1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
COMMISSION FILE NUMBER 1-9019
UNION TEXAS PETROLEUM HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0040040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1330 POST OAK BLVD.
HOUSTON, TEXAS 77056
(Address of principal
executive offices
and zip code)
(713) 623-6544
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of October 20, 1995, there were 87,611,428 shares of Union Texas Petroleum
Holdings, Inc. $.05 par value Common Stock issued and outstanding.
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FORM 10-Q
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,653 $ 8,389
Accounts and notes receivable, less allowance for doubtful accounts . . . . . 61,557 54,773
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,850 43,228
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . 45,372 30,675
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 169,432 137,065
Equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,533 114,505
Property, plant and equipment, at cost, less accumulated
depreciation, depletion and amortization* . . . . . . . . . . . . . . . . . . 1,588,759 1,286,278
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,919 6,786
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,880,643 $1,544,634
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . $ 2,292 $ 2,292
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,336 106,032
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,720 89,281
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,883 48,069
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 37,063 41,862
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 315,294 287,536
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,055 430,085
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415,227 365,777
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,261 111,737
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,459,837 1,195,135
---------- ----------
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,391 4,391
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,418 19,889
Cumulative foreign exchange translation adjustment and other . . . . . . . . (61,194) (65,476)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,152 394,806
Common stock held in treasury, at cost:
104,155 shares at September 30, 1995 and 221,565 shares at
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,961) (4,111)
---------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . 420,806 349,499
---------- ----------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $1,880,643 $1,544,634
========== ==========
* The Company follows the successful efforts method of accounting for oil and
gas activities.
The accompanying notes are an integral part of this financial statement.
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3
FORM 10-Q
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Sales and operating revenues . . . . . . . . . . . . . $197,255 $193,707 $637,237 $533,412
Interest income and other revenues . . . . . . . . . . 82 796 412 919
Net earnings of equity investee . . . . . . . . . . . 6,387 5,253 17,328 15,432
-------- -------- -------- --------
203,724 199,756 654,977 549,763
Costs and other deductions:
Product costs and operating expenses . . . . . . . . . 71,111 71,763 224,674 205,708
Exploration expenses . . . . . . . . . . . . . . . . . 22,256 15,375 59,905 39,702
Depreciation, depletion and amortization . . . . . . . 51,998 48,494 136,645 123,536
Selling, general and administrative expenses . . . . . 5,362 6,135 17,643 18,039
Interest expense . . . . . . . . . . . . . . . . . . . 9,106 3,415 19,616 7,953
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . . . . . 43,891 54,574 196,494 154,825
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 32,168 39,933 117,993 105,273
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 11,723 $ 14,641 $ 78,501 $ 49,552
======== ======== ======== ========
Earnings per share of common stock . . . . . . . . . . . . $ .13 $ .17 $ .89 $ .57
======== ======== ======== ========
Dividends per share of common stock . . . . . . . . . . . . $ .05 $ .05 $ .15 $ .15
======== ======== ======== ========
Weighted average number of shares outstanding (000s) . . . 87,763 87,577 87,712 87,656
======== ======== ======== ========
The accompanying notes are an integral part of this financial statement.
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4
FORM 10-Q
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,501 $ 49,552
Adjustment to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization . . . . . . . . . . . . . . . . 136,645 123,536
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (7,234) (6,473)
Net income of equity investee . . . . . . . . . . . . . . . . . . . . . . (17,328) (15,432)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,431 2,873
-------- ---------
Net cash provided by operating activities before changes in other
assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . 194,015 154,056
(Increase) decrease in accounts and notes receivable . . . . . . . . . . (7,106) 4,254
(Increase) decrease in inventories . . . . . . . . . . . . . . . . . . . 3,666 (110)
(Increase) decrease in prepaid expenses and other assets . . . . . . . . (16,225) 1,372
Increase in accounts payable and other liabilities . . . . . . . . . . . 748 134
Decrease in income taxes payable . . . . . . . . . . . . . . . . . . . . (11,551) (13,503)
-------- ---------
Net cash provided by operating activities . . . . . . . . . . . . . . 163,547 146,203
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment . . . . . . . . . . . . . . . . . (369,436) (101,089)
Cash provided by equity investee . . . . . . . . . . . . . . . . . . . . . 19,300 50
Net cash required by sale of businesses . . . . . . . . . . . . . . . . . . (798) (1,144)
-------- ---------
Net cash required by investing activities . . . . . . . . . . . . . . . . (350,934) (102,183)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . 218,406
Payments to settle long-term debt . . . . . . . . . . . . . . . . . . . . . (1,146) (36,146)
Net payments under credit facilities . . . . . . . . . . . . . . . . . . . . (35,503) (15,000)
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,155) (13,151)
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . 311
Proceeds from issuance of treasury stock . . . . . . . . . . . . . . . . . . 1,035
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . (498) (4,877)
Net proceeds from short-term borrowings . . . . . . . . . . . . . . . . . . 31,512 17,025
-------- ---------
Net cash (required) provided by financing activities . . . . . . . . . . 200,651 (51,838)
-------- ---------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . 13,264 (7,818)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 8,389 18,143
-------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 21,653 $ 10,325
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) . . . . . . . . . . . . . . . . . . $ 19,048 $ 6,632
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,435 118,029
The accompanying notes are an integral part of this financial statement.
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FORM 10-Q
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NOTE 1 - BASIS OF PRESENTATION - These consolidated financial statements should
be read in the context of the consolidated financial statements and notes
thereto filed with the Commission in the Company's 1994 annual report on Form
10-K. In the opinion of management, the accompanying unaudited consolidated
financial statements reflect all adjustments, consisting only of normal
adjustments, necessary to present fairly the financial position of Union Texas
Petroleum Holdings, Inc. ("UTPH") and its consolidated subsidiaries (referred
to herein individually and collectively as the "Company") at September 30,
1995, and the results of operations and cash flows for the three and nine
months ended September 30, 1995 and 1994. The results of operations for the
nine months ended September 30, 1995, should not necessarily be taken as
indicative of the results of operations that may be expected for the entire
year 1995. Certain prior period amounts have been reclassified for comparative
purposes.
NOTE 2 - ALBA ACQUISITION - On July 18, 1995, the Company, through its
subsidiary, Union Texas Petroleum Limited ("UTPL"), acquired from Oryx UK
Energy Company ("Oryx") their 15.5% working interest in Block 16/26 in the
central United Kingdom North Sea, which includes the Alba field. UTPL paid
Oryx $270 million for the interest, subject to certain closing adjustments.
The effective date of the transaction was July 1, 1995. The Company funded the
acquisition under its bank credit facilities and its uncommitted and unsecured
lines of credit. The Company increased plant, property and equipment by $328
million, the sum of the purchase price of $270 million and a deferred tax
payable of $58 million arising from the purchase.
