EQUITY OIL COMPANY
P.O. BOX 959 SALT LAKE CITY, UT 84110-0959
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 2001
Please join us for the 2001 Annual Meeting of Shareholders of Equity Oil
Company. The Annual Meeting will be held on Wednesday, May 9, 2001 at 2:00 P.M.
at our executive offices in Salt Lake City, Utah.
The purposes of the Annual Meeting are to:
(1) Elect two directors.
(2) Conduct any other business that may properly come before the Meeting.
You must be a shareholder of record at the close of business on March 20,
2001, to vote at the Annual Meeting. Regardless of whether you will attend the
meeting, please vote by signing, dating and returning the enclosed proxy card.
Voting by mail will not prevent you from voting in person at the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
RUSSELL V. FLORENCE, Secretary
PROXY STATEMENT
This Proxy Statement is being mailed beginning April 1, 2001, in connection
with the solicitation of proxies by the Board of Directors of Equity Oil
Company, a Colorado corporation, for use at the Annual Meeting of Shareholders.
The Meeting will be held in our executive offices at 10 West 300 South, Suite
806 in Salt Lake City, Utah, 84101. The meeting will begin at 2:00 pm Mountain
Daylight Time.
Your proxy is solicited by the Board of Directors. The Company pays the
cost of soliciting your proxy and reimburses brokerage houses and others for
forwarding proxy material to you.
VOTING INFORMATION
If you owned shares at the close of business on March 20, 2001, you are
entitled to vote. You are entitled to one vote for each share you owned on that
date for as many persons as there are directors to be elected. The holders of
the majority of the outstanding stock must be present in person or represented
by proxy to constitute a quorum for the transaction of business at the meeting.
Cumulative voting is not allowed under our Articles of Incorporation. As of
March 1, 2001 there were 12,654,612 shares outstanding.
You can vote in person at the Annual Meeting or you can vote by proxy,
which gives the proxy holder the right to vote your shares on your behalf.
Unless you instruct otherwise, the proxy holders will vote for each of the two
director nominees and for each of the other proposals, if any, to be considered
at the meeting at their discretion. You may revoke your proxy before your proxy
holder votes your shares by filing a written revocation with our Secretary
before the Meeting, signing a proxy bearing a later date, or by voting in person
at the Meeting.
Abstentions and broker non-votes are counted as present and entitled to
vote for purposes of determining a quorum. A broker non-vote occurs when a
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have the discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner. Generally, brokers may vote their client's shares on uncontested director
elections when no instruction has been given to them by the beneficial owner. A
plurality of the votes duly cast is required for the election of a director
(i.e. the nominee receiving the greatest number of votes will be elected).
Abstentions and broker non-votes are not counted for purposes of the election of
a director.
1
ELECTION OF DIRECTORS
The Board of Directors currently consists of eight members. The members are
divided into three classes with staggered terms of three years each. This year,
Joseph C. Bennett will retire from the Board at the end of his term at the
annual meeting. The Articles of Incorporation of the Company provide for a Board
of Directors of not less than six nor more than nine members as fixed from time
to time within that range by resolution of the Board of Directors. Upon being
advised of Mr. Bennett's retirement, the Board adopted a resolution fixing the
number of directors at seven, to become effective at the end of Mr. Bennett's
term. Mr. Bennett has been a director since 1995, and we are grateful to him for
his counsel and business advice.
Two directors will be elected at the upcoming Annual Meeting, each to hold
office for three (3) years, or until 2004. The following candidates, each of
whom are currently members of the Board, are nominated for election by the
Board. They have held the positions shown for at least five years unless
otherwise noted. They were selected on the basis of outstanding achievement in
their careers, broad experience, wisdom, integrity, understanding of the
business environment, willingness to devote adequate time to Board duties, and
ability to make independent, analytical inquiries. If a nominee is unavailable
to serve, which is not anticipated, the proxy holders may vote for another
nominee proposed by the Board. Proxies cannot be voted for a greater number of
persons than the number of nominees named.
Served as
Names, Principal Occupations and Selected Other Director
Information Concerning Nominees for Director Since
PAUL M. DOUGAN Age - 63 1992
Director
President and Chief Executive Officer, Equity Oil Company
President and Director, Symskaya Exploration, Inc.
Director, Leucadia National Corporation.
