FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 333-57376
PROSPECTUS SUPPLEMENT
NOVEMBER 6, 2001
(TO PROSPECTUS DATED MARCH 29, 2001)
$300,000,000
(DUKE ENERGY FIELD SERVICES LLC LOGO)
DUKE ENERGY FIELD SERVICES, LLC
5.75% NOTES DUE 2006
------------------------------
We are offering $300,000,000 principal amount of our 5.75% notes due 2006.
The notes will mature on November 15, 2006. We will pay interest on the notes on
May 15 and November 15 of each year. The first interest payment on the notes
will be made on May 15, 2002. The notes will be issued only in denominations of
$1,000 and multiples of $1,000. We may, at our option, redeem the notes, in
whole or in part, prior to maturity at the redemption price as described in this
prospectus supplement.
The notes will be unsecured and will rank equally with all of our other
unsecured and unsubordinated indebtedness from time to time outstanding. The
notes will not be entitled to the benefit of any sinking fund.
------------------------------
<Table>
<Caption>
PER NOTE TOTAL
-------- ------------
Price to public (1)......................................... 99.870% $299,610,000
Underwriting discount (2)................................... 0.600% $ 1,800,000
Proceeds, before expenses, to us............................ 99.270% $297,810,000
</Table>
- ---------------
(1) Plus accrued interest from November 9, 2001, if settlement occurs after that
date.
(2) See "Underwriting."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through the
facilities of The Depository Trust Company on or about November 9, 2001.
------------------------------
SOLE BOOK-RUNNING MANAGER
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS INC. SCOTIA CAPITAL
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<Table>
<Caption>
PAGE
----
Summary of the Offering..................................... S-3
Use of Proceeds............................................. S-4
Recent Financial Data....................................... S-4
Ratio of Earnings to Fixed Charges.......................... S-5
Description of the Notes.................................... S-5
Underwriting................................................ S-9
Experts..................................................... S-10
Validity of the Notes....................................... S-10
PROSPECTUS
About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Cautionary Statement about Forward-Looking Statements....... 2
Our Company................................................. 3
Ratio of Earnings to Fixed Charges.......................... 5
Use of Proceeds............................................. 5
Description of Debt Securities.............................. 6
Plan of Distribution........................................ 15
Experts..................................................... 17
Validity of the Securities.................................. 17
</Table>
---------------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. If this prospectus
supplement is inconsistent with the accompanying prospectus, you should rely on
this prospectus supplement. We are not, and the underwriters are not, making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information in this prospectus
supplement and the accompanying prospectus is accurate only as of the respective
dates on the front of those documents or earlier dates specified therein. Our
business, financial condition, results of operations and prospects may have
changed since those dates.
S-2
SUMMARY OF THE OFFERING
Issuer........................ Duke Energy Field Services, LLC.
Securities Offered............ $300,000,000 principal amount of 5.75% notes
due 2006.
Maturity...................... The notes will mature on November 15, 2006.
Interest Payment Dates........ May 15 and November 15 of each year, commencing
May 15, 2002.
Redemption.................... We may redeem the notes at our option at any
time, in whole or in part, at a redemption
price equal to 100% of the principal amount of
the notes being redeemed, plus a make whole
premium, together with accrued and unpaid
interest to the redemption date. See
"Description of the Notes -- Optional
Redemption" for a description of how the
redemption price is calculated. The notes do
not have the benefit of a sinking fund.
Ranking....................... The notes will be our direct and unsecured
obligations and will rank equal in priority
with any other series of notes and with our
other unsecured and unsubordinated indebtedness
from time to time outstanding.
Certain Covenants............. The indenture governing the notes contains
certain covenants that, among other things,
limit our ability and the ability of certain of
our subsidiaries:
- to create liens on our assets; and
- to enter into sale and leaseback
transactions.
See "Description of Debt Securities" in the
accompanying prospectus.
S-3
USE OF PROCEEDS
We expect our net proceeds from the offering of the notes to be
approximately $298.4 million. We intend to use the net proceeds to repay a
portion of our outstanding commercial paper. The proceeds of the commercial
paper were originally used to make one-time cash distributions of approximately
$1,525 million to Duke Energy Corporation and approximately $1,220 million to
Phillips Petroleum Company in connection with the March 31, 2000 Combination (as
described in the accompanying prospectus) and for working capital requirements.
At October 31, 2001, we had outstanding approximately $457.5 million of
commercial paper with maturity dates ranging from one day to seven days and with
annual interest rates ranging from 2.85% to 3.02%.
RECENT FINANCIAL DATA
The following table sets forth certain recent financial data. The
information set forth below should be read in conjunction with our audited
consolidated financial statements for the year ended December 31, 2000
incorporated by reference in this prospectus supplement. See "Where You Can Find
More Information" in the accompanying prospectus. The results of operations for
the nine months ended September 30, 2001, are not necessarily indicative of the
results for the full year.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER UNIT DATA AND RATIOS)
INCOME STATEMENT DATA:
Operating revenues........................... $1,681,127 $2,551,995 $7,597,524 $6,175,566
========== ========== ========== ==========
Operating income............................. 114,672 152,501 439,753 345,009
========== ========== ========== ==========
Earnings before interest and tax (1)......... 121,216 156,809 462,377 364,024
Interest expense............................. 42,455 46,343 124,847 106,194
Income tax expense (benefit)................. (75) (3,838) 263 (310,603)
Cumulative effect of accounting change, net
of tax..................................... -- -- 411 --
---------- ---------- ---------- ----------
Net income................................... 78,836 114,304 336,856 568,433
Dividends on preferred members' interest..... 7,125 4,592 21,375 4,592
---------- ---------- ---------- ----------
Earnings available for members' interest..... $ 71,711 $ 109,712 $ 315,481 $ 563,841
========== ========== ========== ==========
OTHER DATA:
Natural gas transported and/or processed,
Tbtu/day................................... 8.8 8.2 8.5 7.4
Natural gas liquids production, MBbl/day..... 412.8 417.0 396.9 349.9
Natural gas marketed, Tbtu/day............... 1.6 0.5 1.6 0.5
Average natural gas price per MMBtu (2)...... $ 2.88 $ 4.27 $ 4.88 $ 3.42
Average natural gas liquids price per gallon
(3)........................................ $ 0.39 $ 0.55 $ 0.49 $ 0.51
EBITDA (1)................................... $ 193,813 $ 219,633 $ 669,691 $ 532,207
Ratio of EBITDA to interest expense (4)...... 4.57 4.74 5.36 5.01
</Table>
<Table>
<Caption>
SEPTEMBER 30, 2001 DECEMBER 31, 2000
------------------ -----------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Total assets................................................ $6,589,296 $6,170,098
Preferred members' interest................................. 300,000 300,000
Members' equity............................................. 2,644,984 2,420,835
Long-term debt.............................................. 1,941,090 1,688,157
</Table>
- ---------------
(1) EBITDA consists of income from continuing operations before interest
expense, income tax expense, and depreciation and amortization expense.
Earnings before interest and tax (EBIT) consists of income from
S-4
continuing operations before interest expense and income tax expense.
Neither EBITDA nor EBIT is a measurement presented in accordance with
accounting principles generally accepted in the United States. You should
not consider either measure in isolation from or as a substitute for net
income or cash flow measures prepared in accordance with accounting
principles generally accepted in the United States or as a measure of our
profitability or liquidity. EBITDA is included as a supplemental disclosure
because it may provide useful information regarding our ability to service
debt and to fund capital expenditures. However, not all EBITDA may be
available to service debt.
(2) Based on the NYMEX Henry Hub prices for the periods indicated.