NOTE 3 - SECONDARY PUBLIC OFFERING - In May 1995, pursuant to a secondary
public offering registered by the Company under the Securities Act of 1933, as
amended, 11.5 million shares of the 33.3 million shares of the Company's common
stock owned by partnerships affiliated with Kohlberg Kravis Roberts & Co.
("KKR") were sold in the open market. The Company did not receive any proceeds
from the offering. KKR currently owns 21.8 million shares of the Company's
common stock.
NOTE 4 - CREDIT FACILITIES - The Company currently has three unsecured bank
credit facilities (the "Credit Facilities"). One of the Credit Facilities is a
$100 million revolver that provides for conversion of amounts outstanding on
April 15, 1996 to a one-year term loan maturing April 15, 1997. Another Credit
Facility is a $450 million revolver that reduces quarterly by $35 million
beginning July 31, 1998, with a final maturity of April 30, 1999. In June
1995, the Company entered into a $100 million revolver that provides for
conversion of amounts outstanding on June 15, 1996 to a one-year term loan
maturing June 15, 1997. In addition to such Credit Facilities, the Company has
the ability to obtain short-term borrowings on uncommitted and unsecured lines
of credit with several banks.
In May 1995, the Company's indirect subsidiary, Union Texas Britannia Limited,
which is a wholly owned subsidiary of Union Texas Petroleum Limited, entered
into a 150 million pounds sterling secured financing. The financing is used to
fund the Company's share of the cost of developing the Britannia field to
production.
NOTE 5 - DEBT OFFERINGS - In March 1995, the Company publicly issued $125
million principal amount of 8-3/8% Senior Notes due 2005 (the "8-3/8% Senior
Notes") at an initial public offering price of 99.431%. In April 1995, the
Company publicly issued $75 million principal amount of 8-1/2% Senior Notes due
2007 (the "8-1/2% Senior Notes") at an initial public offering price of
99.658%. The net proceeds from the sale of the 8-3/8% Senior Notes and the
8-1/2% Senior Notes were approximately $123.5 million and $74.2 million,
respectively (after deducting underwriting discount, commissions and offering
expenses). The Company used such proceeds to reduce debt under its existing
credit facility and its uncommitted and unsecured lines of credit.
NOTE 6 - ACCOUNTING PRONOUNCEMENTS RECENTLY ISSUED - In March 1995, the
Financial Accounting Standards Board ("FASB") released Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," which set forth the
criteria for impairment of plant, property and equipment and other long-lived
assets. Adoption of the Statement is required for years beginning after
December 15, 1995. The Company is still reviewing the Statement; however, the
Company believes the pronouncement will have no material impact on the Company.
4
6
NOTE 7 - CONTINGENCIES - The Company and its subsidiaries and related companies
are named defendants in a number of lawsuits and named parties in numerous
government proceedings arising in the ordinary course of business. While the
outcome of contingencies, lawsuits or other proceedings against the Company
cannot be predicted with certainty, management expects that any liability, to
the extent not provided for through insurance or otherwise, will not have a
material adverse effect on the financial statements of the Company.
NOTE 8 - SUPPLEMENTAL GUARANTOR INFORMATION - In connection with the sale of
the Company's 8-3/8% Senior Notes, 8-1/2% Senior Notes and $100 million
principal amount of 8.25% Senior Notes due 1999 (collectively referred to
herein as the "Senior Notes"), the following wholly owned direct or indirect
subsidiaries of UTPH (collectively, the "Guarantors") unconditionally and fully
guaranteed on a joint and several basis UTPH's obligations to pay principal,
premium, if any, and interest with respect to the Senior Notes: Union Texas
East Kalimantan Limited ("Kalimantan"), Union Texas Petroleum Energy
Corporation ("Energy"), Union Texas International Corporation
("International"), Union Texas Products Corporation ("Products") and Unistar,
Inc. ("Unistar"). The Guarantors are also guarantors under the Company's Credit
Facilities. Each of the Guarantors is a Delaware corporation, except that
Kalimantan is incorporated under the laws of the Bahamas, although, the
applicable laws of the Bahamas are similar to the laws of Delaware with respect
to the availability of assets to satisfy the obligations to the holders of the
Senior Notes. Kalimantan and Unistar together own a 37.81% interest in a joint
venture that represents the Company's operations in Indonesia. Products
conducts the Company's domestic hydrocarbon products businesses.
International, a subsidiary of Energy, is a holding company for subsidiaries
that conduct the Company's principal international operations, which include
operations in Indonesia by Kalimantan, a Guarantor, and in the United Kingdom
and Pakistan by two non-Guarantor subsidiaries. Separate financial statements
of the Guarantors of the Senior Notes are not considered to be material to the
holders of the Senior Notes. See Notes 14 and 19 of Notes to Consolidated
Financial Statements in the Company's 1994 annual report on Form 10-K for
information describing the Company's operations through the two Guarantor
subsidiaries in Indonesia relating to a production sharing contract as well as
through the non-Guarantor subsidiaries in the United Kingdom, Pakistan and
other international locations.
Investments in subsidiaries are accounted for by the Company on the equity
basis for purposes of the supplemental information. In 1995, the Company
changed its basis of presentation for investments in subsidiaries from the cost
to the equity method for purposes of the supplemental guarantor information.
Accordingly, prior year information has been restated.
Certain reclassifications were made to conform all of the financial information
to the financial presentation on a consolidated basis. The principal
eliminating entries eliminate investments in subsidiaries, intercompany
balances and intercompany dividends.