DOUGLAS W. BRANDRUP Age - 60 1975
Director
Chairman of the Board of Directors
Senior Partner, Griggs Baldwin & Baldwin
Attorney at Law - Greenwich, Connecticut
2
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following individuals are either serving as directors or executive
officers. They have held the positions shown for at least five years unless
otherwise noted. Term expiration dates are shown for those members of the Board
of Directors.
Served Term
Since Expires
PHILIP J. "JACK" BERNHISEL Age - 53 1996 2002
Director
Owner, European Marble & Granite Company. Former Senior Vice President - Law
and Finance for Kennecott Corporation, 1986 - 1993, and Corporate Controller for The
Standard Oil Company. Attorney and Certified Public Accountant.
W. DURAND EPPLER Age - 47 1997 2002
Director
Vice-President, Corporate Development, Newmont Mining Corporation.
President, Newmont Indonesia Limited.
Former Managing Director of Chemical Securities, Inc., Metals and Mining Group.
WILLIAM P. HARTL Age - 66 1997 2003
Director
Chairman and CEO, Parker Consultants Inc.
Former Vice President, Investor Relations, Ashland Inc.
Past President, Petroleum Investor Relations Association
Past Chairman, National Investor Relations Institute
Director, The Communications Strategy Group, Inc.
WILLIAM D. FORSTER Age - 54 1994 2003
Director
Chairman and CEO, W. Forster & Co., Inc.
Chairman and CEO, Stonington Corporation
RANDOLPH G. ABOOD Age - 50 1997 2003
Director
Manager and member of The Ninigret Group, L.C.
Tax attorney, Satterlee Stephens Burke & Burke 1976 to 1996.
Director, Royster-Clark, Inc.
JAMES B. LARSON Age - 39 1997
Vice President - Operations
RUSSELL V. FLORENCE Age - 39 2001
Secretary and Treasurer
Mr. Florence was appointed Secretary and Treasurer effective March 1, 2001 He
has been employed as Assistant Secretary and Controller of the Company for over
5 years.
3
SECURITY OWNERSHIP OF MANAGEMENT
Unless otherwise indicated, the following table sets forth, as of March 1,
2001, information with respect to the beneficial ownership of the our Common
Stock by (i) each of our executive officers, (ii) each of our directors, and
(iii) all of our executive officers and directors as a group. Unless indicated
otherwise, each person named below has (a) an address in care of our principal
executive offices, and (b) to the best of our knowledge, sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by each person.
Amount and
Nature of
Title of Beneficial Percent of
Class Name Ownership Class
- ----- ---- --------- -----
Common Paul M. Dougan(1) 790,476 5.9
Douglas W. Brandrup(2) 162,000 1.2
William P. Hartl(2) 10,000 .1
Philip J. "Jack" Bernhisel(2) 23,000 .2
William D. Forster(2) 27,000 .2
Randolph G. Abood(2) 29,800 .2
W. Durand Eppler(2) 9,500 .1
James B. Larson(3) 98,400 .7
Russell V. Florence(4) 39,735 .3
Total Ownership of Directors 1,189,211 8.9
and Executive Officers as a Group(5)
(1) The calculation of beneficial ownership includes 563,500 shares subject
to outstanding options that were exercisable at the table date or within 60 days
of such date; 66,676 shares owned by Mr. Dougan's wife and 31,206 shares held in
a Family Limited Partnership of which Mr. Dougan is the general partner. The
calculation does not include 3,470 shares for which Mr. Dougan's wife acts as
trustee and 221,916 shares owned by Mr. Dougan's married daughters and their
families over which Mr. Dougan has no voting power and concerning which he is
not the beneficial owner.
(2) The calculation of beneficial ownership includes 5,000 shares subject
to outstanding options that were exercisable at the table date or within 60 days
of such date.
(3) The calculation of beneficial ownership includes 93,800 shares subject
to outstanding options that were exercisable at the table date or within 60 days
of such date.
(4) The calculation of beneficial ownership includes 35,900 shares subject
to outstanding options that were exercisable at the table date or within 60 days
of such date.
(5) The calculation of beneficial ownership includes 696,200 shares subject
to outstanding options that were exercisable at the table date or within 60 days
of such date.
4
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires Equity's
executive officers, directors and persons who own more than 10% of the Company's
stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission ("SEC"). A copy of each report is furnished to Equity.