(3) Based on the index prices from the Mont Belvieu and Conway market hubs that
are weighted by our component and location mix for the periods indicated.
(4) The ratio of EBITDA to interest expense represents a ratio that provides an
investor with information as to our current ability to meet our financing
costs.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to fixed
charges for the periods indicated. From a financial reporting perspective, we
are the successor to Duke Energy Corporation's North American midstream natural
gas business. The subsidiaries of Duke Energy Corporation that conducted this
business were contributed to us in March 2000 immediately prior to the
combination of these subsidiaries with the North American midstream natural gas
business of Phillips Petroleum Company. For periods prior to the Combination,
Duke Energy Field Services, LLC and these former subsidiaries of Duke Energy
Corporation collectively are referred to as the "Predecessor Company."
<Table>
<Caption>
PREDECESSOR COMPANY COMPANY
------------------------- ------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- -----------------
Ratio of earnings to fixed
charges.......................... 9.11 2.52 1.07 2.33 3.43 3.64
</Table>
For purposes of calculating the ratios of earnings to fixed charges: (1)
"earnings" means income before extraordinary charges plus income taxes and fixed
charges, and (2) "fixed charges" include interest on indebtedness, amortization
of deferred financing costs, and that portion of lease expense that is deemed to
be representative of an interest factor. The ratio includes amounts from our
company, all of our majority-owned subsidiaries and our proportionate share of
distributed amounts from 50% owned investments accounted for using the equity
method.
DESCRIPTION OF THE NOTES
The following description of the material terms of the notes is only a
summary and is not intended to be comprehensive. The description should be read
together with the description of the general terms and provisions of Debt
Securities provided under the caption "Description of Debt Securities" in the
accompanying prospectus.
GENERAL
The notes will be limited in principal amount to $300,000,000 and will be
issued as a series of Debt Securities under the indenture dated as of August 16,
2000, as amended and supplemented, between us and The Chase Manhattan Bank, as
Trustee.
The entire principal amount of the notes will mature and become due and
payable, together with any accrued and unpaid interest, on November 15, 2006.
The notes will not be subject to any sinking fund provision.
S-5
INTEREST
The notes will bear interest from November 9, 2001 at the annual rate
stated on the cover page of this prospectus supplement. We will pay interest
semiannually on May 15 and November 15 of each year, commencing May 15, 2002, to
each person in whose name the notes are registered at the close of business on
the fifteenth calendar day before the relevant interest payment date. The amount
of interest payable will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable is not a
business day, we will pay that interest on the next business day without any
interest or other payment due to the delay.
OPTIONAL REDEMPTION
We will have the right to redeem the notes, in whole or in part at any
time, at a redemption price equal to the greater of (1) 100% of the principal
amount of the notes to be redeemed and (2) the sum of the present values of the
remaining scheduled payments of principal and interest on such notes (exclusive
of interest accrued to the redemption date) discounted to the redemption date on
a semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate plus 30 basis points, plus, in either case, accrued and
unpaid interest on the principal amount being redeemed to such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term of the notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such notes.
"Comparable Treasury Price" means with respect to any redemption date for
notes, the average of two Reference Treasury Dealer Quotations for such
redemption date.
"Quotation Agent" means the Reference Treasury Dealer appointed by us.
"Reference Treasury Dealer" means each of Banc of America Securities LLC
and Merrill Lynch Government Securities Inc., and their respective successors;
provided, however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), we
will substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding such redemption date.
"Treasury Rate" means, with respect to any redemption date, (1) the yield,
under the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release designated
"H.15 (519)" or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Comparable Treasury Issue (if no maturity is within three months before
or after the maturity date of the notes to be redeemed, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined, and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight-line basis, rounding to the nearest month) or (2)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
year equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date. The Treasury Rate will be calculated on
the third business day preceding the redemption date.
S-6
REDEMPTION PROCEDURES
We will provide not less than 30 nor more than 60 days' notice mailed to
each registered holder of the notes to be redeemed. If the redemption notice is
given and funds deposited as required, then interest will cease to accrue on and
after the redemption date on the notes or portions of such notes called for
redemption. In the event that any redemption date is not a business day, we will
pay the redemption price on the next business day without any interest or other
payment due to the delay.
RANKING
The notes will be our direct and unsecured obligations. The notes will rank
equal in priority with all of our other existing and future unsecured and
unsubordinated indebtedness and senior in right of payment to all of our
existing and future subordinated debt. At October 31, 2001, we had outstanding
approximately $2.4 billion of unsecured and unsubordinated indebtedness. The
indenture contains no restrictions on the amount of additional indebtedness that
we may issue under it.
DENOMINATIONS
The notes will be issuable in denominations of $1,000 and integral
multiples of $1,000.
DEFEASANCE AND COVENANT DEFEASANCE
The notes will be subject to Defeasance and Covenant Defeasance as defined
and described in the indenture. See "Description of Debt
Securities -- Defeasance and Covenant Defeasance" in the accompanying
prospectus.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as the initial securities
depositary for the notes. The notes will be initially issued as fully registered
securities registered in the name of Cede & Co., DTC's nominee. One or more
fully registered global certificates will be issued, representing the total
principal amount of the notes, and will be deposited with the Trustee as
custodian for DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants
("participants") deposit with DTC. DTC also facilitates the settlement among
participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("direct participants"). DTC is owned by a number of its direct
participants and by The New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly ("indirect
participants"). The rules applicable to DTC and its participants are on file
with the Securities and Exchange Commission.
Purchases of notes within the DTC system must be made by or through direct
participants, which will receive a credit for the notes on DTC's records. The
ownership interest of each actual purchaser of notes ("beneficial owner") is in
turn to be recorded on the direct and indirect participants' records. Beneficial
owners will not receive written confirmation from DTC of their purchases, but
beneficial owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the direct or indirect participants through which the beneficial owners
entered into the transaction. Transfers of ownership interests in the notes are
to be accomplished by entries made on the books
S-7
of participants acting on behalf of beneficial owners. Beneficial owners will
not receive certificates representing their ownership interests in the notes,
except in the event that use of the book-entry system for the notes is
discontinued.
To facilitate subsequent transfers, all notes deposited by participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of notes with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
beneficial owners of the notes. DTC's records reflect only the identity of the
direct participants to whose accounts such notes are credited, which may or may
not be the beneficial owners. The participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices will be sent to DTC. If less than all of the notes are
being redeemed, DTC will reduce the amount of interest of each direct
participant in the notes in accordance with its procedures.
Neither DTC nor Cede & Co. will consent or vote with respect to notes.
Under its usual procedures, DTC would mail an Omnibus Proxy to us as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose account notes
are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Payments on the notes will be made to Cede & Co., as nominee of DTC. DTC's
practice is to credit direct participants' accounts, upon DTC's receipt of funds
and corresponding detailed information, on the relevant payment date in
accordance with their respective holdings shown on DTC's records. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants and not of DTC or us, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment to Cede & Co. is the responsibility of our company or of the paying
agent, disbursement of such payments to direct participants is the
responsibility of Cede & Co. and disbursement of such payments to the beneficial
owners is the responsibility of direct and indirect participants.
Except as provided herein, a beneficial owner of an interest in a global
note will not be entitled to receive physical delivery of notes. Accordingly,
each beneficial owner must rely on the procedures of DTC to exercise any rights
under the notes. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global note.
DTC may discontinue providing its services as securities depositary with
respect to the notes at any time by giving reasonable notice to us. Under such
circumstances, in the event that a successor securities depositary is not
obtained within 90 days, certificates representing the notes will be printed and
delivered to the holders of record. Additionally, we may decide to discontinue
use of the system of book-entry transfers through DTC (or a successor securities
depositary) with respect to the notes. In that event, certificates for such
notes will be printed and delivered to the holders of record.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but neither we
nor any underwriter takes any responsibility for its accuracy. We have no
responsibility for the performance by DTC or its participants of their
respective obligations, including obligations that they have under the rules and
procedures that govern their operations.