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SUPPLEMENTAL COMBINING BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
ASSETS
UNCONSOLIDATED
-----------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
---- ------------ ------------ ------- ----
Current assets:
Cash and cash equivalents . . . . . . . $ 905 $ 3,116 $ 17,632 $ 21,653
Accounts and notes receivable, less
allowance for doubtful accounts . . . 52 33,960 27,545 61,557
Inventories . . . . . . . . . . . . . . 19,011 21,839 40,850
Prepaid expenses and other current assets 1,557 6,575 37,240 45,372
Intercompany notes receivable . . . . . 665,646 $ (665,646)
-------- ---------- ---------- ----------- ----------
Total current assets . . . . . . . . . 2,514 62,662 769,902 (665,646) 169,432
Intercompany investments . . . . . . . . 622,017 351,627 (973,644)
Equity investment . . . . . . . . . . . . 112,533 112,533
Property, plant and equipment, at cost,
less accumulated depreciation,
depletion and amortization* . . . . . . 93,128 390,525 1,105,106 1,588,759
Other assets . . . . . . . . . . . . . . 5,569 4,350 9,919
-------- ---------- ---------- ----------- ----------
Total assets . . . . . . . . . . . . . $723,228 $ 917,347 $1,879,358 $(1,639,290) $1,880,643
======== ========== ========== ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . $ 2,292 $ 2,292
Short-term debt . . . . . . . . . . . . $ 75,000 63,336 138,336
Accounts payable . . . . . . . . . . . . 1,380 $ 16,855 78,485 96,720
Taxes payable . . . . . . . . . . . . . 26,348 22,837 (8,302) 40,883
Other current liabilities . . . . . . . 10,703 2,991 23,369 37,063
Intercompany notes payable . . . . . . . 12,960 652,686 $ (665,646)
-------- ---------- ---------- ----------- ----------
Total current liabilities . . . . . . . 113,431 55,643 811,866 (665,646) 315,294
Long-term debt . . . . . . . . . . . . . 590,000 24,055 614,055
Deferred income taxes . . . . . . . . . . 2,003 105,216 308,008 415,227
Other liabilities . . . . . . . . . . . . 1,445 4,837 108,979 115,261
Intercompany clearing account . . . . . . (443,694) (289,568) 154,273 578,989
-------- ---------- ---------- ----------- ----------
Total liabilities . . . . . . . . . . . 263,185 (123,872) 1,407,181 (86,657) 1,459,837
-------- ---------- ---------- ----------- ----------
Stockholders' equity:
Common stock . . . . . . . . . . . . . . 4,391 19 121,082 (121,101) 4,391
Paid in capital . . . . . . . . . . . . 19,418 1,689,426 557,898 (2,247,324) 19,418
Cumulative foreign exchange
translation adjustment and other . . . (21,957) (39,237) (61,194)
Retained earnings (deficit) . . . . . . 460,152 (648,226) (167,566) 815,792 460,152
Common stock held in treasury, at cost . (1,961) (1,961)
-------- ---------- ---------- ----------- ----------
Total stockholders' equity . . . . . . 460,043 1,041,219 472,177 (1,552,633) 420,806
-------- ---------- ---------- ----------- ----------
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . . $723,228 $ 917,347 $1,879,358 $(1,639,290) $1,880,643
- --------------- ======== ========== ========== ============ ==========
* The Company follows the successful efforts method of accounting for oil and
gas activities.
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SUPPLEMENTAL COMBINING BALANCE SHEET
DECEMBER 31, 1994
ASSETS
UNCONSOLIDATED
-----------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
---- ------------ ------------ ------- ----
Current assets:
Cash and cash equivalents . . . . . . . $ 528 $ 5,299 $ 2,562 $ 8,389
Accounts and notes receivable, less
allowance for doubtful accounts . . . 273 31,302 23,198 54,773
Inventories . . . . . . . . . . . . . . 23,764 19,464 43,228
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . . 1,457 5,074 24,144 30,675
Intercompany notes receivable . . . . . 105,502 243,504 (349,006)
-------- --------- ---------- ----------- ----------
Total current assets . . . . . . . . . 2,258 170,941 312,872 (349,006) 137,065
Intercompany investments . . . . . . . . 511,122 100,521 (611,643)
Equity investment . . . . . . . . . . . . 114,505 114,505
Property, plant and equipment, at cost,
less accumulated depreciation,
depletion and amortization* . . . . . . 88,951 394,745 802,582 1,286,278
Other assets . . . . . . . . . . . . . . 3,920 2,866 6,786
-------- --------- ---------- ----------- ----------
Total assets . . . . . . . . . . . . . $606,251 $ 780,712 $1,118,320 $ (960,649) $1,544,634
======== ========= ========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . $ 2,292 $ 2,292
Short-term debt . . . . . . . . . . . . $ 40,000 66,032 106,032
Accounts payable . . . . . . . . . . . . 295 $ 23,727 65,259 89,281
Taxes payable . . . . . . . . . . . . . 21,904 26,746 (581) 48,069
Other current liabilities . . . . . . . 5,360 10,922 25,580 41,862
Intercompany notes payable . . . . . . . 8,395 340,611 $ (349,006)
-------- --------- ---------- ----------- ----------
Total current liabilities . . . . . . . 67,559 69,790 499,193 (349,006) 287,536
Long-term debt . . . . . . . . . . . . . 425,504 4,581 430,085
Deferred income taxes . . . . . . . . . . 2,003 107,707 256,067 365,777
Other liabilities . . . . . . . . . . . . 2,478 4,300 104,959 111,737
Intercompany clearing account . . . . . . (284,114) (363,270) 36,909 610,475
-------- --------- ---------- ----------- ----------
Total liabilities . . . . . . . . . . . 213,430 (181,473) 901,709 261,469 1,195,135
-------- --------- ---------- ----------- ----------
Stockholders' equity:
Common stock . . . . . . . . . . . . . . 4,391 19 121,080 (121,099) 4,391
Paid in capital . . . . . . . . . . . . 19,888 1,721,287 272,441 (1,993,727) 19,889
Cumulative foreign exchange
translation adjustment and other . . . (22,153) (43,323) (65,476)
Retained earnings (deficit) . . . . . . 394,806 (759,121) (133,587) 892,708 394,806
Common stock held in treasury, at cost . (4,111) (4,111)
-------- --------- ---------- ----------- ----------
Total stockholders' equity . . . . . . 392,821 962,185 216,611 (1,222,118) 349,499
-------- --------- ---------- ----------- ----------
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . . $606,251 $ 780,712 $1,118,320 $ (960,649) $1,544,634
- --------------- ======== ========= ========== =========== ==========
* The Company follows the successful efforts method of accounting for oil and
gas activities.
