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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 BOULEVARD, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 623-6544
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.05 par value New York Stock Exchange
Pacific Exchange, Inc.
8.25% Senior Notes due 1999 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filings pursuant to Item
405 of Regulation S-K (sec.229.405 under the Securities Exchange Act of 1934) is
not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
As of February 20, 1998, there were 85,161,652 shares of Union Texas
Petroleum Holdings, Inc. $.05 par value Common Stock issued and outstanding,
62,958,861 of which, having an aggregate market value of $1,231,632,718, were
held by non-affiliates of the registrant. For purposes of the above statement
only, all directors and executive officers of the registrant are assumed to be
affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement related to the registrant's 1998 Annual
Stockholders Meeting are incorporated by reference into Part III of this report.
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business.................................................... 3
Overview.................................................... 3
Segment Data................................................ 5
Reserves.................................................... 6
Production.................................................. 7
Oil and Gas Prices and Production Costs..................... 7
Acreage..................................................... 8
Drilling Activities......................................... 8
Exploration and Production.................................. 10
U.K. North Sea.............................................. 10
Indonesia................................................... 12
Venezuela................................................... 17
Pakistan.................................................... 19
Alaska...................................................... 20
Other Activities............................................ 21
Petrochemicals.............................................. 23
Plant Operations............................................ 23
Storage and Transportation.................................. 23
Other Matters............................................... 24
Insurance................................................... 24
Employees................................................... 24
Risk Factors................................................ 24
Item 2. Properties.................................................. 28
Item 3. Legal Proceedings........................................... 28
Item 4. Submission of Matters to a Vote of Security Holders......... 28
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 29
Item 6. Selected Financial Data..................................... 30
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 30
Item 8. Financial Statements and Supplementary Data................. 37
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 66
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 67
Item 11. Executive Compensation...................................... 67
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 67
Item 13. Certain Relationships and Related Transactions.............. 68
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 68
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PART I
ITEM 1. BUSINESS.
OVERVIEW
The Company, the successor to a corporation founded in 1896, is a
U.S.-based independent (non-integrated) oil and gas company with worldwide
operations. At December 31, 1997, the Company had proved oil and gas reserves of
459 million barrels of oil equivalent. In February 1998, the Company recorded an
additional 114 million barrels of proved reserves in connection with its
Venezuelan acquisition. All of the Company's oil and gas producing activities
are currently conducted outside of the United States in the United Kingdom (the
"U.K.") sector of the North Sea, Indonesia, Venezuela and Pakistan. The Company
also operates a U.S.-based petrochemical business.
The Company's principal current international activities began in the late
1960s with its participation in a joint venture in Indonesia and in two
consortia in the U.K. North Sea. In addition, the Company established Venezuela
as a significant core operated area with the 1998 acquisition of a 100% interest
in an operating service contract and a successful bid in 1997 for another
operating service contract. The Company is also currently engaged in exploration
and production activities in several other countries and development of an oil
field on Alaska's North Slope. International oil and gas properties accounted
for 93% of the Company's total proved reserves as of December 31, 1997. All of
the Company's net income attributable to its oil and gas operations in recent
periods has been generated by its international operations.
The Company's principal properties in the U.K. North Sea are interests in
the Alba, Piper, Claymore, Saltire, Chanter, Iona and Scapa oil fields, the Sean
gas fields and the Britannia gas and condensate field. The Company has a 15.5%
working interest in Block 16/26, which includes the Alba field that came on
stream in 1994 and is operated by Chevron U.K. Limited. As of December 31, 1997,
the Company had recorded approximately 34 million barrels of oil as proved
reserves for the Alba field, of which 23 million barrels of oil are classified
as proved undeveloped. The Company also has a 9.42% unit interest in the
Britannia gas field, a portion of which underlies the Alba field. The Britannia
field is operated by Britannia Operator Limited, a joint venture between Conoco
(U.K.) Limited and Chevron U.K. Limited. As of December 31, 1997, the Company
had recorded 54 million barrels of oil equivalent of proved undeveloped reserves
for the Britannia field. Production from the Britannia field is expected to
begin in August 1998. The Company owns a 20% working interest in the Piper,
Claymore, Saltire, Chanter, Iona and Scapa oil fields, which are operated by Elf
Exploration UK plc, and a 25% working interest in the North, South and East Sean
gas fields, which are operated by Shell U.K. Limited.
The Company's Indonesian activities consist primarily of its 37.81% working
interest in the East Kalimantan joint venture that produces natural gas and, to
a lesser extent, oil and condensate from several fields in Indonesia. The
Company holds its interests in this joint venture directly through a wholly
owned subsidiary and also indirectly through its 50% interest in Unimar Company
("Unimar"), which is a partnership with a subsidiary of LASMO plc, a U.K.
company. Unimar owns ENSTAR Corporation and its subsidiaries, including Virginia
Indonesia Company, the operator of the joint venture. The Company's interests in
Unimar are reported on its Consolidated Financial Statements as an equity
investment (the "Equity Partnership"). See Notes 5 and 19 of Notes to
Consolidated Financial Statements for additional information regarding the
Equity Partnership.
Natural gas produced by the East Kalimantan joint venture is converted into
liquefied natural gas ("LNG") at facilities owned by Pertamina, the Indonesian
national oil and gas company. Currently, LNG is principally sold to two groups
of Japanese industrial and utility customers, the national oil company of the
Republic of China, a consortium of buyers organized by Osaka Gas, and Korea Gas
Corporation, under long-term contracts originally signed in 1973, 1981, 1987,
1990 and 1991, respectively. In 1995, Pertamina extended its 1973 and 1981
long-term LNG sales contracts and signed agreements for two new long-term LNG
sales contracts. Payments for LNG under all LNG sales contracts are made in U.S.
dollars directly to a bank in the U.S. During 1997, 80% of the joint venture's
share of LNG was sold, and in 1998, 74% is expected to be sold, by Pertamina to
Japanese customers. To supply the additional quantities of LNG called for
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primarily by the 1973 contract extension, Pertamina completed construction of a
seventh processing train at the Bontang LNG facility in November 1997. Financing
of an eighth train was consummated in March 1997 and construction began in July
1997 primarily to support the new sales contracts. The Company is also
participating in exploration activities of the East Kalimantan joint venture, as
well as exploration activities independent of that joint venture in other parts
of Indonesia.
The Company's activities in Venezuela consist of its interest in two
operating service contracts covering the Desarrollo Zulia Occidental ("DZO")
unit and the Boqueron contract area. The Company's reserves in Venezuela
currently account for over 25% of the Company's worldwide reserves. In February
1998, the Company acquired all of the stock of Compania Occidental de
Hidrocarburos, Inc. ("Hidrocarburos"), a U.S. affiliate of Occidental Oil and
Gas Corporation ("Occidental"), for approximately $212 million, which included
approximately $14 million of working capital and certain closing adjustments
effective December 31, 1997. Occidental may receive contingent payments of up to
a maximum of $15 million annually for six years based primarily on the level of
oil prices. Hidrocarburos operates the DZO unit under its 100% interest in an
operating service contract with a subsidiary of the national oil company,
Petroleos de Venezuela S.A. ("PDVSA"). As of February 1998, the Company had
recorded for the DZO unit 114 million barrels of proved reserves, of which 56
million barrels are classified as proved undeveloped. In June 1997, the Company
and its co-venturer, Preussag Energie GmbH of Germany, were the successful
bidders for the Boqueron area service contract awarded under Venezuela's Third
Operating Agreement Round. The Company has a 66.67% interest in the Boqueron
operating service contract and expects to assume operatorship in May 1998. As of
December 31, 1997, the Company recorded 40 million barrels of proved reserves
for the Boqueron contract area.
Since 1977, the Company has operated through joint ventures oil and gas
exploration, development and production activities in the Badin area in
Pakistan. Oil production from the Badin area began in 1982, and gas production
began in 1989. The Company has working interests of either 30% or 25.5% in the
currently producing fields. The Company also has other concessions in Pakistan.
The Company and its co-venturers, ARCO Alaska, Inc. and Anadarko Petroleum
Corp., are developing the Alpine oil field in the Western Colville area on
Alaska's North Slope. ARCO is the operator of the field. The Company has a 22%
working interest in the Alpine field. As of December 31, 1997, proved
undeveloped reserves (net) for the field were 32 million barrels of oil.
Production from the Alpine field is expected to begin in the first part of 2000.
The Company pursues opportunities and participates worldwide in exploration
for oil and gas in both new venture areas and the Company's producing areas.
Current worldwide activity is in Alaska, Algeria, Bolivia, China, Egypt, Greece,
Ireland, Italy, Jordan, Kazakhstan/Caspian Sea, Papua New Guinea, Sicily,
Trinidad, Tunisia and Yemen and other areas in Latin America, Africa and the
Middle East, as well as the U.K., Indonesia, Venezuela and Pakistan.
In the United States, the Company operates the Geismar olefins plant in
which it owns a 41.67% interest. Located near Baton Rouge, Louisiana, the
Geismar plant, which currently has a 1.275 billion annual gross pounds capacity
(531 million net), processes gas liquids feedstocks to produce ethylene for sale
to several petrochemical manufacturers for the production of plastics used in
various consumer products. In 1997, the Company finished construction of a
thirteenth furnace and in the first quarter of 1998, commenced the upgrading of
nine of the plant's existing furnaces with completion expected in early 1999.
The Company is studying additional opportunities to expand and add value to its
petrochemical business.
In February 1998, the Board of Directors of the Company approved a $413
million capital expenditure budget for 1998, an increase of about 60% from the
$262 million spent in 1997. Approximately $284 million has been budgeted for oil
and gas development projects in Venezuela, the U.K. North Sea, Indonesia,
Pakistan and Alaska, including $79 million for Venezuela, $56 million for the
U.K. and $50 million for Alaska. The Company has budgeted approximately $82
million for exploration projects in the U.K. North Sea, Indonesia and Pakistan
and new venture exploration activities. Approximately $39 million has been
budgeted for the Company's U.S. petrochemical interests. The purchase costs of
the Venezuelan acquisitions and potential acquisitions are not included in
capital expenditures or the budgets.
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5
Unless the context otherwise requires, references herein to the Company are
not intended to imply exact corporate relationships and include Union Texas
Petroleum Holdings, Inc., its predecessors and its subsidiaries, including their
interests in certain joint ventures and partnerships. Union Texas Petroleum
Holdings, Inc. was organized under the laws of the State of Delaware in 1982.
The address and telephone number of the Company's principal executive offices
are 1330 Post Oak Blvd., Houston, Texas 77056, (713) 623-6544. As of February
20, 1998, the Company had approximately 1,300 full-time employees worldwide. For
a discussion of risks, uncertainties and assumptions affecting the Company's
business, see "-- Risk Factors" and Item 7 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations.
SEGMENT DATA
The table below summarizes the Company's revenues, net income and
identifiable assets by areas of activity for the past three years(a):
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
(DOLLARS IN MILLIONS)
Exploration and production:
Sales and operating revenues:
United Kingdom..................... $ 367 $ 406 $ 323
Indonesia.......................... 287 341 276
Pakistan........................... 66 66 51
Other International................ 1
------ ------ ------
Total......................... $ 720 $ 813 $ 651
====== ====== ======
Net income (loss):
United Kingdom..................... 68 85 46
Indonesia.......................... 106 121 95
Pakistan........................... 19 27 14
Other International................ (88) (33) (49)
United States (Alaska)............. (3) (8) (6)
------ ------ ------
Total......................... $ 102 $ 192 $ 100
====== ====== ======
Identifiable assets:
United Kingdom..................... 1,156 1,244 1,168
Indonesia.......................... 415 444 459
Venezuela.......................... 126
Pakistan........................... 67 60 46
Other International................ 43 15 9
United States (Alaska)............. 38 23 13
------ ------ ------
Total......................... $1,845 $1,786 $1,695
====== ====== ======
Petrochemicals:
Sales and operating revenues....... $ 188 $ 193 $ 200
Net income (b)..................... 20 15 38
Identifiable assets................ 134 116 111
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(a) Net income (loss) and identifiable assets do not give effect to general and
administrative items. See Note 15 of Notes to Consolidated Financial
Statements for additional data.
(b) Includes assumed U.S. taxes at regular statutory tax rates. The Company,
however, was subject to the U.S. corporate alternative minimum tax during
the periods indicated.
As reflected in the preceding table, a significant portion of the Company's
income was generated from its overseas operations, particularly its
participation in the producing fields in the East Kalimantan area of Indonesia
and in the U.K. North Sea. All of the Company's oil and gas and petrochemical
activities are
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subject to a variety of risks. See "-- Risk Factors" and Item 7 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations.
RESERVES
The following table sets forth information regarding the Company's
estimates of its proved net reserves as of December 31, 1997. The Company's
estimates of reserves filed with federal agencies, including the Securities and
Exchange Commission, agree with the information set forth below. See "-- Risk
Factors," Item 7 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations and Note 19 of Notes to Consolidated Financial
Statements.
OIL (MBbls)(a)(b) GAS (MMcf)(b) OIL EQUIVALENTS (Mboe)(a)(b)
--------------------------------- ----------------------------------- ---------------------------------
DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL
--------- ----------- ------- --------- ----------- --------- --------- ----------- -------
United Kingdom....... 40,835 35,820 76,655 124,843 247,349 372,192 62,360 78,466 140,826
Indonesia(c)......... 17,473 1,775 19,248 670,415 110,674 781,089 133,062 20,857 153,919
Venezuela(d)......... 40,000 40,000 40,000 40,000
Pakistan............. 4,206 1,640 5,846 75,107 44,787 119,894 17,155 9,362 26,517
Alaska............... 32,005 32,005 32,005 32,005
------- ------ ------- --------- ------- --------- ------- ------- -------
Total........ 102,514 71,240 173,754 870,365 402,810 1,273,175 252,577 140,690 393,267
------- ------ ------- --------- ------- --------- ------- ------- -------
Equity Partnership:
Indonesia(c)....... 7,316 749 8,065 284,535 47,134 331,669 56,374 8,875 65,249
------- ------ ------- --------- ------- --------- ------- ------- -------
Total........ 109,830 71,989 181,819 1,154,900 449,944 1,604,844 308,951 149,565 458,516
======= ====== ======= ========= ======= ========= ======= ======= =======
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(a) For the purpose of calculating reserves, oil includes condensate, and for
the U.K., oil also includes natural gas liquids.
(b) Unless otherwise indicated in this Annual Report on Form 10-K, gas volumes
are stated at the legal pressure base of the area or country in which the
reserves are located and at 60 degrees Fahrenheit. As used herein, the term
"BTU" means British thermal unit, the term "TBtu" means trillion BTUs, the
term "MMBtu" means million BTUs, the term "Mcf" means thousand cubic feet,
the term "MMcf" means million cubic feet, the term "Bcf" means billion
cubic feet, the term "Tcf" means trillion cubic feet, the term "Bbl" means
barrel, the term "MBbls" means thousands of barrels, the term "MMBbls"
means millions of barrels, the term "boe" means barrel of oil equivalent,
the term "Mboe" means thousand barrels of oil equivalent and the term
"MMboe" means million barrels of oil equivalent. Gas is converted into a
barrel of oil equivalent based on 5.8 Mcf of gas to one barrel of oil. The
term "LNG" means liquefied natural gas and the term "LPG" means liquefied
petroleum gas.
(c) Information regarding Indonesian reserves relates to the Company's net
interest in a production sharing contract between the Indonesian joint
venture and Pertamina. The joint venture has no ownership interest in the
reserves but does have the right to share revenues and production and is
entitled to recover most field and other operating costs and capital
depreciation. The reserve estimates, which are based on year-end prices,
are subject to revision as product prices and costs fluctuate due to the
cost recovery feature under the production sharing contract. The impact on
reserves is inversely related to price changes and directly related to
changes in field operating and capital costs. In addition, reserve
estimates are subject to revision due to the effect that price fluctuations
generally have on estimates of recoverable reserves. Debt relating to the
LNG processing facilities owned by Pertamina is contractually required to
be serviced from proceeds of LNG sales prior to the distribution of such
proceeds primarily to the members of the joint venture, Pertamina and the
other production sharing contractors. The debt obligation is not the
obligation of the joint venture. Debt service relating to such facilities
is accounted for in the Company's reserve estimates as a cost of production
and operation. Such debt service is deducted in estimating future net
revenues to be distributed among Pertamina and the production sharing
contractors, including the joint venture and the Company's interest
therein. See "Exploration and Production -- Indonesia" below and Note 19 of
Notes to Consolidated Financial Statements.
(d) The reserves table, as well as the other tables in this Annual Report on
Form 10-K, does not include the reserves associated with the DZO unit,
which were recorded in February 1998. Information regarding all Venezuelan
reserves relates to the Company's net interest in an operating service
contract for the Boqueron area between the Company, the other contractor
and a subsidiary of PDVSA. The Government
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of Venezuela retains full ownership of all hydrocarbons. The Company will
receive a service fee for each barrel of crude oil produced at Boqueron,
which consists of the following two components: (i) a set fee for the
baseline production and (ii) a sliding incentive fee for the incremental
production, as well as cost recovery for field and other capital and
operating costs. See "Exploration and Production -- Venezuela" below and
Note 19 of Notes to Consolidated Financial Statements.
PRODUCTION
The following table sets forth the Company's average daily production of
oil, natural gas liquids and gas during 1997, 1996 and 1995:
EQUITY
UNITED PARTNERSHIP
KINGDOM INDONESIA PAKISTAN INDONESIA
------- --------- -------- -----------
Oil (MBbls per day):
1997............................................. 43 6 7 2
1996............................................. 43 6 6 2
1995............................................. 40 6 5 2
Natural gas liquids (MBbls per day):
1997............................................. 1 2
1996............................................. 2 2
1995............................................. 2 1
Gas (MMcf per day):
1997............................................. 29 219(a) 37 72(a)
1996............................................. 46 258(a) 41 85(a)
1995............................................. 34 251(a) 45 83(a)
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(a) Includes gas consumed in the operation of the Indonesian LNG plant.
OIL AND GAS PRICES AND PRODUCTION COSTS
The Company's average sales prices and production costs of oil, natural gas
liquids and gas for 1997, 1996 and 1995 were as follows:
EQUITY
UNITED PARTNERSHIP
KINGDOM INDONESIA PAKISTAN INDONESIA
------- --------- -------- -----------
Average sales prices:
Per Bbl of oil
1997............................................. $17.28 $19.71 $17.09 $19.71
1996............................................. 19.60 19.49 17.75 19.49
1995............................................. 16.14 17.14 14.24 17.14
Per Bbl of natural gas liquids
1997............................................. 15.19 20.39
1996............................................. 14.47 18.04
1995............................................. 10.92 18.11
Per Mcf of gas
1997............................................. 2.92 3.24(a) 1.61 3.24(a)
1996............................................. 2.83 3.34(a) 1.61 3.34(a)
1995............................................. 2.78 2.90(a) 1.32 2.90(a)
Average production costs per boe(b):
1997............................................. 4.57 3.08(c) 2.15 2.87(c)
1996............................................. 4.31 3.22(c) 2.39 3.05(c)
1995............................................. 5.05 3.02(c) 3.55 2.72(c)
(Footnotes on following page)
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(a) Includes natural gas sold to fertilizer plants and a refinery. The average
sales price for LNG for 1997, 1996 and 1995 was $3.45, $3.52 and $3.03 per
Mcf, respectively.
(b) Primarily includes expenditures for operating expenses.
(c) Includes plant processing costs and debt service on the Indonesian LNG
processing facilities.
ACREAGE
The following table summarizes the Company's developed and undeveloped
acreage at December 31, 1997, by geographic area. As used herein and in
"Drilling Activities" below, the term "gross" refers to acres or wells in which
the Company owns a working interest, and the term "net" refers to gross acres or
wells multiplied by the percentage of the working interest owned by the Company.
DEVELOPED ACRES UNDEVELOPED ACRES
---------------- ------------------
AREA GROSS NET GROSS NET
---- ------ ---- ------- -------
(NUMBERS IN THOUSANDS)
United States (Alaska)............................ 396 119
United Kingdom.................................... 148 20 1,017 191
Indonesia......................................... 97 25 5,715 2,356
Venezuela......................................... 7 4
Pakistan.......................................... 32 9 5,519 3,349
Other International............................... 18,698 7,719
--- -- ------ ------
Total................................... 284 58 31,345 13,734
=== == ====== ======
Equity Partnership:
Indonesia....................................... 97(a) 11 1,046(a) 121
=== == ====== ======
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(a) The Company also has a direct interest in such gross developed and
undeveloped acreage, which is included above in the Company's gross acreage
for Indonesia.
DRILLING ACTIVITIES
At December 31, 1997, the Company's total gross and net productive oil and
gas wells, including multiple completions, by geographic area, were as shown in
the table below. The gross number of oil and gas wells with multiple completions
was 250.
OIL WELLS GAS WELLS
-------------- ---------------
AREA GROSS NET GROSS NET
---- ----- ----- ----- ------
United Kingdom...................................... 69 13.22 29 4.60
Indonesia........................................... 80 19.97 395 95.92
Venezuela........................................... 9 6.00
Pakistan............................................ 51 14.94 45 13.01
Other International.................................
--- ----- --- ------
Total..................................... 209 54.13 469 113.53
=== ===== === ======
Equity Partnership:
Indonesia......................................... 80(a) 8.78 395(a) 42.25
=== ===== === ======
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(a) The Company also has a direct interest in such wells, which is included
above in the Company's gross wells for Indonesia.
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The net productive and dry exploratory wells drilled during 1997, 1996 and
1995, by geographic area, were as follows:
EXPLORATORY WELLS
---------------------------------------
PRODUCTIVE DRY
------------------ ------------------
AREA 1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
United States (Alaska)...................... 1.41(a) .22
United Kingdom.............................. .23 .16 .73
Indonesia................................... .26 .44 .33
Pakistan.................................... .77 .56 1.42 1.72 1.12 1.63
Other International......................... 1.65 1.90
---- ---- ---- ---- ---- ----
Total............................. .77 1.97 1.42 3.86 1.94 4.59
==== ==== ==== ==== ==== ====
Equity Partnership:
Indonesia................................. .11
====
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(a) Includes net interest in four wells drilled prior to 1996, which were in
suspense pending determination of commerciality.
The net productive and dry development wells drilled during 1997, 1996 and
1995, by geographic area, were as follows:
DEVELOPMENT WELLS
---------------------------------------
PRODUCTIVE DRY
------------------ ------------------
AREA 1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
United Kingdom.............................. 1.42 .87 1.36 .20 .20 .20
Indonesia................................... 2.05 1.95 3.90
Pakistan.................................... 1.02 1.16 .86 .26 .86 .26
---- ---- ---- ---- ---- ----
Total............................. 4.49 3.98 6.12 .46 1.06 .46
==== ==== ==== ==== ==== ====
Equity Partnership:
Indonesia................................. .90 .86 1.72
==== ==== ====
At December 31, 1997, wells in progress were as follows:
EXPLORATORY DEVELOPMENT
------------- -------------
AREA GROSS NET GROSS NET
---- ----- ---- ----- ----
United States (Alaska)................................
United Kingdom........................................ 21 2.31
Indonesia............................................. 4 .85
Pakistan.............................................. 3 .77
Other International................................... 4 1.50
-- ---- -- ----
Total....................................... 7 2.27 25 3.16
== ==== == ====
Equity Partnership:
Indonesia........................................... 4(a) .37
== ====
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(a) The Company also has a direct interest in such wells, which is included
above in the Company's gross wells for Indonesia.
At December 31, 1997, there were pressure maintenance programs in the U.K.
North Sea and in Pakistan.
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EXPLORATION AND PRODUCTION
U.K. North Sea
The Company's principal U.K. North Sea properties include interests in the
Alba, Piper, Claymore, Saltire, Chanter, Iona and Scapa oil fields, the Sean gas
fields and the Britannia gas and condensate field. The Company also owns a 20%
interest in the Flotta terminal and pipeline system located in the Orkney
Islands of northern Scotland, which currently handles approximately 10% of the
U.K.'s oil production.
Alba Field. In July 1995, the Company acquired a 15.5% working and revenue
interest in the central U.K. North Sea's Block 16/26, which includes the Alba
oil field. The Alba field has been developed using a fixed platform located in
the northern part of the field from which oil is pumped to a permanently moored
floating storage unit three miles away. Shuttle tankers then transport the oil.
At year-end, proved reserves (net) for the Alba field were 34 MMBbls of oil, of
which 23 MMBbls are classified as proved undeveloped. The Company anticipates
recording additional proved reserves based on the field's production history and
future development activity. The Alba field, which commenced production in
January 1994, is expected to produce for over 20 years and maintain its 1997
peak production level in 1998. Average daily production (net to the Company) for
1997 was 14 MBbls of oil. During 1998, the Company expects to spend $32 million
on field development, including the construction of a gas pipeline, upgrading of
certain facilities and drilling activities. Chevron U.K. Limited operates the
field. Production from the Alba field is subject to U.K. corporation tax and the
U.K. Petroleum Revenue Tax ("PRT"), but is not subject to U.K. royalty.
Britannia Field. The Company has a 9.42% unit interest in the undeveloped
Britannia natural gas and condensate field, a portion of which underlies the
Alba field, in the U.K. North Sea. As of December 31, 1997, the Company has
spent a total of $132 million on development, of which $41 million was spent in
1997 for platform fabrication and installation, and expects to spend
approximately $24 million in 1998. The Britannia field is operated by Britannia
Operator Limited, a joint venture between Conoco (U.K.) Limited and Chevron U.K.
Limited. Production from Britannia is expected to begin in August 1998 with a
production life of approximately 30 years. Long-term agreements have been
reached to sell a substantial portion of the gas production in the U.K. market
to: Kinetica Limited (a subsidiary of Powergen plc), Conoco (U.K.) Limited,
Mobil Gas Marketing (U.K.) Limited, National Power plc and Total Oil Marine plc.
The gas production will be processed at the SAGE terminal in St. Fergus in
northeastern Scotland, which has been expanded by the SAGE owners to accommodate
the Britannia production. In August 1997, the platform was installed in the
field. The gas and condensate export lines were successfully laid and tied-in
during the third quarter of 1997 and are expected to be fully operational in the
second quarter of 1998. Governmental approval for the habitation of the platform
was granted in December 1997. As of December 31, 1997, proved undeveloped
reserves (net) for the Britannia field were 54 MMboe. The Company anticipates
recording additional proved reserves based on the field's development results
and future production history. Production from the Britannia field will be
subject to the U.K. corporation tax, but will not be subject to U.K. royalty or
PRT.
Piper and Claymore Fields. In 1971, the Company joined a consortium of
companies, of which Elf Exploration UK plc is now the operator, to explore for
oil and gas in certain areas of the U.K. North Sea. The Company has a 20%
working interest (17.5% revenue interest after government royalty) in the Piper
and Claymore fields discovered in 1972 and 1974, respectively. Production from
Piper and Claymore originally began in late 1976 and late 1977, respectively.
After being shut down in July 1988, Claymore recommenced in 1989, and Piper
recommenced in 1993 from a new fixed platform ("Piper B"). Oil production from
the fields is transferred 135 miles via the joint venture's pipeline to the
Flotta terminal. The remaining proved reserves (net) as of December 31, 1997,
contained in the Piper and Claymore fields were 10 MMboe and 14 MMboe,
respectively. Average daily production of oil and liquids (net to the Company)
for 1997 from the Piper and Claymore fields was 9 MBbls and 7 MBbls,
respectively.
Piper Satellite Fields. The Company also has a 20% working and revenue
interest in the Saltire, Chanter and Iona fields, satellites to Piper. The
Saltire field was developed in 1993 with a fixed platform connected subsea to
the Piper B platform. The Chanter and Iona fields are subsea tiebacks to the
Piper B platform and the Saltire platform, respectively. Remaining proved
reserves (net) at December 31, 1997 for the three satellite fields are 4.5
MMboe.
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Claymore Satellite Field. The Scapa field, in which the Company has a 20%
working and revenue interest, was discovered in 1975 and is produced using a
subsea production facility tied to the Claymore platform. Average daily
production (net to the Company) for 1997 was 4 MBbls of oil and liquids.
Remaining proved reserves (net) at December 31, 1997, for the Scapa field were 4
MMboe.
The Piper and Claymore fields are currently subject to PRT at a 50%
statutory rate, which is based on the net value of oil and gas produced from
each field and on pipeline tariffs. The U.K. tax structure has encouraged
development of fields in the North Sea by exempting all or part of their
production from PRT. These fields, such as the Saltire, Chanter, Iona and Scapa
fields, are referred to as edge oil fields because they generally have separate
field designations, incur little or no PRT, have no government royalty interest
burden and are generally developed as satellites from an existing platform. It
is anticipated that only small amounts of PRT, if any, will be paid on the
production from these fields. All production from any field receiving
development consent after March 16, 1993, such as the Britannia and Iona fields,
is exempt from PRT. Production exempted from PRT provides a greater contribution
to cash flow on a per-barrel basis. All production is subject to the U.K.
corporation tax, which is at the current rate of 31% (an effective rate of 25.5%
after benefits provided by the U.K./U.S. tax treaty). Under current U.S. tax
law, the PRT and U.K. corporation tax may be credited against U.S. taxes.
Sean Fields. The Company has a 25% working interest (24.375% revenue
interest after overriding royalty) in the North, South and East Sean gas fields
located in the southern portion of the U.K. North Sea and operated by Shell U.K.
Limited. The proved reserves (net) as of December 31, 1997 for the fields were
20 MMboe.
The Sean platforms, which currently serve the North, South and East Sean
fields, made their first deliveries in December 1986. Under the terms of a
long-term gas sales contract with British Gas Trading Limited (BGT), the Company
currently maintains each winter contract period the capability of delivering up
to 15 Bcf (net to the Company) from the North and South Sean fields. In recent
years, the average sales from these fields net to the Company has been 3.1 Bcf.
Inasmuch as there were higher sales during the 1996-1997 winter contract period
(10.5 Bcf net to the Company), and due to a mild winter, the Company expects
significantly lower than average sales for the 1997-1998 winter contract period.
This peak-shaving gas sales agreement also provides that currently proved gas
reserves from the North and South Sean fields are dedicated to the buyer. The
price under the gas sales agreement is based upon the volume of gas taken and
various U.K. price indices. The average price for 1997 was $3.19 per Mcf. During
the fall and winter months, the Company also earns a capacity charge, which is
independent of production levels, to ensure field deliverability of 600 MMcf
(gross) per day. The capacity charge for 1997 totaled $39 million (net to the
Company), and the revenue for the volume of gas taken on 38 days of production
was $18 million (net to the Company). Production from the North and South Sean
fields is subject to U.K. corporation tax and PRT, but is not subject to U.K.
royalty.
Discovered in 1994, the East Sean field is separated from the producing
reservoirs of the North and South Sean fields, and as a result, production from
the East Sean field is not dedicated to the peak-shaving contract with BGT.
During 1997, the Company's share of gas from the East Sean field was sold, on
the U.K.'s short term gas market, to a number of companies. Average daily
production (net to the Company) for 1997 was 8 MMcf per day. Production from the
East Sean Field is subject to U.K. corporation tax but is not subject to U.K.
royalty or PRT.
Customers. For 1997, the Company's U.K. operations had crude oil sales at
prevailing market prices to Texaco Limited equal to 12% of the Company's total
sales and operating revenues. Because of the market for Northwest European crude
oil, the Company believes that the loss of this customer would not have a
material adverse effect on the Company. See Note 13 of Notes to Consolidated
Financial Statements.
Other Information. During 1997, the Company sold its 4.19% equity interest
in the unitized Ross field to a subsidiary of Nippon Oil. The consortium of the
Piper and Claymore fields have instigated a cost-reduction program, which is
expected to save the Company in excess of $20 million net over the next decade.
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Production from the Company's interests in the U.K. fields totaled 18 MMboe
during 1997, a decrease of 7% from 1996. In 1998, the Company expects production
from these fields to slightly decrease from the 1997 production level with
additional production expected to be contributed from the Britannia field by the
fourth quarter of 1998. Payment to the Company with respect to oil production
from the Alba, Piper, Claymore, Saltire, Chanter, Iona and Scapa fields is made
in U.S. dollars, and payments for gas production, including under the Sean gas
sales agreements, are made in pounds sterling. There are no significant
restrictions on the repatriation of funds from the Company's U.K. subsidiary to
the U.S. Dividends paid to the Company by its U.K. subsidiary are subject to a
25% U.K. advance corporation tax. For dividends paid before April 6, 1999,
approximately 27.5% of this tax (or approximately 6.9% of the dividend paid) is
available for immediate refunding to the Company by the U.K. government. For
dividends paid after April 5, 1999, approximately 2.5% of this tax (or
approximately 0.2778% of the dividend paid) is available for immediate refunding
to the Company by the U.K. government. All of this tax (including the refunded
portion) may be credited against the U.K. corporation tax paid by the Company's
U.K. subsidiary.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Indonesia
The Company is engaged in oil and gas exploration, development and
production in Indonesia, primarily through a joint venture group it joined in
1969. Under a production sharing contract with Pertamina, the Indonesian
national oil company, which currently covers approximately 1.1 million acres,
the joint venture produces gas and, to a lesser extent, oil and condensate, in
the Sanga Sanga block in the East Kalimantan area. Substantially all of the
natural gas produced by the joint venture is supplied, pursuant to long-term
contracts with Pertamina, to a liquefaction plant owned by Pertamina at Bontang
Bay, approximately 35 miles from the production areas. At the Bontang plant, gas
is converted into LNG in parallel processing units ("trains") by reducing the
temperature of the gas to approximately minus 161 degrees Celsius. The Bontang
plant currently has seven trains in operation. Construction of a third dock and
LPG facilities began in February 1997 and is expected to be completed in 1999.
The financing of an eighth train, an additional LNG storage tank, an additional
natural gas pipeline and a debottlenecking project for the first six trains was
consummated in March 1997. Construction began in 1997 and is expected to be
completed by late 2000. After conversion, the LNG is pumped into specially
designed tankers (owned by third parties) and transported to purchasers in the
Pacific Rim, where it is returned to its original gaseous form and used for fuel
by electric utilities and industry. The Bontang plant also processes LPG.
Production Sharing Contract and Drilling. The joint venture's production
sharing contract with Pertamina grants the joint venture the right to share in
the production and revenues from the contract area, but not ownership rights in
the oil and gas reserves. The joint venture's contract area in East Kalimantan
includes substantial portions of two fields, Badak and Nilam, as well as several
other fields. The joint venture has relinquished 20% of the area covered by the
production sharing contract since 1990 when the contract was extended and is
required to relinquish the following additional amounts of the area covered by
the contract: 10% by August 7, 1998, 10% by December 31, 2000, 15% by December
31, 2002, and 15% by December 31, 2004. The joint venture, however, is not
obligated to relinquish any area from which oil or natural gas is produced.