S-8
UNDERWRITING
Duke Energy Field Services, LLC and the underwriters for the offering named
below have entered into an underwriting agreement with respect to the notes.
Duke Energy Field Services, LLC has agreed to sell and each underwriter has
severally agreed to purchase the aggregate principal amount of notes indicated
in the following table.
<Table>
<Caption>
AGGREGATE
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
- ----------- ------------
Banc of America Securities LLC.............................. $210,000,000
Banc One Capital Markets Inc. .............................. 45,000,000
Scotia Capital (USA) Inc. .................................. 45,000,000
------------
Total............................................. $300,000,000
============
</Table>
The obligation of the underwriters to purchase the notes is subject to the
terms and conditions set forth in the underwriting agreement. The underwriting
agreement requires the underwriters to purchase all the notes offered by this
prospectus supplement, if any of such notes are purchased.
Notes sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus
supplement. Any notes sold by the underwriters to securities dealers may be sold
at a discount from the initial public offering price of up to 0.35% of the
principal amount of the notes. Any such securities dealers may resell any notes
purchased from the underwriters to certain other brokers or dealers at a
discount from the initial public offering price of up to 0.25% of the principal
amount of the notes. If all of the notes are not sold at the initial public
offering price, the underwriters may change the offering price and the other
selling terms.
The notes are a new issue of securities with no established trading market.
We have been advised by the underwriters that they intend to make a market in
the notes but are not obligated to do so and may discontinue market making at
any time without notice. We cannot assure you as to the liquidity of the trading
market for the notes.
In connection with the offering, the underwriters may purchase and sell the
notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater aggregate
principal amount of notes than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the notes
while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because they have repurchased notes sold by or for the
account of such underwriter in stabilizing or short covering transactions.
The expenses of the offering, not including the underwriting discount, are
estimated to be approximately $200,000. The underwriters have agreed to
reimburse us $750,000, of which approximately $200,000 is for expenses of the
offering.
We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, and to
contribute to payments in respect thereto.
In the ordinary course of their respective businesses, the underwriters and
their affiliates have engaged, and may in the future engage, in commercial
banking and/or investment banking transactions with us and our affiliates.
Because more than ten percent of the net proceeds of this offering may be paid
to members or affiliates of members of the National Association of Securities
Dealers, Inc. participating in the offering, the offering will be conducted in
accordance with NASD Conduct Rule 2710(c)(8).
S-9
EXPERTS
The financial statements incorporated in this prospectus supplement by
reference from Duke Energy Field Services, LLC's Annual Report on Form 10-K for
the year ended December 31, 2000, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and has been so incorporated in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for us by Vinson & Elkins
L.L.P., Houston, Texas and for the underwriters by Sullivan & Cromwell, New
York, New York.
S-10
PROSPECTUS
$550,000,000
DUKE ENERGY FIELD SERVICES, LLC
---------------------
DEBT SECURITIES
---------------------
This prospectus contains summaries of the general terms of these
securities. You will find the specific terms of any securities offered, and the
manner in which they are being offered, in supplements to this prospectus. You
should read this prospectus and any prospectus supplement carefully before you
invest.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March 29, 2001.
TABLE OF CONTENTS
<Table>
About This Prospectus....................................... 1
Where You Can Find More Information......................... 1
Cautionary Statement About Forward-Looking Statements....... 2
Our Company................................................. 3
Ratio Of Earnings To Fixed Charges.......................... 5
Use Of Proceeds............................................. 5
Description Of Debt Securities.............................. 6
Plan Of Distribution........................................ 15
Experts..................................................... 17
Validity Of The Securities.................................. 17
</Table>
ii
ABOUT THIS PROSPECTUS
This prospectus is part of registration statements that we filed with the
Securities and Exchange Commission using the "shelf" registration process. Under
this shelf registration process, we may issue the debt securities described in
this prospectus in one or more offerings up to a total dollar amount of
$550,000,000 (or its equivalent in foreign currencies).
This prospectus constitutes part of the registration statements on Form S-3
filed with the SEC under the Securities Act of 1933. It omits some of the
information contained in the registration statements, and reference is made to
the registration statements for further information with respect to us and the
securities we are offering. Any statement contained in this prospectus
concerning the provisions of any document filed as an exhibit to the
registration statements or otherwise filed with the SEC is not necessarily
complete, and in each instance reference is made to the copy of the document
filed.
This prospectus provides you with a general description of the debt
securities that we may offer. Each time we sell debt securities, we will provide
a prospectus supplement that will contain specific information about the terms
of that offering and the debt securities to be sold. The prospectus supplement
may also add, update or change information contained in this prospectus. Any
statement that we make in this prospectus will be modified or superseded by any
inconsistent statement made by us in a prospectus supplement. The registration
statements filed with the SEC includes exhibits that provide more details about
the matters discussed in this prospectus. You should read this prospectus, the
related exhibits filed with the SEC and any prospectus supplement, together with
the additional information described under "Where You Can Find More
Information."
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Form 10 for the registration of our member
interests pursuant to Section 12(g) of the Securities Exchange Act of 1934. As a
result, we are now required to comply with the informational requirements of the
Securities Exchange Act of 1934, and, accordingly, we will file annual,
quarterly and special reports, and other information with the SEC (File No.
000-31095). Our SEC filings are available to the public over the Internet at the
SEC's web site at http://www.sec.gov. You may also read and copy any document we
file at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the SEC's Public
Reference Room in Washington, D.C. by calling the SEC at 1-800-SEC-0330.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities being registered or until we terminate this
registration statement:
- Our Form 10 filed with the SEC.
- Our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2000
and September 30, 2000 filed with the SEC.
- Our Current Reports on Form 8-K filed with the SEC on August 16, 2000 and
February 1, 2001.
If you ask us by phone or in writing, we will give you a free copy of any
or all of the information incorporated by reference (other than exhibits, unless
they are specifically incorporated by reference). Please direct your request by
mail to Duke Energy Field Services, LLC, Attention: Vice President, Investor
Relations, 370 17th Street, Suite 900, Denver, Colorado 80202 or by telephone at
(303) 595-3331.
1
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
any other person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. We
are not making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should not assume that the information in
this prospectus, any prospectus supplement or any document incorporated by
reference is accurate as of any date other than the date of those documents. Our
business, financial condition, results of operations and prospects may have
changed since those dates.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference statements that do
not directly or exclusively relate to historical facts. Such statements are
"forward-looking statements." You can typically identify forward-looking
statements by the use of forward-looking words, such as "may," "could,"
"project," "believe," "anticipate," "expect," "estimate," "potential," "plan,"
"forecast" and other similar words.
All statements other than statements of historical facts contained in this
prospectus, including statements regarding our future financial position,
business strategy, budgets, projected costs and plans and objectives of
management for future operations, are forward-looking statements.