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SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
UNCONSOLIDATED
-----------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
---- ------------ ------------ ------- ----
Revenues:
Sales and operating revenues . . . . . $108,657 $ 89,866 $ (1,268) $197,255
Interest income and other revenues . . $ 3,584 (1,609) 10,962 (12,855) 82
Net earnings (losses) of
intercompany investees . . . . . . . 21,781 (14,748) (7,033)
Net income of equity investee . . . . 6,387 6,387
-------- -------- --------- -------- --------
25,365 98,687 100,828 (21,156) 203,724
Costs and other deductions:
Product cost and operating expenses . (557) 41,854 31,082 (1,268) 71,111
Exploration expenses . . . . . . . . . 479 21,777 22,256
Depreciation, depletion and
amortization . . . . . . . . . . . . 4,939 9,229 37,830 51,998
Selling, general and administrative
expenses . . . . . . . . . . . . . . (349) 1,706 4,005 5,362
Interest expense . . . . . . . . . . . 6,564 1,048 14,349 (12,855) 9,106
-------- -------- --------- -------- --------
Income before income taxes . . . . . . 14,768 44,371 (8,215) (7,033) 43,891
Income taxes . . . . . . . . . . . . . 3,045 22,590 6,533 32,168
-------- -------- --------- -------- --------
Net income . . . . . . . . . . . . . . $ 11,723 $ 21,781 $ (14,748) $ (7,033) $ 11,723
======== ======== ========= ========= ========
8
10
SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
UNCONSOLIDATED
-----------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
---- ------------ ------------ ------- ----
Revenues:
Sales and operating revenues . . . . . $121,893 $ 73,214 $ (1,400) $193,707
Interest income and other revenues . . $ 843 2,832 1,658 (4,537) 796
Net earnings (losses) of
intercompany investees . . . . . . . 22,507 (4,831) (17,676)
Net income of equity investee . . . . 5,253 5,253
-------- -------- --------- -------- --------
23,350 125,147 74,872 (23,613) 199,756
Costs and other deductions:
Product cost and operating expenses . 1 50,914 22,248 (1,400) 71,763
Exploration expenses . . . . . . . . . 3,639 11,736 15,375
Depreciation, depletion and
amortization . . . . . . . . . . . . 4,912 10,933 32,649 48,494
Selling, general and administrative
expenses . . . . . . . . . . . . . . 532 2,069 3,534 6,135
Interest expense . . . . . . . . . . . 3,086 1,239 3,627 (4,537) 3,415
-------- -------- --------- -------- --------
Income before income taxes . . . . . . 14,819 56,353 1,078 (17,676) 54,574
Income taxes . . . . . . . . . . . . . 178 29,789 9,966 39,933
-------- -------- --------- -------- --------
Net income . . . . . . . . . . . . . . $ 14,641 $ 26,564 $ (8,888) $(17,676) $ 14,641
======== ======== ========= ======== ========
9
11
SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
UNCONSOLIDATED
-----------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
---- ------------ ------------ ------- ----
Revenues:
Sales and operating revenues . . . . . $366,936 $ 274,200 $ (3,899) $637,237
Interest income and other revenues . . $ 3,973 3,793 19,828 (27,182) 412
Net earnings (losses) of intercompany
investees . . . . . . . . . . . . . 110,895 (20,917) (89,978)
Net income of equity investee . . . . 17,328 17,328
-------- -------- --------- -------- --------
114,868 367,140 294,028 (121,059) 654,977
Costs and other deductions:
Product cost and operating expenses . 944 135,689 91,940 (3,899) 224,674
Exploration expenses . . . . . . . . . 2,368 57,537 59,905
Depreciation, depletion and
amortization . . . . . . . . . . . . 13,396 29,091 94,158 136,645
Selling, general and administrative
expenses . . . . . . . . . . . . . . 397 5,604 11,642 17,643
Interest expense . . . . . . . . . . . 13,846 3,107 29,845 (27,182) 19,616
-------- -------- --------- -------- --------
Income before income taxes . . . . . . 86,285 191,281 8,906 (89,978) 196,494
Income taxes . . . . . . . . . . . . . 7,784 80,386 29,823 117,993
-------- -------- --------- -------- --------
Net income . . . . . . . . . . . . . . $ 78,501 $110,895 $ (20,917) $(89,978) $ 78,501
======== ======== ========== ========= ========
10
12
SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
UNCONSOLIDATED
-----------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
---- ------------ ------------ ------- ----
Revenues:
Sales and operating revenues . . . . . $319,691 $ 216,715 $ (2,994) $533,412
Interest income and other revenues . . $ 3,004 8,933 2,137 (13,155) 919
Net earnings (losses) of intercompany
investees . . . . . . . . . . . . . 71,232 (3,782) (67,450)
Net earnings of equity investee . . . 15,432 15,432
-------- -------- --------- -------- --------
74,236 340,274 218,852 (83,599) 549,763
Costs and other deductions:
Product cost and operating expenses . (353) 139,995 69,060 (2,994) 205,708
Exploration expenses . . . . . . . . . 230 4,817 34,655 39,702
Depreciation, depletion and
amortization . . . . . . . . . . . . 12,059 31,869 79,608 123,536
Selling, general and administrative
expenses . . . . . . . . . . . . . . 423 5,907 11,709 18,039
Interest expense . . . . . . . . . . . 7,219 3,596 10,293 (13,155) 7,953
-------- -------- --------- -------- --------
Income before income taxes . . . . . . 54,658 154,090 13,527 (67,450) 154,825
Income taxes . . . . . . . . . . . . . 5,106 78,241 21,926 105,273
-------- -------- --------- -------- --------
Net income . . . . . . . . . . . . . . $ 49,552 $ 75,849 $ (8,399) $(67,450) $ 49,552
======== ======== ========== ========= ========
11
13
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
UNCONSOLIDATED
-----------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
---- ------------ ------------ ------- ----
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . $ 78,501 $110,895 $ (20,917) $(89,978) $ 78,501
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization . . 13,396 29,091 94,158 136,645
Deferred income taxes . . . . . . . . . . . (2,189) (5,045) (7,234)
Income (losses) of equity investees . . . . (110,895) 3,589 89,978 (17,328)
Intercompany dividends received . . . . . . 80,563 (80,563)
Other . . . . . . . . . . . . . . . . . . . 1,894 1,537 3,431
(Increase) decrease in working capital
and other assets and liabilities . . . . . 9,150 (14,451) (25,167) (30,468)
-------- -------- --------- -------- --------
Net cash provided (required) by
operating activities . . . . . . . . . . (7,954) 207,498 44,566 (80,563) 163,547
-------- -------- --------- -------- --------
Cash flows from investing activities:
Additions to property, plant and equipment . (16,680) (28,304) (324,452) (369,436)
Cash provided by equity investee . . . . . . 19,300 19,300
Net cash required by sales of businesses . . (798) (798)
-------- -------- --------- -------- --------
Net cash required by investing
activities . . . . . . . . . . . . . . (16,680) (9,004) (325,250) (350,934)
-------- -------- --------- -------- --------
Cash flows from financing activities:
Net proceeds from long-term debt . . . . . . 197,713 20,693 218,406
Payments to settle long-term debt . . . . . (1,146) (1,146)
Net payments under credit facilities . . . . (35,503) (35,503)
Purchase of treasury stock . . . . . . . . . (498) (498)
Proceeds from issuance of treasury stock . . 1,035 1,035
Common stock dividends . . . . . . . . . . (13,155) (13,155)
Intercompany dividends . . . . . . . . . . . (67,500) (13,063) 80,563
Net proceeds from short-term borrowings . . 35,000 (3,488) 31,512
(Decrease) increase in net payable
to parent . . . . . . . . . . . . . . . . (159,581) (133,177) 292,758
-------- -------- --------- -------- --------
Net cash provided (required) by
financing activities . . . . . . . . . . 25,011 (200,677) 295,754 80,563 200,651
-------- -------- --------- -------- --------
