1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 1-7792
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
TAX-ADVANTAGED SAVINGS PLAN OF POGO PRODUCING COMPANY
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
POGO PRODUCING COMPANY
5 GREENWAY PLAZA, SUITE 2700
HOUSTON, TEXAS 77046
2
Item 4. (a) Financial Statements and Schedules prepared in accordance with
the financial reporting requirements of ERISA.
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
TOGETHER WITH AUDITORS' REPORT
3
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Board,
Tax-Advantaged Savings Plan
of Pogo Producing Company:
We have audited the accompanying statements of net assets available for plan
benefits of the Tax-Advantaged Savings Plan of Pogo Producing Company (the Plan)
as of December 31, 1998 and 1997, and the related statements of changes in net
assets available for plan benefits for the years then ended. These financial
statements and the supplemental schedules referred to below are the
responsibility of the administrative board of the Plan. Our responsibility is to
express an opinion on these financial statements and supplemental schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of December
31, 1998 and 1997, and the changes in its net assets available for plan benefits
for the years then ended in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes as of December 31, 1998, and reportable transactions for
the year then ended are presented for purposes of additional analysis and are
not a required part of the basic financial statements but are supplementary
information required by the Department of Labor Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
May 21, 1999
4
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1998 AND 1997
1998 1999
------------ ------------
INVESTMENTS, at quoted market value:
Common stock of Pogo Producing Company $ 4,022,343 $ 8,704,772
Prime Portfolio Money Market Fund 931,769 870,442
Investment-Grade Corporate Portfolio Bond Fund 629,581 527,742
Vanguard/Wellington Fund 1,288,076 1,180,000
Vanguard/Index Trust - 500 Portfolio 1,094,813 758,867
Vanguard PrimeCap Fund 2,761,141 2,240,276
CONTRIBUTIONS RECEIVABLE:
Participant 47,109 41,854
Company 32,189 28,703
CASH 1,873 3,267
------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 10,808,894 $ 14,355,923
============ ============
The accompanying notes are an integral part of these financial statements.
5
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ --------
INTEREST/DIVIDEND INCOME $ 395,821 $ 314,465
------------ ------------
NET DEPRECIATION IN MARKET VALUE OF INVESTMENTS (4,178,966) (4,632,910)
------------ ------------
CONTRIBUTIONS:
Participant 835,835 743,616
Company 655,796 594,324
------------ ------------
Total contributions 1,491,631 1,337,940
------------ ------------
WITHDRAWALS AND TERMINATIONS (1,255,515) (768,965)
------------ ------------
DECREASE IN NET ASSETS AVAILABLE FOR PLAN BENEFITS (3,547,029) (3,749,470)
NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year 14,355,923 18,105,393
------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $ 10,808,894 $ 14,355,923
============ ============
The accompanying notes are an integral part of these financial statements.
6
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN:
General
Pogo Producing Company (Pogo) adopted the Employees Stock Purchase Plan
effective January 1, 1978, as amended July 10, 1981. On January 1, 1985, the
Employees Stock Purchase Plan was amended and renamed the Tax-Advantaged Savings
Plan (the Plan). Any salaried employee of Pogo is eligible to be a participant
of the Plan on the first day of the calendar quarter following employment.
John O. McCoy, Jr., an officer of Pogo, serves as trustee of the Plan. The Plan
is administered by an administrative board appointed by Pogo's board of
directors. The members of the administrative board receive no compensation for
their services, and all expenses of the Plan, including brokerage commissions,
are paid by Pogo.
Investments
The investment options include the Pogo Common Stock Fund, the Prime Portfolio
Money Market Fund, the Investment-Grade Corporate Portfolio Bond Fund, the
Vanguard/Wellington Fund, the Vanguard/Index Trust - 500 Portfolio and the
Vanguard PrimeCap Fund. (See Exhibits 1 and 2 for financial statements by
investment fund.)
The Pogo Common Stock Fund is used to invest in Pogo common stock. All employer
contributions as well as employee-designated monies are placed in this account.
Any dividends are used to purchase additional shares for the Plan.
The Prime Portfolio Money Market Fund (Money Market Fund) invests in
high-quality money market instruments that mature in one year or less.
The Investment-Grade Corporate Portfolio Bond Fund (Corporate Bond Fund)
investments are placed in a diversified portfolio of long-term, investment-grade
bonds which, at the time of purchase, were selected from the four highest grades
assigned by Moody's Investors Service or Standard & Poors Corporation (S&P).
The Vanguard/Wellington Fund (Wellington Fund) contributions are invested in a
diversified and balanced program of investing in bonds and common stocks. Bonds
are held for relative stability of income and principal, while the common stocks
are held for potential growth of capital and income. The fund invests
approximately 60 percent to 70 percent of its total assets in common stock.