The forward-looking statements in this prospectus reflect our intentions,
plans, expectations, assumptions and beliefs about future events and are subject
to risks, uncertainties and other factors, many of which are outside our
control. Important factors that could cause actual results to differ materially
from the expectations expressed or implied in the forward-looking statements
include known and unknown risks. Known risks include, but are not limited to the
following:
- the timing and extent of changes in commodity prices and demand for our
services;
- our use of derivative financial instruments to hedge commodity and
interest rate risks;
- our ability to access the debt and equity markets, which will depend on
general market conditions and the credit ratings for our debt
obligations;
- changes in laws and regulations, particularly with regard to taxes,
safety and protection of the environment or the increased regulation of
the gas gathering and processing industry;
- weather and other natural phenomena;
- industry changes, including the impact of consolidations, and changes in
competition;
- our ability to obtain required approvals for construction or
modernization of gathering and processing facilities, and the timing of
production from such facilities, which are dependent on the issuance by
federal, state and municipal governments or agencies of building,
environmental and other permits, the availability of specialized
contractors and work force and prices of and demand for products; and
- the effect of accounting policies issued periodically by accounting
standard-setting bodies.
In light of these risks, uncertainties and assumptions, the forward-looking
events referred to in this prospectus or in any prospectus supplement might not
occur or might occur to a different extent or at a different time than described
in this prospectus or in any prospectus supplement. Except as otherwise required
by law, we undertake no obligation to update or revise our forward-looking
statements, whether as a result of new information, future events or otherwise.
2
OUR COMPANY
Duke Energy Field Services, LLC is a company that holds the combined North
American midstream natural gas gathering, processing, marketing and natural gas
liquids businesses of Duke Energy Corporation ("Duke Energy") and Phillips
Petroleum Company ("Phillips"). The transaction in which those businesses were
combined on March 31, 2000 is referred to in this prospectus as the
"Combination." Our limited liability company agreement limits the scope of our
business to the midstream natural gas industry in the United States and Canada,
the marketing of natural gas liquids in Mexico and the transportation, marketing
and storage of other petroleum products, unless otherwise approved by our Board
of Directors.
Unless the context otherwise requires, descriptions of assets, operations
and results in this prospectus give effect to the Combination and related
transactions, the transfer to us of additional midstream natural gas assets
acquired by Duke Energy or Phillips prior to the Combination and the transfer to
us of the general partner of TEPPCO Partners, L.P. ("TEPPCO"). In this
prospectus, the terms "we," "us" and "our" refer to Duke Energy Field Services,
LLC and our subsidiaries, giving effect to the Combination and related
transactions.
The midstream natural gas industry is the link between the exploration and
production of raw natural gas and the delivery of its components to end-use
markets. We operate in the two principal business segments of the midstream
natural gas industry:
- natural gas gathering, processing, transportation and storage; and
- natural gas liquids ("NGLs") fractionation, transportation, marketing and
trading.
We believe that we are one of the largest gatherers of raw natural gas,
based on wellhead volume, in North America. We are the largest producer, and we
believe that we are one of the largest marketers, of NGLs in North America. In
2000:
- we gathered and/or transported an average of approximately 7.6 trillion
British thermal units per day of raw natural gas;
- we produced an average of approximately 360,000 barrels per day of NGLs;
and
- we marketed and traded an average of approximately 500,000 barrels per
day of NGLs.
We gather raw natural gas through gathering systems located in seven major
natural gas producing regions: Permian Basin, Mid-Continent, East
Texas -- Austin Chalk -- North Louisiana, Onshore Gulf of Mexico, Rocky
Mountains, Offshore Gulf of Mexico and Western Canada. Our gathering systems
consist of approximately 57,000 miles of gathering pipe, with approximately
35,000 active connections to producing wells.
Our natural gas processing operations involve the separation of raw natural
gas gathered both by our gathering system and by third party systems into NGLs
and residue gas. We process the raw natural gas at our 68 owned and operated
plants and at 11 third-party operated facilities in which we hold an equity
interest.
The NGLs separated from the raw natural gas by our processing operations
are either sold and transported as "NGL raw mix" or further separated through a
process known as fractionation into their individual components (ethane,
propane, butanes and natural gasoline) and then sold as components. We
fractionate NGL raw mix at our 12 owned and operated processing facilities and
at two third-party operated fractionators in which we hold an equity interest.
We sell NGLs to a variety of customers ranging from large, multi-national
petrochemical and refining companies to small regional retail propane
distributors. Substantially all of our NGL sales are made at market-based
prices, including the approximately 40% of our NGL production that is committed
to Phillips under an existing 15-year contract, of which 14 years remain.
3
The residue gas that results from our processing is sold at market-based
prices to marketers or end users including large industrial customers and
natural gas and electric utilities serving individual consumers. We market
residue gas through our wholly owned gas marketing company. We also store
residue gas at our 8.5 billion cubic foot natural gas storage facility.
On March 31, 2000, we obtained by transfer from Duke Energy the general
partner of TEPPCO Partners, L.P., a publicly traded limited partnership which
owns and operates a network of pipelines for refined products and crude oil. The
general partner is responsible for the management and operations of TEPPCO. We
believe that our ownership of the general partner of TEPPCO improves our
business position in the transportation sector of the midstream natural gas
industry and provides additional flexibility in pursuing our disciplined
acquisition strategy by providing an alternative acquisition vehicle. It also
provides us with an opportunity to sell appropriate assets currently held by our
company to TEPPCO. Through our ownership of the general partner of TEPPCO we
have the right to receive from TEPPCO incentive cash distributions in addition
to a 2% share of distributions based on our general partner interest. At
TEPPCO's 2000 per unit distribution level, the general partner:
- receives approximately 20% of the cash distributed by TEPPCO to its
partners, which consists of 18% from the incentive cash distribution and
2% from the general partner interest; and
- under the incentive cash distribution provisions, receives 50% of any
increase in TEPPCO's per unit cash distributions.
Our principal executive offices are located at 370 17th Street, Suite 900,
Denver, Colorado 80202, and our telephone number is (303) 595-3331.
4
RATIO OF EARNINGS TO FIXED CHARGES
The following table contains our consolidated ratio of earnings to fixed
charges for the periods indicated. From a financial reporting perspective, we
are the successor to Duke Energy's North American midstream natural gas
business. The subsidiaries of Duke Energy that conducted this business were
contributed to us in March 2000 immediately prior to the combination of these
subsidiaries with the North American midstream natural gas business of Phillips
Petroleum Company. For periods prior to the Combination, Duke Energy Field
Services, LLC and these former subsidiaries of Duke Energy collectively are
referred to as the "Predecessor Company."
<Table>
<Caption>
COMPANY
-------------
NINE MONTHS
PREDECESSOR COMPANY ENDED
-------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- -------------
Ratio of earnings to fixed charges................ 4.10 9.11 2.52 1.07 2.33 3.38
</Table>
For purposes of calculating the ratios of earnings to fixed charges: (1)
"earnings" means income before extraordinary charges plus income taxes and fixed
charges, and (2) "fixed charges" include interest on indebtedness, amortization
of deferred financing costs, and that portion of lease expense that is deemed to
be representative of an interest factor. The ratio includes amounts from our
company, all of our majority-owned subsidiaries and our proportionate share of
distributed amounts from 50% owned investments accounted for using the equity
method.
USE OF PROCEEDS
Unless the applicable prospectus supplement states otherwise, we will use
the net proceeds from the sale of the debt securities offered by this prospectus
and any prospectus supplement for general corporate purposes, which may include
repayment of indebtedness, capital expenditures, future acquisitions, advances
to subsidiaries and additions to our working capital. If we do not use the net
proceeds immediately, we may temporarily invest them in short-term
interest-bearing obligations or deposit them with banks.
5
DESCRIPTION OF DEBT SECURITIES
Any debt securities issued using this prospectus ("Debt Securities") will
be our direct unsecured general obligations. The Debt Securities will be senior
debt securities.
The Debt Securities will be issued under an Indenture (the "Indenture")
between us and The Chase Manhattan Bank (the "Trustee").
The Debt Securities may be issued from time to time in one or more series.
The particular terms of each series that is offered by a prospectus supplement
will be described in the prospectus supplement.