SEC regulations require Equity to identify anyone who filed a required
report late during the most recent fiscal year. Based solely on review of
reports furnished to the Company and written representations that no other
reports were required during the year ended December 31, 2000, all Section 16(a)
filing requirements were met.
BOARD COMMITTEES AND MEETINGS
The Board of Directors has an Audit, Compensation, and Nominating
Committee. The Audit Committee, consisting of only outside Directors, reviews
our internal and external reporting, the scope of the independent audit and any
comments by the independent auditors regarding internal controls and accounting
procedures, and further considers management's response to any such comments.
William D. Forster chairs the committee. Other committee members are P.J. "Jack"
Bernhisel, Randolph G. Abood, W. Durand Eppler, and William P. Hartl. The Audit
Committee met once in 2000 to review the work of the independent auditors. The
Committee also meets telephonically prior to the release of each quarter's
earnings.
The Compensation Committee evaluates management's performance, reviews and
establishes compensation levels for our Executive Officers, administers our cash
bonus and incentive stock option plans, and considers other related matters
concerning management motivation and compensation. The Committee consists solely
of outside Directors. Joseph C. Bennett chairs the committee. Other committee
members are Douglas W. Brandrup, P.J. "Jack" Bernhisel, William D. Forster,
Randolph G. Abood, William P. Hartl, and W. Durand Eppler. The Committee met
once in 2000.
The Nominating Committee interviews, nominates and recommends individuals
for membership on our Board of Directors. The entire Board of Directors acts as
a Nominating Committee. By February 1 of each year, candidates are nominated for
directorships to be filled. Candidates may be suggested by Board members or
stockholders. There is no specific procedure to be followed by security holders
in submitting recommendations to the Board. In selecting a candidate,
consideration is given to the skills and characteristics required of Board
members in the context of the current makeup of the Board and our business.
The Board of Directors held one special and four regular meetings in 2000.
No Director attended less than 75% of the meetings.
COMPENSATION OF DIRECTORS
Non-Employee Directors receive quarterly retainer payments in the amount of
$1,500 each quarter. Fees of $750 were paid for each of the regular meetings
attended in 2000. Each Non-Employee Director was granted non- qualified options
to purchase 5,000 shares of the Company's common stock at the last Annual
Meeting date as additional compensation, as provided for under the 2000
Incentive Stock Option Plan. Mr. Brandrup received $10,000 in additional fees
for services as Chairman during 2000. Mr. Forster, Mr. Bernhisel, and Mr. Eppler
each received $10,000 during 2000 for their service on a special committee of
the Board.
5
SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended December 31,
2000, 1999 and 1998 respectively, for the Company's President and Chief
Executive Officer , and other executive officers of the Company.
Long Term Compensation
Annual Compensation Awards
------------------------------------------------ -------------------------------------------
Other Annual Restricted Options/ All other
Name and Principal Position Year Salary ($) Bonus ($)(2) Compensation Stock Awards SAR's (3) Compensation($)(1)
- --------------------------- ---- ---------- --------- ------------ ------------ -------- -----------------
Paul M. Dougan, 2000 255,000 47,822 NA NA 58,000 20,965
President and 1999 242,100 24,210 NA NA 127,000 2,552
Chief Executive Officer 1998 242,100 0 NA NA 54,000 22,508
James B. Larson 2000 130,000 19,504 NA NA 25,000 9,993
Vice-President of Operations 1999 108,200 10,820 NA NA 37,500 8,243
1998 108,200 0 NA NA 16,000 8,344
Clay Newton (4) 2000 130,000 19,504 NA NA 0 10,020
Corporate Secretary, 1999 108,200 10,820 NA NA 37,500 8,318
Treasurer, and 1998 108,200 0 NA NA 16,000 8,469
Chief Financial Officer
Russell V. Florence (5) 2000 85,000 9,564 NA NA 12,000 6,492
Corporate Secretary 1999 76,000 7,603 NA NA 8,000 5,781
Treasurer 1998 72,700 0 NA NA 16,000 5,574
NOTES
(1) The amounts shown in this column for the last fiscal year include the
following: (i) Mr. Dougan, $12,750 - annual Company contribution to the
Company's Defined Contribution Plan, (DCP), $6,375 - contribution to a
supplemental retirement plan, $1,840 - value of Company paid term life insurance
premiums; (ii) Mr. Larson, $9,750 - annual Company contribution to the DCP, $243
- - value of Company paid term life insurance premiums; (iii) Mr. Newton, $9,750 -
annual Company contribution to the DCP, $270 - value of Company paid term life
insurance; (iv) Mr. Florence, $6,375 - annual Company contribution to the DCP,
$117 - value of Company paid term life insurance.