The production sharing contract originally expired in 1998, but in 1990,
Pertamina and the joint venture amended the production sharing contract and
extended the joint venture's right to explore, develop and produce oil and gas
in the contract area until 2018 through a second production sharing contract,
containing terms and conditions generally similar to the amended production
sharing contract. References herein to the production sharing contract mean the
production sharing contract in effect for the applicable time period. The
production sharing contract entitles the joint venture participants to recover
most field and other operating costs, as well as capital depreciation, and to
receive, net of Indonesian taxes, 35% of the remaining gas production through
August 7, 1998, and 25% or 30%, depending upon the applicable LNG sales contract
and field supplying gas in support of such LNG sales contract, with some
exceptions, of such production for the remaining term of the contract. The
production sharing contract also entitles the joint venture participants to
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take their respective shares of oil and condensate production in kind, and after
recovering operating expenses and capital depreciation, to retain 15% of the
proceeds from sales of such production, net of Indonesian taxes. Proceeds from
the sale of oil and condensate (except for that sold pursuant to the joint
venture's domestic market obligation discussed below) are currently based on
official Indonesian crude oil prices and reflect world market prices.
The Company owns a 37.81% working interest in the joint venture (26.25%
directly and 11.56% through subsidiaries of Unimar, the Equity Partnership). The
Company's 11.56% indirect interest is subject to the right of holders of
Unimar's Indonesian Participating Units ("IPUs") to receive a percentage of
certain cash flow resulting from Unimar's interest in the joint venture until
September 25, 1999, at which time the IPUs will expire with no residual value to
the holder. In 1997, approximately one-fourth of the Company's interest in such
cash flow of Unimar was burdened by such payment obligation. Virginia Indonesia
Company, a participant in the joint venture and a subsidiary of Unimar, acts as
operator of the joint venture. The vote of participants holding 66 2/3% of the
total joint venture ownership interest is generally required for approval of
significant matters pertaining to the joint venture.
At December 31, 1997, proved reserves (net) attributable to the Company's
total interest in the joint venture were approximately 1.1 Tcf of gas and 27
MMBbls of oil and condensate. For a discussion of factors that impact Indonesian
reserve estimates, see "Reserves" above and Note 19 of Notes to Consolidated
Financial Statements. Substantially all of the joint venture's natural gas
production and reserves are committed to several long-term supply agreements
with Pertamina, which obligate the joint venture to supply certain minimum
quantities of natural gas. The Company believes that there are adequate reserves
in the joint venture's production sharing contract area to supply natural gas
under the joint venture's contractual commitments outstanding as of December 31,
1997. Pertamina continues to make progress in marketing additional LNG volumes.
The percentage of the natural gas supplied by the joint venture in support of
future LNG or LPG sales contracts, or renewals or extensions of existing
long-term sales contracts, is dependent primarily upon the uncommitted reserves
of natural gas that the joint venture has in its production sharing contract
area at the time that Pertamina establishes the allocation of the natural gas
supply for such sales contracts among the various contractor groups in the East
Kalimantan area, which participation percentage has decreased. See "Sales
Contracts" below.
In 1997 and 1996, nine and eight successful development wells,
respectively, were drilled in fields in East Kalimantan. During 1998, the
Company expects to spend approximately $42 million on development projects. In
addition, the joint venture plans to continue exploration efforts in 1998 by
seismic data acquisition and exploratory drilling. The joint venture also
continues to evaluate the East Kalimantan area to identify additional oil and
gas prospects. All of these expenditures will be cost recoverable pursuant to
the production sharing contract.
The joint venture participants are required collectively to sell
approximately 8.5% (7.2% after August 7, 1998) of the total oil and condensate
production from most existing fields in the contract area at $0.20 per barrel
for domestic Indonesian consumption. The domestic market obligation is
suspended, however, for the first 60 months of production from new fields in the
contract area, after which the price will be 10% of the realized Indonesian
export price. These obligations are factored into the Company's net reserves
estimates. Each participant's remaining oil and condensate production is
generally sold in world oil markets. In addition to the oil and condensate sold
for domestic use, the joint venture supplies gas for domestic consumption, and
the amount supplied for such purposes may increase or decrease in the future.
Profits from gas supplied for domestic consumption, which was sold at an average
price of $1.06 per Mcf in 1997, are less than from gas supplied for LNG. Gas
supplied for domestic consumption constituted less than 8% of the joint
venture's gas production during 1997.
Bontang Plant. At the Bontang plant, natural gas supplied by the joint
venture and other production sharing contractors is converted to LNG, and
shipped in LNG tankers ("cargoes"). These specially designed tankers vary in
size, and the term "cargo" as used herein means 125,000 cubic meters of LNG.
During 1997, the completion of the seventh train increased the production
capacity of the Bontang plant from 15.6 metric tons per annum to 18.5 metric
tons per annum. The Bontang plant currently has limited unused processing
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capacity. See "Sales Contracts" below for more information. The amount of
revenue that the Company receives as a result of the production of natural gas
in support of the sale of LNG by Pertamina is dependent upon the number of
cargoes shipped each year, the Company's ultimate participation in each cargo,
the price the buyers must pay for the LNG purchased and the costs to be deducted
from the proceeds of sales of LNG.
The Bontang plant is owned by Pertamina and operated on a
cost-reimbursement basis by a corporation owned in part by the joint venture.
The financing of the original two trains was repaid in 1990, and the financing
for the second two trains was repaid in 1993. Financing for construction of the
fifth train at the Bontang plant was provided principally from Japanese sources
through a funding arrangement under which debt service is paid to the lenders by
the Trustee (as defined below) from the proceeds of LNG sales, primarily under
the contract signed in 1987 with Chinese Petroleum Corporation ("CPC"), the
national oil company of the Republic of China (Taiwan). Final repayment is
scheduled in 2000. In 1991, Pertamina arranged $750 million under a similar
financing arrangement for the construction of the sixth train and associated
facilities at the Bontang plant. Construction began in 1991 and was completed in
late 1993 at a cost of approximately $700 million. Repayment began in 1994 from
proceeds of the Osaka contract (as defined below), and final repayment is
scheduled in 2004. In July 1995, a $969.5 million financing was completed for
the seventh train, third dock, LPG expansion and other support facilities. The
financing was provided from Japanese sources through arrangements similar to
those used to finance the Bontang plant's fifth and sixth trains. The
construction of the seventh train began in 1995 and was completed in November
1997. Repayment is scheduled to begin in December 1998 principally from the
proceeds of the short-term LNG sales contracts with CPC and Korea Gas
Corporation ("KGC") and starting in 2000, from the proceeds of the extension of
the 1973 contract, and final repayment is expected in 2008. In March 1997, a
$1,127 million financing was completed for the eighth train, an additional LNG
storage tank, an additional natural gas pipeline, a debottlenecking project for
the first six trains and other support facilities. The financing was primarily
provided by Taiwanese and Japanese sources through arrangements similar to those
used to finance the Bontang plant's fifth, sixth and seventh trains.
Construction of the eighth train began in July 1997 and is scheduled for
completion by 2000. Repayment of this financing is scheduled to begin in 2000
from the proceeds of the Badak V and Badak VI LNG sales contracts discussed
below. Financing of the fifth, sixth, seventh and eighth trains are nonrecourse
to both Pertamina and the joint venture.
Sales Contracts. The joint venture currently has gas supply agreements with
Pertamina that support the long-term and short-term LNG sales contracts and
obligate the joint venture to provide certain quantities of natural gas for
fulfillment of Pertamina's obligations pursuant to the LNG sales contracts. The
supply agreements terminate concurrently with the expirations of their
respective LNG sales contracts. The Company's right to receive revenues from the
sale of LNG and LPG under existing contracts as well as any future new contracts
or extensions or renewals of existing contracts is affected by the allocation of
the gas supply obligation in support of Pertamina's sales contracts among the
joint venture and the other production sharing contractors supplying gas to the
Bontang plant, which allocations vary among the sales contracts. This allocation
is set by Pertamina and is primarily based upon uncommitted reserves of natural
gas available at the time Pertamina makes the allocation. The allocation to the
Company's joint venture in such contracts has declined over time since the
initial 1973 sales contract allocation at 97.9%, when the joint venture was
virtually the only supplier to the Bontang plant, to the present when there are
two other major production sharing contractors supplying gas to the Bontang
plant and sharing in the allocation of volumes. In 1997 and 1996, 87 Bcf and 106
Bcf, respectively, net to the Company, were delivered to Pertamina under these
supply agreements. Gas production for the joint venture in Indonesia has peaked.
The joint venture's share, which also includes the Company's net interest, in
LNG volumes from the Bontang plant declined in 1997 by approximately 18% as
compared to 1996 primarily due to a reduction in deliveries under the initial
1973 contract in which the joint venture has a high allocation interest. A
further decline in the joint venture's participation percentage in LNG volumes
of 18% is expected in 1998 as compared to 1997 due to the reduction in
deliveries under the 1973 contract as well as the reduction in the sharing
percentages under the production sharing contract from 35% to 25% or 30%
starting in August 1998. The effect of such lower gas supplies will not have as
significant an impact on the Company's total annual cash flow. See Production
Sharing Contract and Drilling above and the table below for more information.
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LNG is currently sold by Pertamina to two groups of Japanese industrial and
utility customers and to CPC under long-term contracts signed in 1973, 1981 and
1987, respectively. Additionally, sales of LNG began in November 1994 under a
long-term contract signed in 1990 with a consortium of buyers organized by Osaka
Gas, a Japanese utility (the "Osaka contract"). LNG is also sold by Pertamina
under additional long-term contracts with KGC signed in 1983 and 1991 (the
"Korean Carryover" and "Korea II" contracts, respectively) and under the
long-term Mid-Cities Gas Companies ("MCGC") contract signed in 1992. Some of the
added capacity from the expansion of the LNG facilities during 1993 is also used
to supply LNG sold under short-term contracts to Japanese, Korean and Taiwanese
buyers. The sales price under the LNG sales contracts is tied to an average of
prices for exported Indonesian crude oil. In 1997, 80% of the joint venture's
share of LNG was sold by Pertamina to Japanese customers. The Company expects in
1998 such percentage to be 74%, with Korean and Taiwanese customers purchasing
the remainder at 16% and 10%, respectively. Due to the current Asian economic
crisis, the ability of certain LNG customers to take their contractual
quantities may be impaired and Pertamina and such customers could agree either
to reduce or defer some contracted quantities. Although the Company cannot
predict the impact of the current Asian economic crisis on such customers, the
Company currently expects that it will not have a material impact on the Company
in 1998.
In 1995, Pertamina finalized agreements to extend the LNG contracts
originally signed in 1973 and 1981 until 2010 and 2011, respectively. Pertamina
also signed agreements for two new long-term LNG sales contracts with CPC (Badak
VI) and KGC (Badak V), which provide for LNG sales from 1998 until 2017. To
support the supply of the additional quantities of LNG required primarily by the
1973 extended contract, the seventh train was completed in November 1997.
Construction of the eighth train and associated projects began in July 1997 and
is expected to be completed by 2000, primarily to support the supply of
quantities of LNG required by the new CPC and KGC long-term contracts.
The 1973 and 1981 contracts (including extensions thereof) and the CPC, CPC
(Badak VI), Osaka, Korean Carryover, Korea II, KGC (Badak V) and MCGC contracts
(collectively, the "long-term contracts") contain take-or-pay provisions that
generally require that the purchasers either take the contracted quantities or
pay for such quantities even if not taken. Prior to any extensions, the initial
term of each long-term contract is approximately 20 years. The other contracts
described in the table below are short-term contracts and generally have a term
of ten years or less. Of the remaining LNG sales volumes to be delivered after
December 31, 1997, under all of the contracts described in the table below, the
long-term contracts and the short-term contracts represent approximately 98% and
2%, respectively, of such deliveries.
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The following table sets forth information regarding the Bontang LNG
plant's share of LNG sales contracts at December 31, 1997:
JOINT
VENTURE'S
SHARE OF
REMAINING REMAINING
LNG LNG
SALES JOINT VENTURE SALES
CONTRACT VOLUMES PARTICIPATION VOLUMES
TERM (TBtu) %(a)(b) (TBtu)(c)
--------- --------- ------------- ---------
LONG-TERM:
1973....................................... 1977-1999 367 97.9/27.2 102
1973 Extension............................. 2000-2010 4,800 (d) (d)
1981....................................... 1983-2003 994 66.4/29.6 625
1981 Extension............................. 2003-2008 933 16.5 154
1981 Extension............................. 2008-2011 565 (e) (e)
CPC........................................ 1990-2009 1,059 29.6 314
CPC (Badak VI)............................. 1998-2017 1,762 21.6/16.5 294
Osaka (Badak IV)........................... 1994-2013 1,912 27.2 520
Korean Carryover........................... 1986-2006 130 50.0 65
Korea II................................... 1994-2014 783 27.2 213
KGC (Badak V).............................. 1998-2017 1,040 21.6/16.5 177
MCGC....................................... 1996-2015 336 27.2 92
SHORT-TERM:
Toho....................................... 1988-2000 12 29.6/27.2 3
KGC MOA.................................... 1995-1999 148 21.6 32
CPC MOA.................................... 1998-1999 46 21.6 10
KGC MOA.................................... 1996-1999 132 21.6 29
MOA (Aquarius)............................. 1997-1999 32 21.6 7
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(a) The joint venture's participation percentage is set by Pertamina based upon
uncommitted reserves of the various production sharing contractors
supplying gas to the Bontang plant. The participation percentages
determined by Pertamina apply to new contracts, or amendments or extensions
of contracts, entered into during certain time periods. During 1996,
Pertamina set the joint venture's participation percentage at 16.5%, based
upon the joint venture's uncommitted natural gas reserves certified as of
April 30, 1995, for the first five and one half years of the 1981
extension, 2000-2017 period of the CPC (Badak VI) and the KGC (Badak V)
long-term contracts. For other future sales contracts, including the
remaining term of the 1981 extension and the final year of the 1973
extension, the Company cannot predict the participation percentage of the
joint venture in such contracts, although absent the discovery of
significant additional gas reserves in the joint venture's contract area,
the participation percentage is expected to be less than 16.5%.
(b) Those contracts that show two joint venture participation percentages have
been amended or extended to provide for additional deliveries. The second
percentage indicates the portion of gas to be supplied under the amendment
or extension of such contract by the joint venture. The joint venture has a
97.9% and 27.2% interest in 3 and 364 remaining TBtus, respectively, of the
total 367 TBtus remaining to be sold under the 1973 contract; a 66.4% and
29.6% interest in 899 and 95 remaining TBtus, respectively, of the total
994 TBtus remaining to be sold under the 1981 contract; a 21.6% and 16.5%
interest in the 49 and 1,713 remaining TBtus, respectively, of the total
1,762 TBtus remaining to be sold under the CPC (Badak VI) contract; a 21.6%
and 16.5% interest in the 104 and 936 remaining TBtus, respectively, of the
total 1,040 TBtus remaining to be sold under the KGC (Badak V) contract;
and a 29.6% and 27.2% interest in the 0 and 12 remaining TBtus,
respectively, of the total 12 TBtus remaining to be sold under the Toho
contract.
(c) The joint venture's share of remaining LNG sales volumes represents volumes
available to the joint venture under the sales contracts for servicing its
share of plant operating and debt service costs, as
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applicable, for recovering exploration, development and production costs
and for profit sharing between the joint venture and Pertamina.
(d) The joint venture's participation in the 1973 extension is 21.6% for the
period 2000-2009. The joint venture's share of the contracted volumes for
such period is 943 TBtus. As discussed in footnote (a) above, the joint
venture's participation in the final year of the 1973 extension has not
been determined by Pertamina and is not expected before 1999.
(e) As discussed in footnote (a) above, the joint venture's participation in
the final three years of the 1981 extension has not been determined by
Pertamina and is not expected before 1999.
In general, the processing and operating costs of the Bontang plant are
charged to each LNG and LPG sales contract during each year based upon the ratio
of the sum of BTUs of LNG and LPG processed by the Bontang plant for each
contract to the total number of BTUs processed by the Bontang plant.
Under the 1973, extended 1973, extended 1981, Korean Carryover, MCGC, CPC,
certain KGC (Badak V) and CPC (Badak VI) long-term contracts and, in general,
the short-term contracts, LNG is sold on a delivered basis (i.e., title and risk
of loss do not pass until the LNG is unloaded at the customers' facilities).
Under the 1981, Osaka, Korea II and the remaining KGC (Badak V) contracts, LNG
is delivered F.O.B. (i.e., title and risk of loss pass upon loading at
Pertamina's port facility). Payments for LNG under all of the LNG sales
contracts are, or will be, made by the purchasers in U.S. dollars directly to a
bank in the U.S. that acts as trustee and paying agent (the "Trustee") with
respect to sales proceeds. Bontang plant processing fees, debt service with
respect to plant financings, transportation (as required) and other costs are
deducted from sales proceeds, and the balance is then distributed to Pertamina,
the members of the joint venture and the other production sharing contractors.
At December 31, 1997, the average LNG price under all contracts supplied
from the Bontang plant was $3.00 per MMBtu, or $3.37 per Mcf, as compared to
$3.62 per MMBtu, or $3.99 per Mcf at December 31, 1996. Prices under the
contracts are subject to monthly adjustments. As of December 31, 1997, January
27, 1998, and February 20, 1998, the average price for the group of crude oils
used to determine the price of LNG was $19.47, $17.50 and $14.75 per Bbl,
respectively. The Company is unable to predict the amount or timing of future
changes in the price of this group of crude oils. Every $1.00 change in the
average of the price of this group of crude oils results in approximately a
$0.17 per Mcf change in the price of LNG.
Pertamina also sells LPG produced at the LPG processing facilities at the
Bontang plant under seven contracts with Japanese purchasers, each of which is
for a ten-year term. In 1997, the Bontang plant delivered an aggregate of up to
1,000,000 metric tons of LPG (7.4 MMboe) per year to support these contracts.
The joint venture currently has 29.6%, 27.2% and 21.6% participations in the gas
processed at the Bontang plant to supply quantities of LPG to be sold under the
LPG contracts. Pertamina may from time to time sell quantities of LPG outside of
the seven LPG contracts, and to the extent that such sales are made, the joint
venture currently will have a 21.6% participation in the gas processed at the
Bontang plant to supply those additional sales. A significant portion of the LPG
sales proceeds from sales under the seven contracts is dedicated to the
repayment of financing of the LPG processing facilities at the Bontang plant.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Venezuela
In February 1998, the Company acquired a company which holds an operating
service contract covering 100% of the Desarrollo Zulia Occidental (DZO) unit in
Western Venezuela. In June 1997, the Company led a successful bid to obtain
another operating service contract for the Boqueron contract area in Eastern
Venezuela. With these two service contracts, Venezuela is established as a
significant new operated core area for the Company. Although the Government of
Venezuela retains full ownership of all hydrocarbons, the Company will serve as
a contractor to operate the fields on behalf of the affiliate of the national
oil company, PDVSA. An affiliate of PDVSA has an option to purchase up to a 10%
interest in the contracts for the DZO unit and Boqueron area. Under an operating
service agreement, the contractor is paid a fee based on a
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predetermined formula, which is invoiced quarterly based on barrels of crude oil
produced and receives its payments from the PDVSA affiliate. Invoice amounts and
payments are denominated in U.S. dollars. The Company's interest in the reserves
in Venezuela currently account for over 25% of the Company's total worldwide
reserve base. The Company plans to spend about $79 million in 1998 on
development activities in Venezuela.
DZO Unit
The Company acquired in February 1998 all of the stock of Compania
Occidental de Hidrocarburos, Inc. ("Hidrocarburos"), a U.S. affiliate of
Occidental Oil & Gas Corporation ("Occidental"), for approximately $212 million,
which includes $14 million in working capital and certain closing adjustments
effective as of December 31, 1997. Occidental may receive contingent payments of
up to a maximum of $15 million annually for six years based primarily on the
level of oil prices. Hidrocarburos operates as contractor of the DZO unit
located west of Lake Maracaibo in Western Venezuela under a 20-year operating
service contract with PDVSA Petroleo y Gas S.A. ("PDVSA PyG"), a subsidiary of
PDVSA and the successor to Maraven, S.A. The operating service contract was
awarded to Hidrocarburos during Venezuela's Second Round of Operating Agreements
in 1993 and commenced operations in 1994. Under the provisions of the contract,
the contractor invests capital and provides technology for reactivation of the
fields for which the contractor receives various fees per barrel delivered to
the custody transfer point. The fees received are operating, capital
reimbursement and interest on unrecovered capital costs which are in total
limited by a maximum total fee. The maximum total fee is indexed with a basket
of crude oil products and was approximately $7.50 per barrel in the latter half
of 1997. The Company cannot predict the extent that the future maximum total fee
will limit the operating, interest and capital fees received and recorded.
Additionally, an incremental incentive fee of several dollars per barrel, which
is also indexed to a basket of crude oil products but is not limited by the
maximum total fee, is payable when cumulative production from the DZO unit (from
inception of the 1993 contract) reaches 52 million barrels. Cumulative
production is expected to reach 52 million barrels during the second half of
1999. The contractor does not pay royalties related to the DZO unit. Operating
costs in early 1998 averaged about $2.90 per barrel. The 20-year operating
service contract expires in 2013 and may be extended with the approval of PDVSA
PyG. In 1998, the Company recorded for the DZO unit 114 million barrels of
proved reserves, of which 56 million barrels are classified as proved
undeveloped. The Company anticipates spending $400 to $450 million over the next
nine years for future development expenditures. The Company plans to increase
current production from 23,000 gross barrels a day up to 55,000 gross barrels
within five years.
Boqueron Contract Area
In June 1997, the Company led a successful bid for the Boqueron contract
area under Venezuela's Third Operating Agreement Round. The Company was named
the operator and is a contractor with a 66.67% interest in the contract area and
Preussag Energie GmbH of Germany, the other contractor and a co-venturer, has a
33.33% interest (collectively, the "Contractors"). The Company and Preussag
Energie paid $175 million for the rights to the service contract for the
Boqueron contract area. Under the 20-year contract, the Contractors will operate
and produce oil from Boqueron on behalf of PDVSA PyG, successor to Lagoven,
S.A., which currently serves as operator. The Company expects to assume
operatorship in May 1998, pending approval of its development plan which was
filed in January 1998. The Contractors are compensated a U.S. dollar service fee
to cover reimbursement of costs plus profit. There are two components of the
fee, which include (i) a set fee for baseline production and (ii) a fee for
incremental production. PDVSA PyG will pay the Contractors a set fee of $1.25
per barrel for operating the baseline production. In the Boqueron contract area,
the baseline production initial rate is estimated at 8,500 gross barrels per day
with a nominal annual decline rate of 10%. In terms of the incremental
production, the Contractors will be paid a sliding incentive fee based on field
profitability and will be allowed to recover field and other capital and
operating costs through the fee mechanism. The field profitability is based on
production at world market prices net of a 1/6 government royalty and field
costs. The Company recorded approximately 40 million net barrels in proved
reserves from the Boqueron contract area during 1997 with additional reserves
expected to be recorded in the future as the field is further developed. The
Contractors must invest at least $13 million over the next three years and
currently expect to spend between $300 million to $325 million in the area over
the next five years. With this
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additional development spending, the Company expects to increase current
production at the Boqueron contract area from 8,500 gross barrels of oil a day
to a rate of 50,000 to 60,000 gross barrels within three to five years.
Other Information. Income from the DZO unit and Boqueron contract area is
subject to Venezuelan income tax at 34%. In addition, each Venezuelan
municipality levies a tax on gross income at varying rates. Under the DZO unit
service contract, municipal tax is considered a capital expenditure subject to
reimbursement as part of the capital fee reimbursement. Under the Boqueron
contract area service contract, municipal tax in excess of 4% is reimbursed by
PDVSA PyG and municipal tax up to 4% is deductible for Venezuela income tax
purposes.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Pakistan
Badin Concessions
Since 1977, the Company has operated through joint ventures oil and gas
exploration, production and development activities in the Badin area of the
Sindh Province in southeastern Pakistan. The Company's activities are conducted
under three concession agreements.
1977 Concession. In April 1977, the Pakistan government granted exploration
rights in the Badin area to the Company and its co-venturers (the "1977
concession"). The Company is the operator of a joint venture that includes the
Oil and Gas Development Corporation, a Pakistan government-owned company. The
oil and gas reserves discovered under the 1977 concession continue to be
produced under leases granted by the Pakistan government. The terms of such
leases are 30 years from the date that they were first granted. The Company has
a 30% working interest (26.25% revenue interest) in the 1977 concession area.
1992 Concession. In 1992, the joint venture was granted a three-year
extension of the exploration license that it originally received in 1977 (the
"1992 concession"). The oil and gas reserves discovered under the 1992
concession are produced under 20-year leases granted or pending approval by the
Pakistan government. Production from the 1992 concession began during 1995. The
Company has a 25.5% working interest (22.3% revenue interest) in the 1992
concession area.
1995 Concession. The exploration license granted by the Pakistan government
in 1992 under the 1992 concession expired in January 1995 as to 1.6 million
acres in the Badin area not covered by leases granted or pending approval under
the 1977 concession and 1992 concession. In December 1994, the joint venture and
the Pakistan government signed a new petroleum concession agreement covering
such acreage (the "1995 concession"). The oil and gas reserves discovered under
the 1995 concession are produced under 20-year leases granted or pending
approval by the Pakistan government. Production from the 1995 concession began
during 1996. The Company has or will have a 25.5% working interest (22.3%
revenue interest), provided the Pakistan government elects to exercise its
option to increase its working interest in each such discovery to 25%. The
exploration license granted under the 1995 concession expired in January 1998 as
to all but 8,188 acres covered by leases granted or applied for under the 1995
concession and other areas subject to ongoing operations at the expiration of
the 1995 concession. The joint venture has reapplied for an exploration license
for the relinquished acreage.
The Pakistan government is contractually obligated under the 1977, 1992 and
1995 concession agreements to issue leases upon the determination of a
commercial discovery and the fulfillment by the joint venture of the conditions
of the concession agreements and the exploration license.
Proved reserves (net) at December 31, 1997, for the Company's interest in
the Badin concessions were 6 MMBbls of oil and 120 Bcf of gas. The joint venture
under these concessions produced approximately 45% of Pakistan's total domestic
oil output and 8% of the country's gas production in 1997. Average daily
production (net to the Company) during 1997 was 7 MBbls of oil and 37 MMcf of
gas as compared to 6.2 MBbls of oil and 41.4 MMcf of gas in 1996 with the
decline primarily due to lower gas demand and market
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constraints in Pakistan. The Company's share of the oil produced from the 1977
and 1992 concessions is sold for both Pakistan domestic use and for export. The
price received for oil sold domestically is tied to the average spot market
price of Middle Eastern crude oil. In 1997, the Company supplied 1.47 MMBbl of
oil (net to the Company) for export at prices based on competitive spot market
rates. The Company and its co-venturers sell natural gas produced from the 1977
concession area to Sui Southern Gas Company, Ltd. ("SSGC"), a Pakistan
government-owned entity. The contract expires in 2003 and provides that SSGC
must either take or pay for the contracted quantities of natural gas. Natural
gas produced from the 1992 concession area is also sold, and natural gas
produced from the 1995 concession is expected to be sold, to SSGC under a
contract with terms similar to the SSGC contract covering production from the
1977 concession.
During 1997, the Company drilled seven exploratory wells in the Badin
concessions, three of which were discoveries. During 1998, the Company plans to
drill up to nine exploration wells and up to eight development wells in the
Badin concessions.
Eastern Sindh Concessions
In April 1995, the Company signed a concession agreement with the Pakistan
government covering 1.8 million acres in the Eastern Sindh block in the Sindh
Province of southeastern Pakistan for which the Company was granted an
exploration license in December 1994. The concession agreement and the
exploration license provide the Company with the right to explore for oil and
gas for an initial period of three years, with an option for three extensions of
one year each, and upon a commercial discovery, the right to apply for a 20-year
lease with the Pakistan government. The Company is the operator and has a 70%
working interest in the concession and exploration license, which is subject to
reduction if the Pakistan government elects to participate upon discovery of
commercial production. In 1997, the initial exploration well was unsuccessful.
In December 1997, the Pakistan government granted a six-month extension to the
initial three-year term of the concession and exploration license in order for
the Company to complete the analysis on the well as well as an aeromagnetic
survey on the block. Additionally, in October 1997, the Company signed two
concession agreements with the Pakistan government covering approximately 1.2
million acres in the Khinsar block and 1 million acres in the Umer Kot block,
located along the eastern boundary and western boundary, respectively, of the
Eastern Sindh Concession in the Sindh province of Pakistan.
On November 12, 1997, five of the Company's employees were killed in an
attack by unknown assailants in Karachi, Pakistan. The Federal Bureau of
Investigation and the government of Pakistan are investigating the tragedy.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Alaska
The Company pursues development and exploration projects in Alaska. At
year-end 1997, the Company held acreage primarily in Western Colville, the Kenai
Peninsula and offshore northeast Alaska in the Beaufort Sea.
Western Colville. The Company and its co-venturers are developing the
Alpine oil field in the Western Colville area on Alaska's North Slope 34 miles
west of the Kuparuk River oil field. ARCO Alaska, Inc., the operator, Anadarko
Petroleum and the Company have a 56%, 22% and 22% working interest in Alpine,
respectively. Partner project approval was obtained in June 1997 and in February
1998 permits were issued by the U.S. Army Corps of Engineers allowing field
construction and development activities to proceed as planned. Production from
Alpine is scheduled to begin the first part of 2000 at an anticipated initial
rate of 40,000 barrels of oil per day gross, with peak production of 70,000
barrels per day gross in 2001. The field is expected to produce for about 25
years. Oil from Alpine will be moved to market through a new 34-mile pipeline
that is under construction and will connect Alpine to the Trans Alaska Pipeline
via the Kuparuk pipeline system. As of December 31, 1997, proved undeveloped
reserves (net) for the Alpine field were 32 MMBbls. The Company anticipates
recording additional proved reserves based on the field's development drilling
and future production performance. Development of the Alpine field is expected
to cost $650 million
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gross. The Company's estimated total share of development costs for its interest
in Alpine is $143 million from 1997 to 2002. As of December 31, 1997, the
Company has spent $9 million for initial development activities and expects to
spend approximately $50 million in 1998. The three companies were the high
bidders on 23 new leases covering 46,643 gross acres in the Colville area at the
lease sale held in November 1997 by the State of Alaska. Also in November 1997
at such lease sale, the Company was the high bidder on four new leases covering
approximately 13,104 gross acres located northeast in the Colville area. Three
exploration wells and two development wells are planned in the Colville area
during the winter season of 1998.
Kenai Peninsula. Effective November 1, 1993, the Company entered into an
exploration agreement with Cook Inlet Region, Inc. ("CIRI"), an Alaska Native
Regional Corporation. Under the agreement, the Company will bear 100% of the
exploration costs and may acquire leases on prospects identified, subject to
CIRI's option to participate in the leases and the exploration, drilling and
development of such prospects. As of February 1, 1998, the Company has
approximately 37,354 gross and 32,928 net acres under lease on the Kenai
Peninsula. The Company plans to drill one well in 1998 subject to gas marketing
arrangements which are currently under negotiation and are expected to be
finalized in the first part of 1998.
Kuvlum/Hammerhead. In January 1998, the Company, Chevron U.S.A., Inc. and
Shell Frontier Oil & Gas, Inc. signed an agreement that established Chevron as
operator of the Kuvlum and Hammerhead federal exploratory oil and gas units in
the Beaufort Sea offshore northern Alaska. The Company and Shell each will have
a 20% working interest in every lease in both units pending government approval.
The companies are working with the Minerals Management Service to pursue a
development plan that would include potential joint development for Eastern
Beaufort Sea and North Slope discoveries.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Other Activities
In addition to the activities described above, the Company conducts
evaluations as well as undertakes exploration activities worldwide to expand its
reserve base. The Company has budgeted a total of $82 million for exploration
activities during 1998, $23 million of which will be spent in the U.K.,
Indonesia and Pakistan and $59 million in new ventures, including primarily the
activities described below. The Company is also pursuing downstream
opportunities in Pakistan, Indonesia and Latin America, including LPG and
petrochemical projects.
China. In 1997, the Company acquired a 40% interest in a 2.27 million acre
exploration block, known as Contract Area 11/05, in Bohai Bay offshore the
People's Republic of China from a subsidiary of Phillips Petroleum Company,
which serves as operator and holds the remaining 60% interest. China National
Offshore Oil Corp. ("CNOOC") has the right to acquire up to 51% interest in any
proposed development. During 1997, the joint venture drilled two exploration
wells, which were oil discoveries. A third well drilled in early 1998 was
unsuccessful. During 1998, the joint venture plans to gather more seismic data
and drill a fourth well in late 1998 or 1999.
Algeria. In 1997, the Company acquired a 30% interest in two blocks in the
Ghadames Basin in Algeria from a subsidiary of Phillips Petroleum Company, which
serves as operator and holds the remaining 70% working interest. The Bordj
Messouda Blocks 406B and 209 comprise a total of 1.5 million acres and are
located in southeastern Algeria. The first exploration well drilled in 1997 was
unsuccessful and the joint venture plans to drill a second well in the first
half of 1998.
Tunisia. In October 1997, the Company announced that it acquired a 25%
working interest in an exploration venture in the Ghadames Basin in southwestern
Tunisia. The Company acquired its interest in the 1.44 million acre Borj El
Khadra block from a subsidiary of Phillips Petroleum Company, which serves as
operator and has a 25% interest in the block. LASMO Tunisia B.V. is also a
partner in the venture with a 50% working interest. In the event that a
discovery is developed, L'Enterprise Tunisienne d'Activites Petrolieres
("ETAP"), the Tunisian national oil company, has the right to participate for up
to a 50% working interest, thereby reducing each co-venturer's working interest
in half, assuming full participation by ETAP. About
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1,500 kilometers of 2-D seismic data have been acquired over the block, where
the venture plans to drill an exploration well in 1999. The joint venture plans
to participate in geological studies during 1998. The Borj El Khadra block is
adjacent to the Bordj Messouda block in Algeria.
The Company has an oil and gas exploration permit on the one-million-acre
Ramla block offshore southeast Tunisia in the Gulf of Gabes. The Company serves
as operator and bears 50% of the exploration costs. In the event of a commercial
discovery, the Tunisian national oil company has the right to participate for up
to a 50% working interest. The permit expires in January 1999. The initial
exploration well was non-commercial. A second well commenced drilling in early
1998.
The Company also has a 65% working interest in the onshore Jeffara
exploration permit, which covers 970,000 acres in the Medenine Region of
southeastern Tunisia. The Company's interest is subject to the Tunisian national
oil company's right to participate for up to a 50% working interest in the event
of a commercial discovery. The Jeffara exploration permit, which is operated by
the Company, has been extended through 1998. An exploration well drilled in 1997
was unsuccessful.