We have summarized selected provisions of the Indenture below. The summary
is not complete. The form of the Indenture has been filed as an exhibit to the
registration statement, and you should read the Indenture for provisions that
may be important to you. Whenever we refer in this prospectus or in any
prospectus supplement to particular sections or defined terms of the Indenture,
such sections or defined terms are incorporated by reference herein or therein,
as applicable. Capitalized terms used in this summary have the meanings
specified in the Indenture.
GENERAL
The Indenture provides that Debt Securities in separate series may be
issued from time to time without limitation as to aggregate principal amount. We
may specify a maximum aggregate principal amount for the Debt Securities of any
series. We will determine the terms and conditions of the Debt Securities,
including the maturity, principal and interest, but those terms must be
consistent with the Indenture. Debt Securities of a series need not be issued at
the same time, bear interest at the same rate or mature on the same date.
Each series of Debt Securities will rank equally with every other series of
Debt Securities and with all of our other unsecured and unsubordinated debt.
A prospectus supplement relating to any series of Debt Securities being
offered will include specific terms related to the offering, including the price
or prices at which the Debt Securities to be offered will be issued. These terms
will include some or all of the following:
- the title of the Debt Securities;
- the total principal amount of the Debt Securities;
- the date or dates on which the principal of the Debt Securities will be
payable or the method for determining the date or dates, and any right
that we have to change the date on which principal is payable;
- the interest rate or rates of the Debt Securities, if any, or the method
for determining the rate or rates, and the date or dates from which
interest will accrue;
- any interest payment dates and the regular record date for the interest
payable on each interest payment date, if any;
- whether we may extend the interest payment periods and, if so, the terms
of the extension;
- the places where payments on the Debt Securities will be payable;
- whether we have the option to redeem the Debt Securities and, if so, the
terms of our redemption option;
- any obligation we have to redeem the Debt Securities through a sinking
fund or to purchase the Debt Securities through a purchase fund or at the
option of the holder;
- whether the Debt Securities are defeasible;
- the currency in which payments will be made if other than U.S. dollars,
and the manner of determining the equivalent of those amounts in U.S.
dollars;
6
- if payments may be made, at our election or at the holder's election, in
a currency other than that in which the Debt Securities are stated to be
payable, then the currency in which those payments may be made, the terms
and conditions of the election and the manner of determining those
amounts;
- the portion of the principal payable upon acceleration of maturity, if
other than the entire principal;
- whether the Debt Securities will be issuable as global securities and, if
so, the securities depositary;
- any index or formula used for determining principal, premium or interest;
- if the principal payable on the maturity date will not be determinable on
one or more dates prior to the maturity date, the amount which will be
deemed to be such principal amount or the manner of determining it;
- any addition to or change in the events of default in the Indenture;
- any addition to or change in the covenants in the Indenture; and
- any other terms of the Debt Securities not inconsistent with the
provisions of the Indenture.
Unless we state otherwise in the prospectus supplement, we will issue the
Debt Securities only in fully registered form, without coupons, and there will
be no service charge for any registration of transfer or exchange of the Debt
Securities. We may, however, require payment to cover any tax or other
governmental charge payable in connection with any transfer or exchange. Subject
to the terms of the Indenture and the limitations applicable to global
securities, Debt Securities may be transferred or exchanged at the corporate
trust office of the Trustee or at any other office or agency maintained by us
for such purpose.
The Debt Securities of each series will be issuable in denominations of
$1,000 and any integral multiples of $1,000, unless we state otherwise in the
prospectus supplement.
We may offer and sell Debt Securities, including original issue discount
Debt Securities, at a substantial discount below their principal amount. The
applicable prospectus supplement will describe special U.S. federal income tax
and any other considerations applicable to those securities. In addition, the
applicable prospectus supplement may describe certain special U.S. federal
income tax or other considerations, if any, applicable to any Debt Securities
that are denominated in a currency other than U.S. dollars.
RANKING
Each series of Debt Securities will be unsecured senior obligations and
will rank equally with every other series of Debt Securities and with all of our
other unsecured and unsubordinated debt. The Debt Securities will, however, be
effectively subordinated in right of payment to any secured indebtedness to the
extent of the value of the assets securing that indebtedness. Except as provided
in the Indenture or specified in any authorizing resolution or supplemental
indenture relating to a series of Debt Securities to be issued, the Indenture
will not limit the amount of additional indebtedness that may rank equally with
the Debt Securities or the amount of indebtedness, secured or otherwise, that
may be incurred or preferred stock that may be issued by any of our
subsidiaries.
GLOBAL SECURITIES
We may issue some or all of the Debt Securities as book-entry securities.
Any such book-entry securities will be represented by one or more fully
registered global certificates. We will register each global security with, or
on behalf of, a securities depositary identified in the applicable prospectus
supplement. Each global certificate will be deposited with the securities
depositary or its nominee or a custodian for the securities depositary.
7
As long as the securities depositary or its nominee is the registered
holder of a global security representing Debt Securities, that person will be
considered the sole owner and holder of the global security and the Debt
Securities it represents for all purposes. Except in limited circumstances,
owners of beneficial interests in a global security:
- may not have the global security or any Debt Securities it represents
registered in their names;
- may not receive or be entitled to receive physical delivery of
certificated Debt Securities in exchange for the global security; and
- will not be considered the owners or holders of the global security or
any Debt Securities it represents for any purposes under the Debt
Securities or the Indenture.
We will make all payments of principal and any premium and interest on a
global security to the securities depositary or its nominee as the holder of the
global security. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of securities in definitive form. These
laws may impair the ability to transfer beneficial interests in a global
security.
Ownership of beneficial interests in a global security will be limited to
institutions having accounts with the securities depositary or its nominee,
which are called "participants" in this discussion, and to persons that hold
beneficial interests through participants. When a global security representing
Debt Securities is issued, the securities depositary will credit on its
book-entry, registration and transfer system the principal amounts of Debt
Securities the global security represents to the accounts of its participants.
Ownership of beneficial interests in a global security will be shown only on,
and the transfer of those ownership interests will be effected only through,
records maintained by:
- the securities depositary, with respect to participants' interests; and
- any participant, with respect to interests the participant holds on
behalf of other persons.
Payments participants make to owners of beneficial interests held through
those participants will be the responsibility of those participants. The
securities depositary may from time to time adopt various policies and
procedures governing payments, transfers, exchanges and other matters relating
to beneficial interests in a global security. None of the following will have
any responsibility or liability for any aspect of the securities depositary's or
any participant's records relating to beneficial interests in a global security
representing Debt Securities, for payments made on account of those beneficial
interests or for maintaining, supervising or reviewing any records relating to
those beneficial interests:
- our company;
- the Trustee under the Indenture; or
- an agent of either our company or the Trustee.
REDEMPTION
Any provisions relating to the redemption of Debt Securities will be set
forth in the applicable prospectus supplement. Unless we state otherwise in the
applicable prospectus supplement, we may redeem Debt Securities only upon notice
mailed at least 30 but not more than 60 days before the date fixed for
redemption. Unless we state otherwise in the applicable prospectus supplement,
that notice may state that the redemption will be conditional upon the Trustee
or the paying agent receiving sufficient funds to pay the principal, premium and
interest on those Debt Securities on the date fixed for redemption and that if
the Trustee or the paying agent does not receive those funds, the redemption
notice will not apply, and we will not be required to redeem those Debt
Securities.
8
We will not be required to:
- issue, register the transfer of, or exchange any Debt Securities of a
series during the period beginning 15 days before the date the notice is
mailed identifying the Debt Securities of that series that have been
selected for redemption; or
- register the transfer of, or exchange any Debt Security of that series
selected for redemption except the unredeemed portion of a Debt Security
being partially redeemed.