(2) Bonus amounts shown are those earned for the year indicated.
(3) Option amounts shown are those granted during the year indicated.
Options granted during 2000 were granted on February 9, 2000.
(4) Mr. Newton resigned as an officer of the Company effective February 28,
2001.
(5) Mr. Florence was appointed Corporate Secretary and Treasurer of the
Company effective March 1, 2001.
6
OPTIONS GRANTED IN 2000
The following information is furnished for the year ended December 31, 2000
for the Company's named executive Officers for stock options granted in 2000.
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
------------------------------------------------------------- -----------------------
% of Total
Options/SAR's
Options/ Granted to Exercise or
SAR's Granted Employees in Base Price Expiration
(#) (1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
--------------- --------------- ------------ ------------ ---------- -----------
Name
Paul M.Dougan.............. 58,000 26.5% $1.5000 2/09/2010 $ 54,714 $225,656
James B. Larson............. 17,000 7.8% $1.5000 2/09/2010 $ 16,037 $ 66,140
Clay Newton (2).............. 17,000 7.8% $1.5000 2/09/2010 $ 16,037 $ 66,140
Russell V. Florence (3)...... 8,000 3.7% $1.5000 2/09/2010 $ 7,547 $ 31,125
AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END VALUES
Number of Value of Unexercised
Unexercised Options/ In-The-Money Options
Shares SAR's at FY-End /SAR's at FY-End
Acquired on Value (#) Exercisable/ ($) Exercisable/
Exercise (#) Realized ($) Unexercisable Unexercisable
-------------- ------------ ------------------------------------------
Name
Paul M. Dougan............................ NA NA 495,500/58,000 $363,499/$116,000
James B. Larson............................ NA NA 80,900/63,600 $24,678/$116,710
Clay Newton (2)............................ 4,500 $7,313 75,200/62,800 $13,711/$116,710
Russell V. Florence (3).................... 2,400 $3,900 25,700/30,400 $4,750/$51,394
NOTES
(1) Options granted under the Company's Incentive Stock Option Plan. Under
the terms of the Plan, options are 10 year options with vesting periods ranging
from 1 to 6 years, generally terminating 3 months following an optionee's death
or retirement. Options granted during 2000 were granted on February 9, 2000.
(2) Mr. Newton resigned as an officer of the Company effective February 28,
2001.
(3) Mr. Florence was appointed Corporate Secretary and Treasurer of the
Company effective March 1, 2001.
7
REPORT OF THE COMPENSATION COMMITTEE
Compensation Philosophy and Objectives
The Compensation Committee is comprised of directors who are not employees
or former employees of Equity Oil Company. Our responsibilities as committee
members include the approval and administration of the compensation and benefit
programs for Equity's named executive officers whose compensation is shown in
this proxy statement.
Equity is in the oil and gas exploration and production business, an
industry characterized by unpredictable revenues resulting from price volatility
in world oil and gas markets. Because of this unstable environment, our
compensation policies are not based upon short term financial results; rather,
they focus on longer term objectives and achievements that expand our asset
base. These objectives include acquiring producing reserves at attractive costs,
locating and exploring promising prospects, and implementing projects designed
to increase reserves and production on existing properties.
Our philosophy is to directly align the interests of executive management
and other key employees with those of our shareholders. The major components of
this philosophy are:
o Creating compensation plans which enable us to attract and retain
officers and key employees important to the Company's success, and to
provide them a compensation package reflecting both Equity's and their
performance, measured by success in achieving strategic, operating and
financial objectives.
o Providing meaningful cash and equity-based incentives for executives
and other key employees to ensure they are motivated over the short and
long term to respond to our challenges and opportunities as owners,
rather than simply as employees.
o Rewarding executives and key employees for superior performance when
our shareholders receive an attractive return on their investment over
the longer term.
Our objective is to set executive and other key employee base salaries at
or below the average base salaries of our peer companies based upon industry
surveys. These surveys include the companies that make up the industry index
used in the accompanying performance chart. In addition to base salaries, we
provide incentives through a combination of a cash bonus program, an
equity-based stock option program, and a profit sharing retirement plan.