The Vanguard/Index Trust - 500 Portfolio (Index 500 Fund) investments are placed
in all of the stocks included in the S&P 500 Index in approximately the same
proportions as they are represented in the S&P 500 Index.
The Vanguard PrimeCap Fund (PrimeCap Fund) invests principally in a portfolio of
common stocks selected on the basis of fundamental factors such as above-average
earnings growth and current earnings as compared to the S&P 500 Index,
consistency of earnings growth and earnings quality.
7
-2-
Contributions
Each participant may contribute up to 10 percent of his compensation to the
Plan. In accordance with provisions of the Tax Reform Act of 1986, each
participant's contributions are subject to certain limitations. This limitation
was $10,000 for 1998 and $9,500 for 1997. Pogo contributes an amount equal to
each participant's contribution, limited to a maximum of 6 percent of the
participant's eligible compensation. Each participant's account is credited with
his or her contribution, the company-matching contribution and an allocation of
Plan earnings. Allocations of earnings are based on the proportion that each
participant's account balance bears to the total of all participant account
balances. Matching funds contributed to the Plan by Pogo are invested only in
Pogo common stock.
Distributions and Withdrawals
Participants are entitled to receive the portion of the Plan equity which
represents their individual contribution. The Plan allows participants to be
fully vested in the portion of the Plan which is represented by Pogo
contributions after two full years of employment with the company.
In the event of death, retirement, disability or termination after vesting, a
participant is entitled to all of his portion of the Plan equity applicable to
Pogo's contributions.
Forfeitures
A participant terminated for reasons other than death, retirement or disability
forfeits the unvested portion of his Plan equity attributable to Pogo's
contribution, and such forfeiture is held in suspense for one year. If the
participant returns to employment prior to incurring a one-year break in
service, his unvested share of Pogo matching contributions is not forfeited. If
the participant is not reemployed prior to incurring a one-year break in
service, his unvested share of Pogo matching contributions is forfeited and used
to reduce future contributions by Pogo. At December 31, 1998, there were 204
shares of Pogo's common stock forfeited and held in suspense.
Termination of the Plan
The Plan may be terminated, amended or modified by Pogo's board of directors at
any time. In the event the Plan is terminated, all participants become vested
and entitled to receive the Plan equity attributable to all contributions made
for the participants by Pogo.
2. SUMMARY OF ACCOUNTING POLICIES:
Basis of Accounting
The records of the Plan are maintained on the cash basis of accounting and are
adjusted to the accrual basis for financial reporting purposes.
Quoted market prices as of the last trading day of the Plan year have been used
to determine the market value of Plan investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to use estimates and assumptions that
affect the accompanying financial statements and disclosures. Actual results
could differ from those estimates.
8
-3-
Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for plan benefits from
the financial statements to the Form 5500:
December 31
----------------------------
1998 1997
----------- -----------
Net assets available for plan benefits - financial statements $10,808,894 $14,355,923
Less- Amounts allocated to withdrawing participants (5,733) (385,348)
----------- -----------
Net assets available for plan benefits - Form 5500 $10,803,161 $13,970,575
=========== ===========
The following is a reconciliation of withdrawals and terminations from the
financial statements to the Form 5500:
December 31
----------------------------
1998 1997
----------- -----------
Withdrawals and terminations - financial statements $1,255,515 $ 768,965
Add- Amounts allocated to withdrawing participants, December 31, 5,733 385,348
1998 and 1997
Less- Amounts allocated to withdrawing participants, (385,348) (106,366)
---------- ----------
December 31, 1997 and 1996
Withdrawals and terminations - Form 5500 $ 875,900 $1,047,947
========== ==========
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
withdrawals that have been processed and approved for payment prior to December
31 but not yet paid as of that date.
3. FEDERAL INCOME TAXES:
The Plan obtained its latest determination letter on February 25, 1996, in which
the Internal Revenue Service stated that the Plan, as then designed, was in
compliance with the applicable requirements of the Internal Revenue Code (IRC).
The administrative board believes that the Plan is currently designed and being
operated in compliance with the applicable requirements of the IRC. Therefore,
the administrative board believes that the Plan was qualified and the related
trust was tax-exempt as of December 31, 1998 and 1997.
4. RISKS AND UNCERTAINTIES:
The Plan provides for investments in company common stock, money market accounts
and various investment grade securities. Investment securities, in general, are
exposed to various risks, such as interest rate, credit and overall market
volatility risk. Due to the level of risk associated with certain investment
securities, it is reasonably possible that changes in the values of investment
securities will occur in the near term and that such changes could materially
affect the amounts reported in the statements of net assets available for plan
benefits and in participant accounts.