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
The Indenture provides that we may consolidate or merge with or into, or
convey or transfer all or substantially all of our properties and assets to,
another corporation or other entity. Any successor must, however, assume our
obligations under the Indenture and the Debt Securities, and we must deliver an
officers' certificate and an opinion of counsel to the Trustee that affirms
compliance with all conditions in the Indenture. When those conditions are
satisfied, the successor will succeed to and be substituted for us under the
Indenture, and we will be relieved of our obligations under the Indenture and
the Debt Securities.
EVENTS OF DEFAULT
Unless otherwise specified in the applicable prospectus supplement, each of
the following will constitute an event of default under the Indenture:
- failure to pay principal of or premium on any Debt Security of that
series when due;
- failure to pay when due any interest on any Debt Security of that series
that continues for 60 days; for this purpose, the date on which interest
is due is the date on which we are required to make payment following any
deferral of interest payments by us under the terms of Debt Securities
that permit such deferrals;
- failure to make any sinking fund payment when required for any Debt
Security of that series that continues for 60 days;
- failure to perform any covenant in the Indenture (other than a covenant
expressly included solely for the benefit of other series) that continues
for 90 days after the Trustee or the holders of at least 33% of the
outstanding Debt Securities of that series give us written notice of the
default;
- certain events of bankruptcy, insolvency or reorganization affecting us;
and
- any other event of default that may be provided with respect to Debt
Securities of that series.
In the case of the fourth event of default listed above, the Trustee may
extend the grace period. In addition, if holders of a particular series have
given a notice of default, then holders of at least the same percentage of Debt
Securities of that series, together with the Trustee, may also extend the grace
period. The grace period will be automatically extended if we have initiated and
are diligently pursuing corrective action.
If an event of default with respect to Debt Securities of a series occurs
and is continuing, then the Trustee or the holders of at least 33% of the
outstanding Debt Securities of that series may declare the principal amount of
all Debt Securities of that series to be immediately due and payable. However,
that event of default will be considered waived at any time after the
declaration but before a judgment for payment of the money due has been
obtained, if:
- we have paid or deposited with the Trustee all overdue interest, the
principal and any premium due otherwise than by the declaration and any
interest on such amounts, and any interest on overdue
9
interest, to the extent legally permitted, in each case with respect to
that series, and all amounts due to the Trustee; and
- all events of default with respect to that series, other than the
nonpayment of the principal that became due solely by virtue of the
declaration, have been cured or waived.
The Trustee is under no obligation to exercise any of its rights or powers
at the request or direction of any holders of Debt Securities unless those
holders have offered the Trustee security or indemnity against the costs,
expenses and liabilities that it might incur as a result. The holders of a
majority in principal amount of the outstanding Debt Securities of any series
have, with certain exceptions, the right to direct the time, method and place of
conducting any proceedings for any remedy available to the Trustee or the
exercise of any power of the Trustee with respect to those Debt Securities. The
Trustee may withhold notice of any default, except a default in the payment of
principal or interest, from the holders of any series if the Trustee in good
faith considers it in the interest of the holders to do so.
The holder of any Debt Security will have an absolute and unconditional
right to receive payment of the principal, any premium and, within certain
limitations, any interest on that Debt Security on its maturity date or
redemption date and to enforce those payments.
If certain payments on a series of Debt Securities are insured by a
financial guaranty insurance policy or other policy, terms other than those that
are described in the preceding three paragraphs may apply to that series.
We will be required to furnish to the Trustee annually a statement by
certain of our officers to the effect that we are not in default under the
Indenture, or if there has been a default, specifying the default and its
status.
PAYMENTS; PAYING AGENT
The paying agent will pay the principal of any Debt Securities only if
those Debt Securities are surrendered to it. Unless we state otherwise in the
applicable prospectus supplement, the paying agent will pay interest on Debt
Securities, subject to such surrender, where applicable, at its office or, at
our option:
- by wire transfer to an account at a banking institution in the United
States that is designated in writing to the Trustee at least 16 days
prior to the date of payment by the person entitled to that interest; or
- by check mailed to the address of the person entitled to that interest as
that address appears in the security register for those Debt Securities.
Unless we state otherwise in the applicable prospectus supplement, the
Trustee will act as paying agent for that series of Debt Securities, and the
principal corporate trust office of the Trustee will be the office through which
the paying agent acts. We may, however, change or add paying agents or approve a
change in the office through which a paying agent acts.
Any money that we have paid to a paying agent for principal or interest on
any Debt Securities that remains unclaimed at the end of two years after that
principal or interest has become due will be repaid to us at our request. After
repayment to us, holders should look only to us for those payments.
NEGATIVE PLEDGE
While any of the Debt Securities remain outstanding, we will not, and will
not permit any Principal Subsidiary (as defined below) to, create, or permit to
be created or to exist, any mortgage, lien, pledge, security interest or other
encumbrance upon any Principal Property (as defined below) of ours or of a
Principal Subsidiary, or upon any shares of stock of any Principal Subsidiary,
whether such Principal Property is, or shares of stock are, owned on or acquired
after the date of the Indenture, to secure any of
10
our indebtedness for borrowed money, unless the Debt Securities then outstanding
are equally and ratably secured for so long as any such indebtedness is so
secured.
The foregoing restriction does not apply with respect to, among other
things:
- purchase money mortgages, or other purchase money liens, pledges,
security interests or encumbrances upon property that we or any Principal
Subsidiary acquired after the date of the Indenture; mortgages, liens,
pledges, security interests or other encumbrances existing on any
property or shares of stock at the time we or any Principal Subsidiary
acquired it or them, including those which exist on any property or
shares of stock of an entity with which we or any Principal Subsidiary
are consolidated or merged or which transfers or leases all or
substantially all of its properties to us or any Principal Subsidiary; or
conditional sales agreements or other title retention agreements and
leases in the nature of title retention agreements with respect to any
property that we or any Principal Subsidiary acquired after the date of
the Indenture; provided, however, that no such mortgage, lien, pledge,
security interest or other encumbrance shall extend to or cover any other
property that we or any Principal Subsidiary owns;
- mortgages, liens, pledges, security interests or other encumbrances upon
any of our property or the property of any Principal Subsidiary or shares
of stock of any Principal Subsidiary that existed on the date of the
initial issuance of Debt Securities or upon the property or shares of
stock of any corporation existing at the time that entity became a
Principal Subsidiary;
- pledges or deposits to secure performance in connection with bids,
tenders, contracts (other than contracts for the payment of money) or
leases to which we are, or any Principal Subsidiary is, a party;
- liens created by or resulting from any litigation or proceeding which at
the time is being contested in good faith by appropriate proceedings;
- liens incurred in connection with repurchase, swap or other similar
agreements (including commodity price, currency exchange and interest
rate protection agreements);
- mortgages, liens, pledges, security interests or other encumbrances on
any property arising in connection with any defeasance, covenant
defeasance or in-substance defeasance of our or any Principal
Subsidiary's indebtedness, including the Debt Securities;
- mortgages, liens, pledges, security interests or other encumbrances in
favor of the United States of America, any State, any foreign country or
any department, agency or instrumentality or political subdivision of any
such jurisdiction, to secure partial, progress, advance or other payments
pursuant to any contract or statute or to secure any indebtedness
incurred for the purpose of financing all or any part of the purchase
price or the cost of constructing or improving the property subject to
such mortgages, including, without limitation, mortgages to secure
indebtedness of the pollution control or industrial revenue bond type;
- indebtedness which may be issued by us or any of our Principal
Subsidiaries in connection with our consolidation or merger or the
consolidation or merger of any of our Principal Subsidiaries with or into
any other entity in exchange for or otherwise in substitution for secured
indebtedness of that entity ("Third Party Debt") which by its terms (1)
is secured by a mortgage on all or a portion of the property of that
entity, (2) prohibits secured indebtedness from being incurred by that
entity, unless the Third Party Debt is secured equally and ratably with
such secured indebtedness, or (3) prohibits secured indebtedness from
being incurred by that entity;
- indebtedness of any entity which we or any Principal Subsidiary are
required to assume in connection with a consolidation or merger of that
entity, with respect to which any of our or any Principal Subsidiary's
property is subjected to a mortgage, lien, pledge, security interest or
other encumbrance;
11
- mortgages, liens, pledges, security interests or other encumbrances on
property held or used by us or any Principal Subsidiary in connection
with the gathering, processing, transportation or marketing of natural
gas, oil or other minerals;
- mortgages, liens, pledges, security interests or other encumbrances in
favor of us, one or more Principal Subsidiaries, one or more wholly owned
Subsidiaries (as defined below) or any of the foregoing in combination;
- mortgages, liens, pledges, security interests or other encumbrances upon
any property acquired, constructed, developed or improved by us or any
Principal Subsidiary after the date of the Indenture which are created
before, at the time of, or within 18 months after such acquisition (or in
the case of property constructed, developed or improved, after the
completion of the construction, development or improvement and
commencement of full commercial operation of that property, whichever is
later) to secure or provide for the payment of any part of its purchase
price or cost; provided that, in the case of such construction,
development or improvement, the mortgages, liens, pledges, security
interests or other encumbrances shall not apply to any property that we
or any Principal Subsidiary own other than real property that is
unimproved until that time; and
- the replacement, extension or renewal of any mortgage, lien, pledge,
security interest or other encumbrance described above or the
replacement, extension or renewal (not exceeding the principal amount of
indebtedness so secured together with any premium, interest, fee or
expense payable in connection with any such replacement, extension or
renewal) of the indebtedness so secured; provided that such replacement,
extension or renewal is limited to all or a part of the same property
that secured the mortgage, lien, pledge, security interest or other
encumbrance replaced, extended or renewed, plus improvements on it or
additions or accessions to it.