Bolivia. The Company has a 20% interest in the 1.6 million acre exploration
block operated by Maxus/YPF known as the Caipipendi block in the Southern
Foothills Belt. A deep exploratory well commenced drilling in 1997 and is
currently drilling. During 1998, the joint venture also plans to acquire seismic
data over the block and possibly drill another well.
Italy. The Company had interests in a total of 385,668 gross (137,313 net)
acres in the Southern Apennines oil play onshore southern Italy at the end of
1997. In 1996, the Company acquired interests in three onshore exploration
permits in the Basilicata Region covering approximately 100,630 gross (25,158
net) acres in this play. The Company holds a 50% working interest in each
permit. Triton Mediterranean Oil and Gas N.V. serves as operator. In 1995, the
Company acquired interests in three onshore exploration permits covering 216,000
gross acres in the same region. The Company serves as operator of and holds an
82% working interest in the Serra Corneta permit. The Company also holds a
33.33% working interest in the Tempa dei Mercanti permit, operated by Edison
Gas, and a 20% working interest in the Forenza permit, operated by LASMO
International Limited. Geological and seismic studies on the six permit areas
were conducted in 1996 and 1997 and will continue in 1998. In 1995 the Company
also acquired a 20% working interest in the onshore Baragiano permit, which
covers about 68,913 gross acres in the Basilicata Region, from Enterprise Oil
Exploration Ltd. ("Enterprise"). Enterprise serves as operator. The Baragiano
permit's first exploration well was unsuccessful.
Kazakhstan/Caspian Sea Area. In May 1997, the Company formed a joint
venture with Oman Oil Company Limited ("Oman Oil") to explore for, develop and
produce oil and gas in two blocks, A and E, covering four million acres onshore
Kazakhstan and offshore in the Kazakhstan sector of the Caspian Sea. The Company
will serve as operator of the new venture and owns a 75% interest. Oman Oil, a
state-owned project development company of Oman, retains a 25% interest. The
joint venture has preferential rights to select two offshore blocks in the
Kazakhstan sector of the Caspian Sea. During 1998, the joint venture plans to
study seismic data acquired during 1997 and start a preliminary evaluation of
the onshore area, as well as select offshore blocks in the next bid round
procedure. The Company is also pursuing opportunities onshore Azerbaijan.
U.K. and Ireland. In 1997, the Company was awarded a 25% working interest
in four offshore blocks (Tranche 36) covering 212,000 acres, in the U.K. Rockall
basin located about 125 miles northwest of Scotland. The joint venture, operated
by Texaco Britain Limited, was granted an exploration license for an initial
three-year period and a seismic acquisition program was conducted immediately
following license award. The Company was also awarded a 25% interest in four
full and two part blocks, comprising 245,000 acres, in the Irish Rockall basin
about 80 miles northwest of Ireland. This exploration license, operated by
Enterprise Oil plc, is for a 16-year period divided into four-year intervals.
The Company acquired seismic data in 1997, and the joint venture plans to
process and evaluate such data during 1998.
The Company has a 25% working and revenue interest in two full and one part
offshore blocks encompassing 163,000 acres in St. George's Channel offshore
Ireland operated by Marathon Oil Company
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("Marathon"). The Company also has a 15% working and revenue interest in eight
offshore blocks covering 400,000 acres in St. George's Channel offshore Western
England operated by Marathon. This acreage contains a small gas discovery.
Although initial exploration wells were unsuccessful, during 1998, the Company
plans to evaluate seismic data on these blocks.
The Company has a 15% working and revenue interest in five and one half
blocks covering 344,000 acres offshore southwest Ireland in the Porcupine basin
and a 30% working and revenue interest in 11 blocks offshore west Ireland that
cover 650,000 acres in the Slyne/Erris basins. Each joint venture, operated by
Statoil (U.K.) Ltd., was granted a license to explore for oil and natural gas
for a 15-year and 16-year period, subject to certain minimum work requirements
at three-year and four-year intervals, respectively. The licenses have been
extended for another interval and the joint ventures continue to conduct
additional geological and geophysical studies.
Other. In 1998, the Company plans to participate in several new exploration
venture areas, including up to two exploration wells in Yemen and seismic
studies in Egypt, onshore Greece, Jordan, onshore and offshore Papua New Guinea,
Sicily and offshore Trinidad. The Company is also pursuing opportunities in
additional new exploration ventures, including the Middle East, Central Asia,
Latin America and Africa.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
PETROCHEMICALS
Plant Operations. The Company's petrochemical business consists primarily
of the Company's 41.67% interest in the jointly owned Geismar olefins plant
located on the Mississippi River near Baton Rouge, Louisiana. The joint owners
are BASF Corporation with a 41.67% interest and GE Petrochemicals, Inc. with a
16.66% interest. The plant began operations in 1968. The Company operates the
plant, with production costs and plant production being shared by the three
joint owners according to their ownership interests. With completion of the
thirteenth furnace in December 1997 that increased capacity by about 26 million
gross pounds, the plant has the capacity to produce approximately 1.275 billion
gross pounds (531 million net) of ethylene and 92 million gross pounds (38
million net) of polymer-grade propylene annually. An upgrade of the nine
original furnaces began in the first quarter of 1998 and is expected to be
completed in February 1999. The total cost of the new furnace and upgrading
project is estimated to be approximately $27.8 million gross ($11.6 million net
to the Company).
In 1997, which included a two-week scheduled turnaround, and 1996, the
Company's net ethylene sales were 475 million pounds and 510 million pounds,
respectively, and its net propylene sales were 30 million pounds and 34 million
pounds, respectively. The Company sells its share of the ethylene and propylene
produced by the plant to a number of major customers for the manufacture of
plastics used in various consumer products. The sales price of ethylene averaged
$0.24 per pound in 1997 and $0.22 per pound in 1996. Sales of propylene, used in
the manufacture of various products such as building materials, clothing and
tires, averaged $0.18 per pound and $0.16 per pound in 1997 and 1996,
respectively.
During 1997, the average margin per pound of the Company's ethylene was
$0.09 per pound as compared to $0.06 per pound for 1996. The Company's ethylene
margin is primarily affected by the price received for the ethylene and the cost
of feedstock (natural gas liquids) and natural gas.
Storage and Transportation. In addition to the Geismar plant, the Company
owns and operates a 192-mile ethane feedstock pipeline system, which transports
feedstock to its olefins plant from several major suppliers, including the
Company's natural gas liquids fractionation plant and supporting 133-mile
pipeline system in Rayne, Louisiana. The Company plans to extend this system in
1998 to expand the Company's market capability for transporting ethane. The
Company is also committed to participate in a pipeline connection to a gas
liquids fractionator in Napoleonville, Louisiana, which has access to new
natural gas liquids (feedstocks) associated with new Gulf of Mexico gas
production. The Company also operates
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underground storage terminals and a 78-mile ethylene pipeline system, portions
of which are jointly owned, to serve the Geismar facility and several other
petrochemical plants primarily in the Baton Rouge area.
Capital expenditures for the petrochemical business were $29 million (net
to the Company) during 1997. The Company plans to spend $39 million (net to the
Company) in capital expenditures for the petrochemical business during 1998,
which include costs for the expansion and enhancement of its supply and
distribution system and preliminary engineering for a capacity upgrade for the
Geismar olefins plant, as well as other projects to enhance production, safety
and efficiency. The Company continues to study opportunities to expand and add
value to its petrochemicals business.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
OTHER MATTERS
Insurance. As is customary in the oil and gas and petrochemical industries,
the Company reviews its safety equipment and procedures and carries insurance
against some, but not all, risks of the business. See "Risk Factors." Losses and
liabilities would reduce revenues and increase costs to the Company to the
extent not covered by insurance. The oil and gas and petrochemical businesses
can be hazardous, involving unforeseen circumstances such as blowouts,
explosions or environmental damage. To address the hazards inherent in the oil
and gas and petrochemical businesses, the Company maintains a comprehensive
insurance program covering its worldwide interests. This insurance coverage
includes physical damage coverage, third party general liability insurance,
employers liability, as well as redrill, well control, environmental and
pollution and other coverage, although coverage for environmental and
pollution-related losses is subject to significant limitations. In addition, the
Company maintains business interruption insurance on its major international oil
and gas producing interests and on its petrochemical business. The scope, terms,
retentions, amount and cost of all such insurances vary depending upon various
market factors and other considerations.
Employees. As of February 20, 1998, the Company had approximately 1,300
employees. The Company believes that its relations with its employees are good.
RISK FACTORS
Forward-Looking Statements. All statements other than statements of
historical fact contained in this report, including statements in Item
7 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations are forward-looking statements. When used herein, the words "budget,"
"anticipate," "expects," "believes," "seeks," "goals," "plans," "strategy,"
"intends," or "projects" and similar expressions are intended to identify
forward-looking statements. It is important to note that the Company's actual
results could differ materially from those projected by such forward-looking
statements and no assurance can be given that the expectations will prove
correct. In reliance upon the Private Securities Litigation Reform Act of 1995,
factors identified by the Company that could cause the Company's future results
to differ materially from the results discussed in such forward-looking
statements include the following risks described under "Risk Factors." All
forward-looking statements in this report are expressly qualified in their
entirety by the cautionary statements in this paragraph and shall be deemed in
the future to be modified in their entirety by the Company's public
pronouncements, including those contained in all future reports and other
documents filed by the Company with the Securities and Exchange Commission.
Volatility of Prices and Availability of Markets. The Company's revenues,
profitability and future rate of growth are highly dependent upon the prices of
and demand for oil and gas, which can be extremely volatile. The volatile energy
market makes it difficult to estimate future prices, service fees and sales
volumes of natural gas, crude oil and LNG, which are affected by a number of
factors beyond the control of the Company, including worldwide supplies of and
demand for oil and gas, changing international economic and political
conditions, such as the current Asian economic crisis, contract enforceability,
insolvency of other parties, domestic and foreign energy legislation, weather,
environmental conditions, regulations and events, and actions of major petroleum
producers including members of the Organization of Petroleum Exporting
Countries. If oil prices decline, the price or service fee for a significant
portion of the natural gas and oil
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produced from the Company's properties, including the sales price for LNG, will
also decline. The Company's Venezuelan revenues are based on a fee adjusted
quarterly by the percentage change of a basket of crude oil product prices
instead of absolute dollar changes, which impacts both any upward and downward
effects of changing prices on the Company's Venezuelan revenues and cash flows.
If the price of oil increases, there could be an increase in the cost to the
Company for drilling and related services with escalating equipment and labor
costs because of increased demand, as well as increase in revenues. The ethylene
business is cyclical and the Company cannot predict the duration of any trends
in the business. The Company's ethylene margins have averaged approximately
$0.09, $0.06 and $0.13 during 1997, 1996 and 1995, respectively. The marketing
and prices received by the Company for its ethylene petrochemical business are
affected by worldwide and U.S. demand for petrochemicals, inventory levels,
feedstock costs and availability, plant utilization rates, plant operations and
costs and competitive capacity expansion. The marketability of the Company's
natural gas, crude oil, LNG and ethylene production depends in part upon the
availability, proximity and capacity of gathering systems and processing
facilities. The Company's financial condition, operating results and liquidity
may be materially affected by any significant fluctuations in its sales prices.
The Company's ability to implement its business strategy and service its
long-term obligations and to generate funds for capital expenditures will be
similarly affected.
Business Risks. The Company's activities are subject to the risks normally
associated with oil and gas operations and petrochemical operations. The nature
of the oil and gas business involves a variety of risks usually associated with
exploration for, and development, production and transportation of, oil and gas,
including blowouts, cratering, oil spills, fires, geologic uncertainties and
adverse or seasonal weather conditions. Offshore operations are also subject to
marine perils and extensive governmental regulations, as well as interruption or
termination by governmental authorities based on environmental or other
considerations. The Company's operations, including its petrochemical
operations, are subject to certain additional risks, including the breakdown or
failure of equipment, downtime of production units due to turnarounds, the
performance of equipment at levels below those originally projected, and
explosions, fires, floods and other catastrophic events. In certain cases, the
Company is also at risk in regards to any interruptions in related facilities,
which are not under its control. For example, in Indonesia, the Bontang plant's
ability to manufacture and ship quantities of LNG is dependent upon the
continued operation of the Bontang plant without mechanical failure and without
the shutdown of any processing units in excess of scheduled maintenance periods.
The sale of LNG is also dependent upon the availability of shipping without
interruption and upon the continued operation or timely construction of the
buyers receiving terminals. The costs associated with transportation of certain
products, including LNG, such as repair and maintenance or replacement of LNG
tankers, are beyond the control of the Company. The occurrence of any of these
events could cause injury to life or property, interruptions in operations,
failure to produce oil or gas in commercial quantities, inability to fully
produce discovered reserves, loss of revenues and margins or increases in the
costs of operations.
Uncertainties in Reserve Estimation, Production Success and Reserve
Replacement. There are numerous uncertainties inherent in estimating quantities
of reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
producer. The reserve data set forth in this report represent only estimates.
Underground accumulations of oil and gas cannot be measured in an exact way. The
accuracy of any reserve estimate is a function of the quality and quantity of
available data and of engineering and geological interpretation and judgment. As
a result, estimates by different engineers often vary. In addition, results of
drilling, testing and production subsequent to the date of an estimate may
justify revision of such estimate. Accordingly, reserve estimates at a specific
point in time are often different from the quantities of oil and gas that are
ultimately recovered, which differences may be significant. Additionally, the
estimates of future net revenues from proved reserves of the Company and the
present value of future net revenues are based upon certain assumptions about
future production levels, prices, costs and Venezuelan service fees that may not
prove correct over time. The meaningfulness of such estimates is highly
dependent upon the assumptions upon which they were based.
In general, the Company's volume of production from oil and gas properties
declines with the passage of time. Except to the extent the Company conducts
successful exploration or development activities or acquires
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26
additional properties containing proved reserves, or both, the proved reserves
of the Company, and the revenues generated from production thereof (assuming no
price increases), will decline as reserves are produced. Drilling activities are
expensive and subject to numerous risks, including the risk that no commercially
viable oil or gas production will be obtained. The decision to purchase a
property interest or explore or develop a property will depend in part on
geophysical and geological analysis and engineering studies, the results of
which may be inconclusive or subject to varying interpretations. The cost of
drilling, completing and operating wells is often uncertain. Drilling may be
curtailed, delayed or canceled as a result of many factors, including
availability or high cost of rigs and labor due to increased demand, title
problems, project approvals by joint venture partners, weather conditions,
government regulations, shortages or delays in obtaining equipment, and
limitations in the transportation, storage or market for products. No assurance
can be given that wells will be able to sustain production rates commensurate
with the drill stem tests. Increases or decreases in prices of oil and gas and
in cost levels, along with the timing of development projects, will also affect
revenues generated by the Company and the present value of estimated future net
cash flows from its properties. Revenues generated from future activities of the
Company are highly dependent upon the level of success in finding, developing or
acquiring additional reserves.
For the Company's reserves in Indonesia, the reserve estimates, which are
based on year-end prices, for the Company's net interest in the production
sharing contract are subject to revision as product prices and costs fluctuate
due to the cost recovery feature under the contract. The impact on reserves is
inversely related to price changes and directly related to changes in field
operating and capital costs. In addition, reserves are subject to revision due
to the effect that price fluctuations generally have on estimates of recoverable
reserves. See Note 19 of Notes to Consolidated Financial Statements. The
Company's right to receive revenues under its future new sales contracts or
extensions of renewals of existing contracts is affected by the gas supply
obligation in support of such contracts among the joint venture and other
production sharing contractors. The allocation to the Company's joint venture in
such contracts has declined significantly over time. Because a substantial
portion of the joint venture's reserves of natural gas has been committed to
support existing LNG sales contracts, the Company expects that absent the
discovery of significant additional natural gas reserves in the joint venture's
contract area, the joint venture's participation in future new sales contracts
for LNG and LPG, or in extensions or renewals of existing long-term contracts,
will be less than its current participation in existing contracts.
Governmental Actions, Regulation and Taxation. Petroleum and petrochemical
operations are subject to various types of regulation throughout the world. The
Company believes that its operations and facilities are in general compliance
with existing regulations. Nevertheless, the risks of substantive costs and
liabilities are inherent in operations such as the Company's, and there can be
no assurance that significant costs and liabilities will not be incurred in the
future. Legislation affecting these businesses is under regular review for
amendment or expansion, frequently increasing the regulatory burden. For
example, statutes and regulations require permits for drilling operations,
drilling bonds and reports concerning operations. Also, numerous departments and
agencies are authorized by statute to issue and have issued rules and
regulations binding on the oil and gas industry, the petrochemicals industry and
individual members of these industries. Such rules and regulations pose
difficult and costly compliance and reporting requirements, some of which carry
substantial penalties for the failure to comply. Most of the foreign countries
in which the Company operates have statutes and regulations governing the
Company's operations, including the unitization or pooling of oil and gas
properties, rates of production from oil and gas wells and taxation of sales and
production. The regulatory burden on the oil and gas industry and the
petrochemical industry increases the costs of doing business and, consequently,
affects profitability.
The Company's international operations are subject to certain risks,
including expropriation of assets, joint and several liability with co-venturers
under government contracts, governmental reinterpretation of applicable laws and
contract terms, increases in or assessments of taxes and government royalties,
renegotiation of contracts with governments or customers, government approvals
of lease, permit or similar applications and of exploration and development
plans, political and economic instability, such as the current Asian economic
crisis, guerilla activity, acts of terrorism, disputes between governments,
payment delays, export and import restrictions, limits on allowable levels of
exploration and production and currency shortages,
26
27
currency rate fluctuations, exchange losses and repatriation restrictions, as
well as changes in laws and policies governing operations of companies with
overseas operations, including more strict environmental regulation. In
addition, in the event of a dispute arising from foreign operations, the Company
may be subject to the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdiction of courts in the
U.S. The Company may also be hindered or prevented from enforcing its rights
with respect to a governmental instrumentality because of the doctrine of
sovereign immunity. Foreign operations and investments may also be subject to
laws and policies of the U.S. affecting foreign commerce and trade, investment
and taxation, including but not limited to credibility of foreign taxes and the
imposition of economic sanctions, that could affect the conduct and
profitability of those operations.
Competition. The Company operates in a highly competitive environment. The
Company actively competes with major and independent energy companies for
exploration leases, licenses, concessions and acquisitions of desirable
properties as well as for the equipment and labor required to develop and
operate such properties and market the products produced. Likewise, the Company
competes with other large domestic producers of ethylene in product price,
product quality, product deliverability and production capacity. Many of these
competitors have greater financial and other resources, such as technical
capabilities and human resources, substantially greater than those of the
Company. In addition, some of the Company's competitors have greater experience,
especially in certain international areas where the Company is currently seeking
to acquire interests or expand production capacity.
Environmental. Various international, federal, state and local laws and
regulations, including the preparation of environmental assessments and impact
studies that can delay drilling activity as well as covering the discharge of
materials, or otherwise relating to the protection of the environment, and
private environmental organizations, affect the Company's operations and costs.
In particular, the Company's petrochemical wastes are subject to stringent
environmental regulations relating to, among other things, solid and hazardous
waste management and disposal, air emissions, waste water treatment and other
matters that may affect the environment. Environmental regulations may have an
increasing impact upon the Company's operations. The Company is committed to
managing its operations in a safe and environmentally responsible manner and
believes that its operations and facilities are in general compliance with
applicable environmental regulations. Environmental capital expenditures for
1997 were not material, nor are they expected to be material during 1998.
Nevertheless, the risks of substantial costs and liabilities are inherent in
operations such as the Company's. There can be no assurance that significant
costs and liabilities will not be incurred by the Company in the future.
The Company has, in the past, owned, leased or operated numerous properties
in the U.S. that have been used for the production of oil and gas for many years
and currently participates in exploration and development activities in Alaska.
Although the Company believes that its past operating and disposal practices
were standard in the industry at the time and were generally in compliance with
then-existing rules and regulations, certain wastes may have been disposed of or
released or contamination may have occurred on or under the properties owned,
leased or operated by the Company. State and federal laws applicable to oil and
gas wastes and properties have gradually become more strict. In addition, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
also known as the "superfund" law, and comparable state laws impose liability,
without regard to fault or the legality of the original conduct, on certain
classes of persons that have contributed to the release of a "hazardous
substance" into the environment. Under these laws, the Company could be required
with respect to past, existing and future properties, to remove or remediate
previously disposed of wastes or property contamination (including groundwater
contamination at onshore locations), to perform remedial plugging operations to
prevent future contamination or to clean up disposal sites where "hazardous
substances" from its operations have been taken.
The Company's foreign operations are similarly subject to foreign laws
covering environmental and worker safety matters. The Company's operations in
the U.K. are subject to the Prevention of Oil Pollution Act, the Environmental
Protection Act and related statutes and orders, as well as certain regulations
of the European Union. As a contractor in Venezuela, the Company submits capital
and operating budgets to the affiliate of PDVSA, which then obtains such permits
from the Ministry of Energy and Mines and Ministry of
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Environment, as required. The foreign laws, however, have not had, and are not
presently expected to have, a material adverse effect on the Company's financial
statements.
Hedging. The Company may enter into hedging contracts from time to time in
order to minimize the impact of adverse price fluctuations, including futures
contracts. To the extent the Company engages in such activities it may be
prevented from realizing the benefits of price increases above the levels of the
hedges. Risks related to hedging activities include the risk that counter
parties to hedge transactions will default on obligations to the Company. There
are also foreign exchange risks inherent in operations such as the Company's.
The Company's revenues are predominantly based upon the world market price for
crude oil, which is denominated in U.S. dollars. The functional currency for
translating the accounts of the Company's foreign subsidiaries is the U.S.
dollar, except for subsidiaries in the U.K. where the functional currency is
pounds sterling. Certain operating costs, taxes, capital costs and intercompany
transactions represent commitments settled in foreign currency. The Company
periodically enters into foreign exchange contracts as a hedge against
fluctuations in foreign currency rates. The operator of the Company's Indonesian
joint venture has entered into certain such contracts to hedge the Indonesian
Rupiah for purposes of its local payroll obligations, which are not a material
amount to the Company. The Company cannot predict with any certainty the results
of currency exchange rate fluctuations. See Item 7 -- Management's Discussion
and Analysis of Financial Condition and Results of Operations.
ITEM 2. PROPERTIES.
For a description of the Company's properties, see Item 1 of Part I of this
Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries and related entities are named defendants
in numerous lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business.
While the outcome of the contingencies, lawsuits or other proceedings
against the Company cannot be predicted with certainty, management expects that
such 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. See Item 1 -- Business -- Risk Factors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to stockholders' vote during the fourth quarter
of the fiscal year ended December 31, 1997.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Since September 24, 1987, the Company's common stock, $.05 par value (the
"Common Stock"), has been traded on the New York Stock Exchange and the Pacific
Exchange under the symbol "UTH." As of February 20, 1998, there were
approximately 85,161,652 shares of Common Stock outstanding held by
approximately 305 stockholders of record. Beginning with the second quarter of
1988, the Company has paid regular quarterly dividends on the Common Stock of
$.05 per share each quarter. See Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations.
The following table shows the high and low sales prices of the Common Stock
from the New York Stock Exchange Composite Transactions Tape for 1997 and 1996:
1997 1996
----------------------------------------------------- -----------------------
QUARTER ENDED QUARTER ENDED
----------------------------------------------------- -----------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30
-------- ------- -------- ------- -------- -------
High................. 23 7/8 21 3/8 24 9/16 24 1/2 20 1/4 20 1/4
Low.................. 17 15/16 17 1/4 19 7/8 20 17 5/8 18
1996
-----------------------
QUARTER ENDED
-----------------------
SEPT. 30 DEC. 31
-------- -------
High................. 21 3/4 23
Low.................. 18 5/8 20 5/8
The last reported sale price of the Common Stock on the New York Stock
Exchange on February 20, 1998, was $19 9/16.
The Company has a Rights Agreement (the "Rights Agreement") designed to
help assure that all of the Company's stockholders receive fair and equal
treatment in the event of any proposed takeover of the Company. Under this
Rights Agreement, each outstanding share of the Company's Common Stock includes
one common stock purchase right ("Right") which becomes exercisable under
certain circumstances, including when beneficial ownership of the Company's
Common Stock by any person, or group, equals or exceeds 15% of the Company's
outstanding Common Stock (such person being an "Acquiring Person"). Certain
persons specified in the Rights Agreement who owned more than 15% or more of the
Common Stock at the adoption of the Rights Agreement as of September 12, 1997
are not considered Acquiring Persons. See Item 12 -- Security Ownership of
Certain Beneficial Owners and Management. When they become exercisable, each
Right entitles the registered holder to purchase from the Company one-half of
one share of Common Stock at a price of $90.00, per full share of Common Stock
subject to adjustment under certain circumstances. Upon the occurrence of
certain events specified in the Rights Agreement, each holder of a Right (other
than an Acquiring Person) will have the right, upon exercise of such Right, to
receive that number of shares of common stock of the Company (or the surviving
corporation) that, at the time of such transaction, would have a market value of
two times the purchase price of the Right. No Rights were exercisable under the
Rights Agreement at December 31, 1997. See Note 14 of Notes to Consolidated
Financial Statements.
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ITEM 6. SELECTED FINANCIAL DATA.
The financial data as of and for the years ended December 31, 1993 through
1997 were derived from the audited consolidated financial statements of the
Company and should be read in connection with the consolidated financial
statements and related notes included elsewhere herein.
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Revenues.............................................. $ 933,228 $ 1,036,449 $ 876,029 $ 769,595 $ 696,663
Costs and other deductions:
Product costs and operating expenses................ 314,330 341,057 299,133 299,586 301,276
Exploration expenses................................ 99,380 51,765 77,185 53,532 93,640
Depreciation, depletion and amortization............ 216,108 212,470 191,503 168,570 242,704
Selling, general and administrative expenses........ 26,696 26,945 26,098 24,525 23,780
Interest expense.................................... 7,412 25,173 28,783 11,399 6,369
Preferred dividends of a subsidiary................. 1,911
----------- ----------- ----------- ----------- -----------
Income before income taxes and cumulative effect of
change in accounting principle...................... 269,302 379,039 253,327 211,983 26,983
Income taxes (benefit)................................ 133,436 226,812 150,977 145,245 (3,686)
----------- ----------- ----------- ----------- -----------
Income before cumulative effect of change in
accounting principle................................ 135,866 152,227 102,350 66,738 30,669
Cumulative effect of change in accounting principle... (3,743)
----------- ----------- ----------- ----------- -----------
Net income............................................ $ 135,866 $ 152,227 $ 102,350 $ 66,738 $ 26,926
=========== =========== =========== =========== ===========
Basic earnings per share of common stock:
Income before cumulative effect of change in
accounting principle.............................. $ 1.60 $ 1.75 $ 1.17 $ .76 $ .35
Cumulative effect of change in accounting
principle......................................... (.04)
----------- ----------- ----------- ----------- -----------
Net income.......................................... $ 1.60 $ 1.75 $ 1.17 $ .76 $ .31
=========== =========== =========== =========== ===========
Weighted average shares outstanding................... 85,094,393 87,155,028 87,686,777 87,642,451 87,218,027
Diluted earnings per share of common stock:
Income before cumulative effect of change in
accounting principle.............................. $ 1.59 $ 1.74 $ 1.16 $ .76 $ .34
Cumulative effect of change in accounting
principle......................................... (.04)
----------- ----------- ----------- ----------- -----------
Net Income............................................ $ 1.59 $ 1.74 $ 1.16 $ .76 $ .30
=========== =========== =========== =========== ===========
Weighted average shares outstanding including
potential dilutive common shares.................... 85,558,631 87,561,714 88,098,090 87,936,598 88,332,689
Dividends per share of common stock................... $ .20 $ .20 $ .20 $ .20 $ .20
=========== =========== =========== =========== ===========
BALANCE SHEET DATA (AT END OF PERIOD):
Net working capital................................... $ (104,303) $ (77,297) $ (36,269) $ (44,439) $ (52,035)
Property, plant and equipment -- net.................. 1,746,661 1,632,423 1,551,198 1,286,278 1,088,884
Total assets.......................................... 2,021,556 1,942,004 1,836,818 1,544,634 1,338,741
Long-term debt........................................ 626,404 558,463 712,132 536,117 447,374
Common stock and other stockholders' equity........... 668,595 586,022 423,790 349,499 281,246
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
1997 Compared with 1996. Net income for the year ended December 31, 1997
was $136 million, or $1.60 per share as compared to net income of $152 million
or $1.75 per share for the year ended December 31, 1996. In 1997, the Company
recorded approximately $43 million of U.S. tax benefits and a one-time U.K.
deferred tax charge of $14 million, see Note 9 of Notes to Consolidated
Financial Statements. Excluding these items, net income for 1997 was $107
million or $1.26 per share. The 1997 earnings were negatively impacted by an
anticipated decline in Indonesian LNG volumes, lower U.K. and Pakistan crude oil
prices and higher exploration expenses partially offset by higher ethylene
margins and lower interest expense.
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Sales and operating revenues for 1997 were $909 million, down from $1,008
million in 1996. International revenues totaled $720 million as compared to $813
million in 1996. In the U.K., sales and operating revenues decreased by $40
million due to lower crude oil prices and lower gas volumes. In Indonesia, sales
decreased $53 million due to lower LNG sales volumes and prices. The Company's
participation share in LNG volumes delivered from its Indonesian operations
declined by approximately 18% in 1997 as LNG cargo deliveries under certain
sales contracts were replaced by ones in which the Company had a lower average
participation interest. In Pakistan, sales were essentially level with 1996 as
higher oil volumes offset lower oil prices.
In 1998, the Company's participation share in LNG volumes delivered from
its Indonesian operations is expected to decline by approximately 18% as certain
LNG sales contracts are replaced by ones in which the Company has a lower
average participation interest. Also, the decline includes a reduction in the
sharing percentages under the Company's production sharing contract beginning in
August 1998. The effect of such lower LNG deliveries will not have as
significant an impact on the Company's total annual cash flow. To a lesser
extent further declines are expected in 1999 while a slight increase is
anticipated in 2000 after the eighth train is completed.
Petrochemical revenues totaled $188 million in 1997 as compared to $193
million in the prior year, while operating profit was $32 million as compared to
$24 million in 1996. The increased operating profit was primarily due to higher
ethylene sales prices and lower feedstock costs, resulting in an average
ethylene margin of 9 cents per pound in 1997 as compared to 6 cents per pound in
1996.
Average prices received and volumes sold by the Company's major operations
during 1997 and 1996, respectively, were as follows:
VOLUMES
PRICES (000S PER DAY)
---------------- --------------
1997 1996 1997 1996
------ ------ ----- -----
Crude oil (barrels):
U.K............................................ $17.28 $19.60 43 43
Pakistan....................................... 17.09 17.75 7 6
Indonesia...................................... 19.71 19.49 6 6
Indonesian LNG (Mcf)............................. 3.45 3.52 179 218
Pakistan natural gas (Mcf)....................... 1.61 1.61 37 41
U.K. natural gas (Mcf)........................... 2.92 2.83 28 46
U.S. ethylene (pounds)........................... .24 .22 1,301 1,392
Exploration expenses increased by $48 million due to higher exploration
drilling and geological and geophysical ("G&G") expenditures. Product costs and
operating expenses decreased by $27 million, due to lower Indonesian operating
expenses and a charge in 1996 for the voluntary retirement program. Interest
expense decreased by $18 million primarily due to higher capitalized interest
related to the final phases of development of the Britannia field, which is
expected to commence production in August 1998.
1996 Compared with 1995. Net income for the year ended December 31, 1996
was $152 million, or $1.75 per share as compared to net income of $102 million,
or $1.17 per share for the year ended December 31, 1995. The 1996 earnings were
favorably impacted by higher worldwide oil prices, higher sales volumes in the
U.K., higher Indonesian LNG sales prices and volumes and lower exploration
expenses, partially offset by lower ethylene margins and the cost of a special,
one-time voluntary retirement program.
Sales and operating revenues for 1996 were $1,008 million, up from $852
million in 1995. International revenues totaled $813 million as compared to $651
million in 1995. In the U.K., sales and operating revenues increased by $83
million due to higher prices and increased sales volumes, which were primarily a
result of the July 1995 acquisition of an interest in the Alba field. In
Indonesia, sales increased $64 million due to higher LNG sales prices and
volumes and higher crude oil prices. In Pakistan, sales were $15 million above
1995 due to higher crude oil and gas prices, partially offset by lower gas
volumes.
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Petrochemical revenues totaled $193 million in 1996 as compared to $200
million in the prior year, while operating profit was $24 million as compared to
$62 million in 1995. The decreased operating profit was primarily due to lower
ethylene sales prices and increased feedstock costs, resulting in an average
ethylene margin of 6 cents per pound in 1996 vs. 13 cents per pound in 1995.
FINANCIAL CONDITION AND LIQUIDITY
General. In order to increase value for all the Company's stockholders, the
Company's long-term growth strategy is an active program focused on development
of core producing assets, participation in a diversified exploration program,
participation in enhanced production ventures and growth of its petrochemical
business. In 1997 the Company successfully bid to enter operations in Venezuela,
formed new exploration ventures in Kazakhstan/Caspian Sea, China and other
strategic areas and continued development of the U.K. and Alaska oil and gas
projects. At year-end 1997, estimated proved worldwide reserves grew to 459
MMboe from 443 MMboe at year-end 1996 and the Company replaced about 134% of its
worldwide production over the three year period 1995 through 1997. The Company's
oil and gas production costs per barrel of oil equivalent averaged $3.66 per
barrel in 1997, compared to $3.61, $3.95, $3.98 and $4.73 in 1996, 1995, 1994
and 1993, respectively. The Company replaced approximately 135% of its 1997
worldwide production.
In 1998 the Company is focused on pursuing both near-term and long-term
growth opportunities through an active program focused on development of
existing core producing assets, development and integration of Venezuela as a
new core producing asset, participation in a diversified exploration program,
participation in enhanced production ventures, portfolio management and growth
of its petrochemical business. An important key to growth for the Company is
adding new reserves to replace reserves that are depleted by production and that
are at normal decline in production rates as well as to offset the significant
lesser participation share of the gas volumes the Company has and will have to
support Indonesian LNG sales contracts. With the addition of the operating
service fee agreements in Venezuela and expectations from other properties, the
Company expects to increase its estimated annual production from 44.2 million
barrels of oil equivalent in 1997 to about 53 million barrels of oil equivalent
in 1998. The Company anticipates that by 2002 its annual worldwide production
will reach 90 million barrels of oil equivalent, which production growth will
benefit substantially from the successful development of the Venezuelan
operations, the Britannia field in the U.K. North Sea and the Alpine field in
Alaska's North Slope.