9
EXHIBIT 1
Page 1 of 2
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1998
Nonparticipant-
Participant-Directed Directed
---------------------------------------------------------------- --------------
Pogo Money Corporate Index Pogo
Common Market Bond Wellington 500 PrimeCap Common
Stock Fund Fund Fund Fund Fund Fund Stock Fund Total
---------- --------- --------- ----------- ----------- ---------- -------------- ----------
INVESTMENTS, at quoted
market value:
Common stock of
Pogo Producing Company $847,540 $ -- $ -- $ -- $ -- $ -- $3,174,803 $ 4,022,343
Prime Portfolio Money
Market Fund -- 931,769 -- -- -- -- -- 931,769
Investment-Grade Corporate
Portfolio Bond Fund -- -- 629,581 -- -- -- -- 629,581
Vanguard/Wellington Fund -- -- -- 1,288,076 -- -- -- 1,288,076
Vanguard/Index Trust -
500 Portfolio -- -- -- -- 1,094,813 -- -- 1,094,813
Vanguard PrimeCap Fund -- -- -- -- -- 2,761,141 -- 2,761,141
CONTRIBUTIONS RECEIVABLE 8,135 2,167 5,125 8,222 11,987 11,473 32,189 79,298
CASH -- 1,873 -- -- -- -- -- 1,873
-------- -------- -------- ---------- ---------- ---------- ---------- -----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $855,675 $935,809 $634,706 $1,296,298 $1,106,800 $2,772,614 $3,206,992 $10,808,894
======== ======== ======== ========== ========== ========== ========== ===========
This exhibit is an integral part of the accompanying financial statements.
10
EXHIBIT 1
Page 2 of 2
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1997
Nonparticipant-
Participant-Directed Directed
---------------------------------------------------------------- --------------
Pogo Money Corporate Index Pogo
Common Market Bond Wellington 500 PrimeCap Common
Stock Fund Fund Fund Fund Fund Fund Stock Fund Total
---------- --------- --------- ----------- ----------- ---------- -------------- ----------
INVESTMENTS, at quoted
market value:
Common stock of
Pogo Producing Company $1,943,834 $ -- $ -- $ -- $ -- $ -- $6,760,938 $ 8,704,772
Prime Portfolio Money
Market Fund -- 870,442 -- -- -- -- -- 870,442
Investment-Grade Corporate
Portfolio Bond Fund -- -- 527,742 -- -- -- -- 527,742
Vanguard/Wellington Fund -- -- -- 1,180,000 -- -- -- 1,180,000
Vanguard/Index Trust -
500 Portfolio -- -- -- -- 758,867 -- -- 758,867
Vanguard PrimeCap Fund -- -- -- -- -- 2,240,276 -- 2,240,276
CONTRIBUTIONS RECEIVABLE 8,302 2,089 4,808 7,181 7,455 12,019 28,703 70,557
CASH -- 3,267 -- -- -- -- -- 3,267
---------- -------- -------- ---------- -------- ---------- ---------- -----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $1,952,136 $875,798 $532,550 $1,187,181 $766,322 $2,252,295 $6,789,641 $14,355,923
========== ======== ======== ========== ======== ========== ========== ===========
This exhibit is an integral part of the accompanying financial statements.
11
EXHIBIT 2
Page 1 of 2
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND
INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1998
Nonparticipant-
Participant-Directed Directed
------------------------------------------------------------------------ ---------------
Pogo Money Corporate Index Pogo
Common Market Bond Wellington 500 PrimeCap Common
Stock Fund Fund Fund Fund Fund Fund Stock Fund Total
---------- ---------- ---------- ----------- ------------ ------------ ------------ -----------
INTEREST/DIVIDEND INCOME $ 7,532 $ 48,163 $ 52,566 $ 140,500 $ 15,495 $ 103,824 $ 27,741 $ 395,821
NET APPRECIATION
(DEPRECIATION) IN MARKET
VALUE OF INVESTMENTS (1,050,201) -- 722 (7,213) 208,911 454,065 (3,785,250) (4,178,966)
CONTRIBUTIONS 165,571 37,415 52,719 149,481 193,420 237,229 655,796 1,491,631
WITHDRAWALS AND
TERMINATIONS (270,169) (3,546) (744) (114,832) (141,929) (243,359) (480,936) (1,255,515)
INTERFUND TRANSFERS 50,806 (22,021) (3,107) (58,819) 64,581 (31,440) -- --
----------- -------- -------- ---------- ---------- ------------ ----------- -----------
INCREASE (DECREASE)
IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS (1,096,461) 60,011 102,156 109,117 340,478 520,319 (3,582,649) (3,547,029)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year 1,952,136 875,798 532,550 1,187,181 766,322 2,252,295 6,789,641 14,355,923
----------- -------- -------- ---------- ---------- ------------ ----------- -----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 855,675 $935,809 $634,706 $1,296,298 $1,106,800 $ 2,772,614 $ 3,206,992 $10,808,894
=========== ======== ======== ========== ========== ============ =========== ===========
This exhibit is an integral part of the accompanying financial statements.