Under the cash bonus program, executives and other key employees can earn
additional compensation up to 50% of their base salary. In determining the size
of the bonus, the key factors we consider are reserve replacement exceeding
production by a meaningful measure at attractive finding costs, and individual
accomplishments. Along with these factors, we subjectively consider the degree
of success in meeting strategic, operating and financial objectives such as oil
and gas production levels, earnings per share, operating cash flow, and
developing exploration and development prospects, among other considerations.
These latter measures, while not specifically weighted, are all critical to
building shareholder value, which is our ultimate goal.
The stock option program provides a method of encouraging long term results
beneficial to our shareholders since the potential value of each stock option is
tied to increased shareholder value. The options are always awarded at present
market value, and vest in 1 to 6 years. All stock options have a duration of ten
years before expiration. We do not reprice stock options.
Change in Control Arrangements
The Company has entered into Change in Control Agreements with Mr. Dougan,
Mr. Larson, and Mr. Florence. Pursuant to such agreements, upon certain change
of control events, if the Company terminates their employment without "cause,"
or if their responsibilities are significantly reduced within a two year period
after a change in control occurs, they will be entitled to receive an amount
equal to 2.5, 2.0, and 2.0 times, respectively, of their average base salary and
bonus during the preceding five years. The agreements are intended to ensure
continuity in management during a change in control, and are automatically
renewed each year unless terminated 60 days in advance by the Company. Copies of
these agreements may be found as exhibits to our Form 10K filings.
8
Company Performance and Chief Executive Officer Compensation
We determine compensation for Paul M. Dougan, President and Chief Executive
Officer, in the same manner as we do for other officers and key employees of the
Company. While there is no specific relationship between corporate performance
and base salary, Mr. Dougan's incentive compensation is largely dependent upon
the overall performance of the Company.
As oil prices continued to rise in the latter half of 1999, and in
recognition of the fact that Mr. Dougan had forgone any salary increases since
early 1997 in order to help us conserve cash, we increased his salary by
approximately 5% for fiscal year 1999. In setting Mr. Dougan's base salary, we
considered his contribution in responding to this more favorable economic
environment by reducing the Company's outstanding debt, developing new
exploration projects, and accelerating drilling programs. According to the
performance criteria of the cash bonus program, which includes reserve
replacement success and finding cost performance, Mr. Dougan earned a 18.75%
bonus for 2000.
EQUITY OIL COMPANY COMPENSATION COMMITTEE
Joseph C. Bennett, Chairman Douglas W. Brandrup
P.J. "Jack" Bernhisel W. Durand Eppler
William D. Forster William P. Hartl
Randolph G. Abood
AUDIT COMMITTEE DISCLOSURE
The Audit Committee of the Board is responsible for, among other things,
considering the appointment of the independent auditors for the Company,
reviewing with the auditors the plan and scope of the audit and audit fees,
monitoring the adequacy of reporting and internal controls and meeting
periodically with internal and independent auditors. Under the rules of the New
York Stock Exchange, all of the members of the Audit Committee are independent.
In 2000, the Audit Committee approved and adopted an Audit Committee
Charter, which is attached to this Proxy Statement as Exhibit A. Estimated fees
for the last fiscal year were: Audit and 10Q review--$71,000; and Other -- none.
REPORT OF THE AUDIT COMMITTEE
In connection with the December 31, 2000 financial statements, the Audit
Committee (1) reviewed and discussed the audited financial statements with
management; (2) discussed with the auditors the matters required by Statement on
Auditing Standards No. 61; and (3) received and discussed with the auditors the
matters required by Independence Standards Board Statement No. 1 and considered
the compatibility of non-audit services with the auditor's independence. Based
upon these reviews and discussions, the Audit Committee has recommended to the
Board of Directors, and the Board of Directors has approved, that the Company's
audited financial statements be included in the Securities and Exchange
Commission Annual Report on Form 10-K for the fiscal year ended December 31,
2000.
THE AUDIT COMMITTEE
William D. Forster, Chairman
Philip J. Bernhisel
W. Durand Eppler
William P. Hartl
Randolph G. Abood
This report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
9
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following entities and/or individuals own more than five percent of our
common stock:
Amount and
Nature of
Title of Name and Address of Beneficial Percent
Class Beneficial Owner Ownership of Class
- ----------------------------------------------------------------------------
Common J. Lynn Dougan(1) 860,000 6.8
215 South State Street
Salt Lake City, UT 84101
Dimensional Fund(2) 841,325 6.6
Advisors, Inc.