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . 377 (2,183) 15,070 13,264
Cash and cash equivalents at beginning
of year . . . . . . . . . . . . . . . . . . 528 5,299 2,562 8,389
-------- -------- --------- -------- --------
Cash and cash equivalents at end of year . . $ 905 $ 3,116 $ 17,632 $ 21,653
======== ======== ========= ======== ========
12
14
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
UNCONSOLIDATED
-----------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
---- ------------ ------------ ------- ----
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . $49,552 $75,849 $(8,399) $(67,450) $49,552
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization . . 12,059 31,869 79,608 123,536
Deferred income taxes . . . . . . . . . . . (2,974) (3,499) (6,473)
Income of equity investees . . . . . . . . . (71,232) (11,650) 67,450 (15,432)
Intercompany dividends received . . . . . . . 107,959 (107,959)
Other . . . . . . . . . . . . . . . . . . . 2,484 31,891 (31,502) 2,873
(Increase) decrease in working capital and
other assets and liabilities . . . . . . . 4,590 841 (13,284) (7,853)
-------- -------- --------- -------- --------
Net cash provided (required) by
operating activities . . . . . . . . . . (2,547) 233,785 22,924 (107,959) 146,203
-------- -------- --------- -------- --------
Cash flows from investing activities:
Additions to property, plant and
equipment . . . . . . . . . . . . . . . . . (13,266) (24,899) (62,924) (101,089)
Cash provided by equity investee . . . . . . 50 50
Net required by sales of businesses . . . . (1,144) (1,144)
-------- -------- --------- -------- --------
Net cash required by investing activities . (13,266) (24,849) (64,068) (102,183)
-------- -------- --------- -------- --------
Cash flows from financing activities:
Net payments under credit facilities . . . . (15,000) (15,000)
Payments to settle long-term debt . . . . . (35,000) (1,146) (36,146)
Net proceeds from short-term borrowings . . 17,025 17,025
Purchase of treasury stock . . . . . . . . . (4,877) (4,877)
Proceeds from issuance of common stock . . . 311 311
Dividends paid . . . . . . . . . . . . . . . (13,151) (13,151)
Intercompany dividends . . . . . . . . . . . (65,000) (42,959) 107,959
Increase (decrease) in net payable
to parent . . . . . . . . . . . . . . . . 66,336 (147,624) 81,288
-------- -------- --------- -------- --------
Net cash provided (required) by
financing activities . . . . . . . . . . 15,644 (212,624) 37,183 107,959 (51,838)
-------- -------- --------- -------- --------
Net decrease in cash and cash
equivalents . . . . . . . . . . . . . . . . (169) (3,688) (3,961) (7,818)
Cash and cash equivalents at beginning
of year . . . . . . . . . . . . . . . . . . 68 7,957 10,118 18,143
-------- -------- --------- -------- --------
Cash and cash equivalents at end of year . . $ (101) $ 4,269 $ 6,157 $ 10,325
========= ======== ========= ======== ========
13
15
UNION TEXAS PETROLEUM HOLDINGS, INC.
With respect to the unaudited consolidated financial information of Union Texas
Petroleum Holdings, Inc. for the three and nine month periods ended September
30, 1995 and 1994, Price Waterhouse LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report dated October 24, 1995 appearing
below, states that they did not audit and they do not express an opinion on
that unaudited consolidated financial information. Price Waterhouse LLP has
not carried out any significant or additional audit tests beyond those which
would have been necessary if their report had not been included. Accordingly,
the degree of reliance on their report on such information should be restricted
in light of the limited nature of the review procedures applied. Price
Waterhouse LLP is not subject to the liability provisions of section 11 of the
Securities Act of 1933 for their report on the unaudited consolidated financial
information because that report is not a "report" prepared or certified by
Price Waterhouse LLP within the meaning of sections 7 and 11 of the Act.
REPORT ON REVIEW BY INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Union Texas Petroleum Holdings, Inc.
We have reviewed the accompanying consolidated balance sheet of Union Texas
Petroleum Holdings, Inc. and consolidated subsidiaries as of September 30, 1995
and the related consolidated statements of operations for the three and nine
month periods ended September 30, 1995 and 1994 and of cash flows for the nine
month periods ended September 30, 1995 and 1994. This financial information is
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial information for it to be in conformity
with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1994, and the related
consolidated statements of operations, of cash flows, and of stockholders'
equity for the year then ended (not presented herein), and in our report dated
January 25, 1995 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet information as of December 31, 1994, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
PRICE WATERHOUSE LLP
Houston, Texas
October 24, 1995
14
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements, notes, and management's discussion contained in the registrant's
1994 annual report on Form 10-K, and condensed financial statements and notes
contained in this report.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1994
Net income for the three months ended September 30, 1995, was $12 million, or
$.13 per share as compared to net income of $15 million, or $.17 per share
reported for the same period in 1994. Earnings per share for the current
period were unfavorably impacted primarily by higher exploration expenses,
higher interest expense, lower LNG sales volumes and prices, partially offset
by higher U.S. ethylene margins and higher volumes in the U.K. North Sea.
Sales and operating revenues for the three months ended September 30, 1995,
were $197 million, $4 million higher than the third quarter of 1994.
International revenues totaled $149 million as compared to $147 million for the
third quarter of 1994. In the U.K., sales and operating revenues increased by
$14 million due to increased sales volumes, primarily as a result of the July
acquisition of the Alba field, and due to higher natural gas prices and
volumes. In Indonesia, sales decreased $15 million due to lower LNG and oil
volumes and lower sales prices for LNG and crude oil. It is anticipated that
LNG sales volumes for the remainder of 1995 will continue to be lower as
compared to 1994. In Pakistan, sales were $3 million above 1994 primarily due
to higher volumes and gas prices partially offset by lower crude prices.
Average prices received and volumes sold by the Company's major operations
during the third quarter of 1995 and 1994, respectively, were as follows:
PRICES VOLUMES
(000S PER DAY)
1995 1994 1995 1994
---- ---- ---- ----
Crude oil (barrels):
U.K. $15.16 $15.69 47 36
Pakistan 13.77 14.40 6 5
Indonesia 16.39 17.41 5 6
Indonesian LNG (Mcf) 2.92 3.06 191 234
Pakistan natural gas (Mcf) 1.37 1.04 45 40
U.K. natural gas (Mcf) 2.74 1.12 18 13
U.S. ethylene (pounds) .25 .21 1,180 1,280
Petrochemical revenues totaled $48 million for the current period, essentially
level with 1994, while operating profit was $17 million as compared to $7
million in the prior period. The increase was primarily due to higher ethylene
sales prices, which offset lower sales volumes, and lower product cost, which
resulted in an increase in ethylene margins to 14 cents per pound in 1995 vs. 7
cents per pound in 1994.
Exploration expenses increased by $7 million primarily due to drilling
expenditures in Tunisia, Eastern Indonesia and Vietnam. Interest expense
increased by $6 million during the period due to higher levels of debt and
higher interest rates.