Achievement of growth through this program will require significant capital
investment as reflected in the capital expenditure budget for 1998, which
represents an increase of approximately 60% over the amount spent in 1997,
excluding acquisitions. The Company's capital expenditures for 1998 are
estimated to be $413 million, excluding capitalized interest, and reflect a
focus on development projects while maintaining a diversified exploration
program. Approximately $284 million of the 1998 capital budget is allocated for
oil and gas development projects. The major components of the 1998 development
budget are the Company's two new operations in Venezuela, increased development
activity in the Alpine project in Alaska's North Slope and completion of the
U.K. North Sea Britannia gas development project. The Company has budgeted
approximately $82 million for exploration projects, including participating in
20-25 exploration wells in strategic areas as well as at its producing ventures
in the U.K. North Sea, Indonesia and Pakistan. In addition to growth in its oil
and gas business, the Company is studying opportunities for expanding and adding
value to its Gulf Coast petrochemical business. The Company's growth strategy
will require implementing investment opportunities in a very competitive
industry environment. The Company will consider strategies to leverage or
increase value in its portfolio of properties, including selective farmouts as
well as opportunities with its mature assets.
The Company's business and strategy are impacted by prices the Company
receives for its crude oil, LNG, natural gas, ethylene and Venezuelan service
fees that are subject to many factors beyond the Company's control. At the end
of 1997 and in the beginning of 1998, worldwide oil prices have declined, with
the spot price for West Texas Intermediate averaging $16.65 per barrel in
January 1998. In the beginning of 1998, the operating service fee for the
Venezuelan DZO unit was approximately $5.00 per barrel and is adjusted quarterly
by the percentage change of a basket of crude oil prices instead of absolute
dollar changes. Although the Company cannot predict with any degree of certainty
the prices it will receive in 1998 and future
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33
years for its products and services, it estimates that a change of $1.00 in the
average price of crude oil and LNG impacts the Company's net income and cash
flow by approximately $22 million and $25 million, respectively. Also, the
Company estimates that a margin change of an average one cent per pound of
ethylene for an entire year at full capacity production would affect net income
and cash flow on an annualized basis for the petrochemical business of the
Company by approximately $5 million.
In developing its business plan for 1998, the Company has assumed that oil
prices will have a recovery from the January 1998 levels. In 1998 the Company
has budgeted for significant capital investment that will be funded with
increased borrowings under its credit facilities and contemplated issuance of
preferred and long-term debt securities as well as funds from operations.
Approximately 90% of the Company's oil and gas revenues are indexed to world
crude oil prices. With such assumptions for the business plan and increased
interest expense and higher capital spending, the Company anticipates a decline
in net income and cash flow in 1998. In the event that prices are materially
below those assumed in its business plan, the Company has a contingency program
that includes reductions in capital and operating expenses that would not
significantly impact current operations but defer certain exploration and
development plans. Any such deferrals could limit opportunities for new reserves
from exploration successes and delay anticipated production from certain
properties thus impacting net income and cash flows.
Cash flow. Net cash provided by operating activities was $272 million in
1997, a decrease of $112 million from the prior year. The decrease was primarily
the result of lower crude oil prices and a decline in LNG sales volumes. Net
cash required by investing activities was $318 million in 1997, an increase of
$177 million from 1996. The change was primarily related to the increase in
property, plant and equipment for the Boqueron acquisition. In 1997, net cash
provided by financing activities was $27 million compared to net cash required
in 1996 of $211 million. The change resulted from the use of excess cash flow to
pay down debt and 1997 borrowings to fund the Boqueron acquisition.
Capital resources. Capital expenditures for 1997 were $379 million,
excluding capitalized interest, an increase from the prior year's expenditures
of $186 million. This increase was primarily the result of the Company's
Boqueron acquisition and higher exploration drilling and G&G expenditures.
The Company acquired in February 1998 all of the stock of Compania
Occidental de Hidrocarburos, Inc ("Hidrocarburos"), a U.S. affiliate of
Occidental Oil & Gas Corporation ("Occidental"), for approximately $212 million,
which includes approximately $14 million in working capital and certain closing
adjustments effective as of December 31, 1997. The Company initially funded the
acquisition under bank facilities, including a new $130 million facility through
Hidrocarburos guaranteed by the Company. Occidental may receive contingent
payments of up to a maximum of $15 million annually for six years based
primarily on the level of oil prices. Hidrocarburos operates as contractor of
the DZO unit in Western Venezuela under a 20-year operating service contract
with a subsidiary of the national oil company, PDVSA. The contractor invests
capital and provides technology for reactivation of the fields for which the
contractor receives various fees per barrel delivered to the custody transfer
point. The fees received are operating, capital reimbursement and interest on
unrecovered capital costs which are in total limited by a maximum total fee. The
maximum total fee is indexed with a basket of crude oil products and was
approximately $7.50 per barrel in the latter half of 1997. The Company cannot
predict the extent that the future maximum total fee will limit the operating,
interest and capital fees received and recorded. Additionally, an incremental
incentive fee of several dollars per barrel, which is also indexed to a basket
of crude oil products but is not limited by the maximum total fee, is payable
when cumulative production from the DZO unit (from inception of the 1993
contract) reaches 52 million barrels. Cumulative production is expected to reach
52 million barrels during the second half of 1999. The contractor does not pay
royalties related to the DZO unit. Operating costs in early 1998 averaged about
$2.90 per barrel. In 1998, the Company recorded for the DZO unit 114 million
barrels of proved reserves of which 56 million barrels are classified as proved
undeveloped. The Company anticipates spending $400 to $450 million over the next
nine years for future DZO development expenditures. The Company plans to
increase current production from 23,000 gross barrels a day up to 55,000 gross
barrels within five years.
In June 1997, the Company led a successful bid for the Boqueron contract
area under Venezuela's Third Operating Agreement Round. The Company was named
the operator and is a contractor with a 66.67%
33
34
interest in the operating service contract and Preussag Energie GmbH of Germany,
the other contractor and a co-venturer, has a 33.33% interest (collectively, the
"Contractors"). The Company and Preussag Energie paid $175 million for the
rights to the service contract for the Boqueron contract area. Under the 20-year
contract, the Contractors will produce oil from Boqueron on behalf of a
subsidiary of PDVSA, which currently serves as operator. The Company expects to
assume operatorship in May 1998, pending approval of its development plan. The
Contractors are compensated a U.S. dollar service fee to cover reimbursement of
costs plus profit. There are two components of the fee, which include (i) a set
fee for baseline production and (ii) a fee for incremental production. The PDVSA
subsidiary will pay the Contractors a set fee of $1.25 per barrel for operating
the baseline production. In the Boqueron contract area, the baseline production
initial rate is estimated at 8,500 gross barrels of oil a day with a nominal
annual decline rate of 10%. In terms of the incremental production, the
Contractors will be paid a sliding incentive fee based on field profitability
and will be allowed to recover field and other capital and operating costs
through the fee mechanism. The field profitability is based on production at
world market prices net of a 1/6 government royalty and field costs. The Company
recorded approximately 40 million net barrels in proved reserves from the
Boqueron contract area during 1997 with additional reserves expected to be
recorded in the future as the field is further developed. The Contractors must
invest at least $13 million over the next three years and currently expect to
spend between $300 million and $325 million in the area over the next five
years. With this additional development spending, the Company expects to
increase current production at the Boqueron contract area from 8,500 gross
barrels of oil a day to a rate of 50,000 to 60,000 gross barrels within three to
five years.
Financing Activities: For information on the Company's outstanding debt
agreements, see Note 7 of the Notes to Consolidated Financial Statements. The
Company had two unsecured credit facilities (the "Credit Facilities") at
December 31, 1997. One of the Credit Facilities is a $100 million revolver that
provides for conversion of amounts outstanding on March 10, 1998 to a one-year
term loan maturing March 9, 1999. The Company is in negotiations to replace the
$100 million Credit Facility. The other Credit Facility is a dual currency (U.S.
dollars and pounds sterling) $450 million revolver that reduces quarterly by $35
million beginning June 30, 2001, with a final maturity of March 31, 2002. At
December 31, 1997, no amounts were outstanding under the Credit Facilities. 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 stockholders' equity, as adjusted, at $350 million. Under
the terms of the Credit Facilities, the Company may pay dividends and make stock
repurchases provided that such level of minimum stockholders' equity is
maintained and the Company complies with certain other covenants in the Credit
Facilities. At December 31, 1997, the Company's adjusted stockholders' equity
was approximately $704 million.
The Company has uncommitted and unsecured lines of credit with several
banks in both U.S. dollars and pounds sterling. At December 31, 1997, $83
million was outstanding under these money market lines which bore interest at a
weighted average rate of 6.9% per annum. In February 1998 the Company's indirect
subsidiary, Hidrocarburos, entered into a $130 million committed term loan,
which matures on May 4, 1998, to initially fund a portion of the DZO
acquisition. The term loan is guaranteed by the Company, and supported by the
$450 million Credit Facility. The Company intends to refinance such term loan
with long-term financing. At February 20, 1998, $85 million, $130 million and
$121 million were outstanding under the Credit Facilities, term loan and the
uncommitted lines of credit, respectively. As of such date, the Company had
approximately $214 million of such available financing.
The Company's indirect subsidiary, Union Texas Britannia Limited ("UTBL"),
has a 150 million pounds sterling secured financing from a syndicate of banks.
The financing has a final maturity in September 2005. At December 31, 1997, 85
million pounds sterling ($141 million) was outstanding under UTBL's financing
which bore interest at a weighted average rate of 8.4% per annum.
The Company has outstanding $100 million principal amount of 8.25% Senior
Notes due 1999, $125 million principal amount of 8 3/8% Senior Notes due 2005
and $75 million principal amount of 8 1/2% Senior Notes due 2007 (collectively
the "Senior Notes"). In 1995 the Company issued $100 million aggregate principal
amount of medium term notes ("MTN") with terms of seven and twelve years and
interest rates varying from 6.51% to 6.81%. The Senior Notes and MTN are
referred to herein as the "Notes". The Notes
34
35
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 any future subordinated indebtedness of the
Company. Each of the Notes contain similar restrictive covenants. The 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 Notes.
In July 1997, the Company filed a shelf registration statement with the
SEC, covering the issuance of up to $500 million of several types of securities,
including debt securities, common stock, preferred stock and warrants to
purchase securities in any combination that the Company may elect to offer from
time to time on such terms as the Company deems appropriate. The Company
believes the shelf registration provides additional financing flexibility to
meet future funding requirements and to take advantage of potentially attractive
capital market conditions. The Company intends to use the net proceeds from any
offering for general corporate purposes, which may include the repayment of
outstanding indebtedness, working capital increases, capital expenditures and
acquisitions. No securities have yet been issued, although the Company is
contemplating an offering of preferred stock and long-term debt securities.
In 1994, the Company's Board of Directors authorized the repurchase of up
to 2,000,000 shares of the Company's stock, all of which were repurchased by the
end of 1996. In October, 1996, the Company's Board of Directors authorized the
repurchase of up to an additional 2,000,000 shares of the Company's common
stock, all of which were repurchased by March 31, 1997. The repurchased stock
will be used for general corporate purposes, including fulfilling employee
benefit program obligations. At December 31, 1997, 2,728,267 shares of common
stock were held, at cost, as treasury shares.
As of December 31, 1997, the Company's scheduled maturities of long-term
debt outstanding for the five-year period of 1998 through 2002 are approximately
$0 million, $123 million, $30 million, $33 million and $186 million,
respectively. The Company believes that it will have sufficient sources of funds
to satisfy these scheduled maturities. The Company may enter into interest rate
swap contracts from time to time. However, the Company did not enter into any
interest rate swap contracts during 1997.
Financial Condition. In each of the four quarters ended December 31, 1997,
the Company declared and paid a dividend of approximately $4.4 million on its
common stock. On January 21, 1998, the Company announced a dividend on its
common stock of $.05 per share to stockholders of record as of January 30, 1998,
which was paid on February 13, 1998.
Since the Company's U.S. corporate alternative minimum tax ("AMT")
liability has exceeded its otherwise determined regular U.S. federal income tax
liability, the Company has accumulated an AMT credit of approximately $24
million which may be applied against future regular federal tax liabilities. In
addition, the Company has approximately $117 million (pre-tax) of Net Operating
Loss ("NOL") carryforwards from its U.S. exploration and production operations
which could be applied against future U.S. federal taxable income. These NOLs
must be utilized prior to their expiration, which is between 2002 and 2006, see
Note 9 of Notes to Consolidated Financial Statements.
As a result of reserve engineering analysis and subsequent development
plans for the Company's reserves in the Alpine field in Alaska as well as
expectations for its U.S. petrochemical business, the Company now expects to
utilize the AMT credit and a portion of the NOL carryforwards. In 1997, the
Company adjusted its deferred tax valuation allowance and subsequently recorded
$43 million of net income, representing the $24 million AMT credit and $19
million (after-tax) of NOL carryforwards, see Note 9 of Notes to Consolidated
Financial Statements. Changes in the Company's actual or anticipated income
subject to U.S. taxes, changes in U.S. tax laws or changes in U.S. tax rates may
give rise to adjustments to the Company's deferred tax assets or liabilities,
including the valuation allowance, in the future.
As a result of its international operations, the Company monitors currency
rate fluctuations, including the impact of the recent activity in the Asian
market. Such fluctuations have not had a material impact on the Company's
operations. In 1997 and 1998, 80% and 74%, respectively, of the Indonesia
natural gas supplied by the Company's joint venture was, and is expected to be
sold, to Japanese industrial and utility customers, with
35
36
the remainder sold to Korean and Taiwanese buyers. Although the Company cannot
predict the impact of the current Asian economic crisis on the buyers of LNG,
the Company expects currently that it will not have a material impact on the
Company in 1998. Payments for the Indonesian LNG under all of the sales
contracts are made in U.S. dollars directly to a bank in the U.S. that acts as
trustee and paying agent with respect to the sales proceeds. Likewise all
invoice and payments for the operating service fees in Venezuela will be made in
U.S. dollars.
The functional currency for translating the accounts of foreign
subsidiaries is the U.S. dollar, except for subsidiaries in the U.K. where the
functional currency is pounds sterling. The Company's revenues are predominantly
based upon the world market price for crude oil, which is denominated in U.S.
dollars. Certain operating costs, taxes, capital costs and intercompany
transactions represent commitments settled in foreign currencies. Exchange rate
fluctuations on transactions in currencies other than the functional currency
are recognized as gains and losses in current period income. The Company
periodically enters into foreign exchange contracts as a hedge against
fluctuations in foreign currency rates. These contracts are generally of a
short-term nature. At December 31, 1997, the Company had open contracts with a
net value of 7 million pounds sterling. However, there are foreign exchange
risks inherent in operations such as the Company's, and the Company cannot
predict with any certainty the results of currency exchange rate fluctuations.
The Company may enter into hedging contracts and other risk management
activities, such as swaps or fixed price contracts in order to minimize the
impact of adverse price fluctuations. Gains or losses on these activities are
recognized in sales revenues when the underlying exposed hedged production is
sold. As of December 31, 1997, the Company did not have any such contracts.
The year 2000 issue relates to computer programs being written with two
digits rather than four to define the applicable year. Computer programs that
have date-sensitive software may recognize a date using "00" as the year 1900
instead of 2000. The Company is addressing the year 2000 issue through an
assessment of its operational field systems, information technology systems and
the year 2000 readiness of its significant partners, suppliers, vendors and
customers. This assessment includes among other matters a detailed analysis of
the Company's worldwide software and hardware applications and communications
with the companies who operate a significant portion of the Company's assets.
The Company is in the process of converting its software accounting system to a
new system, which is year 2000 compliant. The Company has targeted mid-1999 as
the completion date for its plan. While the Company expects to resolve its year
2000 issue substantially through the replacement and upgrades of software, there
can be no guarantee that the systems of other companies on which the Company
depends will be timely converted or that a failure to convert by another
company, or a conversion that is not compatible with the Company's systems,
would not have a material adverse effect on the Company. The Company does not
expect that the costs of addressing the year 2000 issue will have a material
impact on the Company's financial position or results of operations.
The foregoing discussion of the Company's financial condition and liquidity
includes in several instances forward-looking statements, which are based upon
management's good faith assumptions relating to the financial, market, operating
and other relevant environments that will exist and affect the Company's
business and operations in the future. No assurance can be made that the
assumptions upon which management based its forward-looking statements will
prove to be correct, or that the Company's business and operations will not be
affected in any substantial manner by other factors not currently foreseeable by
management or beyond the Company's control. All forward-looking statements
involve risks and uncertainty, including, but not limited to, the following:
volatility of crude oil, LNG, natural gas and ethylene prices, capital
expenditures, production variances from expectations, the need to develop and
replace reserves, risks in the development and integration of new assets,
environmental risks, drilling and operating risks, risks related to exploration
and development projects, uncertainties about estimates of reserves,
competition, government actions and regulations, foreign currencies and the
ability of the Company to implement its business strategy. For additional
discussion of such risks, uncertainties and assumptions, see Item
1. Business -- Risk Factors.
36
37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants........................... 38
Consolidated Balance Sheet, December 31, 1997 and 1996...... 39
Consolidated Statement of Operations, Years Ended December
31, 1997, 1996 and 1995................................... 40
Consolidated Statement of Cash Flows, Years Ended December
31, 1997, 1996 and 1995................................... 41
Consolidated Statement of Stockholders' Equity, Years Ended
December 31, 1997, 1996 and
1995...................................................... 42
Notes to Consolidated Financial Statements.................. 43
37
38
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Union Texas Petroleum Holdings, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Union
Texas Petroleum Holdings, Inc. and its subsidiaries at December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
February 16, 1998
38
39
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
Current assets:
Cash and cash equivalents................................. $ 24,324 $ 43,574
Accounts and notes receivable............................. 82,172 96,687
Inventories............................................... 38,318 39,721
Prepaid expenses and other current assets................. 30,539 23,560
---------- ----------
Total current assets.............................. 175,353 203,542
Equity investments.......................................... 90,488 93,262
Property, plant and equipment, at cost, less accumulated
depreciation, depletion and amortization*................. 1,746,661 1,632,423
Other assets................................................ 9,054 12,777
---------- ----------
Total assets...................................... $2,021,556 $1,942,004
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ $ 2,290
Accounts payable.......................................... 132,735 103,225
Taxes payable............................................. 94,366 126,813
Other current liabilities................................. 52,555 48,511
---------- ----------
Total current liabilities......................... 279,656 280,839
Long-term debt.............................................. 626,404 558,463
Deferred income taxes....................................... 321,879 391,534
Other liabilities........................................... 125,022 125,146
---------- ----------
Total liabilities................................. 1,352,961 1,355,982
---------- ----------
Stockholders' equity:
Common stock.............................................. 4,391 4,391
Paid in capital........................................... 18,645 18,863
Cumulative foreign exchange translation adjustment and
other.................................................. (34,954) (21,955)
Retained earnings......................................... 733,201 614,376
Common stock held in treasury, at cost, 2,728,267 shares
at December 31, 1997 and 1,490,322 shares at December
31, 1996............................................... (52,688) (29,653)
---------- ----------
Total stockholders' equity........................ 668,595 586,022
---------- ----------
Total liabilities and stockholders' equity........ $2,021,556 $1,942,004
========== ==========
- ---------------
* 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.
39
40
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- ---------- --------
REVENUES:
Sales and operating revenues.............................. $909,391 $1,008,476 $851,601
Interest income and other revenues........................ 3,224 1,836 3,557
Net income of equity investees............................ 20,613 26,137 20,871
-------- ---------- --------
933,228 1,036,449 876,029
COSTS AND OTHER DEDUCTIONS:
Product costs and operating expenses...................... 314,330 341,057 299,133
Exploration expenses...................................... 99,380 51,765 77,185
Depreciation, depletion and amortization.................. 216,108 212,470 191,503
Selling, general and administrative expenses.............. 26,696 26,945 26,098
Interest expense.......................................... 7,412 25,173 28,783
-------- ---------- --------
Income before income taxes.................................. 269,302 379,039 253,327
Provision for income taxes.................................. 133,436 226,812 150,977
-------- ---------- --------
Net income.................................................. $135,866 $ 152,227 $102,350
======== ========== ========
EARNINGS PER SHARE OF COMMON STOCK:
Basic earnings per share of common stock.................. $ 1.60 $ 1.75 $ 1.17
======== ========== ========
Diluted earnings per share of common stock................ $ 1.59 $ 1.74 $ 1.16
======== ========== ========
DIVIDENDS PER SHARE OF COMMON STOCK......................... $ .20 $ .20 $ .20
======== ========== ========
Weighted average number of shares outstanding (000s)........ 85,094 87,155 87,687
======== ========== ========
Weighted average number of shares outstanding including
potential dilutive common shares (000s)................... 85,559 87,561 88,098
======== ========== ========
The accompanying notes are an integral part of this financial statement.
40
41
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 135,866 $ 152,227 $ 102,350
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, depletion and
amortization..................... 216,108 212,470 191,503
Deferred income taxes.............. (63,540) (31,588) (19,576)
Net income of equity investees..... (20,613) (26,137) (20,871)
Other.............................. 3,377 2,981 3,581
--------- --------- ---------
Net cash provided by operating
activities before changes in
other assets and
liabilities................... 271,198 309,953 256,987
Decrease (increase) in accounts
and notes receivable.......... 13,642 (17,793) (22,667)
Decrease in inventories.......... 1,049 4,228 1,351
(Increase) decrease in prepaid
expenses and other assets..... (4,948) 10,569 (6,628)
Increase in accounts payable and
other liabilities............. 19,936 8,410 3,233
(Decrease) increase in income
taxes payable................. (29,006) 68,630 1,649
--------- --------- ---------
Net cash provided by operating
activities.................... 271,871 383,997 233,925
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and
equipment.......................... (341,297) (181,967) (412,039)
Cash provided by equity investees..... 23,387 41,351 26,900
Cash required by sale of businesses,
net................................ (809)
--------- --------- ---------
Net cash required by investing
activities......................... (317,910) (140,616) (385,948)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from long-term debt...... 44,203 61,440 327,103
Payments to settle long-term debt..... (2,290) (2,292) (2,292)
Net payments under credit
facilities......................... (132,000) (193,503)
Net proceeds (payments) from money
market lines of credit ............ 27,893 (92,069) 43,151
Purchase of treasury stock............ (34,305) (32,360) (4,136)
Proceeds from issuance of treasury
stock.............................. 8,329 3,876 1,916
Dividends paid........................ (17,041) (17,471) (17,536)
--------- --------- ---------
Net cash provided (required) by
financing activities............... 26,789 (210,876) 154,703
--------- --------- ---------
Net (decrease) increase in cash and
cash equivalents................... (19,250) 32,505 2,680
Cash and cash equivalents at beginning
of year............................... 43,574 11,069 8,389
--------- --------- ---------
Cash and cash equivalents at end of
year.................................. $ 24,324 $ 43,574 $ 11,069
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest (net of amount
capitalized)..................... $ 5,457 $ 22,882 $ 29,765
Income taxes....................... 223,183 190,517 168,140
The accompanying notes are an integral part of this financial statement.
41
42
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
COMMON STOCK (SHARES)
Authorized....................................... 200,000,000 200,000,000 200,000,000
=========== =========== ===========
Issued:
Beginning of year............................. 87,829,283 87,829,283 87,829,283
Issuance of stock.............................
----------- ----------- -----------
Ending balance................................ 87,829,283 87,829,283 87,829,283
=========== =========== ===========
COMMON STOCK AT PAR VALUE ($.05 PER SHARE)
Beginning of year................................ $ 4,391 $ 4,391 $ 4,391
Issuance of stock................................
----------- ----------- -----------
Ending balance................................... $ 4,391 $ 4,391 $ 4,391
=========== =========== ===========
PAID IN CAPITAL
Beginning balance................................ $ 18,863 $ 19,405 $ 19,889
Issuance of stock................................
Reissuance of treasury stock..................... (218) (542) (484)
----------- ----------- -----------
Ending balance................................... $ 18,645 $ 18,863 $ 19,405
=========== =========== ===========
CUMULATIVE FOREIGN EXCHANGE TRANSLATION ADJUSTMENT
AND OTHER
Beginning balance................................ $ (21,955) $ (75,077) $ (65,476)
Translation adjustments.......................... (13,038) 53,044 (9,406)
Supplemental pension plan minimum liability...... 39 78 (195)
----------- ----------- -----------
Ending balance................................... $ (34,954) $ (21,955) $ (75,077)
=========== =========== ===========
RETAINED EARNINGS
Beginning balance................................ $ 614,376 $ 479,620 $ 394,806
Net income....................................... 135,866 152,227 102,350
Dividends on common stock........................ (17,041) (17,471) (17,536)
----------- ----------- -----------
Ending balance................................... $ 733,201 $ 614,376 $ 479,620
=========== =========== ===========
TREASURY STOCK, AT COST
Beginning balance................................ $ (29,653) $ (4,549) $ (4,111)
Purchases........................................ (34,305) (32,360) (4,136)
Issues........................................... 11,270 7,256 3,698
----------- ----------- -----------
Ending balance................................... $ (52,688) $ (29,653) $ (4,549)
=========== =========== ===========
The accompanying notes are an integral part of this financial statement.
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43
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company is engaged in oil and gas exploration and production
principally overseas and petrochemical manufacturing in the United States.
International activities are conducted primarily in Indonesia, the United
Kingdom sector of the North Sea, Venezuela, Pakistan and other strategic areas.
Two limited partnerships (the "KKR Partnerships"), organized and controlled by
an affiliate of Kohlberg Kravis Roberts & Co. ("KKR"), own approximately 25.7%
of the Company's issued and outstanding common stock.
Principles of consolidation
The consolidated financial statements include the accounts of Union Texas
Petroleum Holdings, Inc. ("UTPH"), its wholly owned subsidiaries and
proportionate interests in the assets, liabilities and operations of
unincorporated joint ventures (referred to herein individually and collectively
as the "Company"). Investments in which the Company has between a 20% to 50%
ownership interest are accounted for using the equity method. All material
intercompany transactions are eliminated.
Use of estimates
The consolidated financial statements are prepared in conformity with
general accepted accounting principles, which require management to make certain
estimates and assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the related reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Management believes that the estimates are reasonable.
Inventories
Finished product inventories are valued at the lower of cost or market
using the first-in, first-out method ("FIFO"). Materials and supplies
inventories are valued at the lower of average cost or market. Effective January
1, 1996, the Company changed the method of accounting for valuing its
petrochemical product inventory from the last-in, first out ("LIFO") method to
the first-in, first out ("FIFO") method. The change did not have a material
effect on the results of operations for prior periods, nor is it anticipated
that it will have a material impact on future periods. The Company believes that
use of the FIFO method results in a better measurement of operating results and
better reflects the current value of inventory on the balance sheet.
Property, plant and equipment
Oil and gas exploration and production activities are accounted for
employing the successful efforts method. Under this method, costs of successful
exploratory wells, development wells and acreage are capitalized. Costs of
unsuccessful exploratory wells are expensed upon the determination that the well
does not justify commercial development. Other exploration costs including
geological and geophysical costs in exploration areas, delay rentals, production
costs and overhead are charged to expense as incurred.
Major renewals and improvements are capitalized, and the assets replaced
are retired. Maintenance and repairs are expensed as incurred.
Depreciation, depletion and amortization of the capitalized costs of
producing properties, both tangible and intangible, are provided for on the
units-of-production basis. Unit-of-production rates are based on estimated
proved oil and gas reserves. Annually, or whenever significant events or changes
in circumstances occur, oil and gas producing properties are reviewed to
determine whether it is probable that impairment of the capitalized cost of
specific producing asset groups has occurred. Amortization of undeveloped
acreage
43
44
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
from date of acquisition is based upon such factors as lease term, estimated
evaluation period and prior experience. The Company reviews its leases and
related amortization rates periodically.
Estimated dismantlement, restoration and abandonment costs net of estimated
salvage value are taken into account in determining amortization and are
included in other long-term liabilities, which as of December 31, 1997 and 1996
were $68.6 million and $60.3 million, respectively, of such costs. Depreciable
assets other than oil and gas properties are depreciated using the straight-line
method based on estimated asset service lives from 5 to 31 years.
Foreign currency
The functional currency for translating the accounts of foreign
subsidiaries is the U.S. dollar, except for subsidiaries in the United Kingdom,
where the functional currency is the local currency. Translation adjustments of
this local currency, which represent unrealized increases and decreases in the
Company's net investment in foreign operations as the result of exchange rate
changes, are included in stockholders' equity as the cumulative foreign exchange
translation adjustment. Transaction gains and losses resulting from the effect
of exchange rate fluctuations on transactions in currencies other than the
functional currency are included in determining net income. Foreign exchange
losses included in the determination of net income for the years 1997, 1996, and
1995 were $416, $54 and $768, respectively.
Hedging Activities
The Company periodically enters into foreign exchange contracts as a hedge
against fluctuations in foreign currency rates. These contracts are generally of
a short-term nature. At December 31, 1997, the Company had open foreign exchange
contracts with a net value of 7 million pounds sterling. However, there are
foreign exchange risks inherent in operations such as the Company's, and the
Company cannot predict with any certainty the results of currency exchange rate
fluctuations. The Company may enter into hedging contracts and other risk
management activities, such as swaps or fixed price contracts, in order to
minimize the impact of adverse price fluctuation. Gains or losses on these
activities are recognized in sales revenues when the underlying exposed hedged
production is sold. As of December 31, 1997, the Company did not have any such
open contracts.
Accounting Pronouncements Recently Issued
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information". SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. SFAS No. 130 requires that all items required to be
recognized under accounting standards as components of comprehensive income be
reported as a part of the basic financial statements. SFAS No. 131 establishes
standards for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in interim
financial reports issued to shareholders. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997 but the
statement need not be applied to interim financial statements in the initial
year of application. The Company does not expect adoption of these new standards
to materially affect the Company's reporting practices.
Other
The fair value of financial instruments included in the Company's assets
and liabilities approximates carrying value. Cash equivalents are comprised of
highly liquid debt instruments purchased at a maturity of three months or less.
44
45
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 2 -- ACCOUNTS AND NOTES RECEIVABLE
At December 31, 1997 and 1996, accounts and notes receivable consisted of
the following:
1997 1996
------- -------
Accounts receivable, trade.................................. $82,172 $96,687
Most of the Company's worldwide business activity is with major marketing
companies, industrial users and joint venture partners. Those receivables
considered a significant credit risk are backed by letters of credit. Typically,
credit terms are of a short-term nature.
NOTE 3 -- INVENTORIES
At December 31, 1997 and 1996, inventories consisted of the following:
1997 1996
------- -------
Products.................................................... $13,884 $15,804
Materials and supplies...................................... 24,434 23,917
------- -------
$38,318 $39,721
======= =======
NOTE 4 -- PREPAID EXPENSES AND OTHER CURRENT ASSETS
At December 31, 1997 and 1996, prepaid expenses and other current assets
consisted of the following:
1997 1996
------- -------
Prepaid Insurance........................................... $15,027 $ 7,257
Prepaid Taxes............................................... 565 558
Deferred Charges............................................ 14,947 15,745
------- -------
$30,539 $23,560
======= =======
NOTE 5 -- EQUITY INVESTMENTS
At December 31, 1997 and 1996, investments, accounted for using the equity
method, consisted of the following:
1997 1996
------- -------
Unimar Company.............................................. $90,204 $93,262
Virginia Enterprises Inc. (VEI)............................. 284
------- -------
$90,488 $93,262
======= =======
The Company has a 50% interest in Unimar Company ("Unimar"), a partnership
through which the Company has an additional 11.56% working interest in the
Indonesian joint venture, resulting in a total working interest for the Company
of 37.81%. The Company owns 50% of the stock of VEI, a corporation that focuses
on Indonesian business development opportunities.
45
46
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The Company's share of selected financial data for its equity investees are
summarized as follows:
1997 1996 1995
-------- -------- --------
Net revenues....................................... $108,671 $126,326 $101,010
Gross profit....................................... 74,665 90,547 67,777
Equity net income.................................. $ 20,430(a) $ 25,707 $ 20,071
Other.............................................. 183 430 800
-------- -------- --------
Net income of equity investees..................... $ 20,613 $ 26,137 $ 20,871
======== ======== ========
- ---------------
(a) Includes a net loss of $3,129 for VEI.
1997 1996
-------- --------
Current assets.............................................. $ 13,782 $ 14,172
Total assets................................................ 183,760 191,738
Current liabilities......................................... 17,864 20,047
Partners' account........................................... 83,775 87,219
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
At December 31, 1997 and 1996, property, plant and equipment consisted of
the following:
1997 1996
----------- -----------
Land and land improvements................................ $ 13,800 $ 13,055
Oil and gas properties and equipment...................... 2,900,045 2,812,546
Plants and equipment...................................... 168,330 164,167
Other facilities.......................................... 15,272 12,082
Construction and wells in progress........................ 399,493 205,261
----------- -----------
3,496,940 3,207,111
Less -- accumulated depreciation, depletion and
amortization............................................ (1,750,279) (1,574,688)
----------- -----------
$ 1,746,661 $ 1,632,423
=========== ===========
In June 1997, the Company led a successful bid for Venezuela's Boqueron
area under Venezuela's Third Operating Agreement Round. In the third quarter of
1997 the Company paid $117 million to the Venezuelan government for its share of
the bid. This payment was funded under the Company's Credit Facilities, lines of
credit and cash from operations. The Company was named the operator and has a
66.67% interest in the Boqueron operating service contract with a subsidiary of
PDVSA and will work with the Company's co-venturer, Preussag Energie GmbH of
Germany, who has a 33.33% interest, to further develop this currently-producing
field. An affiliate of PDVSA has the option to purchase up to a 10% interest in
the contract. In 1997 the Company increased property, plant and equipment for
the Boqueron operating service contract by $124 million.
In February 1998, the Company acquired all of the stock of Hidrocarburos, a
U.S. affiliate of Occidental, for approximately $212 million, which included
approximately $14 million in working capital and certain closing adjustments.
The Company initially funded the acquisition under bank facilities, including a
new $130 million facility through Hidrocarburos guaranteed by the Company.
Occidental may receive contingent payments of up to a maximum of $15 million
annually for six years based primarily on the level of oil prices. Hidrocarburos
operates the DZO unit located west of Lake Maracaibo in Western Venezuela under
a 20-year operating service contract with a subsidiary of PDVSA. An affiliate of
PDVSA has the option to purchase up to a 10% interest in the contract.
