for the appropriate tax treatment of the distribution, or the reporting of the same, by any such stockholder.

SOURCE National Energy Group, Inc.

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