15
17
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1994
Net income for the nine months ended September 30, 1995, was $79 million, or
$.89 per share as compared to net income of $50 million, or $.57 per share
reported for the same period in 1994. The current period was favorably
impacted by higher U.S. ethylene margins and sales volumes, higher volumes in
the U.K. and Pakistan and higher oil and gas prices, partially offset by higher
exploration expenses and lower Indonesian LNG volumes.
Sales and operating revenues for the nine months ended September 30, 1995, were
$637 million, up from $533 million in the prior year. International revenues
totaled $478 million as compared to $418 million for the first nine months of
1994. In the U.K., sales and operating revenues increased by $49 million due
to higher prices and increased sales volumes. In Indonesia, sales increased $3
million as compared to 1994 due to higher crude oil and LNG prices, which were
partially offset by lower volumes. Lower LNG volumes are attributable to a
lower average participation interest in cargoes delivered for the period, and
it is anticipated that LNG sales volumes for the remainder of 1995 will
continue to be lower as compared to 1994. In Pakistan, sales were $8 million
above 1994 primarily due to higher prices and higher crude oil volumes.
Average prices received and volumes sold by the Company's major operations
during the first nine months of 1995 and 1994, respectively, were as follows:
PRICES VOLUMES
(000S PER DAY)
1995 1994 1995 1994
---- ---- ---- ----
Crude oil (barrels):
U.K. $16.22 $14.53 37 32
Pakistan 14.41 13.57 6 5
Indonesia 17.19 15.72 6 6
Indonesian LNG (Mcf) 3.06 2.82 212 228
Pakistan natural gas (Mcf) 1.32 1.08 45 44
U.K. natural gas (Mcf) 2.91 2.37 29 20
U.S. ethylene (pounds) .27 .18 1,271 1,145
Petrochemical revenues totaled $158 million as compared to $114 million in the
first nine months of 1994, while operating profit was $55 million as compared
to $10 million in the prior period. The increase was primarily due to higher
ethylene sales prices and lower product cost, which resulted in an increase in
ethylene margins to 16 cents per pound in 1995 vs. 4 cents per pound in 1994,
and due to higher volumes.
Exploration expenses increased by $20 million primarily due to drilling
expenditures in Argentina, Ireland, Tunisia, Vietnam and Eastern Indonesia.
Interest expense increased by $12 million during the period due to higher
levels of debt and to higher interest rates. The effective tax rate decreased
from the prior year due primarily to the increase in U.S. petrochemical income,
which is taxed at lower rates, partially offset by higher new venture
exploration expenses, most of which generate no tax benefits.
16
18
FINANCIAL CONDITION
Cash flow from operations: Net cash provided by operating activities was $164
million in the first nine months of 1995, an increase of $17 million from the
same period in the prior year. The increase was primarily the result of
improved ethylene margins and sales volumes and higher international oil and
gas prices, partially offset by higher exploration costs and lower Indonesian
volumes.
Ethylene margins have averaged approximately 16 cents per pound in the first
nine months of 1995, as compared to 4 cents per pound for the first nine months
of 1994 and have averaged approximately 14 cents per pound during the third
quarter of 1995 and 13 cents per pound for the month of September 1995. During
the last six months of 1994, ethylene margins improved significantly from the
first six months of 1994. The Company expects ethylene margins for the fourth
quarter of 1995 to be less than the fourth quarter of 1994, which averaged 12
cents per pound. Ethylene volumes were down about 8% in 1995's third quarter
compared to a year ago. The ethylene business is cyclical and the Company
cannot predict the duration of any trends in the business. The prices the
Company receives for its ethylene are sensitive to many factors beyond the
control of the Company, such as worldwide and U.S. demand for petrochemicals,
inventory levels, feedstock costs and availability, plant utilization rates,
plant operations and costs and competitive capacity expansion.
Capital resources: Capital expenditures for the first nine months of 1995 were
$144 million including capitalized interest of $17 million. Capital
expenditures for the first nine months of 1994 were $95 million including
capitalized interest of $14 million. The increase is principally due to
development costs for the Britannia field and increased exploration spending.
The Company expects that capital expenditures for 1995 will be approximately
$175 million excluding capitalized interest.
On July 18, 1995, the Company, through its subsidiary, Union Texas Petroleum
Limited ("UTPL"), acquired from Oryx UK Energy Company ("Oryx") their 15.5%
working interest in Block 16/26 in the central United Kingdom North Sea, which
includes the Alba field. UTPL paid Oryx $270 million for the interest, subject
to certain closing adjustments. The effective date of the transaction was July
1, 1995. The Company funded the acquisition under its bank credit facilities
and its uncommitted and unsecured lines of credit. As a result of the
acquisition, the Company recorded approximately 45 million barrels of oil as
proved reserves, of which approximately 30 million barrels are classified as
proved undeveloped. The Company expects to spend about $30 million net over
the next five years for future development expenditures related to those
reserves. The Alba field commenced production in January 1994 and is operated
by Chevron U.K. Ltd.
The Company's plans in the near term are to focus on integrating the
interests in Alba as well as the undeveloped Britannia field acquired in late
1994 into its existing North Sea program while utilizing any excess cash flow
for the reduction of debt. The Company will also continue to emphasize
developing its core holding and conducting an active exploration program as
well as controlling costs.
Financing activities: The Company has three unsecured credit facilities (the
"Credit Facilities"). One of the Credit Facilities is a $100 million unsecured
credit agreement with NationsBank of Texas, N.A. ("NationsBank"), as agent,
Bank of America National Trust and Savings Association ("Bank of America") and
Union Bank of Switzerland, Houston Agency ("UBS"), as co-agents, and certain
other banks, that provides for conversion of amounts outstanding on April 15,
1996 to a one-year term loan maturing April 15, 1997. This Credit Facility
replaced a prior $200 million revolver. Another Credit Facility is with
NationsBank, as agent, Bank of America and UBS, as co-agents, and certain other
banks. Initially this Credit Facility was a $350 million revolver that in
April 1995 was amended to increase the amount of the facility to $450 million
and to provide that the amount of the facility would reduce quarterly by $35
million beginning July 31, 1998, with a final maturity of April 30, 1999. The
$450 million revolver allows the Company to obtain up to $300 million of
availability thereunder in U.S. dollar loans that bear interest at a rate
determined in a competitive bid process. Loans under the $450 million revolver
may be made in both pounds sterling and U.S. dollars at the option of the
Company. In June 1995, the Company executed an amendment to eliminate the
total indebtedness restriction under such two Credit Facilities, which was a
$775 million limitation. In June 1995, the Company entered into an additional
$100 million unsecured credit agreement with NationsBank, as agent, and Bank of
America and UBS, as co-agents. This Credit Facility is a revolver that
provides for conversion of amounts outstanding on June 15, 1996 to a one-year
term loan maturing June 15, 1997. Loans under the Credit Facilities bear
interest at floating market rates based on, at the Company's option, the agent
bank's base rate or LIBOR, plus applicable margins, subject to increase in
certain events. Borrowings under the Credit Facilities are guaranteed by
certain subsidiaries of the Company that also guarantee the Company's Senior
Notes (as defined below). The Credit Facilities contain restrictive covenants,
including maintenance of certain coverage ratios related to the incurrence of
additional indebtedness and limitations on asset sales and mergers or
consolidations. The covenants also require maintenance of a certain level of
stockholders' equity. Based on current conditions, the Company expects to pay
17
19
dividends without restriction under the Credit Facilities. At September 30,
1995, $290 million was outstanding under the Credit Facilities bearing interest
at a weighted average rate of 6.21% per annum.