46
47
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 7 -- DEBT
At December 31, 1997 and 1996, long-term debt consisted of the following:
1997 1996
-------- --------
8.25% Senior Notes due November 15, 1999.................... $100,000 $100,000
8 3/8% Senior Notes due 2005................................ 125,000 125,000
8 1/2% Senior Notes due 2007................................ 75,000 75,000
Medium Term Notes........................................... 100,000 100,000
Britannia financing......................................... 140,809 98,588
Subsidiary production loan.................................. 2,290
Money market lines of credit and other...................... 85,595 59,875
-------- --------
626,404 560,753
Less -- portion due within one year......................... (2,290)
======== ========
$626,404 $558,463
======== ========
Credit Facilities
The Company had two unsecured credit facilities (the "Credit Facilities")
at December 31, 1997. One of the Credit Facilities is a $100 million revolver
that provides for conversion of amounts outstanding on March 10, 1998 to a
one-year term loan maturing March 9, 1999. The Company is in negotiations to
replace the $100 million Credit Facility. The other Credit Facility is a dual
currency (U.S. dollars and pounds sterling) $450 million revolver that reduces
quarterly by $35 million beginning June 30, 2001, with a final maturity of March
31, 2002. At December 31, 1997, no amounts were outstanding under the Credit
Facilities. The $450 million facility allows the Company to borrow up to $300
million in U.S. dollar loans at interest rates determined in a competitive bid
process. Loans under the $450 million facility may be made in both pounds
sterling and U.S. dollars at the option of the Company. 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 or decrease in certain events. 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
stockholders' equity, as adjusted, at $350 million. Under the terms of the
Credit Facilities, the Company may pay dividends and make stock repurchases
provided that such level of minimum stockholders' equity is maintained and the
Company complies with certain other covenants in the Credit Facilities. At
December 31, 1997, the Company's adjusted stockholders' equity was approximately
$704 million. The Credit Facilities provide the Company with the ability to
borrow on a long-term basis.
Term Loan
In February 1998 the Company's indirect subsidiary, Hidrocarburos, entered
into a $130 million committed term loan to initially fund a portion of the DZO
acquisition. The term loan is guaranteed by the Company and is supported by the
$450 million Credit Facility. The facility matures on May 4, 1998 and bears
interest at variable market rates.
Senior and Medium Notes
The Company has outstanding $100 million principal amount of 8.25% Senior
Notes due 1999, $125 million principal amount of 8 3/8% Senior Notes due 2005
and $75 million principal amount of 8 1/2% Senior Notes due 2007 (collectively
the "Senior Notes"). In 1995 the Company issued $100 million aggregate principal
amount of medium term notes ("MTN") with terms of seven and twelve years and
interest rates
47
48
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
varying from 6.51% to 6.81%. The Senior Notes and MTN are referred to herein as
the "Notes". The 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 any future subordinated
indebtedness of the Company. Each of the Notes contain similar restrictive
covenants. The 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 Notes.
Britannia Financing
The Company's indirect subsidiary, Union Texas Britannia Limited ("UTBL"),
which is a wholly owned subsidiary of UTPL, has a 150 million pounds sterling
secured financing from a syndicate of 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 December 31, 1997, 85 million pounds sterling ($141 million) was
outstanding under UTBL's financing which bore interest at a weighted average
rate of 8.4% per annum.
Subsidiary Production Loan
In 1997, Union Texas Pakistan, Inc., a wholly owned subsidiary of the
Company, repaid the remaining $2,290 balance of its non recourse loan.
Money Market Lines of Credit
The Company has uncommitted and unsecured lines of credit with several
banks in both U.S. dollars and pounds sterling. These money market borrowings,
which have a short-term maturity, have been classified as long term debt based
on the Company's intent and ability to refinance them on a long-term basis
through its Credit Facilities. At December 31, 1997, $83 million was outstanding
under these money market lines which bore interest at a weighted average rate of
6.9% per annum.
Interest capitalized for the years 1997, 1996, and 1995 was $40,664,
$26,017, and $23,081, respectively.
Scheduled maturities of long-term debt outstanding during the five years
1998 through 2002 are $0, $122,613, $30,184, $33,329 and $185,926, respectively.
NOTE 8 -- EARNINGS PER SHARE
In the fourth quarter of 1997, the Company adopted the provisions of SFAS
No. 128, "Earnings Per Share", and restated previously reported earnings per
share in conformity with SFAS 128. The new standard specifies the computation,
presentation and disclosure requirements for earnings per share.
48
49
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
A reconciliation of the numerators and denominators of the basic and
diluted EPS computations is as follows:
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
BASIC EPS COMPUTATION
Numerator, Net Income............................ $135,866 $152,227 $102,350
Denominator, Common Shares Outstanding (000's)... 85,094 87,155 87,687
-------- -------- --------
Basic EPS per share.............................. $ 1.60 $ 1.75 $ 1.17
======== ======== ========
DILUTED EPS COMPUTATION
Numerator, Net Income............................ $135,866 $152,227 $102,350
Denominator, Common Shares Outstanding (000's)... 85,094 87,155 87,687
Potential Common Shares:
Stock Options (000's)......................... 465 406 411
-------- -------- --------
Total (000's)................................. 85,559 87,561 88,098
-------- -------- --------
Diluted EPS Per Share............................ $ 1.59 $ 1.74 $ 1.16
======== ======== ========
Weighted average stock options (000's) in 1997, 1996 and 1995 that were not
included in the computation of diluted shares since they had an anti-dilutive
effect were 446 options, 456 options and 436 options, respectively.
NOTE 9 -- INCOME TAXES
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
United States:
Federal(current)................................. $ 4,666 $ 2,393 $ 2,935
State (current).................................. 1,435 (2,014) 4,767
Federal (deferred)............................... (47,550)
-------- -------- --------
(41,449) 379 7,702
-------- -------- --------
Foreign:
Current.......................................... 190,875 258,021 162,851
Deferred......................................... (15,990) (31,588) (19,576)
-------- -------- --------
174,885 226,433 143,275
-------- -------- --------
$133,436 $226,812 $150,977
======== ======== ========
A deferred tax liability or asset is recorded for future tax consequences
arising from differences between the financial accounting and tax basis of the
assets and liabilities of the Company. A valuation allowance with reserves
recorded as necessary for any tax benefit not expected to be realized, is
required of deferred tax assets. Deferred tax liabilities or assets are adjusted
for changes in income tax laws or rates when enacted. Deferred tax expense or
benefit is derived from changes in deferred tax liabilities or assets. A current
tax expense or benefit is recognized for the estimated taxes payable or
refundable on tax returns for the current year.
Under the U.S. corporate alternative minimum tax ("AMT"), the Company's
U.S. tax liability is the greater of its regular U.S. federal income tax or the
AMT. To the extent that the Company's AMT liability exceeds its otherwise
determined regular U.S. federal income tax liability, an AMT credit will be
generated and this credit may be applied against future regular federal tax
liabilities. Since the Company's AMT liability has exceeded its otherwise
determined regular U.S. federal income tax liability, the Company has
accumulated an AMT credit of approximately $24 million which may be applied
against future regular federal tax
49
50
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
liabilities. In addition, the Company has approximately $117 million (pre-tax)
of Net Operating Loss ("NOL") carryforwards from its U.S. exploration and
production operations which could be applied against future U.S. federal taxable
income. These NOLs must be utilized prior to their expiration, which is between
2002 and 2006.
As a result of reserve engineering analysis and subsequent development
plans for the Company's reserves in the Alpine field in Alaska as well as
expectations for its U.S. petrochemical business, the Company now expects to
utilize the AMT credit and a portion of the NOL carryforwards. In 1997 the
Company adjusted its deferred tax valuation allowance and subsequently recorded
$43 million of net income, representing the $24 million AMT credit and $19
million (after-tax) of NOL carryforwards. Changes in the Company's actual or
anticipated income subject to U.S. taxes, changes in U.S. tax laws or changes in
U.S. tax rates may give rise to adjustments to the Company's deferred tax assets
or liabilities, including the valuation allowance, in the future.
In the third quarter of 1997, the British government enacted changes in the
U.K. corporate tax laws which affect the Company's U.K. operations. The ACT
credit on dividends paid by U.K. companies has been substantially reduced and
the U.K. corporate tax rate was lowered from 33% to 31%. The reduction in the
ACT credit will be effective for dividends paid on or after April 6, 1999 while
the lowering of the corporate tax rate was effective April 1, 1997. In the third
quarter of 1997, the Company recorded a one-time, non-cash charge to deferred
tax expense of approximately $14 million, primarily related to the reduction of
the ACT credit on future dividends.
The principal items accounting for the difference in taxes on income
computed at the United States statutory rate and as recorded are as follows:
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
Computed tax at 35% of pretax income............... $ 94,256 $132,664 $ 88,664
Taxes in excess of the U.S. tax rate on foreign
earnings......................................... 77,038 77,613 56,353
AMT................................................ 4,666 2,393 2,935
Domestic operating losses generating no tax
benefit.......................................... 3,591 16,156
NOL Benefit........................................ (19,100)
AMT credit carryforward............................ (28,450)
All other items, net............................... 1,435 (2,014) 3,025
-------- -------- --------
$133,436 $226,812 $150,977
======== ======== ========
50
51
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Deferred tax liabilities (assets) are comprised of the effects of temporary
differences as follows:
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
---------- ----------
Gross deferred tax liabilities:
Property differences pertaining to depreciation and other
expenditures........................................... $439,539 $457,112
Gross deferred tax assets:
NOL carryforwards......................................... (41,059) (40,128)
AMT credit................................................ (28,450) (23,854)
U.K. Corporation Tax effect of deferred Petroleum Revenue
Tax.................................................... (26,726) (30,439)
Dismantlement and removal provision....................... (43,384) (35,139)
-------- --------
Total before valuation allowance.................. $299,920 $327,552
Less: valuation allowance................................... 21,959 63,982
-------- --------
Total -- net...................................... $321,879 $391,534
======== ========
NOTE 10 -- PENSION BENEFITS
The Union Texas Petroleum Salaried Employees' Pension Plan (the "Pension
Plan") covers substantially all employees. Plan benefits are generally based on
years of service and an employee's compensation levels during the last years of
employment. The Company's funding policy is to contribute annually an amount at
least equal to the minimum funding requirement of the Employee Retirement Income
Security Act of 1974.
The Union Texas Petroleum Supplemental Retirement Plans ("Supplemental
Retirement Plans") cover certain employees whose pension benefits were affected
by changes in the Internal Revenue Code of 1986, as amended, and certain other
benefit limitations of the Internal Revenue Code. The supplemental plans are
unfunded.
51
52
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The Pension Plan has assets in excess of the projected benefit obligation.
The assets of this plan are held by trustees and are invested in common stock,
fixed rate and real estate investments. The following table sets forth the
plans' funded status at December 31, 1997 and 1996:
SUPPLEMENTAL
PENSION PLAN RETIREMENT PLANS
------------------- -----------------
1997 1996 1997 1996
-------- -------- ------- -------
Actuarial present value of benefit
obligations:
Vested benefits........................... $117,666 $114,078 $ 4,917 $ 4,273
Nonvested benefits........................ 6,206 4,692 318 246
-------- -------- ------- -------
Total accumulated benefit
obligation...................... 123,872 118,770 5,235 4,519
Amounts related to projected pay
increases.............................. 10,516 9,584 2,999 2,254
-------- -------- ------- -------
Total projected benefit
obligation...................... 134,388 128,354 8,234 6,773
Net assets available for plan benefits held
by trustees............................... 154,395 136,623
-------- -------- ------- -------
Net assets over (under) projected benefit
obligation................................ 20,007 8,269 (8,234) (6,773)
Unrecognized net obligation at the date of
initial application of FAS 87 (1/1/86).... 931 1,241
Unrecognized prior service cost............. 2,504 2,670 512 917
Adjustment required to recognize minimum
liability................................. (1,130) (1,574)
Unrecognized net (gain) loss................ (19,725) (6,682) 3,617 2,911
-------- -------- ------- -------
Prepaid pension cost (pension
liability)............................. $ 3,717 $ 5,498 $(5,235) $(4,519)
======== ======== ======= =======
Net periodic pension cost for 1997, 1996 and 1995 included the following
components:
1997 1996 1995
-------- -------- --------
Service cost-benefits earned during the period..... $ 2,824 $ 2,917 $ 2,310
Interest cost on projected benefit obligation...... 9,752 10,015 10,469
Return on plan assets.............................. (27,850) (19,113) (30,625)
Net amortization and deferral...................... 18,663 9,635 22,560
-------- -------- --------
Net periodic pension cost before effect of
settlement loss, curtailment loss and termination
benefits......................................... 3,389 3,454 4,714
Settlement loss (gain)............................. 458 (822)
Curtailment loss................................... 359
Termination benefits............................... 176 2,586
-------- -------- --------
Net periodic pension cost.......................... $ 4,023 $ 5,577 $ 4,714
======== ======== ========
The 1996 settlement gain, curtailment loss and the termination benefits
resulted from a 1996 voluntary retirement program. In 1996, the Company offered
a voluntary retirement program for 77 of its 1,100 employees who met certain
criteria and were either nearing retirement eligibility or were already
eligible, providing such employees the special one-time opportunity to retire
with enhanced benefits. A total of 47 employees elected to participate in the
program.
The assumed average rate of return on plan assets was 8% in 1997, 1996 and
1995 for the plans. Measurement of the projected benefit obligation was based on
an assumed discount rate of 7% and 7% in 1997,
52
53
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
7.25% and 7% in 1996 and 7.25% and 7% in 1995 for normal and lump sum eligible
participants, respectively, for the Pension and Supplemental Retirement Plans
and an assumed long-term rate of compensation increase of 5%, 5% and 4.5% for
the Pension and Supplemental Retirement Plans in 1997, 1996 and 1995,
respectively.
NOTE 11 -- OTHER POSTRETIREMENT BENEFITS
The Company currently provides postretirement benefits, principally health
care and life insurance benefits, for employees. Under the Company's current
policy, substantially all of the Company's employees may become eligible for
those benefits if they reach normal retirement age with ten years of service
while working for the Company. These benefits are unfunded.
The following table sets forth the plan's status at December 31:
1997 1996
-------- --------
Accumulated postretirement benefit obligation:
Retirees' benefits........................................ $ 32,500 $ 33,501
Other fully eligible participants' benefits............... 3,023 3,465
Other active plan participants' benefits.................. 6,444 6,405
-------- --------
Accumulated postretirement benefit obligation.......... (41,967) (43,371)
Unrecognized amounts:
Prior service cost........................................ (3,936) (7,831)
Net loss.................................................. 11,061 13,692
-------- --------
Accrued obligation.......................................... $(34,842) $(37,510)
======== ========
Net postretirement benefit cost for 1997, 1996 and 1995 included the
following components:
1997 1996 1995
------- ------- -------
Service cost-benefits earned during the period........ $ 579 $ 603 $ 503
Interest cost on projected benefit obligation......... 2,894 2,901 3,117
Net amortization...................................... (3,276) (3,094) (3,136)
------- ------- -------
Net postretirement benefit cost....................... $ 197 $ 410 $ 484
======= ======= =======
Measurement of the accumulated postretirement benefit obligation was based
on an assumed discount rate of 7% for 1997, 7.25% for 1996 and 7.25% for 1995.
For measurement purposes, a 10.5%, 11.25% and 12% annual rate of increase in the
per capita cost of covered health care benefits for those age 65 and older were
assumed for 1997, 1996 and 1995, respectively; the rate was assumed to decrease
linearly to 6% for 2003 and after. The health care cost trend rate assumption
has a significant effect on the amounts reported. Increasing the assumed health
care cost trend rates by 1% in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1997 and 1996, by $1,808
and $1,898, respectively. Additionally, it would increase the aggregate of the
service and interest cost components of net periodic postretirement benefit cost
for the years ended December 31, 1997, 1996 and 1995 by $192, $201 and $216,
respectively.
NOTE 12 -- STOCK OPTIONS
The Company has four stock-based compensation plans, which are described
below. The Company applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its plans and adopted the footnote
disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation". Accordingly, no compensation expense has been recognized for its
fixed stock option plans other than options granted with attached stock
appreciation rights, which may, at the employees' option be settled in cash
53
54
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
or the issuance of stock. Had compensation cost for the Company's stock based
compensation plans been determined based on the fair value at the grant dates
for awards under those plans consistent with the method of SFAS No. 123, the
Company's net income and earnings per share would have been reduced to the pro-
forma amounts indicated below:
1997 1996 1995
-------- -------- --------
Net income
As Reported........................... $135,866 $152,227 $102,350
Pro Forma............................. $132,550 $151,188 $102,350*
Basic earnings per share
As Reported........................... $ 1.60 $ 1.75 $ 1.17
Pro Forma............................. $ 1.56 $ 1.73 $ 1.17*
Diluted earnings per share
As Reported........................... $ 1.59 $ 1.74 $ 1.16
Pro Forma............................. $ 1.55 $ 1.73 $ 1.16*
- ---------------
* No impact on 1995 net income or earnings per share since no stock options
granted after 1994 vested during 1995.
The Company has four fixed stock option plans. Under the terms of the 1994
Incentive Plan, the Company has authorized the issuance of options to employees
and certain members of the board of directors to purchase up to 4 million shares
of common stock. Options are exercisable for a maximum period of ten years at an
exercise price of not less than the fair market value of the underlying common
stock at the time of the grant. The options granted to employees vest at 25% per
annum. A total of 1,613,200 options were granted in October 1997, at $23.03125
per share to all U.S.-based employees. Certain officers have been granted
nonqualified options and incentive stock options with appreciation rights. At
December 31, 1997, options outstanding with respect to 1,381,100 shares of
common stock have appreciation rights attached. Following the adoption of the
1994 Incentive Plan during 1995, all further stock option grants will be made
under the 1994 Incentive Plan only. In 1997, 5,000 options at $18.4375, 17,000
options at $19.75 and 5,000 options at $20.6875 were granted to certain
directors and these options are 100% vested.
Under the terms of the 1992 Stock Option Plan, the Company authorized the
issuance of options to employees to purchase up to 4 million shares of common
stock. Options are exercisable for a maximum period of ten years at an exercise
price of not less than the fair market value of the underlying common stock at
the time of the grant. Options granted prior to 1994 vest at 20% per annum.
Options granted in 1994 vest at 25% per annum. At December 31, 1997, options
outstanding with respect to 547,800 shares of common stock have appreciation
rights attached.
Under the terms of the 1985 Stock Option Plan (the "1985 Plan"), the
Company authorized the issuance of options to officers and key employees to
purchase up to 4,466,667 shares of common stock. Options are exercisable for a
maximum period of ten years at an exercise price of not less than the fair
market value of the underlying common stock at the time of the grant. Certain
officers have been granted options with appreciation rights. All options granted
are fully vested. At December 31, 1997, options outstanding with respect to
221,273 shares of common stock have appreciation rights attached.
Under the terms of the 1987 Stock Option Plan, the Company authorized the
issuance of options to purchase up to 1,333,333 shares of common stock to
certain employees not covered under the 1985 Plan. Options are exercisable for a
maximum period of ten years at an exercise price of not less than the fair
market value of the underlying common stock at the time of the grant. All
options granted are fully vested.
54
55
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995; dividend yield of 1.03%,
expected volatility of 25.45%, 25.32% and 25.32%, risk-free interest rates of
6.00%, 6.36% and 5.87%, and expected lives of 5.5, 6 and 6 years, respectively.
A summary of the status of the Company's four fixed stock option plans as
of December 31, 1997, 1996 and 1995 and changes during the years ending on those
dates is presented below:
1997 1996 1995
---------------------- ---------------------- ----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- --------- ---------- --------- ---------- ---------
Outstanding at beginning of
year......................... 5,088,617 $18.89 4,172,595 $18.08 3,535,396 $17.97
Granted........................ 1,613,200 23.03 1,252,300 21.06 896,200 18.06
Exercised...................... 485,389 17.09 260,628 16.17 164,274 14.97
Canceled....................... 80,655 20.01 75,650 19.34 94,727 19.25
---------- ---------- ----------
Outstanding at end of year..... 6,135,773 20.11 5,088,617 18.89 4,172,595 18.08
========== ========== ==========
Options Exercisable at
year-end..................... 2,878,446 2,319,023 1,787,941
Weighted-average fair value of
options granted during the
year......................... $ 7.46 $ 7.43 $ 6.06
The following table summarizes information about the four fixed stock
option plans at December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE
- ----------------- ----------- ---------------- ---------------- ----------- ----------------
$12.25-16.125 455,428 1.9 years $14.29 455,428 $14.29
$18.0625-23.03125 5,680,345 7.9 20.58 2,423,018 19.31
--------- ---------
$12.25-23.03125 6,135,773 7.5 20.11 2,878,446 18.52
========= =========
NOTE 13 -- MAJOR CUSTOMERS
During 1997, the Company's U.K. operations had sales to Texaco Limited, in
the amount of $105,705 or 12% of the Company's total sales and operating
revenues. During 1996, the Company's U.K. operations had sales to Elf Trading,
in the amount of $120,805 or 12%, of total sales and operating revenues. During
1995, the Company's U.K. operations had sales to B.P. Oil International Limited
and Elf Trading in the amount of $107,891 and $109,067, 13% and 13%,
respectively, of total sales and operating revenues.
NOTE 14 -- SHAREHOLDERS EQUITY
Preferred Stock
The Company is authorized to issue up to 15,000,000 shares of preferred
stock. The Board of Directors of the Company without further approval of the
shareholders, can authorize the issuance, at any time or from time to time, of
one or more series of preferred stock and determine the number of shares in each
series and the designations, powers, rights, preferences and any qualifications,
limitations and restrictions of each series. Among the specific matters which
may be determined, if any, by the Board of Directors are: dividend rights,
conversion or exchange rights, voting rights, rights and terms of redemption
(including sinking fund provisions) and rights upon liquidation or distribution
of the assets of the Company.
55
56
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Stockholder Rights Plan
In September 1997, the Company adopted a rights agreement (the "Rights
Agreement") whereby a dividend of one Common Stock Purchase Right (a "Right")
was paid for each outstanding share of the Company's Common Stock. The Rights
will be exercisable only if a person acquires beneficial ownership of 15 percent
or more of the Company's Common Stock (an "Acquiring Person"), or commences a
tender offer which would result in beneficial ownership of 15 percent or more of
such stock. When they become exercisable, each Right entitles the registered
holder to purchase from the Company one-half of one share of Common Stock at a
price of $90.00 per full share of Common Stock, subject to adjustment under
certain circumstances.
Upon the occurrence of certain events specified in the Rights Agreement,
each holder of a Right (other than an Acquiring Person) will have the right to
purchase, at the Right's then current exercise price, shares of the Company's
Common Stock having a value of twice the Right's exercise price. In addition,
if, after a person becomes an Acquiring Person, the Company is involved in a
merger or other business combination transactions with another person in which
the Company is not the surviving corporation, or under certain other
circumstances, each Right will entitle its holder to purchase, at the Right's
then current exercise price, shares of common stock of the other person having a
value of twice the Right's exercise price.
Unless redeemed by the Company earlier, the Rights will expire on September
30, 2007. The Company will generally be entitled to redeem the Rights in whole,
but not in part, at $0.001 per Right, subject to adjustment. No Rights were
exercisable under the Rights Agreement at December 31, 1997.
The terms of the Rights generally may be amended by the Company without the
approval of the holders of the Rights prior to the public announcement by the
Company or an Acquiring Person that a person has become an Acquiring Person.
Before such announcement, the terms may be amended only to (i) cure any
ambiguity; (ii) correct or supplement any provision which may be defective or
inconsistent with other provisions; or (iii) change or supplement the provisions
in any manner which the Company deems necessary or desirable, so long as such
change does not adversely affect the interest of the holders of the Rights.
56
57
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 15 -- SEGMENT FINANCIAL DATA
EXPLORATION AND PRODUCTION
----------------------------------------------------------------
UNITED OTHER PETRO-
STATES UNITED INTER- CHEMICALS
(ALASKA) KINGDOM INDONESIA VENEZUELA PAKISTAN NATIONAL (a) OTHER(a) TOTAL
-------- ------- --------- --------- -------- -------- --------- -------- ------
(DOLLARS IN MILLIONS)
1997
Sales and operating revenues... $ 367 $287 $66 $188 $ 1 $ 909
====== ==== === ==== ==== ======
Operating profit (loss)........ $(3) $ 126 $192 $24 $(88) $ 32 $ (4) $ 279
Interest income................ 2 1 3
General and administrative
expenses..................... (27) (27)
Interest expense............... (1) (1) (5) (7)
Net Income (loss) of equity
investees.................... 24 (3) 21
--- ------ ---- --- ---- ---- ---- ------
Income (loss) before income
taxes........................ (3) 127 217 23 (88) 32 (39) 269
Income taxes (benefit)......... 59 111 4 12 (53) 133
--- ------ ---- --- ---- ---- ---- ------
Net income (loss).............. $(3) $ 68 $106 $19 $(88) $ 20 $ 14 $ 136
=== ====== ==== === ==== ==== ==== ======
Identifiable assets............ $38 $1,156 $415 $126 $67 $ 43 $134 $ 43 $2,022
Capital additions.............. 15 103 31 124 11 32 29 5 350
Depreciation, depletion and
amortization................. 1 150 38 11 7 7 2 216
1996
Sales and operating revenues... $ 406 $341 $66 $193 $ 2 $1,008
====== ==== === ==== ==== ======
Operating profit (loss)........ $(8) $ 163 $233 $39 $(33) $ 24 $(15) $ 403
Interest income................ 1 1 2
General and administrative
expenses..................... (27) (27)
Interest expense............... (4) (1) (20) (25)
Net income of equity
investee..................... 26 26
--- ------ ---- --- ---- ---- ---- ------
Income (loss) before income
taxes........................ (8) 160 260 38 (33) 24 (62) 379
Income taxes (benefit)......... 75 139 11 9 (7) 227
--- ------ ---- --- ---- ---- ---- ------
Net income (loss).............. $(8) $ 85 $121 $27 $(33) $ 15 $(55) $ 152
=== ====== ==== === ==== ==== ==== ======
Identifiable assets............ $23 $1,244 $444 $60 $ 15 $116 $ 40 $1,942
Capital additions.............. 11 119 23 15 7 8 3 186
Depreciation, depletion and
amortization................. 1 156 39 7 1 6 2 212
1995
Sales and operating revenues... $ 323 $276 $51 $ 1 $200 $ 1 $ 852
====== ==== === ==== ==== ==== ======
Operating profit (loss)........ $(6) $ 84 $178 $19 $(49) $ 62 $ (5) $ 283
Interest income................ 2 1 1 4
General and administrative
expenses..................... (26) (26)
Interest expense............... (6) (1) (22) (29)
Net income of equity
investee..................... 21 21
--- ------ ---- --- ---- ---- ---- ------
Income (loss) before income
taxes........................ (6) 80 200 18 (49) 62 (52) 253
Income taxes (benefit)......... 34 105 4 24 (16) 151
--- ------ ---- --- ---- ---- ---- ------
Net income (loss).............. $(6) $ 46 $ 95 $14 $(49) $ 38 $(36) $ 102
=== ====== ==== === ==== ==== ==== ======
Identifiable assets............ $13 $1,168 $459 $46 $ 9 $111 $ 31 $1,837
Capital additions.............. 6 353 30 10 2 7 1 409
Depreciation, depletion and
amortization................. 139 35 7 4 5 2 192
- ---------------
(a) Petrochemical operations and Other represent United States activities.
NOTE 16 -- COMMITMENTS
The Company has entered into various commitments and operating agreements
related to the development of and production from certain proved oil and gas
properties. Also during the normal course of business, the Company has issued
various letters of credit, bank guarantees and performance bonds, which at
December 31, 1997, totaled $8 million. At December 31, 1997, the Company had
open foreign exchange contracts with a net value of 7 million pounds sterling.
These contracts hedge economic exposures, based on the Company's assessment of
its net exposure to changes in foreign currency rates. It is management's belief
57
58
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
that such commitments and guarantees will be met without material adverse effect
on the Company's financial position.
The amounts of operating lease obligations due during the five years 1998
through 2002 are $8,283, $7,788, $5,705, $1,065 and $1,093, respectively.
Rental expense for the years 1997, 1996 and 1995 was $9,810, $8,783, and
$9,379, respectively.
NOTE 17 -- CONTINGENCIES
The Company and its subsidiaries and related companies are named defendants
in a number of lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business.
While the outcome of such contingencies, lawsuits or other proceedings
against the Company cannot be predicted with certainty, management expects that
such 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 18 -- SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1997 1996
QUARTER ENDED QUARTER ENDED
---------------------------------------------------- ------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR MAR. 31 JUNE 30 SEPT. 30
-------- -------- -------- -------- -------- -------- -------- --------
Net sales and operating
revenues................. $282,021 $211,686 $182,843 $232,841 $909,391 $258,178 $223,192 $227,284
Gross profit............... 144,800 87,336 71,750 96,017 399,903 126,518 96,052 100,659
Net income (loss).......... 63,770 25,349 48,047 (1,300) 135,866 47,561 30,837 33,521
Per share of common stock:
Net earnings (basic)..... .74 .30 .57 (.02) 1.60 .54 .35 .39
Net earnings (diluted)... .74 .30 .56 (.02) 1.59 .54 .35 .38
Dividends................ .05 .05 .05 .05 .20 .05 .05 .05
Market price:
High..................... 23 7/8 21 3/8 24 9/16 24 1/2 24 9/16 20 1/4 20 1/4 21 3/4
Low...................... 17 15/16 17 1/4 19 7/8 20 17 1/4 17 5/8 18 18 5/8
1996
QUARTER ENDED
---------------------
DEC. 31 YEAR
-------- ----------
Net sales and operating
revenues................. $299,822 $1,008,476
Gross profit............... 144,915 468,144
Net income (loss).......... 40,308 152,227
Per share of common stock:
Net earnings (basic)..... .47 1.75
Net earnings (diluted)... .46 1.74
Dividends................ .05 .20
Market price:
High..................... 23 23
Low...................... 20 5/8 17 5/8
Source of Market Prices: New York Stock Exchange Composite Transactions Tape
NOTE 19 -- SUPPLEMENTARY OIL AND GAS INFORMATION
Reserve estimation -- (Unaudited)
Oil and gas reserves cannot be measured exactly. Reserve estimates are
based on many factors related to reservoir performance which require evaluation
by the engineers interpreting the available data, as well as price, costs and
other economic factors. The reliability of these estimates at any point in time
depends on both the quality and quantity of the technical and economic data, the
production performance of the reservoirs as well as extensive engineering
judgement. Consequently, reserve estimates are subject to revision as additional
data becomes available during the producing life of a reservoir. When a
commercial reservoir is discovered, proved reserves are initially determined
based on only limited data from the first well or wells. Further drilling may
better define the extent of the reservoir and additional production performance,
well tests and engineering studies will likely improve the reliability of the
estimate.
Reserves are considered proved if economic producibility is supported by
either actual production or conclusive formation tests. Proved developed
reserves are reserves that can be expected to be recovered through existing
wells with existing equipment and operating methods. Proved undeveloped reserves
are reserves that are expected to be recovered from new wells on undrilled
acreage or from existing wells where a relatively significant expenditure is
required to permit production. These estimates do not include reserves
58
59
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
which may be found by extension of proved areas or reserves recoverable by
secondary or tertiary recovery methods unless these methods are in operation and
showing successful results.
In 1997 the Company led a successful bid for Venezuela's Boqueron area
under Venezuela's Third Operating Agreement Round, adding 40 million barrels of
oil to its proved reserves at year end 1997. Information regarding Venezuelan
reserves relates to the Company's net interest in an operating service contract
for the Boqueron area between the Company, the other contractor and a subsidiary
of the national oil company, PDVSA. The Government of Venezuela retains full
ownership of all hydrocarbons. The Company will receive a service fee for each
barrel of crude oil produced from the Boqueron area, which consists of the
following two components: (i) a set fee for the baseline production and (ii) a
sliding incentive fee for the incremental production, as well as cost recovery
for field and other capital and operating costs. The reserves table does not
include the proved reserves associated with the DZO unit, which were recorded in
February 1998.
In 1996, the Company and co-venturers ARCO Alaska, Inc. (operator) and
Anadarko Petroleum Corp. announced plans to develop the Alpine oil field in
Alaska. In 1996, the Company recorded 32 million net barrels in proved
undeveloped oil reserves from the Alpine field which is scheduled to begin
production in the first part of 2000.
In 1995, the Company purchased an interest in the Alba field in the U.K.
North Sea, adding at July 1, 1995, 45 million barrels of oil equivalent ("boe").
In 1994, the Company purchased an interest in the undeveloped Britannia
field in the U.K. North Sea, adding at year end 1994, 38 million boe to its
proved reserves.
Information presented for the Company's operations in Indonesia relates to
a production sharing contract between a joint venture group in which the Company
is a member and Pertamina. Debt service relating to the Indonesian facility
which liquefies natural gas supplied by the joint venture and other production
sharing contractors is accounted for by the Company as a cost of production and
operation. The debt obligation is non-recourse to the Company. Such debt service
is deducted in estimating future net revenues to be distributed among Pertamina
and the production sharing contractors including the joint venture and the
Company's interest therein. The joint venture has no ownership interest in the
oil and gas reserves but does have the right to share revenues and/or production
and is entitled to recover most field and other operating costs and capital
depreciation. Indonesian reserves associated with the Unimar partnership are
shown under the caption "Non-Consolidated Interests." The reserve estimates,
which are based on year-end prices, are subject to revision as product prices
and costs fluctuate due to the cost recovery feature under the production
sharing contract. The impact on reserves is inversely related to price changes
and directly related to changes in field operating and capital costs. In
addition, reserve estimates are subject to revision due to the effect that price
fluctuations generally have on estimates of recoverable reserves.
"Other International" represents an interest in Egypt, which was sold in
December 1996.