In addition, we or any Principal Subsidiary may create or assume any other
mortgage, lien, pledge, security interest or other encumbrance not excepted in
the Indenture without us equally and ratably securing the Debt Securities, if
immediately after that creation or assumption, our principal amount of
indebtedness for borrowed money that all such other mortgages, liens, pledges,
security interests and other encumbrances secure does not exceed an amount equal
to 10% of our Consolidated Adjusted Net Assets as shown on our consolidated
balance sheet for the accounting period occurring immediately before the
creation or assumption of that mortgage, lien, pledge, security interest or
other encumbrance.
For purposes of the preceding paragraphs, the following terms have these
meanings: "Principal Property" means any natural gas pipeline, natural gas
gathering system, natural gas storage facility, natural gas processing plant or
other plant or facility located in the United States that in the opinion of our
Board of Directors or our management is of material importance to our business
and the business of our consolidated subsidiaries taken as a whole; "Principal
Subsidiary" means any of our Subsidiaries that owns a Principal Property; and
"Subsidiary" means, as to any entity, an entity of which more than 50% of the
outstanding capital stock having ordinary voting power (other than capital stock
having such power only by reason of contingency) is at the time owned, directly
or indirectly, through one or more intermediaries, or both, by such entity.
LIMITATION ON SALES AND LEASEBACKS
Neither we nor any Principal Subsidiary may enter into any Sale and
Leaseback Transaction unless:
- we or that Principal Subsidiary would be entitled to incur indebtedness
in a principal amount equal to the Attributable Debt with respect to such
Sale and Leaseback Transaction, secured by a mortgage, lien, pledge,
security interest or other encumbrance on the property subject to such
Sale and Leaseback Transaction without equally and ratably securing the
Debt Securities pursuant to the covenant described above under "Negative
Pledge";
- after the date on which the Debt Securities are originally issued and
within a period beginning 12 months prior to the consummation of such
Sale and Leaseback Transaction and ending 12
12
months after the consummation of such Sale and Leaseback Transaction, we
or any Subsidiary shall have expended for property used or to be used in
our business or the business of our Subsidiaries an amount equal to all
or a portion of the net proceeds from such Sale and Leaseback Transaction
and we shall have elected to designate such amount as a credit against
such Sale and Leaseback Transaction (with any amount not being so
designated to be applied as set forth in the following bullet point);
- during the 12-month period after the effective date of such Sale and
Leaseback Transaction, we shall have applied to the voluntary defeasance
or retirement of Debt Securities or any other indebtedness an amount
equal to the greater of the net proceeds of the sale or transfer of the
property leased in such Sale and Leaseback Transaction and the fair
value, as determined by our Board of Directors, of such property at the
time such Sale and Leaseback Transaction was entered into (in either case
adjusted to reflect the remaining term of the lease and any amount we
expend as set forth in the preceding bullet point), less an amount equal
to the principal amount of such Debt Securities or other indebtedness
voluntarily defeased or retired within such 12-month period and not
designated as a credit against any other Sale and Leaseback Transaction
that we or any of our Subsidiaries enter into during such period; or
- such Sale and Leaseback Transaction is with one of our Affiliates.
This restriction will not apply to certain Sale and Leaseback Transactions
between us and a Principal Subsidiary or between Principal Subsidiaries.
For purposes of the preceding paragraph, the following terms have these
meanings: "Sale and Leaseback Transaction" means an arrangement with any lender
or investor or to which such lender or investor is a party providing for the
leasing for a term of greater than three years of any property or asset which
has been or is being sold or transferred more than 18 months after its
acquisition or the completion of construction or beginning of operation thereof
to such lender or investor or to any entity to whom funds have been or are to be
advanced by such lender or investor on the security of the property or asset;
"Affiliate" of a specified person or entity means any other person or entity
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person or entity; "Attributable Debt" means
the total net amount of rent (discounted at the rate per year indicated in the
Indenture) required to be paid during the remaining term of any lease; and
"Consolidated Adjusted Net Assets" means the total amount of assets after
deducting:
- all current liabilities (excluding any which are by their terms
extendible or renewable at the option of the obligor to a time more than
12 months after the time as of which the amount is being computed); and
- total prepaid expenses and deferred charges.
MODIFICATION AND WAIVER
The Indenture may be modified with the consent of the holders of a majority
in principal amount of the outstanding Debt Securities of all series affected by
the modification (voting as one class). The consent of the holder of each
outstanding Debt Security affected is, however, required to:
- change the maturity date of the principal, or any installment of
principal or interest on that Debt Security;
- reduce the principal amount, the interest rate or any premium payable
upon redemption of that Debt Security;
- reduce the amount of principal due and payable upon acceleration of
maturity;
- change the currency of payment of principal, premium or interest on that
Debt Security;
13
- impair the right to institute suit to enforce any such payment on or
after the maturity date or redemption date;
- reduce the percentage in principal amount of Debt Securities of any
series required to amend or modify the Indenture, waive compliance with
certain restrictive provisions of the Indenture or waive certain
defaults; or
- with certain exceptions, modify the provisions of the Indenture governing
amendments of the Indenture or governing waiver of covenants or past
defaults.
In addition, we may supplement the Indenture to create new series of Debt
Securities and for certain other purposes, without the consent of any holders of
Debt Securities.