12
EXHIBIT 2
Page 2 of 2
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND
INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1997
Nonparticipant-
Participant-Directed Directed
--------------------------------------------------------------------- ---------------
Pogo Money Corporate Index Pogo
Common Market Bond Wellington 500 PrimeCap Common
Stock Fund Fund Fund Fund Fund Fund Stock Fund Total
------------ ---------- --------- ---------- -------- ---------- -------------- -----------
INTEREST/DIVIDEND INCOME $ 8,441 $ 45,349 $ 37,298 $ 99,000 $ 15,272 $ 81,271 $ 27,834 $ 314,465
NET APPRECIATION
(DEPRECIATION) IN MARKET
VALUE OF INVESTMENTS (1,220,727) -- 25,389 112,030 155,458 492,180 (4,197,240) (4,632,910)
CONTRIBUTIONS 222,754 37,139 34,917 121,664 127,490 199,652 594,324 1,337,940
WITHDRAWALS AND TERMINATIONS (268,499) (1,090) (5,087) (10,084) (8,429) (14,124) (461,652) (768,965)
INTERFUND TRANSFERS 34,785 44,930 (63,328) 41,977 (16,342) (42,022) -- --
----------- -------- -------- ---------- -------- ---------- ----------- -----------
INCREASE (DECREASE) IN NET
ASSETS AVAILABLE FOR
PLAN BENEFITS (1,223,246) 126,328 29,189 364,587 273,449 716,957 (4,036,734) (3,749,470)
NET ASSETS AVAILABLE FOR
PLAN BENEFITS,
beginning of year 3,175,382 749,470 503,361 822,594 492,873 1,535,338 10,826,375 18,105,393
----------- -------- -------- ---------- -------- ---------- ----------- -----------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS,
end of year $ 1,952,136 $875,798 $532,550 $1,187,181 $766,322 $2,252,295 $ 6,789,641 $14,355,923
=========== ======== ======== ========== ======== ========== =========== ===========
This exhibit is an integral part of the accompanying financial statements.
13
SCHEDULE I
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
Number of Current
Identity of Issue Description of Investment Shares/Units Cost Value
----------------- ------------------------- ------------ ------- -------
Pogo Producing Company* Pogo Common Stock Fund 309,411 $ 6,405,352 $ 4,022,343
Vanguard* Prime Portfolio Money Market Fund 931,769 931,769 931,769
Vanguard* Investment-Grade Corporate 67,770 612,617 629,581
Portfolio Bond Fund
Vanguard* The Vanguard/Wellington Fund 43,887 1,118,595 1,288,076
Vanguard* The Vanguard/Index Trust -500 9,608 688,813 1,094,813
Portfolio
Vanguard* The Vanguard PrimeCap Fund 57,934 1,643,636 2,761,141
------------- -------------
$ 11,400,782 $ 10,727,723
============ ============
*Indicated party in interest.
14
SCHEDULE II
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
ITEM 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
Current Value Net
Identity of Purchase Selling Cost of of Asset on Gain
Party Involved Description of Asset Transaction Price Price Asset Transaction Date (Loss)
--------------- -------------------- ----------- ---------- ---------- ---------- ---------------- -------
Vanguard Prime Portfolio 87 purchase
Money Market Fund transactions $1,101,187 $ - $1,101,187 $1,101,187 $ -
Vanguard Prime Portfolio
Money Market Fund 29 sale transactions - 1,039,863 1,039,863 1,039,863 -
Pogo Producing Company Pogo Common Stock 33 purchase
Fund transactions 952,990 - 952,990 952,990 -
Pogo Producing Company Pogo Common Stock 18 sale
Fund transactions - 799,968 609,935 799,968 190,033
NOTE: This schedule is a listing of a series of purchase and sale transactions
in the same security which exceeded 5 percent of the Plan assets as of
January 1, 1998.
15
(b) Exhibits --
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
TAX-ADVANTAGED SAVINGS PLAN OF
POGO PRODUCING COMPANY
/s/ JOHN O. McCOY, JR.
--------------------------------------
By: John O. McCoy, Jr.
Member of the Administrative Board
Date: June 21, 1999
17
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
23.1 -- Consent of Arthur Andersen LLP