59
60
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The Company's net quantities of proved developed and undeveloped reserves
of oil and natural gas, by geographic areas and changes therein, were as
follows:
ESTIMATED QUANTITIES OF NET PROVED CRUDE OIL AND NATURAL GAS LIQUIDS RESERVES
CONSOLIDATED SUBSIDIARIES
----------------------------------------------------------------------------------
UNITED
STATES UNITED OTHER
(ALASKA) KINGDOM INDONESIA VENEZUELA(a) PAKISTAN INTERNATIONAL TOTAL
-------- ------- --------- ------------ -------- ------------- -------
(THOUSANDS OF BARRELS)
YEAR ENDED DECEMBER 31, 1997
Net proved reserves
-- beginning of year.... 32,005 90,514 16,949 0 6,746 0 146,214
-- revisions of previous
estimates............. 2,117 4,412 1,510 8,039
-- extensions,
discoveries and other
additions............. 3 3
-- purchase of minerals
in place.............. 40,000 40,000
-- production........... (15,976) (2,113) (2,413) (20,502)
------ ------- ------ ------ ------ --- -------
Net proved reserves
-- end of year.......... 32,005 76,655 19,248 40,000 5,846 0 173,754
====== ======= ====== ====== ====== === =======
Net proved developed
reserves
-- beginning of year.... 51,265 12,071 0 4,839 0 68,175
-- end of year.......... 40,835 17,473 40,000 4,206 0 102,514
YEAR ENDED DECEMBER 31, 1996
Net proved reserves
-- beginning of year.... 105,714 18,942 4,383 19 129,058
-- revisions of previous
estimates............. (546) 42 3,589 (4) 3,081
-- extensions,
discoveries and other
additions............. 32,005 1,498 1,053 34,556
-- production........... (16,152) (2,035) (2,279) (15) (20,481)
------ ------- ------ ------ --- -------
Net proved reserves
-- end of year.......... 32,005 90,514 16,949 6,746 0 146,214
====== ======= ====== ====== === =======
Net proved developed
reserves
-- beginning of year.... 67,147 17,041 3,215 19 87,422
-- end of year.......... 51,265 12,071 4,839 0 68,175
YEAR ENDED DECEMBER 31, 1995
Net proved reserves
-- beginning of year.... 73,862 19,142 3,842 32 96,878
-- revisions of previous
estimates............. 1,995 1,894 1,275 9 5,173
-- extensions,
discoveries and other
additions............. 1,261 1,261
-- purchase of minerals
in place.............. 45,012 45,012
-- production........... (15,155) (2,094) (1,995) (22) (19,266)
------- ------ ------ --- -------
Net proved reserves
-- end of year.......... 105,714 18,942 4,383 19 129,058
======= ====== ====== === =======
Net proved developed
reserves
-- beginning of year.... 56,773 17,247 2,714 32 76,766
-- end of year.......... 67,147 17,041 3,215 19 87,422
NON-
CONSOLIDATED TOTAL
INTERESTS WORLDWIDE
------------ ---------
(THOUSANDS OF BARRELS)
YEAR ENDED DECEMBER 31, 19
Net proved reserves
-- beginning of year.... 6,986 153,200
-- revisions of previous
estimates............. 1,778 9,817
-- extensions,
discoveries and other
additions............. 3
-- purchase of minerals
in place.............. 40,000
-- production........... (699) (21,201)
----- -------
Net proved reserves
-- end of year.......... 8,065 181,819
===== =======
Net proved developed
reserves
-- beginning of year.... 4,944 73,119
-- end of year.......... 7,316 109,830
YEAR ENDED DECEMBER 31, 19
Net proved reserves
-- beginning of year.... 7,711 136,769
-- revisions of previous
estimates............. (52) 3,029
-- extensions,
discoveries and other
additions............. 34,556
-- production........... (673) (21,154)
----- -------
Net proved reserves
-- end of year.......... 6,986 153,200
===== =======
Net proved developed
reserves
-- beginning of year.... 6,926 94,348
-- end of year.......... 4,944 73,119
YEAR ENDED DECEMBER 31, 19
Net proved reserves
-- beginning of year.... 7,571 104,449
-- revisions of previous
estimates............. 832 6,005
-- extensions,
discoveries and other
additions............. 1,261
-- purchase of minerals
in place.............. 45,012
-- production........... (692) (19,958)
----- -------
Net proved reserves
-- end of year.......... 7,711 136,769
===== =======
Net proved developed
reserves
-- beginning of year.... 6,835 83,601
-- end of year.......... 6,926 94,348
- ---------------
(a) The Company's Venezuelan reserves reflect the Company's net interest in an
operating service fee contract for the Boqueron area between the Company,
the other contractor and a subsidiary of PDVSA. The Company's February 1998
acquisition of an interest in the operating service contract for the DZO
unit with net proved reserves of 114 million barrels, is not included.
60
61
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
ESTIMATED QUANTITIES OF NET PROVED NATURAL GAS RESERVES
CONSOLIDATED SUBSIDIARIES
-------------------------------------------- NON-
UNITED CONSOLIDATED TOTAL
KINGDOM INDONESIA PAKISTAN TOTAL INTERESTS WORLDWIDE
------- --------- -------- --------- ------------ ---------
(MILLIONS OF CUBIC FEET)
YEAR ENDED DECEMBER 31, 1997
Net proved reserves
-- beginning of year....................... 363,472 846,744 120,027 1,330,243 351,506 1,681,749
-- revisions of previous estimates......... 19,361 16,433 12,228 48,022 7,334 55,356
-- extensions, discoveries and other
additions............................... 986 986 986
-- production.............................. (10,641) (82,088) (13,347) (106,076) (27,171) (133,247)
------- ------- ------- --------- ------- ---------
Net proved reserves
-- end of year............................. 372,192 781,089 119,894 1,273,175 331,669 1,604,844
======= ======= ======= ========= ======= =========
Net proved developed reserves
-- beginning of year....................... 126,963 718,721 57,019 902,703 297,841 1,200,544
-- end of year............................. 124,843 670,415 75,107 870,365 284,535 1,154,900
YEAR ENDED DECEMBER 31, 1996
Net proved reserves
-- beginning of year....................... 344,132 898,374 121,422 1,363,928 365,079 1,729,007
-- revisions of previous estimates......... 4,407 44,909 10,846 60,162 18,352 78,514
-- extensions, discoveries and other
additions............................... 31,791 2,904 34,695 34,695
-- production.............................. (16,858) (96,539)(a) (15,145) (128,542) (31,925)(a) (160,467)
------- ------- ------- --------- ------- ---------
Net proved reserves
-- end of year............................. 363,472 846,744(a) 120,027 1,330,243 351,506(a) 1,681,749
======= ======= ======= ========= ======= =========
Net proved developed reserves
-- beginning of year....................... 139,413 758,942 58,642 956,997 307,102 1,264,009
-- end of year............................. 126,963 718,721 57,019 902,703 297,841 1,200,544
YEAR ENDED DECEMBER 31, 1995
Net proved reserves
-- beginning of year....................... 319,621 972,796 97,895 1,390,312 385,834 1,776,146
-- revisions of previous estimates......... 37,079 19,270 24,976 81,325 10,228 91,553
-- extensions, discoveries and other
additions............................... 14,952 14,952 14,952
-- production.............................. (12,568) (93,692)(a) (16,401) (122,661) (30,983)(a) (153,644)
------- ------- ------- --------- ------- ---------
Net proved reserves
-- end of year............................. 344,132 898,374(a) 121,422 1,363,928 365,079(a) 1,729,007
======= ======= ======= ========= ======= =========
Net proved developed reserves
-- beginning of year....................... 149,301 812,933 51,883 1,014,117 320,502 1,334,619
-- end of year............................. 139,413 758,942 58,642 956,997 307,102 1,264,099
- ---------------
(a) Includes gas consumed in the operation of the LNG plant, which was
approximately 9 Bcf and 3 Bcf, 12 Bcf and 4 Bcf and 11 Bcf and 4 Bcf
attributable to the Company and its Unimar partnership, respectively, for
1997, 1996 and 1995; and gas sold to fertilizer plants and a refinery.
61
62
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Costs incurred and results of operations
Costs incurred in oil and gas property acquisition, exploration and
development activities whether expensed or capitalized were as follows:
CONSOLIDATED SUBSIDIARIES
------------------------------------------------------------------------
UNITED OTHER NON-
STATES UNITED INTER- CONSOLIDATED TOTAL
(ALASKA) KINGDOM INDONESIA VENEZUELA PAKISTAN NATIONAL TOTAL INTERESTS WORLDWIDE
-------- ------- --------- --------- -------- -------- ----- ------------ ---------
(DOLLARS IN MILLIONS)
Property acquisition
(proved and unproved)
1997................... $ 5(a) $121(e) $21 $147 $147
1996................... 2 3 5 5
1995................... 1 $275 2 278 278
Exploration
1997................... $ 2 $ 8 $ 8 $23 $69 $110 $ 2 $112
1996................... 13(a) 6 7 11 28 65 65
1995................... 10 10 8 11 46 85 85
Development
1997................... $10(b) $102(c) $30(d) $ 3 $10 $ 2 $157 $10 $167
1996................... 3 118(c) 24 12 157 8 165
1995................... 78(c) 31(d) 6 115 10 125
- ---------------
(a) Includes $1 million for capitalized interest in 1997 and 1996,
respectively.
(b) Includes $2 million for capitalized interest.
(c) Includes $32 million, $25 million and $22 million for capitalized interest
in 1997, 1996 and 1995, respectively.
(d) Includes $1 million for capitalized interest in 1997 and 1995,
respectively.
(e) Includes $4 million for capitalized interest.
62
63
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The aggregate amount of capitalized costs (including construction in
progress) relating to oil and gas producing activities and the aggregate amount
of the related accumulated depreciation, depletion and amortization ("DD&A")
including accumulated valuation allowances at December 31, were as follows:
CONSOLIDATED SUBSIDIARIES
----------------------------------------------------------------
UNITED OTHER NON- TOTAL
STATES UNITED INTER- CONSOLIDATED WORLD-
(ALASKA) KINGDOM INDONESIA VENEZUELA PAKISTAN NATIONAL TOTAL INTERESTS WIDE
-------- ------- --------- --------- -------- -------- ------ ------------ ------
(DOLLARS IN MILLIONS)
Proved and unproved properties
Gross capital
1997................... $41 $2,182 $771 $124 $105 $43 $3,266 $549 $3,815
1996................... 37 2,129 742 94 12 3,014 535 3,549
1995................... 26 1,832 718 79 15 2,670 525 3,195
Accumulated DD&A
(including valuation
allowances)
1997................... 5 1,080 472 65 9 1,631 382 2,013
1996................... 14 959 436 54 2 1,465 360 1,825
1995................... 13 733 396 48 10 1,200 336 1,536
Proved properties
Gross capital
1997................... 39 2,174 762 124 96 3,195 549 3,744
1996................... 21 2,118 733 88 2,960 535 3,495
1995................... 1,822 710 75 4 2,611 525 3,136
Accumulated DD&A
1997................... 3 1,075 465 63 1,606 382 1,988
1996................... 956 428 52 1,436 360 1,796
1995................... 731 389 46 4 1,170 336 1,506
63
64
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The results of operations for the Company's oil and gas producing
activities for 1997, 1996 and 1995 were as follows:
CONSOLIDATED SUBSIDIARIES
------------------------------------------------------------
UNITED OTHER NON-
STATES UNITED INTER- CONSOLIDATED TOTAL
(ALASKA) KINGDOM INDONESIA PAKISTAN NATIONAL TOTAL INTERESTS WORLDWIDE
-------- ------- --------- -------- -------- ----- ------------ ---------
(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31, 1997
Net sales......................... $367 $287 $66 $720 $109 $829
---- ---- --- ---- ---- ----
Production costs.................. 82 50 10 142 13 155
Exploration expenses.............. $ 2 8 7 21 $ 61 99 1 100
DD&A.............................. 148 38 11 197 21 218
Other Costs....................... 20 20 20
Valuation allowances.............. 1 2 7 10 10
--- ---- ---- --- ---- ---- ---- ----
Total costs and expenses.... 3 240 95 42 88 468 35 503
--- ---- ---- --- ---- ---- ---- ----
(3) 127 192 24 (88) 252 74 326
Income tax expense(a)............. 58 112 5 175 50 225
--- ---- ---- --- ---- ---- ---- ----
Results of operations(b).......... $(3) $ 69 $ 80 $19 $(88) $ 77 $ 24 $101
=== ==== ==== === ==== ==== ==== ====
YEAR ENDED DECEMBER 31, 1996
Net sales......................... $406 $341 $66 $813 $126 $939
---- ---- --- ---- ---- ----
Production costs.................. 82 60 12 154 12 166
Exploration expenses.............. $ 7 5 7 8 $ 25 52 52
DD&A.............................. 154 39 6 199 24 223
Other Costs....................... 7 7 7
Valuation allowances.............. 2 2 1 5 5
--- ---- ---- --- ---- ---- ---- ----
Total costs and expenses.... 9 243 106 26 33 417 36 453
--- ---- ---- --- ---- ---- ---- ----
(9) 163 235 40 (33) 396 90 486
Income tax expense(a)............. 74 141 11 226 64 290
--- ---- ---- --- ---- ---- ---- ----
Results of operations(b).......... $(9) $ 89 $ 94 $29 $(33) $170 $ 26 $196
=== ==== ==== === ==== ==== ==== ====
YEAR ENDED DECEMBER 31, 1995
Net sales......................... $323 $276 $51 $ 1 $651 $101 $752
---- ---- --- ---- ---- ---- ----
Production costs.................. 88 55 17 160 12 172
Exploration expenses.............. $ 6 10 8 7 46 77 77
DD&A.............................. 138 35 7 180 21 201
Valuation allowances.............. 1 4 5 5
--- ---- ---- --- ---- ---- ---- ----
Total costs and expenses.... 6 237 98 31 50 422 33 455
--- ---- ---- --- ---- ---- ---- ----
(6) 86 178 20 (49) 229 68 297
Income tax expense(a)............. 34 105 5 144 47 191
--- ---- ---- --- ---- ---- ---- ----
Results of operations(b).......... $(6) $ 52 $ 73 $15 $(49) $ 85 $ 21 $106
=== ==== ==== === ==== ==== ==== ====
- ---------------
(a) Computed using statutory rates adjusted for permanent differences, tax
credits and allowances that are reflected in the income tax expense for the
respective years.
(b) Excludes overhead and financing costs.
64
65
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Standardized measure of discounted future net cash flows -- (Unaudited)
The standardized measure of discounted future net cash flows and changes
therein relating to proved oil and gas reserves for 1997, 1996 and 1995 were as
follows:
CONSOLIDATED SUBSIDIARIES
---------------------------------------------------------------
UNITED NON- TOTAL
STATES UNITED CONSOLIDATED WORLD-
(ALASKA) KINGDOM INDONESIA VENEZUELA PAKISTAN TOTAL INTERESTS WIDE
-------- ------- --------- --------- -------- ------- ------------ -------
(DOLLARS IN MILLIONS)
DECEMBER 31, 1997
Future cash inflows.................. $ 420 $2,911 $ 2,754 $ 298 $305 $ 6,688 $1,213 $ 7,901
Future production and development
costs.............................. (230) (1,120) (1,030) (141) (86) (2,607) (469) (3,076)
Future income tax expense............ (52) (520) (815) (19) (65) (1,471) (358) (1,829)
------- ------- ------- ----- ---- ------- ------ -------
Future net cash flows(a)............. 138 1,271 909 138 154 2,610 386 2,996
10% discount for estimated timing of
cash flows......................... 91 569 410 73 43 1,186 181 1,367
------- ------- ------- ----- ---- ------- ------ -------
Standardized measure of discounted
future net cash flows.............. $ 47 $ 702 $ 499 $ 65 $111 $ 1,424 $ 205 $ 1,629
======= ======= ======= ===== ==== ======= ====== =======
DECEMBER 31, 1996
Future cash inflows.................. $ 658 $3,825 $ 3,260 $370 $ 8,113 $1,436 $ 9,549
Future production and development
costs.............................. (240) (1,258) (1,066) (86) (2,650) (493) (3,143)
Future income tax expense............ (142) (804) (1,067) (94) (2,107) (470) (2,577)
------- ------- ------- ---- ------- ------ -------
Future net cash flows(a)............. 276 1,763 1,127 190 3,356 473 3,829
10% discount for estimated timing of
cash flows......................... (182) (785) (505) (54) (1,526) (223) (1,749)
------- ------- ------- ---- ------- ------ -------
Standardized measure of discounted
future net cash flows.............. $ 94 $ 978 $ 622 $136 $ 1,830 $ 250 $ 2,080
======= ======= ======= ==== ======= ====== =======
DECEMBER 31, 1995
Future cash inflows.................. $3,437 $ 2,861 $232 $ 6,530 $1,260 $ 7,790
Future production and development
costs.............................. (1,291) (1,093) (93) (2,477) (507) (2,984)
Future income tax expense............ (656) (867) (36) (1,559) (382) (1,941)
------- ------- ---- ------- ------ -------
Future net cash flows(a)............. 1,490 901 103 2,494 371 2,865
10% discount for estimated timing of
cash flows......................... (661) (403) (30) (1,094) (177) (1,271)
------- ------- ---- ------- ------ -------
Standardized measure of discounted
future net cash flows.............. $ 829 $ 498 $ 73 $ 1,400 $ 194 $ 1,594
======= ======= ==== ======= ====== =======
- ---------------
(a) Future net cash flows were computed using year-end prices and costs and
statutory tax rates adjusted for permanent differences, tax credits and
allowances.
65
66
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Changes in the standardized measure of discounted future net cash flows for
the consolidated subsidiaries were as follows:
1997 1996 1995
------ ------ ------
(DOLLARS IN MILLIONS)
Beginning of year........................................ $1,830 $1,400 $1,065
Sales and transfers of oil and gas produced, net of
production costs....................................... (545) (643) (513)
Net changes in prices, development and production
costs.................................................. (805) 673 324
Extensions, discoveries and improved recovery, less
related costs.......................................... 1 200 20
Purchase of minerals in place............................ 73 287
Development costs incurred during the period............. 109 129 92
Revisions of previous quantity estimates................. 61 133 83
Increase in present value due to passage of one year..... 306 233 185
Net change in income taxes............................... 394 (295) (143)
------ ------ ------
End of year.............................................. $1,424 $1,830 $1,400
====== ====== ======
The standardized measure data includes estimates of oil and gas reserve
volumes and forecasts of future production rates over the reserve lives.
Estimates of future production expenditures, including taxes and future
development costs, are based on management's best estimate of such costs
assuming a continuation of current economic and operating conditions. No
provision is included for depletion, depreciation and amortization of property
acquisition costs or indirect costs. The sales prices used in the calculation
are the year-end prices of crude oil, including condensate and natural gas
liquids, and natural gas which as of December 31, 1997, 1996 and 1995 were
$15.35, $23.48 and $18.53 per barrel of U.K. crude oil (Flotta) and $3.00,
$3.62, and $2.85 per Mcf (at the plant inlet) of Indonesian LNG, respectively.
Because of the estimated nature of the data presented, changes in price and cost
levels, as well as the timing of future development costs, may have a
significant impact on such data and cause such data not to be representative of
production or cash flows the Company may realize in the future.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
66
67
PART III
For the information called for by Items 10, 11 and 13, as well as
additional information for Item 12, reference is made to the Company's
definitive proxy statement for its 1998 Annual Meeting of Stockholders, which
will be filed with the Securities and Exchange Commission within 120 days after
December 31, 1997, and portions of which are incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
In July 1985, two limited partnerships (the "KKR Partnerships"), which are
affiliated with Kohlberg Kravis Roberts & Co. ("KKR"), purchased approximately
50% of the then outstanding common stock of the Company from AlliedSignal Inc.
("Allied"). In September 1987, the Company sold 18,000,000 shares of its common
stock in concurrent public offerings in the United States and outside the United
States. In November 1992, Allied sold, in a secondary public offering, its
33,333,334 shares of common stock, which represented approximately 39% of the
Company's then issued and outstanding shares of common stock. In May 1995, the
KKR Partnerships sold, in a secondary public offering, 11,500,000 shares of
their 33,333,334 shares of common stock, which represented approximately 13% of
the Company's then issued and outstanding shares of common stock. Each of these
secondary offerings was registered by the Company under the Securities Act of
1933, as amended (the "Securities Act") pursuant to the Company's agreement with
the KKR Partnerships described below. The Company did not receive any proceeds
from the secondary public offerings.
KKR Associates is a limited partnership of which Henry R. Kravis, George R.
Roberts, Michael W. Michelson, James H. Greene, Jr. and Edward A. Gilhuly,
directors of the Company, are five of the eleven general partners and Messrs.
Kravis and Roberts are also the members of the Executive Committee of KKR
Associates. KKR Associates is the sole general partner of each of the KKR
Partnerships, and possesses 100% of the voting power and investment power to the
shares owned by the KKR Partnerships. The KKR Partnerships are Petroleum
Associates, L.P. ("Petroleum Associates"), which owns of record approximately
25% of the Company's outstanding shares and KKR Partners II, L.P., which owns of
record less than 1% of the Company's shares. As a result, the KKR Partnerships
and their general partners may be able to exercise substantial influence over
the Company, through their representation with five of the twelve directors on
the Company's Board of Directors and by reason of their significant voting power
with respect to the election of directors and actions submitted to a vote of
stockholders.
The limited partnership agreement pursuant to which Petroleum Associates
was organized expired on December 31, 1997 in accordance with the terms of the
limited partnership agreement. The terminated Petroleum Associates partnership
continues to be in existence for a winding-up period after such date. The
limited partnership agreement provides that, in connection with the dissolution
and winding up of Petroleum Associates, KKR Associates has the sole discretion
regarding the timing (which may be one or more years after the expiration of the
partnership agreement) and the manner of the disposition of the common stock of
the Company owned by Petroleum Associates, including public or private sales of
such common stock, the distribution of such common stock to the limited partners
of Petroleum Associates or a combination of the foregoing. If shares of the
Company's common stock are distributed to the limited partners of Petroleum
Associates, each limited partner will thereafter have sole discretion with
respect to its common stock. In addition, pursuant to the limited partnership
agreement, Petroleum Associates will distribute to KKR Associates for its own
account, concurrently with any sales of shares owned by Petroleum Associates,
cash and/or shares of common stock that together have a fair market value equal
to approximately 20% of the profits realized with respect to the shares sold and
distributed. The KKR Partnerships and certain transferees of their shares are,
under certain circumstances, exempt from the 15% threshold of an Acquiring
Person under the Company's Rights Agreement. See Item 5 -- Market for
Registrant's Common Equity and Related Stockholder Matters.
67
68
The Company has agreed that, upon request of the KKR Partnerships, the
Company will register under the Securities Act and applicable state securities
laws the sale of the Company's common stock owned by the KKR Partnerships as to
which registration has been requested. The Company's obligation is subject to
certain limitations relating to a minimum amount required for registration, the
timing of a registration and other similar matters. The Company is obligated to
pay any registration expenses incidental to such registration, excluding
underwriters' commissions and discounts.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)1 FINANCIAL STATEMENTS.
The following financial statements and the Report of Independent
Accountants are filed as a part of this report on the pages indicated:
Report of Independent Accountants -- page 38.
Consolidated Balance Sheet -- December 31, 1997 and 1996 -- page 39.
Consolidated Statement of Operations -- For the years ended December
31, 1997, 1996 and 1995 -- page 40.
Consolidated Statement of Cash Flows -- For the years ended December
31, 1997, 1996 and 1995 -- page 41.
Consolidated Statement of Stockholders' Equity -- For the years ended
December 31, 1997, 1996 and 1995 -- page 42.
Selected Quarterly Financial Data for the two years ended December 31,
1997 -- page 58.
Selected Financial Data for the five years ended December 31,
1997 -- page 30.
(a)2 EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 -- Restated Certificate of Incorporation of Union Texas
Petroleum Holdings, Inc., as amended on May 10, 1995
(Filed under the identical exhibit number to the
Company's Form 8-K dated May 18, 1995 (Commission File
No. 1-9019) and incorporated herein by reference)
3.2# -- Bylaws of Union Texas Petroleum Holdings, Inc. as amended
December 19, 1997
3.3 -- Specimen of Certificate evidencing the Common Stock with
Rights attached (Filed as Exhibit 3.2 of the Company's
Form 10-Q for quarter ended September 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
4.1 -- Indenture for 8.25% Senior Notes due November 15, 1999,
dated as of November 15, 1992, between Union Texas
Petroleum Holdings, Inc., the Subsidiaries named therein
and State Street Bank and Trust Company (including form
of note) (Filed as Exhibit 10.1 to the Company's Form
10-Q for quarter ended March 31, 1994 (Commission File
No. 1-9019) and incorporated herein by reference)
68
69
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.2 -- Indenture dated as of March 15, 1995, among Union Texas
Petroleum Holdings, Inc., the Subsidiaries named therein
and The First National Bank of Chicago, as trustee (the
"1995 Indenture") (Filed as Exhibit 10.1 to the Company's
Form 10-Q for quarter ended March 31, 1995 (Commission
File No. 1-9019) and incorporated herein by reference)
4.3 -- Specimen Form of 8 3/8% Senior Note due March 15, 2005,
issued by Union Texas Petroleum Holdings, Inc. pursuant
to the 1995 Indenture (Filed as Exhibit 10.2 to the
Company's Form 10-Q for quarter ended March 31, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
4.4 -- Specimen Form of 8 1/2% Senior Note due April 15, 2007,
issued by Union Texas Petroleum Holdings, Inc. pursuant
to the 1995 Indenture (Filed as Exhibit 10.3 to the
Company's Form 10-Q for quarter ended March 31, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
4.5 -- Supplement dated November 7, 1995 to Indenture dated as
of November 15, 1992 for 8.25% Senior Notes due 1999,
between Union Texas Petroleum Holdings, Inc., the
Subsidiaries named therein and State Street Bank and
Trust Company (Filed as Exhibit 4.1 to the Company's Form
8-K dated November 17, 1995 (Commission File No. 1-9019)
and incorporated herein by reference)
4.6 -- Supplement dated November 7, 1995 to the 1995 Indenture
between Union Texas Petroleum Holdings, Inc., the
Subsidiaries named therein and The First National Bank of
Chicago (Filed as Exhibit 4.2 to the Company's Form 8-K
dated November 17, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
4.7 -- Form of Fixed Rate Medium-Term Note issued by the Company
pursuant to the 1995 Indenture (Filed as Exhibit 4.4 to
the Company's Registration Statement No. 33-64049 and
incorporated herein by reference). The Company agrees to
furnish to the Commission upon request a copy of each
instrument with respect to issues of such notes of the
Company, the authorized principal amount of which does
not exceed 10% of the consolidated assets of the Company
and its subsidiaries
4.8 -- Rights Agreement dated as of September 12, 1997 between
the Company and First Chicago Trust Company of New York,
as Rights Agent, which includes as Exhibit A the Form of
Right Certificate and as Exhibit B the Summary of Rights
to Purchase Common Stock (Filed as Exhibit 1 to the
Company's Form 8-A Registration Statement filed September
15, 1997 (Commission File No. 1-9019) and as Exhibit 4.1
to the Company's 10-Q for quarter ended September 30,
1997 (Commission File No. 1-9019) and incorporated herein
by reference)
10.1 -- Tax Agreement, dated as of June 27, 1985, among Allied
Corporation and Union Texas Petroleum Holdings, Inc.
(Filed as Exhibit 10.6 to the Company's Registration
Statement No. 33-00312 and incorporated herein by
reference)
10.2+ -- Form of Subscription Agreement between Union Texas
Petroleum Holdings, Inc. and certain employees (Filed as
Exhibit 10.8 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.3+ -- Form of Tagalong Agreement between Union Texas Petroleum
Holdings, Inc. and certain employees (Filed as Exhibit
10.9 to the Company's Registration Statement No. 33-00312
and incorporated herein by reference)
10.4+ -- Amended and Restated Union Texas Petroleum Salaried
Employees' Pension Plan, effective as of January 1, 1994
(Filed under the identical exhibit number to the
Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
69
70
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.5+ -- Union Texas Petroleum Holdings, Inc. 1985 Stock Option
Plan, as amended (Filed as Exhibit 10.10 to Post
Effective Amendment No. 2 to the Company's Registration
Statement No. 33-12800 and incorporated herein by
reference)
10.6+ -- Amended and Restated Union Texas Petroleum Savings Plan
for Salaried Employees, effective as of January 1, 1993
(Filed under the identical exhibit number to the
Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.7+ -- Amended and Restated Supplemental Non-Qualified Savings
Plan for Executive Employees of Union Texas Petroleum
Holdings, Inc. and its Subsidiaries, effective as of
January 1, 1993 (Filed under the identical exhibit number
to the Company's 1993 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.8+ -- Form of employment letter with executive officers (Filed
as Exhibit 10.18 to the Company's Registration Statement
No. 33-00312 and incorporated herein by reference) and
Exhibit A (Filed as Exhibit 10.10 to the Company's 1992
Form 10-K (Commission File No. 1-9019) and incorporated
herein by reference)
10.9 -- Joint Venture Agreement, dated as of August 8, 1968,
among Roy M. Huffington, Inc., Virginia International
Company, Austral Petroleum Gas Corporation, Golden Eagle
Indonesia Limited and Union Texas Far East Corporation,
as amended (the "Joint Venture Agreement") (Filed as
Exhibit 6.6 to the Registration Statement No. 2-58834 of
Alaska Interstate Company and incorporated herein by
reference)
10.10 -- Supply Agreement, dated as of April 14, 1981, for Badak
LNG Expansion Project among Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara ("Pertamina") and the parties
to the Joint Venture Agreement (Filed as Exhibit 10.14 to
the Company's 1992 Form 10-K (Commission File No. 1-9019)
and incorporated herein by reference)
10.11 -- Indenture, dated as of September 25, 1984, between Unimar
Company, as Issuer, and Irving Trust Company, as Trustee,
providing for 14,077,747 Indonesian Participating Units
(Filed as Exhibit 4 to the Form S-14 Registration
Statement No. 2-93037 of Unimar Company and incorporated
herein by reference)
10.12 -- Amended and Restated Agreement of General Partnership of
Unimar Company, dated as of September 11, 1990 (Filed as
Exhibit 3.1 to the Form 10-Q for quarter ended September
30, 1990 of Unimar Company (Commission File No. 1-8791)
and incorporated herein by reference)
10.13 -- License No. P054 concerning all or part of the following
blocks in the United Kingdom North Sea: 49/15 and 49/25
(Sean Field) (Filed as Exhibit 10.74 to the Company's
Registration Statement No. 33-00312 and incorporated
herein by reference)
10.14 -- License No. P220 concerning all or part of the following
blocks in the United Kingdom North Sea: 9/26, 14/19,
15/11, 15/15, 15/17 and 210/29 (Piper Field) (Filed as
Exhibit 10.75 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.15 -- License No. P249 concerning part of the following block
in the United Kingdom North Sea: 14/19 (Claymore Field)
(Filed as Exhibit 10.76 to the Company's Registration
Statement No. 33-00312 and incorporated herein by
reference)
10.16 -- License No. P250 concerning all or part of the following
blocks in the United Kingdom North Sea: 9/26, 15/11,
15/15, 210/29, 15/17 and 14/19 (Scapa Field) (Filed as
Exhibit 10.77 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
70
71
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.17 -- Restated United Kingdom Continental Shelf Operating
Agreement (Piper License), dated as of August 11, 1977,
among Occidental Petroleum (U.K.) Limited, Occidental of
Britain, Inc., Getty Oil (Britain) Limited, Allied
Chemical (Great Britain) Limited, Allied Chemical (North
Sea) Ltd., Thomson North Sea Limited and the British
National Oil Corporation (Filed as Exhibit No. 10.78 to
the Company's Registration Statement No. 33-00312 and
incorporated herein by reference)
10.18 -- Restated United Kingdom Continental Shelf Operating
Agreement (Claymore License), dated August 11, 1977,
among Occidental Petroleum (Caledonia) Limited,
Occidental of Scotland, Inc., Getty Oil (Britain)
Limited, Allied Chemical (Great Britain) Limited, Allied
Chemical (North Sea) Ltd., Thomson North Sea Limited and
the British National Oil Corporation (Filed as Exhibit
10.79 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.19 -- United Kingdom Continental Shelf Joint Operating
Agreement for Blocks 49/15a and 49/25a (Sean Field),
dated July 3, 1984, among Shell U.K. Limited, Union Texas
Petroleum Limited, Britoil Public Limited Company and
Esso Exploration and Production U.K. Limited (Filed as
Exhibit 10.81 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.20 -- Agreement for Sale and Purchase of Natural Gas from the
Sean North and Sean South Fields, dated November 7, 1984,
between Union Texas Petroleum Limited and British Gas
Corporation, including list of omitted schedules (Filed
as Exhibit 10.82 to the Company's Registration Statement
No. 33-00312 and incorporated herein by reference)
10.21 -- Badak III LNG Sales Contract, dated March 19, 1987,
between Pertamina, as Seller, and Chinese Petroleum
Corporation, as Buyer (Filed as Exhibit 10.28 to the
Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.22 -- Supplemental Indenture, dated as of October 31, 1986, to
the Indenture between Unimar Company and Irving Trust
Company (Exhibit 10.13 above) (Filed as Exhibit 10.114 to
the Company's Registration Statement No. 33-16267 and
incorporated herein by reference)
10.23 -- Amended and Restated Registration Rights Agreement, dated
September 30, 1987, among Union Texas Petroleum Holdings,
Inc. and Certain Holders of Certain Securities of Union
Texas Petroleum Holdings, Inc. (Filed as Exhibit 10.117
to Post Effective Amendment No. 1 to the Company's
Registration Statement No. 33-12800 and incorporated
herein by reference)
10.24+ -- Union Texas Petroleum Holdings, Inc. 1987 Stock Option
Plan and First Amendment to Union Texas Petroleum
Holdings, Inc. 1987 Stock Option Plan (Filed as Exhibit
4.4 to the Company's Registration Statement No. 33-21684
and incorporated herein by reference)
10.25 -- Badak III LNG Sales Contract Supply Agreement, dated
October 19, 1987, among Pertamina and the parties to the
Joint Venture Agreement (Filed as Exhibit 10.132 to Post
Effective Amendment No. 1 to the Company's Registration
Statement No. 33-12800 and incorporated herein by
reference)
71
72
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.26 -- $316,000,000 Bontang III Loan Agreement, dated February
9, 1988, among the 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 for the Tranche B Lenders and as Tranche
B Lender (Filed as Exhibit 10.83 to Post Effective
Amendment No. 2 to the Company's Registration Statement
No. 33-12800 and incorporated herein by reference)
10.27 -- Bontang III Producers Agreement, dated as of February 9,
1988, among Pertamina, Roy M. Huffington, Inc.,
Huffington Corporation, VICO, Virginia International
Company, Ultramar Indonesia Company Limited, Union Texas
East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum,
Ltd., in favor of Train-E Finance Co., Ltd., as Tranche A
Lender, The Industrial Bank of Japan Trust Company as
Agent for the Tranche B Lenders and as Tranche B Lender,
and the other Tranche B Lenders named therein (Filed as
Exhibit 10.84 to the Post Effective Amendment No. 2 to
the Company's Registration Statement No. 33-12800 and
incorporated herein by reference)
10.28 -- Bontang III Trustee and Paying Agent Agreement, dated
February 9, 1988, among Pertamina, Roy M. Huffington,
Inc., Huffington Corporation, Virginia International
Company, VICO, Ultramar Indonesia Limited, Union Texas
East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum,
Ltd. and the Trustee thereunder (Filed as Exhibit 10.42
to the Company's 1991 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.29+ -- Third Amendment to Union Texas Petroleum Holdings, Inc.
1985 Stock Option Plan (Filed as Exhibit 10.95 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.30+ -- Second Amendment to Union Texas Petroleum Holdings, Inc.