1299 Ocean Ave., 11th Floor
Santa Monica, CA 90401
John W. Straker, Jr.(3) 1,114,550 8.8
4900 Boggs Road
Zanesville, Ohio 43702-0910
Asher B. Edelman Group(4) 801,800 6.3
717 Fifth Avenue
New York, New York 10022
(1) The calculation of beneficial ownership includes 315,000 shares owned
by the Galena Group, a limited partnership of which Mr. Dougan is the general
partner and has sole voting and investment power. Mr. Dougan is the brother of
Paul M. Dougan, President of the Company.
(2) According to a Schedule 13-G dated February 2, 2001 by Dimensional Fund
Advisors, Inc. Dimensional Fund Advisors Inc. ("Dimensional"), an investment
advisor registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under the
Investment Company Act of 1940, and serves as investment manager to certain
other commingled group trusts and separate accounts. These investment companies,
trusts and accounts are the "Funds". In its role as investment adviser or
manager, Dimensional possesses voting and/or investment power over the
securities of the Issuer described in this schedule that are owned the Funds.
All securities reported in this schedule are owned by the Funds. Dimensional
disclaims beneficial ownership of such securities.
(3) According to a Schedule 13-D dated June 5, 2000, the names of the
persons filing that statement (the "Reporting Persons") are John W. Straker,
Jr., an individual ("Straker") and The Oxford Oil Company, an Ohio corporation
("Oxford Oil"). The Reporting Persons made a single joint filing because they
may be deemed to constitute a "group" within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 13d- 5(b)(1)
thereof. Oxford Oil is 100% owned by Mr. Straker. Mr. Straker holds directly
293,000 shares of common stock and Oxford Oil holds 821,550 shares of common
stock. Pursuant to Rule 13d-3 of the Exchange Act, Mr. Straker may be deemed to
be the beneficial owner of all 1,114,550 shares of common stock held by the
Reporting Persons.
(4) According to a Schedule 13-D dated February 2, 2001, Asher B. Edelman
owns no shares of Common Stock. As the President and sole Director of Edelman
Management, he may be deemed to be the beneficial owner of the common shares of
Edelman Value Partners, L.P., Edelman Value Fund, Ltd., and Wimbledon Edelman
Select Opportunities Hedged Fund, Ltd (the "Funds"), which Funds own 310,950,
421,600, and 69,250 shares, respectively, pursuant to Rule 13d-3 of the Exchange
Act.
10
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN
This page is a graphical representation of the performance graph required
to be filed with this proxy statement. The graph compares the return of an
investment in the Company's Common Stock at December 31, 1995 with a similar
investment in the stocks of the Company's selected peer group, a published
industry or line-of-business index, and a broad equity market index, which in
this case is the Russell 2000 Small Cap index.
The data points of the graph are as follows:
1995(1) 1996 1997 1998 1999 2000
Equity Oil Company 100 52.12 52.12 16.49 19.15 59.57
Russell 2000 Small Cap 100 116.49 142.54 138.91 168.44 163.35
S&P Oil & Gas Small Cap 100 170.93 153.75 92.98 116.52 230.26
Notes:
(1) Assumes that the value of the investment in the Company's common stock,
and in each index, was $100 on December 31, 1995, and that all dividends were
reinvested.
(2) As a published industry index, the Company uses the Standard & Poors
Oil & Gas (Exploration & Production) Small Cap Index.
11
EXPENSES OF SOLICITATION
We will pay the expense of soliciting proxies, including costs of
preparing, assembling and mailing of the notice, proxy, and proxy statement. We
have engaged D. F. King & Co., Inc., New York, to assist in the soliciting of
proxies from brokerage firms and others, and for forwarding the soliciting
materials to beneficial owners of stock. We estimate that up to $7,500 will be
incurred in connection with the solicitation. In addition to the use of the
mails, our Officers and Directors may solicit proxies by personal interview or
by telephone.
AUDITORS
Our financial statements for the year ended December 31, 2000 were examined
by the independent certified public accounting firm of PricewaterhouseCoopers
LLP. Our Board of Directors has again selected their firm to serve as the
auditors for the Company for 2001. A representative of PricewaterhouseCoopers
LLP is expected to be present at the stockholders' meeting to make any statement
they may desire or respond to such questions as may be appropriate.