At September 30, 1995, $138 million was outstanding under the Company's
uncommitted and unsecured lines of credit. These amounts outstanding bear
interest at a weighted average rate of 6.68% per annum and do not reduce
amounts available under the Company's Credit Facilities.
In May 1995, the Company's indirect subsidiary, Union Texas Britannia Limited
("UTBL"), which is a wholly owned subsidiary of UTPL, entered into a 150
million pounds sterling secured financing from Chemical Bank, NationsBank N.A.
(Carolinas), National Westminster Bank plc and certain other banks. The
financing is used to fund the Company's share of the cost of developing the
Britannia field to production (including interest and other financing costs
incurred prior to completion and potential cost overruns), and any remaining
availability after completion may, subject to certain coverage ratios being
met, be used for UTBL's general corporate purposes. Except for certain support
by UTPL related to any potential cost overruns in excess of the facility amount
(limited to 30 million pounds sterling), insurance, tax benefits and
administrative services, the lenders' recourse will be limited to the Britannia
field project assets and is nonrecourse to the Company. The financing has a
final maturity in September 2005. At September 30, 1995, 13 million pounds
sterling ($21 million) was outstanding under UTBL's financing.
In May 1995, pursuant to a secondary public offering registered by the Company
under the Securities Act of 1933, as amended, 11.5 million shares of the 33.3
million shares of the Company's common stock owned by partnerships affiliated
with Kohlberg Kravis Roberts & Co. ("KKR") were sold in the open market. The
Company did not receive any proceeds from the offering. KKR currently owns
21.8 million shares of the Company's common stock.
In March 1995, the Company publicly issued $125 million principal amount of
8-3/8% Senior Notes due 2005 (the "8-3/8% Senior Notes") at an initial public
offering price of 99.431%. In April 1995, the Company publicly issued $75
million principal amount of 8-1/2% Senior Notes due 2007 (the "8-1/2% Senior
Notes") at an initial public offering price of 99.658%. The net proceeds from
the sale of the 8-3/8% Senior Notes and the 8-1/2% Senior Notes were
approximately $123.5 million and $74.2 million, respectively (after deducting
underwriting discount, commissions and offering expenses). The Company used
such proceeds to reduce debt under its existing credit facility and its
uncommitted and unsecured lines of credit. The Company's $100 million principal
amount of 8.25% Senior Notes due 1999 ("the 8.25% Senior Notes) together with
the 8-1/2% Senior Notes and the 8-3/8% Senior Notes are referred to herein as
the "Senior Notes." The Senior Notes represent general unsecured obligations of
the Company and rank pari passu in right of payment with the Company's
obligations under its Credit Facilities, and senior in right of payment to
subordinated indebtedness, if any, of the Company. The Senior Notes are
guaranteed by the subsidiaries of the Company that are also guarantors under
the Company's Credit Facilities, and the two recent issuances contain
restrictive covenants similar to the Company's 8.25% Senior Notes. The Senior
Notes are redeemable at any time, at the option of the Company, in whole or in
part, at a price equal to 100% of their principal amount plus accrued interest
plus a make whole premium relating to the then-prevailing Treasury Yield and
the remaining life of the Senior Notes.
In addition, at the 1995 Annual Meeting of Stockholders held May 10, 1995, the
Company's stockholders approved the authorization of a new class of 15 million
shares of preferred stock. The new preferred stock provides the Company
additional financing flexibility to issue from time to time this form of equity
based on current market conditions.
On April 27, 1994, the Company's Board of Directors authorized the repurchase
of up to 2,000,000 shares of the Company's common stock and pursuant thereto,
the Company had repurchased 329,536 shares as of December 31, 1994. The
repurchased stock will be used for general corporate purposes, including
fulfilling employee benefit program obligations. The Company has repurchased
54,900 shares during 1995 and at September 30, 1995, 104,155 shares of common
stock were held, at cost, as treasury shares.
Financial condition: In the first, second and third quarters of 1995, the
Company declared and paid a dividend of approximately $4.4 million on its
common stock. On October 20, 1995, the Company announced a dividend on its
common stock of $.05 per share to stockholders of record as of October 31,
1995, payable on November 15, 1995.
In March 1995, the Financial Accounting Standards Board ("FASB") released
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which set forth the criteria for impairment of plant, property and equipment
and other long-lived assets. Adoption of the Statement is required for years
beginning after December 15, 1995. The Company is still reviewing the
Statement; however, the Company believes the pronouncement will have no
material impact on the Company.
18
20
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company and its subsidiaries and related companies are named defendants in
numerous lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business. While the outcome of lawsuits or
other proceedings against the Company cannot be predicted with certainty,
management does not expect these matters to have a material adverse effect on
the financial position of the Company. (See Item 3 in the Company's 1994
annual report on Form 10-K.)
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
10.1 Bontang V Loan Agreement, dated as of July
1, 1995, among BankAmerica International,
as Trustee under the Bontang V Trustee and
Paying Agent Agreement, as Borrower,
Bontang Train-G Project Finance Co., Ltd.
("Tranche A Lender"), the Banks named
therein as Tranche B Lenders, The Long-Term
Credit Bank of Japan, Limited, New York
Branch ("Facility Agent"), The Fuji Bank,
Limited ("Intercreditor Agent"), Credit
Lyonnais ("Technical Agent"), and Credit
Lyonnais, The Fuji Bank, Limited and The
Long-Term Credit Bank of Japan, Limited
(collectively, the "Arrangers").
10.2 Bontang V Producers Agreement, dated as of
July 1, 1995, by Perusahaan Pertambangan
Minyuak Dan Gas Bumi Negara, Virginia
Indonesia Company, OPICOIL Houston, Inc.,
Virginia International Company, LASMO Sanga
Sanga Limited, Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc.,
Total Indonesie, Unocal Indonesia Company
and Indonesia Petroleum, Ltd.
(collectively, the "Producers"), in favor
of the Tranche A Lender, Facility Agent,
Intercreditor Agent, Technical Agent and
Arrangers.