1987 Stock Option Plan (Filed as Exhibit 10.96 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.31+ -- Union Texas Petroleum Supplemental Retirement Plan (Filed
as Exhibit 10.99 to the Company's Form 10-Q for quarter
ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.32+ -- Amended and Restated Union Texas Petroleum Supplemental
Retirement Plan II, effective January 1, 1994 (Filed as
Exhibit 10.41 to the Company's 1993 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.33+ -- Union Texas Petroleum Supplemental Retirement Plans
Trust, as amended (Filed as Exhibit 10.101 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.34 -- Amended and Restated Production Sharing Contract
effective August 8, 1968-August 7, 1998 among Pertamina,
Roy M. Huffington, Inc., VICO, Virginia International
Company, Ultramar Indonesia Limited, Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Huffington Corporation (Filed as Exhibit 10.102 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
72
73
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.35 -- Production Sharing Contract effective August 8,
1998-August 7, 2018 among Pertamina, Roy M. Huffington,
Inc., VICO, Virginia International Company, Ultramar
Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Huffington
Corporation (Filed as Exhibit 10.103 to the Company's
Form 10-Q for quarter ended June 30, 1990 (Commission
File No. 1-9019) and incorporated herein by reference)
10.36 -- Joint Operating Agreement for the Scapa Field, dated
December 23, 1985, among Occidental Petroleum (Caledonia)
Limited, Texaco Britain Limited, Union Texas Petroleum
Limited, Thomson North Sea Limited, Thomson Scottish
Petroleum Limited and the Oil and Pipelines Agency (Filed
as Exhibit 10.104 to the Company's Form 10-Q for quarter
ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.37 -- Amended and Restated 1973 LNG Sales Contract, dated as of
the 1st day of January, 1990, by and between 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 Buyers (Filed as Exhibit (10)-8 to
the 1993 Form 10-K of Unimar Company (Commission File No.
1-8791) and incorporated herein by reference)
10.38 -- Amended and Restated Bontang Processing Agreement, dated
February 9, 1988, among Pertamina and Roy M. Huffington,
Inc., Huffington Corporation, VICO, Virginia
International Company, Ultramar Indonesia Limited, Union
Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia
Petroleum, Ltd. and P.T. Badak Natural Gas Liquefaction
Company (Filed as Exhibit (10)-39 to the 1988 Form 10-K
of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.39 -- Amended and Restated Debt Service Allocation Agreement,
dated February 9, 1988, among Pertamina and Roy M.
Huffington, Inc., VICO, Ultramar Indonesia Limited,
Virginia International Company, Union Texas East
Kalimantan Limited, Universe Tankships, Inc., Huffington
Corporation, Total Indonesie, Unocal Indonesia, Ltd. and
Indonesia Petroleum, Ltd. (Filed as Exhibit (10)-40 to
the 1988 Form 10-K of Unimar Company (Commission File No.
1-8791) and incorporated herein by reference)
10.40 -- Amendment No. 1 to Bontang III Producers Agreement, dated
as of May 31, 1988, among Pertamina, Roy M. Huffington,
Inc., Huffington Corporation, VICO, Virginia
International Company, Ultramar Indonesia Limited, Union
Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia
Petroleum, Ltd. and Train-E Finance Co., Ltd., as Tranche
A Lender, and The Industrial Bank of Japan Trust Company
on behalf of the Tranche B Lender, (Filed as Exhibit
(10)-21 to the 1993 Form 10-K of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
10.41 -- Badak IV LNG Sales Contract, dated October 23, 1990,
between Pertamina, as Seller, and Osaka Gas Co., Ltd.,
Tokyo Gas Co., Ltd. and Toho Gas Co., Ltd., as Buyer
(Filed as Exhibit (10)-65 to the 1990 Form 10-K of Unimar
Company (Commission File No. 1-8791) and incorporated
herein by reference)
10.42 -- Supply Agreement for Natural Gas to Badak IV LNG Sales
Contract, dated August 12, 1991, by and between
Pertamina, VICO, Opicoil Houston, Inc., Ultramar
Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.80 to the
Company's 1991 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
73
74
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.43 -- LNG Sales and Purchase Contract (Korea II), dated May 7,
1991, between Pertamina, as Seller, and Korea Gas
Corporation, as Buyer (Filed as Exhibit (10)-1 to the
1990 Form 10-Q for quarter ended June 30, 1991 of Unimar
Company (Commission File No. 1-8791) and incorporated
herein by reference)
10.44 -- $750,000,000 Bontang IV Loan Agreement, dated as of
August 26, 1991, among the Trustee under the Bontang IV
Trustee and Paying Agent Agreement as Borrower, Chase
Manhattan Asia Limited and The Mitsubishi Bank, Limited
as Coordinators, the other banks and financial
institutions named therein as Arrangers, Co-Arrangers,
Lead Managers, Managers, Co-Managers and Lenders, The
Chase Manhattan Bank, N.A. and The Mitsubishi Bank,
Limited as Co-Agents and The Chase Manhattan Bank, N.A.
as Agent (Filed as Exhibit 10.1 to the Form 10-Q for
quarter ended September 30, 1991 of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
10.45 -- Bontang IV Producers Agreement, dated as of August 26,
1991, by Pertamina, Virginia International Company,
Opicoil Houston, Inc., VICO, Ultramar Indonesia Limited,
Union Texas East Kalimantan Limited, Universe Gas & Oil
Company, Inc., Total Indonesie, Unocal Indonesia, Ltd.
and Indonesia Petroleum, Ltd. in favor of The Chase
Manhattan Bank, N.A., as Agent for the Lenders and as
Lender, and the other Lenders named therein (Filed as
Exhibit 10.2 to the Form 10-Q for quarter ended September
30, 1991 of Unimar Company (Commission File No. 1-8791)
and incorporated herein by reference)
10.46 -- Bontang IV Trustee and Paying Agent Agreement, dated as
of August 26, 1991, among Pertamina, Virginia
International Company, Opicoil Houston, Inc., VICO,
Ultramar Indonesia Limited, Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum,
Ltd. and the Trustee thereunder (Filed as Exhibit 10.3 to
the Form 10-Q for quarter ended September 30, 1991 of
Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.47 -- Consulting Agreement, dated as of November 18, 1992,
among Petroleum Associates, L.P., KKR Partners II, L.P.
and Union Texas Petroleum Holdings, Inc. (Filed as
Exhibit 10.81 to the Company's 1992 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.48+ -- Second Amendment to Union Texas Petroleum Supplemental
Retirement Plans Trust (Filed as Exhibit 10.82 to the
Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.49 -- Amendment No. 1 to Bontang III Trustee and Paying Agent
Agreement, dated as of December 11, 1992, among
Pertamina, VICO, Virginia International Company, Ultramar
Indonesia Limited, Union Texas East Kalimantan Limited,
Opicoil Houston, Inc., Universe Gas & Oil Company, Inc.,
Total Indonesie, Unocal Indonesia Ltd., Indonesia
Petroleum, Ltd. and the Bontang III Trustee (Filed as
Exhibit 10.83 to the Company's 1992 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.50+ -- First Amendment to Union Texas Petroleum Supplemental
Retirement Plan (Filed as Exhibit 10.85 to the Company's
1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.51+ -- Union Texas Petroleum Holdings, Inc. 1992 Stock Option
Plan (Filed as Exhibit 4.3 to the Company's Registration
Statement No. 33-64928 and incorporated herein by
reference)
74
75
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.52 -- Arun and Bontang LPG Sales and Purchase Contract, dated
July 15, 1986, between Pertamina, as Seller, and
Mitsubishi Corporation, Cosmo Oil Co., Ltd., Nippon
Petroleum Gas Co., Ltd., Showa Shell Sekiyu K.K., Kyodo
Oil Co., Ltd., Idemitsu Kosan Co., Ltd. and Mitsui
Liquefied Gas Co., Ltd., as Buyers (Filed as Exhibit
(10)-60 to the 1991 Form 10-K of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
10.53 -- Petroleum Concession Agreement, dated January 21, 1992,
between the President of the Islamic Republic of Pakistan
and Union Texas Pakistan, Inc., Occidental Petroleum
(Pakistan) Inc. and Oil & Gas Development Corporation
(Filed as Exhibit 10.87 to the Company's Form 10-Q for
quarter ended March 31, 1992 (Commission File No. 1-9019)
and incorporated herein by reference)
10.54 -- Amended and Restated Supply Agreement (In support of the
Amended and Restated 1973 LNG Sales Contract), dated
September 22, 1993, and effective December 3, 1973,
between Pertamina and VICO, LASMO Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.75 to the
Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.55 -- Share Sale Agreement, dated October 18, 1994, among Union
Texas Petroleum Limited, Fina Petroleum Development
Limited and Fina Exploration Limited (the "Share Sale
Agreement") (Filed as Exhibit 2.1 to the Company's Form
8-K dated November 14, 1994 (Commission File No. 1-9019)
and incorporated herein by reference)
10.56 -- Guarantee, dated October 18, 1994, by Union Texas
International Corporation relating to the Share Sale
Agreement (Filed as Exhibit 2.3 to the Company's Form 8-K
dated November 14, 1994 (Commission File No. 1-9019) and
incorporated herein by reference)
10.57 -- Petroleum Concession Agreement, dated April 20, 1977,
between the President of Pakistan and Union Texas
Pakistan, Inc. (Filed as Exhibit 10.87 to the Company's
1994 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.58 -- Amendments to Arun and Bontang LPG Sales and Purchase
Contract, dated October 5, 1994, between Pertamina, as
Seller, and Mitsubishi Corporation, Cosmo Oil Co., Ltd.,
Nippon Petroleum Gas Co., Ltd., Showa Shell Sekiyu K.K.,
Japan Energy Corporation, Idemitsu Kosan Co., Ltd. and
Mitsui Oil & Gas Co., Ltd., as Buyers (Filed as Exhibit
10.88 to the Company's 1994 Form 10-K (Commission File
No. 1-9019) and incorporated herein by reference)
10.59 -- Amendment to the Amended and Restated 1973 LNG Sales
Contract, dated as of the 1st day of June 1992, by and
between Pertamina, as Seller, and Kyushu Electric Power
Co., Inc., Nippon Steel Corporation and Toho Gas Co.,
Ltd., as Buyers (Filed as Exhibit (10)-9 to the 1993 Form
10-K of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.60 -- Facility Agreement, dated May 26, 1995, among Union Texas
Britannia Limited, Chemical Bank, as Arranger,
NationsBank, N.A. Carolinas, as Facility Agent, National
Westminster Bank plc, as Funding Agent, and the
Co-Arrangers, Technical Agents, Account Bank and Banks
named therein (Filed as Exhibit 10.9 to the Company's
Form 10-Q for quarter ended June 30, 1995 (Commission
File No. 1-9019) and incorporated herein by reference)
75
76
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.61 -- Sponsor Direct Agreement, dated May 26, 1995, among Union
Texas Petroleum Limited, Union Texas Britannia Limited
and NationsBank N.A. Carolinas, as Facility Agent (Filed
as Exhibit 10.10 to the Company's Form 10-Q for quarter
ended June 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.62 -- Sponsor Support Agreement, dated May 26, 1995, between
Union Texas Petroleum Limited and Union Texas Britannia
Limited (Filed as Exhibit 10.11 to the Company's Form
10-Q for quarter ended June 30, 1995 (Commission File No.
1-9019) and incorporated herein by reference)
10.63+ -- Union Texas Petroleum Holdings, Inc. 1994 Incentive Plan
(Filed as Exhibit 10.12 to the Company's Form 10-Q for
quarter ended June 30, 1995 (Commission File No. 1-9019)
and incorporated herein by reference)
10.64+ -- First Amendment to Union Texas Petroleum Holdings, Inc.
1992 Stock Option Plan (Filed as Exhibit 10.13 to the
Company's Form 10-Q for quarter ended June 30, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
10.65 -- Sale and Purchase Agreement dated May 31, 1995, between
Union Texas Petroleum Limited and Oryx U.K. Energy
Company (Filed as Exhibit 10.14 to the Company's Form
10-Q for quarter ended June 30, 1995 (Commission File No.
1-9019) and incorporated herein by reference)
10.66 -- 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") (Filed as Exhibit 10.1 to
the Company's Form 10-Q for quarter ended September 30,
1995 (Commission File No. 1-9019) and incorporated herein
by reference)
10.67 -- Bontang V Producers Agreement, dated as of July 1, 1995,
by Pertamina, VICO, 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, the Banks
named therein as Tranche B Lenders and the Facility
Agent, Intercreditor Agent and Technical Agent (Filed as
Exhibit 10.2 to the Company's Form 10-Q for quarter ended
September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.68 -- Bontang V Trustee and Paying Agent Agreement, dated as of
July 1, 1995, among the Producers and BankAmerica
International, as Trustee and Paying Agent (Filed as
Exhibit 10.3 to the Company's Form 10-Q for quarter ended
September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.69 -- 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
(Filed as Exhibit 10.6 to the Company's Form 10-Q for
quarter ended September 30, 1995 (Commission File No.
1-9019) and incorporated herein by reference)
76
77
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.70 -- Second Amended and Restated 1973 LNG Sales Contract,
dated as of August 3, 1995, between 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 (Filed as
Exhibit 10.7 to the Company's Form 10-Q for quarter ended
September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.71 -- 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
VICO, LASMO Sanga Sanga Limited, OPICOIL Houston, Inc.,
Union Texas East Kalimantan Limited, Universe Gas and Oil
Company, Inc. and Virginia International Company (Filed
as Exhibit 10.8 to the Company's Form 10-Q for quarter
ended September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.72+ -- First Amendment to Union Texas Petroleum Savings Plan for
Salaried Employees (Filed as Exhibit 10.9 to the
Company's Form 10-Q for quarter ended September 30, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
10.73+ -- Second Amendment to Union Texas Petroleum Savings Plan
for Salaried Employees (Filed as Exhibit 10.103 to the
Company's 1995 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.74 -- Second Amended and Restated 1981 Badak LNG Sales
Contract, dated as of August 3, 1995, between Pertamina,
as Seller, and Chubu Electric Power Co., Inc., The Kansai
Electric Power Co., Inc., Osaka Gas Co., Ltd. and Toho
Gas Co., Ltd., as Buyers, with related letter agreement,
dated August 3, 1995, between Seller and Buyers (Filed as
Exhibit 10.104 to the Company's 1995 Form 10-K
(Commission File No. 1-9019) and incorporated herein by
reference)
10.75 -- LNG Sales and Purchase Contract (Badak V), dated August
12, 1995, between Pertamina and Korea Gas Corporation
(Filed as Exhibit 10.105 to the Company's 1995 Form 10-K
(Commission File No. 1-9019) and incorporated herein by
reference)
10.76 -- LNG Sale and Purchase Contract (Badak VI), dated October
25, 1995, between Pertamina and Chinese Petroleum
Corporation (Filed as Exhibit 10.106 to the Company's
1995 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.77 -- Badin-II Revised Petroleum Concession Agreement, dated
January 22, 1995 between the President of the Islamic
Republic of Pakistan and Union Texas Pakistan, Inc.,
Occidental Petroleum (Pakistan), Inc., Oil and Gas
Development Corporation and the Federal Government of the
Islamic Republic of Pakistan (Filed as Exhibit 10.107 to
the Company's 1995 Form 10-K (Commission File No. 1-9019)
and incorporated herein by reference)
10.78+ -- Third Amendment to Union Texas Petroleum Savings Plan for
Salaried Employees (Filed as Exhibit 10.1 to the
Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by
reference)
77
78
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.79 -- First Supply Agreement for Package V Excess Sales
(1998-1999 LNG Sales to Korea Gas Corporation under Badak
V), dated as of May 1, 1996, between Pertamina and
Virginia Indonesia Company, Lasmo Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.2 to the
Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by
reference)
10.80 -- Package VI Supply Agreement for Natural Gas in Support of
2000-2017 LNG Sales to Korea Gas Corporation under Badak
V, dated as of May 1, 1996, between Pertamina and
Virginia Indonesia Company, Lasmo Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.4 to the
Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by
reference)
10.81 -- Package VI Supply Agreement for Natural Gas in Support of
2000-2017 LNG Sales to Chinese Petroleum Corporation
under Badak VI, dated as of May 1, 1996, between
Pertamina and Virginia Indonesia Company, Lasmo Sanga
Sanga Limited, Opicoil Houston, Inc., Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Virginia International Company (Filed as Exhibit 10.5 to
the Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by
reference)
10.82 -- First Supply Agreement for Package VI Excess Sales
(2003-2008 LNG Sales under the Second Amended and
Restated 1981 Badak Sales Contract), dated as of May 1,
1996, between Pertamina and Virginia Indonesia Company,
Lasmo Sanga Sanga Limited, Opicoil Houston, Inc., Union
Texas East Kalimantan Limited, Universe Gas & Oil
Company, Inc. and Virginia International Company (Filed
as Exhibit 10.6 to the Company's Form 10-Q for quarter
ended June 30, 1996 (Commission File No. 1-9019) and
incorporated herein by reference)
10.83+ -- First Amendment to Supplemental Non-Qualified Savings
Plan for Executive Employees (Filed as Exhibit 10.1 to
the Company's Form 10-Q for quarter ended September 30,
1996 (Commission File No. 1-9019) and incorporated herein
by reference)
10.84+ -- Second Amendment to the Salaried Employees' Pension Plan
(Filed as Exhibit 10.2 to the Company's Form 10-Q for
quarter ended September 30, 1996 (Commission File No.
1-9019) and incorporated herein by reference)
10.85 -- License No. P213 and Deed of License Assignment covering
United Kingdom North Sea Blocks 16/26 (Britannia and Alba
Fields) and 28/5a (Filed as Exhibit 10.105 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.86+ -- First Amendment to Union Texas Petroleum Holdings, Inc.
1994 Incentive Plan (Filed as Exhibit 10.107 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.87+ -- Second Amendment to Union Texas Petroleum Holdings, Inc.
1992 Stock Option Plan (Filed as Exhibit 10.108 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.88+ -- Third Amendment to Union Texas Petroleum Holdings, Inc.
1987 Stock Option Plan (Filed as Exhibit 10.109 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
78
79
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.89+ -- Fourth Amendment to Union Texas Petroleum Holdings, Inc.
1985 Stock Option Plan (filed as Exhibit 10.110 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.90+ -- First Amendment to Union Texas Petroleum Supplemental
Retirement Plan II (filed as Exhibit 10.111 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.91 -- Second Amended and Restated Credit Agreement dated as of
March 29, 1996 among Union Texas Petroleum Holdings,
Inc., the Banks and Co-Agents listed therein and
NationsBank of Texas, N.A., as Agent (Filed as Exhibit
10.1 to the Company's Form 10-Q for quarter ended March
31, 1996 (Commission File No. 1-9019) and incorporated
herein by reference)
10.92 -- First Amendment Agreement dated as of March 11, 1997 to
the Second Amended and Restated Credit Agreement dated as
of March 29, 1996, among Union Texas Petroleum Holdings,
Inc., the Banks and Co-Agents listed therein and
NationsBank of Texas, N.A., as Agent (Filed as Exhibit
10.1 to the Company's Form 10-Q for quarter ended March
31, 1997 (Commission File No. 1-9019) and incorporated
herein by reference)
10.93 -- Credit Agreement dated as of March 11, 1997 among Union
Texas Petroleum Holdings, Inc., the Banks and Co-Agents
listed therein and NationsBank of Texas, N.A., as Agent
(Filed as Exhibit 10.2 to the Company's Form 10-Q for
quarter ended March 31, 1997 (Commission File No. 1-9019)
and incorporated herein by reference)
10.94 -- $1,127,000,000 Bontang VI Loan Agreement, dated as of
March 4, 1997, among Bank of America National Trust and
Savings Association, as Trustee under the Bontang VI
Trustee and Paying Agent Agreement, as Borrower, Bank of
Taiwan New York Agency as Lead Arranger, Bontang LNG
Train-H Investment Co., Ltd. as Co-Lead Arranger, The
Chase Manhattan Bank as Agent, Co-Agent and Co-Arranger,
and the Co-Agents, Co-Arrangers and Lenders named therein
(Filed as Exhibit 10.3 to the Company's Form 10-Q for
quarter ended March 31, 1997 (Commission File No. 1-9019)
and incorporated herein by reference)
10.95 -- Bontang VI Producers Agreement, dated as of March 4,
1997, by Pertamina, Total Indonesie, VICO, Union Texas
East Kalimantan Limited, Lasmo Sanga Sanga Limited,
Virginia International Company, Opicoil Houston, Inc.,
Universe Gas & Oil Company, Inc., Indonesia Petroleum,
Ltd., Unocal Indonesia Company (collectively, the
"Producers"), in favor of Bank of Taiwan New York Agency,
as Lead Arranger, Bontang LNG Train-H Investment Co.,
Ltd. as Co-Lead Arranger, The Chase Manhattan Bank as
Agent, Co-Agent and Co-Arranger, and the Co-Agents,
Co-Arrangers and Lenders named therein (Filed as Exhibit
10.4 to the Company's Form 10-Q for quarter ended March
31, 1997 (Commission File No. 1-9019) and incorporated
herein by reference)
10.96 -- Bontang VI Trustee and Paying Agent Agreement, dated as
of March 4, 1997, among the Producers and Bank of America
National Trust and Savings Association, as Trustee and
Paying Agent (Filed as Exhibit 10.5 to the Company's Form
10-Q for quarter ended March 31, 1997 (Commission File
No. 1-9019) and incorporated herein by reference)
10.97 -- Letter Agreement Amendment to Facility Agreement dated
May 26, 1995 between Union Texas Britannia Limited as
Borrower and The Chase Manhattan Bank as Arranger,
NationsBank, N.A. as Facility Agent and the Technical
Agents, Funding Agent, Account Bank and the other
financial institutions named therein (Filed as Exhibit
10.6 to the Company's Form 10-Q for quarter ended March
31, 1997 (Commission File No. 1-9019) and incorporated
herein by reference)
79
80
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.98 -- Amendment No. 2 to Bontang III Loan Agreement, dated as
of March 4, 1997 among BankAmerica 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 (Filed as
Exhibit 10.7 to the Company's Form 10-Q for quarter ended
March 31, 1997 (Commission File No. 1-9019) and
incorporated herein by reference)
10.99 -- Second Amendment to the Union Texas Petroleum Holdings,
Inc. 1994 Incentive Plan (Filed as Exhibit 10.2 to the
Company's Form 10-Q for quarter ended June 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.100 -- Third Amendment to Union Texas Petroleum Holdings, Inc.
1992 Stock Option Plan (Filed as Exhibit 10.3 to the
Company's Form 10-Q for quarter ended June 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.101 -- Fourth Amendment to Union Texas Petroleum Holdings, Inc.
1987 Stock Option Plan (Filed as Exhibit 10.4 to the
Company's Form 10-Q for quarter ended June 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.102 -- Fifth Amendment to Union Texas Petroleum Holdings, Inc.
1986 Stock Option Plan (Filed as Exhibit 10.5 to the
Company's Form 10-Q for quarter ended June 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.103 -- Third Amendment to Union Texas Petroleum Salaried
Employees' Pension Plan (Filed as Exhibit 10.1 to the
Company's Form 10-Q for quarter ended September 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.104 -- Stock Purchase Agreement dated as of January 27, 1998
between Occidental Oil and Gas Corporation, Union Texas
Venezuela Limited and Union Texas International
Corporation (Filed as Exhibit 2.1 to the Company's Form
8-K filed February 13, 1998 (Commission File No. 1-9019)
and incorporated herein by reference)
10.105+# -- Conformed Union Texas Petroleum Holdings, Inc. Executive
Severance Plan
10.106# -- Boqueron Operating Agreement dated July 29, 1997 between
Lagoven, S.A. and Union Texas Venezuela Limited and
Preussag Energie GmbH (portions have been omitted
pursuant to a request for confidential treatment under
the Securities Exchange Act of 1934)
10.107# -- DZO Operating Services Agreement dated November 19, 1993
between Compania Occidental de Hidrocarburos, Inc. and
Maraven, S.A., as amended by Addendum No. 1 dated
December 7, 1994 (portions have been omitted pursuant to
a request for confidential treatment under the Securities
Exchange Act of 1934)
10.108# -- Loan Agreement dated February 4, 1998 between Compania
Occidental de Hidrocarburos, Inc., as Borrower and
NationsBank of Texas, N.A. with Promissory Note attached
as Exhibit A and Guaranty Agreement dated as of February
4, 1998 between Union Texas Petroleum Holdings, Inc., as
Guarantor, and NationsBank of Texas, N.A., as Lender,
attached as Exhibit B
10.109+# -- Fourth Amendment to Union Texas Petroleum Salaried
Employees' Pension Plan
10.110+# -- Fourth Amendment to Union Texas Petroleum Savings Plan
for Salaried Employees
10.111+# -- Amended and Restated Union Texas Petroleum Deferred
Compensation Plan
80
81
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.112# -- Addendum to Badak IV LNG Sales Contract Supply Agreement,
dated January 31, 1994, but effective as of October 23,
1990, by and between Pertamina, on the one hand, and
VICO, LASMO Sanga Sanga Limited, Opicoil Houston, Inc.,
Union Texas East Kalimantan Limited, Universe Gas & Oil
Company, Inc. and Virginia International Company
10.113# -- Memorandum of Agreement, dated September 30, 1994 by and
between Pertamina and Korea Gas Corporation
10.114# -- Package V Supply Agreement (1995-1999 LNG Sales to Korea
Gas Corporation), dated June 16, 1995, but effective as
of September 30, 1994, between Pertamina and VICO, LASMO
Sanga Sanga Limited, Opicoil Houston, Inc., Union Texas
East Kalimantan Limited, Universe Gas & Oil Company, Inc.
and Virginia International Company
10.115# -- Memorandum of Agreement, effective as of December 6,
1994, between Pertamina and Chinese Petroleum Corporation
for sale and purchase of LNG during 1998 and 1999
10.116# -- Package V Supply Agreement (1998-1999 LNG Sales to
Chinese Petroleum Corporation), dated June 16, 1995, but
effective as of December 6, 1994, by and between
Pertamina and VICO, Lasmo Sanga Sanga Limited, Opicoil
Houston, Inc., Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Virginia
International Company
10.117# -- Trust under the Union Texas Petroleum Deferred
Compensation Plan
10.118# -- Supplemental Memorandum, dated as of August 24, 1983, by
and between Pertamina and Roy M. Huffington, Inc.,
Virginia International Company, Ultramar Indonesia
Limited, Indonesian Superior Oil Company, Union Texas Far
East Corporation and Universe Tankships, Inc.
10.119# -- Seventh Supply Agreement for Excess Sales (Additional
Fixed Quantities Under Badak LNG Sales Contract as a
Result of Contract Amendment and Restatement) between
Pertamina and Virginia Indonesia Company, Opicoil
Houston, Inc., Ultramar Indonesia Limited, Union Texas
East Kalimantan Limited, Universe Gas & Oil Company, Inc.
and Virginia International Company, effective as of
January 1, 1990
21.1# -- List of Subsidiaries
23.1 -- Consent of Price Waterhouse LLP is included on page S-1
of this Annual Report on Form 10-K
24.1 -- Power of Attorney, pursuant to which amendments to this
Annual Report on Form 10-K may be filed, is included on
page 82 of this Annual Report on Form 10-K
27.1# -- Financial data schedule
- ---------------
+ Executive Severance Plan or Arrangement pursuant to Item 601(b)(10)(iii)(A) of
Regulation S-K.
# Filed herewith.
(B) REPORTS ON FORM 8-K
The Company filed Current Reports on Form 8-K dated: (i) October 22, 1997
to attach a press release announcing the Company's third quarter earnings and
(ii) February 13, 1998 to report the Venezuelan acquisition of a 100% interest
in the operating services contract for the DZO unit, the drilling results of an
exploration well in China and to attach press releases reporting that five
employees were killed in Pakistan, the appointment of Ambassador Robert Barry to
the Company's Board of Directors, the Company's 1997 year-end and fourth quarter
results and the Company's 1998 capital spending budget.
81
82
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ DONALD M. MCMULLAN
-------------------------------------
Donald M. McMullan
Vice President and Controller
Date: February 26, 1998
POWER OF ATTORNEY
We, the undersigned, directors and officers of Union Texas Petroleum
Holdings, Inc. (the "Company"), do hereby severally constitute and appoint John
L. Whitmire, Larry D. Kalmbach and Donald M. McMullan and each or any one of
them, our true and lawful attorneys and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, and to file the same with
all exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys and agents, and
each or any of them, full power and authority to do and perform each and every
act and thing requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JOHN L. WHITMIRE Chairman of the Board and Chief February 26, 1998
- ----------------------------------------------------- Executive Officer (Principal
(John L. Whitmire) Executive Officer)
/s/ LARRY D. KALMBACH Vice President and Chief Financial February 26, 1998
- ----------------------------------------------------- Officer (Principal Financial
(Larry D. Kalmbach) Officer)
/s/ DONALD M. MCMULLAN Vice President and Controller February 26, 1998
- ----------------------------------------------------- (Principal Accounting Officer)
(Donald M. McMullan)
/s/ ROBERT L. BARRY Director February 26, 1998
- -----------------------------------------------------
(Robert L. Barry)
/s/ GLENN A. COX Director February 26, 1998
- -----------------------------------------------------
(Glenn A. Cox)
/s/ EDWARD A. GILHULY Director February 26, 1998
- -----------------------------------------------------
(Edward A. Gilhuly)
82
83
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES H. GREENE, JR. Director February 26, 1998
- -----------------------------------------------------
(James H. Greene, Jr.)
/s/ HENRY R. KRAVIS Director February 26, 1998
- -----------------------------------------------------
(Henry R. Kravis)
/s/ MICHAEL W. MICHELSON Director February 26, 1998
- -----------------------------------------------------
(Michael W. Michelson)
/s/ WYLIE B. PIEPER Director February 26, 1998
- -----------------------------------------------------
(Wylie B. Pieper)
/s/ STANLEY P. PORTER Director February 26, 1998
- -----------------------------------------------------
(Stanley P. Porter)
/s/ GEORGE R. ROBERTS Director February 26, 1998
- -----------------------------------------------------
(George R. Roberts)
/s/ RICHARD R. SHINN Director February 26, 1998
- -----------------------------------------------------
(Richard R. Shinn)
/s/ SELLERS STOUGH Director February 26, 1998
- -----------------------------------------------------
(Sellers Stough)
83
84
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of Union Texas Petroleum Holdings, Inc.'s Registration
Statements on Form S-8 (Nos. 33-26105, 33-44045, 33-13575, 33-21684, 33-59213,
33-64928, 333-30805, 333-30807 and 333-30811) and Form S-3 (No. 333-31039) of
our report dated February 16, 1998 appearing on page 38 of this Form 10-K.
PRICE WATERHOUSE LLP
Houston, Texas
February 26, 1998
S-1
85
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 -- Restated Certificate of Incorporation of Union Texas
Petroleum Holdings, Inc., as amended on May 10, 1995
(Filed under the identical exhibit number to the
Company's Form 8-K dated May 18, 1995 (Commission File
No. 1-9019) and incorporated herein by reference)
3.2# -- Bylaws of Union Texas Petroleum Holdings, Inc. as amended
December 19, 1997
3.3 -- Specimen of Certificate evidencing the Common Stock with
Rights attached (Filed as Exhibit 3.2 of the Company's
Form 10-Q for quarter ended September 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
4.1 -- Indenture for 8.25% Senior Notes due November 15, 1999,
dated as of November 15, 1992, between Union Texas
Petroleum Holdings, Inc., the Subsidiaries named therein
and State Street Bank and Trust Company (including form
of note) (Filed as Exhibit 10.1 to the Company's Form
10-Q for quarter ended March 31, 1994 (Commission File
No. 1-9019) and incorporated herein by reference)
4.2 -- Indenture dated as of March 15, 1995, among Union Texas
Petroleum Holdings, Inc., the Subsidiaries named therein
and The First National Bank of Chicago, as trustee (the
"1995 Indenture") (Filed as Exhibit 10.1 to the Company's
Form 10-Q for quarter ended March 31, 1995 (Commission
File No. 1-9019) and incorporated herein by reference)
4.3 -- Specimen Form of 8 3/8% Senior Note due March 15, 2005,
issued by Union Texas Petroleum Holdings, Inc. pursuant
to the 1995 Indenture (Filed as Exhibit 10.2 to the
Company's Form 10-Q for quarter ended March 31, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
4.4 -- Specimen Form of 8 1/2% Senior Note due April 15, 2007,
issued by Union Texas Petroleum Holdings, Inc. pursuant
to the 1995 Indenture (Filed as Exhibit 10.3 to the
Company's Form 10-Q for quarter ended March 31, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
4.5 -- Supplement dated November 7, 1995 to Indenture dated as
of November 15, 1992 for 8.25% Senior Notes due 1999,
between Union Texas Petroleum Holdings, Inc., the
Subsidiaries named therein and State Street Bank and
Trust Company (Filed as Exhibit 4.1 to the Company's Form
8-K dated November 17, 1995 (Commission File No. 1-9019)
and incorporated herein by reference)
4.6 -- Supplement dated November 7, 1995 to the 1995 Indenture
between Union Texas Petroleum Holdings, Inc., the
Subsidiaries named therein and The First National Bank of
Chicago (Filed as Exhibit 4.2 to the Company's Form 8-K
dated November 17, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
4.7 -- Form of Fixed Rate Medium-Term Note issued by the Company
pursuant to the 1995 Indenture (Filed as Exhibit 4.4 to
the Company's Registration Statement No. 33-64049 and
incorporated herein by reference). The Company agrees to
furnish to the Commission upon request a copy of each
instrument with respect to issues of such notes of the
Company, the authorized principal amount of which does
not exceed 10% of the consolidated assets of the Company
and its subsidiaries
86
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.8 -- Rights Agreement dated as of September 12, 1997 between
the Company and First Chicago Trust Company of New York,
as Rights Agent, which includes as Exhibit A the Form of
Right Certificate and as Exhibit B the Summary of Rights
to Purchase Common Stock (Filed as Exhibit 1 to the
Company's Form 8-A Registration Statement filed September
15, 1997 (Commission File No. 1-9019) and as Exhibit 4.1
to the Company's 10-Q for quarter ended September 30,
1997 (Commission File No. 1-9019) and incorporated herein
by reference)
10.1 -- Tax Agreement, dated as of June 27, 1985, among Allied
Corporation and Union Texas Petroleum Holdings, Inc.