The holders of a majority in principal amount of the outstanding Debt
Securities of any series may waive, for that series, our compliance with certain
restrictive provisions of the Indenture, including the covenants described under
"Negative Pledge" and "Limitation on Sales and Leasebacks". The holders of a
majority in principal amount of the outstanding Debt Securities of all series
with respect to which a default has occurred and is continuing, voting as one
class, may waive that default for all those series, except a default in the
payment of principal or any premium or interest on any Debt Security or a
default with respect to a covenant or provision that cannot be amended or
modified without the consent of the holder of each outstanding Debt Security of
the series affected.
If certain payments on a series of Debt Securities are insured by a
financial guaranty insurance policy or other policy, terms other than those that
are described in the preceding paragraph may apply to that series.
DEFEASANCE AND COVENANT DEFEASANCE
If, and to the extent, indicated in the applicable prospectus supplement,
we may elect, at our option at any time, to have the provisions of the Indenture
relating to defeasance or covenant defeasance applied to the Debt Securities of
any series or to any part of a series. The Indenture provides that we may be:
- discharged from our obligations, with certain limited exceptions, with
respect to any series of Debt Securities, as described in the Indenture,
such a discharge being called a "defeasance" in this prospectus; and
- released from our obligations under the covenants described in "Negative
Pledge" and "Limitations on Sales and Leasebacks" and any restrictive
covenants that may be especially established with respect to any series
of Debt Securities, such a release being called a "covenant defeasance"
in this prospectus.
We must satisfy certain conditions to effect a defeasance or covenant
defeasance. Those conditions include the irrevocable deposit with the Trustee,
in trust, of money or government obligations that through their scheduled
payments of principal and interest would provide sufficient money to pay the
principal and any premium and interest on those Debt Securities on the maturity
dates of those payments or upon redemption. Additional conditions, if any, to
exercising defeasance or covenant defeasance with respect to any series of Debt
Securities will be described in the applicable prospectus supplement.
Following a defeasance, payment of the Debt Securities defeased may not be
accelerated because of an event of default. Following a covenant defeasance, the
payment of Debt Securities may not be accelerated by reference to the covenants
from which we have been released. A defeasance may occur after a covenant
defeasance.
Under current U.S. federal income tax laws, a defeasance would be treated
as an exchange of the relevant Debt Securities in which holders of those Debt
Securities might recognize gain or loss. In addition, the amount, timing and
character of amounts that holders would thereafter be required to include in
income might be different from that which would be includible in the absence of
that defeasance. We
14
urge investors to consult their own tax advisors as to the specific consequences
of a defeasance, including the applicability and effect of tax laws other than
U.S. federal income tax laws.
Under current U.S. federal income tax laws, unless accompanied by other
changes in the terms of the Debt Securities, a covenant defeasance should not be
treated as a taxable exchange.
CONCERNING THE TRUSTEE
The Trustee will perform only those duties that are specifically set forth
in the Indenture unless an event of default occurs and is continuing. In case an
event of default occurs and is continuing, the Trustee will exercise the same
degree of care as a prudent individual would exercise in the conduct of his or
her own affairs. Subject to those provisions, the Trustee is under no obligation
to exercise any of its powers under the Indenture at the request of any holder
of Debt Securities unless that holder offers reasonable indemnity to the Trustee
against the costs, expenses and liabilities that it might incur as a result.
NOTICE
Notice to holders of Debt Securities will be given by mail to such holders
as they may appear in the security register.
TITLE
We, the Trustee and any agent of our company or of the Trustee may treat
the person in whose name a Debt Security is registered as the absolute owner of
the Debt Security, whether or not such Debt Security may be overdue, for the
purpose of making payment and for all other purposes.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
PLAN OF DISTRIBUTION
We may sell the Debt Securities:
- through underwriters or dealers;
- through agents;
- directly to a limited number of institutional purchasers or to a single
purchaser; or
- through a combination of any of these methods of sale.
The applicable prospectus supplement will describe the terms under which
the offered Debt Securities are offered, including:
- the names of any underwriters, dealers or agents;
- the purchase price and the net proceeds from the sale;
- any underwriting discounts and other items constituting underwriters'
compensation;
- any initial public offering price; and
- any discounts or concessions allowed, re-allowed or paid to dealers.
Any underwriters or dealers may from time to time change any initial public
offering price and any discounts or concessions allowed, re-allowed or paid to
dealers.
15
If underwriters participate in the sale of the offered Debt Securities,
those underwriters will acquire the Debt Securities for their own account and
may resell them in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time of
the sale. If the Debt Securities are sold through underwriters, the applicable
prospectus supplement will state the names and any compensation that may be paid
to the underwriters.
Unless we state otherwise in the applicable prospectus supplement, the
obligations of any underwriter to purchase the offered Debt Securities will be
subject to conditions, and the underwriter will be obligated to purchase all the
Debt Securities offered, except that in some cases involving a default by an
underwriter, less than all of the Debt Securities offered may be purchased.
If the offered Debt Securities are sold through an agent, the applicable
prospectus supplement will state the name and any compensation that may be paid
to the agent. Unless we state otherwise in the applicable prospectus supplement,
that agent will be acting on a best-efforts basis for the period of its
appointment.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments that the
underwriters, dealers or agents may be required to make.
Underwriters, dealers, agents and their affiliates may engage in
transactions with us or our affiliates, and may from time to time perform
services for us or our affiliates in the ordinary course of their business.
We may authorize agents, underwriters or dealers to solicit offers by
certain institutional investors to purchase offered Debt Securities providing
for payment and delivery on a future date specified in the applicable prospectus
supplement. Institutional investors to which such offers may be made, when
authorized, include commercial and savings banks, insurance companies, pension
funds, investment companies, education and charitable institutions and such
other institutions as may be approved by us. The obligations of any such
purchasers under such delayed delivery and payment arrangements will be subject
to the condition that the purchase of the offered Debt Securities will not at
the time of delivery be prohibited under applicable law. The underwriters and
such agents will not have any responsibility with respect to the validity or
performance of such contracts.
The Debt Securities may or may not be listed on a national securities
exchange.
16
EXPERTS
The combined financial statements of Duke Energy Field Services, LLC and
Affiliates as of December 31, 1998 and 1999 and each of the three years in the
period ended December 31, 1999 and the 1997 combined statements of operations
and cash flows for UPFuels Division incorporated in this prospectus by reference
and appearing in the Form 10 of the Company filed on July 20, 2000 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports which are also incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Phillips Gas Company as of
December 31, 1999 and 1998 and for each of the three years in the period ended
December 31, 1999 included in the Form 10 of the Company filed on July 20, 2000,
which are incorporated herein by reference, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report which is incorporated
herein by reference and has been so incorporated in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
The combined statements of income and cash flows of the UPFuels Division of
Union Pacific Resources Group, Inc. for the year ended December 31, 1998 and the
three months ended March 31, 1999 included in the Form 10 of the Company filed
on July 20, 2000, which are incorporated herein by reference, have been audited
by Arthur Andersen LLP, independent public accountants, as stated in their
report on such financial statements in reliance upon the report of such firm
given upon their authority as experts in auditing and accounting.
VALIDITY OF THE SECURITIES
Our legal counsel, Vinson & Elkins L.L.P., Houston, Texas, will pass upon
the validity of the Debt Securities on our behalf. Counsel named in any
applicable prospectus supplement will pass upon the validity of the Debt
Securities on behalf of any underwriters, dealers or agents.
17
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$300,000,000
(DUKE ENERGY FIELD SERVICES LLC LOGO)
DUKE ENERGY FIELD SERVICES, LLC
5.75% NOTES DUE 2006
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PROSPECTUS SUPPLEMENT
NOVEMBER 6, 2001
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SOLE BOOK-RUNNING MANAGER
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS INC.
SCOTIA CAPITAL
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