10.3 Bontang V Trustee and Paying Agent
Agreement, dated as of July 1, 1995, among
the Producers and BankAmerica
International, as Trustee and Paying Agent.
10.4 Amendment No. 1 to Amended and Restated
Badak Trustee and Paying Agent Agreement,
dated as of July 1, 1995, among Continental
Bank International, as Trustee, and the
Producers.
10.5 Amendment No. 1 to Amended and Restated
Bontang Excess Sales Trustee and Paying
Agent Agreement, dated as of July 1, 1995,
among Continental Bank International, as
Trustee, and the Producers.
19
21
10.6 Amendment No. 1 to Bontang III Loan
Agreement, dated as of July 1, 1995, among
Continental Bank International, as Trustee
under the Bontang III Trustee and Paying
Agent Agreement, Train-E Finance Co., Ltd.,
as Tranche A Lender, and The Industrial
Bank of Japan Trust Company, as Agent on
behalf of the Majority Tranche B Lenders.
10.7 Second Amended and Restated 1973 LNG Sales
Contract, dated as of August 3, 1995,
between Perusahaan Pertambangan Minyak Dan
Gas Bumi Negara ("Pertamina"), as Seller,
and Chubu Electric Power Co., Inc., The
Kansai Electric Power Co., Inc., Kyushu
Electric Power Co., Inc., Nippon Steel
Corporation, Osaka Gas Co., Ltd. and Toho
Gas Co., Ltd., as the Buyers, with related
letter agreement, dated August 3, 1995,
between Seller and Buyers.
10.8 Package V Supply Agreement for Natural Gas
in Support of the 1973 LNG Sales Contract
Extension, dated June 16, 1995, effective
October 6, 1994, between Pertamina and
Virginia Indonesia Company, LASMO Sanga
Sanga Limited, OPICOIL Houston, Inc., Union
Texas East Kalimantan Limited, Universe Gas
and Oil Company, Inc. and Virginia
International Company.
10.9 First Amendment to Union Texas Petroleum
Savings Plan for Salaried Employees.
15 Independent Accountants' Awareness Letter.
27.1 Financial Data Schedule for the nine-month
period ended September 30, 1995.
(b) Reports on Form 8-K
The Company filed a Form 8-K dated July 14, 1995 to disclose
completion of financing on Train G in Indonesia and an update to
the offshore Ireland drilling activities.
The Company filed a Form 8-K dated July 25, 1995 to attach a press
release announcing the Company's second quarter earnings.
The Company filed a Form 8-K dated July 28, 1995 to report the
completion of the acquisition of an interest in the Alba Field.
The Company filed a Form 8-K dated August 18, 1995 to disclose an
update of the Company's drilling results on the Kai-Tanimbar-Rebi
blocks in Eastern Indonesia and to attach a press release
announcing natural gas discoveries in Pakistan.
The Company filed a Form 8-K dated September 25, 1995 to attach
press releases announcing the participation in an exploration
concession in Italy, the results of an offshore Tunisia exploration
well and the results of an offshore Vietnamese exploration well.
The Company filed a Form 8-K/A dated October 2, 1995 to include
certain historical and pro forma information for the Alba
acquisition.
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22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION TEXAS PETROLEUM HOLDINGS, INC.
Date: October 27, 1995 By: /s/ DONALD M. MCMULLAN
-------------------------------
Donald M. McMullan
Vice President and Controller
(Chief Accounting Officer
and officer duly authorized to
sign on behalf of the registrant)
21
23
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Bontang V Loan Agreement, dated as of July 1, 1995, among
BankAmerica International, as Trustee under the Bontang V
Trustee and Paying Agent Agreement, as Borrower, Bontang
Train-G Project Finance Co., Ltd. ("Tranche A Lender"), the
Banks named therein as Tranche B Lenders, The Long-Term Credit
Bank of Japan, Limited, New York Branch ("Facility Agent"),
The Fuji Bank, Limited ("Intercreditor Agent"), Credit
Lyonnais ("Technical Agent"), and Credit Lyonnais, The Fuji
Bank, Limited and The Long-Term Credit Bank of Japan, Limited
(collectively, the "Arrangers").
10.2 Bontang V Producers Agreement, dated as of July 1, 1995, by
Perusahaan Pertambangan Minyuak Dan Gas Bumi Negara, Virginia
Indonesia Company, OPICOIL Houston, Inc., Virginia
International Company, LASMO Sanga Sanga Limited, Union Texas
East Kalimantan Limited, Universe Gas & Oil Company, Inc.,
Total Indonesie, Unocal Indonesia Company and Indonesia
Petroleum, Ltd. (collectively, the "Producers"), in favor of
the Tranche A Lender, Facility Agent, Intercreditor Agent,
Technical Agent and Arrangers.
10.3 Bontang V Trustee and Paying Agent Agreement, dated as of July
1, 1995, among the Producers and BankAmerica International, as
Trustee and Paying Agent.
10.4 Amendment No. 1 to Amended and Restated Badak Trustee and
Paying Agent Agreement, dated as of July 1, 1995, among
Continental Bank International, as Trustee, and the Producers.
10.5 Amendment No. 1 to Amended and Restated Bontang Excess Sales
Trustee and Paying Agent Agreement, dated as of July 1, 1995,
among Continental Bank International, as Trustee, and the
Producers.
10.6 Amendment No. 1 to Bontang III Loan Agreement, dated as of
July 1, 1995, among Continental Bank International, as Trustee
under the Bontang III Trustee and Paying Agent Agreement,
Train-E Finance Co., Ltd., as Tranche A Lender, and The
Industrial Bank of Japan Trust Company, as Agent on behalf of
the Majority Tranche B Lenders.
24
10.7 Second Amended and Restated 1973 LNG Sales Contract, dated as
of August 3, 1995, between Perusahaan Pertambangan Minyak Dan
Gas Bumi Negara ("Pertamina"), as Seller, and Chubu Electric
Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu
Electric Power Co., Inc., Nippon Steel Corporation, Osaka Gas
Co., Ltd. and Toho Gas Co., Ltd., as the Buyers, with related
letter agreement, dated August 3, 1995, between Seller and
Buyers.
10.8 Package V Supply Agreement for Natural Gas in Support of the
1973 LNG Sales Contract Extension, dated June 16, 1995,
effective October 6, 1994, between Pertamina and Virginia
Indonesia Company, LASMO Sanga Sanga Limited, OPICOIL Houston,
Inc., Union Texas East Kalimantan Limited, Universe Gas and
Oil Company, Inc. and Virginia International Company.
10.9 First Amendment to Union Texas Petroleum Savings Plan for
Salaried Employees.
15 Independent Accountants' Awareness Letter.
27.1 Financial Data Schedule for the nine-month period ended
September 30, 1995.