DATE FOR STOCKHOLDER PROPOSALS
FOR THE 2002 ANNUAL MEETING
Stockholder proposals intended to be presented at our 2002 annual meeting
must be received at our principal office, P.O. Box 959, Salt Lake City, Utah
84110-0959 no later than December 1, 2001 to be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
According to the Bylaws of the Company, director nominee proposals must be
submitted by February 1, 2002 for consideration by the Nominating Committee.
ADDITIONAL INFORMATION
If you would like a copy of our most recent annual report on Form 10-K,
which we have filed with the Securities and Exchange Commission, please write to
Russell V. Florence, Secretary, Equity Oil Company, P.O. Box 959, Salt Lake
City, Utah 84110-0959. We will send to it you at no charge.
OTHER MATTERS
The Board does not intend to present any items of business other than those
stated in the Notice of Annual Meeting of Shareholders. If other matters are
properly brought before the meeting, the persons named in the accompanying proxy
will vote the shares represented by it in accordance with their best judgment.
Discretionary authority to vote on other matters is included in the proxy.
BY ORDER OF THE BOARD OF DIRECTORS
RUSSELL V. FLORENCE, Secretary
12
APPENDIX A
EQUITY OIL COMPANY
AUDIT COMMITTEE CHARTER
MISSION STATEMENT
The audit committee will assist the board of directors in fulfilling its
oversight responsibilities. The audit committee will review the financial
reporting process, the system of internal control, the audit process, and the
company's process for monitoring compliance with laws and regulations. In
performing its duties, the committee will maintain effective working
relationships with the board of directors, management, and the external
auditors. To effectively perform his role, each committee member will obtain an
understanding of the detailed responsibilities of committee membership as well
as the company's business, operations, and risks.
ORGANIZATION
Members of the audit committee will be appointed annually by the board of
directors. The committee will consist of not less than three members, each of
whom is financially literate. Each member of the committee will be an
independent director as defined by the National Association of Securities
Dealers. In selecting a committee chairman, the board of directors will choose
someone with strong leadership qualities, objectivity, and the ability to
promote effective working relationships among committee members, management, and
external auditors.
The committee will meet regularly, with at least one meeting held in
person. A detailed written agenda for each meeting will be prepared and
distributed to the committee members in advance, along with other relevant
information. In addition to the committee, other participants may include a
representative of the external auditors and management.
ROLES AND RESPONSIBILITIES
INTERNAL CONTROL
o Evaluate whether management is setting the appropriate tone at
the top by communicating the importance of internal control and
ensuring that all individuals possess an understanding of their
roles and responsibilities;
o Focus on the extent to which external auditors review computer
systems and applications, the security of such systems and
applications, and the contingency plan for processing financial
information in the event of a systems breakdown;
o Gain an understanding of whether internal control recommendations
made by external auditors have been implemented by management;
and
o Ensure that the external auditors keep the audit committee
informed about fraud, illegal acts, deficiencies in internal
control, and certain other matters.
FINANCIAL REPORTING
GENERAL
o Review significant accounting and reporting issues, including
recent professional and regulatory pronouncements, and understand
their impact on the financial statements; and
o Ask management and the external auditors about significant risks
and exposures and the plans to minimize such risks.
ANNUAL FINANCIAL STATEMENTS
o Review the annual financial statements and determine whether they
are complete and consistent with the information known to
committee members, and assess whether the financial statements
reflect appropriate accounting principles;
o Pay particular attention to complex and/or unusual transactions
such as restructuring charges and derivative disclosures;
o Focus on judgmental areas such as those involving valuation of
assets and liabilities, including, for example, the accounting
for and disclosure of obsolete or slow moving inventory; loan
losses; warranty, product, and environmental liability;
litigation reserves; and other commitments and contingencies;
o Meet with management and the external auditors to review the
financial statements and the results of the audit;
o Consider management's handling of proposed audit adjustments
identified by the external auditors;
o Review the MD&A and other sections of the annual report before
its release and consider whether the information is adequate and
consistent with members' knowledge about the company and its
operations; and
o Ensure that the external auditors communicate certain required
matters to the committee.