(Filed as Exhibit 10.6 to the Company's Registration
Statement No. 33-00312 and incorporated herein by
reference)
10.2+ -- Form of Subscription Agreement between Union Texas
Petroleum Holdings, Inc. and certain employees (Filed as
Exhibit 10.8 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.3+ -- Form of Tagalong Agreement between Union Texas Petroleum
Holdings, Inc. and certain employees (Filed as Exhibit
10.9 to the Company's Registration Statement No. 33-00312
and incorporated herein by reference)
10.4+ -- Amended and Restated Union Texas Petroleum Salaried
Employees' Pension Plan, effective as of January 1, 1994
(Filed under the identical exhibit number to the
Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.5+ -- Union Texas Petroleum Holdings, Inc. 1985 Stock Option
Plan, as amended (Filed as Exhibit 10.10 to Post
Effective Amendment No. 2 to the Company's Registration
Statement No. 33-12800 and incorporated herein by
reference)
10.6+ -- Amended and Restated Union Texas Petroleum Savings Plan
for Salaried Employees, effective as of January 1, 1993
(Filed under the identical exhibit number to the
Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.7+ -- Amended and Restated Supplemental Non-Qualified Savings
Plan for Executive Employees of Union Texas Petroleum
Holdings, Inc. and its Subsidiaries, effective as of
January 1, 1993 (Filed under the identical exhibit number
to the Company's 1993 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.8+ -- Form of employment letter with executive officers (Filed
as Exhibit 10.18 to the Company's Registration Statement
No. 33-00312 and incorporated herein by reference) and
Exhibit A (Filed as Exhibit 10.10 to the Company's 1992
Form 10-K (Commission File No. 1-9019) and incorporated
herein by reference)
10.9 -- Joint Venture Agreement, dated as of August 8, 1968,
among Roy M. Huffington, Inc., Virginia International
Company, Austral Petroleum Gas Corporation, Golden Eagle
Indonesia Limited and Union Texas Far East Corporation,
as amended (the "Joint Venture Agreement") (Filed as
Exhibit 6.6 to the Registration Statement No. 2-58834 of
Alaska Interstate Company and incorporated herein by
reference)
10.10 -- Supply Agreement, dated as of April 14, 1981, for Badak
LNG Expansion Project among Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara ("Pertamina") and the parties
to the Joint Venture Agreement (Filed as Exhibit 10.14 to
the Company's 1992 Form 10-K (Commission File No. 1-9019)
and incorporated herein by reference)
87
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.11 -- Indenture, dated as of September 25, 1984, between Unimar
Company, as Issuer, and Irving Trust Company, as Trustee,
providing for 14,077,747 Indonesian Participating Units
(Filed as Exhibit 4 to the Form S-14 Registration
Statement No. 2-93037 of Unimar Company and incorporated
herein by reference)
10.12 -- Amended and Restated Agreement of General Partnership of
Unimar Company, dated as of September 11, 1990 (Filed as
Exhibit 3.1 to the Form 10-Q for quarter ended September
30, 1990 of Unimar Company (Commission File No. 1-8791)
and incorporated herein by reference)
10.13 -- License No. P054 concerning all or part of the following
blocks in the United Kingdom North Sea: 49/15 and 49/25
(Sean Field) (Filed as Exhibit 10.74 to the Company's
Registration Statement No. 33-00312 and incorporated
herein by reference)
10.14 -- License No. P220 concerning all or part of the following
blocks in the United Kingdom North Sea: 9/26, 14/19,
15/11, 15/15, 15/17 and 210/29 (Piper Field) (Filed as
Exhibit 10.75 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.15 -- License No. P249 concerning part of the following block
in the United Kingdom North Sea: 14/19 (Claymore Field)
(Filed as Exhibit 10.76 to the Company's Registration
Statement No. 33-00312 and incorporated herein by
reference)
10.16 -- License No. P250 concerning all or part of the following
blocks in the United Kingdom North Sea: 9/26, 15/11,
15/15, 210/29, 15/17 and 14/19 (Scapa Field) (Filed as
Exhibit 10.77 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.17 -- Restated United Kingdom Continental Shelf Operating
Agreement (Piper License), dated as of August 11, 1977,
among Occidental Petroleum (U.K.) Limited, Occidental of
Britain, Inc., Getty Oil (Britain) Limited, Allied
Chemical (Great Britain) Limited, Allied Chemical (North
Sea) Ltd., Thomson North Sea Limited and the British
National Oil Corporation (Filed as Exhibit No. 10.78 to
the Company's Registration Statement No. 33-00312 and
incorporated herein by reference)
10.18 -- Restated United Kingdom Continental Shelf Operating
Agreement (Claymore License), dated August 11, 1977,
among Occidental Petroleum (Caledonia) Limited,
Occidental of Scotland, Inc., Getty Oil (Britain)
Limited, Allied Chemical (Great Britain) Limited, Allied
Chemical (North Sea) Ltd., Thomson North Sea Limited and
the British National Oil Corporation (Filed as Exhibit
10.79 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.19 -- United Kingdom Continental Shelf Joint Operating
Agreement for Blocks 49/15a and 49/25a (Sean Field),
dated July 3, 1984, among Shell U.K. Limited, Union Texas
Petroleum Limited, Britoil Public Limited Company and
Esso Exploration and Production U.K. Limited (Filed as
Exhibit 10.81 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.20 -- Agreement for Sale and Purchase of Natural Gas from the
Sean North and Sean South Fields, dated November 7, 1984,
between Union Texas Petroleum Limited and British Gas
Corporation, including list of omitted schedules (Filed
as Exhibit 10.82 to the Company's Registration Statement
No. 33-00312 and incorporated herein by reference)
88
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.21 -- Badak III LNG Sales Contract, dated March 19, 1987,
between Pertamina, as Seller, and Chinese Petroleum
Corporation, as Buyer (Filed as Exhibit 10.28 to the
Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.22 -- Supplemental Indenture, dated as of October 31, 1986, to
the Indenture between Unimar Company and Irving Trust
Company (Exhibit 10.13 above) (Filed as Exhibit 10.114 to
the Company's Registration Statement No. 33-16267 and
incorporated herein by reference)
10.23 -- Amended and Restated Registration Rights Agreement, dated
September 30, 1987, among Union Texas Petroleum Holdings,
Inc. and Certain Holders of Certain Securities of Union
Texas Petroleum Holdings, Inc. (Filed as Exhibit 10.117
to Post Effective Amendment No. 1 to the Company's
Registration Statement No. 33-12800 and incorporated
herein by reference)
10.24+ -- Union Texas Petroleum Holdings, Inc. 1987 Stock Option
Plan and First Amendment to Union Texas Petroleum
Holdings, Inc. 1987 Stock Option Plan (Filed as Exhibit
4.4 to the Company's Registration Statement No. 33-21684
and incorporated herein by reference)
10.25 -- Badak III LNG Sales Contract Supply Agreement, dated
October 19, 1987, among Pertamina and the parties to the
Joint Venture Agreement (Filed as Exhibit 10.132 to Post
Effective Amendment No. 1 to the Company's Registration
Statement No. 33-12800 and incorporated herein by
reference)
10.26 -- $316,000,000 Bontang III Loan Agreement, dated February
9, 1988, among the 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 for the Tranche B Lenders and as Tranche
B Lender (Filed as Exhibit 10.83 to Post Effective
Amendment No. 2 to the Company's Registration Statement
No. 33-12800 and incorporated herein by reference)
10.27 -- Bontang III Producers Agreement, dated as of February 9,
1988, among Pertamina, Roy M. Huffington, Inc.,
Huffington Corporation, VICO, Virginia International
Company, Ultramar Indonesia Company Limited, Union Texas
East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum,
Ltd., in favor of Train-E Finance Co., Ltd., as Tranche A
Lender, The Industrial Bank of Japan Trust Company as
Agent for the Tranche B Lenders and as Tranche B Lender,
and the other Tranche B Lenders named therein (Filed as
Exhibit 10.84 to the Post Effective Amendment No. 2 to
the Company's Registration Statement No. 33-12800 and
incorporated herein by reference)
10.28 -- Bontang III Trustee and Paying Agent Agreement, dated
February 9, 1988, among Pertamina, Roy M. Huffington,
Inc., Huffington Corporation, Virginia International
Company, VICO, Ultramar Indonesia Limited, Union Texas
East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum,
Ltd. and the Trustee thereunder (Filed as Exhibit 10.42
to the Company's 1991 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.29+ -- Third Amendment to Union Texas Petroleum Holdings, Inc.
1985 Stock Option Plan (Filed as Exhibit 10.95 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
89
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.30+ -- Second Amendment to Union Texas Petroleum Holdings, Inc.
1987 Stock Option Plan (Filed as Exhibit 10.96 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.31+ -- Union Texas Petroleum Supplemental Retirement Plan (Filed
as Exhibit 10.99 to the Company's Form 10-Q for quarter
ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.32+ -- Amended and Restated Union Texas Petroleum Supplemental
Retirement Plan II, effective January 1, 1994 (Filed as
Exhibit 10.41 to the Company's 1993 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.33+ -- Union Texas Petroleum Supplemental Retirement Plans
Trust, as amended (Filed as Exhibit 10.101 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.34 -- Amended and Restated Production Sharing Contract
effective August 8, 1968-August 7, 1998 among Pertamina,
Roy M. Huffington, Inc., VICO, Virginia International
Company, Ultramar Indonesia Limited, Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Huffington Corporation (Filed as Exhibit 10.102 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.35 -- Production Sharing Contract effective August 8,
1998-August 7, 2018 among Pertamina, Roy M. Huffington,
Inc., VICO, Virginia International Company, Ultramar
Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Huffington
Corporation (Filed as Exhibit 10.103 to the Company's
Form 10-Q for quarter ended June 30, 1990 (Commission
File No. 1-9019) and incorporated herein by reference)
10.36 -- Joint Operating Agreement for the Scapa Field, dated
December 23, 1985, among Occidental Petroleum (Caledonia)
Limited, Texaco Britain Limited, Union Texas Petroleum
Limited, Thomson North Sea Limited, Thomson Scottish
Petroleum Limited and the Oil and Pipelines Agency (Filed
as Exhibit 10.104 to the Company's Form 10-Q for quarter
ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.37 -- Amended and Restated 1973 LNG Sales Contract, dated as of
the 1st day of January, 1990, by and between 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 Buyers (Filed as Exhibit (10)-8 to
the 1993 Form 10-K of Unimar Company (Commission File No.
1-8791) and incorporated herein by reference)
10.38 -- Amended and Restated Bontang Processing Agreement, dated
February 9, 1988, among Pertamina and Roy M. Huffington,
Inc., Huffington Corporation, VICO, Virginia
International Company, Ultramar Indonesia Limited, Union
Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia
Petroleum, Ltd. and P.T. Badak Natural Gas Liquefaction
Company (Filed as Exhibit (10)-39 to the 1988 Form 10-K
of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
90
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.39 -- Amended and Restated Debt Service Allocation Agreement,
dated February 9, 1988, among Pertamina and Roy M.
Huffington, Inc., VICO, Ultramar Indonesia Limited,
Virginia International Company, Union Texas East
Kalimantan Limited, Universe Tankships, Inc., Huffington
Corporation, Total Indonesie, Unocal Indonesia, Ltd. and
Indonesia Petroleum, Ltd. (Filed as Exhibit (10)-40 to
the 1988 Form 10-K of Unimar Company (Commission File No.
1-8791) and incorporated herein by reference)
10.40 -- Amendment No. 1 to Bontang III Producers Agreement, dated
as of May 31, 1988, among Pertamina, Roy M. Huffington,
Inc., Huffington Corporation, VICO, Virginia
International Company, Ultramar Indonesia Limited, Union
Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia
Petroleum, Ltd. and Train-E Finance Co., Ltd., as Tranche
A Lender, and The Industrial Bank of Japan Trust Company
on behalf of the Tranche B Lender, (Filed as Exhibit
(10)-21 to the 1993 Form 10-K of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
10.41 -- Badak IV LNG Sales Contract, dated October 23, 1990,
between Pertamina, as Seller, and Osaka Gas Co., Ltd.,
Tokyo Gas Co., Ltd. and Toho Gas Co., Ltd., as Buyer
(Filed as Exhibit (10)-65 to the 1990 Form 10-K of Unimar
Company (Commission File No. 1-8791) and incorporated
herein by reference)
10.42 -- Supply Agreement for Natural Gas to Badak IV LNG Sales
Contract, dated August 12, 1991, by and between
Pertamina, VICO, Opicoil Houston, Inc., Ultramar
Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.80 to the
Company's 1991 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.43 -- LNG Sales and Purchase Contract (Korea II), dated May 7,
1991, between Pertamina, as Seller, and Korea Gas
Corporation, as Buyer (Filed as Exhibit (10)-1 to the
1990 Form 10-Q for quarter ended June 30, 1991 of Unimar
Company (Commission File No. 1-8791) and incorporated
herein by reference)
10.44 -- $750,000,000 Bontang IV Loan Agreement, dated as of
August 26, 1991, among the Trustee under the Bontang IV
Trustee and Paying Agent Agreement as Borrower, Chase
Manhattan Asia Limited and The Mitsubishi Bank, Limited
as Coordinators, the other banks and financial
institutions named therein as Arrangers, Co-Arrangers,
Lead Managers, Managers, Co-Managers and Lenders, The
Chase Manhattan Bank, N.A. and The Mitsubishi Bank,
Limited as Co-Agents and The Chase Manhattan Bank, N.A.
as Agent (Filed as Exhibit 10.1 to the Form 10-Q for
quarter ended September 30, 1991 of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
10.45 -- Bontang IV Producers Agreement, dated as of August 26,
1991, by Pertamina, Virginia International Company,
Opicoil Houston, Inc., VICO, Ultramar Indonesia Limited,
Union Texas East Kalimantan Limited, Universe Gas & Oil
Company, Inc., Total Indonesie, Unocal Indonesia, Ltd.
and Indonesia Petroleum, Ltd. in favor of The Chase
Manhattan Bank, N.A., as Agent for the Lenders and as
Lender, and the other Lenders named therein (Filed as
Exhibit 10.2 to the Form 10-Q for quarter ended September
30, 1991 of Unimar Company (Commission File No. 1-8791)
and incorporated herein by reference)
91
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.46 -- Bontang IV Trustee and Paying Agent Agreement, dated as
of August 26, 1991, among Pertamina, Virginia
International Company, Opicoil Houston, Inc., VICO,
Ultramar Indonesia Limited, Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum,
Ltd. and the Trustee thereunder (Filed as Exhibit 10.3 to
the Form 10-Q for quarter ended September 30, 1991 of
Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.47 -- Consulting Agreement, dated as of November 18, 1992,
among Petroleum Associates, L.P., KKR Partners II, L.P.
and Union Texas Petroleum Holdings, Inc. (Filed as
Exhibit 10.81 to the Company's 1992 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.48+ -- Second Amendment to Union Texas Petroleum Supplemental
Retirement Plans Trust (Filed as Exhibit 10.82 to the
Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.49 -- Amendment No. 1 to Bontang III Trustee and Paying Agent
Agreement, dated as of December 11, 1992, among
Pertamina, VICO, Virginia International Company, Ultramar
Indonesia Limited, Union Texas East Kalimantan Limited,
Opicoil Houston, Inc., Universe Gas & Oil Company, Inc.,
Total Indonesie, Unocal Indonesia Ltd., Indonesia
Petroleum, Ltd. and the Bontang III Trustee (Filed as
Exhibit 10.83 to the Company's 1992 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.50+ -- First Amendment to Union Texas Petroleum Supplemental
Retirement Plan (Filed as Exhibit 10.85 to the Company's
1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.51+ -- Union Texas Petroleum Holdings, Inc. 1992 Stock Option
Plan (Filed as Exhibit 4.3 to the Company's Registration
Statement No. 33-64928 and incorporated herein by
reference)
10.52 -- Arun and Bontang LPG Sales and Purchase Contract, dated
July 15, 1986, between Pertamina, as Seller, and
Mitsubishi Corporation, Cosmo Oil Co., Ltd., Nippon
Petroleum Gas Co., Ltd., Showa Shell Sekiyu K.K., Kyodo
Oil Co., Ltd., Idemitsu Kosan Co., Ltd. and Mitsui
Liquefied Gas Co., Ltd., as Buyers (Filed as Exhibit
(10)-60 to the 1991 Form 10-K of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
10.53 -- Petroleum Concession Agreement, dated January 21, 1992,
between the President of the Islamic Republic of Pakistan
and Union Texas Pakistan, Inc., Occidental Petroleum
(Pakistan) Inc. and Oil & Gas Development Corporation
(Filed as Exhibit 10.87 to the Company's Form 10-Q for
quarter ended March 31, 1992 (Commission File No. 1-9019)
and incorporated herein by reference)
10.54 -- Amended and Restated Supply Agreement (In support of the
Amended and Restated 1973 LNG Sales Contract), dated
September 22, 1993, and effective December 3, 1973,
between Pertamina and VICO, LASMO Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.75 to the
Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
92
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.55 -- Share Sale Agreement, dated October 18, 1994, among Union
Texas Petroleum Limited, Fina Petroleum Development
Limited and Fina Exploration Limited (the "Share Sale
Agreement") (Filed as Exhibit 2.1 to the Company's Form
8-K dated November 14, 1994 (Commission File No. 1-9019)
and incorporated herein by reference)
10.56 -- Guarantee, dated October 18, 1994, by Union Texas
International Corporation relating to the Share Sale
Agreement (Filed as Exhibit 2.3 to the Company's Form 8-K
dated November 14, 1994 (Commission File No. 1-9019) and
incorporated herein by reference)
10.57 -- Petroleum Concession Agreement, dated April 20, 1977,
between the President of Pakistan and Union Texas
Pakistan, Inc. (Filed as Exhibit 10.87 to the Company's
1994 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.58 -- Amendments to Arun and Bontang LPG Sales and Purchase
Contract, dated October 5, 1994, between Pertamina, as
Seller, and Mitsubishi Corporation, Cosmo Oil Co., Ltd.,
Nippon Petroleum Gas Co., Ltd., Showa Shell Sekiyu K.K.,
Japan Energy Corporation, Idemitsu Kosan Co., Ltd. and
Mitsui Oil & Gas Co., Ltd., as Buyers (Filed as Exhibit
10.88 to the Company's 1994 Form 10-K (Commission File
No. 1-9019) and incorporated herein by reference)
10.59 -- Amendment to the Amended and Restated 1973 LNG Sales
Contract, dated as of the 1st day of June 1992, by and
between Pertamina, as Seller, and Kyushu Electric Power
Co., Inc., Nippon Steel Corporation and Toho Gas Co.,
Ltd., as Buyers (Filed as Exhibit (10)-9 to the 1993 Form
10-K of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.60 -- Facility Agreement, dated May 26, 1995, among Union Texas
Britannia Limited, Chemical Bank, as Arranger,
NationsBank, N.A. Carolinas, as Facility Agent, National
Westminster Bank plc, as Funding Agent, and the
Co-Arrangers, Technical Agents, Account Bank and Banks
named therein (Filed as Exhibit 10.9 to the Company's
Form 10-Q for quarter ended June 30, 1995 (Commission
File No. 1-9019) and incorporated herein by reference)
10.61 -- Sponsor Direct Agreement, dated May 26, 1995, among Union
Texas Petroleum Limited, Union Texas Britannia Limited
and NationsBank N.A. Carolinas, as Facility Agent (Filed
as Exhibit 10.10 to the Company's Form 10-Q for quarter
ended June 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.62 -- Sponsor Support Agreement, dated May 26, 1995, between
Union Texas Petroleum Limited and Union Texas Britannia
Limited (Filed as Exhibit 10.11 to the Company's Form
10-Q for quarter ended June 30, 1995 (Commission File No.
1-9019) and incorporated herein by reference)
10.63+ -- Union Texas Petroleum Holdings, Inc. 1994 Incentive Plan
(Filed as Exhibit 10.12 to the Company's Form 10-Q for
quarter ended June 30, 1995 (Commission File No. 1-9019)
and incorporated herein by reference)
10.64+ -- First Amendment to Union Texas Petroleum Holdings, Inc.
1992 Stock Option Plan (Filed as Exhibit 10.13 to the
Company's Form 10-Q for quarter ended June 30, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
93
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.65 -- Sale and Purchase Agreement dated May 31, 1995, between
Union Texas Petroleum Limited and Oryx U.K. Energy
Company (Filed as Exhibit 10.14 to the Company's Form
10-Q for quarter ended June 30, 1995 (Commission File No.
1-9019) and incorporated herein by reference)
10.66 -- 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") (Filed as Exhibit 10.1 to
the Company's Form 10-Q for quarter ended September 30,
1995 (Commission File No. 1-9019) and incorporated herein
by reference)
10.67 -- Bontang V Producers Agreement, dated as of July 1, 1995,
by Pertamina, VICO, 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, the Banks
named therein as Tranche B Lenders and the Facility
Agent, Intercreditor Agent and Technical Agent (Filed as
Exhibit 10.2 to the Company's Form 10-Q for quarter ended
September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.68 -- Bontang V Trustee and Paying Agent Agreement, dated as of
July 1, 1995, among the Producers and BankAmerica
International, as Trustee and Paying Agent (Filed as
Exhibit 10.3 to the Company's Form 10-Q for quarter ended
September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.69 -- 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
(Filed as Exhibit 10.6 to the Company's Form 10-Q for
quarter ended September 30, 1995 (Commission File No.
1-9019) and incorporated herein by reference)
10.70 -- Second Amended and Restated 1973 LNG Sales Contract,
dated as of August 3, 1995, between 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 (Filed as
Exhibit 10.7 to the Company's Form 10-Q for quarter ended
September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.71 -- 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
VICO, LASMO Sanga Sanga Limited, OPICOIL Houston, Inc.,
Union Texas East Kalimantan Limited, Universe Gas and Oil
Company, Inc. and Virginia International Company (Filed
as Exhibit 10.8 to the Company's Form 10-Q for quarter
ended September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
94
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.72+ -- First Amendment to Union Texas Petroleum Savings Plan for
Salaried Employees (Filed as Exhibit 10.9 to the
Company's Form 10-Q for quarter ended September 30, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
10.73+ -- Second Amendment to Union Texas Petroleum Savings Plan
for Salaried Employees (Filed as Exhibit 10.103 to the
Company's 1995 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.74 -- Second Amended and Restated 1981 Badak LNG Sales
Contract, dated as of August 3, 1995, between Pertamina,
as Seller, and Chubu Electric Power Co., Inc., The Kansai
Electric Power Co., Inc., Osaka Gas Co., Ltd. and Toho
Gas Co., Ltd., as Buyers, with related letter agreement,
dated August 3, 1995, between Seller and Buyers (Filed as
Exhibit 10.104 to the Company's 1995 Form 10-K
(Commission File No. 1-9019) and incorporated herein by
reference)
10.75 -- LNG Sales and Purchase Contract (Badak V), dated August
12, 1995, between Pertamina and Korea Gas Corporation
(Filed as Exhibit 10.105 to the Company's 1995 Form 10-K
(Commission File No. 1-9019) and incorporated herein by
reference)
10.76 -- LNG Sale and Purchase Contract (Badak VI), dated October
25, 1995, between Pertamina and Chinese Petroleum
Corporation (Filed as Exhibit 10.106 to the Company's
1995 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.77 -- Badin-II Revised Petroleum Concession Agreement, dated
January 22, 1995 between the President of the Islamic
Republic of Pakistan and Union Texas Pakistan, Inc.,
Occidental Petroleum (Pakistan), Inc., Oil and Gas
Development Corporation and the Federal Government of the
Islamic Republic of Pakistan (Filed as Exhibit 10.107 to
the Company's 1995 Form 10-K (Commission File No. 1-9019)
and incorporated herein by reference)
10.78+ -- Third Amendment to Union Texas Petroleum Savings Plan for
Salaried Employees (Filed as Exhibit 10.1 to the
Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by
reference)
10.79 -- First Supply Agreement for Package V Excess Sales
(1998-1999 LNG Sales to Korea Gas Corporation under Badak
V), dated as of May 1, 1996, between Pertamina and
Virginia Indonesia Company, Lasmo Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.2 to the
Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by
reference)
10.80 -- Package VI Supply Agreement for Natural Gas in Support of
2000-2017 LNG Sales to Korea Gas Corporation under Badak
V, dated as of May 1, 1996, between Pertamina and
Virginia Indonesia Company, Lasmo Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.4 to the
Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by
reference)
95
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.81 -- Package VI Supply Agreement for Natural Gas in Support of
2000-2017 LNG Sales to Chinese Petroleum Corporation
under Badak VI, dated as of May 1, 1996, between
Pertamina and Virginia Indonesia Company, Lasmo Sanga
Sanga Limited, Opicoil Houston, Inc., Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Virginia International Company (Filed as Exhibit 10.5 to
the Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by
reference)
10.82 -- First Supply Agreement for Package VI Excess Sales
(2003-2008 LNG Sales under the Second Amended and
Restated 1981 Badak Sales Contract), dated as of May 1,
1996, between Pertamina and Virginia Indonesia Company,
Lasmo Sanga Sanga Limited, Opicoil Houston, Inc., Union
Texas East Kalimantan Limited, Universe Gas & Oil
Company, Inc. and Virginia International Company (Filed
as Exhibit 10.6 to the Company's Form 10-Q for quarter
ended June 30, 1996 (Commission File No. 1-9019) and
incorporated herein by reference)
10.83+ -- First Amendment to Supplemental Non-Qualified Savings
Plan for Executive Employees (Filed as Exhibit 10.1 to
the Company's Form 10-Q for quarter ended September 30,
1996 (Commission File No. 1-9019) and incorporated herein
by reference)
10.84+ -- Second Amendment to the Salaried Employees' Pension Plan
(Filed as Exhibit 10.2 to the Company's Form 10-Q for
quarter ended September 30, 1996 (Commission File No.
1-9019) and incorporated herein by reference)
10.85 -- License No. P213 and Deed of License Assignment covering
United Kingdom North Sea Blocks 16/26 (Britannia and Alba
Fields) and 28/5a (Filed as Exhibit 10.105 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.86+ -- First Amendment to Union Texas Petroleum Holdings, Inc.
1994 Incentive Plan (Filed as Exhibit 10.107 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.87+ -- Second Amendment to Union Texas Petroleum Holdings, Inc.
1992 Stock Option Plan (Filed as Exhibit 10.108 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.88+ -- Third Amendment to Union Texas Petroleum Holdings, Inc.
1987 Stock Option Plan (Filed as Exhibit 10.109 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.89+ -- Fourth Amendment to Union Texas Petroleum Holdings, Inc.
1985 Stock Option Plan (filed as Exhibit 10.110 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.90+ -- First Amendment to Union Texas Petroleum Supplemental
Retirement Plan II (filed as Exhibit 10.111 to the
Company's 1996 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.91 -- Second Amended and Restated Credit Agreement dated as of
March 29, 1996 among Union Texas Petroleum Holdings,
Inc., the Banks and Co-Agents listed therein and
NationsBank of Texas, N.A., as Agent (Filed as Exhibit
10.1 to the Company's Form 10-Q for quarter ended March
31, 1996 (Commission File No. 1-9019) and incorporated
herein by reference)
96
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.92 -- First Amendment Agreement dated as of March 11, 1997 to
the Second Amended and Restated Credit Agreement dated as
of March 29, 1996, among Union Texas Petroleum Holdings,
Inc., the Banks and Co-Agents listed therein and
NationsBank of Texas, N.A., as Agent (Filed as Exhibit
10.1 to the Company's Form 10-Q for quarter ended March
31, 1997 (Commission File No. 1-9019) and incorporated
herein by reference)
10.93 -- Credit Agreement dated as of March 11, 1997 among Union
Texas Petroleum Holdings, Inc., the Banks and Co-Agents
listed therein and NationsBank of Texas, N.A., as Agent
(Filed as Exhibit 10.2 to the Company's Form 10-Q for
quarter ended March 31, 1997 (Commission File No. 1-9019)
and incorporated herein by reference)
10.94 -- $1,127,000,000 Bontang VI Loan Agreement, dated as of
March 4, 1997, among Bank of America National Trust and
Savings Association, as Trustee under the Bontang VI
Trustee and Paying Agent Agreement, as Borrower, Bank of
Taiwan New York Agency as Lead Arranger, Bontang LNG
Train-H Investment Co., Ltd. as Co-Lead Arranger, The
Chase Manhattan Bank as Agent, Co-Agent and Co-Arranger,
and the Co-Agents, Co-Arrangers and Lenders named therein
(Filed as Exhibit 10.3 to the Company's Form 10-Q for
quarter ended March 31, 1997 (Commission File No. 1-9019)
and incorporated herein by reference)
10.95 -- Bontang VI Producers Agreement, dated as of March 4,
1997, by Pertamina, Total Indonesie, VICO, Union Texas
East Kalimantan Limited, Lasmo Sanga Sanga Limited,
Virginia International Company, Opicoil Houston, Inc.,
Universe Gas & Oil Company, Inc., Indonesia Petroleum,
Ltd., Unocal Indonesia Company (collectively, the
"Producers"), in favor of Bank of Taiwan New York Agency,
as Lead Arranger, Bontang LNG Train-H Investment Co.,
Ltd. as Co-Lead Arranger, The Chase Manhattan Bank as
Agent, Co-Agent and Co-Arranger, and the Co-Agents,
Co-Arrangers and Lenders named therein (Filed as Exhibit
10.4 to the Company's Form 10-Q for quarter ended March
31, 1997 (Commission File No. 1-9019) and incorporated
herein by reference)
10.96 -- Bontang VI Trustee and Paying Agent Agreement, dated as
of March 4, 1997, among the Producers and Bank of America
National Trust and Savings Association, as Trustee and
Paying Agent (Filed as Exhibit 10.5 to the Company's Form
10-Q for quarter ended March 31, 1997 (Commission File
No. 1-9019) and incorporated herein by reference)
10.97 -- Letter Agreement Amendment to Facility Agreement dated
May 26, 1995 between Union Texas Britannia Limited as
Borrower and The Chase Manhattan Bank as Arranger,
NationsBank, N.A. as Facility Agent and the Technical
Agents, Funding Agent, Account Bank and the other
financial institutions named therein (Filed as Exhibit
10.6 to the Company's Form 10-Q for quarter ended March
31, 1997 (Commission File No. 1-9019) and incorporated
herein by reference)
10.98 -- Amendment No. 2 to Bontang III Loan Agreement, dated as
of March 4, 1997 among BankAmerica 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 (Filed as
Exhibit 10.7 to the Company's Form 10-Q for quarter ended
March 31, 1997 (Commission File No. 1-9019) and
incorporated herein by reference)
97
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.99 -- Second Amendment to the Union Texas Petroleum Holdings,
Inc. 1994 Incentive Plan (Filed as Exhibit 10.2 to the
Company's Form 10-Q for quarter ended June 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.100 -- Third Amendment to Union Texas Petroleum Holdings, Inc.
1992 Stock Option Plan (Filed as Exhibit 10.3 to the
Company's Form 10-Q for quarter ended June 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.101 -- Fourth Amendment to Union Texas Petroleum Holdings, Inc.
1987 Stock Option Plan (Filed as Exhibit 10.4 to the
Company's Form 10-Q for quarter ended June 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.102 -- Fifth Amendment to Union Texas Petroleum Holdings, Inc.
1986 Stock Option Plan (Filed as Exhibit 10.5 to the
Company's Form 10-Q for quarter ended June 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.103 -- Third Amendment to Union Texas Petroleum Salaried
Employees' Pension Plan (Filed as Exhibit 10.1 to the
Company's Form 10-Q for quarter ended September 30, 1997
(Commission File No. 1-9019) and incorporated herein by
reference)
10.104 -- Stock Purchase Agreement dated as of January 27, 1998
between Occidental Oil and Gas Corporation, Union Texas
Venezuela Limited and Union Texas International
Corporation (Filed as Exhibit 2.1 to the Company's Form
8-K filed February 13, 1998 (Commission File No. 1-9019)
and incorporated herein by reference)
10.105+# -- Conformed Union Texas Petroleum Holdings, Inc. Executive
Severance Plan
10.106# -- Boqueron Operating Agreement dated July 29, 1997 between
Lagoven, S.A. and Union Texas Venezuela Limited and
Preussag Energie GmbH (portions have been omitted
pursuant to a request for confidential treatment under
the Securities Exchange Act of 1934)
10.107# -- DZO Operating Services Agreement dated November 19, 1993
between Compania Occidental de Hidrocarburos, Inc. and
Maraven, S.A., as amended by Addendum No. 1 dated
December 7, 1994 (portions have been omitted pursuant to
a request for confidential treatment under the Securities
Exchange Act of 1934)
10.108# -- Loan Agreement dated February 4, 1998 between Compania
Occidental de Hidrocarburos, Inc., as Borrower and
NationsBank of Texas, N.A. with Promissory Note attached
as Exhibit A and Guaranty Agreement dated as of February
4, 1998 between Union Texas Petroleum Holdings, Inc., as
Guarantor, and NationsBank of Texas, N.A., as Lender,
attached as Exhibit B
10.109+# -- Fourth Amendment to Union Texas Petroleum Salaried
Employees' Pension Plan
10.110+# -- Fourth Amendment to Union Texas Petroleum Savings Plan
for Salaried Employees
10.111+# -- Amended and Restated Union Texas Petroleum Deferred
Compensation Plan
10.112# -- Addendum to Badak IV LNG Sales Contract Supply Agreement,
dated January 31, 1994, but effective as of October 23,
1990, by and between Pertamina, on the one hand, and
VICO, LASMO Sanga Sanga Limited, Opicoil Houston, Inc.,
Union Texas East Kalimantan Limited, Universe Gas & Oil
Company, Inc. and Virginia International Company
10.113# -- Memorandum of Agreement, dated September 30, 1994 by and
between Pertamina and Korea Gas Corporation
98
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.114# -- Package V Supply Agreement (1995-1999 LNG Sales to Korea
Gas Corporation), dated June 16, 1995, but effective as
of September 30, 1994, between Pertamina and VICO, LASMO
Sanga Sanga Limited, Opicoil Houston, Inc., Union Texas
East Kalimantan Limited, Universe Gas & Oil Company, Inc.
and Virginia International Company
10.115# -- Memorandum of Agreement, effective as of December 6,
1994, between Pertamina and Chinese Petroleum Corporation
for sale and purchase of LNG during 1998 and 1999
10.116# -- Package V Supply Agreement (1998-1999 LNG Sales to
Chinese Petroleum Corporation), dated June 16, 1995, but
effective as of December 6, 1994, by and between
Pertamina and VICO, Lasmo Sanga Sanga Limited, Opicoil
Houston, Inc., Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Virginia
International Company
10.117# -- Trust under the Union Texas Petroleum Deferred
Compensation Plan
10.118# -- Supplemental Memorandum, dated as of August 24, 1983, by
and between Pertamina and Roy M. Huffington, Inc.,
Virginia International Company, Ultramar Indonesia
Limited, Indonesian Superior Oil Company, Union Texas Far
East Corporation and Universe Tankships, Inc.
10.119# -- Seventh Supply Agreement for Excess Sales (Additional
Fixed Quantities Under Badak LNG Sales Contract as a
Result of Contract Amendment and Restatement) between
Pertamina and Virginia Indonesia Company, Opicoil
Houston, Inc., Ultramar Indonesia Limited, Union Texas
East Kalimantan Limited, Universe Gas & Oil Company, Inc.
and Virginia International Company, effective as of
January 1, 1990
21.1# -- List of Subsidiaries
23.1 -- Consent of Price Waterhouse LLP is included on page S-1
of this Annual Report on Form 10-K
24.1 -- Power of Attorney, pursuant to which amendments to this
Annual Report on Form 10-K may be filed, is included on
page 82 of this Annual Report on Form 10-K
27.1# -- Financial data schedule
- ---------------
+ Executive Severance Plan or Arrangement pursuant to Item 601(b)(10)(iii)(A) of
Regulation S-K.
# Filed herewith.