INTERIM FINANCIAL STATEMENTS
o Be briefed on how management develops and summarizes quarterly
financial information, the extent to which the external auditors
review quarterly financial information, and whether that review
is performed on a pre- or post-issuance basis;
o Meet with management and, if a pre-issuance review was completed,
with the external auditors, either telephonically or in person,
to review the interim financial statements and the results of the
review;
o To gain insight into the fairness of the interim statements and
disclosures, obtain explanations from management and from the
external auditors on whether:
o Actual financial results for the quarter or interim period varied
significantly from budgeted or projected results;
o Changes in financial ratios and relationships in the interim
financial statements are consistent with changes in the company's
operations and financing practices;
o Generally accepted accounting principles have been consistently
applied;
o There are any actual or proposed changes in accounting or
financial reporting practices;
o There are any significant or unusual events or transactions;
o The company's financial and operating controls are functioning
effectively;
o The company has complied with the terms of loan agreements or
security indentures; and
o The interim financial statements contain adequate and appropriate
disclosures.
o Ensure that the external auditors communicate certain required
matters to the committee.
COMPLIANCE WITH LAWS AND REGULATIONS
o Review the effectiveness of the system for monitoring compliance
with laws and regulations and the results of management's
investigation and follow-up (including disciplinary action) on
any fraudulent acts or accounting irregularities;
o Periodically obtain updates from management, general counsel, and
tax director regarding compliance;
o Be satisfied that all regulatory compliance matters have been
considered in the preparation of the financial statements; and
o Review the findings of any examinations by regulatory agencies
such as the Securities and Exchange Commission.
EXTERNAL AUDIT
o Review the external auditors' proposed audit scope and approach;
o Review the performance of the external auditors and recommend to
the board of directors the appointment or discharge of the
external auditors; and
o Review and confirm the independence of the external auditors by
reviewing the nonaudit services provided and the auditors'
assertion of their independence in accordance with professional
standards.
OTHER RESPONSIBILITIES
o Meet with the external auditors and management in separate
executive sessions to discuss any matters that the committee or
these groups believe should be discussed privately;
o Ensure that significant findings and recommendations made by the
internal and external auditors are received and discussed on a
timely basis;
o Review, with the company's counsel, any legal matters that could
have a significant impact on the company's financial statements;
o Review the policies and procedures in effect for considering
officers' expenses and perquisites;
o If necessary, institute special investigations and, if
appropriate, hire special counsel or experts to assist;
o Perform other oversight functions as requested by the full board;
and
o Review and update the charter; receive approval of changes from
the board.
REPORTING RESPONSIBILITIES
o Regularly update the board of directors about committee
activities and make appropriate recommendations.
APPENDIX "B"
FORM OF PROXY
EQUITY OIL COMPANY
P.O. BOX 959 SALT LAKE CITY, UT 84110-0959
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 2001
Notice is hereby given that the Annual Meeting of Stockholders of Equity
Oil Company will be held at the Company's executive office, Suite 806, 10 West
Third South, Salt Lake City, Utah, 84101, on the 9th day of May, 2001 at 2:00
p.m., to consider and act upon the following matters:
1. To elect two Directors to hold office for three years and until the
Annual Meeting of Stockholders in 2004, and until their successors are duly
elected and qualified.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on March 20, 2001,
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting or any adjournment thereof. You are cordially invited
to attend the meeting. In the event you will be unable to attend, you are
respectfully requested to sign, date and return the enclosed proxy in the return
envelope at your earliest convenience.
BY ORDER OF THE BOARD OF DIRECTORS
RUSSELL V. FLORENCE, Secretary
1. To elect the following nominees as directors to hold office for three
years and until the Annual Meeting of Stockholders in 2004 or until their
successors are duly elected and qualified.
NOMINEES: Paul M. Dougan and Douglas W. Brandrup
Note: to withhold authority to vote for any individual nominee, strike a
line through that nominee's name. Unless authority to vote for all the foregoing
nominees is withheld, this proxy will be deemed to confer authority to vote for
every nominee whose name is not stricken. In the event any nominee should be
unable to serve, or for good cause will not serve, it is intended that this
proxy shall be voted for such substitute nominee as may be selected by the Board
of Directors.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Please sign below exactly as name appears. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
EQUITY OIL COMPANY
The undersigned, revoking all prior proxies, hereby appoints Paul M.
Dougan, President, and Russell V. Florence, Secretary, and any one or both of
them with full power of substitution, as proxy or proxies of the undersigned, to
vote all shares of common stock of EQUITY OIL COMPANY of the undersigned as if
the undersigned were personally present and voting at the Company's Annual
Meeting, May 9, 2001, and at all adjournments thereof.